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Research report published into human capital narrative reporting amongst FTSE 100 companies

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27 May 2016

Valuing your Talent partnership has published a research report that looks at the current standard of human capital narrative reporting amongst FTSE 100 companies. The partnership brings together the Chartered Institute of Management Accountants (CIMA), the Chartered Institute of Personnel and Development (CIPD) and the Chartered Management Institute (CMI).

As well as seeking to understand the current practice of human capital reporting, the research sought to understand whether the 2014 Financial Reporting Council (FRC) Guidance on the Strategic Report had improved current practice.  Analysis was performed of the annual reports of FTSE 100 companies in both 2013 and 2015.  The analysis performed was of key human capital terms included within the annual reports.  Key human capital elements were grouped together under the categories of: knowledge, skills and abilities (KSA), human resource development (HRD), employee welfare/stability and employee equity.   

To understand whether those companies were reporting human capital issues accurately within their annual reports, a comparison was made between the narrative reported in the annual reports and any human capital issues that might have been reported in the media.

Key findings show:

  • There has been an “overall increase” in the reporting of human capital issues particularly in the area of human resource development. 
  • Specifically there was a 127% increase in human rights reporting under the employee equity heading.
  • Within KSA the two largest increases were the key terms of ethics (22%) and employee well-being (21%).
  • In the employee equity category, equality had increased by 34% and diversity by 29%.
  • Companies working in the areas of property and recreation saw largest increases in human capital reporting.
  • The review of the media highlighted that whilst some company’s annual reports were referring to stories appearing in the media others left out important details or did not report adverse incidents at all.
  • There was “clear evidence” that companies are focusing on workforce and succession planning and the research indicates that there were good practice examples in this area.
  • Companies are attaching a “high importance” to illustrating how they care for the well-being of their employees.  Findings also highlighted that many companies are focused on understanding the capabilities of their workforce and “frequently” illustrate in their reports how their approach to skills development is linked to risk issues such as skills shortages.

The report concludes that overall the quantity and quality of human capital reporting has increased across FTSE 100 companies between 2013 and 2015.  The report also concludes that “the majority of FTSE 100 companies are doing more than simply fulfilling their statutory duties in terms of reporting”.   However the report does warn that even though there has been an improvement in reporting, investors might still struggle to make informed decisions based upon the information reported.  It highlights: 

Even though it would appear that there has been an overall increase in HC reporting, it is debatable whether investors and other stakeholders will be able to make informed decisions based on what are, on the whole, generally positive reports on a variety of HC issues.

The report recommends that companies continue to focus on the reporting of human capital issues but seek to adopt a “broadly consistent terminology to describe human capital items” as this would allow easier comparison between companies.  However, the report is clear that this does not mean a boilerplate approach to reporting.

A press release is available on the CIPD website.  The full report, Valuing your Talent: Illustrating your company’s true value, is available on the Valuing your Talent website.

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