HUMAN CAPITAL AS AN ASSET: PAGE 7 AN ACCOUNTING FRAMEWORK FOR THE NEW WORLD OF WORK HUMAN CAPITAL METRICS - THE CURRENT STATE OF PLAY Human capital can be a company’s greatest asset; it can Four major groups are driving these efforts: make or break the business strategy and is a key differentiator. A company’s intangible assets, including human capital and culture, are now estimated to comprise on average 52% of a 1. — Regulatory bodies. An August 2019 proposal by the US Securities and Exchange company’s market value Commission (SEC) would expand reporting requirements to include a broad set of measures including training hours, worker productivity and turnover. The International Chairs or chief executive officers often cite “people” or “talent” Financial Reporting Standards (IFRS) and US Financial Accounting Standards Board as a top priority; however, even if companies now typically (FASB) both have requirements in place for reporting employee-employer transaction recognize the importance of people, the frameworks needed information related to employee benefits, retirement plans and compensation. for human capital management have been lagging. The human — International organizations. In late 2018 the International Organization for capital agenda needs to be part of board-level decision- Standardization (ISO) specified 23 core metrics – including costs and worker productivity; making, integrating human capital metrics with financial and health and well-being; and leadership trust – for organizations to track and report. Earlier 2. this year a task force organized by the International Business Council (IBC) of the World operational measurements Economic Forum released a consultation draft proposing a set of common environmental, 4 social and governance (ESG) disclosures and metrics . The disclosures are organized From the shareholders’ perspective, organizations should have into four pillars aligned with the UN Sustainable Development Goals (SDGs): principles of similar levels of emphasis and transparency regarding investment governance, planet, people and prosperity. The people pillar includes metrics covering three key themes: dignity and equality; health and well-being; and skills for the future. in, and returns from, human capital. — Investor communities. For example, the Human Capital Management Efforts to introduce robust measures of human capital into Coalition (HCMC), representing 26 institutional investors, has been instrumental in petitioning the SEC to move in the direction of requiring human capital metric financial reporting have accelerated in recent years as there reporting. is clear and growing market interest in understanding how companies manage and measure human capital to uphold — Policy-makers The US Congress is examining the topic of human capital reporting. In addition, the EU’s non-financial disclosure requirements are designed to the principles of stakeholder capitalism3. Such work to date, promote greater transparency in organizational efforts related to social responsibility however, often lacks specificity, context and comparability. and the treatment of employees as well as board of director diversity.