MDIA-p3-01-4-PERSPECTIVES

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MDIA ... Multi Dimension Impact Accounting ... is not only multi dimensional but also multi perspective. A framework of data analysis and decision making for the 21st century needs to be comprehensive and coherent ... and this is how MDIA is designed. It is not enough to focus on the money profit performance of the business and corporate sector. The challenge is to enable decision making that takes into consideration both the business and corporate sector AND the social impact (people) AND the environment (planet). A system of metrics that does all of this is long overdue, but they are emerging and they will be game changers.

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MDIA-p3-01-4-PERSPECTIVES

  1. 1. MULTI DIMENSION IMPACT ACCOUNTING MDIA-p3-01-PERSPECTIVES-150618.odp Peter Burgess (c) All rights reserved MDIA PERSPECTIVES
  2. 2. MULTI DIMENSION IMPACT ACCOUNTING WORK-IN-PROGRESS. SLIDESET STILL IN DEVELOPMENT. UPDATES WILL BE POSTED OVER THE NEXT SEVERAL WEEKS
  3. 3. PERSPECTIVE ... An object looks very different depending on the position of the observer. But it is the same object nevertheless. MULTI DIMENSION IMPACT ACCOUNTING
  4. 4. In the complex global socio-enviro- economic system, multiple PERSPECTIVES are essential ... One perspective … that of the business organization is not enough … but that is really all there is. MULTI DIMENSION IMPACT ACCOUNTING
  5. 5. Multiple PERSPECTIVES are essential ... ● an ORGANIZATION perspective (which already exists for money transactions) ● a PEOPLE perspective; ● a PROCESS perspective; ● a PRODUCT perspective; and, ● a PLACE perspective. MULTI DIMENSION IMPACT ACCOUNTING
  6. 6. TRIPLE BOTTOM LINE (TBL) The idea of the Triple Bottom Line … PROFIT, PEOPLE and PLANET has been around since the 1990s*. This is good, but while it broadens the scope of the metrics it is limited to the single perspective, that of the ORGANIZATION. MULTI DIMENSION IMPACT ACCOUNTING * When it was first described by John Elkington
  7. 7. THE CHALLENGE The challenge is to have a data system that is meaningful from every perspective of the socio- enviro-economic-system. Hence, the need for a data framework that has Multi Dimensions and enables Multi Perspectives MULTI DIMENSION IMPACT ACCOUNTING
  8. 8. THE TVM-MDIA SOLUTION ... MDIA uses concepts from conventional double entry accounting where there are both Balance Sheet and Profit and Loss Accounts. The building block for MDIA is similar … State1 → Flow → Process → Flow → State2 … a scheme that can be applied to every economic activity in any setting anywhere. MULTI DIMENSION IMPACT ACCOUNTING
  9. 9. This MDIA building block will: ● Aggregate to enable summary reporting; and ● Enable drill down to activities that are relevant at any and all subsidiary levels down to the individual level. MULTI DIMENSION IMPACT ACCOUNTING
  10. 10. SOCIO-ENVIRO-ECONOMIC ● SOCIO is the PEOPLE dimension. Everything should result in people progressing. ● ENVIRO is about NATURE and the ultimate source of everything that people can ever have. ● ECONOMIC is the Man Built Structures and Systems (Man Built Capital) that have been built to enable progress. MULTI DIMENSION IMPACT ACCOUNTING
  11. 11. HISTORY … HOW THE THREE SEGMENTS HAVE CHANGED OVER TIME MULTI DIMENSION IMPACT ACCOUNTING
  12. 12. YELLOW: The PEOPLE piece … Human Capital (NC) DIRTY BROWN: The ECONOMIC piece … Man Built Capital (MBC) GREEN: NATURE, ENVIRONMENT … Natural Capital (NC) MULTI DIMENSION IMPACT ACCOUNTING COLOR KEY
  13. 13. MULTI DIMENSION IMPACT ACCOUNTING Hum an Capital Man Built Capital Natural Capital
  14. 14. MULTI DIMENSION IMPACT ACCOUNTING Hum an Capital Man Built Capital Natural Capital
  15. 15. MULTI DIMENSION IMPACT ACCOUNTING Hum an Capital Man Built Capital Natural Capital
  16. 16. MULTI DIMENSION IMPACT ACCOUNTING Hum an Capital Man Built Capital Natural Capital
  17. 17. MULTI DIMENSION IMPACT ACCOUNTING Hum an Capital Man Built Capital Natural Capital
  18. 18. MULTI DIMENSION IMPACT ACCOUNTING Hum an Capital Man Built Capital Natural Capital
  19. 19. Trajectory to disaster! This must be changed to this … MULTI DIMENSION IMPACT ACCOUNTING
  20. 20. MULTI DIMENSION IMPACT ACCOUNTING Hum an Capital Man Built Capital Natural Capital
  21. 21. PEOPLE progressing MBC* efficient PLANET healthy MULTI DIMENSION IMPACT ACCOUNTING * Man Built Capital … Man Built Structures and Systems
  22. 22. SO … How do we go from an economy where there is a singular focus on PROFIT to something that embraces ALL the dimensions of the global complex socio-enviro-economic system? How do these all come together as a single coherent system? MULTI DIMENSION IMPACT ACCOUNTING
  23. 23. SO … What is the PEOPLE perspective? What is the ORGANIZATION perspective? What is the PRODUCT perspective? What is the PROCESS perspective? What is the PLACE perspective? How do these all come together as a single coherent system? MULTI DIMENSION IMPACT ACCOUNTING
  24. 24. How must the components of MBC be changed to get best possible results? How can people in organizations collectively make better decisions? MULTI DIMENSION IMPACT ACCOUNTING
  25. 25. How can PEOPLE make better decisions? MULTI DIMENSION IMPACT ACCOUNTING
  26. 26. Part of the answer is BETTER METRICS MULTI DIMENSION IMPACT ACCOUNTING
  27. 27. Multi Dimension Impact Accounting (MDIA) MULTI DIMENSION IMPACT ACCOUNTING
  28. 28. MDIA tracks impact on ALL* the components of the system … MULTI DIMENSION IMPACT ACCOUNTING * Not just the money based financial metrics
  29. 29. MULTI DIMENSION IMPACT ACCOUNTING 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 Making MDIA coherent with Socio-Enviro-Economic System Human Capital
  30. 30. Note that FINANCIAL CAPITAL has been separated out from the other parts of the MBC segment Note also the addition of SUN to enable metrics about renewables MULTI DIMENSION IMPACT ACCOUNTING
  31. 31. The next slide shows the elements of the system by segment … MULTI DIMENSION IMPACT ACCOUNTING
  32. 32. MULTI DIMENSION IMPACT ACCOUNTING Financial Capital Human Capital Man Built Capital Natural Capital Sun Financial Capital Human Capital Man Built Capital Natural Capital Money FoodGovernmentNature (life) Sun Nature (life) Capital Market Value Water Laws. RulesNature (life)Land Shelter InfrastructureWater Clothes IndustryNature (life)Air Health MiningEcoservices Education Energy Skills Waste RecreationRetail Culture Logistics Religion Knowledge Technology Security Energy Mobility Profit More Elements of the MDIA Framework
  33. 33. Things change over time … STATE* changes MULTI DIMENSION IMPACT ACCOUNTING * Think the 'State of the Union' message that the President of the United States delivers each year to Congress
  34. 34. MULTI DIMENSION IMPACT ACCOUNTING These 3 slides explain the concept of STATE and FLOW … or in accounting terms: BALANCE SHEET and PROFIT AND LOSS
  35. 35. MULTI DIMENSION IMPACT ACCOUNTING STEADY STATE
  36. 36. MULTI DIMENSION IMPACT ACCOUNTING POSITIVE PROGRESS
  37. 37. MULTI DIMENSION IMPACT ACCOUNTING DETERIORATION OF STATE
  38. 38. Integrate this idea into the multi capital MDIA framework … MULTI DIMENSION IMPACT ACCOUNTING
  39. 39. 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 Economic Activity or Process Transformation --->
  40. 40. Practically every organization on the planet has financial accounts that record money transactions and report money related performance … MULTI DIMENSION IMPACT ACCOUNTING
  41. 41. Financial accounts describe economic activity in money or financial terms while completely ignoring impact on everything else MULTI DIMENSION IMPACT ACCOUNTING
  42. 42. 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
  43. 43. The next slides show how IMPACT must be incorporated into the data architecture … MULTI DIMENSION IMPACT ACCOUNTING
  44. 44. 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
  45. 45. 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 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
  46. 46. 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
  47. 47. Because of the way double entry accounting works … the operating accounts (P&L) for an economic activity or process result in changes to the Balance Sheet of the entity … MULTI DIMENSION IMPACT ACCOUNTING
  48. 48. 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 Financial Costs Financial Profit Financial Revenues Financial Balance Sheet BOP Financial Balance Sheet EOP
  49. 49. Economic operations also have IMPACTS on human capital (people), on man built capital (MBC) and natural capital (environment / planet) … but these are outside the 'reporting boundary' for the entity. MULTI DIMENSION IMPACT ACCOUNTING
  50. 50. 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
  51. 51. Integrated accounting for IMPACT requires the reporting boundary to extend to all the extremities of the system in one coherent system. MULTI DIMENSION IMPACT ACCOUNTING
  52. 52. This represents how Integrated Impact Accounting will work for a reporting entity … MULTI DIMENSION IMPACT ACCOUNTING
  53. 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. 54. The ORGANIZATION perspective ... The operations of an organization are the aggregation of all the economic activities or operations of the organization. For money accounting there are established rules how this consolidation is done. Similar rules are needed for the aggregation of impact for the organization. MULTI DIMENSION IMPACT ACCOUNTING
  55. 55. A world with no economic activity is represented by this … MULTI DIMENSION IMPACT ACCOUNTING
  56. 56. 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
  57. 57. A world with just one economic activity will look like this … MULTI DIMENSION IMPACT ACCOUNTING
  58. 58. 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
  59. 59. MULTI DIMENSION IMPACT ACCOUNTING 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 Where this ... represents this ...
  60. 60. So … the ORGANIZATION is represented in this way … MULTI DIMENSION IMPACT ACCOUNTING
  61. 61. 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 ORGANIZATION with one operation
  62. 62. An organization with many operations looks like this … MULTI DIMENSION IMPACT ACCOUNTING
  63. 63. 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 ORGANIZATION with many operations
  64. 64. And a PRODUCT aggregates in a very similar way … MULTI DIMENSION IMPACT ACCOUNTING
  65. 65. 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
  66. 66. 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
  67. 67. The money accounting presentation of the SUPPLY CHAIN may have this form … MULTI DIMENSION IMPACT ACCOUNTING
  68. 68. 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...
  69. 69. … and the IMPACT ACCOUNTING for the SUPPLY CHAIN needs to look something like this … MULTI DIMENSION IMPACT ACCOUNTING
  70. 70. MULTI DIMENSION IMPACT ACCOUNTING MBC 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
  71. 71. The progress and performance of a PLACE is also a result of the aggregation of many economic activities … MULTI DIMENSION IMPACT ACCOUNTING
  72. 72. 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 PLACE with many economic activities
  73. 73. Quality of Life for PEOPLE is determined by: Everything that is in the PLACE. The availability and flow of PRODUCTS. Access to OPPORTUNITIES (typically associated with an ORGANIZATION and availability jobs). MULTI DIMENSION IMPACT ACCOUNTING
  74. 74. 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 PLACE with many economic activities PEOPLE Quality of Life PLACE is important PRODUCTS are important to satisfy needs and for quality of life ORGANIZATION for jobs is important ORGANIZATION with one operation
  75. 75. Small decisions by people make all the difference MULTI DIMENSION IMPACT ACCOUNTING
  76. 76. MULTI DIMENSION IMPACT ACCOUNTING Sun Small decisions by people make all the differenceBOP EOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun Product Place Supply Chain Process Organization Enabling environment Society
  77. 77. MULTI DIMENSION IMPACT ACCOUNTING Sun Small decisions by people make all the differenceBOP EOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun
  78. 78. PEOPLE need easy access to data that will improve the decisions they make … ● for themselves; ● for society; and ● for the environment. MULTI DIMENSION IMPACT ACCOUNTING
  79. 79. This is very different from most of the data that is easily accessible for PEOPLE that only has the corporate purpose of selling more product ... … no matter what the impact on PEOPLE, PLANET or PLACE MULTI DIMENSION IMPACT ACCOUNTING
  80. 80. FINAL WORD There are more dimensions than just money! There are more perspectives than just the corporate organization! MULTI DIMENSION IMPACT ACCOUNTING
  81. 81. 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
  82. 82. 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

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