The Securities and Exchange Commission (SEC) recently introduced new disclosure requirements that went into effect on November 9, 2020. They now require public companies to disclose the number of employees and a description of human capital resources, along with any human capital measures or objectives—from the operating model, to talent planning, learning and innovation, employee experience, and work environment.
Episode 284: Human Capital Metrics & SEC Reporting with Kristina Flügel (@KristinaFlügel)
I spoke to Kristina Flügel, Global Head of Human Resources at DWS Group and former Managing Director of Human Resources for Deutsche Bank. Kristina has worked with the company through an IPO (initial public offering) and believes that effective management and development of human capital is a key driver for organizational success and sustainable people management. It is also a fundamental part of DWS’s commitment to the Social and Governance ESG pillars and strategy to support the global community in achieving the UN’s Sustainable Development Goals.
I asked Kristina why she decided to sign up for Human Capital Reporting Standards and when deciding what to report if she used the ISO standards as a guide. “At DWS we’re committed to environmentally sustainable and socially responsible investing. It’s a commitment that runs deeply through everything we do,” said Kristina. “We also understand that the performance and the sustainability of our workforce is fundamental to the success of DWS. This was the trigger for us wanting to become certified. The ISO human capital reporting standards is the first globally comprehensive standard that has allowed us to do this. It provides a comparable and transparent means to assess our performance across 23 core HR metrics and ensures that we’re taking the right action to enable our workforce.”
We need to be able to measure so we can make better decisions, and that’s why I am so excited to have Kristina on the podcast. Kristina’s company is one of the first to lead this charge, which begins with certification. “To be certified requires rigorous independent assessment by an external auditor and is evidence that our human capital reporting meets the required standards. These cover our core HR areas, such as organizational culture, recruitment, leadership, turnover, productivity, health and safety, diversity and inclusion…they serve as a clear sign to our stakeholders of the legitimacy of our reporting and all are a fundamental part of our commitment to the social and governance ESG pillars and strategy to support the global community in achieving the UN sustainable development goals. As one of the first organizations to be certified in accordance with these standards, we aspire to lead in the developing area of disclosure.”
I asked Kristina about the pre-audit process and what that looked like for her company. “Our first step was to provide the reportable data for the 23 metrics to our external consultant or auditor to verify the content, they then evaluated what we submitted based on the ISO standards…once we received the confirmation that we were compliant in all areas, we were presented with official certification which is valid for three years.”
ESG Criteria and How it Applies to HR Metrics
Environmental, social, and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to make decisions. I asked Kristina about her company’s approach to ESG criteria and how they impact HR metrics. “ESG is our core license to operate and this has been the heartbeat of DWS for the last two decades. Last quarter, our CEO announced that starting this year, every new investment product by the firm will be an ESG fund as demand rises for sustainable investing.”
“Sustainability for us is more than a corporate topic; it has also become a topic of society and of industry in general. Within the social and governance pillars, we recognize that human capital management, diversity and inclusion, and executive compensation are key HR metrics of importance to ESG conscious investors analyzing their investment decisions.”
For those of us in HR who are responsible for metrics, specifically at the HR executive level, I asked Kristina what systems and support we need to look for in order to report human capital metrics. “An effective HR information system and expertise in people analytics are really basic here; it’s then important to have the capability to take the data and present it in a clear understandable way to internal and external stakeholders. The most important is to have buy-in and sponsorship from the top of the house, from the executive board, investor relations, and senior leaders across the business, as they are the ones who will be answering questions on these metrics. They need to trust in you and in the process.”
With the new standards and SEC regulations, the spotlight will shine even brighter on HR and our ability to perform in the areas of employee development, safety, engagement, attraction, and retention. This is the first opportunity we have had to talk to an HR leader who has been involved in human capital metrics since the SEC announced its new guidelines. I’m so pleased to have had the opportunity to speak with Kristina and learn more about the process.
Listen to the entire podcast to hear Kristina’s thoughts on how HR leaders should decide which metrics to disclose, the global implications of the new SEC rules, and how transparency into human capital metrics changes the landscape of HR.
Connect with Kristina Flügel.
– DWS Annual Report for 2020 (includes Human Capital Metrics starting on page 102)
– ISO 30414: Human resource management guidelines for internal and external human capital reporting.
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