The Corporate Sustainability Reporting Directive (CSRD) represents a paradigm shift in how companies report their sustainability efforts. As businesses work to align with CSRD requirements, electronic reporting and eXtensible Business Reporting Language (XBRL) tagging are must-have tools in order to achieve compliance. These technologies not only streamline compliance but also enhance the utility and transparency of sustainability disclosures, ensuring organizations meet growing stakeholder demands for high-quality, comparable data.
CONTEXT
What is CSRD and why does it matter?
The CSRD, adopted by the European Union, aims to improve corporate accountability and transparency regarding environmental, social, and governance (ESG) matters. It expands the scope of the Non-Financial Reporting Directive (NFRD) by requiring detailed and standardized reporting from a broader range of companies, including large private firms and listed small- and medium-sized enterprises.
With climate change, social equity, and corporate responsibility taking center stage, stakeholders — investors, regulators, and the public — demand reliable data to evaluate companies’ ESG performance. CSRD mandates companies to disclose information aligned with the European Sustainability Reporting Standards (ESRS), making it essential for organizations to adopt robust reporting mechanisms.
FOR MORE CONTEXT
What you need to know: Why electronic reporting is essential
Manual reporting processes are increasingly inadequate in an era of digitalization and high-volume data. Electronic reporting involves the use of digital tools and platforms to collect, organize, and share data, providing several advantages:
- Efficiency: Automating data collection and reporting reduces time spent on manual entry, minimizes errors, and ensures faster compliance.
- Accuracy: Advanced electronic reporting systems help ensure consistent and accurate reporting, reducing risks of misrepresentation or non-compliance.
- Scalability: As reporting requirements grow in complexity, electronic systems can easily accommodate additional data fields and evolving standards.
- Accessibility: Electronic reporting platforms make it easier for stakeholders to access and analyze data in real time, fostering transparency.
BENEFITS
XBRL tagging: the backbone of standardized reporting
XBRL is the standard. The standard is used to create the digital taxonomies, which contain the tags/labels that can be used to markup the data that allow organizations to markup their financial and non-financial data, ensuring the information is machine-readable and comparable across companies and sectors. For CSRD compliance, XBRL tagging serves several pivotal roles:
- Standardization of data: XBRL ensures that sustainability data adheres to consistent definitions and formats, aligning with ESRS requirements. This enables apples-to-apples comparisons across companies, industries, and regions.
- Improved stakeholder analysis: Investors, regulators, and other stakeholders can easily analyze tagged data, reducing time spent interpreting diverse reporting formats and improving decision-making.
- Automation and integration: XBRL-tagged data integrates seamlessly with other financial systems, enabling automated audits, streamlined submission to regulators, and data sharing across platforms.
- Global compatibility: As sustainability reporting requirements converge globally, compatibility across data is paramount. XBRL is the standard by which digital taxonomies are created. Elements across different digital taxonomies can be “linked” based on the definitions per disclosure standard. This ensures comparability and ensures organizations remain future-proof.
ADDITIONAL INFORMATION
CSRD and XBRL tagging in practice
Under CSRD, companies are required to disclose ESG data in a human and machine-readable format—making inline XBRL tagging a mandatory aspect of compliance. For example:
- Companies must tag metrics related to carbon emissions, energy use, diversity, and governance practices.
- These tags must align with ESRS definitions, ensuring consistency with EU Taxonomy regulations and climate targets.
HOW SPHERA CAN HELP
Inline XBRL
Sphera makes it possible for customers to prepare inline XBRL reports for the exchange of business information in a digital, human- and machine-readable format. This set-up streamlines the generation, sharing, and scrutiny of business reporting data.
The software provides disclosure templates, positions and analytics which help customers collect, aggregate and disclose the required data. This ensures that all necessary information is not only captured but also systematically arranged for ease of understanding and quick reference. Moreover, Sphera’s inline XBRL utility fuses the cogency of human-readable XHTML files with the systematic order of machine-readable data. This feature further assists customers in generating reports that are both accurate and compliant with CSRD regulations, thereby enhancing the efficiency of sustainability reporting and ensuring regulatory compliance without hassle.
