Investing in Safety: What to Expect in Terms of ROI

Typically, the benefits of health and safety systems are framed in terms of cost-avoidance. Organisations are constantly reminded that health and safety failure is expensive. And whilst this is certainly true, there are benefits to health and safety success that go beyond cost-avoidance.

Today, successful organisations view safety as an asset, and health and safety spending as an investment. This is because a safe workplace adds measurable business value, and can drive tangible improvements in performance, profit, and culture.

In October 1987, Paul O’Neill gave his now famous first speech as CEO of Alcoa, stunning shareholders by announcing that the company’s primary focus would be on worker safety over profits. Investors were spooked.

However, O’Neill was at the company for 13 years after this announcement, and in that time Alcoa’s income increased fivefold. According to data from the NSC, Alcoa’s annual earnings also went from $0.20 per share to $1.41 in the five years between 1994 and 1999. The company’s sales also grew an average of 15 percent per year.

This notion that safety is good for business is not a new concept, but it is one that is gaining increasing traction as more in-depth research is released. One study puts the return on investment of health and safety spending at 2.2 [1]. The researchers said that while occupational safety and health was a statutory obligation for employers that was beneficial to employees, it was also “equally a factor for business success.” Specific microeconomic benefits are outlined in the table below.

effects of health and safety initiatives

Other studies have this number even higher. In fact, a Comcare paper reveals an average return of $5.81 for every dollar invested by companies into workplace health programs [2]. It also found the average worksite health program:

• decreased sick leave absenteeism by 25.3 percent
• decreased workers compensation costs by 40.7 percent
• decreased disability management costs by 24.2 percent

Another study analysed the stock market performance of companies recognised for their health and safety and found an average annual return of 6.03 percent – well above the market average of 2.92 percent [3]. The researchers said the evidence was there to support the concept that focusing on the health and safety of a workforce is good business.

Research published in the American Journal of Health Promotion and the European Journal of Public Health have since reinforced this perspective but add additional insights. A 2014 study found that workplace health promotion programs do indeed demonstrate a positive return on investment, though exact returns vary by study design [4]. Importantly, the review also reported that negative ROIs were found among the cohort of the most rigorous studies. This sobering finding should help remind us that, while safety initiatives have a probability of financial returns, merely 'throwing money at the problem' is not a foolproof approach.

Similarly, a 2023 systematic review further highlighted how workplace prevention interventions do result in positive financial returns on average. Yet, again it was found that higher quality studies more often report negative returns than quasi-experimental or non-experimental studies, although negative ROIs were here still in the minority (15%) [5]. One possible lesson to take from this is to be careful of the bias of wishful thinking when analysing the effects of particular safety programs, and that accurate feedback is crucial for decision-making.

The core insight remains powerful: while comprehensive wellness efforts can dramatically improve healthcare costs, productivity, and overall performance, rigorous and unbiased reporting systems are essential to distinguish worthwhile initiatives from wasteful ones.

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Sources

1. International Social Security Association, The return on prevention: Calculating the costs and benefits of investments in occupational safety and health in companies, Geneva, 2011
2. Australian Government (Comcare), Benefits to Business: The Evidence for Investing in Worker Health and Wellbeing, 2011
3. Environ Med, The link between workforce health and safety and the health of the bottom line: tracking market performance of companies that nurture a “culture of health”, 2013
4. American Journal of Health Promotion, The relationship between return on investment and quality of studies for workplace health promotion programs, 2014
5. European Journal of Public Health, Return on investment of workplace-based prevention interventions: a systematic review, 2023