Download - MDIA p3 01 2 WHAT 150727

2. EXPLANATION This slideset is A WORK-IN-PROGRESS. It will be upgraded periodically. It is part of a series of more than 50 slidesets. Navigation to all of these is available here: FEEDBACK is welcome. Please email to Peter Burgess [email protected] with a catchy phrase in the subject line so that it gets attention, and please identify the specific slideset(s) involved. This explanation is version v150801. The most current text is available at: MULTI DIMENSION IMPACT ACCOUNTING http://www.truevaluemetrics.org/DBadmin/DBtxt001.php?vv1=txt00010199 http://www.truevaluemetrics.org/DBadmin/DBtxt001.php?vv1=N1-Slidesets-p3

3. The GOAL is to design and deploy a system of metrics for management that accounts for impact on people and planet as rigorously as double entry accounting accounts for money transactions that impact profit MULTI DIMENSION IMPACT ACCOUNTING

4. MULTI DIMENSION IMPACT ACCOUNTING The first step is to design and develop a data architecture that is congruent with the realities of the modern very complex global socio-enviro-economic system

5. To manage effectively there must be METRICS for ALL the elements of the system. MULTI DIMENSION IMPACT ACCOUNTING

6. The following is an old slide that crudely represents the totality of the socio-enviro-economic system showing beginning of period state (BOP), then activities and then the end of period state (EOP). MULTI DIMENSION IMPACT ACCOUNTING

7. MULTI DIMENSION IMPACT ACCOUNTING STATE - BOP STATE - EOPPERIOD ACTIVITES

8. The problem is that conventional financial accounting and top level economic metrics only measure this small part of the total system MULTI DIMENSION IMPACT ACCOUNTING

9. MULTI DIMENSION IMPACT ACCOUNTING STATE - BOP STATE - EOPPERIOD ACTIVITES

10. We need a system that tracks impact on ALL the components of the system MULTI DIMENSION IMPACT ACCOUNTING

11. We need a system where IMPACT on PEOPLE and PLANET are as important as PROFIT performance of the organization and the WEALTH of owners MULTI DIMENSION IMPACT ACCOUNTING

12. We need a system that will enable better management of everything that matters MULTI DIMENSION IMPACT ACCOUNTING

13. We need a system that is really easy to use MULTI DIMENSION IMPACT ACCOUNTING

14. We need a system that does not cost very much MULTI DIMENSION IMPACT ACCOUNTING

15. We need a system that takes full advantage of what we already know MULTI DIMENSION IMPACT ACCOUNTING

16. We need a system that allows data to be summarized easily and still be meaningful MULTI DIMENSION IMPACT ACCOUNTING

17. We need a system that allows for easy 'drill down' to disaggregated data that can be used for timely decision making and rapid action where it can do the most good MULTI DIMENSION IMPACT ACCOUNTING

18. We need a system where ALL the PERSPECTIVES of the system are taken into consideration MULTI DIMENSION IMPACT ACCOUNTING

19. The double entry construct of conventional double entry accounting is a good starting point MULTI DIMENSION IMPACT ACCOUNTING

20. Double entry accounting enables STATE and FLOW to be accounted for in a very simple and effective manner MULTI DIMENSION IMPACT ACCOUNTING

21. State B/S (BOP) Flow P&L New State B/S (EOP) MULTI DIMENSION IMPACT ACCOUNTING BOP Beginning of Period EOP End of Period

22. These 3 slides show how simple and powerful this idea can be MULTI DIMENSION IMPACT ACCOUNTING

23. MULTI DIMENSION IMPACT ACCOUNTING

26. These reflect respectively Steady State; Positive Progress; and Deterioration of State MULTI DIMENSION IMPACT ACCOUNTING

27. PROGRESS is measured simply by reference to the CHANGE in STATE over time. MULTI DIMENSION IMPACT ACCOUNTING

28. No information about ACTIVITIES is needed in order to measure PROGRESS only information about changes in STATE MULTI DIMENSION IMPACT ACCOUNTING

29. State, Progress and Performance State is the Balance Sheet of the entity at a moment in time; Progress may be measured by comparing the Balance Sheet changes between the beginning and the end of the period; Performance is a measurement that relates the Progress to the resources consumed. MULTI DIMENSION IMPACT ACCOUNTING

30. MULTI DIMENSION IMPACT ACCOUNTING EFFICIENCY AND EFFECTIVENESS

31. This is VERY powerful ... MULTI DIMENSION IMPACT ACCOUNTING

32. BUT when this is ONLY done for MONEY PROFIT optimization in the socio-enviro-economic system, the collateral damage to PEOPLE and PLANET may well be substantial and is ignored MULTI DIMENSION IMPACT ACCOUNTING

33. Without numbering the IMPACT, then the IMPACT on PEOPLE and PLANET will continue to be ignored in mainstream decision making MULTI DIMENSION IMPACT ACCOUNTING

34. Peter Drucker famously said: You only manage what you measure MULTI DIMENSION IMPACT ACCOUNTING

35. It can also be said that: If you want to change the way the game is played, you must change the way the game is scored MULTI DIMENSION IMPACT ACCOUNTING

36. SO back to the 3 segments* NOT THIS OUTCOME ... MULTI DIMENSION IMPACT ACCOUNTING * See MDIA WHY?

37. MULTI DIMENSION IMPACT ACCOUNTING Hum an Capital Man Built Capital Natural Capital

38. Trajectory to disaster! This must be changed to this MULTI DIMENSION IMPACT ACCOUNTING

39. MULTI DIMENSION IMPACT ACCOUNTING Hum an Capital Man Built Capital Natural Capital

40. There must be: PEOPLE progressing MBC* efficient PLANET healthy MULTI DIMENSION IMPACT ACCOUNTING * Man Built Capital Man Built Structures and Systems

41. SO MULTI DIMENSION IMPACT ACCOUNTING

42. MULTI DIMENSION IMPACT ACCOUNTING Fundamentals of the Socio-Enviro-Economic System Human Capital Man Built Capital Natural Capital

43. MULTI DIMENSION IMPACT ACCOUNTING Fundamentals of the Socio-Enviro-Economic System Financial Capital Human Capital Man Built Capital Natural Capital Man Built Capital Natural Capital Human Capital Split out Financial Capital from other components of Man Built Capital

44. MULTI DIMENSION IMPACT ACCOUNTING Fundamentals of the Socio-Enviro-Economic System Financial Capital Human Capital Man Built Capital Natural Capital SunSun Man Built Capital Natural Capital Sun Human Capital Add Sun the source of all energy Split out Financial Capital from other components of Man Built Capital

45. MULTI DIMENSION IMPACT ACCOUNTING Fundamentals of the Socio-Enviro-Economic System Financial Capital Human Capital Man Built Capital Natural Capital SunSun Financial Capital Human Capital Man Built Capital Natural Capital SunSunSun Man Built Capital Natural Capital Sun Human Capital Add Sun the source of all energy Split out Financial Capital from other components of Man Built Capital Reorder because Financial Capital metrics exist

46. MULTI DIMENSION IMPACT ACCOUNTING Sun STATE Beginning of Period - BOP STATE End of Period - EOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun FLOWS* ACTIVITIES* PROCESSES* * Any amount of complexity STATE remains simple

47. MULTI DIMENSION IMPACT ACCOUNTING Sun Fundamentals of the Socio-Enviro-Economic SystemBOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun EOP BOP = Beginning of Period STATE EOP = End of Period STATE PROGRESS is Change in STATE during the period. ALL the elements of the BOP and EOP STATES need to be quantified

48. MULTI DIMENSION IMPACT ACCOUNTING Sun Fundamentals of the Socio-Enviro-Economic SystemBOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun EOP Any number of activities may take place during a period. They may be extremely complex and interconnected, but PROGRESS is still measured by CHANGE in STATE.

49. MULTI DIMENSION IMPACT ACCOUNTING Sun Fundamentals of the Socio-Enviro-Economic SystemBOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun EOP PERFORMANCE is measured by relating PROGRESS achieved with the RESOURCES consumed. How much is Human Capital increased and how much are Financial, Man Built and Natural Capital diminished

50. Conventional money profit accounting works very well for financial performance that is impact on corporate profits and stock value. MULTI DIMENSION IMPACT ACCOUNTING

51. MULTI DIMENSION IMPACT ACCOUNTING Sun BOP EOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun Financial Accounts describe Financial Impact Financial Costs Financial Profit Financial Revenues Financial Balance Sheet BOP Financial Balance Sheet EOP Balance Sheet Changes

52. But something more complete is needed something that embraces IMPACT on SOCIETY (PEOPLE) and ENVIRONMENT (PLANET) in a way that Is both easy and rigorous MULTI DIMENSION IMPACT ACCOUNTING

53. MULTI DIMENSION IMPACT ACCOUNTING Sun BOP EOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun Financial Accounts describe Financial Impact Financial Costs Financial Profit Financial Revenues Financial Balance Sheet BOP Financial Balance Sheet EOP Impact Accounts reflect Externalities Balance Sheet Changes Impact on Institutions Impact on People Impact on Society Impact on Physical Impact on Knowledge Impact on Resources Impact on Environment Impact on EcoSystem Balance Sheet Changes Balance Sheet Changes Balance Sheet Changes

54. the reporting envelope needs to be redefined so that IMPACT is inside the reporting envelope MULTI DIMENSION IMPACT ACCOUNTING

55. MULTI DIMENSION IMPACT ACCOUNTING Sun BOP EOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun Financial Accounts describe Financial Impact Financial Costs Financial Profit Financial Revenues Financial Balance Sheet BOP Financial Balance Sheet EOP Impact Accounts reflect Externalities Balance Sheet Changes Balance Sheet Changes Balance Sheet Changes Balance Sheet Changes Impact on Institutions Impact on People Impact on Society Impact on Physical Impact on Knowledge Impact on Resources Impact on Environment Impact on EcoSystem

56. The financial profit and loss account for an organization has a lot of performance information MULTI DIMENSION IMPACT ACCOUNTING

57. MULTI DIMENSION IMPACT ACCOUNTING Sun BOP EOP Financial Capital Human Capital Man Built Capital Natural Capital Sun Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun FINANCIAL P&L ACCOUNT REVENUES Products Sold X Price Products Bought X Price Energy Bought X Price Employee Benefits Employee Payroll Other expenditures Asset use costs Depreciation Financial expenses Pro-good expenditures Taxation PROFIT COSTS FINANCIAL ACCOUNTING

58. Positive IMPACT not accounted for needs to be added in MULTI DIMENSION IMPACT ACCOUNTING

59. MULTI DIMENSION IMPACT ACCOUNTING Sun BOP EOP REVENUES Products Sold X Price VALUE to buyer Equals HUMAN CAPITAL ADD Wages and benefits What value to employee? Pro-good expenditures What value to society? Taxation Funds government. Good value to society. POSITIVE IMPACT NOT ACCOUNTED FOR Financial Capital Human Capital Man Built Capital Natural Capital Sun Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun FINANCIAL P&L ACCOUNT REVENUES Products Sold X Price Products Bought X Price Energy Bought X Price Employee Benefits Employee Payroll Other expenditures Asset use costs Depreciation Financial expenses Pro-good expenditures Taxation PROFIT COSTS FINANCIAL ACCOUNTING PLUS GOOD IMPACT

60. and negative IMPACT needs to be brought into account MULTI DIMENSION IMPACT ACCOUNTING

61. MULTI DIMENSION IMPACT ACCOUNTING Sun BOP EOP For products and energy bought and this process Free use of the commons and public services & infrastructure Degradation of land Water scarcity and degradation Air pollution: Impact on people Air pollution: Impact on climate Air pollution: Impact on people Solid waste Resource depletion Environmental Degradation Negative impact Financial Capital Human Capital Man Built Capital Natural Capital Sun Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun FINANCIAL P&L ACCOUNT REVENUES Products Sold X Price Products Bought X Price Energy Bought X Price Employee Benefits Employee Payroll Other expenditures Asset use costs Depreciation Financial expenses Pro-good expenditures Taxation PROFIT COSTS FINANCIAL ACCOUNTING LESS BAD IMPACT

62. MDIA impact accounts include profit performance and impact arising both for PEOPLE and PLANET ... MULTI DIMENSION IMPACT ACCOUNTING

63. MULTI DIMENSION IMPACT ACCOUNTING Sun BOP EOP REVENUES Products Sold X Price VALUE to buyer Equals HUMAN CAPITAL ADD Wages and benefits What value to employee? Pro-good expenditures What value to society? Taxation Funds government. Good value to society. For products and energy bought and this process Free use of the commons and public services & infrastructure Degradation of land Water scarcity and degradation Air pollution: Impact on people Air pollution: Impact on climate Air pollution: Impact on people Solid waste Resource depletion Environmental Degradation POSITIVE IMPACT NOT ACCOUNTED FOR Negative impact Financial Capital Human Capital Man Built Capital Natural Capital Sun Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun FINANCIAL P&L ACCOUNT REVENUES Products Sold X Price Products Bought X Price Energy Bought X Price Employee Benefits Employee Payroll Other expenditures Asset use costs Depreciation Financial expenses Pro-good expenditures Taxation PROFIT COSTS FINANCIAL ACCOUNTING PLUS GOOD & BAD

64. REMINDER This slideset is A WORK-IN-PROGRESS. It will be upgraded periodically. It is part of a series of more than 50 slidesets. Navigation to all of these is available here: FEEDBACK is welcome. Please email to Peter Burgess [email protected] with a catchy phrase in the subject line so that it gets attention, and please identify the specific slideset(s) involved. This explanation is version v150801. The most current text is available at: MULTI DIMENSION IMPACT ACCOUNTING http://www.truevaluemetrics.org/DBadmin/DBtxt001.php?vv1=txt00010199 http://www.truevaluemetrics.org/DBadmin/DBtxt001.php?vv1=N1-Slidesets-p3

65. THANK YOU Some links and contact information: Peter Burgess [email protected] Peter Burgess LinkedIn profile https://www.linkedin.com/in/peterburgess1 Link to TrueValueMetrics.org website http://www.truevaluemetrics.org/ Link to navigation to other slides in this series: MULTI DIMENSION IMPACT ACCOUNTING http://www.truevaluemetrics.org/DBadmin/DBtxt001.php?vv1=N1-Slidesets-p3

Download - MDIA p3 01 2 WHAT 150727

Top Related