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TVA p3 01 The Global SOCIO ENVIRO ECONOMIC System

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The Global SOCIO-ENVIRO-ECONOMIC System is a complex system and a significant challenge to manage in an appropriate way. While there has been progress in improving quality of life for some people using the metrics of money, it has been done at the expense of some segments of society and at a huge cost to the environment , neither of which are part of the money metrics framework.

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TVA p3 01 The Global SOCIO ENVIRO ECONOMIC System

  1. 1. The Global SOCIO-ENVIRO-ECONOMIC System File: TVA-p3-01-SOCIO-ENVIRO-ECONOMIC-151103.odp Peter Burgess (c) All rights reserved 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. Socio-Enviro-Economic or PEOPLE, ENVIRONMENT and MAN-BUILT CAPITAL MULTI DIMENSION IMPACT ACCOUNTING
  4. 4. Sustainable progress requires decision making that optimizes for all the segments of the system. Metrics to optimize for company profit performance and capital market value ignoring externalities are not enough! MULTI DIMENSION IMPACT ACCOUNTING
  5. 5. The next slide shows: PEOPLE MORE THAN 7 BILLION NOW AND GROWING MULTI DIMENSION IMPACT ACCOUNTING
  6. 6. MULTI DIMENSION IMPACT ACCOUNTING
  7. 7. The next slide shows: ENVIRONMENT SUN, PLANET EARTH, FAUNA and FLORA MULTI DIMENSION IMPACT ACCOUNTING
  8. 8. MULTI DIMENSION IMPACT ACCOUNTING
  9. 9. The next slides shows: MAN-BUILT CAPITAL GOVERNMENT, LAW, CITIES, INDUSTRY AND A LOT MORE MULTI DIMENSION IMPACT ACCOUNTING
  10. 10. MULTI DIMENSION IMPACT ACCOUNTING
  11. 11. MULTI DIMENSION IMPACT ACCOUNTING
  12. 12. MULTI DIMENSION IMPACT ACCOUNTING
  13. 13. MULTI DIMENSION IMPACT ACCOUNTING
  14. 14. MULTI DIMENSION IMPACT ACCOUNTING
  15. 15. MULTI DIMENSION IMPACT ACCOUNTING
  16. 16. HISTORY … HOW THE THREE SEGMENTS HAVE CHANGED OVER TIME MULTI DIMENSION IMPACT ACCOUNTING
  17. 17. 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
  18. 18. AT THE START THERE WERE FEW PEOPLE, LITTLE MAN BUILT CAPITAL AND PLENTY OF UNEXPLOITED NATURAL CAPITAL MULTI DIMENSION IMPACT ACCOUNTING
  19. 19. MULTI DIMENSION IMPACT ACCOUNTING Hum an Capital Man Built Capital Natural Capital
  20. 20. OVER TIME MORE PEOPLE, MORE MAN BUILT CAPITAL AND EVENTUALLY TOO MUCH PRESSURE ON NATURAL CAPITAL MULTI DIMENSION IMPACT ACCOUNTING
  21. 21. MULTI DIMENSION IMPACT ACCOUNTING Hum an Capital Man Built Capital Natural Capital
  22. 22. MULTI DIMENSION IMPACT ACCOUNTING Hum an Capital Man Built Capital Natural Capital
  23. 23. MULTI DIMENSION IMPACT ACCOUNTING Hum an Capital Man Built Capital Natural Capital
  24. 24. MULTI DIMENSION IMPACT ACCOUNTING Hum an Capital Man Built Capital Natural Capital
  25. 25. MULTI DIMENSION IMPACT ACCOUNTING Hum an Capital Man Built Capital Natural Capital
  26. 26. Trajectory to disaster! This must be changed to this … MULTI DIMENSION IMPACT ACCOUNTING
  27. 27. MULTI DIMENSION IMPACT ACCOUNTING Hum an Capital Man Built Capital Natural Capital
  28. 28. PEOPLE progressing MBC* efficient PLANET healthy MULTI DIMENSION IMPACT ACCOUNTING * Man Built Capital … Man Built Structures and Systems
  29. 29. MULTI DIMENSION IMPACT ACCOUNTING Sun BOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun EOPSocio-Enviro-Economic System
  30. 30. To manage change there have to be METRICS for ALL the components of the system. MULTI DIMENSION IMPACT ACCOUNTING
  31. 31. This is the background for MULTI DIMENSION IMPACT ACCOUNTING (MDIA) MULTI DIMENSION IMPACT ACCOUNTING
  32. 32. MDIA tracks impact on ALL* the components of the system … MULTI DIMENSION IMPACT ACCOUNTING * Not just the money based financial metrics
  33. 33. MULTI DIMENSION IMPACT ACCOUNTING Fundamentals of the Socio-Enviro-Economic System Human Capital Man Built Capital Natural Capital
  34. 34. MULTI DIMENSION IMPACT ACCOUNTING Fundamentals of the Socio-Enviro-Economic System Financial Capital Human Capital Man Built Capital Natural Capital Man Built Capital Natural Capital Human Capital Split out Financial Capital from other components of Man Built Capital
  35. 35. MULTI DIMENSION IMPACT ACCOUNTING Fundamentals of the Socio-Enviro-Economic System Financial Capital Human Capital Man Built Capital Natural Capital SunSun 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
  36. 36. MULTI DIMENSION IMPACT ACCOUNTING Fundamentals of the Socio-Enviro-Economic System 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
  37. 37. MULTI DIMENSION IMPACT ACCOUNTING Sun Fundamentals of the Socio-Enviro-Economic SystemBOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun EOP BOP = Beginning of Period STATE EOP = End of Period STATE PROGRESS is Change in STATE during the period. ALL the elements of the BOP and EOP STATES need to be quantified
  38. 38. MULTI DIMENSION IMPACT ACCOUNTING Sun Fundamentals of the Socio-Enviro-Economic SystemBOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun EOP Any number of activities may take place during a period. They may be extremely complex and interconnected, but PROGRESS is still measured by CHANGE in STATE.
  39. 39. MULTI DIMENSION IMPACT ACCOUNTING Sun Fundamentals of the Socio-Enviro-Economic SystemBOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun EOP PERFORMANCE is measured by relating PROGRESS achieved with the RESOURCES consumed. How much is Human Capital increased and how much are Financial, Man Built and Natural Capital diminished
  40. 40. MULTI DIMENSION IMPACT ACCOUNTING Sun Fundamentals of the Socio-Enviro-Economic SystemBOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun Financial Capital … virtual masquerading as reality. Human Capital … PEOPLE … are complex, because we originated through nature, but our inventions are simple. Man Built Capital is so simplistic compared to Natural Capital. While in some part amazing, it is very crude compared to what is the norm in Natural Capital. In the end it is Natural Capital that is going to determine everything. NC is infinitely complex and resilient and will outlast everything Man Built … and People are unlikely to survive in a future mass extinction that is quite certain. The source of ALL energy to drive the system EOP
  41. 41. MDIA builds on double entry and the concept of state and flow … MULTI DIMENSION IMPACT ACCOUNTING
  42. 42. MULTI DIMENSION IMPACT ACCOUNTING These 3 slides explain the concept of STATE and FLOW … or in accounting terms, the BALANCE SHEET / PROFIT AND LOSS relationship …
  43. 43. MULTI DIMENSION IMPACT ACCOUNTING STEADY STATE
  44. 44. MULTI DIMENSION IMPACT ACCOUNTING POSITIVE PROGRESS
  45. 45. MULTI DIMENSION IMPACT ACCOUNTING DETERIORATION OF STATE
  46. 46. These reflect … ● Steady state; ● Positive progress; and ● Deterioration of state MULTI DIMENSION IMPACT ACCOUNTING
  47. 47. No information about activities is needed in order to measure PROGRESS … only measures about changes in STATE MULTI DIMENSION IMPACT ACCOUNTING
  48. 48. State, Progress and Performance ● State is the Balance Sheet of the entity at a moment in time; ● Progress is measured by comparing Balance Sheet changes between the beginning and the end of the period; ● Performance is a measurement that relates Progress to the resources consumed. MULTI DIMENSION IMPACT ACCOUNTING
  49. 49. MULTI DIMENSION IMPACT ACCOUNTING EFFICIENCY AND EFFECTIVENESS
  50. 50. MULTI DIMENSION IMPACT ACCOUNTING Sun STATE … Beginning of Period - BOP STATE … End of Period - EOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun FLOWS* ACTIVITIES* PROCESSES* * Any amount of complexity … STATE remains simple
  51. 51. MULTI DIMENSION IMPACT ACCOUNTING Sun Fundamentals of the Socio-Enviro-Economic SystemBOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun Financial Capital … virtual masquerading as reality. Human Capital … PEOPLE … are complex, because we originated through nature, but our inventions are simple. Man Built Capital is so simplistic compared to Natural Capital. While in some part amazing, it is very crude compared to what is the norm in Natural Capital. In the end it is Natural Capital that is going to determine everything. NC is infinitely complex and resilient and will outlast everything Man Built … and People are unlikely to survive in a future mass extinction that is quite certain. The source of ALL energy to drive the system EOP
  52. 52. A fundamental reality … The origin of all FINANCIAL WEALTH has been NATURAL CAPITAL facilitated by a lot of human energy and man built knowledge, structures and systems. MULTI DIMENSION IMPACT ACCOUNTING
  53. 53. MULTI DIMENSION IMPACT ACCOUNTING ELEMENTS OF THE SYSTEM by SEGMENT Financial Capital Human Capital Man Built Structures & Systems Natural Capital Sun Financial Capital Human Capital Man Built Structures & Systems 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
  54. 54. The system is complex … MULTI DIMENSION IMPACT ACCOUNTING
  55. 55. MULTI DIMENSION IMPACT ACCOUNTING Sun Complex system … competing agendas Sun BOP Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun EOP Financial Capital Human Capital Man Built Capital Natural Capital Sun
  56. 56. Managing in a complex system is a challenge … The best practice it to drive decision making with the best / quickest data about progress and performance and at the most granular level … this is the essence of the MDIA data architecture. MULTI DIMENSION IMPACT ACCOUNTING
  57. 57. 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
  58. 58. 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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