Digital sustainability reporting with the ESRS XBRL taxonomy

Helena Bergthaler,
Sarah Espinosa
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EFRAG has adopted the draft of the ESRS XBRL taxonomy for digital tagging of sustainability reports. In future, companies subject to the CSRD will have to disclose their reports in this electronic format. This will make sustainability information more easily accessible and increase transparency.

Overview of the ESRS XBRL taxonomy

To advance the digitalisation of sustainability data in accordance with the Corporate Sustainability Reporting Directive (CSRD) guidelines, the European Financial Reporting Advisory Group (EFRAG) is moving forward with the introduction of a digital XBRL taxonomy (XBRL = extensible Business Reporting Language) for the European Sustainability Reporting Standards (ESRS). According to EFRAG, the so-called ESRS XBRL taxonomy reflects the human-readable version of the ESRS and has been developed in accordance with its structure and methodology. On January 10,2024, the draft for the ESRS XBRL taxonomy was approved by EFRAG and will soon be subject to public consultation.

Digital sustainability reporting in accordance with the ESRS XBRL taxonomy

In the context of ESRS, an "XBRL taxonomy" refers to a directory or classification scheme that defines and structures data elements for sustainability reporting according to the standard. Digital reporting using the ESRS XBRL taxonomy aims to enhance access to sustainability data, as well as its analysability and comparability. Furthermore, the standardized format makes compliance with ESRS clearer.

For the publication of sustainability disclosures, the European Single Electronic Format (ESEF) will be used, comprising both a substantive and a technical component. The first component is dictated by the taxonomy, which establishes the reporting-relevant contents (data points) and thus reflects the legal requirements. Consequently, the ESRS XBRL taxonomy encompasses the overarching ESRS General Requirements and Disclosures (ESRS 1 and ESRS 2) as well as the ten subtopics of the topic-specific standards (Environmental, Social and Governance). The second component is defined by the InlineXBRL (iXBRL) reporting language, exactly specifying how and where the report-relevant contents (data points) are to be disclosed.

Furthermore, the CSRD stipulates that disclosures must be labeled ("tagged") with iXBRL, meaning that each sustainability data point requires a precisely specified digital labelling. Reporters will need to focus on cross-cutting standard topics to ensure the highest possible clarity of reports and avoid redundancies. After all tagged information has undergone validations according to both the technical and content components, the report will be made available in XHTML format.

Issuers whose securities are admitted to trading on a regulated market are already familiar with iXBRL from financial reporting. For annual financial reports, these companies are already required to tag basic information or primary financial statement components with iXBRL. This should generally provide a solid foundation for digital sustainability reporting. It is likely that the implementation of digital sustainability reporting will be structured similarly to financial reporting. However, at the time of publication of this article, no further information on this technical aspect is available.

To implement these technical requirements, namely the labelling of data points and the visualization of reports, specialized "viewer" and "tagger" software will be required similar to financial reports. Here too, it remains to be seen whether the same software solutions can be used as well.

Public consultation on the draft of the ESRS XBRL taxonomy

Since 9 February 2024, EFRAG has been inviting the public to provide feedback on the draft of the ESRS XBRL Taxonomy. In order to provide the addressed stakeholders with more context for their responses, further documents have been made available in addition to the draft, such as explanatory notes as a basis for conclusions. In addition to sample XBRL reports, a visualisation of the ESRS taxonomy was published in Excel. Based on these various auxiliary documents, stakeholders can submit their feedback via an online questionnaire by 8 April 2024. The feedback submitted will then be taken into account for the finalisation of the ESRS XBRL taxonomy. The public consultation allows all affected groups, such as future users of the ESRS XBRL taxonomy, to express their opinions.

Postponement of ESAP (European Single Access Point) to 2027

Originally, the plan was to upload sustainability reports tagged using iXBRL to the European Single Access Point (ESAP) starting in 2024. However, the publication of this portal has been postponed to 2027 by the European Securities and Markets Authority (ESMA). This delay also has direct implications for sustainability reporting, as ESAP is intended to serve as a central point for accessing publicly available financial and sustainability information on EU companies and EU investment products. This is particularly important for all EU companies subject to CSRD, as ESAP is intended to provide easy access to sustainability information, thereby supporting the objectives of the Green New Deal. The exact details of its implementation are now awaited.

What does this mean for companies and what needs to be done?

As capital market-oriented companies, unless they are SMEs, are required to provide CSRD-compliant sustainability starting from the financial year 2024, and large public-interest entities from the financial year 2025, they should promptly engage with the ESRS XBRL taxonomy and implement it gradually. This entails aligning existing practices in sustainability reporting with the ESRS XBRL taxonomy. Large public-interest entities that have not previously prepared reports using ESEF should prepare for the implementation of the XBRL taxonomy at an early stage. In addition to the substantive reporting obligations under CSRD, the digital reporting format of the XBRL taxonomy poses a further challenge for companies.

Grant Thornton is available as a contact partner to support both annual financial reporting and CSRD-compliant sustainability reporting.