Employers Urged to Invest in Their Human Capital

February 18, 2015 Business Day Live

By Tamar Kahn

The company that pioneered using rewards to encourage medical scheme members to lead healthier lives is now trying to persuade JSE-listed companies to invest more in their workers’ health.

Discovery wants firms to add measurements of employee health to their statutory financial reports, an approach it has dubbed the “fourth bottom line”.

“Human capital is a company’s most important asset,” says Discovery chief financial officer Brett Tromp. “For corporations to take more responsibility for the health of their employees they need to introduce a fourth reporting line in addition to the financial, environmental and social reporting lines.”

The “fourth bottom line” should also interest investors, as healthy employees are more productive, says Daniel Malan, a lecturer at the University of Stellenbosch Business School and a consultant to Discovery.

He says a recent US study found stock in a portfolio of companies that had won awards for their health and safety programmes would have produced a return better than the Standard & Poor’s 500 average. The study considered an investment of $10,000 between 1999-2012 in various investment cycles, and found at best the portfolio of healthy companies beat the S&P 500 average by 5%.

Discovery’s research among its call-centre staff found that people who smoke are less productive and make more mistakes than nonsmokers, says Tromp.

“The average employee takes eight days of sick leave annually, costing employers about R10,000 a year. It has also been demonstrated that work absenteeism costs the economy an average R16bn a year. Given that the economy is experiencing challenges, keeping workers healthy should be a priority,” he says.

The concept of “fourth bottom line” reporting is very much a work in progress, as Discovery’s US-based Vitality Institute has yet to figure out exactly what metrics are best to measure. Last year the institute released a report on health promotion and preventing chronic diseases in working-age Americans, and fourth bottom line reporting was among its key recommendations.

The idea has apparently had a warm response from Health Minister Aaron Motsoaledi and fellow health ministers in the Southern African Development Community, who are concerned about the region’s growing burden of noncommunicable diseases such as diabetes. Last month, Sadc health ministers endorsed Discovery’s fourth bottom strategy in principle, and set up a ministerial team headed by UNAIDS regional director Sheila Tlou to guide its promotion in Sadc.

Tromp says convincing employees their health data will not be used against them is vital. “Discovery does not believe that negative incentives are appropriate in relation to workplace health and wellness programmes,” he says. “The aim is to encourage employers to help (employees) live a healthier lifestyle. The UK-based Oxford Health Alliance showed three behaviours cause four chronic conditions that are responsible for up to 60% of deaths worldwide.”

The behaviours are smoking, inactive lifestyle and poor nutrition, which all raise the risk of heart and lung diseases, cancer and diabetes.

Some of the metrics Discovery is considering including in fourth bottom line reporting are smoking and the prevalence of noncommunicable diseases, Tromp says. The metrics selected will need to be clear and easy to understand, readily measurable and have a significant impact on employee health.

 

Image: Health Minister Aaron Motsoaledi. Picture Credit: Trevor Samson via BD Live

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