mdia p3-03-the-product-perspective-150420a

MULTI DIMENSION IMPACT ACCOUNTING

File: MDIA-p3-13-0-PRODUCT-150705.odp Peter Burgess (c) All rights reserved

MDIA

PRODUCTGOODS AND SERVICES FOR QUALITY OF LIFE


WORK-IN-PROGRESS.SLIDESET STILL IN DEVELOPMENT.UPDATES WILL BE POSTED OVER THE NEXT SEVERAL WEEKS

PRODUCT Used by people to live their lives

Made by companies

Inputs to economic activities

Outputs from economic activities

Flows through a supply chain

Has impact during use

Has impact post use in the waste chain

Product links everything


PRODUCT GOOD

Gives people the opportunity to have a good quality of life and standard of living

The production of product gives people jobs.


PRODUCT BADThe life cycle of a product almost always has a significant negative impact on resource depletion, environmental degradation and loss of ecosystem service capacity.



SunBOPEOPSunFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSunSunSunFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSunFINANCIAL ACCOUNTSDESCRIBE ECONOMICACTIVITY IN FINANCIALOR 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



SunFINANCIAL P&L ACCOUNTFinancial Accounts describe Economic Activity

REVENUESProducts Sold X PriceProducts Bought X PriceBOPEOPEnergy Bought X PriceEmployee BenefitsEmployee PayrollOther expendituresAsset use costsDepreciationFinancial expensesPro-good expendituresTaxationPROFITSunFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSunSunSunFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSunCOSTS


SunADD positive impact not accounted for

BOPEOPREVENUESProducts Sold X PriceVALUE to buyerEqualsHUMAN CAPITAL ADDWages and benefitsWhat value to employee?Pro-good expendituresWhat value to society?TaxationWhat value to society?POSITIVE IMPACT NOTACCOUNTEDFORFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSunSunFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSunFINANCIAL P&L ACCOUNTREVENUESProducts Sold X PriceProducts Bought X PriceEnergy Bought X PriceEmployee BenefitsEmployee PayrollOther expendituresAsset use costsDepreciationFinancial expensesPro-good expendituresTaxationPROFITCOSTS


SunDEDUCT negative impact not accounted for

BOPEOPFor products andenergy bought and this processFree use of thecommons andpublic services& infrastructureDegradationof landWater scarcityand degradationAir pollution:Impact on peopleAir pollution:Impact on climateAir pollution:Impact on peopleSolid wasteResourcedepletionEnvironmental DegradationNegativeimpactFile: MDIA-Framework-004-150411-WIP.odp Peter Burgess (c) All rights reserved

FinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSunSunFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSunFINANCIAL P&L ACCOUNTREVENUESProducts Sold X PriceProducts Bought X PriceEnergy Bought X PriceEmployee BenefitsEmployee PayrollOther expendituresAsset use costsDepreciationFinancial expensesPro-good expendituresTaxationPROFITCOSTS


SunACCOUNTING FOR EVERYTHING

BOPEOPREVENUESProducts Sold X PriceVALUE to buyerEqualsHUMAN CAPITAL ADDWages and benefitsWhat value to employee?Pro-good expendituresWhat value to society?TaxationWhat value to society?For products andenergy bought and this processFree use of thecommons andpublic services& infrastructureDegradationof landWater scarcityand degradationAir pollution:Impact on peopleAir pollution:Impact on climateAir pollution:Impact on peopleSolid wasteResourcedepletionEnvironmental DegradationPOSITIVE IMPACT NOTACCOUNTEDFORNegativeimpactFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSunSunFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSunFINANCIAL P&L ACCOUNTREVENUESProducts Sold X PriceProducts Bought X PriceEnergy Bought X PriceEmployee BenefitsEmployee PayrollOther expendituresAsset use costsDepreciationFinancial expensesPro-good expendituresTaxationPROFITCOSTS

When money accounting is used to manage the supply chain it looks something like this:



PRODUCT the SUPPLY CHAIN

Zero to startCosts this stageProfit this stagePrice this stageZero to startCosts this stageProfit this stagePrice Stage 1FINANCIAL ACCOUNTS EACH STEP OF THE SUPPLY CHAINCost = Price stage 1Costs Stage 2Profit Stage 2

Cum Costs Cum ProfitPrice Stage 2Cost = Price stage 2Costs Stage 3Profit Stage 3




Cum Costs Cum ProfitPrice Stage 5ETC...

When IMPACT accounting is used to manage the supply chain it looks something like this:



MBSSNaturalCapitalHumanCapitalPRODUCT the SUPPLY CHAIN

IMPACT ACCOUNTING ADJUSTMENTSZero to startCosts this stageProfit this stagePrice this stageFINANCIAL ACCOUNTSZero to startCosts this stageProfit this stagePrice Stage 1FINANCIAL ACCOUNTS EACH STEP OF THE SUPPLY CHAINCost = Price stage 1Costs Stage 2Profit Stage 2

ImpactStage 1ImpactStage 1ImpactStage 1

Cum Costs Cum ProfitPrice Stage 2ImpactStage 2ImpactStage 2ImpactStage 2Cum ImpactCum ImpactCum ImpactCost = Price stage 2Costs Stage 3Profit Stage 3

Cum Costs Cum ProfitPrice Stage 3ImpactStage 3ImpactStage 3ImpactStage 3Cum ImpactCum ImpactCum ImpactFinancialDimensionFile: MDIA-Framework-004-150411-WIP.odp Peter Burgess (c) All rights reserved

The next slide shows

how the money P&L report describes the impact of the money transactions on the money balance sheet of the operation

while the IMPACTS of the operations on society and the environment are ignored because they are outside the reporting envelope.



SunBOPEOPSunFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSunSunSunFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSun

Financial Accounts describe Financial Impact

Financial CostsFinancial ProfitFinancial RevenuesFinancialBalance Sheet

BOPFinancialBalance Sheet

EOPImpact Accounts reflect Externalities

Balance SheetChangesImpact on InstitutionsImpact on PeopleImpact on SocietyImpact on PhysicalImpact on KnowledgeImpact on ResourcesImpact on EnvironmentImpact on EcoSystemBalance SheetChangesBalance SheetChangesBalance SheetChanges

A better framework for reporting would be this




Financial Accounts describe Financial Impact

Financial CostsFinancial ProfitFinancial RevenuesFinancialBalance Sheet

BOPFinancialBalance Sheet

EOPImpact Accounts reflect Externalities

Balance SheetChangesImpact on InstitutionsImpact on PeopleImpact on SocietyImpact on PhysicalImpact on KnowledgeImpact on ResourcesImpact on EnvironmentImpact on EcoSystemBalance SheetChangesBalance SheetChangesBalance SheetChanges

So think of all this miniaturized:



SunEvery single PROCESS has IMPACT on EVERYTHING

BOPEOPSunFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSunSunSunFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSun

And then becoming part of the supply chain:



SunPRODUCT made by one PROCESS

BOPEOPSunFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSunSunSunFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSun



PRODUCT

PRODUCT the result of a SUPPLY CHAIN withseries of PROCESSES

So using impact accounting the numbers aggregate in this way:



MBSSNaturalCapitalHumanCapitalPRODUCT the SUPPLY CHAIN

ADJUSTMENTS TO REFLECT IMPACT (EXTERNALITIES)Zero to startCosts this stageProfit this stagePrice this stageZero to startCosts this stageProfit this stagePrice Stage 1FINANCIAL ACCOUNTS EACH STEP OF THE SUPPLY CHAINCost = Price stage 1Costs Stage 2Profit Stage 2

ImpactStage 1ImpactStage 1ImpactStage 1

Cum Costs Cum ProfitPrice Stage 2ImpactStage 2ImpactStage 2ImpactStage 2Cum ImpactCum ImpactCum ImpactCost = Price stage 2Costs Stage 3Profit Stage 3

Cum Costs Cum ProfitPrice Stage 3ImpactStage 3ImpactStage 3ImpactStage 3Cum ImpactCum ImpactCum ImpactFinancialDimension

Most companies are going to make decisions about product based on profit


And most people are going to make the 'buy' or 'not to buy' decision based on VALUE


Increasingly VALUE is a function of: (1) Price relative to the utility ofthe product(2) The life cycle environmental and social impact of the product


From the company perspective, in the end, it is people that are going to make the key decisions about the profit potential of a product.

When they don't buy there is no profit


ADVERTISING does not message the inconvenient truth that the IMPACT of more sales is more stress on the environment and in certain cases a more problematic situation for the customer.


TRUTH IN ADVERTISING should mean that the information is correct not only in a legalistic sense, but also in terms of messaging ALL that matters for a better world.


BETTER PRODUCTS are going to be one of the big ways in which the PROGRESS and PERFORMANCE of the SOCIO-ENVIRO-ECONOMIC SYSTEM is going to be improved.


For the buyer, the buy decision is driven by money and impact factors that include:Money price to buy

Money costs during use

End of use money value

Beneficial impact for the user

Life cycle social impact

Life cycle environmental impact


The business world makes knowing about price very easy.

Conversely, information about life cycle social and environmental impact is very difficult to find.


In the end, it is going to be PEOPLE making 'buy' or 'not to buy' decisions about PRODUCTS that is going to change everything


Follow up: Request for Feedback

Getting these ideas fleshed out into a clear, simple but comprehensive structure is a big job and remains a work-in-progress. Many organizations are making progress with this, but there is no broad universal framework yet that will enable all the pieces to come together and work efficiently.

I would like to get feedback from anyone and everyone to help move this initiative forward. While I have some clear concepts about much of this architecture, there are many details that I do not know enough about and need help. So, please feel free to contact me ([email protected]). Please put something relevant and catchy in the subject line.


Some links and contact information:

Peter Burgess [email protected]

Peter Burgess LinkedIn profilehttps://www.linkedin.com/in/peterburgess1

Link to TrueValueMetrics.org websitehttp://www.truevaluemetrics.org/

Link to navigation for MDIA slidesetshttp://www.truevaluemetrics.org/DBadmin/DBtxt001.php?vv1=list0200-Burgess-p3-Slidesets


mdia p3-03-the-product-perspective-150420a

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