TVA p3 The GLOBAL SOCIO ENVIRO ECONOMIC System

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The Global SOCIO-ENVIRO-ECONOMIC System is a very complex system and a significant challenge to manage in an effective way. While there has been progress in improving quality of life for many people using the metrics of money, the system leaves many behind. Worse, a system that only has focus on money economics means that progress is achieved at the expense of some segments of society and at a huge cost to the environment , neither of which are part of the dominant money metrics framework. True Value Accounting brings people (society) and planet (environment) into the accounting and accountability in a way that is as rigorous for these elements as it is for money.

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TVA p3 The GLOBAL SOCIO ENVIRO ECONOMIC System

  1. 1. The Global SOCIO-ENVIRO-ECONOMIC System File: TVA-p3-SOCIO-ENVIRO-ECONOMIC-160330.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 TRUE VALUE 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! TRUE VALUE ACCOUNTING
  5. 5. TRUE VALUE ACCOUNTING
  6. 6. The next slide shows: PEOPLE MORE THAN 7 BILLION NOW AND GROWING TRUE VALUE ACCOUNTING
  7. 7. TRUE VALUE ACCOUNTING
  8. 8. The next slide shows: ENVIRONMENT SUN, PLANET EARTH, FAUNA and FLORA TRUE VALUE ACCOUNTING
  9. 9. TRUE VALUE ACCOUNTING
  10. 10. The next slides shows: MAN-BUILT CAPITAL GOVERNMENT, LAW, CITIES, INDUSTRY AND A LOT MORE TRUE VALUE ACCOUNTING
  11. 11. TRUE VALUE ACCOUNTING
  12. 12. TRUE VALUE ACCOUNTING
  13. 13. TRUE VALUE ACCOUNTING
  14. 14. TRUE VALUE ACCOUNTING
  15. 15. TRUE VALUE ACCOUNTING
  16. 16. TRUE VALUE ACCOUNTING
  17. 17. HISTORY … HOW THE THREE SEGMENTS HAVE CHANGED OVER TIME TRUE VALUE ACCOUNTING
  18. 18. 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
  19. 19. AT THE START THERE WERE FEW PEOPLE, LITTLE MAN BUILT CAPITAL AND PLENTY OF UNEXPLOITED NATURAL CAPITAL MULTI DIMENSION IMPACT ACCOUNTING
  20. 20. MULTI DIMENSION IMPACT ACCOUNTING Hum an Capital Man Built Capital Natural Capital
  21. 21. OVER TIME MORE PEOPLE, MORE MAN BUILT CAPITAL AND EVENTUALLY TOO MUCH PRESSURE ON NATURAL CAPITAL TRUE VALUE ACCOUNTING
  22. 22. Hum an Capital Man Built Capital Natural Capital TRUE VALUE ACCOUNTING
  23. 23. Hum an Capital Man Built Capital Natural Capital TRUE VALUE ACCOUNTING
  24. 24. Hum an Capital Man Built Capital Natural Capital TRUE VALUE ACCOUNTING
  25. 25. Hum an Capital Man Built Capital Natural Capital TRUE VALUE ACCOUNTING
  26. 26. Hum an Capital Man Built Capital Natural Capital TRUE VALUE ACCOUNTING
  27. 27. Trajectory to disaster! This must be changed to this … TRUE VALUE ACCOUNTING
  28. 28. Hum an Capital Man Built Capital Natural Capital TRUE VALUE ACCOUNTING
  29. 29. PEOPLE progressing MBC* efficient PLANET healthy * Man Built Capital … Man Built Structures and Systems TRUE VALUE ACCOUNTING
  30. 30. 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 TRUE VALUE ACCOUNTING
  31. 31. To manage change there have to be METRICS for ALL the components of the system. TRUE VALUE ACCOUNTING
  32. 32. This is the background for TRUE VALUE ACCOUNTING a system for MULTI DIMENSION IMPACT ACCOUNTING TRUE VALUE ACCOUNTING
  33. 33. True Value Accounting (TVA) accounts for impact on ALL* the components of the system … * Not just the money based financial metrics TRUE VALUE ACCOUNTING
  34. 34. Fundamentals of the Socio-Enviro-Economic System Human Capital Man Built Capital Natural Capital TRUE VALUE ACCOUNTING
  35. 35. 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 TRUE VALUE ACCOUNTING
  36. 36. 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 TRUE VALUE ACCOUNTING
  37. 37. 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 TRUE VALUE ACCOUNTING
  38. 38. 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 TRUE VALUE ACCOUNTING
  39. 39. 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. TRUE VALUE ACCOUNTING
  40. 40. 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 TRUE VALUE ACCOUNTING
  41. 41. 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 TRUE VALUE ACCOUNTING
  42. 42. TVA builds on double entry and the concept of state and flow … TRUE VALUE ACCOUNTING
  43. 43. These 3 slides explain the concept of STATE and FLOW … or in accounting terms, the BALANCE SHEET / PROFIT AND LOSS relationship … TRUE VALUE ACCOUNTING
  44. 44. STEADY STATE TRUE VALUE ACCOUNTING
  45. 45. POSITIVE PROGRESS TRUE VALUE ACCOUNTING
  46. 46. DETERIORATION OF STATE TRUE VALUE ACCOUNTING
  47. 47. These reflect … ● Steady state; ● Positive progress; and ● Deterioration of state TRUE VALUE ACCOUNTING
  48. 48. No information about activities is needed in order to measure PROGRESS … only measures about changes in STATE MULTI DIMENSION IMPACT ACCOUNTING
  49. 49. 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
  50. 50. EFFICIENCY AND EFFECTIVENESS TRUE VALUE ACCOUNTING
  51. 51. Sun STATE Beginning of Period 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 SunSun Financial Capital CHANGE Human Capital CHANGE Man Built Capital CHANGE Natural Capital CHANGE Sun ACTIVITIES During the Period CHANGE During the Period STATE End of Period TRUE VALUE ACCOUNTING
  52. 52. 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 TRUE VALUE ACCOUNTING
  53. 53. 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. TRUE VALUE ACCOUNTING
  54. 54. 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 TRUE VALUE ACCOUNTING
  55. 55. The system is complex … TRUE VALUE ACCOUNTING
  56. 56. Complex system … competing agendas TRUE VALUE ACCOUNTING
  57. 57. 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 TVA data architecture. TRUE VALUE ACCOUNTING
  58. 58. Measuring facilitates management, and measurement is facilitated by using the STATE ---> FLOW ---> STATE concept of double entry accounting not only for money and the organization, but for everything of value and for impacts, both good and bad, on everything. TRUE VALUE ACCOUNTING
  59. 59. 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 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: 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
  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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