FTSE 100 firms do not provide enough information to evidence what they are doing around skills investment, diversity and inclusion or employee wellbeing, analysis has found.
The CIPD , the Pensions and Lifetime Savings Association (PLSA) and investment firm Railpen said employers needed to be more transparent about how they recruit, invest in, and manage their workforce in their annual reports if they wanted employees and potential investors to understand how they are building productive and sustainable organisations.
The bodies’ analysis of workforce disclosures in the 2021 annual reports of FTSE 100 firms found the quality of reporting in seven key areas was generally low and the use of data to evidence their comments was ad-hoc.
The seven themes they analysed included: workforce cost and composition; employee relations and wellbeing; reward; voice; skills, capabilities and recruitment; and response to Covid-19.
CIPD chief executive Peter Cheese said: “The pandemic and rapidly changing world of work mean that workforce matters have become even more important to understand. We need organisations to show how they are responding to demands for more responsible, productive and sustainable businesses, and how they are investing in the workforces and cultures they need to thrive in a more uncertain and changeable future.”
He urged organisations to place more emphasis on the ‘S’ part of ESG (environmental, social and governance).
“Now is the time for more transparency and action, but this requires more guidance and clearer frameworks for reporting. The creation of an accepted baseline framework for workforce reporting would help organisations report how they manage and invest in their people in a clear and consistent way and improve reporting practices over time,” said Cheese.
Joe Dabrowski, deputy director of policy at PLSA, said high-quality workforce reporting is key to better outcomes for companies, investors and workers.
Environmental, social and governance
“You often hear companies say that ‘people are our greatest assets’ and yet, in many cases, the reality fails to match the well-meaning words,” he said.
“It remains vital that investors and regulatory bodies continue to push companies to provide better transparency in these areas, which are core to how their overall approach to ESG will be judged.”
They said parties including the Financial Reporting Council, investors and business groups should agree a baseline framework for workforce reporting to improve the quality and consistency of company disclosures on people issues.
Such a framework should include four areas: workforce composition, employee relations and wellbeing, reward and recognition, skills and capabilities. Their report says these areas are “material to all organisations in terms of their culture, their role in value creation and in identifying risks associated with people and the workforce”.
The How do companies report on their ‘most important asset’? report, finds that:
- Although 93% of FTSE 100 companies provided evidence of D&I investment in their annual reports, only 22% provided the ethnic breakdown of their workforce (10% in 2019). Only nine disclosed their ethnicity pay gap (three in 2019)
- 97% mention investment in skills and development, but only 37% reported their number of apprenticeships and internships; 35% disclosed training hours; and 16% disclosed training costs.
- Just 11% provided their internal hire rate – often an indicator of how well companies train and develop employees
- Only 15% disclosed their pension policy in the people section of their annual report
- Only 13% of reports discussed mental wellbeing in relation to health and safety or risk assessments, suggesting it is still not being taken seriously by firms
- 36% mentioned worker voice in relation to trade unions (8% in 2019)
- Narrative on support provided to employees working from home during the pandemic, such as providing IT equipment or mental health support, was discussed by 71%.
The report also recommends that:
- High-quality corporate reporting should be combined with robust employee voice mechanisms and diverse boards that are focused on employment practices
- The Companies Act 2006 should be amended to replace the term ‘employees’ with ‘workforce’ to require companies to report equally on workers under all contract types, rather than just their direct employees
- Workforce reporting would be improved by enhanced oversight of the ‘comply or explain’ corporate governance regime by the Audit, Reporting and Governance Authority once it is established, through the publication of a regular, published annual audit of company reports.