XBRL Tagging: From Easing Financial Reporting to Transforming Sustainability Reporting for Transparency, Auditability and Assurance
XBRL tagging is increasingly becoming a transformative tool. Originally developed for financial reporting (first introduced in the U.S. in 1998, mandated in China in 2004, and later adopted by Japan, Korea, the U.S., and Europe between 2008-2011), it is now used in over 65 countries worldwide for financial and regulatory disclosures. XBRL tagging is now being adapted for sustainability reporting to streamline processes, enhance transparency, and support automation, all while ensuring compliance with evolving regulations. This article will explore what XBRL tagging is, how it has been used in financial reporting, the importance of adapting it to sustainability reporting, and how this adaptation is occurring amid increasing regulatory demands and the growing need for auditability and assurance, enabled by XBRL.
For instance, data items like “net profit” or “carbon emissions” in financial or sustainability reports can be uniquely identified by XBRL tags, following standardized definitions from taxonomies such as International Financial Reporting Standards (IFRS), US Generally Accepted Accounting Principles (GAAP), or national regulations. This tagging ensures the data is machine-readable, automatable, and comparable across companies and reporting periods. Specific XBRL tags clarify what the data represents, such as quarterly revenue or annual carbon emissions, along with contextual details like when it occurred or its broader classification (e.g., category or grouping within assets).
What is XBRL tagging?
XBRL tagging is the process of applying standardized digital labels, or ‘tags’, to individual items of financial or business data (including sustainability metrics) within reports, using the Extensible Business Reporting Language (XBRL) framework. These tags, derived from a dictionary-like structure called a taxonomy, help classify, identify, and relate data elements, such as revenue, assets, or sustainability metrics. This ensures that the information is easily understood, searched, analyzed, and compared by software across organizations and jurisdictions.
Moreover, XBRL enhances auditability and assurance in sustainability reporting by providing traceable, standardized, machine-readable disclosures advocated alongside contemporary frameworks like the CSRD (Corporate Sustainability Reporting Directive) and California’s SB-253 (Senate Bill-253), and BRSR (Business Responsibility and Sustainability Reporting) in India. This boosts transparency, reliability, and accountability.
iXBRL, or inline XBRL, is an extension of XBRL that embeds data into human-readable HTML documents, allowing users to view the information in a standard web browser, making the data more accessible and visually appealing.
The process involves mapping each data point to a corresponding taxonomy concept, then using XBRL software to tag individual numbers and disclosures. Additional details, such as the reporting period (e.g., quarterly or annually) and calculation relations (e.g., summing up expenses), are embedded within the digital report. The data is then validated against regulatory requirements before being submitted to authorities, such as the SEC or local regulators, for compliance and public disclosure. Apart from SEC filings, XBRL is also mandated by regulations like ESEF (European Single Electronic Format) in Europe, SEBI (Securities and Exchange Board of India) and increasingly in other countries.
How has XBRL tagging been used in financial reporting?
XBRL tagging is performed using specialized software or reporting tools that apply standardized tags to relevant data points, such as revenue or profit, in financial reports. It can involve using existing standardized tags or creating extensions for company-specific disclosures. This enables financial reports to be aggregated, validated, and analyzed by stakeholders, including regulators, auditors, investors, and analysts. XBRL has been widely used for financial filings to regulators, such as the SEC (Securities & Exchange Commission) in the United States, and it ensures the auditability and assurance of reported data.
In financial reporting, XBRL tagging involves digitally labeling items in financial statements, such as balance sheets, income statements, and cash flow statements, using tags from recognized taxonomies like IFRS or US GAAP. Companies map their financial data to these taxonomy elements, ensuring that each figure is clearly identified and classified for electronic filing and automated analysis by regulators, investors, and auditors.
For financial reporting, iXBRL improves data analysis quality and reduces the time needed to produce reports. It makes financial data easier to share and compare, aiding decision -making processes. With standardized, machine-readable,and traceable data, XBRL tagging also streamlines audits and assurance processes. Additionally, it enables automated analysis and benchmarking of financial statements by rating agencies and investors, reduces manual errors, and ensures regulatory compliance by facilitating efficient disclosures.
Why is it important to adapt XBRL tagging to sustainability reporting?
Moreover, XBRL tagging enhances transparency and trust, allowing regulators, investors, and stakeholders to verify and analyze sustainability data more efficiently, reducing the risk of greenwashing or misreporting. It also facilitates the automated collection, aggregation, and benchmarking of sustainability data, improving reporting efficiency and enabling rapid analytics for ratings, risk assessments, and strategic planning.
In addition to regulatory requirements, voluntary frameworks like GRI (Global Reporting Initiative), IFRS S1 and S2, SASB (Sustainability Accounting Standards Board) are also recommending or adopting XBRL tagging, further highlighting its growing importance.
We are seeing inclreaing compliance focus in sustainabiltiy reporting, for instance CSRD (which imposes penalties ranging from $11,000 to over $1 million for non-compliance) BRSR in India (penelties upto $120,500) and California’s SB-253 (with fines up to $500,000) These comtemorary frameworks are also advocating for XBRL tagging dues to its valued benefits. First, it enables the standardization of sustainability metrics like carbon emissions, energy use, and water consumption through globally recognized taxonomies, making sustainability data more intelligible and comparable. Second, XBRL tagging helps combat greenwashing by ensuring that sustainability reporting is not just cosmetic but complies with audit and assurance standards, thus fostering greater accountability.
Importantly, non-compliance with XBRL tagging under regulations like, BRSR in India under and can result in significant penalties. As sustaianbility reporting matures, added with compliance component, across geographies, including California’s SB-253 (XBRL tagging is advisable and final rule is being finalized as we write this article) in the US, EU’s CSRD, Australia (currently working on its XBRL texonomy), failure to comply will lead to financial and reputational consequences. XBRL tagging is therefore becoming a critical component for ensuring compliance.
How is XBRL tagging being adapted in sustainability reporting? The way forward and solutions
BriskFlow AI is one such solution, enabling XBRL tagging from PDFs, Excel files, and API data in just four easy steps. This tool supports across a range of compliance and voluntary reporting frameworks including CSRD and California’s SB-253, GRI, SASB, IFRS, and BRSR. The process involves selecting the reporting framework, ingesting data, tagging with an LLM-assisted co-pilot, and then validating and exporting in XBRL/iXBRL. BriskFlow AI is designed for speed, accuracy, and scale, offering no-code workflows and API-first white-label integration for seamless submission.
Looking ahead, more jurisdictions will adopt XBRL tagging for sustainability data, making digital, standardized reporting a baseline expectation. This will be driven by mix of evolving regulations and mounting market pressure. According to the MSCI Sustainability Institute, adopting XBRL will allow investors to extract material financial information from disclosures 10 times faster and at a fraction of the cost compared to using AI to extract data from PDFs. We can also expect the development of expanded taxonomies with more granular tags for issues like supply chain impact, circular economy, and biodiversity metrics, improving the quality and scope of disclosures.
XBRL is also becoming central in global climate discussions, exemplified by the Digital Climate Reporting Roundtable at Climate Week NYC, hosted by XBRL US. This event focused on reducing reporting burdens, ensuring data quality assurance, and the role of technology providers in supporting the market. BriskFlow AI participated in the roundtable and XBRL US participated in the launch event of BriskFlow AI during Climate Week NYC at NEST Campus, highlighting the impact of BriskFlow AI’s efforts to transform digital sustainability reporting.
The development of sustainability-specific taxonomies is underway, with organizations like EFRAG for the EU CSRD and IFRS & ISSB creating taxonomies that define tags for climate, nature, diversity, and other social metrics. Companies are now disclosing sustainability data using XBRL tagging within structured reports, often alongside financial statements, enabling faster and more consistent analysis by regulators and investors. Additionally, integrated reporting platforms and software providers are increasingly offering tools that incorporate XBRL tagging for both mandatory and voluntary sustainability disclosures.
XBRL tagging is increasingly gaining adoption. The EU’s CSRD, for example, advocates companies to disclose sustainability data using the European Single Electronic Format (ESEF) with XBRL tags. Similarly, BRSR in India under under leadership of Securities and Exchange Board of India (SEBI) mandates XBRL tagging. We also have California’s SB-253 advising XBRL tagging under the oversight of the California Air Resources Board (CARB). Other standards, such as ISSB (International Sustainability Standards Board) , IFRS S1 and S2, GRI, SASB , are also recommending XBRL integration for sustainability reporting, while Australia is moving towards defining an XBRL taxonomy for Australian Sustainability Reporting Standards (ASRS) compliance.
As XBRL-based sustainability reporting gains traction, global harmonization and convergence will make sustainability data more comparable and accessible for investors and rating agencies worldwide. Widespread adoption of XBRL tagging will enable automated benchmarking, real-time analytics, and AI-driven sustainability insights, transforming how companies, investors, and regulators engage with sustainability data. The benefits of XBRL tagging are clear, and its adoption is increasingly about transparency, supporting audit and assurance.