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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Integrated Reporting Framework, Global Reporting Initiative Framework and Business Responsibility and Sustainability Reporting

Narmada Chemicals Ltd discharges treated effluent that has improved river water quality near its plant, while the process uses significant water and energy. Its integrated report explains the net effect on the capitals over the short, medium and long term. Which feature of the value creation concept in the IR Framework does this best illustrate?

It illustrates that the organisation's activities and outputs increase, decrease or transform the capitals, so value can be created, preserved or eroded over time. The report shows both the river improvement and the resource use, covering effects beyond financial capital and across short, medium and long terms.

  1. ACapitals are increased, decreased or transformed by the organisation's activities and outputs, so value is created, preserved or erodedCorrect
  2. BValue is created only for shareholders through financial capital
  3. CCapitals remain fixed and are only consumed by operations
  4. DValue creation is reported only for the current year

Explanation

The IR Framework says capitals are stores of value that are increased, decreased or transformed through activities and outputs. The report shows both improvement of natural capital and use of resources, so effects are not limited to financial capital or to one year, which rules out the other options.

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