Integrated reporting (IR) is designed to give investors and banks a holistic view of how an organisation creates and sustains value in the short, medium and long term.
In developing an IR, organisations will be required to focus on the material elements of six capitals – financial, manufactured, intellectual, human, social and relationship, and natural – and how they relate to each other and corporate strategy.
The HR profession has an opportunity to take ownership of human, and social and relationship part of the report.
The IR framework defines human capital as:
• Ability to understand, develop and implement an organisation's strategy.
• Loyalties and motivations for improving processes, goods and services.
• An organisation's approach to risk management and ethical values.
Social and relationship capital includes:
• Shared norms, common values and behaviours.
• Key stakeholder relationships, and the trust and willingness to engage that an organisation has developed and strives to build and protect with external stakeholders.
• Intangibles associated with the brand and reputation that an organisation has developed.
• An organisation's social licence to operate.
The IIRC said integrated reports should combine quantitative and qualitative information, and should not be prescriptive. This means human capital reporting does not have to include metrics or use metrics that have a financial value to ascertain value.
IR and Valuing your Talent
Last month, the CIPD launched the Valuing your Talent to develop a human capital framework that will help businesses measure the impact and value of workers. The CIPD aims to create practical tools and indicators to help business leaders, investors and other stakeholders assess an organisations workforce and the value they contribute.
The framework should help the profession establish consistency in the way human capital is measured and reported, but has been met with resistance from factions of the HR profession that do not believe accurate values can be placed on people.
HR must act now
Earlier this year, HR magazine investigated the role HR could play in IR. Laurence Collins, director of people and workforce analytics at professional services firm Deloitte, said currently HR only reports on staff turnover and absenteeism, because that's all it can measure, not because it's really valuable to shareholders.
"Unless HR acts now, the gap is going to get wider and the responsibility for HR metrics is going to be taken away and given to a more strategic finance function," Collins told HR magazine.
"If anything, IR will highlight the gap between what the organisation wants to report on, and what HR will be able to report on. IR will help HR understand strategy, but HR needs to be contributing to and shaping that strategy, not just responding to it."
Read HR magazine's in-depth report into HR and IR here.
