Putting human capital reporting on the agenda for international sustainability standards

First focus on successful general disclosure and climate reporting…

We welcome the move to international sustainability reporting standards. In terms of priorities, it would make sense to ensure that the first two standards (general disclosure and climate) are a success, in order to ensure that later standards are also adopted. Evidence of relevance to impact and implementation issues should also be acquired to inform later developments. We would then focus on human capital reporting, which is our area of expertise. 

...then prioritise matters of human and social capital…

The human capital (or social) side of reporting is less well developed or consistently reported on than other aspects of governance and environmental reporting. While we recognise the economic imperatives and global climate emergencies that require attention, we also argue that company boards and investors need to prioritise matters of human and social capital. This was very much in evidence during the Covid-19 pandemic. Health and safety, labour and skills availability, and job design and culture were all demonstrated to being material to company performance and therefore important and significant in their own right. 

In terms of areas most likely to affect value creation, we suggest the following order: 

• Workforce investment
• Employee engagement
• Worker wellbeing (including mental health and benefits)
• Diversity, equity and inclusion
• Workforce composition and costs
• The alternative workforce
• Labour conditions in the value chain.

We suggest that the ISSB look at the ISO human capital reporting standards in addition to those mentioned in the consultation. 

…and implement clear objectives for human capital reporting.

We also believe that it would be important to discuss what we hope to achieve from reporting on human capital. Social reporting objectives could be for directors to describe: 

• how they manage people in their workforce, value chain and consumer base, to gain an understanding of management competence 
• how the company provides healthy and inclusive work, to gain an understanding of how likely the company is to be able to attract and retain employees
• how the company will manage the climate transition (just transition). As highlighted above, how an organisation conducts workforce planning and trains and develop its workforce is a critical foundation for transitioning to net zero operations.