Investor-grade organizational health reporting: What it is and why it matters

There is a growing trend towards mandatory reporting of organizational health metrics, similar to financial reporting.

The Securities and Exchange Commission (SEC) recently proposed to expand corporate disclosures to include human capital management, including metrics such as workforce diversity, organizational health, and development. In the future, regulators and investors will require companies to report on the health of their organization, including their employees' mental health, workplace safety and corporate governance practices.

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In this new era of organizational health reporting, accuracy, timeliness, and audibility are essential. Investors will expect reliable data on organizational health, and investors need assurances that the data is accurate to make informed investment decisions. They need "investor-grade reporting" for organizational health metrics.

However, companies face significant challenges in ensuring that their organizational health data is accurate, consistent, comparable, and auditable. Organizational health data comes in various forms and sizes and is spread across different departments of an organization, making it difficult to collect and collate the data accurately. To ensure good governance, cross-functional teams within the organization need to engage to collect this data. Using technology to aggregate data at scale is also crucial for complete transparency and auditability.

It is necessary for companies to act now because investors will demand it. As the SEC proposal indicates, investors are increasingly interested in companies' organizational health practices, and their investment decisions are influenced by such data. Therefore, companies need to start collecting and reporting on their organizational health metrics accurately and transparently to meet investors' expectations and stay competitive in the market.

Benefits of Investor-Grade Organizational Health Reporting

Along with meeting the needs of investors, regulators, and other stakeholders for decision-useful accurate organizational health data, building more rigorous "investor-grade" processes has a series of internal benefits that will drive value for your organization:

• Achieve commitments: The right investor-grade data will be required to track organizational health targets and support internal and external organizational health goals.
• Ensure executive visibility: Having strong organizational health data will ensure leadership has visibility into organizational health risks and progress toward goals.
• Build resiliency: As the global focus on organizational health continues to grow, companies will need to integrate organizational health performance into operations to stay competitive and compliant.
• Reduce risks: Building strong organizational health data systems to support reporting will ensure your organization can defend its position and reduce risks around what legislation is passing and when.
• Increase transparency: Organizational health reporting with the same rigor as financial reporting will provide deep insights into how well an organization is managing its organizational health risks.

Being a laggard is no longer an option in an ever-evolving organizational health landscape. The risk is too high not to act now. Providing stakeholders with investor-grade reporting will help companies be resilient in a dynamic market and regulatory landscape and meet organizational health commitments.

How to Move Your Organization Toward Investor-Grade Organizational Health Reporting

Too many companies still consider organizational health as an afterthought; no longer will a piecemeal approach to collecting and reporting organizational health data cut it. To move forward with investor-grade organizational health reporting, companies need to get engagement from the executive level down and build a strategy to start today and slowly iterate on processes and policies for accurate organizational health data collection and reporting. Cross-functional engagement will be key in enabling the correct governance for the appropriate and accurate collection of data.

Cross-Functional Engagement is Key to Success

Engaging with a cross-functional group guided by organizational health and sustainability teams will be essential for investor-grade organizational health reporting. The integration of legal, finance, executives, and many other teams within the organization will be necessary for the proper governance, aggregation of data, and ensuring data is accurate and consistent. Cross-functional engagement ensures buy-in throughout the company embedding organizational health in the culture of the company. It also ensures that each team is engaged in the process and sharing accurate and timely information and data. The below image and list are a snapshot of who should be involved and why:

• The legal team should be involved because of the litigation risks associated with compliance reporting.
• Finance departments should be integrated into the process, as they will be able to translate organizational health risks into financial risks.
• Human Resources teams should be involved in the cross-functional engagement process as they are responsible for managing and monitoring employee health and safety, diversity, and inclusion efforts, which are critical components of organizational health reporting.
• An internal auditing team will be critical to ensuring compliance with any regulations and assurance of data accuracy.

Companies should include other teams on a case-by-case basis depending on the structure of a business; human resources teams, operations teams, marketing teams, and others could all be included in a governance strategy to ensure reporting is transparent, consistent, comprehensive, and aligned across the whole organization.

Steps to be Successful with Investor-Grade Reporting

Leveraging the cross-functional expertise across an organization, as outlined above, builds the controls and procedures needed for investor-grade reporting. However, successful investor-gade reporting needs more than just good governance to ensure the accuracy, auditability, and transparency needed. Here are 10 steps to ensure successful investor-grade reporting:

• Leverage the cross-functional domain expertise - As outlined earlier, take advantage of experience across the company building visibility, controls, and process.
• Make sure you have the right software for investor-grade reporting - Enabling cross-functional teams to aggregate with the full auditability and transparency required for investor-grade reporting can only be achieved at scale through technology.
• Ensure proper governance around procedures and processes - Maintain cross-functional engagement and alignment and iterate on governance processes.
• Improve stakeholder transparency - Give clear and consistent reporting on methodologies on how data was collected, strategies, and progress towards goals, to promote trust.
• Integrate risks or opportunities into business strategy - Combine these risks and opportunities into the wider business strategy to ensure the organization stays competitive and looks better to investors.
• Set an improvement target - Set achievable goals, such as improving mental health, increasing engagement or reducing health care costs, and track and report progress toward them.
• Benchmark peers - To get a better understanding of where the organization sits among its competitors and jurisdiction and where improvements need to be made.

Successful investor-grade reporting requires support from the highest levels and clearly delineated roles, processes, procedures, and strategies. Technologies and alignment with key organizational health frameworks can ensure clarity and make the process a lot less onerous.

Credible Data for Stakeholders

Integrating reporting into investor reporting will soon become necessary to stay compliant and competitive. It will need to be treated with the same level of rigor and importance as financial reporting. While collecting and measuring the data might seem overwhelming and complex, the benefits will far outweigh the challenges.

Companies are stepping up to the challenge and providing enterprises with the technology to collect and register accurate data. From a perspective, to account for the health of large corporations and financial institutions, a technological solution is vital.

Using technology will make investor-grade reporting a far less daunting prospect and will enable organizations to ensure compliance with the growing number of regulations. Technology allows companies to spend less time collecting data and assuring its accuracy and more time building strategies and mitigating other impacts.

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