Safety essential for sustainable growth

Ensuring safe working conditions is more than a moral obligation---it is crucial for economic success

India’s rise as a manufacturing hub has been significantly influenced by geopolitical shifts, with businesses around the world seeking to diversify their supply chains. However, the foundation for this transformation was laid well before these global changes, notably with the launch of the “Make in India” initiative in 2014. This programme was designed to rejuvenate the manufacturing sector by promoting innovation and positioning India as a global leader in production. Central to this initiative are several supportive government policies, including the production-linked incentive schemes, simplified regulatory processes, a focus on infrastructure development, and an emphasis on skill development. These measures are all aimed at stimulating business growth and making India an attractive destination for manufacturing investments.

India’s demographic dividend, which provides a large and youthful workforce, complements these policies. This combination of a growing market and a steady supply of labour creates an environment ripe for business expansion, making India a preferred location for companies looking to establish or expand their manufacturing operations. As a result, India is poised to become a critical player in global supply chains, potentially serving as a cornerstone in the global manufacturing landscape.

However, the economic vibrancy that comes with this growth is not without its challenges. Workplace accidents and occupational hazards are significant threats to the health and well-being of workers. Unfortunately, workplace safety in India remains a critical concern. BRSR (Business Responsibility and Sustainability Reporting) data for the NSE-500 companies paints a worrying picture.  Total workplace injuries increased to 10,726 in financial year (FY) 2022-23 from 9,880 in FY22, while high-consequence injuries rose by a third to 904 from 676 during the same period. Although the total fatalities decreased to 463 in FY23 from 586 in FY22, this still represents more than a death a day.

There are two disturbing aspects of this data. First, it pertains to the top 500 companies, representing just a small fraction of India’s workforce; approximately 90 per cent of workers in India are employed in the informal sector, where conditions are often more hazardous. This stark reality underscores the urgency of prioritising workplace safety across all sectors.

Moreover, being better capitalised and with access to more resources and material, the injuries in this cohort of companies should be much lower, which leads one to believe the share of the informal sector in the broader set will be higher, in percentage terms at least.

The second is that this data relates to direct employees and does not give data regarding contract employees. Capturing and reporting this data can only mean that the actual numbers are higher. This is because increasingly work is no longer undertaken by direct employees but is farmed to temporary workers or contracted out. For instance, the deaths of six workers while discharging hazardous chemicals were not reported by the company, which argued that the task was contracted out. Reporting such data is essential and should be an easy fix.

The BRSR mandates that companies disclose data relating to safety related incidents, for both employees and workers under four heads. These are total recordable work injuries, fatalities, high consequence work-related injuries and lost time. Companies report data for direct hires. Asking for this data to include contract employees will give a more complete picture.

 Thijs Aaten of APG, the largest pension fund in the Netherlands (disclosure, APG encouraged us to look at workplace injury as did HDFC Ergo General Insurance), noted that “shareholders are rarely apprised of the gaps which led to the injuries/fatalities, nor the countermeasures taken to prevent recurrence. Very little commentary is provided on KPIs, incident reporting mechanisms, and distribution of compensation in case of adverse events. Insurance coverage is weak and often does not cover contract workers. Similarly, for the majority of companies (more than 70 per cent) health and safety policies do not cover value chain partners.”

This situation is largely attributed to weak oversight and leadership apathy. The safety and welfare of workers are rarely prioritised by boards and top management, whose focus remains predominantly on financial performance. Safety audits are often reduced to mere formalities, rather than tools for instilling a safety-first mindset throughout organisations. Boards need to rethink their priorities. 

Accidents are more than just statistical numbers— they lead to human suffering and impact individuals, families and at times, entire communities. Beyond the ethical imperative to protect workers, the economic impact of workplace accidents is substantial as businesses incur significant costs, including medical expenses, lost productivity, and potential legal liabilities. These costs can hinder economic growth and erode the financial health of businesses.

Ensuring safe working conditions is more than a moral obligation as it also promotes sustainable economic growth. Safe workplaces attract and retain skilled workers, enhance the reputation of businesses, and build trust among stakeholders, all of which contribute to long-term success and competitiveness in the market.

The writer is with Institutional Investors Advisory Services India. The views are personal. X: @AmitTandon_In