Understanding the XBRL standard – used for non-financial data

eXtensible Business Reporting Language (XBRL) is an open international electronic business and financial data communication standard. It allows companies to prepare, publish, and share financial statements and reports in a standardized format that is easily accessed and analyzed by regulators, investors, analysts, and other stakeholders.

XBRL is widely used for financial reporting by regulatory bodies such as the U.S. Securities and Exchange Commission (SEC) and the European Banking Authority (EBA).

Key aspects of XBRL include:

  • Standardization: XBRL uses common definitions and rules (taxonomies) to ensure data consistency across different organizations, industries, and countries.
  • Data Tags: Each item of data in an XBRL document is tagged with specific information (e.g., revenue, net income, assets), enabling automated processing and analysis of that data.
  • Automation: XBRL allows for the automation of data collection and analysis processes, reducing the risk of errors and improving efficiency.
  • Customization: Companies can extend XBRL taxonomies to fit their reporting needs while aligning with standardized elements.

Using XBRL in sustainability data reporting

XBRL is increasingly used for sustainability reporting because it enhances sustainability-related data’s transparency, comparability, and reliability. It is becoming more important as stakeholders demand better insights into a company’s environmental, social, and governance (ESG) performance. The reasons for using XBRL in these reports are as follows:

  • Standardization of ESG Data: Sustainability reports often cover diverse metrics like carbon emissions, water usage, employee diversity, and governance structures.
  • Regulatory Compliance: As sustainability reporting becomes mandatory in many jurisdictions, companies must disclose ESG performance according to specific standards. XBRL helps firms comply with these requirements by providing a uniform framework for reporting that aligns with various ESG standards (e.g., Global Reporting Initiative (GRI), SASB, and the EU Taxonomy).
  • Improved Decision-Making: XBRL enhances the usability of sustainability information by making it more accessible and analyzable, supporting better decision-making in areas such as investment, corporate governance, and risk management.

How can XBRL be implemented for sustainability reporting in a company?

Implementing XBRL for sustainability data reporting involves several steps to ensure a smooth transition and effective use of the standard.

 

“Because we don’t think about future generations, they will never forget us.”                           

– Henrik Tikkanen

  1. Understand Sustainability Reporting Requirements
  • Regulatory Guidelines: Identify the sustainability reporting standards or frameworks the company will follow, such as the Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB), or the EU’s Corporate Sustainability Reporting Directive (CSRD).
  • ESG Metrics: Determine which ESG metrics are relevant for the company, including environmental impact, social factors, and governance issues.
  1. Review XBRL Sustainability Taxonomies
  • Review existing sustainability taxonomies, such as those developed by the European Financial Reporting Advisory Group (EFRAG) for CSRD, or industry-specific taxonomies that align with your chosen reporting standards.
  • If no specific taxonomy exists for your needs, work with experts to extend or customize one.
  1. Select the Right XBRL Software
  • Choose an XBRL software solution or platform that can support the preparation, validation, and submission of sustainability reports.
  • Ensure the software can handle multiple frameworks and extend taxonomies if needed.
  1. Map Data to the XBRL Taxonomy
  • Data Collection: Identify the relevant sustainability data from across the organization (e.g., energy usage, waste). Ensure that the data is accurate and complete.
  • Tagging Data: Use the XBRL software to tag each data point to the corresponding element in the sustainability taxonomy.
  • Customization: If the standard taxonomy does not cover certain sustainability metrics, work with your software provider or XBRL consultants to extend the taxonomy by creating new tags.
  1. Validate the XBRL Report
  • Once data is tagged, the report should be validated to ensure it complies with XBRL standards and the chosen sustainability taxonomy.
  1. Generate and Publish the XBRL Report
  • Report Generation: After validation, generate the final XBRL report, ensuring that it is in the correct format required by regulatory bodies or stakeholders.
  • Stakeholder Communication: Consider making the report available to investors, sustainability analysts, and the public through your company’s website or sustainability portal.
  1. Monitor and Improve Reporting Processes
  • Feedback Loop: After the initial implementation, monitor the feedback from regulators, stakeholders, and internal teams.
  • Continuous Improvement: Regularly refine the data collection and reporting process to streamline future reports, improve transparency, and meet any new regulatory requirements.

Benefits of XBRL tagging

XBRL tagging offers numerous benefits that improve the quality and usability of financial and sustainability reporting. Here are some advantages:

  1. Reduced Reporting Costs: Automating the data extraction and reporting process through XBRL can lower the costs associated with manual data entry, validation, and reporting.
  2. Improved Data Accessibility: XBRL tags make data machine-readable, enabling automated extraction and analysis, thus increasing accessibility for investors, analysts, and regulators.
  3. Enhanced Comparability: Tagging data using standardized definitions allows easy comparison across companies, industries, and periods, helping stakeholders assess performance more effectively.
  4. Increased Transparency: XBRL provides clear definitions and context for each data point, enhancing the reported information’s transparency.
  5. Easier Updates and Revisions: Companies can more easily revise their reports. Changes can be made at the data level, and the reports can be regenerated without starting from scratch.
  6. Support for Integrated Reporting: XBRL tagging can be used to integrate financial and non-financial data, allowing for a more holistic view of a company’s performance.

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