New Risk-Based UK Health & Safety Sentencing Guidelines Trigger A 148% Increase In Fines
On February 1 2016, the new sentencing guidelines for health and safety offences came into force in the UK. With the aim to prevent a health and safety incident from occurring, the guidelines now focus on the ‘risk of harm’ as opposed to actual harm. As a result, 2016 saw a 148% increase in the overall cost of health and safety fines compared to 2015. In 2016, at least 18 fines exceeded the £1 million mark compared to just two cases the year before. The UK is the European country with the second highest amount of EHS regulations enforced after Germany, reaching 1,748 regulations.
Prior to the new sentencing guidelines a million pound fine would require a severe incident such as a fatality to occur. Balfour Beatty, for example, received a £1 million fine after a fatality occurred due to the incorrect working conditions of using an unsuitably-sized excavator. The same size of fine was received by National Grid after a fatal incident occurred due to non-compliance with gas escape procedures. The new angle taken on sentencing health and safety incidents that focuses on the risk of harm is reflected in the ConocoPhillips case. The firm was fined £3 million after pleading guilty to three breaches of health and safety regulations including the release of 600kgs of potentially explosive gas on a North Sea oil platform. No workers suffered any injuries.
Environmental fines in the UK have also reached an all-time high. In March 2017 Thames Water, a privately-owned water utility with £2 billion in annual revenue, received a record £20.3 million fine for releasing 1.4bn litres of untreated sewerage into the Thames and its tributaries. This fine greatly exceeded the largest preceding fine for water utilities of £2 million and reflects the leeway given to judges to impose multi-million pound fines on large commercial organizations.
The take-away for EHS leaders and executives should not be to focus on EHS compliance since that will not solve the operational problems which are the cause of the fines. Instead, executives should incorporate EHS non-compliance risks into their enterprise risk management frameworks at a comparative level to financial risks such as internal controls and IT risks like cyber-security protection. Only a top-down risk perspective which marries the potential to incur huge EHS-related fines with investments in operational improvements will help corporations to make the right investments to avoid massive fines which negatively impact financial performance in a material way.