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NAPF calls for clearer reporting around human capital

The pensions fund body calls on business leaders to address the hole in corporate reporting

There is a “workforce-sized hole in corporate reporting”, according to a discussion paper by the National Association of Pension Funds (NAPF).

The paper, Where is the workforce in corporate reporting?, highlights the lack of consistent information around human capital in corporate reports. It calls for business leaders, HR, policy makers and the investment community to work together to address this gap.

It says that while pension funds are looking for evidence of the long-term sustainable success of the organisations they choose to invest in, they often cannot find clear data to explain what a company is doing around its people, or how people drive value creation in a business.

At an event launching the report, NAPF chief executive Joanne Segars said that while most companies “treat workforce as an asset, too often it’s the missing piece of the puzzle in corporate reporting”.

She called for “transparent information” around human capital to help investors “make informed decisions”.

Segars acknowledged a ‘“catch-22 situation”, with businesses claiming investors don’t ask for information around human capital and investors saying companies don’t disclose it, but she encouraged collaboration between different stakeholders.

“We often hear much talk of the ‘productivity puzzle’ and how this can be solved to bolster economic recovery, yet one of the key factors in driving growth – both corporate and economic – does not appear to be deemed sufficiently material for companies to measure or report,” she said. “That factor is the people who constitute a company’s workforce.”

The NAPF report identifies four areas to be developed in corporate reporting. They are:

  • The composition of the workforce (for example contingent and permanent labour, and the number of people on zero-hours contracts)
  • The stability of the workforce (including regrettable turnover, diversity and pay, and pension provision)
  • The skills and capability of the workforce (investment in training and development)
  • The motivation and engagement of the workforce

Speaking at the event, CIPD CEO Peter Cheese welcomed the report. He said “now is the time” the business community starts “taking this stuff seriously” as intangible assets are driving more business value than ever before.

He called on HR to be “at the forefront of the debate”, working with other functions – particularly finance – and investors. “This can only be solved through collaboration,” he said.

He added that companies who argue that they can’t disclose this information as it’s “competitive intelligence” are talking “total rubbish”. “It’s about: Do you understand as a business the important drivers of your business now and in the future?” he said.

Managing director, global implementation at the International Integrated Reporting Council Neil Stevenson said human capital measures are necessary to help investors “evaluate the long-term potential of investment decisions”.

He added that investors don’t necessarily need “reams of data”, they are looking for evidence that “human capital is being managed in the right way".

“Is the data being linked to value creation and the business model?” he asked. “Numbers need to be put within that broader context. If human capital really is one of the drivers of your value creation story, it should be across the organisation – not just engagement, but also remuneration for example.”