ESG in your financial regulatory documents

taxonomie verte

Using XBRL for Interconnecting financial and sustainability (ESG) taxonomies

Structured digitalization of data to facilitate interconnectivity and usability of information throughout regulated disclosed publications, is of utmost importance in order enhance transparency and comparability of data, in line with the European union’s ambitions. Financial taxonomy has been used, over the recent years, to interconnect financial information of several regulated documents of the same nature, thanks to XBRL.

A white paper released by EFRAG* on the 14th of January of this year, is calling on the general public to give feedback, before the 15th of February, on the project of enabling the same XBRL technology to connect financial and sustainability (ESG) taxonomies. This integrated approach ambitions to create links between different indicators and give a clearer and more comprehensive reading to all stakeholders. Disclosed publications could then be analyzed not only from a financial profitability standpoint but also, from that of the sustainability lens. If such a technological feat is successful, navigation through these complex and bulky documents will undoubtedly be facilitated.

The XBRL certified French software provider, Pomelo-Paradigm, has designed and developed a software called Pomdoc Pro to assist issuers and auditors in creating that interconnectivity throughout their regulated disclosed financial documents. Current users of this software include several multinational companies as well as issuers who work on behalf of their clients, who are suject to the NFRD regulation. Pomdoc has integrated the European financial taxonomy and allows users to interconnect the digital data throughout their financial documents. This automated process has resulted in the massive diminution of errors due to reduced manual data entry as well as the promotion of collaborative work, as several departments can work simultaneously on the same document. To date, over 8948 documents have been edited using Pomdoc Pro, software which is entirely ESEF compatible.

Pomelo-Paradigm is at the forefront of the XBRL financial taxonomy interconnectivity and has the technological stability to integrate the ESG taxonomy when it becomes available.

A free demonstration animated by our sales department can be scheduled upon demand!

Cecilia ANICETTE, Senior CSR and Sustainability Consultant

* European Financial Reporting Advisory Group

Green Taxonomy and NFRD

La Taxonomie verte dans la DPEF

New KPI disclosures in 2022 and 2023

Non-financial companies are subject to new reporting obligations within the NFRD scope because of the EU green taxonomy regulations. From the calculation of the imposed key performance indicators to the preparation of the sustainability report, below are a few guidelines to assist you.

New KPIs for sustainability reporting

Details of the new quantitative and qualitative Key Performance Indicators (KPIs) to be disclosed within the NFRD framework are indicated in the delegated acts of the Taxonomy Regulation on climate change mitigation and adaptation, published in July 2021. Since then, the companies concerned have been busy contacting their different business units to collect and centralize the required information needed to calculate these indicators.

As of January 1st, 2022, non-financial companies are expected to identify and classify all their activities and indicate whether they are taxonomy-eligible or not, with regards to two of the six environmental objectives: climate change mitigation and adaptation.  Following this initial step, the three KPIs: % of turnover (CA), % of capital expenditure (CapEx) and/or % of operating expenditure (OpEx) have to be assigned to each activity.

Article 8 of the Taxonomy Regulation specifies that it is also necessary to describe the nature of the activities, making a clear distinction between those that are "transitional" or "enabling", without omitting to specify which objectives they contribute to.

Disclosure of Green Taxonomy KPIs in 2022

Despite this apparent simplification, a methodical and rigorous approach is necessary in order to avoid any error or accusation of greenwashing. This is particularly the case for activities that contribute towards more than one environmental objective; in this context, companies are expected to disclose this information and should be particularly vigilant, not to count the turnover generated for this activity more than once.

Towards complete disclosure in 2023

As of January 2023, the publication of KPIs will be mandatory for all overarching objectives. This implies calculating not only the percentage of taxonomy-eligible activities, but also, that of taxonomy-aligned activities for all the six objectives (climate change mitigation and adaptation, water and marine resources protection, circular economy, waste recycling, pollution reduction and ecosystem protection).

In anticipation of this second disclosure milestone, the delegated acts concerning the second set of screening criteria concerning the objectives 3 to 6, is expected to be published in the upcoming weeks. In order to successfully apply this calculation methodology, several essential advisory tools are at your disposal:

> The delegated acts relating to the climate objectives;

> Annex 1 qualifying criteria & Annex 2 technical screening criteria;

> Article 8 of the EU regulation 2020/852;

> the European compass.

Communicate efficiently with your stakeholders

As an expert in the creation of legally-binding and financial documents, and thanks to its network of partners, Pomelo-Paradigm can assist you with your sustainability reporting and document formatting within the NFRD scope. Contact us for a free sustainability evaluation.

Contact: Cecilia ANICETTE, Senior Consultant, rse@pomelo-paradigm.com