1. 1. MULTI DIMENSION IMPACT ACCOUNTING File: MDIA-p3-13-0-PRODUCT-150705.odp Peter Burgess (c) All rights reserved MDIA PRODUCT GOODS AND SERVICES FOR QUALITY OF LIFE
2. 2. MULTI DIMENSION IMPACT ACCOUNTING WORK-IN-PROGRESS. SLIDESET STILL IN DEVELOPMENT. UPDATES WILL BE POSTED OVER THE NEXT SEVERAL WEEKS
3. 3. 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 MULTI DIMENSION IMPACT ACCOUNTING
4. 4. PRODUCT GOOD Gives people the opportunity to have a good quality of life and standard of living The production of product gives people jobs. MULTI DIMENSION IMPACT ACCOUNTING
5. 5. PRODUCT BAD The life cycle of a product almost always has a significant negative impact on resource depletion, environmental degradation and loss of ecosystem service capacity. MULTI DIMENSION IMPACT ACCOUNTING
6. 6. 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 ECONOMIC ACTIVITY IN FINANCIAL OR MONEY TERMS WHILE COMPLETELY IGNORING IMPACT ON EVERYTHING ELSE
7. 7. 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
8. 8. MULTI DIMENSION IMPACT ACCOUNTING Sun FINANCIAL P&L ACCOUNT Financial Accounts describe Economic Activity REVENUES Products 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 Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun COSTS
9. 9. MULTI DIMENSION IMPACT ACCOUNTING Sun ADD positive impact not accounted forBOP 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 What 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
10. 10. MULTI DIMENSION IMPACT ACCOUNTING Sun DEDUCT negative impact not accounted forBOP 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 File: MDIA-Framework-004-150411-WIP.odp Peter Burgess (c) All rights reserved 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
11. 11. MULTI DIMENSION IMPACT ACCOUNTING Sun ACCOUNTING FOR EVERYTHINGBOP 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 What 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
12. 12. When money accounting is used to manage the supply chain it looks something like this: MULTI DIMENSION IMPACT ACCOUNTING
13. 13. 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...
14. 14. When IMPACT accounting is used to manage the supply chain it looks something like this: MULTI DIMENSION IMPACT ACCOUNTING
15. 15. MULTI DIMENSION IMPACT ACCOUNTING MBSS Natural Capital Human Capital PRODUCT the SUPPLY CHAIN IMPACT ACCOUNTING ADJUSTMENTS Zero to start Costs this stage Profit this stage Price this stage FINANCIAL ACCOUNTS 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 Impact Stage 1 Impact Stage 1 Impact Stage 1 Cum Costs Cum Profit Price Stage 2 Impact Stage 2 Impact Stage 2 Impact Stage 2 Cum Impact Cum Impact Cum Impact Cost = Price stage 2 Costs Stage 3 Profit Stage 3 Cum Costs Cum Profit Price Stage 3 Impact Stage 3 Impact Stage 3 Impact Stage 3 Cum Impact Cum Impact Cum Impact Financial Dimension File: MDIA-Framework-004-150411-WIP.odp Peter Burgess (c) All rights reserved
16. 16. 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. MULTI DIMENSION IMPACT ACCOUNTING
17. 17. 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
18. 18. A better framework for reporting would be this MULTI DIMENSION IMPACT ACCOUNTING
19. 19. 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
20. 20. So think of all this miniaturized: MULTI DIMENSION IMPACT ACCOUNTING
21. 21. MULTI DIMENSION IMPACT ACCOUNTING Sun Every single PROCESS has IMPACT on EVERYTHINGBOP EOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun
22. 22. And then becoming part of the supply chain: MULTI DIMENSION IMPACT ACCOUNTING
23. 23. MULTI DIMENSION IMPACT ACCOUNTING Sun PRODUCT made by one PROCESSBOP EOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun
24. 24. 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 PRODUCT PRODUCT the result of a SUPPLY CHAIN with series of PROCESSES
25. 25. So using impact accounting the numbers aggregate in this way: MULTI DIMENSION IMPACT ACCOUNTING
26. 26. MULTI DIMENSION IMPACT ACCOUNTING MBSS Natural Capital Human Capital 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 Impact Stage 1 Impact Stage 1 Impact Stage 1 Cum Costs Cum Profit Price Stage 2 Impact Stage 2 Impact Stage 2 Impact Stage 2 Cum Impact Cum Impact Cum Impact Cost = Price stage 2 Costs Stage 3 Profit Stage 3 Cum Costs Cum Profit Price Stage 3 Impact Stage 3 Impact Stage 3 Impact Stage 3 Cum Impact Cum Impact Cum Impact Financial Dimension
27. 27. Most companies are going to make decisions about product based on profit MULTI DIMENSION IMPACT ACCOUNTING
28. 28. And most people are going to make the 'buy' or 'not to buy' decision based on VALUE MULTI DIMENSION IMPACT ACCOUNTING
29. 29. Increasingly VALUE is a function of: (1) Price relative to the utility of the product (2) The life cycle environmental and social impact of the product MULTI DIMENSION IMPACT ACCOUNTING
30. 30. 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 MULTI DIMENSION IMPACT ACCOUNTING
31. 31. 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. MULTI DIMENSION IMPACT ACCOUNTING
32. 32. 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. MULTI DIMENSION IMPACT ACCOUNTING
33. 33. 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. MULTI DIMENSION IMPACT ACCOUNTING
34. 34. 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 MULTI DIMENSION IMPACT ACCOUNTING
35. 35. The business world makes knowing about price very easy. Conversely, information about life cycle social and environmental impact is very difficult to find. MULTI DIMENSION IMPACT ACCOUNTING
36. 36. In the end, it is going to be PEOPLE making 'buy' or 'not to buy' decisions about PRODUCTS that is going to change everything MULTI DIMENSION IMPACT ACCOUNTING
37. 37. 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 (peterbnyc@gmail.com). Please put something relevant and catchy in the subject line. MULTI DIMENSION IMPACT ACCOUNTING
38. 38. Some links and contact information: Peter Burgess peterbnyc@gmail.com Peter Burgess LinkedIn profile https://www.linkedin.com/in/peterburgess1 Link to TrueValueMetrics.org website http://www.truevaluemetrics.org/ Link to navigation for MDIA slidesets http://www.truevaluemetrics.org/DBadmin/DBtxt001.php?vv1=list0200-Burgess-p3-Slidesets MULTI DIMENSION IMPACT ACCOUNTING