Push for Human Capital Disclosures Accelerates Worldwide
An effort supported by over 100 leading investment funds has led to the first-known test of voluntary human capital investment disclosures by public companies. Employee engagement, health and safety, training, diversity and turnover are among the Enterprise Engagement metrics included in these disclosures.
Nearly half of 76 public companies approached participated in the first known voluntary disclosure protocols in human capital investments. This announcement came about a week after ESM reported on a separate effort by the new Social and Human Capital Coalition of 200 leading companies seeking to solicit comment on proposed human capital reporting protocols (see ESM: “Share Your Viewpoints on the Social and Human Capital Protocol”).
The Workforce Disclosure Initiative (WDI) of ShareAction at ShareAction.org has published the first report showing the type of data companies can access and what they currently disclose. ShareAction is a U.K. not-for-profit that promotes responsible investment that is supported by about 100 investment companies with over $10 trillion in funds under management. Click here for the complete study.
ShareAction launched the Workforce Disclosure Initiative in late 2016 “in response to institutional investors’ concerns that they struggle to access meaningful data on company workforce management. The WDI helps investors to fill this crucial data gap by bringing them together to request information on how companies manage direct employees and supply chain workers.” ESM has frequently reported on this trend (see ESM: “SEC Petitioned to Mandate Disclosure of Human Capital Investments and Engagement”).
The first phase of the project is funded by the U.K. Department for International Development (DFID) and is run in collaboration with Oxfam and SHARE. “Its ultimate goal is to improve the quality of jobs in the operations and supply chains of multinational companies,” the report explains. “There is growing evidence that workers, companies and investors can all benefit from improving the quality of jobs...A skilled and motivated workforce is vital to business performance while poor labor standards present significant risks to companies.”
45% of Companies Targeted Provided Information
Out of 76 multinational companies invited to complete the pilot survey, 34 responded for a 45% disclosure rate. According to the report, two-thirds of the companies that disclosed information addressed over two-thirds of the survey topics, and many provided feedback on how to improve the process.
Here is a list of the major information categories disclosed to the WDI in the order of frequency and the number of companies that provide that same information in their public disclosures. These are the key reporting criteria recommended by the report and which ShareAction is promoting to public companies and investors worldwide to demonstrate that there is a wide gap between available data and what organizations currently disclose that will change as more investors demand it.
• Employee numbers—34 to WDI, 26 to public
• Employee training—34 to WDI, 21 to public
• Employee numbers by gender—34 to WDI, 28 to public
• Grievance mechanisms—33 to WDI, 12 to public
• Wages—32 to WDI, 10 to public
• Company policies—30 to WDI, 26 to public
• Health and safety of suppliers—30 to WDI, 7 to public
• Contract types—26 to WDI, 5 to public
• Supplier training—28 to WDI, seven to public
• Gender pay gap—seven to WDI, 13 to pubic
• Working hours—25 to WDI, five to public
• Employee turnover—24 to WDI, 13 to public
• Health and safety of employees—23 to WDI, 21 to public
• Freedom of association—22 to WDI, nine to public
• Whistleblowing—20 to WDI, nine to public
• Employee engagement—19 to WDI, 11 to public
• Supplier turnover—15 to WDI, one to public
• Training hours by gender—13 to WDI, eight to public
• Internal hire rates—14 to WDI, seven to public
According to the study, commonly reported barriers to disclosing such information include limitations of internal data collection systems; the challenges of collecting data across business units; resource constraints and decentralized operations/supply chains; difficulties in collating different regional approaches to workforce reporting such as the use of different metrics; and the sensitivities about sharing data that is not currently disclosed.
Respondents reported the following top workplace risks:
• Attracting and retaining talent
• Health and safety
• Training and developing talent
• Culture and values
• Diversity and inclusion
• Regulation
Here are the top workplace opportunities according to respondents:
• Diversity and inclusion
• Training and developing talent
• Employee engagement
• Cultures and values
• Attracting and retaining talent
Recommendations for Future Human Capital Disclosures
The report makes the following recommendations:
- Facilitate cross-functional coordination. The study found that feedback from companies shows that it has been difficult to coordinate the data collection process when it needs to come from many different departments.
- Report actions, not intent. Based on the report, organizations that appear to have robust policies and commitments towards workforce improvement do not report on what actually occurs as a result. The report recommends that whenever possible, companies should include in their disclosures workforce metrics, actions taken to improve workforce issues, and how the company is monitoring and measuring outcomes. “If actions are currently not in place companies can instead acknowledge this gap and disclose steps they are taking to address it.”
- Start filling the gaps. The report says that “the survey was developed through consultation with key stakeholders and continues to evolve to reflect data points that: 1) investors are most interested in and 2) address the most prominent workforce issues. This means that there is a benefit to companies in identifying their data gaps and starting to collect data on parts of the survey that could not be answered.”
WDI recommends that companies “use the WDI framework to inform public commitments to better workforce practices. Our vision is for workforce data to appear as prominently as climate data in companies’ public reports, and the WDI survey can provide pointers on the data to include. We hope companies will use the WDI survey to inform their own internal workforce reporting and that they will start being more transparent about their workforce commitments in their public reports.”
Report Intended to Address Demand for More Human Capital Disclosures
The report explains that “Either directly or through their supply chains, publicly listed companies are some of the largest employers in the world. The jobs they provide represent significant opportunities for economic growth and development. But poor quality and precarious jobs remain prevalent, particularly in developing countries. The United Nations has recognized this in the Sustainable Development Goals (SDGs)—Goal 8 calls for ‘decent work for all’.” The report notes that the social impact data “routinely disclosed in corporate reporting has been limited, especially when compared to information on environmental impact. This is beginning to change. Investors, governments and civil society organizations around the world increasingly call for better disclosure on social impact.”
Regulatory attention to employment standards is also increasing, according to the report. It cited such recent examples as the California Transparency in Supply Chains Act, the U.K. Modern Slavery Act and the French Duty of Care Law. The WDI intends to provide companies a “resource-efficient way to communicate with investors and other stakeholders about their workforce policies and practices.”
The report says that through an annual investor-backed survey, WDI collates comparable data on how companies manage their workforces. It notes that the organization facilitates engagement between investors and companies on direct operations and supply chain workforce issues. “The WDI follows the example set by CDP (formerly the Carbon Disclosure Project). CDP has catalyzed global disclosure from companies on climate and environmental issues, helping this data to be incorporated into investment and engagement strategies.”
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