April 16, 2007
If You Tag It, It Will Be Used: Sustainability Reporting in XBRL
by Bill Baue
Weeks after the latest SEC roundtable on interactive data, the Global Reporting Initiative releases
a draft taxonomy of XBRL tags mapped to G3 Sustainability Reporting Guidelines.
The dawning of the electronic age has radically transformed the way humans interact with
information. Digital data has shifted use from "hard" print copies to electronic files available
on the World Wide Web, email and other formats. More profoundly, e-data transcends the linearity
of print by directly connecting interrelated information--for example through a keyword search
within a document or via a search engine on the Web, or by hyperlinks that directly connect related
items within a document or across the Web.
Charlie Hoffman's 1998 invention of
eXtensible Business Reporting Language (XBRL)
applied all these benefits to corporate reporting. XBRL represents a specific application of
extensible markup language (XML)
that creates taxonomies of "tags" for labeling specific pieces of information to enable their
interconnection. For example, an XBRL tag for "net profits" identifies where this information
appears in every single corporate report, allowing for comparison across years at a single company
or across companies. SEC Chair Christopher Cox has championed what he calls "interactive data," last month hosting the latest
in a series of roundtables on XBRL accompanied by an invitation for public commentary.
XBRL carries perhaps greater significance for sustainability reporting than financial
reporting. Financial reporting is legally required for (and hence universally practiced by)
publicly traded companies, whereas sustainability reporting is largely voluntary--so XBRL brings
greater promise in driving corporate reporting of social and environmental sustainability
"If you tag it, it will be used," said Bill Cunningham, founding president
of socially responsible investing (SRI) advisory firm Creative Investment Research, riffing on Kevin Costner's
"if you build it, they will come" line from Field of Dreams. "If it is used, it will
encourage companies to consider the social and environmental impact of their business operations."
"If we want a set of social and environmental data that is as good as the financial data,
we need to codify the procedures for obtaining it," Mr. Cunningham told SocialFunds.com.
Mr. Cunningham has long recognized the value of applying XBRL to corporate social and
environmental data. He filed a letter with the SEC in October
2006 that included a visual framework for organizing such data. He also sent a letter to Chairman
Cox immediately after last month's roundtable suggesting "the XBRL initiative create a subclass of
tags specifically for data items of interest to social investors [such as] environmental impact and
carbon emission related data, diversity related data, supply chain data . . . "
Executive compensation, an issue where SRIs have long advocated for better practice and
transparency, is the first issue where the SEC is rolling out XBRL tagging for broad use. And 36
companies are voluntarily participating in an SEC program for filing broader financial data in
XBRL. The commission is investing $54 million to revamp its 20-year-old EDGAR system for use with
XBRL. At the same time, the US arm of XBRL International, the nonprofit overseeing the development
of XBRL taxonomies, is sponsoring a project creating a taxonomy for US Generally Accepted
Accounting Principles (GAAP.)
"This initial taxonomy effort on corporate GAAP-based
external reporting information helps pave the way for additional taxonomies to be brought to
market, such as one focused on sustainability information," Rob Blake, vice president of XBRL US,
The Global Reporting Initiative (GRI) has done just that. At the end of last month, GRI
released a beta draft of a taxonomy programmed by
PricewaterhouseCoopers creating XBRL tags mapped to the new G3 Sustainability Reporting Guidelines.
"Creating the taxonomy is the easy part, in a way, because XBRL is a relatively flexible
language--XBRL is just a way to label things, so you can put almost anything you want into XBRL,"
said Sean Gilbert, GRI's director of technical development. "The big challenge for bringing XBRL
to sustainability information is that you have to account for the fact that the information won't
necessarily be presented in the exact same order as the G3 guidelines."
profits" appear in about the same place in almost all corporate financial reports, "carbon dioxide
emissions" could appear just about anywhere in a sustainability report. Furthermore, many elements
of sustainability reporting rely on narrative as opposed to simply numbers. Luckily, XBRL allows
for programming different levels of rigidity--from numerical data fitting very specific definitions
to less restricted narrative information.
"Giving companies a way to put the
sustainability information they're already gathering into the same language as their financial
statement information will also offer new opportunities to communicate the total value their
company is creating for investors," Mr. Gilbert told SocialFunds.com. "If only ten companies were
producing sustainability information, you might think that the hippies got control, but when a
thousand companies are producing this information, then if you say this information is not business
relevant, you're saying all these companies are under a common delusion."
notes that the GRI's XBRL taxonomy is "usable today"--companies or investors can download it from
the GRI website and markup sustainability reports according to the tags.
"The next step
for us is to try to bring together a group of companies and likely end-users such as the SRI
community to take the taxonomy and map it against the way companies report and the way SRI
institutions will use the information to see if there are any ways we can improve it," said Mr.
Gilbert. "We don't have a formal working group put together, but we're in active discussion with
North American and European research agencies."
The Enhanced Business Reporting Consortium
(EBRC), which advocates for expanding
corporate reporting to encompass extra-financial issues encompassing sustainability information,
has drafted a reporting framework incorporating G3 guidelines as well as XBRL tagging.
"One very cool thing about XBRL tagged information is that once you tag it, but can use it
many, many times," said Mike Krzus, executive director of EBRC and a partner at Grant Thornton, a founding member of EBRC along with
Microsoft and PricewaterhouseCoopers.