In addition, the extension of narrative business reporting into areas where the information to be reported is much less amenable to classification by tagging than traditional accounting information, presents a challenge to the concept of reporting enabled or facilitated by technological standards such as XBRL. This will be an increasingly significant handicap as the importance of disclosures in Management’s Discussion and Analysis (MD&A) or the Operating and Financial Review (OFR) grows. This challenge has to be addressed as part of the promotion and development of XBRL. [p.35-36]

In the USA, this comment has relevance to both footnote tagging and corporate action tagging. But I’d like to consider this in the context of sustainability reporting.

The issue with a lot of sustainability data is that it is not performance-related numeric, quantitative data like a financial number – although some is like tonnes of carbon emissions for example. Instead much of it is behaviour-related textual, qualitative data that is evidential in nature. In fact much sustainability reporting could be regarded not as reporting at all but more as the results of an organizational self-assessment survey.

The problem with this kind of data is that even though it can be tagged easily enough, it’s hard to compare – reliably that is. To truly compare two similarly tagged pieces of sustainability evidence almost certainly requires text analysis – something that most (maybe all) traditional corporate reporting software does not offer. So as we move towards a world that ‘integrates’ financial and non-financial data and tries to make connections between the two, we have to face up to the fact that a lot of non-financial data is text and that most reporting tools simply don’t know how to compare and contrast text as opposed to numbers.

It’s fair to say that app development will drive the market for i-Pads, but it’s not unreasonable to envisage paid for applications that use programmes like XBRL to generate content and provide real time comparative corporate and annual reports. This evolving information could remove the traditional ‘annual snapshot’ from the equation, replacing it with more and more frequent updates.

Ignoring the minor quibble of  ‘programmes like XBRL to generate content’  - XBRL is not a programme and nor does it generate content, it contextualizes data – the point of more regular updates is well-taken. The big problem with the annual reporting paradigm is it’s focus on rear-view review of stuff that’s already happened. Truly transparent reporting has to be more continuous and that requires regular feeds to handheld devices – like the iPad.

Transparency is not an annual event, it’s a continuous process. Back in 2007, Tomorrow’s Company put it like this:

Adequate communication with stakeholders can no longer be achieved by publishing a single report each year. Investors are already used to receiving information in a variety of different forms throughout the year. Through the use of the Internet companies are now building similar ongoing relationships with other groups of stakeholders. Investors receive quarterly announcements, ad hoc briefings, and the detailed reports required by different stock exchanges.

The iPad article goes on to say…

But before we condemn print to the archives, it’s likely that it will always have a place with some stakeholders, albeit a slightly different role in the future. Personally, I believe report design will be led by the online requirement and print will support overall communications in the form of summary reports that supplement the full online version. I also think digital reports will become more sophisticated, focusing separately on the needs of different audiences – shareholders, investors, employees, customers, suppliers etc.

What we have to accept in the age of the Internet is that printed annual reports have value only as aesthetic artefacts. Literally the book of the year for the subject company.  The future is near real-time, interactive reports, online and accessible directly or via an API, that leverage an agreed cross-industry data standard like XBRL. The role of today’s annual report is as tomorrow’s collector’s item – a relic of the past.

The GRI (and others e.g. Sigma) have done a great job defining content standards like ESG indicator sets but data standards are few and far between. The GRI’s XBRL taxonomy has not gained much traction and Spain’s RSC-CCI XBRL taxonomy is only being leveraged by a handful of early-adopter organizations. Without data standards to control agreement around what the data actually means, indicators merely present information that is unverifiable at the data storage level.

2. A framework for a truly integrated report needs to be established since currently none exists

This is a big one. A truly holistic framework for integrated reporting is a major task. What this represents is nothing less than defining the web of connections between financial and non-financial data so that drilldown, through and around can deliver true transparency from the numbers. That’s what ‘connected’ and ‘holistic’ reporting is really all about.

3. These frameworks need to more explicitly incorporate how the Internet can be leveraged.

And the terms ‘paper’ and ‘PDF’ are explicitly not incorporated in this framework.

4. Audit methodologies need to be developed for nonfinancial information that are as rigorous as they are for financial information and that cover both paper-based and Internet-based content.

There’s that damn ‘paper’ word again.

But aside from that, we need to replace the word ‘as’ with ‘more’ in front of rigorous. First because financial auditing hasn’t proved especially rigorous over the last decade or so and second because non-financial information is simply more important than financial information to everyone outside the IR ghetto. Auditing to financial information standards is simply not good enough.

Then of course there’s the biggest challenge of all which is getting Governments to understand that without mandates much of this won’t mean squat. Integrated reporting is not just about a few well-intentioned multi nationals cranking out an annual sustainability report – it’s about understanding that we live in an integrated global economy that is inextricably integrated with an environment that is beginning to show distinct signs of disintegrating.

comply-control-communicate

We regard the XBRL journey as having three stages: Comply, Control, and Communicate. If you accept the premise that corporate reporting is essentially about communication, then after more than a decade since XBRL was ‘invented’ we are still at stage one. The few (but growing number) of organizations subject to mandated reporting in XBRL are communicating a relatively limited set of information, mostly financial in nature, that is of interest to a limited number of people.

Stage 2 – Control – refers to the use of XBRL internally within an organization or within closely co-operating industry peer groups, to get better control over the reliability and comparability of data by using XBRL as the basis for a collaborative data standard. Few, if any organizations, are even dabbling with this now. Stage 2 essentially  says ‘If you are spending the time and money to tag your data for regulatory reporting why not get some benefit from this effort within your organization?’.

Stage 3 – Communicate – refers to the pervasive use of multiple XBRL taxonomies to communicate a wide range of financial and non-financial data to produce the kind of holistic reports that communicate organization performance and behaviour to the widest range of stakeholders. It depends on a wide range of XBRL taxomonies being available, for all kinds of data, and global organizations making use of many of them at once. Yikes!

Let’s face it. The value add at stage 1 is minimal. Currently regulators benefit more than the organizations doing the reporting. But as long as regulators make the data available to the cloud-crowd, as the U.S. S.E.C. does for example, we are bound to see the value add rise as innovation delivers new kinds of analytic apps that can the leverage the growing online availability of XBRL data.

Stage 2 is going to be hard. Most organizations are wedded to spreadsheet anarchy and heavily invested in non-taxonomy-aware reporting software, neither of which are suitable for reporting based on a data standard like XBRL. Turning that tanker around is going to be hard and it may hit an iceberg first if ERP vendors don’t adopt XBRL tagging at the transaction level. Take up of XBRL-GL for example has proved a hard sell.

Stage 3 is some way off. The majority of XBRL taxonomies are financially-focused and there’s a lot more to report about an organization than just financial data. There are a few fledgling non-financial XBRL taxonomies (like the GRI’s for example) but not enough to make this stage even viable let alone value-adding.

So we have a long way to go.

But if you believe in the destination, maximum communication of organizational information to the widest range of stakeholders, then the journey has to be worth the effort.

That means reports used to communicate organizational transparency. But don’t expect these reports to be ‘pushed’ out of organizations. Instead they are more likely to be ‘pulled’ together in an automated way by web apps that leverage the combination of XBRL, ontologies and various online data streams. In fact many holistic reports may be compiled without any human intervention at all whilst allowing information consumers to navigate endless pathways through the data.

For example, anyone can use the S.E.C.’s XBRL filing feed to garner a wealth of mainly financial information about a business. But much of the day-to-day operational data about businesses – available externally that is – is contained in other data streams: Press releases and magazine articles, Twitter tweets and blog posts, podcasts and video clips. These streams represent a set of rich content that can be combined, using the right tools, to create holistic views of an organization from different perspectives – assuming of course you have the ‘magic glue’ to tie it all together.

Some think that magic glue will be semantic web ontologies developed in languages such as OWL that will provide the way to pull all this stuff together. Me, I’m not so sure. Ontologies add yet another layer (e.g. data-XBRL-ontology) to the content/context space and I wonder if this isn’t just a layer too far?

PricewaterhouseCoopers in partnership with the Chartered Institute of Management Accountants and Tomorrow’s Company is pleased to announce the commencement of a programme looking at what changes are needed to make corporate reporting fit for purpose for the future. This programme is being kicked off with a “Call for Evidence” which was reported on in The Financial Times.

The post continues…

“In the article Rachel Sanderson states:

“By asking what are the weaknesses and strengths of the system, the barriers obstructing the evolution of corporate reporting, and possible solutions, the group wants to identify the limitations of the existing corporate reporting model and focus on the barriers to changing it.”

We are calling for evidence from all those who have an interest in making corporate reporting work better and are inviting you to give us your views to help shape our thinking.

The Call for Evidence is attached and we look forward to hearing from you.”

Limitations and barriers eh? Well how about lack of availability of standardized data that can be easily consumed by web services to make communication faster, cheaper and better i.e. how about more XBRL (m’lud)?

The scorecard site lets you select a company and period for the results and then gives you access to a CSR scorecard and a graph. So I selected my Spanish Sustainability Stalwart – the Bank of Navarre – as an example, to see their 2009 results.

Their CSR-CS scorecard report can be downloaded in XBRL or as a PDF (see below).

csr-cs

I then took a quick at their energy consumption (in GigaJoules?) by selecting a specific indicator from the XBRL-CCI taxonomy to focus on and chart (see below).

CSR-CS: Indicator = Energy Consumption

Now if only the rest of the world could catch up with Spain…

What I mean is that if there was a central hub for crowdsuggesting extension tags then maybe they would find their way into the taxonomy a bit quicker and help prevent you creating your own extension tag when it’s very similar to someone else’s (that you have no knowledge of). Using this kind of hub you could also vote for an existing extension and bump it up the taxonomy  inclusion ladder (if you get my drift).

In fact what we should do is have an extension ‘lookup’ feature in XBRL report writers that says ‘Hey before you add this extension tag to your taxonomy let me check that someone else hasn’t extended in a similar way before’.

Or maybe we already do and I’ve been drinking too much cider again.

Here’s what it says:

Many see XBRL as a technical solution to create interactive data based on data standards. The technical piece is simply a vehicle to implement the real decision, a necessary concomitant resulting from the agreement that this will be the standard. Once those agreements happen, everyone benefits. Think of the productivity and efficiencies we have realized from standards in such areas as home construction, transportation, health care, retail and even education and health care. We want the data to be interactive, and not get hung up on what produces the data, just like we do not focus on the machine that produces a size 6 dress or a six-panel door. We still have lots of choices and competition, except the competition now is on price, quality and style, as opposed to uniqueness. More importantly, the choice is in the hands of the consumer, not the producer. And isn’t that the essence of data transparency?

The key words to note are ‘agreement’ and ’standards’. Agreement around a ‘data standard’, in this case XBRL, is fundamental to the business, rather than technical, value proposition of XBRL and fundamental to us here at Rivet given that ’standards-based’ reporting is what we do.