Introduction

The Corporate Sustainability Reporting Directive (Directive (EU) 2022/2464, CSRD) requires companies to prepare their sustainability reports in line with the European Sustainability Reporting Standards (ESRS) and to tag their disclosures electronically. This means that companies must prepare their sustainability reports in the Extensible Hypertext Markup Language (XHTML) format and mark / tag their sustainability information using the eXtensible Business Reporting Language (XBRL).

In this newsletter, we answer questions about what XBRL is and how companies can tag their sustainability disclosures in line with the ESRS.

What is XHTML and XBRL?

Although newly introduced for corporate sustainability reporting with the CSRD, the electronic reporting format as such is not new and dates back to 2013, when Directive 2004/109 (Transparency Directive) was amended to include the preparation of annual financial reports in a single electronic reporting format.

The regulatory technical standards for the XHTML and XBRL are set out in Commission Delegated Regulation (EU) 2019/815. XHTML is a document format for electronic reporting. XBRL is a markup language embedded in XHTML documents. The use of XBRL involves the application of a taxonomy to convert human-readable text into machine-readable information. This allows companies’ sustainability information to be easily accessed, analysed, and compared.

The European Securities and Markets Authority (ESMA) has recommended the use of Inline XBRL (iXBRL) for electronic reporting. iXBRL is an extension of XBRL that allows XBRL tags to be embedded in HTML documents. The use of iXBRL enables companies to produce a sustainability report that is both human-readable (a standard-looking report) and machine-readable (data embedded under the text of the report). We advise companies within the scope of the CSRD to use Inline XBRL technology with an appropriate XBRL software.

XBRL for ESRS

The European Commission (EC) has tasked the European Financial Reporting Advisory Group (EFRAG) to develop the XBRL tagging for ESRS reporting. EFRAG has published the Draft ESRS Set 1 XBRL Taxonomy (XBRL taxonomy) for companies to tag their ESRS disclosures and an Explanatory Note and Basis for Conclusions on the XBRL taxonomy (https://xbrl.efrag.org/downloads/Draft-ESRS-Set1-XBRL-Taxonomy-Explanatory-Note-and-Basis-for-Conclusions.pdf). It is expected that EFRAG will hand the final XBRL taxonomy over to the EC and ESMA in Q3 2024.

In the draft XBRL taxonomy, the ESRS disclosures are transposed into the XBRL format with references to the corresponding ESRS disclosures. Accordingly, for each disclosure, undertakings can tag their disclosures in the iXBRL report.

Tagging enables the digital disclosures to be readily identified, navigated and extracted. If a company clearly addresses its ESRS disclosures in a structured sustainability report, the tagging should be an easy task.

How does the XBRL tagging look like?

Each XBRL element has attributes. These attributes can be a data type (e.g. date, percentage, volume, GHG emissions, textblock, string) or a period type (instant/duration). The period type defines, for instance, whether a fact is reported for an instant date (e.g. 31.12.2024) or for a duration period (e.g. 1.1.2024-31.12.2024).

References to the ESRS are provided for each element (disclosure requirement and paragraph number). These elements are identified by their technical name and are accompanied by a brief explanation of their content (labels). To illustrate, an element in the XBRL taxonomy looks like below:

Role Label Technical Name Data Type Period Type References
[200510] ESRS2.BP-1 General basis for preparation of sustainability statement Disclosure of general basis for preparation of sustainability statement esrs:DisclosureOfGeneralBasis

ForPreparationOfSustainability

StatementExplanatory

 Text block Duration Name: ESRS; Number: ESRS 2; Paragraph: 3;

Section: BP-1

The hierarchical system of XBRL taxonomy

All XBRL elements are categorized into Disclosure Requirements using a “tree” structure in the XBRL taxonomy, which mirrors the ESRS structure. This makes it simple to navigate the XBRL taxonomy and shows nested and related elements.

For every disclosure requirement, the XBRL taxonomy applies a hierarchical system of nested elements (referred to as the parent-children relationship). There are three levels of XBRL elements.

The Level 1 XBRL element (parent) is used to contain the full content of the disclosure requirement. The Level 2 XBRL element (children) has dedicated elements for each datapoint listed in the subparagraphs ((a), (b), (c)) of the disclosure requirements. Finally, the Level 3 XBRL reflects the romaine numbered datapoints (a(i), a(ii), a(iii)) of the specific disclosure requirements.

The tagging hierarchy has been developed by EFRAG. It is intended to help companies access the information at each level, depending on their disclosures.

Tagging in the XBRL taxonomy

The tagging of ESRS disclosure requirements appears clear in the draft XBRL taxonomy. However, in some cases, the companies may face challenges in how to tag certain data.

Below are answers to some questions that undertakings may have.

How can an undertaking tag a disclosure that has multiple elements for a single data point?

For cases where a single datapoint has multiple elements or provides different disclosure options, EFRAG has developed multiple taxonomy elements for a single datapoint.

The companies can choose the XBRL element that corresponds to the disclosed information for tagging.

How can an undertaking link IROs, policies, targets and actions to its disclosures?

An undertaking reporting under ESRS is required to disclose its impacts, risks and opportunities (IROs) as well as its policies, targets and actions. These result from the undertaking’s double materiality assessment and are linked to its sustainable practices. Therefore, they are specific to each company.

A specific string XBRL element is provided in the XBRL taxonomy, that allows the topic to be linked to an IRO, policy, target or action. To link such information, an undertaking should use identifiers or names of the related ORIs, policies, targets and actions.

To illustrate, a company may create the string elements as follows:

Identifier Name Target
p-1 Policy to choose suppliers that implement human rights policy All suppliers shall have a human rights policy in line with the German LkSG or international standards.

We advise companies to use consistent IDs and names throughout the report when using string elements. This allows a company to provide a machine-readable link between its disclosures and its IROs, policies, targets and actions.

What should an undertaking do if it receives an error message?

The XBRL taxonomy implements three validation rules.

The first validation rule is to validate whether datapoints related to other EU legislation are tagged in the XBRL report. If not, the company will receive an ERROR message. To avoid this, the undertaking should ensure that it is also reporting correctly for other EU legislations, such as reporting for the Article 8 of the Taxonomy Regulation (EU Directive 2020/852).

The second validation rule is to validate whether the mandatory disclosures that are outside of the materiality assessment are provided. If no tags are found, the company will receive a WARNING message. To avoid such a message, the undertaking should ensure that it carefully assesses the ESRS mandatory disclosures that are outside the scope of its double materiality assessment.

The third validation rule provides an INFORMATION message where the metrics of a disclosure requirement assessed by the company to be not material, and therefore the information is not needed to meet the objective of the disclosure requirement. In these cases, it is recommended that non-material XBRL elements be tagged with “xsi:nil” (not in list), so that the company does not receive a validation message.

If every disclosure is tagged correctly, the undertaking will receive an OK message.

How can an undertaking tag a disclosure that is not in the ESRS?

Undertakings may be required to report under other sustainability reporting standards other than the ESRS. There may be disclosures that are included in other reporting frameworks but not in the ESRS, or an undertaking may prefer to disclose information that is not included in the ESRS.

These disclosures can be tagged with the “Disclosure of other material and (or) entity-specific information [text block]” element in the XBRL taxonomy.

An undertaking has previously reported under the GRI standards. Can they incorporate the disclosures?

The digital interoperability of ESRS with other sustainability reporting standards, such as the Global Reporting Initiative (GRI) standards, is crucial for companies to avoid double reporting.

EFRAG plans to implement concordance tables between ESRS and GRI as part of a separate reference link within the XBRL taxonomy. Nevertheless, as the necessary digital taxonomies are still under development, the tables cannot be developed at this time.

Until the final digital taxonomies are published, companies may take advantage of the interoperability index of the GRI and ESRS standards jointly developed by EFRAG and GRI.

Conclusion

The implementation of the electronic sustainability reporting under the CSRD significantly enhances transparency and allows stakeholders to analyse and compare such data reported under the ESRS. However, this change also brings technical challenges for the companies reporting under the ESRS. Once finalized, companies should familiarize themselves with the ESRS taxonomy and conduct a thorough review to correctly tag their sustainability disclosures in XBRL format.