At the close of the United Nations Climate Change Conference (COP 28) in Dubai in December 2023, there was a call for major global action to reduce greenhouse gas (GHG) emissions, the major cause of global warming and climate change. The centerpiece of the closing agreement was an appeal for a global transition away from reliance on fossil fuels in order to achieve net zero emissions by 2050. Nearer-term goals for 2030 include tripling renewable energy consumption and doubling energy efficiency.


As management accountants know, setting goals is only part of the process: Comparable, consistent, transparent, and accurate measurement and reporting must occur to hold countries and companies accountable for meeting goals. Digitizing environmental, social, and governance (ESG) reporting with Inline eXtensible Business Reporting Language (iXBRL) can provide transparent, accessible information that ESG stakeholders and investors can use and trust for decision making.


What Is iXBRL?


On the financial side of the house, financial reporting in the United States complies with U.S. Generally Accepted Accounting Principles (GAAP) set by the Financial Accounting Standards Board (FASB), while, globally, the International Accounting Standards Board (IASB) developed International Financial Reporting Standards (IFRS) to ensure uniform reporting standards. Both organizations transitioned to digital reporting through mandates that now require listed companies to file financial statements using iXBRL, a structured language that creates one report providing a human-readable display of the financial statements and the underlying computer-readable version of the report. It’s based on a taxonomy or dictionary to ensure companies use comparable tags during the filing process.


As more attention is focused on mandatory and voluntary ESG reporting, iXBRL is being adopted for ESG reporting. John Turner, CEO of XBRL International, said, “It is extremely clear that sustainability disclosures, to meet the mark, must be digital (that is, prepared in Inline XBRL) in order to meet the needs of investors, bond markets and a host of other users.”


Historically, financial and ESG reporting was paper- or PDF-based. To reuse report data meant copying and pasting to another format such as a Word document or a spreadsheet, a process that hampered accuracy and efficiency. Adrien Cloutier, Morningstar’s head of equity data, explained the advantage of iXBRL: Extracting data from an HTML document takes at least 20 minutes, from a good quality PDF, takes around 30 minutes, from an image around 50 minutes. Data pulled from an XBRL file though, can be extracted in 1 to 2 seconds… let’s focus on better analytics rather than scraping data from documents.”


Global regulators are joining the push for digitizing ESG reports using iXBRL. The U.K.’s Streamlined Energy and Carbon Reporting (SECR) policy, which became effective in April 2019, requires large companies and LLPs to disclose carbon emission metrics, including annual energy usage, GHG emissions, and energy efficiency initiatives. While a digital filing requirement wasn’t included in the initial policy, an iXBRL SECR taxonomy was released in 2020 for voluntary use. An early adopter of digital filing is Aviva plc, a U.K.-based insurance company. Aviva’s filing illustrates the power of iXBRL for stakeholders using the reports. Because of the filing’s digital format, its metrics can be accessed, extracted, and reused for analysis.


Figure 1 shows a Tableau data visualization dashboard of Aviva’s 2021 ESG metrics created by XBRL International’s Guidance Manager Revathy Ramanan using data extracted from its annual iXBRL report filing. The visualization clearly presents the metrics in an easy-to-read format enhancing the user’s understanding of the data and clearly showing how iXBRL data be accessed and presented for analysis.


Figure 1: Aviva ESG Visualization


Source: Aviva plc, Annual Report and Accounts 2021. Used with permission of XBRL International.



A climate reporting mandate with significant impact on reporting companies is the European Union (EU) Climate Sustainability Reporting Directive (CSRD) that applies to EU-listed and large companies with a phased-in effective reporting date that started January 1, 2024. Fifty thousand companies with no previous ESG reporting requirement are estimated to be affected. It also applies to companies that have an EU presence despite not being listed on EU stock exchanges, such as U.S. companies doing business in the EU. While the initial mandate required electronic filing using iXBRL, the e-filing requirement was deferred in late 2023 by one year until 2025 pending release of an iXBRL CSRD taxonomy.


As for the U.S., in March 2022, the U.S. Securities & Exchange Commission proposed the Enhancement and Standardization of Climate-Related Disclosures for Investors rule. Electronic tagging of narrative and quantitative climate disclosures using iXBRL is a proposal requirement. However, as of January 2024, the final rule hasn’t been released nor has a supporting ESG metric taxonomy.


Preparing for Digital ESG Reporting


As global momentum builds for ESG disclosures, management accountants are key players who can support their organizations’ compliance with reporting mandates by identifying relevant ESG information, preparing iXBRL filings, and supporting analysis for decision making. The speed of global attention on climate change and the proliferation of reporting mandates for a topic that was barely on the radar five years ago means that management accountants must be proactive to prepare for existing and future mandates.


This isn’t just about global country-wide mandates. Consider the State of California, which passed legislation in October 2023 with an effective date of 2025 requiring digital ESG reporting in 2026. This is the most comprehensive climate reporting legislation in the U.S.


And remember, as Adrien Cloutier said, the end game of reporting is analysis, one of management accountants’ key competencies. Start following ESG reporting mandates, learn about ESG iXBRL taxonomies, become fluent in extracting iXBRL data to streamline the reporting process, and learn how to visualize data. Time is money when it comes to compliance and analysis. Will you be ready?


The views expressed in this article are those of the author and do not necessarily reflect the official policy or position of the U.S. Air Force, the U.S. Department of Defense, or the U.S. Government. Distribution A: Approved for Public Release, Distribution Unlimited: PA#: USAFA-DF-2024-5


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