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ESG and Human Capital Reporting: Contemplating Diversity Disclosures

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Institutional investors and other stakeholders are seeking better information from public companies on workforce diversity. Company executives and boards are discussing how and what to disclose, and many observers believe the SEC will mandate further disclosures. Auditors are even mapping out attestation services for ESG reporting. But when it comes to disclosing Human Capital information, straightforward and satisfactory answers are elusive. For SEC-reporting companies there are few established norms when it comes to diversity-related disclosures, let alone the broader topic of Human Capital issues.

At least three organizations have produced Human Capital disclosure standards, and other organizations have developed frameworks for reporting on diversity topics. Few reporting companies, however, have embraced those standards wholesale. Last summer, the SEC dipped its toe in in the water by adopting a principles-based approach that generally requires a registrant to describe its Human Capital resources including the number of persons employed by the company and any Human Capital measures or objectives that the company focuses on in managing its business. But agency-prescribed reporting requirements are not likely to arrive in time to address the current demands for more transparency that reporting companies face.

The article here provides a brief overview of disclosure issues for reporting companies. It also discusses some of the challenges and opportunities for organizations considering how and whether to report on workforce diversity — the hot Human Capital topic. Last, it briefly discusses a company’s options on where and how to disclose diversity information.