Assessing Human Capital Disclosure in Sustainability Reporting: Application of a South African Reporting Framework

Abstract

Human capital (HC) disclosure improves transparency on employee investment decisions and reduces information asymmetry, yet this is not aligned with the GRI standards in sustainability reporting. This study applies the human resource (HR) reporting framework of the South African Board for People Practices (SABPP) and the Global Reporting Initiative (GRI) standards to assess HC information in sustainability reporting. A cross-sectional design method was applied to a population of the top 100 companies listed on the Johannesburg Stock Exchange (JSE). Five dimensions of the framework, namely, human capital availability (HCA), human capital wellbeing (HCW), human capital investment and growth (HCIG), human capital contribution (HCC), and human capital wealth creation (HCWC), were utilized deductively to construct an assessment instrument/disclosure index. Exploratory factor analysis (EFA) was performed, and Cronbach’s alpha coefficients above 0.60 were generated for the five dimensions, thereby confirming the internal consistency and validity of the disclosure index. A key managerial implication is that the disclosure index will enable HR professionals to provide value-relevant information in sustainability reporting based on GRI standards. Therefore, a novel contribution of the study is the development of a disclosure index to specifically assess employee-related information in sustainability reporting.