ESRS iXBRL taxonomy as the foundation for sustainability report structure

Why ESRS iXBRL taxonomy is so important?

It is no secret that starting in 2025, the Sustainability report, as part of the Management report, will be a mandatory requirement for the annual financial report for the first wave of companies. [For which companies it will be applicable, read here: link].

Compiling a Sustainability report is not the only challenge. Digitalization of the Sustainability report: the preparation process could unexpectedly require a lot of effort.

What does it mean - Digitalization of Sustainability report?

The entire annual report must be in ESEF format (European Single Electronic Format), where the Sustainability report must be marked with iXBRL tags.

Listed companies have been preparing their financial statements in accordance with the IFRS taxonomy in the ESEF format for three years. The main difference between the ESEF formats for the IFRS Annual Financial Report and the Sustainability Report is the taxonomy used. [What taxonomy is? Read here: link.]

XBRL taxonomy can be defined as a dictionary in which all IFRS standards or ESRS data points are compiled in a structured manner, according to which digital reports are prepared. 

Here is the main difference between IFRS and ESRS taxonomies for the user:

• in the case of the IFRS taxonomy, there are 252 mandatory concepts with a monetary (EUR, USD etc.) unit of measure, however,
• the ESRS draft taxonomy has more than 1000 data points with a wide range of types and units of measures - GHG emissions, water and energy consumption, population, pollution, etc.

EFRAG recently published the ESRS draft taxonomy, which was followed by some practical recommendations that, according to the EFRAG representative's judgment, could be useful for compiling Sustainability reports and digital reporting.

What are EFRAG recommendations that we’ve noticed?

• XBRL tool. To open an XBRL taxonomy, an XBRL tool is required. There are quite many XBRL tools available in the market. However, before using a tool for tagging purposes, it is imperative to ensure that the selected tool is officially XBRL-certified. 
  It is important to mention that Orients DIGIT is the unique representative of the Corefiling XBRL tagging and auditing tools in the Baltics. The tool already provides access to the ESRS taxonomy, allowing users to investigate its structure and try out the tagging. 
• Report structure. The ESRS taxonomy represents the detailed sections of the ESRS standards—a structured tree of data points. Therefore, the Sustainability report must adhere to the structure proposed by the ESRS taxonomy to be understandable, informative, and easily converted into a digital format. 

Structure – the fundamental principle in the preparation of the Sustainability report.

Several approaches to the tagging process exist, each with its own pros and cons. Therefore, the entity itself chooses the preferable way of tagging workflow. With the support of the Orients DIGIT team, each approach can be easily realized.

The Orients DIGIT team will help to organize your data structure for the Sustainability report compilation and to define the most important data points. Importantly, we ensure correct and effective tagging of the Sustainability report for the first ESEF year, so that you will avoid repeatedly investing a lot of time and resources in the iXBRL tagging in the the following years. 

Our Orients DIGIT team has three years of practical experience in working with ESEF format and preparing annual reports in iXBRL format for listed companies, as well as extensive expertise in ESG data management.

We also provide valuable advisory assistance on ESG data management, ESRS double materiality, and sustainability reporting structuring.

Do you want to get access to the ESRS  iXBRL taxonomy to build your Sustainability report structure around? Contact us at info@orients.lv.