By Callum Quigley, Principal
The demand from investors and regulators for workforce data continues to grow. The ‘S’ in the ESG model has been playing the poor relation to the environmental and governance commentary for some time, but focus is moving to what can be deemed a company’s most valuable asset; their workforce. This isn’t a PR opportunity for businesses. Investors want information about workforce skills, training and development, board and business culture, and how this relates to the strategic value of the workforce. Due diligence can encompass a company’s impact on its workforce and the wider community. Issues include diversity, gender equality, employee rights, charitable activities and community work. The social element of ESG can be challenging to narrate as it is difficult to create parameters that define the value of social commitments. Where benchmarking for environmental data and reporting is progressing, despite sometimes high costs, benchmarking social data and therefore the reporting of it, is still in it’s infancy.
Data, metrics and definitions can underpin the effort for investor reporting but measuring human issues that are complex, multidimensional and sometimes intangible still presents a challenge. It is no surprise that ESG related HR disclosures can be fragmented and sparse. There have been calls for policymakers to develop uniform standards and disclosure requirements for corporates to enable greater transparency and consistency in approach, as we have seen around both environmental impact and governance.
Data is starting to show its versatility and it is becoming more of a disruptive force in day-to-day business overall, and the human resources sector is a good example of this. HR is undergoing a profound shift which focuses on the organisational need to manage identified competencies, including workforce acquisition, workforce management and workforce optimisation. AI platforms are being introduced that read data to reveal future workforce trends, predict behaviour and manage the future talent needs of your business. Firms can also automate routine HR tasks and help create actionable insights from the data harvested from each employee. In a time where hybrid or remote working is the normal day to day function of a business, using data to collate, corroborate and monitor team behaviours is becoming a necessity and much more than a ‘nice to have’.
In theory, HR data can be managed to provide all the insights an investor might ask for as part of their due diligence process. The question really lies in how comfortable the firm can be in providing access to the information as it will shine a light on social practices and governance both inside and outside the organisation. Has delivering reports to investors in this area been lagging behind because firms aren’t comfortable giving access to the level of information being requested? It becomes a question of whether or not a firm can evidence it is delivering on its social responsibilities.
However, data is also the solution to begin the process of building a robust ESG policy. AI led data reporting can deliver insights to build real focus around where a firm can improve. The new approach to managed human resources gives firms the ability to measure the resource value of individuals within a business and therefore help a firm manage its growth strategy. Human-led HR teams simply cannot handle the same number of touch points that automated platforms can. But there is a need for both; you need human interaction to measure emotion, and that can be one of the biggest ‘tells’ when you are trying to manage your team, particularly in a remote capacity. While seeking out and reporting on data patterns might be useful in terms of managing your team’s time away from their desk, managing mental health is a human interaction. The more personal contact we have with our teams, particularly in a remote environment, the better chance we have of providing a positive working experience for our workforce.