How to address EHS budget cuts
Despite the risk factors associated with cutting safety costs, many executives commonly express a few reasons for reducing or not increasing their company’s environment, health, and safety (EHS) budgets. A frequent objection often comes from small to midsize companies, whose owners don’t believe they have enough employees to justify a comprehensive safety program.
However, it’s precisely these smaller companies that face the greatest risks. Without the legal and financial resources to combat lawsuits and claims of regulatory violations, even a single serious incident can leave them bankrupt. Additionally, the absence of compliant EHS-related recordkeeping can expose these companies to “small” but still significant penalties that erode profits. For example, a $5,000 fine for a lack of supervisory oversight may not have a significant impact on a large, nine-figure firm, but it could have a profoundly negative effect on a family-owned construction business.
Another frequent objection that’s often heard is “We already have workers’ comp insurance.” While workers’ compensation claims may provide coverage for employee medical expenses and wages, they often fail to account for numerous other expenses. These costs include lost time, damaged equipment, diminished morale and productivity, and the training of a replacement employee. According to Liberty Mutual’s 2021 Workplace Safety Index, employers spent over $1 billion per week in direct workers’ compensation costs for disabling, nonfatal workplace injuries in 2018.
In addition to these costs, it’s important to consider that post-incident insurance premiums are likely to increase, especially if the company is found to be negligent. Insurers are reluctant to offer favorable rates to organizations that fail to prioritize accident prevention.
Furthermore, a common short-term mindset among decision-makers is that they can’t afford to invest in an improved EHS program at present, believing it to be a viable investment only when productivity reaches a certain threshold. What they fail to recognize, however, is that safety and productivity are intertwined.
Invest in a comprehensive EHS solution
These data points can greatly support your case when presenting to executives and advocating for a reconsideration of cuts to your EHS budget. To enhance the impact of your proposal, a good idea is to suggest investing in a comprehensive EHS software suite, which can significantly improve the efficiency and cost-effectiveness of your efforts. To prepare for potential objections and questions, take the time to anticipate them and strategize how you’ll address them in advance.
Learn more about how you can gain leadership buy-in by downloading our free guide.
