Industry Insights

HR are CFO´s and CEO´s Darlings to Attract Investors

Apr 17, 2023 | Talent Analytics

HR plays a vital role in promoting sustainability in organizations. EDLIGO's Talent Analytics with AI can assist in reporting, evaluating, and creating value for stakeholders.

Sustainability is a growing topic, especially for Human Resources (HR). In the past, sustainability meant to cover mainly environmental issues. Now the concept of sustainability is being expanded. Now it’s about much more: Not just doing a little greenwashing, pardon, green reporting. All possible environmental, social, governmental aspects, people, employees to the landscape, environmental compatibility, CO2, legal, etc.

In Germany, we do already have an international applicable German Sustainability Code (DNK). This was presented by the Council for Sustainable Development (RNE) in 2011! Therefore, reporting is no longer simply about having done something. HR Reporting is to happen in a standardized, orderly manner, comprehensible and verifiable, repeatable, and readable.

Years ago, ISO 30414 on Human Capital Reporting (HCR) for small and medium-sized enterprises (SMEs) was introduced for HR reporting. And that’s where it already got down to business. HR professionals need to know their numbers! Because: Transparency about human capital is important for access to lending, leasing, and other financial instruments. ISO 30414 has existed since 2018 and has also been published internationally in various languages. The standardized approach to HCR has clear advantages for all stakeholders in the organization in which ISO is used.

CEOs, CFOs, and CHROs will know that legislators have also issued guidelines at the EU level and have detailed and prescribed them at the federal level with “non-financial sustainability reporting” (NFSR) for SMEs and especially large companies. The German Commercial Code (HGB) already knows the “duty for non-financial declaration” in §289b HGB: “A corporation has to add a non-financial statement to its management report“.

The topic is so important internationally, that the International Financial Reporting Standard Foundation (IFRS) is preparing to create a new organization, the International Sustainability Standards Board (ISSB), to deal with the topic of the NSFR. In addition, the Global Reporting Initiative (GRI), the Corporate Sustainability Reporting Directive (CSRD), and the International Federation of Accountants have drawn up guidelines on sustainability.

With these developments, Environmental Social Governance (ESG) has been formed. Previously, only Corporate Social Responsibility (CSR) was known and worked with. ESG goes a step further, is more complex than CSR, and looks at the entire organization with its effects on all stakeholders and environmental factors and influences.

The Haufe, Springer, and Schäfer-Pöschel publishing houses also have HR specialist literature about sustainability in HR. You can no longer overlook this complex of topics; you cannot avoid it and you shouldn’t either.

Human Resources has taken on a key position because of the new guidelines, laws, and regulations and must therefore steer this area skillfully. HR must demonstrably deliver sustainable results with its functions and processes. The quality of this is checked by internal and external stakeholders. Investors in the financial world today want to be sustainable. An indispensable criterion is therefore the sustainability of HR work.

In the HCR, ISO 30414 explains the guidelines and the core areas that HR should report in a standardized way.

  • Compliance and Ethics
  • Diversity
  • Productivity
  • Succession planning
  • Skill, Competencies, Capabilities, Bench strength
  • Hiring, Mobility, Attrition
  • HR cost
  • Employee Availability
  • Leadership
  • Company Culture
  • Wellbeing, Health, and Safety

Obviously, the reports can only be done with a large set of data. Big data is necessary here. This data must first be collected and then processed cleverly. Of course, this must be GDPR-compliant. The data platform should also offer intelligent evaluation. Good artificial intelligence (AI) is looking for solutions – with the data. It’s no longer just about being able to read reports from People Analytics. The step after the analysis with recommendations is coming. The human view the AI-generated recommendations and decides. The person, the manager, makes informed decisions. Based on data and not based on – under certain circumstances – dangerous half-knowledge or gut feel.

While the finance department can certainly present the costs in different variations today, HR key figures require new procedures for efficient data collection and evaluation, and presentation.

These reported representations must be transparent, understandable, and repeatable. Especially in the field of talent management, many companies are reaching their limits today.

Proof that a project was filled purely based on skills or competencies, proof that promotions, succession planning, or high potential identifications were not carried out based on a nose factor or gut feeling is currently not possible in most companies. As a result, a company quickly becomes legally vulnerable (AGG) and deals with itself instead of with the actual business.

Diversity, fairness, and inclusion are expected of all stakeholders, especially in times of New Work and hybrid working methods. The employees want to work in an organization that, in the post-Covid period, builds up systems that evaluate skills and competencies fairly.

For these reasons, a data-driven support platform has become indispensable. A must and at the same time a blessing for CEO, CFO, employees, HR, and investors. Because sustainability that is reportable, comprehensible, and verifiable creates trust among all stakeholders and is, therefore, an essential factor in value creation.

HR, therefore, has a great responsibility to present the sustainability of the company in a realistic, i.e., correct, comparable to industry standard, the motivating manner for the internal and external world.

EDLIGO’s Talent Analytics with artificial intelligence helps HR and organizations to make a very good and essential contribution to sustainability. The processes triggered by Talent Analytics enable comprehensible, repeatable, and comparable evaluations.

Because with EDLIGO, successors, bench strength, potential, those to be promoted, further training suggestions, career plans, project staffing, skill gaps, skill needs, critical skills, retraining and further training needs, diversity gaps, best practices, commitment, internal mobility staffing and much more are quickly and unprejudiced identified and shown.

The article is written by Reimund Nienaber, HR Consulting Director at EDLIGO and a thought leader. Throughout his international career, spanning over 4 continents and more than 20 countries Reimund built highly performing HR and technical teams. With 20 years of innovating in human resources and 15 years in technical and managerial roles, he helped organizations achieve top performance.

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