Why does the Data Transparency Coalition support the adoption of consistent data formats, such as XBRL, throughout regulatory reporting? If regulatory agencies standardized the information they collect, software could automate reporting, replacing layers of lawyers with lines of code – and the cost of compliance would drop.
This is not science fiction. It’s already happening in the Netherlands, where, through the Standard Business Reporting program, the Dutch tax authority, lead business regulator, and statistical agency have adopted consistent data formats across their different reporting regimes. This means Dutch companies can comply with tax, business, and statistical reporting requirements automatically and electronically, using the same data.
We are grateful to the Dutch Tax and Customs Administration for permission to republish the following speech by Rob Kuipers, Standard Business Reporting Commissioner of the Netherlands, delivered on September 8, 2015, at XBRL International in Copenhagen, Denmark. Mr. Kuipers’ speech explains how consistent data formats can dramatically reduce the cost of compliance for business and the cost of administration for government.
This is why we’re calling on Congress to pass the Financial Transparency Act to standardize financial regulatory reporting – and, in the future – similar reforms in other areas of regulation.
Ladies and Gentlemen,
It is an honour to be allowed to give this talk today and my thanks to XBRL International for offering me this opportunity.
Have you ever wondered how XBRL, financial and other accountability will look in the future? That is the question I would like to discuss with you this afternoon.
I would like to invite you to follow me in a governmental vision about what we can achieve with XBRL, but also with an emphasis on what we want to achieve: why are we doing it? This latter question is key. It revolves around the question of how we, as national and international governments, as well as business worlds, can do everything possible to promote open, transparent and strong international economic development. I will focus on what we need to do for this, in the second part of my story.
But first I’d like to tell you my vision for the future on why we are doing this. I’m doing this from my role as SBR Commissioner in the Netherlands; a role I have held since 2009.
Imagine the following. It’s September 8, 2025, exactly 10 years from now. I don’t know whether I’ll be moving around by drone or whether robots will be preparing my food. So I’m really pleased that I don’t have to talk about that today.
Today, I’d like to tell you about developments in standardising exchange of reports or data. And to do this, I’ll start with looking to the future; to September 8, 2025.
In my vision of the future, all businesses and other organisations will then be capable of submitting their data for reports with 1 click of the button, including financial accountability, social responsibility and sustainability. They’ll be able to do this internally, to stakeholders, and to the national and international governments and supervisory bodies that require such data.
And when I say 1 click of the button, I am aware that I’m staying relatively close to how things are now. In ten years, it could be that the process of accountability – whether financial or other forms of reporting – runs entirely automatically, without clicking a button. The data submitted will then be precise, complete and of high quality. This concurs with various promises made by the XBRL community at the start, such as transparency towards users and more convenience in submitting reports. And although XBRL technology has proven its effectiveness, we need more, because we still have a long way to go.
In ten years’ time it will be natural for companies and organisations to contribute to this. Partly because it can be automated, which results in a considerable lightening of administrative load, but mainly because in doing this, they realise that they are contributing to transparency in financial and non-financial reporting.
That transparency reduces capital costs and that sustainable businesses perform better, is already clear now, and will be common knowledge in ten years. Companies and organisations also like to support this, because it enables them not only to contribute to a fairer society but also to improve their chances of performing well.
In this society of 2025 smaller businesses also have improved access to capital. Not because banks take more risks, but because the process of lending is more transparent, runs more quickly and is mainly based on reliable data.
In ten years, governments will ensure that, as far as possible, companies and organisations will have the information gathered by the government available again in the form of open data via standardised channels and a standardised language; in other words XBRL. Whether assisted by market parties or not, many possibilities will arise for the development of smart benchmarks. This is all in keeping with the further development of a “digital data-driven economy”. Digital data on this scale – often also called big data – means so much more than merely the replacement of analogue data. Digital data, based on open standards, gives a tremendous impulse to economic development and innovation in companies. What’s beautiful about standardisation, about open data, is that each party can choose its own approach.
A time and energy investment is required to make agreements about standardisation of data, processes and technology, but after this, different parties can develop, using their own approach and interest.
I’ll now mention a few examples in which I’m unsure as to whether XBRL is relevant, but in which I know that standardisation and open data are crucial.
Through standardisation of location data and open data from the Dutch Education Inspectorate, you can see exactly how well schools are doing in your area.
This same standardisation of location data and municipalities’ open data enables you to see the permits that are being requested in your area.
I’m entirely convinced that better – open – data from the government will result in powerful economic development and increased innovation. That sounds logical, doesn’t it?
This is where my vision for the future ends. Such visions often sound attractive. But it is often no sinecure to bring them within reach. I would like to illustrate this using an example.
The construction of the rail network in the United States ultimately resulted in turbulent economic development, but at the beginning this wasn’t the case. It was actually drastically different at the start.
Numerous separate railway tracks were laid at local levels in the 19th Century, some just a few dozen miles in length, others several hundred miles. These conditions also determined locomotive size and carriage design. The difference between the different systems became particularly evident in the “track gauge”: the distance between the rails. This resulted in an unnecessary burden for passengers, who had to switch trains regularly. This was prompted by the owners’ greed and selfishness, but the fact that this situation persisted for such a long time was probably due even more so to the lack of regulatory mechanism or regulatory “power”. Everyone maintained their own standards.
Luckily relevant developments ensured change: for instance the quality of the tracks improved and government involvement increased. In time, rail companies saw that they could serve both the local as well as the national interest much better if they went for standardisation. The longer passengers and goods could travel without changing, the better the service.
The fight regarding what the new standards should be though, took several decades. When the decision for standardisation was finally taken, more than 20,000 kilometres of rail track was adapted in an unbelievable time of no more than a few days. This then made the turbulent economic development possible. Do you see the parallels?
The example illustrates on the one hand the huge importance of standardisation, but on the other also the huge risk involved in lengthy discussions about standards. I would now like to go over the latter risk and what we can do regarding this.
You all know the quote: the best way to predict the future is to create it. It was ascribed to Abraham Lincoln, a wise man. If my vision for the future has identified shared issues, then it is very wise to examine together, starting today, how we can give form to this.
Because from today we can take decisions every day that lead to the improvements that we’re searching for, like those in the US with the railways. But as far as decision-making is concerned, we should do it a few decades quicker than they did then!
I think that two factors are crucial in this. First, a smart way of cooperating is needed between all involved parties. And second, a faster and unambiguous choice for working with structured data.
Let’s first look at smart forms of cooperation.
One of the most crucial conditions to bring my perspective within reach is a smartly designed system of cooperation. I’ll give you an example of what I mean.
The Dutch government uses more than 60 definitions for the address concept. How can we expect government agencies, companies and organisations to produce unambiguous reports if a government of 1 country does not employ an unambiguous definition for such a concept? How can a Ministry of Education consistently report its spending of public money to national parliament if diverse or unclear definitions mean that schools book the same expenses to different accounts?
How can more trust and transparency appear in financial reports if we do not agree on the content of taxonomies, the dictionaries that we want to use?
The choice we made in the SBR programme in the Netherlands is that all parties that have a serious interest in the future method of financial and non-financial reporting, are invited as partners to participate in the SBR programme. The government plays an important role in the programme, but is not the single authority. Private partners such as accountancy companies, software companies and banks, as well as the business world itself, are steering the programme together with the government.
This is possible because SBR – if well designed – is a typical example with a huge win-win potential. You can make real progress by organising a serious public-private partnership around this. This demands a high level of consensus about where we want to go, a high level of trust in each other’s operations and the willingness to compromise. And even then it will take several years to make good agreements and to really implement these; but not decades. In the Netherlands, SBR is now becoming the norm in numerous public and private domains (sometimes has already become so) for administrative reporting.
A second aspect that is of great importance to the cooperation I’m proposing, is that the cooperation must transcend domains. I often illustrate this using the development of the shipping container.
We all know the shipping container. Possibly the ultimate example of the power of standardisation. Because international organisations agreed on such things as container dimensions:
- crane grippers that transfer these containers can be standardised, which ensures loading and unloading can run reliably and efficiently across the world;
- the dimensions of sea-going vessels, river ships and lorries that transport these containers are harmonised, enabling these containers to be transported internationally in the same way;
- in the Netherlands for example, the height of bridges is harmonised to container lorry heights.
- And because of the World Customs Organization (WCO) data model, Customs knows what is in a container before the vessel berths in the port. This results in faster formal handling and savings. Every hour that a ship is docked, costs the owner money.
I mention this example, because it makes clear that shipping container standardisation has been given a form that transcends domains. And we will do this in our SBR programme too: we are very conscious of not standardising per domain, but across domain boundaries. It should not make any difference whether the definition of a school building is relevant for the school board, for the government, for the bank that supplies a loan or for the education inspectorate: all these parties have an interest in an unambiguous definition. To put this even more clearly: the only real way to standardise is domain-transcending standardisation.
I can possibly illustrate how this should be designed in the Netherlands by the following.
Recently, in July 2015, EPSA (European Public Sector Award) awarded the status of European best practice to the Dutch SBR programme. The EPSA jury was enthusiastic about the projects that received this status: These 64 brilliant public achievements (I’m just quoting EPSA) have found new methods to tackle different problems in relation to a range of important societal challenges, to social care, health, youth unemployment, migration, regional development and business development by using different partnership and cooperation models with convincing results and impact for a better society.
It should be clear that SBR has not contributed to all these policy areas, but the domain-transcending approach aspect has certainly played a big role here. I understand that a non-domain-crossing, or silo approach, can be tempting and seemingly leads to results faster. It often happens that each Ministry or each supervisory body finalises its own system of accountability or data delivery. This can result in relatively quick successes for the Ministry or supervisory body, but does ultimately lead to tremendous and extremely unnecessary additional costs for businesses and organisations. Each delivery of information is based on different agreements regarding data, processes and technologies.
That is why the Netherlands has chosen for a domain-transcending standardisation. Once businesses have a well-designed administration they can deliver their information to the tax office, submit their annual accounts to the Chamber of Commerce, provide data to Statistics Netherlands, request credit online from banks and forward relevant information to pension funds and insurers; and all this using standardisation of data, processes and technology. This Dutch Approach does demand more effort and consultation in advance between the various information recipients, intermediaries, software companies and businesses.
The Dutch Approach is carefully described in our book, Challenging the Chain, which describes the journey of SBR from challenge to solution.
In summary: our approach is characterised by a smart and intensive form of public-private cooperation and by a domain-transcending approach. Both aspects are crucial for the success of our method.
I must add that realising these two aspects is no easy task. It takes a lot of my personal energy to realise this. But believe me: if you do this, it will pay off. And if you don’t, you certainly won’t achieve the results I talked about in my vision for the future.
Dear people, I would now like to move on to what I consider to be the actual challenge of the international community involved with XBRL and related issues.
Together with European and national governments, the XBRL community, intermediaries and software companies, we must simply do everything required to realise the vision I talked about at the start of my speech.
This includes creating a bridge with data definitions across organisational boundaries. And more importantly; across national borders. It may sound simple, but it requires various organisations to cooperate on a complex subject.
It will require adaptations to their current working methods, processes and possibly even the legislation of organisations, companies and governments. And, as there often is during change, there will be resistance; it will be difficult to get everyone to go along with this. Taking such steps requires more than administrative courage and daring alone. But administrative courage and daring are important conditions. These actually free the way for companies to significantly lighten the administrative load and stimulate economic growth. And in my perspective, that’s what it’s about.
A huge step forward in our world of accountability information would be the design of an international taxonomy register. By making an inventory of how many different dictionaries are used, we will quickly gain insight into the complexity that currently exists, showing that a significant effort towards harmonisation is extremely desirable.
I also promised you that I would address the desirability of switching to systematic working based on the concept of structured data.
If we wish to achieve our vision of the future, we will have to choose without hesitation for the standard of structured computer-readable data.
As long as we keep working with unstructured data, tremendous efforts will be required from various parties including entrepreneurs, the government and supervisory bodies to interpret the data in the required way, classify it and enter it without error. In contrast, working with structured, computer-readable data will ensure that system-to-system exchange will be possible.
If we want European exchange of accountability information without the click of a button, we must choose for the standard of structured data, now and in the coming years. If we want more transparency and wish to contribute to innovation, we need to choose for structured, computer-readable data. This demands clear choices from national, European and international leaders. Especially if we realise together that accountability information is increasingly delivered via chains. Across organisations. Across domain boundaries. Across country borders.
I am a naturally optimistic person, but if I’m honest, I am concerned about achieving the vision for the future that I outlined. These concerns come mainly from the difficult discussions that seem to take place within ESMA, to agree on our future reporting format. My impression is that there is a risk that ESMA might not choose for structured data. In the coming years important decisions will need to be taken regarding standardisation of accountability information. European Union countries are working at a different pace on this and use diverse approaches. It would be a tremendous step backwards in Europe if we would have to limit ourselves to the level of technology of the least advanced member country.
What would we say to international businesses if they would have to deliver their financial data in PDF for the coming ten years? In practice, for various receiving organisations, this means that information will need to be copy-typed separately, that system-to-system delivery will not be possible and that we will also be unable to submit any usable open data. In other words; it also means that we run the risk of standing still in an age in which technological development is the driving force of innovation.
Should we then only embrace the most innovative? No. I think that wise leaders choose modern digital and computer-readable technical standards that already appear to work;
open standards that are already used broadly and have been proven to work and that make it possible for companies and organisations to deliver their accountability information simply and easily. We want to avoid what the American railway companies did, taking decades to decide, so that companies and organisations can look back in ten years’ time and can say: do you remember ten years ago? It’s a good thing, that situation changed!
As well as an important assignment for leaders this also requires involvement from the XBRL community. This vision of the future will require broad support.
And as well as the extremely relevant discussion for experts about details – it is especially necessary to demonstrate the added value explicitly. How can we make XBRL interesting for businesses? I would advise to involve people outside the XBRL community for this.
I’ve arrived at my conclusion, which I will express in an ambitious and explicit way. If we want to make our future vision reality, we will have to work together.
Starting today, we will have to proceed with a joint focus. I would like to formulate the following ambitions:
In 3 years it will be possible in each country in Europe to deliver annual accounts and tax returns forms digitally and, by extension, to European institutions, and
In 5 years all European countries’ annual reports and tax returns forms will no longer be submitted on paper, but will only be submitted digitally.
So let us agree together that XBRL is the reporting standard.
Ladies and Gentlemen. From today, even more than before, we will need to work together on the road to European standardisation for business reporting based on computer-readable data. SBR Nederland is ready to contribute.
My thanks for your attention and I hope you enjoy this stimulating conference!