Mdia p3-13-0-product-150705

MULTI DIMENSION IMPACT ACCOUNTING
File: MDIA-p3-13-0-PRODUCT-150705.odp Peter Burgess (c) All rights reserved
MDIA
PRODUCT
GOODS AND SERVICES FOR QUALITY OF LIFE

WORK-IN-PROGRESS.
SLIDESET STILL IN DEVELOPMENT.
UPDATES WILL BE POSTED OVER
THE NEXT SEVERAL WEEKS

PRODUCT
● Used by people to live their lives
● Made by companies
● Inputs to economic activities
● Outputs from economic activities
● Flows through a supply chain
● Has impact during use
● Has impact post use in the waste chain
● Product links everything

PRODUCT … GOOD
Gives people the opportunity to have
a good quality of life and standard of
living
The production of product gives
people jobs.

PRODUCT … BAD
The life cycle of a product almost
always has a significant negative
impact on resource depletion,
environmental degradation and loss
of ecosystem service capacity.

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

The next slides show how the data
design architecture has to work in
order for IMPACT to be computed in
a rigorous and logical way …

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

Sun
ADD positive impact not accounted forBOP EOP
REVENUES
VALUE to buyer
Equals
HUMAN CAPITAL ADD
Wages and benefits
What value to
employee?
What value to society?
Taxation
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
Employee Benefits
Employee Payroll
Other expenditures
Asset use costs
Depreciation
Financial expenses
Taxation
PROFIT
COSTS

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
Employee Benefits
Employee Payroll
Other expenditures
Asset use costs
Depreciation
Financial expenses
Taxation
PROFIT
COSTS

Sun
ACCOUNTING FOR EVERYTHINGBOP EOP
REVENUES
VALUE to buyer
Equals
HUMAN CAPITAL ADD
Wages and benefits
What value to
employee?
Taxation
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
Employee Benefits
Employee Payroll
Other expenditures
Asset use costs
Depreciation
Financial expenses
Taxation
PROFIT
COSTS

When money accounting is used to
manage the supply chain it looks
something like this:

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 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...

When IMPACT accounting is used to
manage the supply chain it looks
something like this:

MBSS
Natural
Capital
Human
Capital
IMPACT ACCOUNTING ADJUSTMENTS
Zero to start
Costs this stage
Profit this stage
Price this stage
FINANCIAL
ACCOUNTS
Zero to start
Costs this stage
Profit this stage
Price Stage 1
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
File: MDIA-Framework-004-150411-WIP.odp Peter Burgess (c) All rights reserved

The next slide shows …
… how the money P&L report describes the
impact of the money transactions on the
money balance sheet of the operation …
… while the IMPACTS of the operations on
society and the environment are ignored
because they are outside the reporting
envelope.

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

A better framework for reporting
would be this …

So think of all this miniaturized:

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

And then becoming part of the
supply chain:

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

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

So using impact accounting the
numbers aggregate in this way:

MBSS
Natural
Capital
Human
Capital
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
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

Most companies are going to make
decisions about product based on
profit …

And most people are going to make
the 'buy' or 'not to buy' decision
based on VALUE …

Increasingly VALUE is a function of:
(1) Price relative to the utility of
the product
(2) The life cycle environmental and
social impact of the product

From the company perspective, in
the end, it is people that are going to
make the key decisions about the
profit potential of a product.
When they don't buy there is no
profit

ADVERTISING does not message the
inconvenient truth that the IMPACT
of more sales is more stress on the
environment and in certain cases a
more problematic situation for the
customer.

TRUTH IN ADVERTISING should
mean that the information is correct
not only in a legalistic sense, but
also in terms of messaging ALL that
matters for a better world.

BETTER PRODUCTS are going to be
one of the big ways in which the
PROGRESS and PERFORMANCE of
the SOCIO-ENVIRO-ECONOMIC
SYSTEM is going to be improved.

For the buyer, the buy decision is
driven by money and impact factors
that include:
●
Money price to buy
● Money costs during use
● End of use money value
● Beneficial impact for the user
● Life cycle social impact
● Life cycle environmental impact

The business world makes knowing
about price very easy.
Conversely, information about life
cycle social and environmental
impact is very difficult to find.

In the end, it is going to be PEOPLE
making 'buy' or 'not to buy' decisions
about PRODUCTS that is going to
change everything

Follow up: Request for Feedback
Getting these ideas fleshed out into a clear, simple but
comprehensive structure is a big job and remains a work-in-
progress. Many organizations are making progress with this,
but there is no broad universal framework yet that will enable
all the pieces to come together and work efficiently.
I would like to get feedback from anyone and everyone to
help move this initiative forward. While I have some clear
concepts about much of this architecture, there are many
details that I do not know enough about and need help. So,
please feel free to contact me (peterbnyc@gmail.com).
Please put something relevant and catchy in the subject line.

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

Mdia p3-13-0-product-150705

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