The International Sustainability Standards Board (ISSB) has consulted on its future agenda priorities: whether to focus on the implementation of its existing standards (general and climate), or whether to add new projects on biodiversity, human capital, human rights and/or integration in company reporting.
The ISSB standards are likely to be adopted alongside the existing International Financial Reporting Standards by many jurisdictions worldwide: the International Organisation of Securities Commissions (IOSCO), representing 130 international securities regulators, has endorsed the ISSB’s work. Some countries, including the UK and Singapore, have announced plans to adopt the ISSB standards. The EU has recently adopted its own European sustainability reporting standards (ESRS), which will align with the ISSB standards such that compliance with ESRS will constitute compliance with ISSB standards.
The CIPD has responded to the consultation to emphasise the importance of human capital reporting for international sustainability standards, especially investment in the workforce. We also encourage the ISSB to reach out to people and finance professionals in any future human capital reporting project.
“Addressing skills and labour shortages has been cited by business leaders as their number one organisational challenge. So why wouldn’t they publish available data on workforce planning, talent management, and training and development?”
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.
Influencing policy
Our public policy team champions better work and working lives by shaping public debate, government policy and legislation.
In her CIPD Voice article, Susannah Haan highlights the importance of the forthcoming European Sustainability Reporting Standards for HR and discusses how they might impact UK companies.
An analysis of how people matters are currently reported and used by boards, including top tips and case studies for HR leaders on how to use metrics to influence organisational strategy
Learn about defining, measuring and reporting human capital, and how HR can use human capital information to drive performance
Discover resources and approaches to environmental, social governance.
