The Netherlands is a global leader in Standard Business Reporting. The country embraced SBR for the digital exchange of business reports across tax authorities, the chamber of commerce, banks and other government agencies in an initiative that dates back to 2003. Today, the Dutch are once again setting new reporting standards with PCAF, the Partnership for Carbon Accounting Financials. This partnership aims to drive transparency and accountability, and facilitate a net zero carbon transition in the financial sector, in light of the Paris Climate Agreement. Visma Connect is proud to contribute to this project. To learn more about this, we spoke with Coen Egberink, Managing Director at Visma Connect. Coen has been leading our team for the past 3 years and is passionate about our mission. He is living in Friesland, a province located in the north of the Netherlands, and as we will hear in this interview, this makes his commitment to climate change awareness personal.
Coen, can you start by telling us what Visma Connect does?
With digitisation increasing around the world, it’s becoming imperative for societies to have a safe, fast and verifiable means to share data for different purposes. Visma Connect is at the heart of this transformation. Just as energy companies provided the infrastructure to power the industrial revolution, Visma Connect is the utility company of the digital society. We facilitate the digital society by delivering qualified messaging services. You could say we are the experts in information chains and reporting ecosystems that are built on trust. Our services range from sending and retrieving, to delivering qualified components (identities, an authorization registry, and a qualified messaging platform).
Visma Connect is a key partner in the Dutch government’s SBR program. We built the National Dutch taxonomies for financial reporting and provide the integrations, data sharing agreements, interfacing standards and processes which make the program run smoothly. We are also working with the State of Florida to modernise reporting with an XBRL standard. Based on this experience, we are now building sector-specific taxonomies for qualified sustainability reporting.
Can you tell us more about taxonomies and their benefits?
A taxonomy is a dictionary with data definitions, and it also defines relationships between data. Taxonomies are used to standardise information reporting, so that receiving parties like regulatory bodies and government institutions can trust data in financial reports, and reporting parties can have a common understanding of the data that is reported.
Besides reducing administrative burdens for reporting parties and for those that request reports, taxonomies make it easier to compare and benchmark reports, as everyone is using the same concepts. Following that process, information always has a “qualified stamp.”
How do you apply this to carbon reporting?
Everyone knows that to combat climate change, we need to reduce our carbon emissions. To achieve this goal, we need to measure companies’ carbon footprint. Doing that is not easy when everyone uses different metrics. ESMA, the European Securities and Markets Authority, launched the ESEF standard. Here, they specify that listed companies on EU-regulated markets need to use XBRL and the IFRS taxonomy to prepare their annual financial reports for financial years beginning on or after January 1, 2020. You can use the same standardisation principles to build a taxonomy for (non-financial) carbon emission reporting.
To be precise, Visma Connect is part of the working group developing a data model to calculate the CO2 impact of investments and loans. We are doing this in cooperation with PCAF (Partnership for Carbon Accounting Financials) and other organizations. Can you tell us about this project?
Financial institutions want to know how companies in their investment portfolio are doing when it comes to carbon emissions. They also want to know how other companies are doing in order to make new investment decisions based on climate change considerations. To make these determinations, you need qualified carbon emission reporting. That’s what this project with PCAF is all about. It’s about making Dutch and other European companies more accountable to internal stakeholders and society. Its goal is ultimately to drive economic growth, but with an eye on sustainability. One of the aspects in PCAF will be defining standards for investments in housing. We already have a lot of experience in this sector. As part of the bigger SBR program, we helped Dutch housing corporations embrace XBRL back in 2017. We built an XBRL taxonomy that allows financial departments at these corporations to submit their reports on a yearly basis, for all regulatory authorities. This saves both sides significant time and effort. The quality of information has also improved. Data integrity is preserved and reports are checked much faster.
How does this help the financial services industry?
By signing the Paris Climate Agreement, financial institutions have committed themselves to report on the climate impact of their loans and investments. PCAF is an open standard that provides comparable measuring methods for climate impact. The standard will help improve the definitions of data and data flows. It will make data exchange and benchmarking easier, nationally and internationally.
Let’s take a look at an example to see how this works in practice. Before we implemented SBR in the Netherlands, companies used more than 100 different definitions of profit. This made it very difficult to compare reports. Now, all companies report using the same definition. My wish is that we will achieve the same for non-financial reporting: having a clear international standard with no cherry-picking. So there is one version of the truth, validated and transparent data, and a way to benchmark our progress on sustainability goals.
Are there other areas in non-financial reporting which can benefit from this approach?
Yes. While PCAF is focused on emissions, there are other data points, like inclusion initiatives, the composition of your board, how you dispose of waste, and sustainable raw material sourcing, which are becoming more and more important. Companies need to be more transparent about their progress in these areas. To facilitate that transparency, they need better and more reliable reporting. This can be achieved with better standards
Why is this so important for you?
I am living in Friesland, one of the northern-most regions in the Netherlands. In the past, almost every year, we celebrated the “Elfstedentocht,” a long distance skating event that would traverse all 11 cities in the province (over 200 kilometers). Sadly, my children don’t know what the Elfstedentocht is, and with climate change, they may never know. We simply don’t get enough natural ice to skate on anymore. This may sound like a silly example, but it shows how things are changing right before our eyes. I want to save the world a lot of administrative burdens, but I also want to make sure my children have a future where they can appreciate these kinds of traditions, and most importantly, a future where there is a healthier planet for all.