Standards Benefit Companies, Data Collectors, Data Users
Executive Summary
To meet the goals of climate initiatives worldwide requires governments to understand the impact of industry on the environment. This can only be accomplished by collecting data that is concretely understood, timely, and consistently prepared to foster a shared understanding of the current state of climate risk and to monitor changes going forward. Digital data standards enable comparison across reporting entities so that businesses can identify their own risks and learn how to reduce their impact on the environment. At the same time, the reporting of climate data must be as efficient as possible to minimize the burden on reporting entities; and the collection and analysis of climate data must be automated to ensure the lowest possible cost for collecting agencies and data users.
Regulators tasked with collecting and evaluating global climate data like greenhouse gas (GHG) emissions are increasingly requiring data to be prepared in structured, machine-readable format, relying on the eXtensible Business Reporting Language (XBRL) standard. This is driven by the recognition that only structured, digital data can be confidently, cost-efficiently reported, collected, and analyzed. Regulators opt for XBRL because it is open, nonproprietary, widely used in global markets, and can render emissions and other data types (financial, narrative, etc.) unequivocally machine-readable.
Agreeing on common data definitions and structure (which is needed when data is standardized) will reduce the burden on companies when reporting climate data. With multiple climate data collection requirements around the world, a single company may be tasked with reporting to more than one regulatory authority. This makes it imperative that regulators agree on a single set of definitions and data structure for reporting of data like GHG emissions where there is likely to be overlap. This will eliminate duplication, the potential for errors, and reduce the burden on those reporting.
This paper recommends adopting the XBRL standard for reporting GHG emissions in support of California SB 253 and for SB 261. XBRL is already being mandated for climate data in jurisdictions in the US and around the world. It is the most cost-efficient approach for reporting entities, and the only method to ensure the collection of clean, consistent data for effective evaluation of climate risk. If regulators adopt the same approach, companies will be able to prepare a single digital report which can support disclosure requirements to the appropriate securities regulators (and many may have more than one) and to the State of California.
