Dr. Subhash Chandar is a renowned, accomplished & award-winning HR expert, currently serving as the Group HR Advisor at ESOM Holdings.
As ESG regulations tighten, investors are turning their attention to the “S” in sustainability, and the spotlight is now on HR.
ESG funds control more than $30 trillion in assets globally and are projected to reach $40 trillion by 2030, according to Bloomberg Intelligence. Yet there’s a striking paradox: Companies can quantify their carbon emissions to the ton, but many still struggle to report workforce diversity, pay equity and safety data with similar precision.
As mandatory human capital disclosure deadlines approach in 2025, this data-quality gap is no longer something organizations can afford to ignore.
A BNP Paribas survey of 420 institutional investors, representing nearly $34 trillion in assets, found that 58% cited ESG data gaps and quality issues as the biggest obstacle to making sustainable investment decisions. While environmental metrics have benefited from decades of standardization, human capital reporting is still catching up—and the window to get it right is closing fast.
The Compliance Wave Of 2025
The regulatory tide is rising quickly. The European Union’s Corporate Sustainability Reporting Directive (CSRD) begins phasing in this year and will eventually cover more than 50,000 companies, including non-EU firms with large European footprints. Unlike past voluntary frameworks, CSRD mandates detailed human capital disclosures with external assurance comparable to financial statements.
Public companies will soon face investor scrutiny and potentially litigation for weak or inconsistent reporting. Across Asia-Pacific, frameworks such as Singapore’s enhanced sustainability disclosures and Australia’s Modern Slavery Act provisions all signal the same destination: mandatory, standardized and assured human capital reporting.
The timing is unforgiving. Building investment-grade data infrastructure typically takes 18 to 24 months, which means some organizations are not just behind schedule; they haven’t even started.
What ‘Investment-Grade’ HR Data Really Means
The gap between what HR currently reports and what investors expect comes down to one word: reliability. HR teams accustomed to presenting headcount and attrition now need to deliver multiyear workforce composition trends. Diversity statements must evolve into granular, auditable metrics showing representation at every level and year-over-year progress.
Investment-grade data is consistent, detailed and verifiable. It uses standardized definitions across time, segments results by business unit and geography, benchmarks externally and undergoes independent assurance. This isn’t about vanity metrics; it’s about material risk and long-term value.
Investors now look for signals embedded in human capital data, such as diversity in leadership pipelines as an indicator of organizational health, pay equity as a sign of governance maturity, safety rates as evidence of operational discipline and training investment as a proxy for innovation and resilience.
The financial audit era took 100 years to mature. The human capital audit era will happen in less than five.
What Leaders Are Doing Right
A handful of global organizations are setting the pace. Salesforce built an ESG data team within HR and conducts annual pay equity analyses with full public transparency. When gaps appear, the company allocates funding to close them (more than $22 million to date), turning equity into a measurable business practice.
Unilever integrated HR analytics into its ESG reporting architecture, creating a single source of truth. Microsoft’s annual “Global Diversity & Inclusion Report,” noted for its consistent methodology and multiyear transparency, continues to set the global benchmark.
Why So Many Are Still Unprepared
HR data sits fragmented across systems with inconsistent definitions and incomplete historical records. Data on supply chain labor and contractor management, which is critical to the “S” in ESG, often resides outside HR’s control. Sustainability teams can’t validate it, and finance teams, though data-savvy, rarely own it.
In most organizations, no single function is accountable for ESG data governance. Moreover, HR teams rarely have experience producing investor-grade analytics or navigating external assurance. Bridging this gap demands integrated data warehouses, stronger cross-functional governance and upskilling in analytics, compliance and reporting integrity.
Why Acting Early Creates A Competitive Advantage
Organizations that act now gain advantages across performance, reputation and capital access. Despite political debate, ESG funds still held over $3.1 trillion in assets as of early 2025, according to Rothschild & Co.
According to the Deloitte Global “2025 Gen Z and Millennial Survey,” 70% of Gen-Z and Millennials “consider a company’s environmental credentials or policies to be very/somewhat important when evaluating a potential employer,” and 75% say “an organization’s community engagement and societal impact are important factors when considering a potential employer.” Considering that turnover can cost six to nine months of salary, the retention benefit alone makes ESG a sound financial investment.
Transparent pay equity reporting reduces litigation exposure, proactive compliance avoids penalties and credible disclosures build investor confidence. When ESG data achieves financial-grade reliability, it transforms not just compliance but corporate strategy.
What Leaders Should Do Now
Time is short. Every C-suite should start with a diagnostic: Assess what HR can report today against what 2025 regulations will demand. Most will discover gaps in data, ownership and readiness. Identifying them early avoids a crisis later.
Next, assign clear ownership. Human capital reporting sits at the intersection of HR, finance and sustainability, requiring joint sponsorship from the CHRO and CFO. Together, they can quantify compliance risk, investor expectations and competitive advantage, thereby building a business case that resonates with the board.
Transformation to investment-grade reporting is not a project; it’s a two-year journey. Those who begin today will be ready when investors come calling. Those who don’t will find themselves explaining gaps they can no longer hide.
The Final Reckoning
Environmental reporting took two decades to mature. Human capital reporting will do so in two years. This is more than a compliance wave; it’s a structural shift in how organizations measure and communicate value.
The companies that see this as a governance opportunity will gain credibility, trust and investor confidence. Those that treat it as a paperwork burden will struggle under the weight of scrutiny.
Investors have already decided that people metrics matter. The only question is whether leadership will act with foresight or wait until regulation forces their hand.
The choice is clear. The time is now. And for those ready to lead, the human P&L starts here.
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