ISO 30414 - A Beginner's Guide
Traditional financial reporting contains minimal information on an organization’s talent management effectiveness and productivity in relation to revenue and profit. With the emergence of environmental, social and governance (ESG) investment frameworks and impact investing, there is a growing need for companies to provide more information on the “human capital” dimension of sustainability.
The recently released ISO #30414 Human Capital Reporting Standard addresses this deficiency with recommendations for disclosing certain advanced workforce productivity metrics. The U.S Securities and Exchange Commission Chairman also has stated that he “would like to see more disclosure from public companies on how they think about human capital.”
This guide provides everything you need to know about ISO 30414, how to obtain the certification and showcase your commitment to ESG principle. This is what we’ll cover in this guide:
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What is ISO 30414?
The ISO 30414 is the first-ever set of guidelines for human capital reporting released by the International Organization for Standardization (ISO) at the end of 2018. ISO 30414 provides guidance on the human capital metrics companies should report internally and those they should disclose publicly. The standards include details on the evaluation, measurement, and formatting of data.
The main purpose is to make the contribution of human capital to the business more transparent to investors.
The U.S. Securities and Exchange Commission (SEC) announced on August 26, 2020 that it adopted new Human Capital Disclosure Requirements for public companies reporting/listing on the U.S. exchanges, making ISO 30414 much more relevant for companies committed to ESG principles.
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Why ISO 30414?
Traditional financial reporting contains minimal information on an organization’s talent management effectiveness and productivity in relation to revenue and profit. The recently released ISO 30414 Human Capital Reporting Standard addresses this deficiency with recommendations for disclosing an international recognized set of metrics that covers all talent management areas. Scroll down to see a more detailed list of areas that ISO 30414 covers.
The U.S Securities and Exchange Commission Chairman also has stated that he “would like to see more disclosure from public companies on how they think about human capital.”
The investment community has been actively seeking additional HR insights to assess how companies are managing their most important asset - their talent. They are now pointing to the ISO standard as a guideline for information. As noted in a February 2019 research brief by Deutsche Bank: “The value of employees will now be calculated under the new-released ISO standard on Human Capital reporting” and “our stock screens detail those stocks in a strong and weak Human Capital position.” BlackRock’s annual letter to CEOs also stated that human capital management is among its top priorities when engaging with companies.
ISO 30414 and ESG Synergy
The “S” in ESG investing stands for the Social aspect of sustainable investing, which includes a company’s strengths and weaknesses in dealing with human capital. This covers a wide range of human capital topics including but not limited to workforce diversity, pay equality and occupation health and safety. This is where the synergy between ESG investing and ISO 30414 shines.
The ISO 30414 guideline contains all the metrics that investors and other stakeholders need to better measure, track and benchmark the company's performance and commitment to the human capital aspect of ESG investing. This guideline will also help U.S. listed companies meet the Securities and Exchange Commission's recent rule changes on human capital disclosure requirements.
While a few global companies have voluntarily disclosed extensive human capital information as part of their Environment, Social and Governance (ESG) reporting, most organizations report very limited information. HCMI estimates that 95% of global companies fall short on Human Capital Reporting today, and are unprepared for CEO, Board, and Investor questions on talent risk, ROI, and productivity.
What's in ISO 30414?
The ISO 30414 guideline includes 58 metrics divided into 11 main categories. You can purchase the complete guidelines with metric definition and formula on ISO's online store.
Compliance
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Number and type of grievance filed
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Training hours on compliance and ethics
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External dispute resolutions
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Number, type and source of external audit
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Findings and actions arising from these
Workforce Costs
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Total workforce costs
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External workforce costs
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Ratio of the basic salary and remuneration for each workforce category
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Total costs of employment
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Cost per hire
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Recruitment costs
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Turnover costs
Diversity
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Workforce diversity with respect to age, gender, nationality, disability, job family, job level/hierarchy, qualification, diversity of leadership team
Leadership
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Leadership trust
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Span of control
Leadership Development
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Percentage of leaders/talents who have formal mentors or coaches
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Percentage of leaders who have the formal function of mentors or coaches
Occupational Health and Safety
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Lost-time for injury
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Number of occupational accidents
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Number of people killed during work (fatality, death or mortality rate)
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Training hours on health and safety at work vs. total amount of training hours
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Number of employees who participated the training/total numbers of employees
Organizational Culture
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Engagement, satisfaction, commitment
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Retention rate
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Productivity - revenue, turnover, profit per employee
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Human capital return on investment
Recruitment, Mobility and Turnover
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Number of qualified candidates per position
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Quality per hire
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Average length: time to fill vacant positions; time to fill vacant critical business positions internal/external
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Transition and future workforce capabilities assessment
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Percentage of positions filled internally
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Percentage of critical business positions filled internally
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Percentage of vacant critical business positions in relation to all vacant positions
Employee Bench Strength
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Turnover rate
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Involuntary turnover rate
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Involuntary critical turnover rate
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Voluntary turnover rate (without retirement)
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Exit/turnover reasons/leaving employment by reason
Skills and Capabilities
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Total developing and training costs
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Learning and development information
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Internal mobility rate
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Workforce competency rate
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Succession planning
Workforce Availability
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Absenteeism rate
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Full-time equivalents
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Number of employees
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Contingent workforce; independent contractor; temporary workforce
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Number of full-time and part-time employees
Our ISO 30414 Certification Process
Our ISO 30414 certification process can be generally broken down into 5 big steps:
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Step 1: Assess current human capital risk disclosures vs. ISO 30414 guidelines
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Step 2: Identify potential disclosure gaps
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Step 3: Evaluate enterprise data availability and system reporting capabilities to determine which metrics to include in internal and external reports
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Step 4: Certification audit
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Step 5: Monitoring and re-certification audit
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