The Hidden Dividend: Why Human Capability Is the Missing Metric in ESG

Dr Marcus Bowles, Chair, The Institute for Working Futures p/l

When ESG comes up in boardrooms, the conversation almost always starts — and usually ends — with the E. Carbon footprints, renewables, energy use, emissions disclosures. Governance, the G, has matured too, pushed along by investors demanding more transparency, more accountability, more action on cyber risks and AI oversight.

But the S — the social pillar — still lags behind. Too often it is reduced to tick-box reporting on compliance, philanthropy, or diversity targets.

This has never made sense to me. Because it is people — the very heart of the social dimension — that create the most enduring form of corporate value.

Investing in human capability — whether that’s giving someone the chance to build durable skills, earn a micro-credential, or open up a new pathway to further learning or careers — is not just a business expense. It’s a profound social contribution. And yet, most of the time, we don’t count it.

Why the “S” Has Lagged

Part of the problem is mindset. Too often, social reporting has been framed around a minimalist principle of “do no harm.” Don’t pollute the community, don’t breach labour laws, don’t damage the brand, don’t embarrass the board. Necessary, yes, but hardly inspirational.

A key missing perspective is viewing the S as important: building leaders, staff, and relationships with stakeholders, customers, and the community can be a valuable social investment for an organisation.

But here’s the gap. When companies report on the social side, it is mostly diversity statistics, workplace safety, Indigenous engagement, or philanthropy. Important, of course, but incomplete. What’s rarely visible is how organisational efforts to build leadership behaviours, grow worker skills, and expand adaptive capacity play a critical role in strengthening the communities they belong to.

Human Capability as Social Capital

Over my career, I’ve seen the same pattern: companies that thrive over the long haul are not the ones chasing only short-term efficiencies. They are the ones investing in what I’d call the “hidden dividend” — the trust, adaptive mindset, and innovation that comes from building human and social capital.

It’s not always easy. In fact, it often looks like what Erik Brynjolfsson and his colleagues describe as a productivity J-curve. The early costs of capability investment feel steep, and the pay-offs take time. But over the years they compound — in loyalty, collaboration, problem-solving, and the reputation that attracts partners and talent. It’s not a path for those chasing short-term efficiencies or quick cost cuts to reassure anxious shareholders.

I structured the Human Capability Standards into four domains, and I believe development can likewise be tracked at four levels:

• Structural — the networks, leadership pipelines, qualifications, and micro-credentials that open doors.
• Relational — the trust, retention, and collaboration that make teams work.
• Cognitive — the shared values and human capabilities, like ethics, empathy, and cultural awareness, that shape decisions.
• Emotional — the confidence, wellbeing, and resilience people feel when their strengths are recognised and valued.

If any of these are missing, legitimacy and effectiveness are fragile. But when all four are built in each employee and the workforce, the dividends flow not just to the company, but to the communities around it.

Making the Invisible Visible

I often hear the objection: “Capability is intangible — you can’t measure it.” It’s a familiar refrain, usually rolled out whenever a skills-first agenda is raised. Yet investment in skills is tangible because they can be demonstrated, applied, and recognised.

In truth, we’ve been measuring the so-called “intangibles” of social capital — trust, reciprocity, networks — for decades. We know how to do it. We know it creates competitive advantage. So why not apply the same logic to developing human capability?

When a worker gains a micro-credential in creativity, critical thinking or collaboration, when a team develops trust through achieving their shared purpose, when a company aligns builds its cultural values like empathy and inclusion into behaviours— these are measurable, reportable outcomes. They are as real as any number on a balance sheet.

Why Employers Should Report Capability Investment

Here’s why I believe capability investment belongs in ESG reporting:

• Investor Transparency – Capital markets are hungry for non-financial indicators of long-term value. Demonstrating the total skills profile of your workforce — both technical and human — shows not only what people can do today, but how they work and why they are ready for tomorrow.
• Community Accountability – Employees are also citizens. By providing transferable credentials, companies give back to the communities they rely on by raising employability, mobility, and future readiness.
• Resilience and Strategy – When crises strike — whether financial shocks, pandemics, or disruptive technologies — it is organisations rich in human and social capital that adapt fastest.
• Regulatory Alignment – In Australia, legislation and processes such as Social Impact Assessments (SIA) already expect companies to demonstrate how they affect communities and workforce participation. Recognising capability investment is a natural extension.

From Expense to Asset

And here lies the irony. Current accounting rules treat machinery and software as assets — but people as costs. A new chatbot or AI system is capitalised on the balance sheet, while an employee’s learning and credential disappears into operating expenses.

This is precisely what ESG reporting can correct. By disclosing investment in human capability standards and micro-credentials, companies can shift the narrative: from cost to capital, from compliance to contribution.

The Social Dividend

The past two decades have brought crisis after crisis — a global financial meltdown, a pandemic, and now the rapid spread of AI. As we look ahead, they all point to the same lesson: resilience doesn’t come from squeezing more efficiency out of systems. It comes from building adaptability into how people think, emotionally engage, and interact — at work, as customers, and across their communities.

And adaptability rests squarely on human capability.

That’s why I believe every employer has both a responsibility and an opportunity to count these investments not just as training costs, but as measurable social contributions.

Because in the end, this is not just about sustaining profits. It’s about sustaining people — employees, customers, and communities alike. And it is people who remain the true source of resilience and future value.