TRUE VALUE ACCOUNTING (TVA) IS THE FRAMEWORK NEEDED FOR BETTER METRICS. TVA is a data architecture and framework for better metrics that will make it easier and less costly to include IMPACT on SOCIETY (PEOPLE) and IMPACT on ENVIRONMENT (PLANET) into integrated reporting in a way that is as rigorous as what is used in conventional double entry financial accounting for PROFIT and the WEALTH of OWNERS. When there is a logical framework, then it becomes much easier to have coherent and meaningful reporting.

1. File: TVA-p3-WHAT-IS-TVA-Framework-for-Better-Metrics-151103.odp Peter Burgess (c) All rights reserved
What is
True Value Accounting?
THE FRAMEWORK NEEDED
FOR BETTER METRICS
TRUE VALUE ACCOUNTING

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. The GOAL is to design and
deploy a system of metrics for
management that accounts for
impact on people and planet as
rigorously as double entry
accounting accounts for money
transactions that impact profit
MULTI DIMENSION IMPACT ACCOUNTING

4. MULTI DIMENSION IMPACT ACCOUNTING
The first step is to design and
develop a data architecture that is
congruent with the realities of the
modern very complex global
socio-enviro-economic system.

5. To manage effectively there must
be METRICS for ALL the elements
of the system.
MULTI DIMENSION IMPACT ACCOUNTING

6. The following is an old slide that
crudely represents the totality of
the socio-enviro-economic system
showing beginning of period state
(BOP), then activities and then the
end of period state (EOP).
MULTI DIMENSION IMPACT ACCOUNTING

7. MULTI DIMENSION IMPACT ACCOUNTING
STATE - BOP STATE - EOPPERIOD ACTIVITES

8. The problem is that conventional
financial accounting and top
level economic metrics only
measure this small part of the
total system …
MULTI DIMENSION IMPACT ACCOUNTING

9. MULTI DIMENSION IMPACT ACCOUNTING
STATE - BOP STATE - EOPPERIOD ACTIVITES

10. We need a system that tracks
impact on ALL the components of
the system …
MULTI DIMENSION IMPACT ACCOUNTING

11. We need a system where IMPACT
on PEOPLE and PLANET are as
important as PROFIT performance
of the organization and the
WEALTH of owners …
MULTI DIMENSION IMPACT ACCOUNTING

12. We need a system that will enable
better management of everything
that matters …
MULTI DIMENSION IMPACT ACCOUNTING

13. We need a system that is really
easy to use …
MULTI DIMENSION IMPACT ACCOUNTING

14. We need a system that does not
cost very much …
MULTI DIMENSION IMPACT ACCOUNTING

15. We need a system that takes full
advantage of what we already
know …
MULTI DIMENSION IMPACT ACCOUNTING

16. We need a system that allows
data to be summarized easily and
still be meaningful …
MULTI DIMENSION IMPACT ACCOUNTING

17. We need a system that allows for
easy 'drill down' to disaggregated
data that can be used for timely
decision making and rapid action
where it can do the most good …
MULTI DIMENSION IMPACT ACCOUNTING

18. We need a system where the
PERSPECTIVES of ALL the actors
in the system are taken into
consideration …
MULTI DIMENSION IMPACT ACCOUNTING

19. The double entry construct of
conventional double entry
accounting is a good starting
point …
MULTI DIMENSION IMPACT ACCOUNTING

20. Double entry accounting enables
STATE and FLOW to be accounted
for in a very simple and effective
manner …
MULTI DIMENSION IMPACT ACCOUNTING

21. State … B/S (BOP)
Flow … P&L
New State … B/S (EOP)
MULTI DIMENSION IMPACT ACCOUNTING
BOP … Beginning of Period
EOP … End of Period
B/S … Balance Sheet
P&L … Profit and Loss Account

22. These 3 slides show how simple
and powerful this idea can be …
MULTI DIMENSION IMPACT ACCOUNTING

23. MULTI DIMENSION IMPACT ACCOUNTING

24. MULTI DIMENSION IMPACT ACCOUNTING

25. MULTI DIMENSION IMPACT ACCOUNTING

26. These reflect respectively …
● Steady State;
● Positive Progress; and
● Deterioration of State
MULTI DIMENSION IMPACT ACCOUNTING

27. PROGRESS is measured simply
by reference to the CHANGE in
STATE over time.
MULTI DIMENSION IMPACT ACCOUNTING

28. There is no need for detailed
information about ACTIVITIES in
order to measure PROGRESS
Change in STATE is the measure
of PROGRESS and relatively easy
to measure.
MULTI DIMENSION IMPACT ACCOUNTING

29. State, Progress and Performance
● State is the Balance Sheet of the entity at a
moment in time;
● Progress may be measured by comparing
the Balance Sheet changes between the
beginning and the end of the period;
● Performance is a measurement that relates
the Progress to the resources consumed.
MULTI DIMENSION IMPACT ACCOUNTING

30. MULTI DIMENSION IMPACT ACCOUNTING
EFFICIENCY AND EFFECTIVENESS

31. This is VERY powerful ...
MULTI DIMENSION IMPACT ACCOUNTING

32. BUT … when this is ONLY done
for MONEY PROFIT optimization,
the potentially huge collateral
damage to PEOPLE and PLANET
is ignored …
MULTI DIMENSION IMPACT ACCOUNTING

33. Without “numbering” IMPACT (the
externalities), then the IMPACT on
PEOPLE and PLANET will be
ignored in mainstream decision
making … with dangerous
consequences!
MULTI DIMENSION IMPACT ACCOUNTING

34. TRUE VALUE ACCOUNTING
Peter Drucker, a well known
management guru famously said:
“You can't manage
what you don't measure”

35. It can also be said that:
“If you want to change the way the game
is played, you must change the way the
game is scored”
MULTI DIMENSION IMPACT ACCOUNTING

36. There are 3 segments in the
socio-enviro-economic system:
… PEOPLE
… MAN BUILT EVERYTHING
… NATURE
MULTI DIMENSION IMPACT ACCOUNTING

37. The world should have:
… a flourishing people segment;
… efficient man built activities;
… and nature not being stressed
MULTI DIMENSION IMPACT ACCOUNTING

38. MULTI DIMENSION IMPACT ACCOUNTING
Hum
an
Capital
Man
Built Capital
Natural Capital

39. … and NOT this … a state of
affairs that will end in disaster …
an existential risk to humanity!
MULTI DIMENSION IMPACT ACCOUNTING

40. MULTI DIMENSION IMPACT ACCOUNTING
Hum
an
Capital
Man
Built Capital
Natural Capital

41. Rather there must be:
● PEOPLE progressing
● MBC* efficient
● PLANET healthy
MULTI DIMENSION IMPACT ACCOUNTING
* Man Built Capital … Man Built Structures and Systems

42. SO …
MULTI DIMENSION IMPACT ACCOUNTING

43. MULTI DIMENSION IMPACT ACCOUNTING
Fundamentals of the Socio-Enviro-Economic System
Human
Capital
Man Built
Capital
Natural
Capital

44. 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

45. 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

46. 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

47. 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

48. 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

49. 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.

50. 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

51. Conventional money profit
accounting works very well for
financial performance … that is
impact on corporate profits and
stock value.
MULTI DIMENSION IMPACT ACCOUNTING

52. 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
Balance
Sheet
Changes

53. But something more complete is
needed … something that
embraces IMPACT on SOCIETY
(PEOPLE) and ENVIRONMENT
(PLANET) in a way that Is both
easy and rigorous …
MULTI DIMENSION IMPACT ACCOUNTING

54. 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

55. … the reporting envelope needs
to be redefined so that IMPACT is
inside the reporting envelope …
MULTI DIMENSION IMPACT ACCOUNTING

56. 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
Balance
Sheet
Changes
Balance
Sheet
Changes
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

57. The financial profit and loss
account for an organization has a
lot of performance information …
MULTI DIMENSION IMPACT ACCOUNTING

58. MULTI DIMENSION IMPACT ACCOUNTING
Sun
BOP EOP
Financial
Capital
Human
Capital
Man Built
Capital
Natural
Capital
Sun Sun
Financial
Capital
Human
Capital
Man Built
Capital
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
FINANCIAL ACCOUNTING

59. Positive IMPACT not accounted
for needs to be added in …
MULTI DIMENSION IMPACT ACCOUNTING

60. MULTI DIMENSION IMPACT ACCOUNTING
Sun
BOP 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
Funds government.
Good value to society.
POSITIVE
IMPACT NOT
ACCOUNTED
FOR
Financial
Capital
Human
Capital
Man Built
Capital
Natural
Capital
Sun Sun
Financial
Capital
Human
Capital
Man Built
Capital
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
FINANCIAL ACCOUNTING PLUS GOOD IMPACT

61. … and negative IMPACT needs to
be brought into account …
MULTI DIMENSION IMPACT ACCOUNTING

62. MULTI DIMENSION IMPACT ACCOUNTING
Sun
BOP 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
Capital
Natural
Capital
Sun Sun
Financial
Capital
Human
Capital
Man Built
Capital
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
FINANCIAL ACCOUNTING LESS BAD IMPACT

63. MDIA impact accounts include
profit performance and impact
arising both for PEOPLE and
PLANET ...
MULTI DIMENSION IMPACT ACCOUNTING

64. MULTI DIMENSION IMPACT ACCOUNTING
Sun
BOP 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
Funds government.
Good 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
Capital
Natural
Capital
Sun Sun
Financial
Capital
Human
Capital
Man Built
Capital
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
FINANCIAL ACCOUNTING PLUS GOOD & BAD

65. FINAL THOUGHT …
This slideset outlines the basic
idea of True Value Accounting,
but the devil is in the detail.
Check out more of our slidesets
to see how these ideas work out
in various settings.
MULTI DIMENSION IMPACT ACCOUNTING

66. 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

67. 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