Mdia p3-05-supply-chain-150420

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Mdia p3-05-supply-chain-150420

  1. 1. MULTI DIMENSION IMPACT ACCOUNTING File: MDIA-p3-06-SUPPLY-CHAIN-150420.odp Peter Burgess (c) All rights reserved MDIA SUPPLY CHAIN
  2. 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 the norm; ● Supply chain optimizes for profit; ● With prevailing laws, regulation and metrics, optimizing for profit results in a race to the bottom for social and environmental impact MULTI DIMENSION IMPACT ACCOUNTING
  3. 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. 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. 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. 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. 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 FINANCIAL ACCOUNTS DESCRIBE ECONOMIC ACTIVITY IN FINANCIAL OR MONEY TERMS WHILE COMPLETELY IGNORING IMPACT ON EVERYTHING ELSE
  8. 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. 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? POSITIVE IMPACT NOT ACCOUNTED FOR 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. 10. MULTI DIMENSION IMPACT ACCOUNTING Sun ACCOUNTING FOR EVERYTHINGBOP 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 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
  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 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
  12. 12. 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
  13. 13. 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
  14. 14. PRODUCT AND SUPPLY CHAIN ● The MONEY dimension of the supply chain is routine; however ● The IMPACT dimensions of the supply chain are rarely implemented in a rigorous manner. ● This is big next step! MULTI DIMENSION IMPACT ACCOUNTING
  15. 15. 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
  16. 16. 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
  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 Economic Activity Financial Costs Financial Profit Financial Revenues Financial Balance Sheet BOP Financial Balance Sheet EOP
  18. 18. 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
  19. 19. 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
  20. 20. MULTI DIMENSION IMPACT ACCOUNTING Sun PLACE … the aggregate of everything in the place 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
  21. 21. 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
  22. 22. 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
  23. 23. MULTI DIMENSION IMPACT ACCOUNTING Sun One of the PROCESSES in a PLACEBOP 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 One of the PROCESSES in a PLACE and also a PROCESS in an ORGANIZATION BOP EOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun
  25. 25. 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 A big ORGANIZATION is the aggregation of many operations or PROCESSES in many PLACES
  26. 26. MULTI DIMENSION IMPACT ACCOUNTING Sun Small decisions by people make all the difference BOP EOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun PEOPLE
  27. 27. MULTI DIMENSION IMPACT ACCOUNTING Sun Everybody has a role in making this world of ours a better place BOP EOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun PEOPLE
  28. 28. 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
  29. 29. 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
  30. 30. 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
  31. 31. SO … TO SUMMARIZE: ● PROCESS is everywhere … ● SUPPLY CHAIN is a chain of PROCESSES MULTI DIMENSION IMPACT ACCOUNTING
  32. 32. ● PROCESS uses inputs (labor, materials, knowhow, natural resources, etc.); ● PROCESS produces PRODUCTS (goods and services that enable living standards and quality of life); ● PROCESS determines efficiency and impact both on PEOPLE and PLANET MULTI DIMENSION IMPACT ACCOUNTING
  33. 33. PROCESS is key to good performance of the SUPPLY CHAIN, both for the PROFIT dimension and also for IMPACT on PEOPLE and PLANET MULTI DIMENSION IMPACT ACCOUNTING

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