Workiva on Inline XBRL and breaking down walls between finance and sustainability
We’re still finding a lot to be excited about in the EU’s new Corporate Sustainability Reporting Directive (CSRD) and the introduction of Inline XBRL in mandatory sustainability reporting – our colleagues at Workiva, an XBRL International Sustaining Partner, agree.
“Without question, XBRL is the standard for digital financial reporting, enabling the production and consumption of millions of reports each year. As it becomes increasingly important to integrate ESG and financial reporting, Inline XBRL is the obvious choice for digital and transparent integrated reporting,” says Andie Wood, Senior director of global XBRL strategy at Workiva.
In a new blog post she has some interesting insights on how CSRD is breaking down those walls between reporting streams. As she observes, the change in name from the previous Non-Financial Reporting Directive (NFRD) might seem trivial but it reflects important feedback from stakeholders on the troublesome implication that such environmental, social and governance (ESG) reporting has no financial relevance. Referring to ‘sustainability’ information allows for a better emphasis on its financial impact and connectivity with traditional financial metrics. The post also covers other key changes, including the location of sustainability reporting as a mandatory part of the annual financial report, digitisation using Inline XBRL, the introduction of an audit requirement and a shift in reporting responsibility to the financial department.
While the reporting requirements will have an inevitable cost for companies, Wood notes that in some ways they will make life easier – “in particular the creation of the standards (clarifying required disclosures and frameworks) and the potential to reduce the number of ad hoc information requests from investors” – and demand from investors will continue to increase. “The imperative to align ESG processes with finance processes gives companies the opportunity to make use of their wealth of experience in the financial domain. The tactics that they use to build closer connections between the teams and processes will help bring ESG data and controls up to speed. Sustainability matters do have financial relevance and, with a shared oversight and final report, it makes sense to break down the walls between finance and sustainability.”
Businesses will need new software tools and support in order to manage this integrated approach to sustainability reporting, so it’s remarkable to see rapid development within the industry making use of all the benefits of XBRL. Just a week after the CSRD proposals Workiva announced that it had extended its cloud platform to offer an end-to-end ESG solution. We look forward to seeing this and many other innovations from many other members as the ESG ecosystem evolves.
Read the post here.