When does money buy love (in financial reporting)?
The United States Securities and Exchange Commission (SEC) has been working at lengths to increase the focus around corporate social responsibility (CSR), with new directives released in 2021, 2022 and more revisions to be expected.
Increasingly, people only want to work with ethical companies. But this is nothing new. A 2021 Grant Thornton report showed that 28% of CFOs cited customers among the stakeholder groups that are motivating their business to enhance social responsibility through environmental social and governance (ESG) programs, rising to 39% at the end of 2022.
According to Harvard Business Review, 90% of the world’s largest companies produce CSR reports, but few are validated. Often these reports represent a record of companies throwing money projects that have no real outcomes. Now, a study carried out by BNP Paribas suggests investors recognise that ethical divestments don’t go far enough. Instead, there is a movement towards encouraging engagement with companies to improve their CSR practices.
So, businesses are under even more pressure to behave like socially responsible corporations. Now that the challenges of proving it are amassing, businesses should first of all start at home by considering how they behave like socially responsible employers.
To do so, they will need a measure of how good they are at retaining staff, minimizing layoffs and ensuring there is enough staff to fulfill labor demands. But most importantly, they still need to capture the proof as financial data.
Create an open dialogue between HR & finance
HR and finance teams need to be able to communicate their objectives clearly, and then be able to measure progress. Although both departments use employee time tracking data to do this already, they use the data very differently.
While finance teams look at employee time to measure and forecast profits, HR uses it to uncover trends in team capacity, individual professional performance or employee wellbeing.
By identifying the commonality, HR and finance teams can open a discourse using employee time tracking data as a universal language. This way, they can incorporate ethics into financial analysis by ensuring that financial goals aren’t pushing employees to their limits.
Define KPIs that social responsibility commitments in check
Time-based key performance indicators (KPIs) help businesses keep track of employee experience as well as their profit margins – especially when it comes to service-based work like consultancy. Time-based employee data can also be used to track progress in CSR.
If the data is already available, business leaders just need to make sure they are looking at the right things and be prepared to make themselves accountable by putting realistic goals in place.
Cash KPIs can show the demonstrable value generated through employee time. When comparing cash value of employee time to the business and cash value of the salary, businesses can use data to evaluate fair pay practices.
Similarly, efficiency KPIs provide insights into workforce distribution, which can help businesses demonstrate work/life balance considerations without relying on qualitative self-report data.
The most commonly measured KPIs usually focus on operational data which tracks the health of key accounts or projects in terms of productivity. Using data slightly differently and adjusting operational KPIs to accommodate ethical employment practices, businesses can begin to calculate one of the most challenging aspects of business to measure – job satisfaction. Anything from short-staffing to halted projects can be recorded in operational data, so these insights hold vital on what might be leading to employee churn, burnout or contributing unethical employment practices.
Make sure technology captures the data you need
Trends are meaningless unless the data they are based on is reliable. In financial reporting, insights need to be well supported with evidence-backed data.
When it comes to capturing data spread over an entire workforce, this can be a challenge. So, using an intuitive, robust time tracking tool will help to secure employee buy-in which is needed to ensure the data is tracked accurately.
But gathering the data is only the first consideration to bear in mind. Like many other digital tools, choosing solutions that are interoperable with existing systems will go a long way to turn goals into reality. Look for flexible time tracking tools like Beebole that can easily be set up to measure the distinct KPIs you want to measure. For KPIs that are more difficult to define – like corporate social responsibility goals – it’s even better if you can find tools that are customisable to your unique needs.
Can financial data accurately represent CSR?
When financial reporting teams focus in on data it already holds, there are ways to accurately represent social responsibility. By measuring the right things with the right tools, numerical financial data can unlock trends that can be used to reassure stakeholders of ethical practice, or hold the business accountable.
Real change only happens when realistic goals can be put in place, and the progress towards those goals can be measured. This is no different in CSR. Businesses need to understand what they are measuring and why. Once they do, they need to choose the most appropriate strategies to track progress and present the results. With holistic confidence in the financial data, they can win confidence from stakeholders and employees alike.
