Put the ‘S’ back into ESG, says NAPF

Companies should be including data on their workforces in their corporate reporting in order to give investors greater insight in to their business model, says a new discussion paper from the National Association of Pension Funds (NAPF).

“It seems presently for both companies and investors that there is a blind spot associated with the ‘S’ of ESG,” said Joanne Segars, chief executive of the NAPF.

There’s little information because investors haven’t been asking for it, she explained, pointing out however that investors can’t ask the questions without the information.

The NAPF paper, Where is the workforce in corporate reporting?, suggests that details on the composition of a company’s workforce should be included in reports. “How many full-time, part-time and temporary workers are there? There’s no mention in information from Sports Direct that 90% of its workforce are on zero hour contracts,” said Segars. “I’m not commenting on its merits but it is a crucial part of its strategy and not currently disclosed to its investors as its not seen as important.”

High turnover should also be disclosed as an exit of talent could signal problems, Segars suggested. “The stability of a workforce is important. Other areas for consideration could be gender balance and pension benefits. Pay differentials could be looked at – unequal pay fails everyone and are damaging for the investor.”

She acknowledged that the NAPF was raising contentious issues – like zero hour contracts and equal pay – but that these issues had to be addressed.

Peter Cheese, chief executive of the Chartered Institute of Personnel and Development , welcomed the paper. “We’ve discussed the premise that ‘people are our most important asset’ for years but now it’s time to take it seriously. After all, how can people not be material?” he asked.

The NAPF will be hosting a series of roundtables to discuss the white paper and how to move things forward.