EU: Expand XBRL Reporting to Include Climate Change Disclosure
On Tuesday, European Commission Executive Vice-President Valdis Dombrovskis gave a speech at a key IFRS conference setting out a broad vision for the future of corporate reporting, incorporating a number of important strands for the XBRL community.
The Commission is reviewing its Non-Financial Reporting Directive, and will ask the European Financial Reporting Advisory Group (EFRAG) to start preparatory work on non-financial reporting standards as quickly as possible. The Commissioner also encouraged the IASB to work with other relevant bodies to ensure that companies can use a single set of global high quality Environmental, Social and Governance (ESG) standards.
For digital non-financial reporting to work, a common standard and taxonomy must be developed – similar to the IFRS taxonomy used for Europe’s Inline XBRL “ESEF” or European Single Electronic Format. For the digital benefits of ESEF to be felt in the ESG space, the Commission also suggests expanding ESEF’s remit to cover these fields. Mr Dombrovskis suggests that ESMA should have responsibility for the taxonomy in this area.
This was a hugely important speech, outlining the manner in which corporate reporting and digitisation can support the EU’s much wider strategy to make finance more sustainable and bring CO2 reduction to the front of policy making.
It also covered a number of aspects of digitisation, suggesting areas in which companies can benefit by embracing standardisation and new automation tools in this field.
The speech was followed up on Wednesday with the announcement of a consultation on the Non Financial Reporting Directive.