Noting that “[t]raditional measures of organizational value and social impact are no longer valid in the age of Uber, Airbnb, and disruptive thinking”, the Harvard Center for Safety & Health Sustainability has published a report examining the current state of human capital metrics (HCM) corporate reporting. The report states that “there is much more that companies could provide from metrics they produce for internal management purposes,” giving further insight into the ongoing push to require companies to make HCM disclosures while attempting to reinforce the notion that such metrics are provide material investor insight into corporate value. The report examined the prevalence of human capital metric disclosures based on data from the 2016 Corporate Sustainability Assessment survey which analyzed the data from nearly 2,000 public companies. Of the 2,000 companies, 863 of responded to the survey. The survey examined publicly available data for the remaining 1,105 public companies which did not answer the survey. Specifically, the survey examined the prevalence of 12 HCM disclosures among global companies ranging from training hours and costs to development metrics, operating profit per employee and several safety metrics.
According to the report on the survey data, “majorities or significant minorities of firms collect information about [human capital] metrics of increasing interest to institutional investors”. The report data, however, shows companies which actually responded to the survey disclose were usually about three times more likely to provide HCM disclosures than those which did not respond. The report continues, noting that U.S. companies “often lag far behind” in HCM disclosures especially when contrasted to EU and UK companies, which given the cultural differences between countries, is not surprising. The report’s conclusions provide insight into the future trajectory of HCM disclosures:
- The report encourages investors to continue to pressure companies into disclosing the data given the survey results which “indicate that a critical mass of global companies already [have the information.”
- The report seeks to reinforce the first point by citing data that close to 90% of companies that responded to the survey disclosed at least five of the examined metrics. The report’s conclusion does not really address the fact that less than half (only about 45%) of the 2,000 companies responded to the survey and instead concludes that it is likely that a population of the non-respondent companies gather the data already as well.
The report concludes, noting that “investors would be best served by a narrative account of a company’s human capital approach, and its relation to [their broader business] strategy . . . buttressed by specific metrics such as those addressed here which detail that approach and assess its effectiveness.”