CSRD: Why is Excel No longer a Valid Tool for Reporting

Currently, companies are faced with growing challenges when it comes to transparently reporting their practices, results and conforming to new regulations.

The Corporate Sustainability Reporting Directive (CSRD) represents a significant advance, establishing strict and detailed requirements for reporting sustainability information. However, this new framework brings with it considerable challenges for organisations accustomed to traditional data management methods.

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Excel doesn’t comply with CSRD requirements

For years, many companies have used Excel spreadsheets to gather, organise and present sustainability data. This tool, although it’s familiar and versatile, is now faced with limitations where precision, coherence and accessibility of data is becoming crucial.

Spreadsheets, by their own design, lack the capacity to manage the complexity and volume of data required by CSRD, and don’t offer the functionality necessary to guarantee the integration and verification of reported information.

The transition of sustainability data management tools from basic Excel style tools to more advanced and specialised tools is not only a question of regulatory compliance; it’s a fundamental transformation in how companies understand and communicate their global impact.

This introduction to a new reporting standard not only underlines the deficiencies in older methods, but also demonstrates the urgency of adopting robust, efficient solutions that above all are capable of supporting rigorous scrutiny under the CSRD framework.

The Main reason: Presentation of Reports in European Single Electronic Format (ESEF)

The presentation of reports to European Single Electronic Format (ESEF) is a key requirement established by Corporate Sustainability Reporting Directive (CSRD) referring to the necessity of preparing sustainability reports in a standardised digital format.

This requirement facilitates accessibility, analysis and comparability of the reported sustainability data of companies to a European Union level.

To comply with this requirement, CSRD relies on the use of XBRL technology (eXtensible Business Reporting Language) for the digital labelling of reported information.

What is XBRL?

XBRL is a language based on XML for the electronic communication of business and financial data. It permits the singular tagging of each piece of financial or sustainable information, which subsequently facilitates identification, processing and automatic analysis for the users of the aforementioned information, such as regulators, investors or analysts.

Key Characteristics for XBRL:

Open Standard: XBRL is an open and free standard, developed and maintained by a non for profit organisation, XBRL International Inc.
Labelling of data points: XBRL labelling (taxonomy) describes the data content in terms of their financial and sustainable significance, making the data “intelligent” and legible by machines.
Interoperability: By being a global standard, it facilitates the interoperability and comparability of financial and sustainable information between different systems and jurisdictions.
Flexibility: XBRL allows the creation of personalised taxonomies to satisfy specific reporting necessities, adapting to different regulatory reporting frameworks.

Implementation of ESEF by means of XBRL within CSRD:

In the context of CSRD, the implementation of ESEF through XBRL allows companies to label their sustainable information in line with the European Sustainability Reporting Standard (ESRS).

This allows regulators and other information users to evaluate a company’s compliance with EU sustainability requirements and to analyse their sustainable performance more efficiently.

The adoption of XBRL in sustainability reporting under CSRD has the following objectives:

Improve the accessibility and usability of sustainability data: The XBRL labelled information can be easily accessed and processed with specialised software, improving the accessibility for all users of the information.
Facilitate comparability and analysis: Standardised labelling allows the comparison of sustainability information between different companies and sectors, facilitating analysis by investors, analysts and stakeholders.
Increase transparency and reliability: The structure and standardisations imposed by XBRL contribute to the precision and consistency of reported information, increasing the trustworthiness of sustainability data.

In conclusion, the implementation of ESEF through XBRL under CSRD represents a significant advance in the standardisation and digitalisation of sustainability reports, aiming towards greater transparency, accessibility and comparability of sustainable information on a European level.

When it comes to key CSRD requirements, a spreadsheet (Excel or any other), won’t be valid specifically when complying to regulations.

Other reasons why Excel Spreadsheets don’t comply to CSRD requirements

Furthermore to what has previously been mentioned, there are more reasons for why we need platforms or an ESG data management software capable of complying to CSRD:

Complexity of Data and Integrated Reporting: The established reporting standards by CSRD and ESRS require the collation, analysis and presentation of a wide variety of sustainability data that tackles environmental, social and governance (ESG) aspects. The complexity and volume of these data points can surpass the data management capacities of Excel, especially within large organisations subject to extensive supply chains.
Consistency and Version Control: Maintaining consistency, accuracy and version control of data in an Excel spreadsheet shared with multiple users and departments can be extremely challenging. This can bring with it errors, duplications and discrepancies in reported data.
Automation and Efficiency: Excel lacks advanced automation capacities necessary for the collation and efficient processing of large volumes of data from varying sources. This can result in a manual reporting process, prone to errors and taking up large amounts of time.
Assurance Requirements and Verification: CSRD ensures reported sustainability information is verified by an independent third party, which requires a level of rigour and transparency in the collation and presentation of data that can be difficult to reach and demonstrate using only Excel.
Data Integration and Double Materiality Analysis: Carrying out a double materiality analysis, that evaluates both the company wide impact on sustainability alongside the impact of sustainability on the company, requires an integrated focus and a deep analysis of data that can be challenging to efficiently manage within Excel.

For these reasons, companies are adopting more sophisticated sustainability data management systems and specifically designed platforms to comply with sustainability reporting regulations such as CSRD and to manage complexity, volume and rigour of required data points.

These solutions offer advanced tools for analysis, automation, version control and report generation that surpass the capacity of traditional Excel spreadsheets.

If you want to learn more about the APLANET platform and how we can help you with compliance to CSRD and other regulations, you can book a demo with one of our experts here.

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