Sustainalytics’ ESG Risk Ratings issue – Occupational Health and Safety – focuses on the management of workplace hazards affecting a company's own employees and on-site contractors.
The Importance of Being Safe
Aside from the obvious impact that workplace health and safety failures can have on employees, numerous studies conducted in recent years have demonstrated the cost that these issues can have on businesses. According to insurance company Liberty Mutual’s 2020 Workplace Safety Index, disabling, non-fatal workplace injuries cost US businesses over USD 59 billion per year in direct compensation costs. Causes of injuries and illnesses at work can be immediate, such as in the case of falls, accidents involving machinery, and road incidents; or gradual, in the case of repetitive motion injuries, or respiratory and oncological diseases brought on by persistent exposure to harmful substances.
Assessing the Unmanaged ESG Risk of Occupational Health and Safety by Industry
Sustainalytics’ ESG Risk Rating for occupational health and safety combines the risk that cannot be managed due to the inherent characteristics of a company’s business model or products, with the risks that could be managed, but are not currently being managed through relevant systems, programs and policies.
Analysis of Sustainalytics’ ratings universe reveals that occupational health and safety is deemed a material risk for 63 subindustries within 28 distinct industry groups. Exhibit 1 below contains a selection of 18 of these, and their average unmanaged risk score for this issue. Of all these industries, the Precious Metals industry has the highest average risk at 4.58, while the Real Estate industry at 1.0 has the lowest.
Source: Sustainalytics data, April 2022
As the world continues to navigate its way through the Covid-19 pandemic, it has become clearer than ever that businesses need to ensure they manage those elements of health and safety in the workplace that they can control, to minimize operational disruption and other negative impacts. Sustainalytics ESG Risk Rating can help investors determine which companies appear best equipped to do just that.