Companies that need to report under the CSRD are required to use ESRS XBRL tagging to convert their sustainability reporting disclosures into a digital format. In August 2024, the European Financial Reporting Advisory Group (EFRAG) developed and published the final draft of the digital XBRL Taxonomy for ESRS, which can be found on the EFRAG website. This proposal is now being submitted to the European Commission (EC) and the European Securities and Markets Authority (ESMA) for approval. The ESRS XBRL Taxonomy includes a collection of XBRL elements ("tags" or “elements”) that mirror the structure of the European Sustainability Reporting Standard.
The XBRL format (eXtensible Business Reporting Language) is a digital data standard primarily used in financial reporting but is becoming increasingly important for sustainability reporting as well. XBRL allows companies to structure, analyze, and share data in a machine-readable format.
💡 Think of it as putting "tags" on pieces of data in a report, like labeling different sections in a book. For example, when a company reports its carbon emissions or financial results, XBRL tags are added to each piece of information, which makes it easy for computers to identify and retrieve specific data points. This digital transformation allows for faster, more accurate data processing and comparison across different companies and industries. However, using this format can make the reporting process more complex and time-consuming, as detailed data must be prepared according to a specific (XBRL) taxonomy.
In recent years, sustainability reporting requirements have increased significantly, especially with the EU Taxonomy and the Corporate Sustainability Reporting Directive (CSRD). These regulations require companies to provide detailed information on environmental, social, and governance (ESG) factors. The CSRD also mandates that companies submit their sustainability data in XBRL, pushing the standardization of reporting across Europe. So in a nutshell - yes, if you are obliged to report under the CSRD, you will need to use the XBRL format in your reports.
Reports based on the CSRD must be integrated into the company's management report and published in the European Single Electronic Format (ESEF). What is the relationship between ESEF and XBRL?
In August 2024, the European Financial Reporting Advisory Group (EFRAG ) released a final proposal of the XBRL taxonomy, which will serve as the standard for submitting the reports.
While XBRL improves the comparability and transparency of sustainability reports, transitioning to this format can seem overwhelming. Data such as CO₂ emissions, energy consumption, and social parameters must be captured in detail and structured within a fixed framework. This can make the reporting process less flexible and require more resources, both in terms of time and IT infrastructure.
Concretely, as laid out in the example above: each section in the ESRS report needs to have a specific tag (or “element”) assigned to it. Moreover, each section can have several of tags, set in the following hierarchy:
The ESRS XBRL Taxonomy uses different types of data to tag sustainability statements, including both quantitative (numbers) and qualitative (text or descriptive) formats. When using this taxonomy, each data point must be tagged in its specific format so that the information can be automatically separated and extracted by the company.
💡 This means: If you are using a specialized software to collect your data, make sure the requested data format is accurate. Collecting data in an Excel sheet or in software that is not specialized for CSRD may result in the wrong data format, resulting to additional work to transform the information into the correct data type format.
The data types are as follows:
The final XBRL taxonomy has released by the EFRAG and submitted to the European Commission (EC) and the European Securities and Markets Authority (ESMA). While it is final for now, updates are likely to be published in the future.
ESMA now needs to prepare the draft, in a Regulatory Technical Standards (RTS), for the tagging of sustainability reports following the ESRS guidelines. These tagging standards will then be officially approved by the European Commission (EC) within the framework of the European Single Electronic Format (ESEF).
Despite the challenges that come with implementing the XBRL format, we still see the long-term benefits in understanding the data and creating better benchmarks for the future. In addition, the long-term application will harmonize regulatory compliance and enhance competitiveness for the companies which properly adopt the standard. These companies can better, more precisely communicate their sustainability performance to external stakeholders. This is why it becomes increasingly important to set your data structures right and prepare your organization for the upcoming reporting.
XBRL is just one puzzle piece out of many: It becomes increasingly important to know which data to collect, how to collect it accurately and in a proper data type, and whom to involve within your organization.
A helpful tool for tackling the challenges of the XBRL format is Codio Impact software. Our specialized platform helps companies efficiently capture, manage, and document sustainability data, while accounting for the XBRL requirements. With automated functions and an easy-to-use interface, Codio Impact simplifies the creation of complex reports and reduces the effort needed to comply with regulations like the CSRD. For more information, book a free demo with us.
