ICAEW SE · Chapter 4 · Question 7 of 18
Which statement best describes the difference between the effect of sustainability matters on 'enterprise value' and on 'social value'?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Enterprise value effects concern how sustainability matters affect the company's cash flows and value to investors, whereas social value concerns the company's effects on people, society and the environment
Explanation
Effects on enterprise value are the 'outside-in' effects of sustainability matters on a company's prospects, which is the focus of investor-oriented reporting. Social value reflects the 'inside-out' impacts of the company on society and the environment. The two often interact, for example when harmful impacts lead to regulation or reputational damage, but they are not identical.
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