Workforce Disclosures Can Strengthen US Companies, Riveron ESG Expert Tells IFR
Riveron ESG consulting expert Elizabeth Saunders recently spoke with IFR Magazine about the growing importance of human capital disclosures. Visit the outlet for the full article or read an abridged excerpt below.
The US Securities and Exchange Commission is introducing a new rule that requires public companies to disclose more human resources-related information, including diversity, pay equity, and workforce turnover data. The proposed human capital management disclosure rule, which is expected to be released in the summer, comes amid a rising backlash against ESG policies. The US regulator has delayed the final rulemaking on climate disclosure after its initial proposal drew intense opposition.
Investors believe greater workforce data disclosures would help them evaluate business performance and lead to better-informed investment decisions.
“People are so focused on the climate rule right now, but they are missing that the human capital rule is going to be quite invasive for companies,” said Elizabeth Saunders, senior managing director at business advisory firm Riveron. Saunders said her clients are concerned about data availability if the SEC demands complex and prescriptive data sets. Companies are also less prepared in providing qualitative information such as succession planning and mechanisms for handling employees’ complaints, she added. Listed companies in the United States have been expanding workforce-related data in recent years, but the level of disclosure varies greatly among companies.
A version of this article, “US-listed firms face greater workforce disclosure,” first appeared in IFR Magazine.
Investor demand: Investors for years have been calling for greater workforce data disclosure, which they believe would help them evaluate business performance and lead to better-informed investment decisions. … Even as companies are increasingly reporting workforce data at the request of ESG-focused investors, the proposed SEC rule means that all information, including diversity statistics and pay equity data, will be subject to public scrutiny. “The cost of collecting the data and disclosing it is incremental,” said Saunders, and the real concern is whether a company’s data shows a lack of diversity and the potential fiduciary and litigation risks.
Early reporting on workforce data has also yielded benefits for some companies. Saunders said clients that disclosed their human resources data in job ads found recruiting to be easier and less costly. “They’re getting more resumes,” she said. “Companies have been cutting costs on everything in the face of recessionary times, but the human capital program is an exception.”