Digital reporting in a cross-border EU

At a conference organised by the European Commission (EC) and Deloitte in October 2019, experts discussed the next steps for digital reporting for EU companies.

Europe does not currently have an equivalent to Japan’s Electronic Disclosure for Investors' NETwork (EDINET) or the US’s Electronic Data Gathering, Analysis, and Retrieval system (EDGAR) system – a central repository of public company disclosures. That makes discovering and comparing corporate performance across the EU’s member states significantly harder, and slower than it should be.

European Financial Transparency Gateway

Deloitte and a consortium of companies have supported the European Commission (DG FISMA and DIGIT) in experimenting in building the European Financial Transparency Gateway (EFTG), a pilot project using distributed ledger technology (DLT) to brake the barriers and provide cross-border information from a single access point. The EFTG pilot is a promising way to use new technology to permit co-operation between independent regulators to provide a “virtual” data discovery and distribution system. The EFTG aims to promote crossborder investment and provide investors with easy access to regulated financial information of companies listed on the European Union's (EU) regulated markets. The pilot project was launched within the framework of the Capital Market Union and the legal obligations of the Directive 2013/50/EC. The goal of the EFTG Pilot Project consists of developing a Blockchain platform infrastructure, technically enabling citizens and investors by giving them increased access to public regulated information provided by the participating Officially Appointed Mechanisms (OAMs). The EFTG project is the first Blockchain-based pilot in Europe, live and publicly available, that on-board real member in the network and shares real financial data from the Member States.

Technology driven transparency

With the new European Single Electronic Format (ESEF) mandate about to kick in, and with resultant Inline eXtensible Business Reporting Language (XBRL) data starting to flow from the beginning of 2021, Europe needs to work out how best to push the EFTG into production, or create an alternative. At the conference entitled “How can technology driven transparency fuel the capital markets union?”, held at Deloitte in Belgium on 2 October 2019, this issue was discussed, together with questions about governance, access and (naturally) funding.

Following a presentation on the EFTG, a panel of high profile speakers, including Deloitte EMEA Blockchain Lab leads and EU Digital Sector representatives, looked at the lessons learned from the EFTG and discussed how DLT fits in the world of data dissemination.

XBRL International CEO John Turner then gave a speech describing the ongoing importance of fundamental data and the need to support financial transparency with strong, public discovery mechanisms. His speech described the way that ESEF can be harnessed to improve trust and simplify investment and lending over time as part of the EU’s Capital Markets Union.

John’s presentation concluded that transparency and discovery are essential: The ability to easily access disclosures regardless of location or circumstance is a key pillar for transparency in the digital age, facilitating trust and connections for investors, lenders, suppliers and customers. Access to reliable, comparable – and digital – fundamental information about companies drives better decisions, better access to capital and greater trust in both commerce and finance.

In the subsequent panel, a high profile set of speakers debated what the future of reporting should look like, with the need for digital corporate reports covering not just traditional financial disclosures but also a range of environmental, social, and governance (ESG) measures a key focus. The panel also agreed that these kinds of reforms need continuous attention from policy makers (not just set and forget) and an iterative process of improvement and change management.

While data has become the new ‘gold’, big data, machine learning and artificial intelligence looks set to fuel the 21st-century’s economy. As such, companies feeding the markets with a lot of financial or non-financial information could represent an important part of this. Private financial services providers are already showing a huge appetite for ‘consuming’ this modern commodity and investors need better access to that information in a simple and easily comparable way. The blockchain based EFTG, along with regulation such as ESEF, are a move towards ensuring that transparency and discovery of data is regulated whilst also being secure and accessible in real time.

ESEF Seminar

On 15 November 2019, a free seminar will be taking place at the Intercontinental, Malta to discuss the new European Single Electronic Format regulation and among other things, a look at ESEF tools, vertical solutions and disclosure automation. For CFOs, finance professionals and management, this is a perfect opportunity to get a better understanding of XBRL and ESEF - guidance will be needed on how to estimate the impact on business and to understand the practical challenges in implementing the standard reporting processes.

To register for the free seminar, please visit www.deloitte.com/mt/esef