ESG practices call for measurement and analysis of many complex dimensions of a firm’s labor supply and human resources throughout its supply chain. To cite just one example, labor rights violations, such as child labor and gender wage gaps, still persist and continue to grow as supply chains are extended globally. Many human capital factors are material to a company’s performance and therefore to the assessment of an investment.
However, reliably and accurately measuring many labor and human resources factors, such as fair labor practices, is especially difficult. This challenge is further exacerbated within large corporations that seek to report labor code violations and remunerations for themselves as well as for their globally distributed suppliers. As a result, current labor metrics are heterogeneous and subjective, as the codes and accepted cultural norms vary with each entity—country, corporation, or NGO—as well as the methods by which fair labor violations and remunerations are accounted for.
To address these complexities and gaps, IMAP is evaluating a workstream that would seek to determine faults in the human capital metrics system and to examine possible improvements. We are considering exploration of the efficacy of rationalization through auditing, the reliability of data reported by corporations, and the viability of other data channels, such as direct-from-employee information.