On August 30, 2024, the European Financial Reporting Advisory Group (EFRAG) published the ESRS Set 1 XBRL Taxonomy. This will enable users to digitally tag sustainability statements, guaranteeing standardisation and transparency in Europe’s Environmental, Social, and Governance (ESG) reports. EFRAG also issued the XBRL Taxonomy for Article 8 disclosures, requested by the European Commission (EC) to expand the framework of digital ESG disclosures.

The Importance of ESRS Set 1 XBRL Taxonomy

The first set of the ESRS (European sustainability reporting standards) XBRL Taxonomy is a useful tool for companies that are required to file their ESG information in the XBRL format. It assists in tagging sustainability reports to enhance the quality of the ESG data by increasing reliability, consistency, or comparability.

Given the need recognised by the EC, the ESRS Set 1 XBRL Taxonomy is the digital version of the human-readable ESRS Set 1, approved by the EC on July 31, 2023, and published in the Official Journal of the European Union on December 22, 2023. This taxonomy offers a starting point for the European Securities and Market Authority (ESMA) to offer Regulatory Technical Standards (RTS) for tagging the ESRS sustainability statements.

The final RTS will be implemented through an EC-delegated act modifying the European Single Electronic Format (ESEF) Regulation.

Key Features and Enhancements in ESRS Set 1 XBRL Taxonomy

The ESRS Taxonomy includes various improvements and new features to increase the quality and usability of ESG reporting:

1. Improved Validation Rules: The taxonomy provides new validation rules with a calculation linkbase to raise error flags for the purpose of having precise reports. This contributes to enhancing the reliability of the aggregated data since it independently indicates discrepancies and totals in calculations.
2. Enhanced Referencing: References to the data points have been made more precise, linking each XBRL element to the corresponding piece of text in the ESRS. This makes the information in the disclosures more readable and easily understandable.
3. Refined Boolean Elements: These elements have been improved for true/false disclosures, which means that each disclosure bears a positive or negative statement to reduce ambiguity.
4. Simplified Dimensional Modelling: The taxonomy uses this concept to break down facts in XBRL. It includes closed hypercubes, which software vendors and technical experts requested, and a refined approach to connecting fact groups to typed dimensions.
5. Streamlined Narrative Elements: It eliminates common elements in ESRS 2 MDR and MDR-related elements in the topical standards. It now follows the taxonomy of reusing elements across environmental standards to make the narrative components clearer and simpler.

Voluntary Adoption and Stakeholder Engagement

Although companies will not be mandated to use digital tagging for ESRS until the EC adopts the XBRL taxonomy as part of the ESEF RTS, EFRAG encourages companies to use it voluntarily. Using the taxonomy to prepare human-readable ESRS statements can be useful in structuring disclosures and improving their decision-making utility for stakeholders like analysts and investors.

Supporting Documents and Implementation Guidance

In addition to the XBRL taxonomy packages (ESRS Set 1 XBRL Taxonomy and Article 8 XBRL Taxonomy), EFRAG has released an ‘Explanatory Note and Basis for Conclusions.’ It outlines the rationale, methodology, and technical options considered while developing the taxonomy. It also shows the reporting format illustrations for using the ESRS Set 1 Taxonomy.

Annex 1 (XBRL taxonomy illustrated in Excel) and Annex 2 (illustrative examples of XBRL reports) contain more detailed information and guide stakeholders on how to implement the taxonomy.

Prepare for the Future of ESF Reporting With DataTracks

The ESRS Set 1 XBRL Taxonomy is a key milestone for digital ESG reporting. Companies that undertake early preparations and embrace this new standard will be well placed to offer the needed transparency and sustainability.

For more details, visit – https://www.efrag.org/en/news-and-calendar/news/efrag-publishes-the-esrs-set-1-xbrl-taxonomy 

DataTracks, a market leader in regulatory compliance solutions, offers a robust platform to meet these requirements. The following are the reasons to choose DataTracks for your ESG reporting needs:

1. Proven Expertise in ESG Reporting: DataTracks is a pioneer in ESG reporting, offering services that are compatible with best practices such as the ESRS Taxonomy.
2. Reliable and Trustworthy Solutions: Several EU companies have relied on DataTracks’ solutions for accurate, reliable, and compliant ESG disclosures.
3. Comprehensive and User-Friendly Platform: DataTracks Rainbow™ has a user-friendly interface that assists users all the way from data entry to reporting.

Contact an expert today at +31 20 225 3702 or enquiry@datatracks.eu to begin your voluntary filing.