MULTI DIMENSION IMPACT ACCOUNTING

MDIA

PROCESS

File: MDIA-p3-03-The-PROCESS-Perspective-150420.odp Peter Burgess (c) All rights reserved

MULTI DIMENSION IMPACT ACCOUNTING

WORK-IN-PROGRESS.SLIDESET STILL IN DEVELOPMENT.UPDATES WILL BE POSTED OVER

THE NEXT SEVERAL WEEKS

PROCESS● PROCESS is everywhere;● PROCESS uses inputs (labor, materials, knowhow, natural resources, etc.);

● PROCESS produces PRODUCTS (goods and services that enable living standards and quality of life);

● PROCESS determines efficiency and impact both on PEOPLE and PLANET

MULTI DIMENSION IMPACT ACCOUNTING

MULTI DIMENSION IMPACT ACCOUNTING

Sun

BOP EOP

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FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun SunSun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

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FINANCIAL ACCOUNTSDESCRIBE ECONOMICACTIVITY IN FINANCIAL

OR MONEY TERMSWHILE COMPLETELYIGNORING IMPACT

ON EVERYTHING ELSE

The next slides show how the data design architecture has to work in order for IMPACT to be computed in a rigorous and logical way …

MULTI DIMENSION IMPACT ACCOUNTING

MULTI DIMENSION IMPACT ACCOUNTING

Sun

FINANCIAL P&L ACCOUNT

Financial Accounts describe Economic Activity

REVENUESProducts Sold X Price

Products Bought X Price

BOP EOP

Energy Bought X Price

Employee Benefits

Employee Payroll

Other expenditures

Asset use costs

Depreciation

Financial expenses

Pro-good expenditures

Taxation

PROFITSun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun SunSun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

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COSTS

MULTI DIMENSION IMPACT ACCOUNTING

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ADD positive impact not accounted forBOP EOP

REVENUESProducts Sold X Price

VALUE to buyerEquals

HUMAN CAPITAL ADD

Wages and benefitsWhat value to

employee?

Pro-good expendituresWhat value to society?

TaxationWhat value to society?

POSITIVE IMPACT NOTACCOUNTED

FOR

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun Sun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun

FINANCIAL P&L ACCOUNT

REVENUESProducts 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

MULTI DIMENSION IMPACT ACCOUNTING

Sun

DEDUCT negative impact not accounted forBOP EOP

For products andenergy bought

and this process

Free use of thecommons andpublic services& infrastructure

Degradationof land

Water scarcityand degradationAir pollution:

Impact on peopleAir pollution:

Impact on climate

Air pollution:Impact on people

Solid waste

Resourcedepletion

Environmental Degradation

Negativeimpact

File: MDIA-Framework-004-150411-WIP.odp Peter Burgess (c) All rights reserved

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun Sun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun

FINANCIAL P&L ACCOUNT

REVENUESProducts 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

MULTI DIMENSION IMPACT ACCOUNTING

Sun

ACCOUNTING FOR EVERYTHINGBOP EOP

REVENUESProducts Sold X Price

VALUE to buyerEquals

HUMAN CAPITAL ADD

Wages and benefitsWhat value to

employee?

Pro-good expendituresWhat value to society?

TaxationWhat value to society?

For products andenergy bought

and this process

Free use of thecommons andpublic services& infrastructure

Degradationof land

Water scarcityand degradationAir pollution:

Impact on peopleAir pollution:

Impact on climate

Air pollution:Impact on people

Solid waste

Resourcedepletion

Environmental Degradation

POSITIVE IMPACT NOTACCOUNTED

FOR

Negativeimpact

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun Sun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun

FINANCIAL P&L ACCOUNT

REVENUESProducts 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

PRODUCT AND SUPPLY CHAIN● The MONEY dimension of the supply chain is routine; however

● The IMPACT dimensions of the supply chain are rarely implemented in a rigorous manner.

● This is big next step!

MULTI DIMENSION IMPACT ACCOUNTING

MULTI DIMENSION IMPACT ACCOUNTING

PRODUCT … the SUPPLY CHAIN

Zero to start

Costs this stage

Profit this stage

Price this stage

Zero to start

Costs this stage

Profit this stage

Price Stage 1

FINANCIAL ACCOUNTS EACH STEP OF THE SUPPLY CHAIN

Cost = Price stage 1

Costs Stage 2

Profit Stage 2

Cum Costs

Cum Profit

Price Stage 2

Cost = Price stage 2

Costs Stage 3

Profit Stage 3

Cum Costs

Cum Profit

Price Stage 3

Cost = Price stage 3

Costs Stage 4

Profit Stage 4

Cum Costs

Cum Profit

Price Stage 4

Cost = Price stage 4

Costs Stage 5

Profit Stage 5

Cum Costs

Cum Profit

Price Stage 5

Cost = Price stage 4

Costs Stage 5

Profit Stage 5

Cum Costs

Cum Profit

Price Stage 5

ETC...

MULTI DIMENSION IMPACT ACCOUNTING

MBC

NaturalCapital

HumanCapital

PRODUCT … the SUPPLY CHAIN

ADJUSTMENTS TO REFLECT IMPACT (EXTERNALITIES)

Zero to start

Costs this stage

Profit this stage

Price this stage

Zero to start

Costs this stage

Profit this stage

Price Stage 1

FINANCIAL ACCOUNTS EACH STEP OF THE SUPPLY CHAIN

Cost = Price stage 1

Costs Stage 2

Profit Stage 2

ImpactStage 1

ImpactStage 1

ImpactStage 1

Cum Costs

Cum Profit

Price Stage 2

ImpactStage 2

ImpactStage 2

ImpactStage 2

Cum Impact

Cum Impact

Cum Impact

Cost = Price stage 2

Costs Stage 3

Profit Stage 3

Cum Costs

Cum Profit

Price Stage 3

ImpactStage 3

ImpactStage 3

ImpactStage 3

Cum Impact

Cum Impact

Cum Impact

FinancialDimension

MULTI DIMENSION IMPACT ACCOUNTING

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Small decisions by people make all the differenceBOP EOP

Sun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun SunSun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun

MULTI DIMENSION IMPACT ACCOUNTING

Sun

BOP EOP

Sun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun SunSun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

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Financial Accounts describe Economic Activity

Financial Costs

Financial Profit

Financial Revenues

FinancialBalance

Sheet

BOP

FinancialBalance

Sheet

EOP

The next slide shows how the operations of a process:(1) through the money P&L report impact of the money balance sheet of the operation; and (2) through the IMPACT accounts report on the impact the operation is having on society and the environment.

MULTI DIMENSION IMPACT ACCOUNTING

MULTI DIMENSION IMPACT ACCOUNTING

Sun

BOP EOP

Sun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun SunSun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun

Financial Accounts describe Financial Impact

Financial Costs

Financial Profit

Financial RevenuesFinancialBalance

Sheet

BOP

FinancialBalance

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

MULTI DIMENSION IMPACT ACCOUNTING

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Every single PROCESS has IMPACT on EVERYTHINGBOP EOP

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FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun SunSun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun

MULTI DIMENSION IMPACT ACCOUNTING

Sun

PRODUCT made by one PROCESSBOP EOP

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FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun SunSun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun

MULTI DIMENSION IMPACT ACCOUNTING

Sun

BOP EOP

Sun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun SunSun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun

PRODUCTPRODUCT … the result of a SUPPLY CHAIN … withseries of PROCESSES

MULTI DIMENSION IMPACT ACCOUNTING

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One of the PROCESSES in a PLACEBOP EOP

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FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun SunSun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun

MULTI DIMENSION IMPACT ACCOUNTING

Sun

One of the PROCESSES in a PLACE and alsoa PROCESS in an ORGANIZATION

BOP EOP

Sun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun SunSun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun

MULTI DIMENSION IMPACT ACCOUNTING

Sun

BOP EOP

Sun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun SunSun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun

ORGANIZATIONA big ORGANIZATION is the aggregation of many operations or PROCESSES in many PLACES

MULTI DIMENSION IMPACT ACCOUNTING

Sun

Small decisions by people make all the differenceBOP EOP

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FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun SunSun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun

PEOPLE

MULTI DIMENSION IMPACT ACCOUNTING

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Everybody has a role in making this world of ours a better place

BOP EOP

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FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun SunSun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun

PEOPLE

MULTI DIMENSION IMPACT ACCOUNTING

Sun

Small decisions by people make all the differenceBOP EOP

Sun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun SunSun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun

Product

Place

Supply Chain

Process

Organization

Enablingenvironment

Society

MULTI DIMENSION IMPACT ACCOUNTING

Sun

Small decisions by people make all the differenceBOP EOP

Sun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun SunSun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun

MULTI DIMENSION IMPACT ACCOUNTING

Sun

Small decisions by people make all the differenceBOP EOP

Sun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun SunSun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun

SO … TO SUMMARIZE:

● PROCESS is everywhere ...

MULTI DIMENSION IMPACT ACCOUNTING

● PROCESS uses inputs (labor, materials, knowhow, natural resources, etc.);

● PROCESS produces PRODUCTS (goods and services that enable living standards and quality of life);

● PROCESS determines efficiency and impact both on PEOPLE and PLANET

MULTI DIMENSION IMPACT ACCOUNTING

● PROCESS is a key to good PROFIT performance;

● PROCESS is also key to good IMPACT performance relative to both PEOPLE and PLANET

MULTI DIMENSION IMPACT ACCOUNTING