The energy industry’s inherent hazards, coupled with reliance on various suppliers and subcontractors, contribute to the frequency of accidents and fatalities. This blog looks at the role of cross-industry collaboration and technology in building a safer work environment.
After a decade of steadily decreasing fatal workplace accidents, the Swedish energy and construction sectors found themselves in the news at the end of 2023 as a result of a dramatic and significant increase in workplace fatalities. You can read more about these here. Incidents such as these are a firm reminder of the importance of maintaining a robust health and safety focus as the energy industry invests in new lower carbon energy sources and the significant new infrastructure required.
Aside from the human cost, research published by a team from the School of Civil Engineering and Built Environment, Science and Engineering Faculty, Queensland University of Technology in 2019 has also identified that accidents in major projects have a significant financial cost ranging from US$1,300 to US$4M depending on the nature of the accident – creating not just a social imperative for strong health and safety policies and processes but a commercial imperative too.
The role of the supply chain in energy project safety
The energy industry’s inherent hazards, coupled with reliance on various suppliers and subcontractors, contribute to the frequency of accidents and fatalities. As energy leaders will know, while complex supply chains and subcontracting are necessary for managing large-scale projects, they introduce complexities that, if not managed properly, can compromise workplace safety as well as, wider financial and sustainability KPIs. Recognizing and addressing the inherent risks of these complexities is essential for ensuring the well-being of workers in the energy sector and preventing loss of life. These include:
Fragmentation of Responsibility: Subcontracting often leads to a fragmentation of responsibility on transport projects. Different subcontractors may be responsible for specific tasks or areas, and this division can result in gaps in communication and coordination.
Varying Safety Standards: Subcontractors may operate under different safety standards or have varying levels of commitment to safety protocols. This can create a disjointed safety culture, as subcontractors may not align seamlessly with the overarching safety policies of the main contractor. Inconsistencies in safety training, equipment use, and emergency procedures can also contribute to workplace hazards.
Limited Control Over Workforce: Main contractors often have limited visibility and control over the workforce of suppliers. This lack of direct oversight can lead to challenges in enforcing safety policies, conducting regular safety inspections, and ensuring that all workers are adequately trained and equipped to handle potential risks.
Competitive Bidding Pressures: In a competitive energy market, subcontractors may face pressure to submit low bids to secure contracts. This can lead to cost-cutting measures, including reduced investment in safety measures. Subcontractors under financial strain may be more inclined to prioritize speed and cost-efficiency over comprehensive safety protocols.
Communication Breakdowns: The subcontracting structure can contribute to communication breakdowns between different tiers of the workforce. Miscommunications about project timelines, changes in plans, or safety procedures can create confusion and increase the likelihood of accidents. Effective communication is crucial for maintaining a safe working environment.
High Turnover and Temporary Workforce: Subcontractors often rely on temporary or transient workers to meet project demands. High turnover rates and the use of temporary workers can result in a less-experienced workforce with varying levels of familiarity with safety procedures. Inadequate training and unfamiliarity with site-specific safety protocols increase the risk of accidents.
Improving workplace health and safety in the energy industry requires a holistic approach that extends to every link in the supply chain. Having a clear view of the health and safety policies and processes deployed by suppliers and subcontractors and being able to clearly see where variances are occurring helps energy companies and their main contractors to ensure standardized safety practices across sites and projects.
Similarly, applying a mix of incentives and penalties, such as excluding contractors that do not comply with certain standards from bidding processes, can provide a powerful incentive for suppliers and subcontractors to focus on adherence to safety requirements. In more recent years, collaborative non-financial initiatives such as cross-sector learning and engagement sessions, performance league tables and wellbeing programmes have been used to great effect.
The value of the “network” approach
Technology offers an effective way to mitigate supply chain risks. Supplier and sub-contractor risk management solutions can be used to capture and validate data from suppliers and contractors and provide analytics to identify key health and safety gaps and support continuous improvement. This enhanced visibility and transparency helps reduce inconsistencies, increase control, and increase overall safety.
An established scheme already runs across the energy sector with established players such as Total Energies, Vattenfall and Exxon as well as new entrants such as Newcleo and Xlinks participating to support higher safety (and sustainability) standards.
Such schemes use the power of industry collaboration to share the cost and responsibility for health, safety and wider ESG-related risk. Using a third-party platform enables supplier and sub-contractor information to be collected, independently validated, stored, and maintained in one central location where it can be accessed by multiple main contractors and primary contractors to provide a clear view of the end-to-end supply chain. It can also provide a route to streamlining procurement with a ready-to-go database of pre-qualified suppliers to meet the full range of energy procurement requirements.
Such a scheme achieves substantial cost savings of up to £25 million annually for the UK Utilities sector and has consistently reduced procurement cycles by up to 30 days, fostered supplier growth, and nurtured sustainable supplier communities. Notably, this sector has also seen a remarkable 47% improvement in sustainability scores while ensuring legislative compliance and underscoring organizational commitments to sustainability.
Safety KPIs
Key markers of an effective safety culture in any organisation are the existence of well documented risk assessment processes, health and safety management systems, and incident investigation processes. An analysis of energy suppliers and subcontractors2 managed centrally in this way shows consistently higher standards as follows:
Risk Assessment Processes: 98% of all Achilles suppliers working in the global energy sectors have a formal risk assessment process. This number improves further when looking at the bigger contractors with 99% of all large suppliers being fully compliant.
Health and Safety Management Systems: 93% of all Achilles suppliers working in energy-related sectors have documented health and safety management systems. Again, this number becomes even stronger when looking at larger companies – with 97% having a verified system in place.
Incidents Investigation: An impressive 97% of all Achilles suppliers working in the global energy-related sectors have formal incident investigation processes in place which again rises to an impressive 99% when looking at larger companies.
The workplace fatality statistics and the associated cost implications for the industry underscore the need to not only address workplace health and safety but also to scrutinize and mitigate supplier and sub-contractor risks.
A holistic approach which harnesses collaborative efforts, and technology can be powerful tools as the industry works to address the hazards that arise from supply chain complexities. By recognizing and rectifying the inherent vulnerabilities within the supply chain, this new emerging area of energy generation can build a safer environment for its workforce.
