Leading with Data to Comply with the SEC’s Mandatory Human Capital Reporting Requirement

It's been two years since the US Securities & Exchange Commission (SEC) issued a mandatory human capital reporting requirement. However, the SEC mandates that the disclosure include a description of human capital resources “only to the extent such is material to the business taken as a whole”. A survey was conducted to review the data submissions of 100 of the Fortune 500 companies reporting on their human capital between November 9, 2020 and March 31, 2021. It was discovered that 95% of companies reported diversity and inclusion data; this discovery is not surprising as human capital ties squarely with diversity, equity and inclusion (DEI) as a people-centric initiative. Yet, the types of information provided about diversity and inclusion barely scratched the surface for the real value that can be realized in analyzing DEI data. According to the The CPA Journal, companies reported on the number of workers completing implicit bias training, gender diversity statistics, diversity on their Boards and among senior executives, diversity targets and approaches to achieving diversity in the workplace. I question why the reported DEI data is not more insightful and “material to the business taken as a whole” – what is it that challenges organizations the most about defining what metrics to address when reporting on human capital? In part, my theory is that this challenge is framed by the intersectionality of stakeholder capitalism and DEI that I addressed in a previous blog post. In that post, I asserted that balancing competing interests among stakeholders is achievable when you lead with analytics. Leading with analytics will allow for establishing targeted and measurable, outcome-based business objectives; in the case of reporting on human capital metrics, a data-driven people analysis, both DEI-focused and non-DEI focused, will provide reliable insights for reporting on meaningful (or more material) human capital priorities. DEI data, in particular, can be most insightful for CFOs, CHROs, and Chief Diversity Officers when integrating the people agenda into the business strategy, particularly when there is a lens on human capital as an organization’s greatest asset. If viewed from this perspective, then DEI as an element of human capital reporting can set the stage for transformational business outcomes with direct impacts to the bottom line. And there’s plenty of research to prove the business case for diversity in the workplace. So, digging into an organization’s DEI data can be a powerful exercise and that can reasonably create apprehension, especially if the analysis proves a lack of diversity. However, the data is also purposeful and when the purpose of the data is understood in context of stakeholder interests, then the power of the human capital data can be properly reported as “material to the business taken as a whole”. In other words, it is essential to know where you’re going (your north star) by determining the purpose for which human capital will contribute to overall business objectives; then you can baseline the data to measure progress and assess the value realized over a defined period of time. With a data-driven approach, human capital reporting will become less anecdotal with greater transparency and more clarity. What’s your perspective on challenges with human capital reporting requirements? #humancapital #reporting #SECreporting #ESG #ESGreporting #DEI #analytics #DEIanalytics #diversity #diversityandinclusion #equity #peopleanalytics #stakeholdermanagement #stakeholderanalysis #reportingrequirements #humancapitalreporting #sustainability #SEC #data #dataanalytics