The Steinhoff Saga Management review - University of Stellenbosch Business School

January – June 2018

A new way to report on health and well-being in business

  • Dr Nicolaas Pronk, Prof Daniel Malan, Dr Gillian Christie, Dr Cother Hajat and Dr Derek Yach
  • MAY 2018
  • Tags Insights, Leadership
12 minutes to read

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Article written by Dr Nicolaas Pronk, Prof Daniel Malan, Dr Gillian Christie, Dr Cother Hajat and Dr Derek Yach

The value of happy and healthy employees

It is undeniably so that happy and healthy employees play a key role in the financial health of an organisation.

The four behaviours of physical inactivity, poor diet, tobacco use and harmful use of alcohol contribute to the four non-communicable diseases of diabetes, cardiovascular disease, cancer and chronic respiratory diseases. Collectively, these diseases account for some 60% of all deaths worldwide.

When companies are recognised for their efforts to successfully create a workplace culture of health and safety, financial modelling studies indicate that they are more likely to outperform the market. One study has suggested that the cumulative output loss as a result of unhealthy and unhappy workers will amount to US$46.7 trillion for the two decades spanning 2010 to 2030 (Bloom, Cafiero, Jané-Llopis et al., 2011). But how is the health and well-being of employees reflected in the reports of organisations?

Sadly, corporate reporting largely lacks the inclusion of health and well-being (HWB) metrics on employees. USB’s Professor Daniel Malan co-wrote an article on this – titled ‘Health and Well-Being Metrics in Business: The Value of Integrated Reporting’ – in the Journal of Occupational and Environmental Medicine.

In this article, the authors said that health has long been recognised as important for sustainable development as well as sustainable business performance. However, companies fail to capture the value of HWB metrics in their reports.

The cumulative output loss as a result of unhealthy and unhappy workers will amount to US$46.7 trillion for […] 2010 to 2030

 

Enter integrated reporting

According to the authors, a wide range of reporting instruments are used by organisations to disclose sustainability-related information. In fact, the number of reporting instruments has almost doubled since 2013, from 180 to 383 instruments, and these are being used in 64 countries. These instruments are used to support corporate reporting on financial, sustainability, social responsibility, integrated, and regulatory matters.

Today, integrated reporting is used as a cohesive approach to corporate reporting. Its main aim is to improve the quality of information that allows for the efficient allocation of financial capital. The International Integrated Reporting Council introduced a framework for integrated reporting that closely aligns human capital with financial, manufactured, intellectual, social and relationship, and natural capitals. This framework successfully positions human capital alongside the other capitals. However, it does not specifically include HWB in the human capital domain.

Integrated reporting should include more information on health and well-being in order to explain to investors of financial capital how a business creates value over time.

Introducing two new tools to report on the health and well-being of employees

Corporate integrated reporting standards (defined as reporting that demonstrates how long-term value is created for shareholders) as well as sustainability reporting standards (broadly described as triple bottom line or non-financial reporting) traditionally include occupational health and safety disclosures but are devoid of HWB indicators. Also, the inclusion of HWB metrics into corporate reporting would support efforts by the United Nations Global Compact to translate the Sustainable Development Goals into action.

Malan and his co-authors have introduced two new measurement tools that allow for the inclusion of HWB metrics into existing standards for corporate reporting. They presented a Core Scorecard and a Comprehensive Scorecard, designed by a team of subject matter experts convened by the Vitality Institute, and organised around the categories of Governance, Management, and Evidence of Success.

Why the need to include these metrics in corporate integrated reporting? According to the authors, this forms part of corporate governance and ethical leadership, and the values that ultimately align with environmental, social and economic performance.

There is a clear business argument to include HWB metrics into existing standards for corporate reporting. Healthy and well employees are more productive, incur less medical care costs, have lower turnover rates, and report higher levels of job performance. Based on these observations, it stands to reason that integrated reporting should include more information on health and well-being in order to explain to investors of financial capital how a business creates value over time.

For their scorecards, the team of experts included metrics categorised into three equally weighted categories, namely Governance (based on leadership style and culture), Management (reflective of the culture through programmes, policies and practices) and Evidence of success (considering specific measurement and assessment activities within the company that reflect programmatic efforts to reduce health risks and quantify outcomes).

Both scorecards were designed to reflect what a company does or provides that generates HWB among its employees. The scorecards reflect an organisational-level set of actions and are focused corporate governance, ethical and value-driven leadership, and conditions of work.

Linking HWB to the workforce, the community, and the performance of the company itself provides an example of creating shared value in which benefits accrue to all stakeholders involved.

The business case for including HWB metrics in integrated reporting

HWB metrics – generated via the two scorecards – can now be used to report on employee health and well-being in integrated company reports. The scorecards have been designed to complement existing standards for corporate integrated reporting where HWB represents the human capital domain alongside other business capitals. The proposed metrics are unique in this way.

Strong corporate governance and a commitment to ethical leadership and values are required to align corporate reporting with environmental, social and economic performance. Linking HWB to the workforce, the community, and the performance of the company itself provides an example of creating shared value in which benefits accrue to all stakeholders involved.

At the same time, the business sector should not only look at HWB as an input to business processes, but also as an output. This requires additional research on the health impact of products and services on consumers and society at large. As an area of future work, HWB as an output of business processes should be prioritised in the context of creating shared value for all stakeholders involved, including the workplace, the marketplace and the community.

Indeed, the authors believe that using the proposed metrics across multiple sectors and in a manner coordinated and supported by leading standard-setting agencies may allow for a standardised approach that is both comparable and material to business. Reporting on HWB in an integrated manner can yield significant returns for business and society alike.

Prof Daniel Malan teaches Business Ethics and Corporate Governance at the University of Stellenbosch Business School. He is the Director of USB’s Centre for Corporate Governance in Africa and a member of the South African Institute of Chartered Accountants’ Advisory Committee on Health and Wellness.

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