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TVA p3 DRAFT A

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TVA-PRESENTATION-DRAFT-A ... This is a working draft of a presentation being prepared to promote the True Value Accounting initiative. This version will most likely change substantially before it is used.

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TVA p3 DRAFT A

  1. 1. WORKING DRAFT - A File: TVA-p3-DRAFT-A-160408.odp Peter Burgess (c) All rights reserved TRUE VALUE ACCOUNTING
  2. 2. THE LETTER P File: TVA-p3-THE-LETTER-P-160408.odp Peter Burgess (c) All rights reserved TRUE VALUE ACCOUNTING
  3. 3. 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
  4. 4. Today I am going to talk about the letter P … TRUE VALUE ACCOUNTING
  5. 5. WHY? TRUE VALUE ACCOUNTING
  6. 6. It is perhaps the most important letter in the English language. TRUE VALUE ACCOUNTING
  7. 7. Many important words relating to society, the environment and the economy we live in, start with the letter P? TRUE VALUE ACCOUNTING
  8. 8. PROFIT, the money measure for business performance and the driver of stock market valuation. TRUE VALUE ACCOUNTING
  9. 9. Everything changes when the PROGRESS of PEOPLE becomes the PURPOSE of economic activity and business. TRUE VALUE ACCOUNTING
  10. 10. We have one PLANET … but we have ignored environmental damage caused by decisions that focus on maximizing PROFIT. TRUE VALUE ACCOUNTING
  11. 11. TBL (Triple Bottom Line)* is an initiative to put PROFIT, PEOPLE, and PLANET into business decisions. * An idea promulgated by John Elkington in 1995 TRUE VALUE ACCOUNTING
  12. 12. PERSPECTIVE … things look different depending on where the viewer is standing. TRUE VALUE ACCOUNTING
  13. 13. PERSPECTIVE TRUE VALUE ACCOUNTING
  14. 14. So, not just one PERSPECTIVE … TRUE VALUE ACCOUNTING
  15. 15. … but all of these: ●PROFIT (ORGANIZATION); ●PEOPLE; ●PLACE (proxy for PLANET); ●PRODUCT (and PROCESS). TRUE VALUE ACCOUNTING
  16. 16. TRUE VALUE ACCOUNTING
  17. 17. TRUE VALUE ACCOUNTING
  18. 18. TRUE VALUE ACCOUNTING
  19. 19. TRUE VALUE ACCOUNTING
  20. 20. So, what happens when we change PURPOSE? TRUE VALUE ACCOUNTING
  21. 21. If we change the main priority from making PROFIT for very few investors to improving Quality of Life for every PERSON in the world ... TRUE VALUE ACCOUNTING
  22. 22. … and doing so without damage to the PLANET as a whole and the PLACES where there are economic activities ... TRUE VALUE ACCOUNTING
  23. 23. … then there will be significant changes in the decisions that get made. TRUE VALUE ACCOUNTING
  24. 24. The Quality of Life for PEOPLE is enabled by PRODUCTS (Goods and Services) TRUE VALUE ACCOUNTING
  25. 25. PRODUCTS are made by PROCESSES, which are used by organizations and make PROFIT ... TRUE VALUE ACCOUNTING
  26. 26. … but PROCESSES also have an IMPACT on PEOPLE who are on the PAYROLL … TRUE VALUE ACCOUNTING
  27. 27. … and PROCESSES also have an IMPACT on the PLACE and PLANET caused by POLLUTION TRUE VALUE ACCOUNTING
  28. 28. We live in a very complex world with a connected socio-enviro-economic system that is not at all well understood. TRUE VALUE ACCOUNTING
  29. 29. Complex system … competing agendas TRUE VALUE ACCOUNTING
  30. 30. How do you PLAN within a complex system? What has happened in the past? What is the history? TRUE VALUE ACCOUNTING
  31. 31. YELLOW: The PEOPLE piece … Human Capital (HC) DIRTY BROWN: The ECONOMIC piece … Man Built Capital (MBC) GREEN: NATURE, ENVIRONMENT … Natural Capital (NC) COLOR KEY TRUE VALUE ACCOUNTING
  32. 32. AT THE START THERE WERE FEW PEOPLE, LITTLE MAN BUILT CAPITAL AND PLENTY OF NATURAL CAPITAL THAT WAS AVAILABLE FOR EXPLOITATION. TRUE VALUE ACCOUNTING
  33. 33. Hum an Capital Man Built Capital Natural Capital TRUE VALUE ACCOUNTING
  34. 34. OVER TIME MORE PEOPLE, MORE MAN BUILT CAPITAL AND EVENTUALLY TOO MUCH PRESSURE ON NATURAL CAPITAL TRUE VALUE ACCOUNTING
  35. 35. Hum an Capital Man Built Capital Natural Capital TRUE VALUE ACCOUNTING
  36. 36. Hum an Capital Man Built Capital Natural Capital TRUE VALUE ACCOUNTING
  37. 37. Hum an Capital Man Built Capital Natural Capital TRUE VALUE ACCOUNTING
  38. 38. Hum an Capital Man Built Capital Natural Capital TRUE VALUE ACCOUNTING
  39. 39. Hum an Capital Man Built Capital Natural Capital TRUE VALUE ACCOUNTING
  40. 40. This is a trajectory to disaster … an existential threat that is being ignored by most of those with power and influence. TRUE VALUE ACCOUNTING
  41. 41. This must be changed to this … TRUE VALUE ACCOUNTING
  42. 42. Hum an Capital Man Built Capital Natural Capital TRUE VALUE ACCOUNTING
  43. 43. PEOPLE progressing MBC* efficient PLANET healthy * MBC … Man Built Capital TRUE VALUE ACCOUNTING
  44. 44. Trajectory to disaster! Over time it looks something like this. Period 1-8 past and present Period 9-12, a future scenario TRUE VALUE ACCOUNTING
  45. 45. Period 1 2 3 4 5 6 7 8 9 10 11 12 HC MBC NC TRUE VALUE ACCOUNTING HC MBC NC HC MBC NC HC MBC NC HC MBC NC HC MBC NC HC MBC NC HC MBC NC HC MBC NC HC MBC NC HC MBC NC HC MBC NC
  46. 46. TRUE VALUE ACCOUNTING Peter Drucker, a well known management guru famously said: “You can't manage what you don't measure”
  47. 47. Because of this it is vital to measure what matters, everything that is really important! TRUE VALUE ACCOUNTING
  48. 48. MONEY as a measure is problematic … TRUE VALUE ACCOUNTING
  49. 49. TRUE VALUE ACCOUNTING
  50. 50. A measure should not change over time but always be the same! TRUE VALUE ACCOUNTING
  51. 51. The measure should not change based on the decisions of any person or institution! TRUE VALUE ACCOUNTING
  52. 52. GDP (Gross Domestic Product) as a measure is also problematic … TRUE VALUE ACCOUNTING
  53. 53. Robert Kennedy spoke out about the problems of GDP as a measure in a speech at the University of Kansas in 1968. TRUE VALUE ACCOUNTING
  54. 54. "Too much and for too long, we seemed to have surrendered personal excellence and community values in the mere accumulation of material things. Our Gross National Product, now, is over $800 billion dollars a year, but that Gross National Product - if we judge the United States of America by that - that Gross National Product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl. It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities. It counts Whitman's rifle and Speck's knife, and the television programs which glorify violence in order to sell toys to our children. Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile. And it can tell us everything about America except why we are proud that we are Americans." TRUE VALUE ACCOUNTING
  55. 55. There are other metrics: ●Genuine Progress Indicator (GPI) ●Gross National Happiness (GNH) ●Human Development Index (HDX) ●Quality of Life Index (QLX) ●The Legatum Prosperity Index (LPX) ●The Happy Planet Index 2.0 (HPX) TRUE VALUE ACCOUNTING
  56. 56. These measures show a less favorable rate of improvement than GDP … for example GDP -v- GPI TRUE VALUE ACCOUNTING
  57. 57. TRUE VALUE ACCOUNTING
  58. 58. The essential of a good unit of measure is that it is always the same … In the USA, the National Institute for Standards and Technology (NIST) is an authority in this regard … see: http://physics.nist.gov/cuu/Units/current.html TRUE VALUE ACCOUNTING
  59. 59. For many years technology has enabled amazing improvements in PRODUCTIVITY TRUE VALUE ACCOUNTING
  60. 60. Almost all the benefit of PRODUCTIVITY has gone to owners … almost none to workers TRUE VALUE ACCOUNTING
  61. 61. This from Robert Reich, Secretary of Labor in the 1990s, shows pay rose with productivity until 1969 … and then it didn't MULTI DIMENSION IMPACT ACCOUNTING
  62. 62. MULTI DIMENSION IMPACT ACCOUNTING
  63. 63. … and this does not include the last decade when worker reward has become even worse. TRUE VALUE ACCOUNTING
  64. 64. HOW? TRUE VALUE ACCOUNTING
  65. 65. I argue that we need to have better metrics. TRUE VALUE ACCOUNTING
  66. 66. So … Data at the Center ● Used to plan ● Used to organize ● Used to implement ● Used to monitor progress ● Used to monitor cost effectiveness ● Used to plan follow up next steps TRUE VALUE ACCOUNTING
  67. 67. TRUE VALUE ACCOUNTING
  68. 68. Not only to measure PROFIT and the performance of the organization … TRUE VALUE ACCOUNTING
  69. 69. But also these things: TRUE VALUE ACCOUNTING
  70. 70. Things like: ●A baby ●Parenting TRUE VALUE ACCOUNTING
  71. 71. TRUE VALUE ACCOUNTING
  72. 72. TRUE VALUE ACCOUNTING
  73. 73. Things like: ●Land degradation, ●Air pollution, ●Water pollution. TRUE VALUE ACCOUNTING
  74. 74. TRUE VALUE ACCOUNTING ●Land degradation ●[IMAGE REMOVED]
  75. 75. TRUE VALUE ACCOUNTING ●Air pollution ●[IMAGE REMOVED]
  76. 76. TRUE VALUE ACCOUNTING
  77. 77. Things like: ●Violence, ●Insecurity, ●Injustice. TRUE VALUE ACCOUNTING
  78. 78. TRUE VALUE ACCOUNTING
  79. 79. TRUE VALUE ACCOUNTING
  80. 80. TRUE VALUE ACCOUNTING
  81. 81. Existential risks like: ●Sea level rise, ●Loss of biodiversity, ●Massive social disorder ●Pandemics. TRUE VALUE ACCOUNTING
  82. 82. TRUE VALUE ACCOUNTING
  83. 83. TRUE VALUE ACCOUNTING
  84. 84. TRUE VALUE ACCOUNTING
  85. 85. TRUE VALUE ACCOUNTING
  86. 86. SO, HOW TO MEASURE? TRUE VALUE ACCOUNTING
  87. 87. … AND KEEP IT SIMPLE, … AND LOW COST, … AND EFFECTIVE? TRUE VALUE ACCOUNTING
  88. 88. … in a world that is very complex … with competing agendas TRUE VALUE ACCOUNTING
  89. 89. Complex system … competing agendas TRUE VALUE ACCOUNTING
  90. 90. TVA TRUE VALUE ACCOUNTING An extension of conventional double entry accounting that has been used for more than 800 years for money profit accountability. TRUE VALUE ACCOUNTING
  91. 91. Accountancy Concepts: ● Double Entry Accounting; ● State, Process and Flow; ● State, Progress and Performance; ● Cost, Price and Value; ● Quantification; ● Standard Value; ● Data at the Center; ● Feedback; ● Reporting Boundaries; ● Consolidation Rules. TRUE VALUE ACCOUNTING
  92. 92. PROGRESS and PERFORMANCE TRUE VALUE ACCOUNTING
  93. 93. PROGRESS is how much better now than before. It is change in STATE from the Beginning of the Period (BOP) to the End of Period (EOP) TRUE VALUE ACCOUNTING
  94. 94. MULTI DIMENSION IMPACT ACCOUNTING
  95. 95. MULTI DIMENSION IMPACT ACCOUNTING
  96. 96. MULTI DIMENSION IMPACT ACCOUNTING
  97. 97. Measure CHANGE in STATE and you measure PROGRESS TRUE VALUE ACCOUNTING
  98. 98. PERFORMANCE is based on the RESOURCES used to make and sustain PROGRESS TRUE VALUE ACCOUNTING
  99. 99. MULTI DIMENSION IMPACT ACCOUNTING
  100. 100. So how do we start to put management metrics into play for everything in the socio-enviro-economic system TRUE VALUE ACCOUNTING
  101. 101. Start with this … TRUE VALUE ACCOUNTING
  102. 102. Hum an Capital Man Built Capital Natural Capital TRUE VALUE ACCOUNTING
  103. 103. The 3 main segments … TRUE VALUE ACCOUNTING
  104. 104. Fundamentals of the Socio-Enviro-Economic System Human Capital Man Built Capital Natural Capital Hum an Capital Man Built Capital Natural Capital TRUE VALUE ACCOUNTING
  105. 105. Fundamentals of the Socio-Enviro-Economic System Human Capital Man Built Capital Natural Capital TRUE VALUE ACCOUNTING
  106. 106. 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
  107. 107. 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
  108. 108. 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
  109. 109. 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
  110. 110. 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
  111. 111. 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
  112. 112. 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
  113. 113. Double entry accounting has a BALANCE SHEET that provides a way to report STATE, and the CHANGE in STATE. TRUE VALUE ACCOUNTING
  114. 114. Double entry accounting has a P&L ACCOUNT that provides a way to report PERFORMANCE. TRUE VALUE ACCOUNTING
  115. 115. This is very POWERFUL, and is the foundation for all management systems in the corporate world. TRUE VALUE ACCOUNTING
  116. 116. But there is a problem … conventional accounting only addresses the performance of the organization … TRUE VALUE ACCOUNTING
  117. 117. … only money based transactions are included. TRUE VALUE ACCOUNTING
  118. 118. … all EXTERNALITIES are ignored ... TRUE VALUE ACCOUNTING
  119. 119. The end result is that the wrong decisions are being made by people in almost every corner of the world. TRUE VALUE ACCOUNTING
  120. 120. … wrong decisions in every part of the global socio-enviro-economic system. TRUE VALUE ACCOUNTING
  121. 121. Effectively all financial wealth has been created by systemic exploitation of nature, knowledge and exploitation of working people. TRUE VALUE ACCOUNTING
  122. 122. TVA TRUE VALUE ACCOUNTING Moving from Financial to Impact Accounting STATE BOP … ACTIVITY ACCOUNTING … STATE EOP TRUE VALUE ACCOUNTING
  123. 123. Moving from Financial to Impact Accounting STATE BOP … ACTIVITY ACCOUNTING … STATE EOP ● Financial accounting; ● P&L and Balance Sheets (BOP and EOP); ● Financial accounting plus GOOD impacts; ● Financial accounting minus BAD impacts; ● Financial accounting with BOTH impacts; ● Bringing in IMPACTS on externalities; ● Expanding the REPORTING ENVELOPE; ● Accounting for IMPACT on ALL capitals. TRUE VALUE ACCOUNTING
  124. 124. FINANCIAL ACCOUNTS Financial Accounts describe Economic Activity 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 TRUE VALUE ACCOUNTING
  125. 125. FINANCIAL ACCOUNTS OF AN ENTERPRISE Financial Accounts describe Economic Activity 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 Cash Current Assets Fixed Assets Intangible Assets TOTAL ASSETS Current Liabilities Long Term Debt Owners' Equity Cash Current Assets Fixed Assets Intangible Assets TOTAL ASSETS Current Liabilities Long Term Debt Owners' Equity Balance Sheet BOP Balance Sheet EOP TRUE VALUE ACCOUNTING
  126. 126. FINANCIAL ACCOUNTS ADD positive impact not accounted for 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 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 TRUE VALUE ACCOUNTING
  127. 127. FINANCIAL ACCOUNTS DEDUCT negative impact not accounted for 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 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 TRUE VALUE ACCOUNTING
  128. 128. FINANCIAL ACCOUNTS ACCOUNTING FOR EVERYTHING 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 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 TRUE VALUE ACCOUNTING
  129. 129. 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 TRUE VALUE ACCOUNTING
  130. 130. Financial Accounts describe Financial Impact Impact Accounts reflect Externalities 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 TRUE VALUE 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
  131. 131. 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 Impact Accounts reflect Externalities 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 TRUE VALUE 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
  132. 132. True Value Accounting is a coherent system that works everywhere in the socio-enviro-economic system. TRUE VALUE ACCOUNTING
  133. 133. FEEDBACK TRUE VALUE ACCOUNTING
  134. 134. Feedback design is key to rapid change … easy quick data that helps to make better decisions TRUE VALUE ACCOUNTING
  135. 135. Feedback is best when it is fast and enables actionable responses TRUE VALUE ACCOUNTING
  136. 136. Here simple feedback in the community BEFORE going into higher level big data systems. TRUE VALUE ACCOUNTING
  137. 137. TRUE VALUE ACCOUNTING
  138. 138. A fundamental reality … All FINANCIAL WEALTH has been created by human energy together with man built knowledge, structures and systems and exploiting NATURAL CAPITAL in an unsustainable way. TRUE VALUE ACCOUNTING
  139. 139. ELEMENTS OF THE SYSTEM by SEGMENT Financial Capital Human Capital Man Built Capital Natural Capital Sun Financial Capital Human Capital Man Built Structures & Systems Natural Capital Money Food Government Nature (life) Sun Nature (life) Capital Market Value Water Laws. Rules Nature (life)Land Shelter Infrastructure WaterClothes Industry Nature (life)Air Health Mining Ecoservices Education EnergySkills Waste Recreation Retail Culture LogisticsReligion Knowledge Technology Security Energy Mobility Profit TRUE VALUE ACCOUNTING
  140. 140. Financial Capital Human Capital Man Built Capital Natural Capital Sun TRUE VALUE ACCOUNTING FINANCIAL CAPITAL … virtual masquerading as reality. As a measure, money is fatally flawed. The problem is compounded with GDP which ignores almost everything that makes life worth living. Corporations are high performance in making profit, but issues like social impact and environmental impact are not measured in a meaningful way and therefore Ignored.
  141. 141. Financial Capital Human Capital Man Built Capital Natural Capital Sun TRUE VALUE ACCOUNTING Human Capital … PEOPLE … are complex, because we originated through nature, but our inventions are simple. Food Water Shelter Clothes Energy Health Education Mobility Recreation Culture Religion Recreation Security Skills
  142. 142. TRUE VALUE ACCOUNTING Man Built Capital … Structures and Systems Man Built Capital is simple compared to Natural Capital. It has become very powerful over the past 300 years but at the expense of natural capital and social capital Government Laws Infrastructure Industry Mining Energy Waste Mobility Logistics Retail Knowledge Technology Financial Capital Human Capital Man Built Capital Natural Capital Sun
  143. 143. Financial Capital Human Capital Man Built Capital Natural Capital Sun TRUE VALUE ACCOUNTING 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. Nature (life) Millions and millions of miracles, and we only know a small part of it all. Land The place where natural systems function, but also where man built processes and structures Water Essential to life, man built processes and the natural cycles that sustain nature Bio-diversity That has made nature the miracle it is, and fundamental to the functioning of the complex system Air pollution Has impact directly on human health and the functioning of many of the systems of nature Eco-system services The myriad of natural recycling mechanisms that serve to keep everything in nature in balance. Air GHG Atmospheric processes that regulate climate and the cycles of many critical compounds
  144. 144. Financial Capital Human Capital Man Built Capital Natural Capital Sun TRUE VALUE ACCOUNTING SUN The source of ALL the energy that drives the system ELEMENTS OF THE SYSTEM
  145. 145. A world with just one economic activity will look like this … MULTI DIMENSION IMPACT ACCOUNTING
  146. 146. 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
  147. 147. Or like this … MULTI DIMENSION IMPACT ACCOUNTING
  148. 148. 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
  149. 149. 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 ...
  150. 150. 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
  151. 151. A world with no economic activity is represented by this … MULTI DIMENSION IMPACT ACCOUNTING
  152. 152. 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
  153. 153. SO … the ORGANIZATION is represented in this way … MULTI DIMENSION IMPACT ACCOUNTING
  154. 154. 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
  155. 155. An organization with many operations looks like this … MULTI DIMENSION IMPACT ACCOUNTING
  156. 156. 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
  157. 157. And a PRODUCT aggregates in a very similar way … MULTI DIMENSION IMPACT ACCOUNTING
  158. 158. 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
  159. 159. 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
  160. 160. The money accounting presentation of the SUPPLY CHAIN may have this form … MULTI DIMENSION IMPACT ACCOUNTING
  161. 161. 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.
  162. 162. … and the IMPACT ACCOUNTING for the SUPPLY CHAIN needs to look something like this … MULTI DIMENSION IMPACT ACCOUNTING
  163. 163. 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
  164. 164. The progress and performance of a PLACE is also a result of the aggregation of many economic activities … MULTI DIMENSION IMPACT ACCOUNTING
  165. 165. 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
  166. 166. 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
  167. 167. Not to mention Natural Capital that continues to have the capacity to support everything that enables our socio-enviro-economic system to function! MULTI DIMENSION IMPACT ACCOUNTING
  168. 168. 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
  169. 169. 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
  170. 170. Small decisions by people make all the difference MULTI DIMENSION IMPACT ACCOUNTING
  171. 171. 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
  172. 172. FINAL WORD There are more dimensions than just money! There are more perspectives than just the corporate organization! MULTI DIMENSION IMPACT ACCOUNTING
  173. 173. 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
  174. 174. 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
  175. 175. TRUE VALUE ACCOUNTING (Photo:Credit: Peter Burnet/Getty Images) Food Waste
  176. 176. ●Power (Electicity), ●Power (Petroleum), ●Power (Pipelines) TRUE VALUE ACCOUNTING
  177. 177. TRUE VALUE ACCOUNTING
  178. 178. TRUE VALUE ACCOUNTING
  179. 179. TRUE VALUE ACCOUNTING ●Power (Pipelines) ●[IMAGE REMOVED]
  180. 180. ●Pigs, ●Poultry, ●Cattle TRUE VALUE ACCOUNTING
  181. 181. TRUE VALUE ACCOUNTING
  182. 182. TRUE VALUE ACCOUNTING
  183. 183. TRUE VALUE ACCOUNTING The dairy herd of farmer Mike Gorton make their way home for milking at his farm near Macclesfield in Cheshire, England. (Photo: Christopher Furlong/Getty Images)

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