A new XML-based reporting language could improve companies' reporting of their businesses' social and environmental impact, according to a report from the United Nations.
Published this week by the United Nations Environment Programme (UNEP) and think-tank SustainAbility, Risk & Opportunity: Best Practice in Non-Financial Reporting , delves into the growing importance of non-financial information in assessing a companies long-term performance.
The report claims that there has been a massive increase in the number of companies opting to release non-financial information pertaining to the impact of social and environmental issues, in addition to the mandatory financial information required by regulators such as the SEC.
Organising this non-financial information into easily digestible reports is an extremely complex process but, according to UNEP, eXtensible Business Reporting Language (XBRL) is used by a growing number of companies and consultants to automatically create integrated digital reports.
"Our response has been increasingly sceptical but now there are signs that real progress is on the horizon," the report states. "Computers can treat XBRL data intelligently, recognising it in documents, analysing it and then presenting it in a variety of ways automatically."
The XML variant is an evolving global standard for tagging data about a company in such a way that it can be processed automatically.
As well as applications for non-financial reporting, XBRL is being championed as a method for improving financial reports by financial regulators and institutions. In the UK the Financial Services Authority has announced it is adopting XBRL, while the Inland Revenue is launching a pilot project for Corporation Tax filing using XBRL in 2005.
But while UNEP is keen to point out the promise of technology such as XBRL to improve company's environmental and social responsibility, it claims that other technological developments may be hindering the process.
The report states that the practice of companies "carpet bombing" regulators with information has slowly moved from print to online publishing. The breadth and depth of reporting on the Web has grown to such an extent that it has made the job of analysing printed reports extremely problematic, the report claims.
"Most printed reports are now backed by Web sites, some of them so voluminous, to the point where our analysts sometimes wonder whether they mightn't be about to become too vast, equivalent to corporate 'black holes' -- with virtually infinite gravitational conditions from which data-hunters would find no escape," the report states.
Companies first began to issue non-financial reports relating to their social and environmental practices due to pressure from Non-Governmental Organisations, but recently investors have begun to include the information to build a better picture of an organisation's potential.
"The challenge is to ensure leading companies integrate their financial and non-financial accounting and reporting in ways that help analysts and rating agencies do their job properly. Most current attempts are resulting in "Frankenstein's Monsters" stitched together from ill-matched parts, but 2005 will see leadership companies setting new standards."