As the emphasis in ESG has shifted away from mainly environmental reporting, frameworks have grown to demonstrate OSH performance to investors and corporate customers, says Louis Wustemann.

ESG, short for environmental, social and governance management and reporting, was a niche term restricted to the investment community a few years back. More recently it has moved into the mainstream, a convenient shorthand for what might have once been called sustainability or corporate social responsibility, plus environmental stewardship. But it also feels appropriate to have a new name for an area of management that has accelerated in importance due to interest from multiple groups of stakeholders.

In this article we explore some of the frameworks that have grown up for businesses to measure and communicate their OSH performance as part of sustainability or ESG reporting and look at the increasing pressure to use the frameworks.

Publicly-traded companies have had to respond to shareholder interest in their sustainability policies and practice for some time. Fund managers acting on behalf of institutional shareholders, such as pension funds, have either made direct enquiries of companies or used rating agencies, which sprang up for the purpose, to assess their performance. External accreditation schemes and formal frameworks were developed to make it easier for companies to formalise their sustainability measurement and reporting and produce more easily comparable data.

At first, these frameworks mostly required environmental information, but in past years, as interest in the social component of ESG – employment conditions and fair treatment of workers – has grown among the public and shareholders, the frameworks have grown or multiplied to focus on these factors. Shareholders and ratings agencies can use certification by companies to the frameworks as a shortcut to avoid having to carrying out extensive research into corporate OSH performance.

Malcolm Staves is Global Vice President, Health and Safety at L'Oréal. He has seen this focus shift to include the social component, including safety and health, saying: “I think that health and safety will be audited more and more as part of ESG. It’s important for health and safety people to be on top of that.” He says the recent statement by the International Labour Organisation that a safe workplace is a fundamental right at work is likely to accelerate the change.

Some larger corporations ask companies in their supply chains to use these same frameworks and others to demonstrate that their environmental and social performance is good enough to contract with an organisation keen to influence suppliers’ impacts as well as its own.

The frameworks

The Global Reporting Initiative (GRI) has been around for almost 26 years and offers framework standards for annual sustainability reporting that are used by around 14,000 organisations worldwide. Its safety and health standard GRI 403 was launched in 2016, then updated in 2018 to tighten reporting requirements. 

GRI 403 2018, which was implemented in 2021, requires users to make ten main “disclosures” about their arrangements to protect employees, contractors and anyone “whose work and/or workplace is controlled by the organisation”. The management approach disclosures ask for details of OSH provision, risk assessment procedures, occupational health services and health promotion initiatives. But there are also topic-specific disclosures of injuries and ill health rates.

Another major framework is derived from the United Nations’ Sustainable Development Goals (SDGs). The SDGs are 17 targets adopted in 2015 for reducing global inequality, poverty and ill health and ensuring sustainable growth by 2030. 

The UN Global Compact was a framework set up specifically to give businesses a set of aims to help the contribute to the SDGs and more than 13,000 organisations have signed up. None of the Global Compact’s ten principles mentions safety and health explicitly but many organisations choose to report on OSH as contributing to principles such as respecting human rights and avoiding labour exploitation. Signatory companies have to make annual progress reports saying how they have improved their contribution to each principle.

Some organisations that have signed up to the global compact, and many that have not, still tie their reporting directly to the SDGs in their public sustainability reports. They commonly describe safety, health and wellbeing initiatives as contributing to SDG 8, which aims for decent work, and SDG 3, to ensure healthy lives and promote wellbeing for all. As a study by the Institution of Occupational Safety and Health has shown, there is plenty of scope for links to other goals, such as SDG 9, to promote inclusive and sustainable industrialisation and SDG 10, to reduce inequality within and among countries.

The most recent framework was launched by the International Sustainability Standards Board (ISSB) in June this year. The IFRS S1 standard builds on the former Sustainability Accounting Standards Board’s (SASB) standards which were developed in the US on an industry-specific basis. IFRS S1 and uses the principal that organisations should assess which sustainability-related risks and opportunities are “material” to their activities and then report on them. It is intended to be a global standard for sustainability disclosures. 

“Material” is defined by the ISSB as anything ESG-related “that could reasonably be expected to affect the entity’s cash flows, its access to finance or cost of capital over the short, medium or long term”, so it will be hard for most organisations signing up to the standard to argue that occupational safety and health is not material to their operations.

Statutory basis

In the near future, these voluntary certification frameworks will be joined by mandatory ones for certain types and sizes of business as governments and international blocs enshrine sustainability reporting standards in law. The UK government has said that it intends to use the ISSB standards as the underpinning of planned UK Sustainability Disclosure Standards (UKSDS), which will be subject to future regulations on measurement and reporting.

Separately, many companies that will be covered by the UKSDS will also have to report under the European Union’s own framework, the European Sustainability Reporting Standards (ESRS), which will apply to companies that trade in the EU, even if they are based in states outside the bloc, such as the UK. The ESRS includes specific references to safety and health for organisations’ own workforces and workers in their value chains, if OSH is judged as material. (When companies conclude that it is not material, they will provide a detailed explanation of their reasoning.)

This step up of reporting standards from voluntary status – though they might not always have felt so voluntary to those who needed accreditation to secure contracts or investment – is a major one. It embeds OSH firmly in sustainability management and reporting and will ensure most safety and health professionals have to learn to frame their efforts to protect workers in an ESG context.

 

Louis Wustemann is a writer and editor on sustainability and health and safety. He was previously Head of Regulatory Magazines at LexisNexis UK, publishing IOSH Magazine, Health and Safety at Work magazine and The Environmentalist among other titles. He is a trustee of the One Percent Safer Foundation.