How is ROI measured in safety? Tools and strategies to calculate impact
Safety professionals understand the vital role that safety plays in the success of their organizations. However, company executives may harbor skeptical views that make it challenging to allocate more resources to safety measures. To overcome this obstacle, it is crucial to highlight how ROI is measured in safety.
The National Safety Council reports that every dollar invested in safety today can generate $2 of future savings. While this figure sounds promising, you might be wondering how ROI is measured and what tools are available to determine the ROI of your own safety program. This article explores various tactics and resources to empower you and encourage further investment in the systems and people that uphold this vital aspect of your business.
Steps for Measuring Safety ROI:
Step 1: Identify Your Safety Program Costs
To accurately measure ROI in safety, the first step is to identify costs associated with your safety program. These costs include employee training, personal protective equipment, software, and various fees. For example, fees associated with safety programs may include the cost of safety inspections, permit fees, safety-related certifications for employees, and registering with regulatory agencies. Focus on the direct costs of your safety program, such as equipment, service, and wage expenses. Once you have a clear understanding of your total expenses, you're ready to move on to the next step.
Step 2: Tally Your Accident and Injury Expenses
Include any cost which is heavily influenced by EHS program performance, such as:
- Litigation costs
- Property loss
- Medical expenses
- Insurance premiums
- Regulatory fines
- Work interruptions and shutdowns
You may also want to factor in overtime costs paid due to incident-related absences causing worker shortages, depending on your industry context.
Step 3: Calculate Your ROI
To demonstrate that safety software will pay for itself, consider the cost of injuries, absences, and insurance premiums before and after implementing the software. For example, compare the cost of safety inspections, permit fees, and hiring outside consultants against the benefits of reducing injuries and absences.
When calculating the ROI of safety, consider the costs associated with implementation, training, and maintenance, as well as the potential reduction in costs associated with fewer injuries and absences. By comparing the costs and benefits, businesses can determine the potential ROI of investing in safety and make a more informed decision about moving forward with the investment.
Tools for Calculating ROI
Several online tools and resources are available to help you calculate the financial impact of your safety program:
- Safety Pays: The Occupational Safety and Health Administration (OSHA) offers a free online tool which helps you calculate the costs of injuries and illnesses to your business and estimate the potential money saved by investing in safety.
- Safety Technology Investment Calculator: The National Safety Council offers an online tool that allows companies to better understand the potential benefits of investing in safety tech. The tool simplifies the comparison between investing in safety technologies and calculates the ROI for eight technologies based on the estimated size and scope of the purchase.
- Preparing the Business Case for Investment in Safety: This whitepaper from The National Safety Council is an excellent resource for exploring the complex relationship between safety and money.
Ideagen EHS can help
Calculating the ROI of safety is essential to convince leadership to allocate the funding necessary to maintain safety progress. By comparing the costs, benefits, and current and future safety performance, safety professionals can strongly argue why investing in safety is a wise business decision. If your organization is still struggling to manage EHS efficiently and isn't achieving the desired return on investment it may be worth taking a closer look at EHS software.
Ideagen EHS centralizes and streamlines all aspects of EHS management, improving efficiency and compliance while providing companies with a deeper understanding of risk. This enables leaders to make proactive and well-informed business decisions. When you have good data and insights, convincing employees, and management to prioritize safety becomes much easier.
Schedule a demo today to learn more about how Ideagen EHS can help you create a safer workplace while achieving a positive ROI. By leveraging the right tools and strategies, you can showcase the financial impact of your safety program and gain the necessary support and investment to drive safety initiatives forward.Find out more