Sustainability reporting is rapidly becoming a mature field, and businesses are providing far more insight into their operations than even just a few years ago. However, analyzing and comparing business sustainability reports can be a cumbersome, time consuming process. In order to be a truly useful tool for investors and community stakeholders, reporting needs to be streamlined, standardized, and above all, integrated into electronic platforms. That is the motivation behind a new format for sustainability reporting that will be developed by the sustainability reporting organization Global Reporting Initiative in partnership with Deloitte, the global financial consulting firm.
XBRL and Sustainability Reporting
The new program will enable investors and analysts to sift through sustainability data electronically by assigning tags to data elements. It will be based on an existing classification system, or taxonomy, currently used by the XBRL financial reporting system. XBRL is a standardized, open source electronic communication platform developed by a 450-member international consortium of businesses along with government agencies and non-government organizations. It stands for Extensible Business Reporting Language. The idea is to enable computer software to analyze, share and present data from different companies in usable forms. One fairly straightforward example is pie charts; XBRL will enable a computer to churn one out far more quickly, compared to an hours-long (or longer) research project if done manually.
Deloitte already uses XBRL for financial data, and it has agreed to be a pilot user of XBRL for its sustainability reporting.
Investor Engagement and Sustainability
Even without the advantages of XBRL, green investors are already pushing financial markets to the next level. Just last week the green investment organization Ceres reported that shareholders have gained “noteworthy victories” in this year’s proxy season, including 45 resolutions that were filed and then withdrawn after companies committed to addressing climate change, fossil fuel and water conservation issues. The 35 leading filers were large institutional investors, including public pension funds, that together manage more than $500 billion. Clearly, stakeholder engagement in sustainability has moved past the actions of a few concerned individuals or organizations.
XBRL and Stakeholder Engagement
If XBRL comes through on its promise of revolutionizing business reporting, it could have a significant impact on stakeholder engagement in corporate sustainability. To cite one example reported by Ceres,one area of great concern for investors this year was the disclosure of risks and management plans for natural gas fracking operations, including water pollution and chemical risks (fracking, or hydraulic fracturing, uses a pumped chemical brine to loosen natural gas from shale formations). Given that fracking products can contain any combination of 750 compounds, a platform like XBRL could give shareholders a far more efficient way to analyze data and compare companies.
Image: Recycling by Steve Snodgrass on flickr.com.
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