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Johannes (Joop) Smits
Partner, People and Organisation, PwC Switzerland
Swiss companies of a certain size need to publish as of this year a report on their ESG measures. What is the most appropriate way of collecting data about employees and suppliers to answer these new requirements? We share explanations in this article.
From the 2023 financial year onwards, large Swiss companies have additional non-financial public reporting obligations under the indirect counter proposal of the Federal Council regarding new Environment, Social and Governance (ESG) rules. In addition, the EU has introduced similar requirements which will extend to many Swiss companies with business activities in the EU.
These new reporting requirements present companies with new challenges around data collection of their workforce as well as from their suppliers. Many Human Resource (HR) leaders have yet to formulate their approach. In this practical, solutions-based article, Johannes Smits, Partner, People and Organisation, PwC Switzerland outlines the six key steps to successfully establish such a workforce and supply chain reporting programme. He also provides insights on how HR leaders can leverage this important analytical information for improved ESG performance on key workforce factors.
Information on sustainability is often relegated to investor relations, largely qualitative in nature and focused on the “E” of ESG. The new reporting requirements bring two key changes. Firstly, on the qualitative side, companies are expected to address where they can improve on workforce issues and how they will achieve the planned improvements. Secondly, the rigour of financial reporting is required, meaning that the reported data must be consistent, timely, data-driven and auditable.
The good news is that there are many benefits to be gained from this approach. These include reduced risks, enhanced access to capital and better talent attraction and retention levels. The following key steps will help you to effectively bring key workforce and supply chain metrics into the ESG reporting framework and achieve the available positive returns.
1. Shift from silos to cross-functional planning and reporting
It is essential that HR leaders collaborate with executive leadership and key corporate functions to understand the workforce and supply chain reporting. Ideally, assembling a cross-functional team will provide guidance on the new reporting requirements e.g. with financial reporting, risk, investor relations, legal and compliance, procurement and HR. This approach will help to provide a comprehensive view of available reporting processes, data sources as well as identifying where the company is lacking insights.
2. Determine what matters most
Measuring people issues that are complex, multidimensional and sometimes intangible, can present a challenge. To avoid under or over investing it is important to define the workforce and supply chain issues that matter most to key stakeholders such as investors, regulators and employees. This can be determined, for example, via “double materiality” assessments. This way you can evaluate issues which need to be addressed as a matter of priority and allocate resources accordingly. Typical Human Rights issues will include child labour and forced labour, specifically in the Supply Chain, but also equal pay for equal work, equal opportunities and health and safety will need to be addressed. The new EU regulations will require companies to also report on topics such as living wages, gender balance, persons with disabilities, workforce training and development, work life balance, incidents and complaint procedures, social protection and the social dialogue (e.g. around crises such as COVID-19).
3. Analyse your available workforce data
To avoid “re-inventing the wheel”, review your available workforce data and its robustness for reporting on workforce matters such as your organisation’s efforts to recruit and manage a diverse and skilled workforce or employee well-being. It is equally important to identify information gaps and close them. In reporting comprehensively about workforce related ESG issues, HR leaders are likely to find that some parts of the story are positive while others offer opportunities for improvement. Where there are challenges, you must articulate measurable improvement plans under the new reporting requirements.
4. Include the entire value chain in your reporting scope
A large portion of the EU’s sustainability regulations will shape Swiss rules as the international regulatory landscape continues to evolve. To meet the expanded requirements and avoid potential liabilities, it is essential to extend the reporting scope to your suppliers. Ensure that they are respecting human rights, specifically, but not solely using forced or child labour and that your suppliers are delivering on Diversity, Equity and Inclusion principles (DE&I) such as equal pay and equal opportunities for all.
5. Automate your data collection and reporting
There are considerable benefits to be gained from automating and where possible, embedding the new HR reporting processes in current systems. These include, for example, ensuring that the data is consolidated through one place (e.g. in a ‘data lake’), enabling faster and more comprehensive data collection while streamlining analysis. Piloting and testing the data collection and reporting process will reduce your risk substantially. Naturally, organisations vary in their levels of maturity, complexity and size. For this reason, HR leaders should retain their ambitious goals, while defining an achievable multi-year roadmap and taking realistic steps along that journey.
6. Communicate the results
Inventory your current workforce related ESG initiatives and publish the results. Include your successes as well as where additional work is required, such as enhanced DE&I implementation programmes or where support might be needed to optimise employee well-being. HR leaders should communicate the challenges and how they faced them openly. Assess your current state, formulate your ambitions as well as the initiatives and resources that you will deploy to close the gaps. In this way, HR demonstrates leadership and vision. Being realistic will strengthen credibility and reinforce your value proposition as an employer. Most employers are facing skills shortages. Our Hopes and Fears survey, conducted in Switzerland and internationally, across 52,000 people, shows clearly how the next generation of talent prioritises working for companies that care about people and the planet.
Act now to ensure success
We highly recommend that HR leaders plan and implement their new ESG reporting programmes as a matter of priority. Do not wait for further developments. The sooner these programmes are commenced the more likely you are to meet the deadlines and achieve the available benefits.
People Sustainability webinar series
People at the center of your efforts. People Sustainability is becoming a priority on business agendas. In this webinar series, we address people-related risks and opportunities across the value and supply chains in order to support you create a sustainable culture within your organisation.
People Sustainability webinar series
People at the center of your efforts. People Sustainability is becoming a priority on business agendas. In this webinar series, we address people-related risks and opportunities across the value and supply chains in order to support you create a sustainable culture within your organisation.
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