Standard & Poors (S & P) Global Ratings has released a new report focused on the importance of companies looking at a wide variety of risks including their human capital. The report is the first in a two part series, looking at how companies manage Environmental, Social and Governance (ESG) issues and explaining the message it gives back to investors about company management and strategies.
S&P Global concludes that strong ESG performers that have stakeholder-focused and adaptive governance structures are the type of business that are most likely to stay resilient in volatile times. On the subject of human capital, they isolate the clear risks that companies face by not having the right discussions around the workforce at board level, and failing to connect workforce strategies clearly with the main business objectives. In reference to the pandemic, they advise “With the unprecedented disruption being wrought by this pandemic, companies across the economy will be forced to closely manage their social and human capital and scrutinise their strategies as well as their readiness for black swan-type risks”.
“Disruptions in operations, supply chains, policy responses, and customer behavior will have financial consequences, while damage to a company’s reputation could stem from changes in what is perceived as socially acceptable by stakeholders”.
“Even if this pandemic is without precedent, the fallout from it could precipitate a more acute focus on [ESG] factors and preparedness for attentive leadership teams”…..”With skills shortages becoming an increasingly important business concern, any controversies related to workforce mismanagement could influence talent recruitment and thereby interfere with the execution of strategic priorities”.
Energy & Utility Skills Chief Executive Nick Ellins commented “The pandemic has yet again reminded nations and major companies of just how critically important their human capital is to ensuring the delivery of their day to day and strategic objectives, and highlighted the crippling risks of shortfall. It is now vital to know whether they have listened and will act. It is been apparent for some time that it is not enough just to focus on financial and natural capital, and investors have been steadily making that point in large numbers through initiatives like the Workforce Disclosure Initiative, where more boardroom assurance and transparency is being sought. This new report from the ratings agency Standard & Poors is well timed, adding to the weight of evidence and advising that companies across the economy will now be forced to closely manage their social and human capital. Those that do will be judged more likely to remain resilient by the financial community.”
Energy & Utility Skills has been prominent in helping the UK utility sector to better value its human capital, convening policy makers, regulators, regulated business, financial stakeholders, trade unions, major supply chain partners and key interest groups to bring increased strategic recognition for the contribution of the workforce in delivering strategic outcomes, and promote the need for one coherent UK labour market and skills approach.
So far in 2020, Energy & Utility Skills events for its members have included two ‘As I Said to the Board….’ strategic roundtables for group HR Directors on how institutional investors value human capital and getting the subject of human capital into the boardroom, plus tracking of the growing call for investor disclosure around human capital, the progression of in the USA of the Workforce Disclosure Investment Act and the second in a series of White papers on the business case for investment in strategic workforce planning.