In summary...
The European Union will adopt XBRL under its CSRD in 2024. To ensure conformity and guarantee uniformity across reports, qualifying companies will need to implement this standard into their sustainability reports from the 2024 reporting period.As governing organisations look to improve the consistency and comparability of sustainability information disclosed by companies, having uniformity in taxonomies becomes essential. To achieve this, XBRL (eXtensible Business Reporting Language) will be adopted under the European Union’s Corporate Sustainability Reporting Directive (CSRD) in 2024.
So, what is XBRL?
XBRL is a global standard for exchanging business information. It’s an open, XML-based standard that provides a common framework for expressing financial reporting and other business information in a machine-readable format.
Common document types, including Word Docs, Excel Spreadsheets and Adobe PDFs can be marked up with XBRL tags that identify common items such as Scope 1 emissions, making them consistent across all reports and compliant with European Single Electronic Format (ESEF) regulation.
The benefits of this tagging are multiple.
- XBRL is machine-readable, which means that computers can process XBRL data automatically, making data exchange quicker and more efficient compared to traditional reporting formats like PDF or Word.
- Using a defined taxonomy means reporting terms are standardised across all reports, making them easier for different global stakeholders to understand and use the data
- Due to its standardsised nature, XBRL makes interoperability across different systems a possibility, allowing more effective communication and data exchange
- Because it can be validated automatically, reporting becomes more accurate and consistent
When will XBRL become a requirement for ESG reporting?
The requirement for XBRL in ESG reporting is being shaped under the European Sustainability Reporting Standards (ESRS). The European Financial Reporting Advisory Group (EFRAG) plans to release the XBRL taxonomy of the ESRS for a 60-day consultation in the first quarter of 2024, with a technical recommendation on the taxonomy to be issued to the European Commission in the second half of 2024.
