MDIA p3-04 NATURAL CAPITAL 151010

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Natural Capital is the foundation for everything, and for most of human history man made activities were small relative to the planet and its natural capital. This is not so any more and everything about natural capital is now stressed and out of its natural equilibrium. This has to change in a significant way. Merely reducing the growth of stress is not enough. Substantial remediation efforts need to be made as well.

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MDIA p3-04 NATURAL CAPITAL 151010

  1. 1. File: TVA-p3-00-NATURAL-CAPITAL-151020.odp Peter Burgess (c) All rights reserved NATURE NATURAL CAPITAL TRUE VALUE ACCOUNTING
  2. 2. CONTEXT This slideset is a Work-in-Progress and will be updated from time to time. It is part of a series that aims to describe the extremely complex socio-enviro-economic system that we live in, and how better metrics will make this system work better. TRUE VALUE ACCOUNTING
  3. 3. NATURAL CAPITAL enables EVERYTHING TRUE VALUE ACCOUNTING
  4. 4. Natural Capital comprises: ● The biological and other mechanisms that enable life; ● The fauna and flora that inhabit the planet … the bio-diversity; ● The natural systems that maintain and clean our environment; ● The minerals; ● The fossil fuel deposits; ● The land; ● The water; ● The air … the atmosphere. TRUE VALUE ACCOUNTING
  5. 5. Most of NATURAL CAPITAL has no 'owner'. Natural capital is part of the COMMONS and as such suffers from 'The tragedy of the commons' With no 'ownership' there has been little incentive to maintain the VALUE of NATURAL CAPITAL. TRUE VALUE ACCOUNTING
  6. 6. NATURAL CAPITAL has been exploited and depleted at no cost to the beneficiaries. TRUE VALUE ACCOUNTING
  7. 7. The capacity of the PLANET is the limiting factor. This has been an emerging issue in scientific circles for more than 50 years. TRUE VALUE ACCOUNTING
  8. 8. TRUE VALUE ACCOUNTING
  9. 9. Sun BOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun EOPVarious EcoSystem Services TRUE VALUE ACCOUNTING
  10. 10. NATURAL CAPITAL has been exploited and depleted at no cost to the beneficiaries. TRUE VALUE ACCOUNTING
  11. 11. ELEMENTS OF THE SYSTEM by SEGMENT 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 TRUE VALUE ACCOUNTING
  12. 12. 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 The energy for everything has come from the sun. Fossil fuels are the result of ancient photo- synthesis. The sun possesses enough energy to power the future, but we do not know how best to fund such a change using conventional analysis. Sun About the SunAbout the Sun TRUE VALUE ACCOUNTING
  13. 13. Sun BOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun Nature (life) Land Water Air pollution Ecoservices GHG emissions About Natural Capital EOP TRUE VALUE ACCOUNTING
  14. 14. Sun BOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun Nature (life) Land Water Air pollution Ecoservices GHG emissions About nature (life) Nature (life) Biodiversity The amazing story of evolution and the diversity that has emerged EOP TRUE VALUE ACCOUNTING
  15. 15. Sun BOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun Nature (life) Land Water Air pollution Ecoservices GHG emissions About ecoservices Ecoservices Nature is extremely complex, but it is balanced with a place for everything and everything it its place. Ecosystem services provide photosynthesis, nitrogen fixing, carbon sequestration, and … EOP TRUE VALUE ACCOUNTING
  16. 16. Sun BOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun Nature (life) Land Water Air pollution Ecoservices GHG emissions About air pollution Air pollution People and man built structures and systems pollute the air which in turn degrades quality of life. This has become a major issue in urban centers around the world. EOP TRUE VALUE ACCOUNTING
  17. 17. Sun BOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun Nature (life) Land Water Air pollution Ecoservices GHG emissions About GHG emissions GHG Emissions Green House Gas (GHG) emissions like CO2, CH4 and others cause global warming, which is having impact on weather patterns and other systems. The natural ecosystem service capacity is not enough to balance the emissions originating from man built systems EOP TRUE VALUE ACCOUNTING
  18. 18. Sun BOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun Nature (life) Land Water Air pollution Ecoservices GHG emissions About Land Land Land is a limiting factor with many competing uses. Natural processes and ecosystem services require land and so do man built structures and systems EOP TRUE VALUE ACCOUNTING
  19. 19. Sun BOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun Nature (life) Land Water Air pollution Ecoservices GHG emissions About Water Water Water is a also a limiting factor and essential for life and many man built processes. There is abundant water but only limited fresh water. Some places have abundant natural water, other places have water shortage EOP TRUE VALUE ACCOUNTING
  20. 20. The PURPOSE of all economic activity is to enable an improved Quality of Life and Standard of Living for PEOPLE. TRUE VALUE ACCOUNTING
  21. 21. More MONEY and more STUFF has been the proxy for a better quality of life and standard of living. This has been one of the drivers of the Western style consumer economy. TRUE VALUE ACCOUNTING
  22. 22. 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 SUN … the Source of ALL our energy TRUE VALUE ACCOUNTING
  23. 23. The SUN is our ultimate source of energy. Only a small fraction of the SUN's energy is used usefully … most goes to waste. TRUE VALUE ACCOUNTING
  24. 24. POPULATION GROWTH In 1900 the world's population was about 1.7 billion people … by 2015 the population exceeded 7.1 billion people. TRUE VALUE ACCOUNTING
  25. 25. RICH COUNTRIES NNN countries with a total population of NNNN have per capita incomes of more than $20,000 per annum TRUE VALUE ACCOUNTING
  26. 26. POOR COUNTRIES NNN countries with a total population of NNNN have per capita incomes less than $20,000 per annum TRUE VALUE ACCOUNTING
  27. 27. The profligate USA The Global Footprint Network (GFN) has calculated that people in the United States need more than 5 planets in order to sustain themselves. TRUE VALUE ACCOUNTING
  28. 28. A typical poor country The people of a typical poor country like Ethiopia with a population of NN million has a per capita Global Footprint of just .N planets. TRUE VALUE ACCOUNTING
  29. 29. In other words there is a TRANSFER of VALUE from the poor people Ethiopia to the rich people of the Unites States TRUE VALUE ACCOUNTING
  30. 30. There are NO METRICS to include these VALUE TRANSFERS from poor countries to rich counties … very convenient for rich countries but fundamentally immoral. TRUE VALUE ACCOUNTING
  31. 31. Western style consumerism and GDP growth are unsustainable! TRUE VALUE ACCOUNTING
  32. 32. 7 billion people on the planet cannot be supported at a typical 'rich country' standard of living using the prevailing consumer model of economic thinking. TRUE VALUE ACCOUNTING
  33. 33. If the population grows to 9 billion or 10 billion the problem will be just that much more serious. TRUE VALUE ACCOUNTING
  34. 34. A completely different model for socio-enviro-economic decision making is needed. TRUE VALUE ACCOUNTING
  35. 35. A key goal of socio-enviro-economic decision making must incorporate the idea that quality of life must be improved over time AND the impact on the environment reduced. TRUE VALUE ACCOUNTING
  36. 36. Every person on the planet has a role to play in this … the has to be a WIN – WIN – WIN outcome. TRUE VALUE ACCOUNTING
  37. 37. The prevailing approach that is only competitive must be replaced by something that is more collaborative. No more 'I win, you lose' that has dominated for all of recorded history. TRUE VALUE ACCOUNTING
  38. 38. A starting point should be that the vast potential of the 'Human Resource' should be mobilized to do things that are useful. TRUE VALUE ACCOUNTING
  39. 39. There is a huge underutilized human resource … young people who are better educated that ever before but either unemployed or underemployed. TRUE VALUE ACCOUNTING
  40. 40. There should also be a commitment to making the best possible use of KNOWLEDGE … TRUE VALUE ACCOUNTING
  41. 41. … with BEST being defined as the most GOOD for PEOPLE with the least damage to the ENVIRONMENT. TRUE VALUE ACCOUNTING
  42. 42. A big commitment should be made to increasing KNOWLEDGE. Research to increase knowledge should be constrained not by the availability of money, but by the availability of BRAIN. TRUE VALUE ACCOUNTING
  43. 43. And KNOWLEDGE should be converted into practical application by a commitment to investment in development and deployment. TRUE VALUE ACCOUNTING
  44. 44. Development and deployment of technology should be driven by the opportunities to impove PROCESSES AND PRODUCTS so that they are more efficient … enabling a better quality of life with less damage to the environment. TRUE VALUE ACCOUNTING
  45. 45. Conventional accounting and business practices equate profitability with efficiency. This is a dangerous practice because externalities that are important are ignored. TRUE VALUE ACCOUNTING
  46. 46. Much of the reporting and analysis are organization centric to serve the investor community … stockholders are the only stakeholder that matters. TRUE VALUE ACCOUNTING
  47. 47. Better metrics are needed … This is what True Value Accounting is being designed to do … a system for Multi Dimension Impact Accounting TRUE VALUE ACCOUNTING
  48. 48. PRODUCTS must be redesigned so that have VALUE for the user while doing the least possible damage to the environment while they are being produced, used and eventually discarded. TRUE VALUE ACCOUNTING
  49. 49. PROCESSES must be redesigned so that they produce valuable products while doing the least possible damage to the environment. TRUE VALUE ACCOUNTING
  50. 50. ORGANIZATIONS need to rethink their PURPOSE so that they use resources in the most efficient way using EFFICIENT PROCESSES to produce VALUABLE PRODUCTS. TRUE VALUE ACCOUNTING
  51. 51. CAPITAL MARKETS need to rethink valuation so that important future RISKS are included in the analysis and all the IMPACTS of companies are taken into consideration. Money profit is only one of the many dimensions that deserves analysis. TRUE VALUE ACCOUNTING
  52. 52. PLACES are KEY … Everything comes together in a PLACE … quality of life for PEOPLE ... the state of LAND, WATER, AIR … the behavior of BUSINESS … the availability of goods and services … the quality of GOVERNANCE. TRUE VALUE ACCOUNTING
  53. 53. FRAMEWORK FOR MEASUREMENT Conventional double entry accounting is a rigorous framework for money profit accounting. True Value Accounting applies these same concepts to the STATE-FLOW-STATE of all the transactions that have impact in the socio-enviro-economic system. TRUE VALUE ACCOUNTING
  54. 54. QUANTIFICATION As long as there are no numbers, there is no measurement. Without measurement there is no management. The most efficient way of numbering is to use the idea of Standard Values TRUE VALUE ACCOUNTING
  55. 55. There are a plethora of numbers that are used at a detail level by scientists, behavioralists and analysts of all types. We need a systematic way of linking many of these measures to a framework of Standard Values. TRUE VALUE ACCOUNTING
  56. 56. Sun BOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun EOP TRUE VALUE ACCOUNTING
  57. 57. 1.5 planets are needed when there are still around 4 billion people who are consuming the barest minimum … Western style consumer capitalism requires more than 5 planets TRUE VALUE ACCOUNTING
  58. 58. Sun BOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun EOP Image credit: Steffen et al. Science (2015). Journal Science / AAAS Planetary Boundaries TRUE VALUE ACCOUNTING
  59. 59. CLOSING THOUGHT A key characteristic of the great American economic success over the past 300 years has been the conversion of NATURAL CAPITAL into FINANCIAL CAPITAL and MONEY WEALTH. This has been possible because of the vast natural resources relative to population. This approach has resulted in depletion of resources and degradation of the environment. Waste has been dumped onto the land, into the water and into the air with no thought to the damage being done. This is UNSUSTAINABLE and has to change. TRUE VALUE ACCOUNTING
  60. 60. REMINDER This slideset is A WORK-IN-PROGRESS. It will be upgraded periodically. It is part of a series of more than 100 slidesets. Navigation to these is available here: FEEDBACK is welcome. Please email to Peter Burgess … peterbnyc@gmail.com … with a catchy phrase in the subject line so that it gets attention, and please identify the specific slideset(s) involved. http://www.truevaluemetrics.org/DBadmin/DBtxt001.php?vv1=N1-Slidesets-p3 TRUE VALUE ACCOUNTING
  61. 61. THANK YOU Some links and contact information: Email 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 to other resources: http://www.truevaluemetrics.org/DBadmin/DBtxt001.php?vv1=list0100-MainNav#1 TRUE VALUE ACCOUNTING

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