Investors Rally for ISSB Action on Human Rights and Human Capital Reporting Standards
A coalition of investors wielding a combined asset value exceeding $1 trillion has made a resounding call to the International Sustainability Standards Board (ISSB), urging it to forge global reporting standards for companies to disclose information related to human capital and human rights. The collective appeal comes at a pivotal juncture as the world grapples with defining the parameters of responsible business practices amid evolving global challenges.
Launched in 2021 during the COP26 climate conference, the ISSB operates under the umbrella of the IFRS Foundation with a clear mandate: to shape IFRS Sustainability Disclosure Standards. These standards are being cultivated to cater to the burgeoning demand from stakeholders - investors, corporations, governments, and regulators alike - for a uniform framework that mandates disclosure on sustainability risks and opportunities, thereby providing a comprehensive view of the impact of these factors on corporate trajectories.
While the ISSB recently unveiled its maiden set of climate and sustainability reporting standards in June 2023, its ongoing Request for Information (RFI) has sparked a dynamic dialogue on the path ahead. The board's RFI explores the possibilities for its next two-year agenda, introducing four potential projects including biodiversity, ecosystems, ecosystem services, human capital, and human rights. It is in response to this RFI that 24 asset managers and asset owners from diverse nations, organized by responsible investment NGO ShareAction, have penned a joint letter to the ISSB.
The essence of the letter lies in its fervent call for the ISSB to accord paramount importance to researching and shaping disclosure standards concerning human capital and human rights. The collective voice of these investors underlines that workforce data and its associated concerns are undergoing unprecedented scrutiny, particularly in light of the upheavals triggered by the COVID-19 pandemic. The ripple effects of growing resignation rates, layoffs, and labor market slowdowns have accentuated the need for transparent corporate practices.
The letter emphatically states, “It is imperative the ISSB prioritizes human capital and human rights in its upcoming work-plan. The financial materiality of human capital and human rights-related topics – and the critical role of human rights due diligence in identifying business risks – has never been clearer.”
The investors further advocated for an integration of the ISSB's projects on human capital and human rights, contending that these issues are intrinsically interconnected. The letter underscored the real-world relationship between these themes, with human rights due diligence serving as a pivotal instrument in identifying labor-related challenges. The interconnectedness of issues like unionization and diversity and inclusion also reinforces the case for a unified approach.
James Coldwell, Head of the Workforce Disclosure Initiative (WDI) at ShareAction, emphasized, “We know that workers around the world face exploitation by unscrupulous companies, harming the workers themselves and creating risks for investors. Tackling these issues can only be achieved when there is transparency around corporate practices – something the ISSB is perfectly positioned to deliver. This is why we’re calling on them to prioritize research into human capital and human rights, to develop a globally accepted reporting framework.”
As the ISSB navigates the RFI feedback and charts its course for the future, this united call from prominent investors underscores the urgency to establish a standardized, globally recognized mechanism for corporate transparency in the domains of human capital and human rights. The stage is set for collective action to drive responsible business practices on a global scale.