What safety metrics affect your ESG rating and how

How to evaluate industrial safety in terms of ESG

There are 4 metrics for evaluation of this level: FAR (Rate of fatalities as a result of work-related injury), Rate of high-consequence work-related injuries, LTAFR (Lost Time Accident Frequency Rate), LTIFR (Lost Time Injury Frequency Rate). We’ve already described some basics for understanding these metrics in the previous article. Some calculations for the metrics are below. 

How to calculate FAR (Rate of fatalities as a result of work-related injury)

The formula is: 

FAR shows how many Fatalities have happened per 1 mln working hours.

What is the Rate of high-consequence work-related injuries, LTAFR and LTIFR

The Rate of high-consequence work-related injuries is an analogue of LTIR from the previous article and shows how many injures (fatalities excluded) has been happening per 1 mln working hours. 

For understanding LTAFR and LTIFR, it’s better to look at our explanation of LTIR since they all have the same basis. 

The formulas are as following: 

LTAFR shows how often accidents are happening at the rate of 1000 workers while LTIFR — the number of accidents per 1 mln working hours. 

All these metrics are usually included in the “S” section of ESG ratings and evaluated according to the simple criteria — in comparison to the average metrics on the market which are available in market reports, consulting analytics, etc.

Why the metrics demonstration matters

Some of your metrics could appear to be not so high as you’d like, maybe even lower than average on the market. However, it’s still important to demonstrate the dynamics of how they’re changing since even a slight improvement may earn you points and have an impact on your final ESG rating (which is often calculated as an average between E, S and G mean grades).

Which KPIs do ESG metrics affect

Since ESG is now an important point and even a demand that society (and investors) makes to companies, top management can find these metrics as a part of their KPIs. ESG targets are more and more often linked to executives’ pay. Occupational safety & health indicators might affect annual bonuses of all kinds of persons in charge from general manager, operations managers, and any manager responsible for line organization at the production or construction site up to CEO and even Chief Business Digital Transformation Officers.

However, ESG KPIs must correspond to the strategy which the manager is responsible for, and not be counterproductive. It’s important to focus on the company’s targets and smoothly include their ESG aspects. It is also vital to provide all necessary assistance to help managers meet ESG targets in terms of occupational safety and health, be it additional inspections or digital tools for personnel monitoring.