‘The most important asset to a company is its people’ may be a business mantra many of us have heard before. Depending on your past experience of employment (my first job was at a theme park near Grimsby in the UK getting shouted at by the public), you may feel that the statement rings a little hollow.
While there are no accounting standards specifically covering the workforce, the International Sustainability Standards Board (ISSB) is conducting research into whether human capital should be the next IFRS Sustainability Disclosure Standard.
More disclosure of workforce-related risks is the big question
While there are still only two IFRS Sustainability Disclosure Standards, IFRS S1 and IFRS S2, the work done by the ISSB remains focused on implementation and adoption. The most significant development since the launch of the first two standards has been proposed amendments to the industry-based implementation guidance on IFRS S2, which continues to generate significant interest.
For context, an International Accounting Standards Board consultation on hyperinflation recently generated 34 comments, whereas proposed amendments to the industry-based guidance under IFRS S2 generated 220. Clearly a technical accounting change on hyperinflation may not seem as exciting to accountants as sustainability disclosures (although they are exciting enough for us to cover in AB), but the number of comments and the breadth of bodies or corporations responding indicate the potential impact.
People focus
The next step for the ISSB is rather unclear. As a university, we have enough trouble convincing students that sustainability reporting is more than just climate, so when the only two issued standards to date cover ‘general requirements’ and ‘climate’, you can see that the challenge is not just felt within the University of Liverpool corridors.
This brings us to the frontrunner for the next major development, namely human capital. The big question being explored by the ISSB is to examine whether there is a need for improved disclosure to investors about what the ISSB refers to as ‘workforce-related risks and opportunities’.
In December 2025, the ISSB was presented with the findings of research into whether standard-setting in this area would be necessary or feasible. The researchers did this by examining the four areas covered in the two existing IFRS Sustainability Disclosure Standards: governance, strategy, risk management, and metrics and targets.
In terms of strategy, the research analysis states there is clear evidence that investors need improved disclosures to understand the entity’s strategy for workforce-related risks and opportunities. This could include the nature of the risks and opportunities, the location of these in the value chain, and how the human capital management strategy informs and is informed by the entity’s overall strategy.
No widely accepted framework addresses the core content areas
A particular investor desire here is for the disclosure of information about groups of workers based on their relationship to the entity, such as whether they are employees or independent contractors.
There is also some evidence of support for improved industry-specific disclosure about the processes entities use to identify and manage workforce-related risks in the supply chain.
As for metrics and targets, the research highlighted two areas that could be improved. The first is for better disclosure from all entities of metrics related to workforce turnover, demographic composition and contractual composition. The second is for better industry-based information on metrics related to child labour, forced and compulsory labour, and workers in business relationships.
Feasibility
So the work done so far has identified that improvements are needed. The big question is to look at how feasible it is to achieve these improvements.
This could result in the development of a new IFRS Sustainability Disclosure Standard, or a project to amend an existing standard or develop non-mandatory guidance and/or educational materials.
One issue with developing a new standard is where to gather information, particularly for areas such as metrics. The climate standard built on work from the Task Force on Climate-related Financial Disclosures and the existing standards of the Sustainability Accounting Standards Board (SASB, now part of the ISSB). However, unlike climate, this area has no widely accepted framework that addresses the core content areas of governance, strategy, risk management, and metrics and targets. Some of the SASB standards could be used to bring in elements of human capital, but there are several areas, such as child labour and forced/compulsory labour, that contain no specific metrics.
Don’t be surprised if a ‘patch’ is applied to IFRS S1
There is very little out there in terms of existing frameworks to address how an entity’s human capital strategy links to its overall strategy, although the Integrated Reporting Framework could provide a helpful starting point, bringing together value creation and strategy.
There are frameworks talking about risk management that have some consistency and could be used by the ISSB. However, while there are frameworks looking at the metrics suggested above, there is often a diversity in terms of the scope and measurement approaches used.
Part of the discussion for the way forward is examining whether IFRS S1 could be expanded in places to incorporate human capital elements, rather than creating a whole new standard. It is possible that the paragraphs in IFRS 1 that specifically look at the areas of strategy, risk management and metrics could simply have some educational material developed to inform preparers on how to add human capital into their reporting under this.
The research points to a problem that investors would like to address. The clearest solution seems to be to develop a new IFRS Sustainability Disclosure Standard, but that could be a lengthy process. With that in mind, don’t be surprised if a ‘patch’ is applied to IFRS S1 in the form of additional disclosures or educational material, which could leave us still waiting for IFRS S3.
