An end to the mantra 'people are our greatest asset'

At its last meeting in Istanbul in 2014 the IIRC Council discussed progress in reporting against human, intellectual and social capitals – capitals that have not traditionally been served by widely-adopted reporting frameworks but which nonetheless lie at the heart of long-term value creation.

One of the biggest areas is human capital reporting – after all, people have been our greatest asset in rhetoric used at least over the past 20 years. What has changed? Well, one factor is the increasing importance attached to this area by investors. In the Harvard Business Review on 10 February 2015, David Creelman and John Boudreau argue that ‘human capital deserves to be treated with the same rigor as financial [and other capitals]…’ and managers should apply ‘frameworks developed in more quantitative disciplines like finance, supply chain and marketing’. The article adds, ‘Managers may soon be held much more accountable for demonstrating that they make rigorous decisions about human capital and organisational capability’.

Perhaps the most encouraging step forward here is the investor demand. <IR> is market-led, so it is pleasing to see a number of bodies come together to develop a report for human capital reporting – especially one which is clearly aligned to the value creation model in the International <IR> Framework. ‘Human capital reporting – investing for sustainable growth’ has been developed by a range of organisations including IIRC Council member the Chartered Institute of Management Accountants. The report highlights a path for change, based on an insight that ‘very few companies communicate an integrated understanding of the capacity of their business to deliver sustained value creation through their people’.

The IIRC has also welcomed the launch of the UN Guiding Principles Reporting Framework, which we believe will help give clarity to companies wanting to improve their reporting on human rights, and provide guidance on identifying human rights content for inclusion in an integrated report.

Companies are making the case for a broader perspective on value creation. Doug Baillie, Chief HR Officer for Unilever has said, “By adopting human capital reporting we are increasing our accountability and presenting a more transparent and coherent picture to our stakeholders on the health of our business. Having an accurate picture can also lead to competitive advantage by unlocking the full potential of our people, making the case for its adoption a resounding one.” Turning to the newly-published integrated report by Philips, it is easy to understand its total deployment of people, investment in R&D, the engagement score and turnover per employee.

These examples show two points of impact that <IR> can promote – enhanced process and better outcomes. Integrated reporting and thinking will lead to the end of a mantra – using reporting rather than well-worn phrases to demonstrate the extent to which people are our greatest asset alongside the other capitals used to create value.