In their excellent book One Report: Integrated Reporting for Sustainable Strategy, authors Eccles and Krzus make brief references to the use of XBRL. But, IMHO, they minimize the importance that an XBRL taxonomy for sustainability reporting can bring to the table, with statements like (p.70):
“It is important to remember to emphasize that XBRL is simply (my italics) an information standard, like HTML, for making it easier to collect, report, and reuse information…It does not make new information available.”
So I’d like to unpick that a little…
XBRL is a way of contexualizing data, based on an agreed taxonomy, that has a number of obvious potential benefits. Benefits that increase the more companies around the world ‘sign up’ to use the same taxonomy.
1. The debate needed to create an XBRL taxonomy has a massive influence of the creation of standard ways to report data. Currently the ‘One Report’ space is populated by a number of players each with a slightly different take on what constitutes CSR/ESG/Sustainability reporting or metrics. That’s great. But a standard at the data level is essential to drive the future of sustainability reporting forward and move it away from today’s presentation-centric focus and towards an ease-of-comparability focus.
2. According to the book (p.136), some analysts avoid paying too much attention to CSR/ESG data from the companies they follow because the ‘transaction cost’ is too high and the ability to easily compare results is not practical. XBRL is all about reducing the transaction cost of getting the data (e.g. the S.E.C.’s RSS feed is both free and easy to consume) and about comparing data across industries and peer groups (that’s why we have a product called CrossView).
But what I really want to take issue with here is that rather dismissive ‘No new information’…
Over at The Daily Extension, our data guru Ted Stavropoulos has helpfully pointed out that at this time, the S.E.C. filing data consists of about 600,000 data points. By this time next year it could be 2.5 million data points. And who knows how many XBRL data points are already in existence around the world in other jurisdictions? It must be many millions already.
So what we have here is a significant and rapidly growing repository of (currently) financial data points. Now as the One Report authors also point out in their chapter The Internet and Integrated Reporting, Web 2.0 tools are changing the face of corporate reporting. And one important aspect of the Web 2.0 world is that of ‘crowdsourcing’: Tapping into the wisdom of crowds.
Now maybe I’m an optimist but I see having direct access to a massive global XBRL database as being one of this decade’s best opportunities to generate new and insightful business information – albeit from old data, delivered in a new way. And once this XBRL repository data also includes environmental and social data points then I’d be willing to bet that all those smart minds out there in the ‘cloud crowd’ will soon start to figure out and find ways to visualize the linkage between financial and environmental/social performance.
No new information? Pah! A pox on your One Report. You rascals.
Tags: Sustainability
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