XBRL tagging: The digital future of financial and ESG reporting

XBRL (eXtensible Business Reporting Language) is a standardized format for structuring financial and sustainability metrics and is playing an increasingly important role in corporate reporting. XBRL technology enables efficient and reliable processing of financial and ESG data, particularly for regulatory disclosure requirements, financial reports, and sustainability reports.

A central component of this technology is XBRL tagging – the process of adding machine-readable labels to individual data points. This makes reports readable not only for humans but also for machines. At the same time, XBRL tagging ensures that information is structured, consistent, and traceable – thus facilitating the analysis and comparison of company data at national and international levels.

In this article, you will learn why XBRL is essential for sustainability reporting, how companies can efficiently tag their reports with XBRL tags, and which best practices lead to a smooth implementation.

Why is XBRL tagging so essential?

In financial and ESG reporting, the digitization and standardization of data is becoming increasingly important. Companies are faced with the challenge of capturing their sustainability and financial information accurately and transparently and providing it in a way that is both regulatory compliant and can be evaluated in the long term. This is precisely where XBRL tagging comes in: it enables structured, machine-readable, and efficient processing of reports and ensures that companies provide their data in a transparent, comparable, and future-proof way.

The technology is already used by numerous regulatory authorities and financial institutions to analyze corporate reports systematically. The XHTML format is particularly important in this context, as it facilitates sustainable storage and evaluation by central actors such as the ECB, the Bundesbank, investors, and political decision-makers.

XBRL technology thus facilitates:

• Structured data collection: XBRL ensures that financial and ESG data is collected in a standardized format that allows for machine processing.
• Automated analysis and validation – XBRL enables the automatic checking and validation of data for compliance with regulatory standards.
• Efficient data processing – The machine-readable structure means that data can be processed quickly and accurately without manual intervention
• Comparability across industries and countries – The standardized structure of XBRL reports ensures consistent and transparent analysis of company data.
• Easier evaluation by stakeholders – Authorities, investors, and other stakeholders can evaluate XBRL data quickly and efficiently to make informed decisions.
• Measurability of progress towards sustainability goals – XBRL helps to track and evaluate progress towards sustainability goals (e.g., the EU's 2025 climate neutrality target).
  
  

XBRL in financial and ESG reporting

Standardized financial reporting with ESEF and XBRL

Since 2020, companies listed on the regulated market – so-called Public Interest Entities (PIEs) or regulated stock corporations – have been obliged to tag their financial figures and certain text passages in the notes to the consolidated financial statements with XBRL tags. This obligation covers a large proportion of the notes to consolidated financial statements as well as the most important IFRS tables:

• Balance sheet
• Cash flow statement
• Profit and loss statement
• Other income statements (OCI)
• Statement of changes in equity

This obligation to XBRL tagging is part of the ESEF (European Single Electronic Format) regulation of the EU. ESEF requires companies to submit their financial reports in XBRL format to ensure the standardization and automation of financial reports. Initially, this requirement applied to listed companies and PIEs, but its application is being extended to an increasing number of companies in order to further increase the efficiency and comparability of reporting. Thus, XBRL tagging is becoming relevant not only for listed companies, but increasingly for a broader business landscape.

The future of digital ESG reporting with CSRD and XBRL

XBRL tagging is now also becoming increasingly crucial in ESG reporting, particularly in the context of the Corporate Sustainability Reporting Directive (CSRD), which, as of January 1, 2024, requires listed companies, public-interest entities (PIEs), and large companies meeting specific criteria to prepare comprehensive sustainability reports in accordance with the European Sustainability Reporting Standards (ESRS). These companies must submit their reports in XBRL format and tag them with XBRL tags based on the ESRS taxonomy. This taxonomy ensures consistent, standardized reporting that improves the comparability and transparency of the published data.

However, applying XBRL tagging will not only be required of listed companies in the future but will increasingly affect a broader group of companies that are required to report sustainably through the CSRD.

XBRL tagging in sustainability reports

With the introduction of XBRL tagging under the CSRD and the ESRS taxonomy, sustainability reporting is being taken to a new level. The ESRS taxonomy ensures that all reporting companies in the EU use the same standard for non-financial reporting (NHB). The standardization enables a machine-readable presentation of non-financial data and ensures uniform reporting structures. XBRL tagging offers numerous advantages for companies and their stakeholders:

• Vertical comparability: Data can be analyzed across sectors, making it easier to compare companies within or across sectors.
• Horizontal comparability: Companies can track their own historical data and clearly document long-term developments, enabling a better analysis of their progress.
• Standardized reporting: All companies covered by the CSRD use the same ESRS taxonomy, which creates a consistent structure for sustainability reporting.
  
• Increased transparency: Investors, regulators, and other stakeholders are provided with a clear and consistent basis for analyzing and comparing sustainability performance.
  
• Easy regulatory compliance: Standardizing data and tagging makes it easier to comply with legal requirements and reduces administrative effort.

How Envoria supports your XBRL tagging with software

The importance of software

The introduction of XBRL tagging for final reporting is a crucial step for companies seeking to meet regulatory requirements. Given the complexity and strict requirements, it is essential to implement XBRL tagging with a professional software solution. Manually creating and assigning XBRL tags would not only be prone to error but also time-consuming and inefficient. Especially with the large amounts of data required for sustainability reporting, it is almost impossible to meet the requirements without automation.

The advantages of XBRL tagging with Envoria

In addition to the existing tagging function in the financial modules of Envoria software, the new integration of XBRL tagging in Envoria's ESG software modules from HJ/2025 will provide companies with a powerful, professionally developed solution that enables them to tag their ESG data efficiently and error-free. Envoria goes beyond standard XBRL tagging functionality to offer full integration of XBRL tags directly into the report creation process. The software will automatically ensure that all relevant ESG metrics are transferred into the XBRL format in accordance with the ESRS.

Benefits of XBRL integration in Envoria

• Complete data flow – from ESG and financial metrics to reporting and submission to auditors
• Integrated XBRL tags – no need for a separate tool, full compliance with regulatory requirements
• Automation – auto-tagging, mathematical consistency checks, and transparent data traceability
  

Examples of how XBRL tagging works with Envoria

Initial data import & tagging

When we start the XBRL tagging process with Envoria, we work closely with you to analyze your previous year's figures (IFRS/ESRS) and tag the first report. As part of that collaboration, we'll perform database training to optimize auto-tagging in future iterations. We'll also provide training to get you up to speed on tagging, and we'll enable auditors and other partners to be involved early on in the process so that all relevant stakeholders are on the same page.

Optimized processes through automation

After the first iteration is complete, you will benefit from Envoria's automated processes. The roll-forward function takes over the previous year's data, which significantly simplifies the process for subsequent years. Auto-tagging intelligently recognizes structured tables and texts and tags them automatically. The software also ensures ICS compliance, so auditors have full data traceability. Experience shows that the effort for companies is significantly reduced after the first implementation since automation takes over the majority of the tagging work.