Growing social inequality has not always been seen as a business risk. The traditional shareholder primacy theory of corporate governance prioritises shareholder interests over other stakeholders. Under such a model, profitability takes precedence over the interests of wider society and local communities.
However, there’s growing recognition that this mindset is working against businesses. Proponents argue that widening wealth gaps pose a threat to both society and business resilience, affecting supply chains, talent pools and sustainability goals.
This highlights the need to integrate social impact into business governance. Business leaders have witnessed how transparent disclosures have made climate change a key factor in financial decision-making. A new initiative aims to do the same for social inequality.
What is the Taskforce on Inequality-related Financial Disclosures?
The TISFD was formally launched in September 2024, with the aim of developing a global framework for companies and financial institutions to report on social-related risks, impacts and opportunities.
It is inspired by the success of the Task Force on Climate-Related Financial Disclosures (TCFD) and the Taskforce on Nature-related Financial Disclosures (TNFD) and will operate in a similar way.
The framework will cover areas such as employee pay, supply chain practices and the impact of businesses’ products and services on customers’ physical and mental wellbeing. These disclosures are intended to clarify the link between the economy and issues such as ill-health and inequality and encourage businesses and investors to address these societal issues.
The TISFD was founded by a group of more than 20 organisations across the public, social and private sectors. It has appointed four chairs: Peter Bakker, president of the World Business Council for Sustainable Development; Sharan Burrow, former general secretary of the International Trade Union Confederation; Arunma Oteh, former World Bank treasurer; and Gabriela Ramos, assistant director-general for social human sciences at UNESCO.
What does it mean for businesses?
Currently, there is is no coherent reporting approach that businesses can use to address the impacts they have on people and communities. The lack of any existing framework for social disclosures reflects the complexity of the issue. Burrow describes the TISFD as the “missing piece” of the puzzle.
With the creation of this framework, businesses and investors will be able to identify, assess and report their social-related impacts. Specifically, it will provide them with a guideline for collecting data on both financial materiality – how social and inequality issues affect financial performance – and impact materiality, the real-world effect of any business’s practices.
Over the coming months, there will be opportunities for businesses and financial institutions to pilot the disclosure framework.
The taskforce says it will begin developing a beta version of the framework in late 2025 and expects to publish the first public version by the end of 2026. The group also plans to release recommendations in voluntary and mandatory standards and laws within three years of launching the framework.
Given the early stages of the project, the long-term impact of TISFD remains unclear. But, if it has a similar impact to climate reporting, it could transform how companies operate. Initiatives related to specific social issues, such as diversity and employee-ownership, may gain importance among investors and stakeholders.
