Companies that cut corners on worker safeguards may save money in the short term but risk far higher costs from disasters, both human and financial
| Photo Credit:
MOHD ARIF
In recent weeks, we have witnessed deadly disasters that highlight flagrant safety lapses. The Air India Dreamliner crash and the Chennai metro rail girder collapse highlight a critical issue: a systemic erosion of industrial safety standards and a diminishing “factor of safety”. In just the first half of 2025, India has witnessed a series of fatal industrial accidents: a fireworks warehouse explosion in Gujarat, a fire accident at a cracker factory in Andhra Pradesh, a blast at an ordnance factory in Nagpur, and a chemical factory explosion in Mumbai, to name a few.
These are some of the prominent ones in major manufacturing setups reported in the press, while there will be many more in the hinterlands which go unreported. According to IndustriALL, which represents workers in a wide range of sectors, over 400 workers lost their lives in workplace accidents in 2024 alone. Per the Directorate General of Factory Advice Service and Labour Institutes (DGFASLI) reports, on average, three people working in factories died every day between 2012 and 2022. Such recurring incidents highlight the serious repercussions when engineering margins erode and oversight falters, and the fact that proactive safety must be a fundamental business imperative. Organisations should move away from a culture of learning only through tragedy and focus on systemic resilience.
Over the last few years, the government has pushed for several initiatives such as the Make in India programme and Production Linked Incentive (PLI) schemes, promotion and development of industrial corridors to attract investments in the manufacturing sector. While these initiatives contribute to the larger development narrative, safety becomes of paramount importance. On the other hand, driven by intense competition, businesses often prioritise efficiency over protective measures, thus operating with razor-thin safety margins.
Dilution in worker safety
Experts warn that cost-cutting has reduced the traditional “factor of safety” in design and operations. In some instances, regulations also allow firms to self-certify safety and ban surprise inspections, effectively prioritising ease of doing business over rigorous oversight. Evidently, accidents that occur as a result of negligence of safety rules are becoming routine.
Academic research and anecdotal evidence have clearly showcased that companies that cut corners on worker safeguards may save money in the short term but risk far higher costs from disasters, both human and financial. Investing in worker health and safety is a strategic business decision. A strong safety culture not only keeps the risks in check it also enhances employee productivity, morale, and performance. It preserves credibility, attracts clients, and secures investor confidence, with favourable ESG (Environmental, Social, Governance) ratings bolstering brand value.
Safety and security of workers is part of the corporate ESG ratings, with a majority of the ESG frameworks recording occupational health and safety under the ‘Social’ category. With millions of dollars of funds flowing based on impact investing models, poor safety performance can lead to lower ESG scores, thus leading to lasting reputation damage. In India, SEBI-driven Business Responsibility and Sustainability Reporting (BRSR) standards also mandate top-listed firms to disclose information related to workplace incident data, further linking safety to shareholder value. ESG ratings, thus, offer an impactful, market-driven mechanism to drive safety improvements, especially where direct regulatory monitoring and enforcement are inconsistent.
In an emerging economy, systems and market conditions may push the limits of organisations to achieve the best performance at breakneck speeds and at a low cost. But the cost of growth should not be paid in people’s lives. The recent tragedies are a grim reminder that engineering margins and corporate goodwill are not infinite. Only a sustained, system-wide focus on occupational health and safety, well-integrated with ESG accountability, can prevent the next disaster and keep industry truly sustainable.
The writer is Faculty – Operations Management and Decision Sciences Area, IIM Tiruchirappalli
Published on July 5, 2025
