Spotlight on safety report highlights risks for boards

Companies must demonstrate that they value safety – a fundamental obligation that starts in the boardroom – with a recent report by the Australian Council of Superannuation Investors (ACSI) showing some progress but highlighting where significant improvement must still be made.

The ACSI ‘Spotlight on Safety’ report looked at publicly-disclosed safety reporting in the 12 months to March 2024 by 78 ASX200 companies which operate in sectors with inherently high safety risks, including metals and mining, energy and utilities, consumer staples and transportation. While ACSI CEO Louise Davidson MAICD noted some improvement on previous years (the review has been undertaken annually since 2019), she also saw multiple issues that directors need to address.

Key areas of concern include a focus from companies on lagging rather than leading indicators of safety, a disconnect with many companies around reporting of contractor safety issues, and an expectation that boards meaningfully reflect the consequences of fatalities in executive remuneration to drive accountability and change.

“Few things are more critical than safety in the workplace, and that fundamental right for people to go to work and come home safely,” Davidson said. “From an investment perspective, if investors can’t get a line of sight on how safety is being thought about, then that’s quite disturbing.

“For the companies not providing information, perhaps they’re sending a message that they don’t realise they’re sending in terms of their level of concern for this issue.”

18 workplace deaths

Three companies reviewed in the report provided no reporting on their safety performance, a lack of transparency that increases investment risk and can lead to erosion of a company’s social licence. While companies reporting contractor safety data increased, less than half of high-risk companies provided separate disclosures on contract workers, who continue to be overrepresented in major incidents and fatalities.

Eighteen workplace deaths were disclosed in financial year 2023 (FY23) reporting, nine involving contractors. Two companies recorded consecutive years of workplace fatalities.

“A lot of safety issues have been occurring in contractor companies, and many companies are not separating out their contractor data from their direct employee safety data,” Davidson said. “We would like to see a stronger trend towards disaggregating that information, because we think it’s really helpful in terms of getting a real spotlight on what’s going on within the company, versus within their contractor workforce.

“There’s an element that companies outsource their most dangerous work, but that doesn’t mean they can outsource their responsibility for safety.  We want to really make sure that contractors are not being treated in different ways on sites from a safety perspective.”

ACSI advocates for a holistic approach to safety, with Davidson noting that reporting is only one part of the safety picture. Companies identifying the right metrics to report is crucial. “What gets measured gets managed.”

The linking of safety performance to executive remuneration – which was done by 94 per cent of companies reviewed – is another area in which Davidson believes directors need to be proactive. Short-term incentives or annual bonuses account for five to 25 per cent of executive remuneration packages. Of the 14 companies that reported workplace fatalities, nine reduced executive bonuses as a result.

“(A holistic approach) goes right from the way companies train and reinforce training for their workforce and keep them safe in myriad ways, right up to … how does the CEO’s pay reflect what’s going on the ground?” Davidson said.

“It’s always challenging to speak about safety as a financial matter, because obviously you can’t put a dollar value on a human life. But having a meaningful safety component in short-term incentives sends a clear message about what’s valued.

“It’s about promoting accountability, and really making sure that at the executive level there’s a clear message from the board about what’s valued. And if it’s only financial outcomes that are valued, there’s a risk that financial outcomes become what’s valued within the organisation, instead of safety outcomes.”

Treating safety in the workplace holistically has increased focus on the psychosocial health of employees – ie, their mental health and wellbeing – along with instances of sexual harassment that should also be captured in safety reporting. While 81 per cent of companies included some disclosure of the mental health and wellbeing of its workforce, reporting of mental health initiatives and practices remained limited in most companies.

In FY23 only 50 per cent of companies assessed made disclosures relating to sexual harassment, with most merely outlining training and grievance mechanisms.

The Australian Human Rights Commission (AHRC) delivered its landmark Respect@Work report in 2020, which led to the introduction of a “positive duty” for employers to take reasonable and proportionate measures to prevent workplace sexual harassment. [LB1] [SD2]

Rio Tinto reporting

Davidson applauded mining company Rio Tinto for its transparency in releasing a recent progress review responding to its 2022 ‘Everyday Respect’ report, which revealed eight employees said they experienced actual or attempted sexual assault or rape in 2024, compared with five in 2021.

“When you’re reporting bad news it’s not easy to do,” Davidson said. “The work Rio is doing there – and others in mining are doing similar work – to really think about and try to inculcate throughout the organisation a focus on psychosocial safety. I think that’s really good to see that these issues are being taken seriously. Because obviously they have a significant impact on the workforce.

“This is an area we’ll be watching. Following the introduction of the positive duty obligations, we expect to see a significant uplift in what companies are reporting next time around.”

In 2023 the AICD and ACSI released research examining board practices around preventing harmful workplace conduct, revealing a growing focus on sexual harassment but mixed readiness and understanding of the full scope of positive duty obligations.

Other findings included organisations still being slow to treat psychosocial hazards with the same priority as physical safety concerns, the challenge of lifting reporting rates and establishing a “speak-up” culture, and the result that transparent organisations that share information about sexual harassment and other positive duty conduct reporting a significant positive impact on workplace culture.

Davidson emphasised the importance of companies moving away from only reporting “lagging” indicators of safety such as lost time injury frequency rates (LTIFR) and total recordable injury frequency rates (TRIFR) and putting greater focus on “leading” indicators such as near misses and accident severity rates. “They can be very insightful, both for the company and for investors.”

The ACSI CEO said it was “alarming” that some companies in a high-risk cohort still provide no safety reporting, with the amount of readily-available data on what good safety reporting looks like making it “hard to do by accident”.

With company directors at risk of being charged with industrial manslaughter, ACSI is advocating for reporting of fatalities to the ASX to be mandatory, which is currently not the case. ACSI’s research revealed 12 high-risk companies in the ASX200 failed to provide any data on fatalities, clouding the picture for investors.

ACSI’s safety research since 2019 has informed extensive engagement with companies where opportunities for improvement have been identified. At board level, Davidson said an expectation of valuing safety, identifying risks and opportunities for improvement was clear.

“This is about people’s lives – it’s such an important issue, the psychosocial issues, sexual harassment and of course physical safety in workplaces. It’s fundamental and companies which are not able to reflect on that and reflect it in their public disclosures, do raise concerns.

“It is fundamentally about transparency, about being clear. For companies to be transparent with the market, it means they have done the work internally, and that in itself is a very valuable process. From an investor perspective, we see safety as a key investment risk.

“Ultimately, companies can expect that investors will be really focused on this at AGMs if there is consistent and continual failure to improve.”