Workplace Health and Safety Is Moving Up on Wall Street
Worker health and safety continues to gain visibility and significance in organizational governance norms and practices. Governmental regulations, civil liability, consensus standards, and so on have had increasing impact since 1970. In the evolution of how “society” responds to business externalities, we have entered an era where the investment community is flexing its muscles and demanding attention be brought to the issue of human capital.
Sustainability has been on the business radar at least going back to the 1980s with the advent of the triple bottom line—an accounting framework that covers the social, environmental, and financial debts of a business—and attention to greenhouse gases, global warming, raising sea levels, and other issues. In the sustainability space, ESG (environmental, social, and corporate governance) is a common term that refers to three dimensions of measuring an organization’s sustainability performance. Historically, these efforts have focused on the “E” and “G.” That began to change with the 1997 founding of the Global Reporting Initiative (GRI), which sought to create an accountability mechanism for social, economic, and governance (SEG) issues. GRI published the first global framework for sustainability reporting in 2000 with guidelines called G1.
AIHA was a co-founder of the Center for Safety and Health Sustainability (CSHS) in 2010. The Center’s primary goal was to ensure that occupational safety and health was included in sustainability reporting in as strong of a position as possible. This effort succeeded in 2013 with the publication of GRI’s G4 guidelines.
Ideas about human capital have been around at least since the writings of the 18th-century economist Adam Smith. The 2020 trifecta of the COVID-19 pandemic, the resulting economic fallout, and societal shifts such as a greater emphasis on diversity, equity, and inclusion have pushed the “S” and human capital into the front row of ESG/SEG.
The application of “capitals thinking” in ESG/SEG is relatively new. The term “natural capital” was first used in the 1970s, and adopted into environmental economics in the late 1980s. The application of natural capital thinking in the ESG/SEG space led to the formation of the TEEB for Business Coalition in 2012, which became the Natural Capital Coalition in 2014. In 2018, the Social and Human Capital Coalition was founded, and in 2020, the two coalitions joined to form the Capitals Coalition (CC). The new entity characterizes itself as a “global collaboration transforming the way decisions are made by including value provided by nature, people, and society.” The CC presents a common conceptualization of capitals as natural, social, human, and produced capital.
The advent of “One Report” and formation of the International Integrated Reporting Council (IIRC) in 2010 introduced and began to formalize ideas of integrated thinking in the ESG/SEG space. “Capitals thinking” is reflected in the IIRC framework, which identifies the six capitals as financial, manufactured, intellectual, human, social and relationship, and natural.
A Human Capital – Occupational Safety and Health (HC-OSH) working group has been formed within the CC to advise on defining the value of a safe and healthy workforce. The working group has begun to collaborate with key stakeholders to develop a “common set of standards and key performance indicators of the value of creating world-class safe and healthy workplaces for people throughout our value chain,” according to an HC-OSH strategy document. The working group has also started efforts to “develop, publish, and promote guidance on using the Social and Human Capital Protocol to inform decision-making.” Despite growing awareness, there is little consensus on how businesses can measure and assess the value of social and human capital, and specifically OSH; the development of measurement and valuation approaches is in its infancy.
One key outcome of the HC-OSH working group will be the development of OSH-related metrics that will be used in the CC’s efforts to influence decision-making and help companies see the interdependency between their business and all the capitals. It is anticipated that these metrics will be used by the investment community and eventually contribute to the ongoing improvement of OSH performance in business.
The working group is just starting to address metrics. It’s premature to speculate on what will be developed, but my sense is that the incorporation of integration- and systems-thinking principles in the OSH space, as well as the integrated thinking (“wholes,” “omics,” “totals,” and so on) that has been evolving within AIHA, will inform the working group’s efforts. I also suspect practices and measures of cumulative risk will be reflected.
I am proud of the contributions that AIHA has made in the ESG/SEG space and am excited about the possibility that lies ahead through our engagement with the Capitals Coalition.
AIHA is putting together a human capital/ESG task force that will serve as a conduit between the Capitals Coalition HC-OSH working group and the AIHA community. If you’re interested in participating on the task force, please consider applying or let me know.