The ESRS Set 1 XBRL taxonomy, published by EFRAG, is a key tool for harmonizing and standardizing reporting practices in line with the CSRD (Corporate Sustainability Reporting Directive). Like its big sister, the ESEF taxonomy, which has been dealing with financial data in Europe for several years now. This taxonomy facilitates the digitization and standardization of sustainability reports, enabling more automated reading and better comparability of data for analysts or regulatory authorities. This innovation promises to transform the way companies manage and communicate their extra-financial information.
What does it involve? What are the key elements to bear in mind? And how can we prepare to ensure compliance? We explain.
CSRD : METHODOLOGY AND STEPS FOR SUCCESSFUL IMPLEMENTATION (FR)
Discover concrete steps for implementing CSRD and a clear explanation of how to deploy ESRS in your organization.
What is the ESRS XBRL taxonomy and why is it crucial?
The European Commission (EC) has mandated Efrag to create an XBRL digital taxonomy for ESRS standards. Adopted in July 2023 and published in August 2024, this taxonomy aims to facilitate the digital tagging of sustainability reports, in line with the CSRD directive. In other words, it makes ESG reports machine-readable, ensuring their consistency, comparability – and therefore easier reading and analysis for investors and analysts – and interoperability with other global reporting frameworks, such as the GRI (Global Reporting Initiative).
The CSRD aims to give extra-financial information the same importance and comparability as financial information. This is demonstrated by the use of XBRL language, already used in financial reporting (for the ESEF taxonomy).
The taxonomy also has another objective: to integrate all data into the European Single Access Point (ESAP), scheduled for 2027. This portal will centralize companies’ financial and sustainability information, offering greater visibility to investors and new financing opportunities.
XBRL ESRS taxonomy: Contents and deadlines to remember
Currently, the ESRS Set 1 XBRL taxonomy covers the 1232 data points of the 12 CSRD sector standards, known as ESRS. This means that companies will have to apply the taxonomy’s tags to each piece of data they include in their reports.
This initial tagging represents a major challenge, but will be crucial to companies’ compliance. It will help them avoid omissions or the insertion of erroneous data, as well as facilitating the interoperability of their reports with other standards.
A phased approach is planned for the roll-out of the ESRS XBRL taxonomy, particularly with regard to narrative tagging. Full implementation should arrive in 2026 on the basis of 2025 data (after the regulatory stages of validation by ESMA, translation into EU regulations and transcription in each member country), with real-life testing and feedback loops.
Understanding XBRL in 3 key concepts ?
The use of a computer language such as XBRL makes it possible to standardize the information provided in reports, ensuring that it remains understandable by humans. In fact, this is the same language used in financial reports in line with current reporting requirements, including the European Single Electronic Format (ESEF) and other international obligations such as the US Securities and Exchange Commission (SEC).
The format facilitates the transparency, comparability and accessibility of ESG data, making reporting more effective and better adapted to the needs of investors, regulators and other stakeholders.
The tagging of sustainability reports in XBRL is based on the use of specific elements called concepts, dimensions and hypercubes.
- Concepts represent the basic elements of the taxonomy, and therefore integrate CSRD data points (such as CO2 emissions or diversity policies).
- Dimensions enable these concepts to be disaggregated according to specific criteria, such as geographical regions or business sectors, and thus avoid duplicating concepts while maintaining a “readable” taxonomic structure.
- Hypercubes structure this multi-dimensional data to provide a clear and comprehensive representation of information. This enables companies to transform their sustainability reports into usable, comparable data, improving their accuracy and analytical value. In these hypercubes, sustainability report information is “tagged” twice, by concept on the one hand, and by dimension on the other.
XBRL ESRS taxonomy: 4 points to remember for better preparation
A. Alignment with global standards
The ESRS XBRL taxonomy aligns with both European and global sustainability reporting frameworks, such as the ISSB (International Sustainability Standards Board) and the GRI, ensuring interoperability and compliance for multinationals. Efrag has ensured that the XBRL taxonomy is compatible with the ISSB’s S1 and S2 standards.
Companies need to streamline their efforts by identifying overlaps between their current reporting frameworks (GRI, TCFD, etc.) and ESRS. This will enable them to reduce redundancies and save time in responding simultaneously to European and global regulations.
However, adapting to the new ESRS methods may require an increase in internal skills or the help of experts. Managing this complexity is an essential challenge if duplication of effort is to be avoided.
B. Gradual implementation and field tests
Implementation of the ESRS XBRL taxonomy will be gradual, with full adoption planned by early 2026 on 2025 indicators and field tests.
Starting now with the simple tags, gradually integrating the more complex ones, and taking part in the tests will enable you to benefit from useful feedback and facilitate adaptation for data points relating to 2025.
This approach will enable you to fine-tune your processes and prepare for any adjustments linked to test feedback.
Good to know: Validation rules have been adjusted to prevent phasing-in items from being flagged as errors when omitted from initial reports. This takes into account the phasing-in schedule of the standards.
C. Flexibility in disaggregation and customization
The taxonomy enables detailed disaggregation of data, such as GHG emissions, and customization of reports. Companies can also create additional tags for their own disclosures.
To take full advantage of this, they need to collect granular data on various ESG indicators, and ensure that their reporting systems are flexible enough to capture this level of detail. Start by identifying which disaggregations (e.g. GHG categories) will be most relevant to your business.
This flexibility allows companies to present a more complete and personalized narrative of their ESG performance, which enhances transparency and stakeholder confidence. However, collecting granular data requires robust internal systems, which may require you to strengthen your data management capabilities or invest in new technologies.
Good to know: Free-dimensional hypercubes, which enabled flexible data disaggregation with freely-defined dimensions, have been discontinued. From now on, data disaggregation will be controlled directly by the XBRL taxonomy itself, imposing a more structured framework.
D. Automated validation for data integrity
The taxonomy incorporates automated validation rules to ensure data consistency and accuracy, reducing errors in sustainability reporting.
Investing in XBRL reporting software enables real-time checks, limiting last-minute errors and facilitating auditability.
The validation system prevents errors, reduces the risk of non-compliance, and simplifies revisions. However, companies unfamiliar with XBRL tagging may need training or expert support.
Good to know: The taxonomy now specifies whether certain elements are mandatory (“shall”) or optional (“may”). This helps users to clearly understand which elements must be included in sustainability reports and which are optional.
Why and how can you prepare today?
Reducing the risk of non-compliance: How proactive adoption of this taxonomy helps meet legal obligations.
Optimizing reporting processes: The benefits of taxonomy in improving the accuracy and efficiency of sustainability reporting.
How Karbonpath can help: Presentation of Karbonpath’s solutions to support companies in adopting and implementing the XBRL taxonomy (software tools, strategic support, regulatory expertise).
Impact on companies and the role of Karbonpath
By proactively adopting the XBRL taxonomy, companies can reduce the risk of non-compliance. By preparing in advance, they ensure that they meet the legal obligations imposed by European sustainability regulations, thereby avoiding penalties and strengthening their credibility with stakeholders.
This taxonomy also optimizes reporting processes. By standardizing data and facilitating its collection, it improves the accuracy and efficiency of ESG reports. Companies can thus reduce errors, save time, and offer clearer, more comparable reports to their investors and regulators.
Karbonpath is playing a key role in this transition. With our CSRD-native platform, Karbonpath supports companies in adopting and implementing the XBRL taxonomy. We offer tailored, ready-to-use software tools, personalized strategic support through our network of partners, and regulatory expertise to ensure a smooth transition in line with European requirements. Our comprehensive solution supports you from start to finish for your reports (CSRD, GRI, Bilan Carbone, and others), ensuring data collection, consolidation and quality validation, to facilitate each stage of the process and secure your compliance.
Conclusion: the XBRL taxonomy, an essential element for the future of sustainability reporting
XBRL taxonomy is an essential pillar for the future of sustainability reporting, as it accompanies digitization and enhances data transparency. By adopting this approach, companies can better position themselves in front of investors and improve their reputation, while meeting the requirements of sustainable finance. Implementation of the ESRS XBRL taxonomy will be gradual, with full adoption planned by early 2026 on 2025 indicators and field tests.