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  1. 1. File: TVM-MILE-webinar-150616 Peter Burgess (c) All rights reserved How to Manage for Best Triple Bottom Line Performance MULTI DIMENSION IMPACT ACCOUNTING
  2. 2. File: TVM-MILE-webinar-150616 Peter Burgess (c) All rights reserved How to Manage for Best Triple Bottom Line Performance
  3. 3. MULTI DIMENSION IMPACT ACCOUNTING WORK-IN-PROGRESS. SLIDESET STILL IN DEVELOPMENT. UPDATES WILL BE POSTED OVER THE NEXT SEVERAL WEEKS
  4. 4. MULTI DIMENSION IMPACT ACCOUNTING For best possible performance, EVERYTHING must be taken into consideration.
  5. 5. MULTI DIMENSION IMPACT ACCOUNTING That is a significant change from the conventional wisdom of prevailing BEST PRACTICE that optimizes for money profit performance in the company
  6. 6. MULTI DIMENSION IMPACT ACCOUNTING It is a fallacy that if GDP growth is good, corporate profits are good, and stock markets are good, then everything is good.
  7. 7. MULTI DIMENSION IMPACT ACCOUNTING It is also false to expect high performance in 'my silo' to result in high performance throughout the complex system that is the modern company and the modern society.
  8. 8. MULTI DIMENSION IMPACT ACCOUNTING Who am I? Who is Peter Burgess?
  9. 9. MULTI DIMENSION IMPACT ACCOUNTING I am in the 4th quarter of my life … the progress of science and technology in my lifetime has been quite amazing … and much else in the world has changed.
  10. 10. MULTI DIMENSION IMPACT ACCOUNTING 1st quarter … I grew up in the UK and ended up with a formal training in engineering and economics from Cambridge, and qualified as a Chartered Accountant in London with Cooper Brothers (now the PriceWaterhouseCoopers firm)
  11. 11. MULTI DIMENSION IMPACT ACCOUNTING 2nd quarter … A fast track career in corporate management in the USA … engineering, construction, iron and steel, pulp and paper, consumer products, electronic technology, marine fisheries. It was all about improving profitability, and I was good at it!
  12. 12. MULTI DIMENSION IMPACT ACCOUNTING 3rd quarter … Independent consulting, mainly international work with both the private sector and institutions like the World Bank, the IFC and many UN agencies. This involved work at the highest levels of Government as well as with people in crisis … refugees, drought victims, etc.
  13. 13. MULTI DIMENSION IMPACT ACCOUNTING 4th quarter … Still independent but less traveling and now with a focus on rethinking the metrics of management so that the fantastic potential of modern technology can be harnessed to enable faster PROGRESS and much better PERFORMANCE of the very complex global SOCIO-ENVIRO-ECONOMIC system.
  14. 14. MULTI DIMENSION IMPACT ACCOUNTING So … what is the state of play in the 1st quarter of this century? ● A lot that is amazingly good: ● Fantastic technological progress; ● Considerable growth of GDP and financial wealth; ● Substantial reduction in global poverty and poverty related issues; ● Significant improvements in health and education.
  15. 15. MULTI DIMENSION IMPACT ACCOUNTING But also many things that should be a whole lot better: ● Social issues of all sorts are emerging and not being addressed; ● Increasing wealth and income disparities; ● Increasing violence, much of it highly organized; ● More and more migration and refugee movements; ● Disaffection with the political establishment; ● Disaffection with the corporate establishment.
  16. 16. MULTI DIMENSION IMPACT ACCOUNTING Also … ● Environmental issues of all sorts that are emerging and not being addressed; ● Greenhouse Gas (GHG) emissions and the related climate change; ● Land degradation and reduction in ecosystem service capacity; ● Water shortages and water quality degradation; ● Air pollution other than GHGs; ● Loss of bio-diversity;
  17. 17. MULTI DIMENSION IMPACT ACCOUNTING Most of our modern quality of life has come about because of amazing technological progress and productivity improvement in the corporate sector.
  18. 18. MULTI DIMENSION IMPACT ACCOUNTING The future depends more than anything else on decisions that are going to be made by leaders in the corporate sector. Will they make the right decisions?
  19. 19. MULTI DIMENSION IMPACT ACCOUNTING The idea of the TRIPLE BOTTOM LINE (TBL)* was a step towards having the corporate world think about PEOPLE and PLANET as well as PROFIT. * John Elkington is credited with originating this idea in the 1990s.
  20. 20. MULTI DIMENSION IMPACT ACCOUNTING The idea of the TRIPLE BOTTOM LINE (TBL) is a beginning and not an end.
  21. 21. MULTI DIMENSION IMPACT ACCOUNTING TBL (or 3BL) may even be something of a distraction. TBL is simply more information that has a focus on the performance of the organization. The bigger need is for the performance of the organization to be put in context with the many other stakeholders in the global socio-enviro-economic system.
  22. 22. MULTI DIMENSION IMPACT ACCOUNTING It should be noted that there is a lot of work being done to improve the measurement and management of IMPACT. ● Recently Kering published information about their work on an environmental profit and loss account (EP&L). Good work, but too slow and too expensive ● Reporting initiatives like the GRI (G4) are spreading. There are also the IR initiative (Integrated Reporting), SASB, SROI and many others, not to mention a variety of initiatives around specific issues like carbon footprint.
  23. 23. MULTI DIMENSION IMPACT ACCOUNTING Most of the better known initiatives are not making much use of the old established double entry feature of conventional accounting which clearly differentiates between STATE and FLOW.
  24. 24. MULTI DIMENSION IMPACT ACCOUNTING AND also makes it possible to get a lot more useful information from less data
  25. 25. 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 …
  26. 26. MULTI DIMENSION IMPACT ACCOUNTING STEADY STATE
  27. 27. MULTI DIMENSION IMPACT ACCOUNTING POSITIVE PROGRESS
  28. 28. MULTI DIMENSION IMPACT ACCOUNTING DETERIORATION OF STATE
  29. 29. These reflect … ● Steady state; ● Positive progress; and ● Deterioration of state MULTI DIMENSION IMPACT ACCOUNTING
  30. 30. No information about the activities is needed in order to understand PROGRESS … only information about changes in STATE MULTI DIMENSION IMPACT ACCOUNTING
  31. 31. 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
  32. 32. MULTI DIMENSION IMPACT ACCOUNTING EFFICIENCY AND EFFECTIVENESS
  33. 33. Cost, Price and Value ● Clarity about what is cost and what is price is very important; ● A buy/sell transaction takes place at a price; ● The buy price becomes the buyer's cost; ● There is a lot of data about price; ● There is very little accessible data about cost; ● Value is a very important idea, but quantified data about value are missing; ● Data about cost, price and value ignore externalities (impact on people and planet) MULTI DIMENSION IMPACT ACCOUNTING
  34. 34. MULTI DIMENSION IMPACT ACCOUNTING
  35. 35. Money as a measure … Money is fatally flawed as a universal way of measuring progress and performance in the totality of the socio-enviro-economic system. Money value is derived from exchange transactions … the market … which gives a result based on supply and demand. It is a 'result' and not a 'measure'. MULTI DIMENSION IMPACT ACCOUNTING
  36. 36. In engineering and science, measures are strictly defined … and are constant no matter what changes in the surrounding system. A metre is always a metre. A kilogram is always a kilogram. Not so money MULTI DIMENSION IMPACT ACCOUNTING
  37. 37. Nevertheless ... Money and conventional money based double entry accounting has been a very effective tool for managing performance in the business setting … going back a very long time … and today at the core of ALL corporate MIS (management information systems). MULTI DIMENSION IMPACT ACCOUNTING
  38. 38. Standard costs Conventional cost accounting often uses a framework of standard costs as a powerful management tool. The standard is the norm. Variations from the standard are identified and used to implement corrective action. MULTI DIMENSION IMPACT ACCOUNTING
  39. 39. Summaries AND Drill-Down Conventional money based accounting enables financial reporting in a simple, understandable way at a summary level. … and on top of the same data enables 'drill- down' to the detail whether it be business unit, department, process or product. MULTI DIMENSION IMPACT ACCOUNTING
  40. 40. Measurement … Money is universally used to measure business performance as well as wealth and values in capital markets … good! But what measure to use for everything that affects human life and quality of life? What measure to use to reflect impact on the environment … the natural systems upon which everything depends. MULTI DIMENSION IMPACT ACCOUNTING
  41. 41. Peter Drucker … You manage what you measure MULTI DIMENSION IMPACT ACCOUNTING
  42. 42. Limited scope Financial reporting is strictly limited to the financial progress and performance of the reporting entity. What happens beyond the reporting boundary has no reporting effect on the entity. None. This is the system and it is inadequate for the modern world where externalities are of consequence. MULTI DIMENSION IMPACT ACCOUNTING
  43. 43. Ignoring Externalities The rule in conventional accounting is to ignore externalities. If there is no money transaction there is nothing … which is patently absurd in a world where natural resources are being depleted and the environment degraded by very large scale economic activities. Not to mention the huge impact business has on society at large … people. MULTI DIMENSION IMPACT ACCOUNTING
  44. 44. But what measure to use for everything that affects human life and quality of life? What measure to use to reflect impact on the environment … the natural systems upon which everything depends including: ● The Carbon Cycle; ● The Water Cycle; ● Land use (including ecosystem services); ● Various Nutrient Cycles. MULTI DIMENSION IMPACT ACCOUNTING
  45. 45. Standards for Cost and Value Conventional cost accounting often uses a framework of standard costs as a management tool. The standard is the norm. Variations from the standard are identified and used to implement corrective action. Impact accounting can be based on a system of standard values similar to standard costs. MULTI DIMENSION IMPACT ACCOUNTING
  46. 46. Quantification Measuring facts is a vital step and this mean putting numbers on measurements. This is essential to enable good decision making. ● Money is used to measure profit and much to do with financial capital. ● A measure is needed for everything to do with human life and quality of life … human capital ● Other measures are needed for: ● The Carbon Cycle; ● The Water Cycle; ● Land use (including ecosystem services); ● Various Nutrient Cycles. MULTI DIMENSION IMPACT ACCOUNTING
  47. 47. The next slide shows: Niger Delta oil pollution … this pollution from oil industry activities has ruined the lives of most of the indigenous people of the area, wrecked the local fishing resources but at NO COST to the oil companies which report high profits and high stock price valuations. Externalities MUST be brought into account. MULTI DIMENSION IMPACT ACCOUNTING
  48. 48. MULTI DIMENSION IMPACT ACCOUNTING SunSun BOP Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun EOP Financial Capital Human Capital Man Built Capital Natural Capital Sun PROCESS OIL POLLUTION IN THE NIGER DELTA
  49. 49. The next graphic slide shows: Beginning of period state BOP and End of period state EOP MULTI DIMENSION IMPACT ACCOUNTING
  50. 50. Also, it shows ... The makeup of STATE as follows: ● Financial Capital ● Human Capital ● Man Built Capital ● Natural Capital and ● Sun The activities between BOP and EOP change ALL these components of state. MULTI DIMENSION IMPACT ACCOUNTING
  51. 51. MULTI DIMENSION IMPACT ACCOUNTING SunSun 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. And the next slide shows ... A typical P&L account representing the activities that are taking place in the period: MULTI DIMENSION IMPACT ACCOUNTING
  53. 53. MULTI DIMENSION IMPACT ACCOUNTING Sun FINANCIAL P&L ACCOUNT Financial Accounts describe Economic Activity REVENUES Products Sold X Price Products Bought X Price BOP EOP Energy Bought X Price Employee Benefits Employee Payroll Other expenditures Asset use costs Depreciation Financial expenses Pro-good expenditures Taxation PROFITSun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun COSTS
  54. 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 ECONOMIC ACTIVITY IN FINANCIAL OR MONEY TERMS WHILE COMPLETELY IGNORING IMPACT ON EVERYTHING ELSE
  55. 55. Next 2 slides ● The first slide is a simplified representation of the State – Flow – State idea for ALL elements of the Socio-Enviro-Economic System ● The second slide shows what the conventional money metrics measure … just a tiny part of everything that matters. MULTI DIMENSION IMPACT ACCOUNTING * BOP – EOP … Beginning and End of Period
  56. 56. MULTI DIMENSION IMPACT ACCOUNTING STATE - BOP STATE - EOPPERIOD ACTIVITES
  57. 57. MULTI DIMENSION IMPACT ACCOUNTING STATE - BOP STATE - EOPPERIOD ACTIVITES
  58. 58. The next slides show how the data architecture has to work in order for IMPACT to be computed in a rigorous and logical way … MULTI DIMENSION IMPACT ACCOUNTING
  59. 59. MULTI DIMENSION IMPACT ACCOUNTING Sun FINANCIAL P&L ACCOUNT Financial Accounts describe Economic Activity REVENUES Products Sold X Price Products Bought X Price BOP EOP Energy Bought X Price Employee Benefits Employee Payroll Other expenditures Asset use costs Depreciation Financial expenses Pro-good expenditures Taxation PROFITSun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun COSTS
  60. 60. MULTI DIMENSION IMPACT ACCOUNTING Sun ADD positive impact not accounted forBOP 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 What 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
  61. 61. MULTI DIMENSION IMPACT ACCOUNTING Sun DEDUCT negative impact not accounted forBOP 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 File: MDIA-Framework-004-150411-WIP.odp Peter Burgess (c) All rights reserved 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
  62. 62. MULTI DIMENSION IMPACT ACCOUNTING Sun ACCOUNTING FOR EVERYTHINGBOP 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 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 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
  63. 63. The next slide shows how the operations of a process: (1) through the money P&L report impact on the money balance sheet of the operation; and, (2) through the IMPACT accounts report on the impact the operation is having on society and the environment. MULTI DIMENSION IMPACT ACCOUNTING
  64. 64. 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
  65. 65. 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
  66. 66. SUPPLY CHAIN MULTI DIMENSION IMPACT ACCOUNTING
  67. 67. SUPPLY CHAIN ● The MONEY dimension of the supply chain is routine; however ● The IMPACT dimensions of the supply chain are rarely (so far, never) implemented in a rigorous manner. MULTI DIMENSION IMPACT ACCOUNTING
  68. 68. MULTI DIMENSION IMPACT ACCOUNTING PRODUCT … the SUPPLY CHAIN 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 FOR 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 Cost = Price stage 3 Costs Stage 4 Profit Stage 4 Cum Costs Cum Profit Price Stage 4 Cost = Price stage 4 Costs Stage 5 Profit Stage 5 Cum Costs Cum Profit Price Stage 5 Cost = Price stage 4 Costs Stage 5 Profit Stage 5 Cum Costs Cum Profit Price Stage 5 ETC...
  69. 69. MULTI DIMENSION IMPACT ACCOUNTING MBC 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
  70. 70. COMPANY MULTI DIMENSION IMPACT ACCOUNTING
  71. 71. To manage for profit AND impact we need to apply this framework for analysis in these ways: ● for the ORGANIZATION as a whole; ● for discrete UNITS of the ORGANIZATION; ● for PROCESSES used in transformation; ● for PRODUCTS through their life cycle; ● for PEOPLE and their quality of life; ● for PLACE and how place impacts Human Capital and interacts with Natural Capital. MULTI DIMENSION IMPACT ACCOUNTING
  72. 72. It is optimizing for ALL of these things that will result in the best possible socio-enviro-economic system performance and the best Triple Bottom Line results. MULTI DIMENSION IMPACT ACCOUNTING
  73. 73. Companies, corporate organizations, are the most efficient way to implement transformation. Applied technology, systems thinking and cost accounting are very highly developed and the results amazing. MULTI DIMENSION IMPACT ACCOUNTING
  74. 74. In a typical business setting: ● Profits are maximized. ● Company valuations are high. ● Products are abundant. ● Society has more employment but also more unemployment. ● Environment is being degraded and there is resource depletion. MULTI DIMENSION IMPACT ACCOUNTING
  75. 75. Everything a company does has an impact not only on the profit of the enterprise but also on society (people) and the natural world / environment (planet) MULTI DIMENSION IMPACT ACCOUNTING
  76. 76. Material Costs Money profit accounting … material costs are a cost to the business and earnings are reduced by high material costs. Supply chain and outsourcing reduce costs and improve profit. Impact accounting … The impacts as materials flow through the supply chain must be brought into account as the material is transformed, and then carried forward in the new products. MULTI DIMENSION IMPACT ACCOUNTING
  77. 77. Energy Costs Money profit accounting … energy costs are a cost to the business and earnings are reduced by high energy costs. Impact accounting … There are very substantial environmental costs associated with energy from carbon based fuels. There is also the cost of resource depletion. Energy impacts in the supply chain should be accounted for. MULTI DIMENSION IMPACT ACCOUNTING
  78. 78. Employees and Payroll Money profit accounting … payroll is a cost to the business and earnings are reduced by higher payroll and benefit costs. Higher wages might mean higher productivity and be good for profit. Impact accounting … There is a direct benefit to the employees and their families with higher wages, but in addition there is a multiplier effect in the community as this money is spent. MULTI DIMENSION IMPACT ACCOUNTING
  79. 79. Advertising and Public Relations Money profit accounting … these costs ae justified because successful advertising and PR increases revenues and profit. Impact accounting … With impact accounting, the indirect impact of increased sales on society and the environment may be brought in to account. For some people more is better. For the more wealthy the impact of more is almost totally related to more damage to environment. MULTI DIMENSION IMPACT ACCOUNTING
  80. 80. Workplace conditions Money profit accounting … low cost, low safety working conditions might result in short term profit maximization … but the risks are high especially if the cost of reputational damage is included. Impact accounting … The impact of poor workplace conditions should be accounted for throughout the supply chain and brought into the trucost of the product. MULTI DIMENSION IMPACT ACCOUNTING
  81. 81. Use of physical assets Money profit accounting … this is usually accounted for by a depreciation charge which reduces profit and provides for deterioration of the physical asset. Impact accounting … There is a not only the physical plant owned by the company but also the public infrastructure that is being used which should be brought into account. MULTI DIMENSION IMPACT ACCOUNTING
  82. 82. Payment of taxes Money profit accounting … taxation reduces business earnings available to the owners. Impact accounting … There is a benefit to Institutional Capital (i.e. Government) because they have revenues to pay for government programs. MULTI DIMENSION IMPACT ACCOUNTING
  83. 83. Pro-Good expenditures Money profit accounting … pro-good expenditures reduce business earnings available to owners. In many situations they are done to reduce taxes Impact accounting … There may be a reputational benefit that feeds back to the company. These expenditures can be of great benefit to individuals and society and should be brought into account. MULTI DIMENSION IMPACT ACCOUNTING
  84. 84. Life Cycle Assessment for Profit Many business initiatives are 'profitable'. Applying some of the concepts of life cycle assessment (LCA) to profit will clarify what profit is good for society and the environment and what profit is anti-social and doing damage to the environment. MULTI DIMENSION IMPACT ACCOUNTING
  85. 85. LCA for Profit example: The oil industry In Saudi Arabia is very profitable … low cost oil and relatively high international prices. The 'profit flow' has enabled expenditures that have built most everything in modern Saudi Arabia and funded important social initiatives like education. A very positive LCA outcome MULTI DIMENSION IMPACT ACCOUNTING
  86. 86. Another LCA for Profit example: Addictive drugs are very profitable. There is a strong demand for the products of the illegal drug trade and profits are high. Some of this 'profit flow' is used to ensure that addiction continues and to ensure that the authorities lose in their attempts to control and eliminate the trade. A very negative LCA outcome MULTI DIMENSION IMPACT ACCOUNTING
  87. 87. Product design Money profit accounting … Good product design can enable higher prices and reduce costs. This is good for profit. Impact accounting … Good product design can also reduce negative impact throughout the supply chain, use and post use waste chain. This is important. MULTI DIMENSION IMPACT ACCOUNTING
  88. 88. Process Money profit accounting … The process used in transformation is a determinant of cost and therefore has an impact on profit. Impact accounting … Good performance in processes enables lower impact on resource depletion and environmental degradation. This is important. MULTI DIMENSION IMPACT ACCOUNTING
  89. 89. Customer Money profit accounting … The customer buys product which creates revenue which is a component of profit. More sales made to customers the better Impact accounting … People need some goods to satisfy needs. Quality of life is not merely about more 'stuff'. Some customers are short of both money and the things they need, but many customers with money have excess stuff and are simply adding to WASTE MULTI DIMENSION IMPACT ACCOUNTING
  90. 90. Informed customer in control Money profit accounting … Advertising is used to inform the customer in a manner that is totally related to selling the company's products. The more the better. Good for profit. Impact accounting … When customers are well informed about products and the IMPACT that products have on their own quality of life and on everything else, it is customers that will be in control and make the difference. MULTI DIMENSION IMPACT ACCOUNTING
  91. 91. PEOPLE MULTI DIMENSION IMPACT ACCOUNTING
  92. 92. PEOPLE … In the end, progress and performance should be evaluated based on the impact economic activity has had on people (society) together with the long term impact on the environment (planet). MULTI DIMENSION IMPACT ACCOUNTING
  93. 93. People Money profit accounting … There is money profit accounting for person. To a great extent money and wealth have become proxies for success. Impact accounting … With impact accounting for the person, there is more clarity about the performance of the person and their role in making society and the world a better place. MULTI DIMENSION IMPACT ACCOUNTING
  94. 94. PLACE MULTI DIMENSION IMPACT ACCOUNTING
  95. 95. PLACE … Everything happens in a place. Impact accounting has a special relevance in a place. The place is always there. Bad actors can be identified and held accountable. Trends can be observed over time. MULTI DIMENSION IMPACT ACCOUNTING
  96. 96. Place Money profit accounting … There is no money profit accounting for place. There is merely an assumption that economic activity is good for the place, no matter what. Impact accounting … The place is the best way to organize impact accounting about everything. It is where the idea of PLANET has some reality. There can be accountability for all actors in the socio-enviro-economic system and impact on the environment observed. MULTI DIMENSION IMPACT ACCOUNTING
  97. 97. Most governments around the world are short of money There is a revenue problem with too low taxes, too many loopholes and simply failure to pay taxes. There is also an expenditure problem with government performance extremely inefficient. MULTI DIMENSION IMPACT ACCOUNTING
  98. 98. QUANTIFICATION AND STANDARD VALUES MULTI DIMENSION IMPACT ACCOUNTING
  99. 99. Money Money is an important metric … but seriously flawed in many ways. It is too entrenched to be changed very much in the short run … but it must be complemented with other units of measure (UOM). MULTI DIMENSION IMPACT ACCOUNTING
  100. 100. UOM for Life and Quality of Life A key characteristic of this UOM must be that a life has value no matter who the person is. It is too entrenched to be changed very much in the short run … but it must be complemented with other units of measure (UOM). MULTI DIMENSION IMPACT ACCOUNTING
  101. 101. Moving forward … Request for collaboration Money is part of a complex socio-enviro-economic system. While it works … it does not work as well as it should, nor as well as it could. The work of MDIA is to enable this complex system to work better. MDIA needs to be a team effort. Join in and help to make the world a better place. Please get in touch. Peter Burgess … peterbnyc@gmail.com MULTI DIMENSION IMPACT ACCOUNTING
  102. 102. Thank you ... A big thank you to the Madinah Institute for Leadership and Entrepreneurship (MILE) for hosting this webinar.
  103. 103. Some links and contact information: 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 for MDIA slidesets http://www.truevaluemetrics.org/DBadmin/DBtxt001.php?vv1=list0200-Burgess-p3-Slidesets MULTI DIMENSION IMPACT ACCOUNTING

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