From living wages to forced labor and inequality, the importance of companies’ social performance is receiving increasing attention.
Most recently, the International Sustainability Standards Board (ISSB) has indicated that it is likely to include social issues among its future agenda priorities. This is great news. ISSB has an opportunity to establish a strong foundation for sustainability reporting on economically important social issues. However, the current plan is likely to miss the mark and prolong the market turmoil. We propose a different way forward.
Evidence of the economic significance of social problems is all around us in the form of lawsuits, new regulations, business interruptions and costs, reputational damage, and more. Examples include forced and child labor in factories and fields, poor wage workers, safety deficiencies and poor community relations in mining operations, data privacy violations, the dangers of social media platform algorithms, or These include systemic risks of inequality.
However, there is currently no global standard that can help companies and investors understand how various “social” issues are interconnected. The topic has proliferated against a backdrop of media scrutiny, public campaigns, increased regulation, and other evidence of a publicly perceived link. There is no viable structure for companies, investors, and others to understand them and their likely significance.
ISSB is currently considering research projects on both ‘human capital’ and ‘human rights’. We recognize that these two categories overlap, but we address this by considering human capital in relation to labor in the value chain and human rights in relation to workers and communities. I am proposing that. They suggest that future research be leveraged to identify boundaries and connections between them.
But in reality, the connections are so wide and the boundaries so narrow that such a division doesn’t really work. Fair wages, social benefits, health and safety are human rights issues, whether in a company’s workplace or a supplier’s workplace. These are factors that affect human capital as well. The composition of the workforce and the use of agency and child labor similarly impact both human rights and human capital wherever workers work.
In other words, searching for the line between human capital and human rights is chasing ghosts. ISSB’s current consultation on the proposed plan is therefore timely and welcome. The company has a once-in-a-lifetime opportunity to chart a clear path forward on social issues that aligns with its goals and foundations by:
- Based on the general requirements standard S1, we will gradually build a cross-cutting social standard. This includes disclosures that demonstrate how well a company’s governance, strategy and risk management address identifying and addressing the specificities of societal risks.
- It includes a clear architecture for social issues on which ISSB’s future work, including enhancements to SASB indicators, can be built.
- It integrates several key employee-related metrics that are generally important to any company, including workforce composition, costs and investments, availability of alternative employees, and diversity, equity, and inclusion (DEI).
This approach will meet ISSB’s ambition to establish a global building block for sustainability reporting by providing a single, solid foundation for disclosures on social risks and opportunities. Probably.
It could be based on the ISSB’s founding documents, in particular the CDSB’s Environmental and Social Information Reporting Framework. The ISSB study has already noted that this framework is relevant to the disclosure of social information, but incorrectly states that it focuses on the human rights of groups of people in an organization’s value chain. In fact, the CDSB framework provides a social Provides a comprehensive four-part architecture for.
This will go beyond the ISSB’s S1 standard for general requirements and will focus on factors specific to social risks, building on elements of the CDSB framework. This includes the importance of global human rights due diligence standards and laws. Direct engagement with affected stakeholder groups and their representatives. External grievance mechanisms to identify and address issues before they become campaigns or litigation. And we also need the expertise of governance bodies to oversee these risks, including where they have their roots in the business model.
Pursuing standards of this kind for social issues would also support interoperability with other reporting standards, in particular the European Sustainability Reporting Standards (ESRS). The ESRS Social Standards follow a four-part architecture reflected in the CDSB’s framework. The first five disclosures of each of these four social standards are nearly identical and provide the same kind of common ground that the ISSB Thematic Standards can provide in terms of financial materiality.
In short, all the ingredients are in place for ISSB to pivot from the idea of two research projects on human capital and human rights to one cross-cutting, less granular project for standards on social issues. Approached this way, it will be less resource intensive than either of the proposed projects.
The B Team, Shift, and the World Benchmarking Alliance are working together to advocate for ISSB to move in this direction. We are very encouraged by the many positive responses.
We believe that a single thematic standard on social issues is a logical starting point for future challenges, a standard that provides a sound building block for fiscally significant social issues that markets desperately need. We hope that ISSB will share this view.
Caroline Rees is president and co-founder of Shift, a nonprofit organization that leverages the power of the United Nations Guiding Principles on Business and Human Rights to promote respect for human rights in business.
Namit Agarwal works as a social change leader at the World Benchmarking Alliance (WBA). He aims to influence the world’s most influential companies to respect people’s rights and entitlements in their workplaces, supply chains and communities.
