Carbon Call: In conversation with XBRL International

Many are optimistic about global climate mitigation efforts following COP28, which came to a close last week in Dubai with a historic agreement to “move away” from fossil fuels. However, true success lies in implementation, and this will require enhanced accountability, which in turn requires high-quality data, i.e., data that is digital, discoverable, and comparable.

To support the transition to more comprehensive and fit-for-purpose climate disclosures, we need a global private-public dialogue, and with extensive experience in the world of business reporting, XBRL International will be taking a leading role in facilitating this discussion. This is particularly important as many countries prepare to shift from voluntary carbon reporting to mandatory reporting.

The Carbon Call’s Jean-Charles Seghers sat down with XBRL International’s John Turner and  Liv Watson to look back over the last 18 months of the Carbon Call, discuss why now is the time for a wider dialogue, and dive deeper into what is planned for the coming months.

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JC Seghers: Looking back over the past 18 months of the Carbon Call, what do you think has been the initiative’s most prominent success? 

Liv Watson: As a multi-stakeholder initiative, the biggest accomplishment of the Carbon Call has undoubtedly been the level of collaboration that’s been fostered throughout. 

The group reached consensus on two occasions: firstly, during the initial stages to uncover the most common constraints that businesses encounter when discovering, sharing, and trying to understand greenhouse gas (GHG) emissions data, and secondly, in the months running up to Climate Week NYC when we rallied around three solution blueprints. This was achieved through transparent and regular communication, with multiple monthly calls and feedback opportunities. 

We now need to ensure that these solutions are used to support the technical implementation of statutory climate and sustainability reporting — they are very important pieces of the puzzle, and we know they generate support and consensus. 

JC Seghers: What has been the Carbon Call’s biggest challenge to date, and how did the initiative’s members overcome it?

John Turner: Without any doubt, the biggest challenge has been understanding one another; the activity of climate disclosures brings together people from a wide range of disciplines, and everyone brings their own perspectives.

Historically, sustainability and GHG accounting have been decoupled from the financial statement preparation process. However, as the Carbon Call matured, it was clear that sustainability and financial reporting, as well as independent assurance, would no longer be separate activities. The upcoming statutory reporting mandates directly impact GHG accounting, reporting, and disclosures. The changes required bring together professionals and experts with vastly different backgrounds; sustainability professionals need to learn about statutory reporting, and financial and accounting professionals need to understand that counting money and counting GHG emissions are two very different things. 

JC Seghers: As the Carbon Call initiative comes to a close, what has been the most important lesson learned from this experience?

Liv Watson: The Carbon Call showed us three things. Firstly, GHG accounting is undergoing drastic and rapid process changes as it gets incorporated into wider corporate reporting. Secondly, more than a climate problem, we are dealing with a problem of data interoperability, which requires better solutions to allow users to search for and access data, to assign context to data points (i.e., metadata), and to ensure we better align and agree on definitions and terminology. Thirdly, we found that while solutions exist, they need to be brought to a broader audience. 

With the transition from voluntary reporting to mandatory reporting, the reliability of the GHG emissions data used goes from being ‘nice to have’ to vital. Carbon disclosures will also fall under the remit of corporate reporting rather than just being something that sits off to the side as a communications function. That shift will be a seismic one that leads to big changes inside corporations, including the blending of skills within teams to ensure sustainability and financial expertise are both represented.

Based on these lessons learned, the Carbon Call is transitioning into a more comprehensive, inclusive, and global public-private dialogue that will drive mandatory and voluntary sustainability disclosures that are digital, discoverable, and comparable.

JC Seghers: XBRL International has traditionally focussed on financial reporting; why is the organization now broadening its focus to include sustainability reporting?

John Turner: Right around the world, there are more than 200 regulatory mandates that oblige the preparation of different kinds of business reports in XBRL format — increasingly in Inline XBRL, which is a special kind of web page that is both human- and machine-readable. Regulators require that corporate reports are digital today because that’s what investors, data providers, and a wide range of other users (including companies that need to compare their performance with their peers) require. It is, after all, the 21st century, and we live in a data paradigm, not a paper one. The XBRL standard is just the digital plumbing to make all that work. 

As regulators move to integrate climate and sustainability reporting alongside financial disclosures, often as a single corporate report, the vast majority of them are planning on ensuring that they are digital.

The Carbon Call has successfully explored the business problems and developed pilots to drive digital, comparable, and discoverable data for climate accounting, but widespread adoption is lacking. To be successful, initiatives must go beyond existing within small communities of stakeholders. We need global solutions that are scalable and accessible to all, and we believe XBRL International is very well-placed to help facilitate this change as the world makes this shift from voluntary to mandatory reporting.

JC Seghers: How can XBRL’s previous work help in the development of digital, discoverable, and comparable carbon accounting?

John Turner: XBRL is the go-to standard for a wide range of digital business reporting. Each year, millions of older, paper-based reports are replaced with accurate, digital XBRL-based documents, enabling the rapid and reliable transfer of information between different organizations.  

Our technical digital standard is already used in more than 50 countries globally, and many regulators have indicated their intention to ensure that their mandates oblige issuers to publish their disclosures primarily in Inline XBRL format. 

With its vast and varied use, XBRL is well-positioned to bring together a range of key audiences, from the climate community and sustainability standards boards to financial regulators, accounting bodies, and corporate entities.

JC Seghers: As we discussed in our recent blog, the Carbon Call is transitioning into a global public-private dialogue over the coming months. Why is now the right time to facilitate such a dialogue in the carbon accounting sector?

Liv Watson: The climate crisis has created the need for urgent action across all industries and sectors in all countries. While a whole host of governments and companies are making ambitious commitments, it is now vital that we ensure they are followed by implementation. To accurately and transparently monitor progress, we need mandatory and voluntary sustainability disclosures that are digital, discoverable, and comparable. 

As we work to establish such technical digital standards in this sector, we need a set of connected dialogues that bring key audiences together to ensure adoption at scale in a cost-effective manner. These dialogues must be collaborative, comprehensive, inclusive, and global.

Dedicated stakeholder groups must also be organized to build consensus on digital practices and strengthen the data plumbing behind sustainability reporting.

The Carbon Call has been an impactful initiative that has set many activities in motion, but now it’s time to scale up efforts beyond the 80 participating organizations and take it out to more stakeholders, including the standards setters and regulators.

JC Seghers: Why is it so important to ensure that GHG emissions reporting is digital?

John Turner: Digital reporting is vital for sustainability disclosures, as well as the relevance, competitiveness, and leadership of business. Users of all kinds — be they human or machine — expect and require carbon reporting data to be digital to ensure they can analyze and compare the information they are interested in.

With metadata — i.e., the data that describes and provides structure to other data — your audit is simpler, your assurance is simpler, and any kind of inspection by regulators one day will be simpler. It will help improve the auditability of reporting because it provides common data definitions, as well as better, easier, and cheaper data exchange within supply chains. Current standards on sustainability reporting do not say anything about metadata.

One of the key steps here is for standards setters to collaborate with each other to create digital connections between the different initiatives. 

To ensure the widespread adoption of digital reporting, we must build capacity in all markets, particularly in middle- and lower-income countries. To be effective, no one can be left behind.

JC Seghers: What is the importance of comparable data, and how can it help companies measure, monitor, and report their emissions reliably?

Liv Watson: With 86% of companies currently using multiple standards for their reporting, many users turn to proxies and guesswork due to the varying and inconsistent requirements of each disclosure. Not only does this create unnecessary work for these corporations, but it also makes it difficult to compare, monitor, and share data. Data that cannot be compared is data that cannot be used easily or effectively.  

Over the next year or two, we will continue to work with the standards setters in order to help facilitate authoritative digital mapping of different standards’ rulebooks to ensure the international utility, comparability, relevance, and interoperability of these standards. 

JC Seghers: How will improving the discoverability of reporting data help companies, regulators, and other stakeholders?

John Turner: A digital and public index is needed to help users discover what reports have been published, as well as when and where. If data cannot be easily found, it may as well not exist. 

It’s very important for there to be ways for those who use carbon accounting information, whether that’s corporations, end users, investors, lenders, policymakers, or the general public, to be able to find this information easily.

There is a vital need for new public digital infrastructure — a global index that will vastly improve and simplify the discovery process of sustainability reports for users of all kinds.

JC Seghers: How can we ensure that the voices and successes of the Carbon Call are carried over into the next stage?

Liv Watson: We’ve learned a lot over the last 18 months, and these invaluable lessons will continue to guide our efforts as we move forward. 

We will continue to work alongside ClimateWorks Foundation (the Carbon Call Secretariat), and we strongly encourage all former Carbon Call members to remain engaged in the process — and for new organizations to get involved — to ensure maximum impact.

JC Seghers: How can organizations get involved in XBRL’s future carbon accounting work?

John Turner: Collaboration is key here. This is a vital and tightly interconnected ecosystem, and everyone in reporting has a role to play. Whether they are familiar with the Carbon Call and XBRL or not, everyone is welcome, and there are several ways they can get involved.

Throughout 2024, there will be calls for stakeholders to engage in different aspects of the dialogue. We need corporations, in particular, to be proactive at testing out the standards they will be reporting against and provide feedback to the standard setters. For example, there will be a European Financial Reporting Advisory Group (EFRAG) taxonomy released in January, and we will be encouraging stakeholders to provide their input. Companies need to ensure that what the standards setters are doing makes sense and meets their requirements. Regulators are extremely dependent on these formal feedback mechanisms, and we strongly encourage former Carbon Call members to be a voice in this process. We want this work to facilitate bilateral communication between the standard setters and the organizations that fall under their jurisdiction.

We also plan to coordinate workshops throughout the year to provide information on upcoming activities and encourage engagement.

With mandatory digital reporting due to be enforced in 2026, we only have around 18 months to make all of this happen. If we don’t do this today, we will incur much higher financial costs to do the same work down the line, not to mention the climate costs, so there is no time to waste.

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[JC] As we enter into the new year and the Carbon Call comes to an end, we strongly encourage member organizations to remain engaged in the discussion. ClimateWorks and I will remain a key part of the process. 

Join us at 10 am EST on January 30 for our webinar to learn more about future plans and opportunities for engagement. We will be sending out webinar registration details in early January.