Foundational Human Capital Reporting:
Taking a Balanced Approach

The HCMC supports mandatory reporting of the following four foundational disclosures:

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1. how many workers (including employees and independent contractors) the company uses to accomplish its strategy;

2. total cost of the work force, presented in a way that evinces a discernable through-line from the company’s audited financial reports to issuer disclosures;

3. turnover, including management’s actions to attract and retain workers and how changes in the ability to attract and retain workers affects the company’s performance and strategy; and

4. diversity data, including diversity by seniority, sufficient to understand the company’s efforts to access and develop new sources of human capital and any strengths or weaknesses in its ability to do so.

The four foundational metrics are designed to anchor open-ended human capital-related information companies provide under Item 101(c)(1)(xiii) and establish a through-line with company financial statements. The intent is that these four metrics work together to help investors evaluate a company's human capital management skill and identify risks and opportunities.

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The HCMC established the following key criteria in evaluating which metrics would be particularly valuable for investors:

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1. RELIABLE, CONSISTENT, CLEAR and COMPARABLE – Quantitative disclosure that allows for robust consistency, clarity, verifiability and comparability for efficient collection, analysis and benchmarking

2. UNIVERSAL – Universally applicable across all companies

3. TIMELESS – Any company that employs people can collect and report data

4. POINT-IN-TIME – Collectible as of a point in time, similar to traditional financial metrics, allowing for greater efficiency in collection and reporting

5. COST-EFFECTIVE TO COLLECT – Companies already collect data requested

―Basic workforce data like payroll & benefits costs tracked using in-house or external service-based HR tools

―U.S. companies already collect diversity data for mandatory EEO-1 reporting

Principles-based disclosures include information that may be more appropriate based on a company’s industry/sector and/or business strategy.

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For example, the most acute health and safety risks for hospitals differ from those most prevalent in mining companies, potentially impacting the metrics companies in each industry measure and monitor. Industries like apparel, food, and electronics, whose products are often obtained or manufactured in countries with weak labor protections, have reason to prioritize collecting and analyzing information about human rights in their supply chains. Human capital priorities can shift even at the same company: A tech firm that abandons hardware manufacturing for cloud computing services would need to retool its recruitment, succession planning, and talent development processes, as would an industrial firm embarking on a digital transformation.

Principles-based disclosures should include metrics related to the following (non-exclusive) list:

―Workforce Health & Safety

―Workforce Skills & Capabilities

―Workforce Culture, Engagement, and Empowerment

―Human and Labor Rights

―Workforce Pay & Incentives