Mdia p3-06-supply-chain-150420
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The document discusses supply chain management and the need for multi-dimensional impact accounting. It notes that traditional supply chain optimization focuses only on profit, often at the expense of social and environmental impacts. Tracking impacts across the entire supply chain is important to improve the balance between profit, people, and the planet. Incorporating impact analysis into standard supply chain data and product information will help decision-makers understand total performance and guide responsible consumer choices.
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Mdia p3-06-supply-chain-150420
- 1. MULTI DIMENSION IMPACT ACCOUNTING File: MDIA-p3-06-Supply-Chain-150420.odp Peter Burgess (c) All rights reserved MDIA The Role of SUPPLY CHAIN Management Analysis Data
- 2. SUPPLY CHAIN ● The supply chain is a key part of the modern economy; ● Supply chain has enabled much of the low cost high profit performance of business that is now normal; ● Supply chain optimizes for profit; ● Much supply chain behavior is a race to the bottom in terms of social and environmental responsibility. MULTI DIMENSION IMPACT ACCOUNTING
- 3. 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...
- 4. SUPPLY CHAIN ● The supply chain works when each stage of the chain is profitable; ● The system works by every stage aiming for maximum profit; ● Entities with the most negotiating power make the most profit; ● However, the financial profit goal excludes important impact issues that are increasingly important. MULTI DIMENSION IMPACT ACCOUNTING
- 5. 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
- 6. MULTI DIMENSION IMPACT ACCOUNTING Sun BOP EOP Sun Financial Capital Human Capital Man Built Structures & Systems Natural Capital Sun SunSun Financial Capital Human Capital Man Built Structures & Systems Natural Capital Sun Financial Accounts describe Economic Activity Financial Costs Financial Profit Financial Revenues Financial Balance Sheet BOP Financial Balance Sheet EOP
- 7. MULTI DIMENSION IMPACT ACCOUNTING Sun BOP EOP Sun Financial Capital Human Capital Man Built Structures & Systems Natural Capital Sun SunSun Financial Capital Human Capital Man Built Structures & Systems Natural Capital Sun IN FINANCIAL OR MONEY TERMS WHILE COMPLETELY IGNORING IMPACT ON EVERYTHING ELSE Financial Accounts describe Economic Activity
- 8. MULTI DIMENSION IMPACT ACCOUNTING Sun Financial Accounts describe Economic ActivityBOP EOP Sun Financial Capital Human Capital Man Built Structures & Systems Natural Capital Sun SunSun Financial Capital Human Capital Man Built Structures & Systems 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
- 9. 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 Structures & Systems Natural Capital Sun Sun Financial Capital Human Capital Man Built Structures & Systems 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. SUPPLY CHAIN ANALYSIS ● By including IMPACT in supply chain management analysis we improve balance between profit, people and planet; ● Corporate decision makers will know more about the true performance of their supply chains. MULTI DIMENSION IMPACT ACCOUNTING
- 11. PRODUCT ● Nothing much will happen until SUPPLY CHAIN IMPACT ANALYSIS is incorporated into the easily available data about PRODUCTS; ● PEOPLE make BUY or NOT TO BUY decisions about PRODUCTS; ● COMPANIES make PROFIT by making PRODUCTS that PEOPLE choose to BUY MULTI DIMENSION IMPACT ACCOUNTING