TVA for MDM 3of10

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True Value Accounting for Multi Dimension Management is an initiative to make it possible to use better metrics so that we have better outcomes for both people and the environment. The initiative is built on top of the methods traditionally associated with conventional double entry accountancy, but applied to everything that makes up the complex ubiquitous socio-enviro-economic system. We have amazing possibilities, but as long as money and greed are the dominant incentive with nothing else of importance being measured, it should be no surprise that the world is suffering from an accelerating race to the bottom. This can be changed, and one of the tools for this should be better metrics along the lines being described by TrueValueMetrics.org. Peter Drucker famously said: 'You manage what you measure', but it is also important to measure the things that matter.

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TVA for MDM 3of10

  1. 1. File: p3-TVA-for-MDM-3of10-160324.odp Peter Burgess (c) All rights reserved True Value Accounting for Multi Dimension Management 3 – PROGRESS AND PERFORMANCE FROM EVERY PERSPECTIVE 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 enable better metrics for the complex socio-enviro-economic system that we all live in. Metrics are powerful, but they must be the right metrics. TRUE VALUE ACCOUNTING
  3. 3. TVA-p3-00-PERSPECTIVES-151103.odp Peter Burgess (c) All rights reserved 3. PERSPECTIVES MEASURING PROGRESS AND PERFORMANCE OF THE SOCIO-ENVIO-ECONOMIC SYSTEM FROM EVERY POINT OF VIEW TRUE VALUE ACCOUNTING
  4. 4. PERSPECTIVE ... An object looks very different depending on the position of the observer. But it is the same object nevertheless. MULTI DIMENSION IMPACT ACCOUNTING
  5. 5. MULTI DIMENSION IMPACT ACCOUNTING PERSPECTIVE
  6. 6. In the modern socio-enviro-economic system, multiple PERSPECTIVES are essential! Looking at progress and performance simply from the perspective of the business organization and its owners is not enough, but that is really what has happened for many decades. MULTI DIMENSION IMPACT ACCOUNTING
  7. 7. 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
  8. 8. FACT TRUE VALUE ACCOUNTING
  9. 9. Data about the FACT TRUE VALUE ACCOUNTING
  10. 10. Data about the FACT using STATE and FLOW metrics TRUE VALUE ACCOUNTING
  11. 11. Data about the IMPACT this FACT IS having on its surroundings TRUE VALUE ACCOUNTING
  12. 12. Data about the IMPACT this FACT IS having on its surroundings and also HAS HAD and WILL HAVE in its surroundings TRUE VALUE ACCOUNTING
  13. 13. This means impact on PEOPLE TRUE VALUE ACCOUNTING
  14. 14. This means impact on the ENVIRONMENT TRUE VALUE ACCOUNTING
  15. 15. This means impact throughout the life cycle of a PRODUCT, from virgin materials, through the supply chain, through use and into the post-use waste chain TRUE VALUE ACCOUNTING
  16. 16. This means impact on everything in a PLACE TRUE VALUE ACCOUNTING
  17. 17. This means impact on all the complex NATURAL CYCLES that enables all the natural processes essential to life TRUE VALUE ACCOUNTING
  18. 18. To have better OUTCOMES in a complex system, ALL the decisions have to be better, and for this a starting point is BETTER METRICS TRUE VALUE ACCOUNTING
  19. 19. 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
  20. 20. 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
  21. 21. 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
  22. 22. This MDIA building block will: ● Aggregate to enable summary reporting; and ● Enable drill down to activities that are relevant at every subsidiary level down to the individual level. MULTI DIMENSION IMPACT ACCOUNTING
  23. 23. 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
  24. 24. 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
  25. 25. A world with no economic activity is represented by this … where STATE does not change from Beginning of Period (BOP) to End of Period (EOP). MULTI DIMENSION IMPACT ACCOUNTING
  26. 26. 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
  27. 27. A world with just one economic activity will look like this … MULTI DIMENSION IMPACT ACCOUNTING
  28. 28. 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
  29. 29. 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:
  30. 30. SO … the ORGANIZATION with just one economic activity is represented in this way … MULTI DIMENSION IMPACT ACCOUNTING
  31. 31. 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
  32. 32. An organization with many operations looks like this … MULTI DIMENSION IMPACT ACCOUNTING
  33. 33. 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
  34. 34. And a PRODUCT aggregates in a very similar way … MULTI DIMENSION IMPACT ACCOUNTING
  35. 35. 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
  36. 36. 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
  37. 37. The money accounting presentation of the SUPPLY CHAIN may have this form … MULTI DIMENSION IMPACT ACCOUNTING
  38. 38. MULTI DIMENSION IMPACT ACCOUNTING MBC Natural Capital Human Capital PRODUCT … the SUPPLY CHAIN EXTERNALITIES IGNORED 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 Financial Dimension ETC... The supply chain optimizes through the interaction of price for the buyer and profit for the seller … impact on externalities is not part of the equation.
  39. 39. … and the IMPACT ACCOUNTING for the SUPPLY CHAIN needs to look something like this … MULTI DIMENSION IMPACT ACCOUNTING
  40. 40. 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
  41. 41. The progress and performance of a PLACE is also a result of the aggregation of many economic activities … MULTI DIMENSION IMPACT ACCOUNTING
  42. 42. 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
  43. 43. 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
  44. 44. 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
  45. 45. Small decisions by people make all the difference MULTI DIMENSION IMPACT ACCOUNTING
  46. 46. 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
  47. 47. 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
  48. 48. 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
  49. 49. 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
  50. 50. FINAL WORD There are more dimensions than just money! There are more perspectives than just the corporate organization! MULTI DIMENSION IMPACT ACCOUNTING
  51. 51. MULTI DIMENSION IMPACT ACCOUNTING Sun PERSPECTIVE Sun BOP Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun EOP Financial Capital Human Capital Man Built Capital Natural Capital Sun
  52. 52. The conventional perspectives about the economy and society are these: ● Organizational performance, corporate profits and stock market prices ● Macro economics at the country level, with some drill down to more local issues TRUE VALUE ACCOUNTING
  53. 53. These perspectives work for the owners of physical and financial assets, for investors in corporate organizations and corporate executives, as well as providing the political class with talking points. However, there are other perspectives that are essential to enable an efficient society and economy that optimizes for everything and has people as a top priority and planet at the center. TRUE VALUE ACCOUNTING
  54. 54. True Value Accounting (TVA) is accounting about everything from multiple perspectives. It is a data system to reflect 'facts' about the system we live in in a way that is as simple as possible and as complete as possible. TRUE VALUE ACCOUNTING
  55. 55. END OF PART 3 3 – MULTIPLE PERSPECTIVES TRUE VALUE ACCOUNTING
  56. 56. LINKS 1. INTRODUCTION AND CONTEXT 2. SYSTEM OF MANY COMPONENTS 3. MULTIPLE PERSPECTIVES 4. THERE ARE BETTER WAYS 5. BETTER MEASURES 6. ORGANIZATION 7. PLACE 8. NATURE 9. PEOPLE 10. PRODUCT 11. 12. 13 14. TRUE VALUE 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: http://www.truevaluemetrics.org/DBadmin/DBtxt001.php?vv1=N1-Slidesets-p3 More about the True Value Metrics initiative is at: http://www.truevaluemetrics.org/DBadmin/DBtxt001.php?vv1=list0100-MainNav 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) or webpage involved. 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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