Mdia p3-01-core-concepts-150420

MULTI DIMENSION IMPACT ACCOUNTING

File: MDIA-p3-01-2-CORE-CONCEPTS-150420.odp Peter Burgess (c) All rights reserved

MDIACORE CONCEPTS


WORK-IN-PROGRESS.SLIDESET STILL IN DEVELOPMENT.UPDATES WILL BE POSTED OVER

THE NEXT SEVERAL WEEKS

From Accountancy:● Double Entry● State, Process and Flow;● State, Progress and Performance;● Cost, Price and Value;● Quantification;● Standard Value;● Data at the Center;● Feedback;● Reporting Boundaries;● Consolidation Rules.


From Accountancy:● 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.


Double Entry Accounting● Double Entry Accounting is the core strength of a good accounting system;

● Every money transaction impacts two accounts; and the system as a whole is always in balance;

● Enables analysis of State, Process and Flow

The next three slides show how ACTIVITY or process and flow changes STATE



These 3 slides explain the concept of STATE and FLOW …

or in accounting terms, the BALANCE SHEET / PROFIT AND LOSS relationship …


STEADY STATE


POSITIVE PROGRESS


DETERIORATION OF STATE

These reflect … ● Steady state;● Positive progress; and● Deterioration of state


No information about the activities is needed in order to understand PROGRESS

… only information about changes in STATE


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



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 Progress to the resources consumed.



EFFICIENCY AND EFFECTIVENESS

Cost, Price and Value● There should be clarity about what is cost and what is price;

● 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, but relatively little accessible data about cost;

● Value is a very important idea, but quantified data about value is missing;

● Money based cost, price and value ignore everything about impact on people and planet.



QuantificationPutting numbers on measurements is a vital step in enabling management and 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.


The role of monetizationMonetization is fatally flawed as a method for measurement.

An exchange transaction … a market … gives a result based more than anything else on supply and demand. It is a 'result' and not a 'measure'.


Standard ValueCost accounting is often based on a framework of standard costs. Impact accounting can be based on a similar system of standards.

The standard is the norm. Variations from the norm are identified and used to prioritize action plans to improve performance


Beyond the Reporting EntityMost reporting is done by implementing organizations about their own progress and performance … usually with little or no reference to impact beyond the boundaries of the reporting entity.

This is completely inadequate, but is the norm and has been for decades.


Ignoring ExternalitiesConventional accounting enables ignoring 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.


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 the accounting.



SunSun

BOP

FinancialCapital

HumanCapital

Man BuiltStructures& Systems

NaturalCapital

Sun SunSun

EOP

FinancialCapital

HumanCapital


NaturalCapital

Sun

PROCESS

OIL POLLUTION IN THE NIGER DELTA

The last slide showed pollution caused by the oil and gas industry in the Niger Delta where there was once a thriving artisanal fishery.

There is accounting for oil company profits. There is no accounting for the catastrophic disruption in the lives of thousands of Nigerians (Human capital impact) nor the damage to the ecosystem (Natural capital impact).


The next slides show:

Amazing complexity … ● Global North/Global South/Community

● Big Organizations - National and International / Small communities

● Elements of Society: National level and community





Feedback● Feedback is best when it is fast and very focused on practical actionable response

● In this example feedback happens in the small community BEFORE the data reaches city, state, national and international big data systems



Malaria in the community● Get data / facts about malaria in the community● This becomes the STATE – BOP*● PLAN malaria control interventions● IMPLEMENT malaria control interventions● Get data about costs● Get data / facts about resulting malaria in the community

● This becomes the resulting STATE EOP*● Assess change from BOP to EOP


* BOP – EOP … Beginning and End of Period


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.


* BOP – EOP … Beginning and End of Period


STATE - BOP STATE - EOPPERIOD ACTIVITES


STATE - BOP STATE - EOPPERIOD ACTIVITES

The makeup of: ● Human Capital;● Financial Capital;● Man Built Capital*; and ● Natural Capital


* Sometimes referred to as MBSS – Man Built Structures and Systems


ELEMENTS OF THE SYSTEM by SEGMENT

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun

FinancialCapital

HumanCapital

Man BuiltStructures & Systems

NaturalCapital

MoneyFood Government Nature (life)

Sun

Nature (life)

Capital Market Value

WaterLaws. Rules Nature (life)Land

ShelterInfrastructure WaterClothes

Industry Nature (life)AirHealth

Mining EcoservicesEducation

EnergySkillsWaste

Recreation RetailCulture

LogisticsReligionKnowledge

Technology

Security

Energy

Mobility

Profit

STATE – FLOW (activities) – STATE ● Financial Capital;● Human Capital;● Man Built Capital*;● Natural Capital;● Sun


* Sometimes referred to as MBSS – Man Built Structures and Systems


ResourceDepletion

EnvironmentDegradation

ImprovesQoL

Super RichAffluent

BoPyramid

Industrial

MiningEnergy

GovernmentNot-for-ProfitPaperwork

Banking

WaterAir

EcoServicesHabitat

Law

MineralsEnergy

Land

ImprovesEnvironment

MaintainsNatural

Capital andremediates

ProducesProducts

ImprovesQoL

FinancialProgress

Renewables

WasteCreation

Super RichAffluent

BoPyramid

Industrial

MiningEnergy

GovernmentNot-for-ProfitPaperwork

Banking

WaterAir

EcoServicesHabitat

Law

MineralsEnergy

Land

Sun

STATE - BOP

Sun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun Sun

STATE - EOP

Sun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun

CompromisesSociety

ActivitiesBad Impact Good Impact

The next 4 slidesSTATE BOP … ACTIVITY ACCOUNTING … STATE EOP

● Financial accounting:● Financial accounting plus GOOD impacts;● Financial accounting minus BAD impacts;● Financial accounting with BOTH impacts.



Sun

FINANCIAL ACCOUNTS

Financial Accounts describe Economic Activity

REVENUESProducts 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

Profit

File: MDIA-Framework-004-150411-WIP.odp Peter Burgess (c) All rights reserved

Sun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun SunSun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun


Sun

FINANCIAL ACCOUNTS

ADD positive impact not accounted for



BOP EOP


Employee Benefits

Employee Payroll

Other expenditures

Asset use costs

Depreciation

Financial expenses


Taxation

Profit


VALUE to buyerEquals

HUMAN CAPITAL ADD

Wages and benefitsWhat value to

employee?

Pro-good expendituresWhat value to society?

TaxationWhat value to society?

POSITIVE IMPACT NOTACCOUNTED

FOR


FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun Sun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun


Sun

FINANCIAL ACCOUNTS

DEDUCT negative impact not accounted for



BOP EOP


Employee Benefits

Employee Payroll

Other expenditures

Asset use costs

Depreciation

Financial expenses


Taxation

Profit

For products andenergy bought

and this process

Free use of thecommons andpublic services& infrastructure

Degradationof land

Water scarcityand degradationAir pollution:

Impact on peopleAir pollution:

Impact on climate

Air pollution:Impact on people

Solid waste

Resourcedepletion

Environmental Degradation

Negativeimpact


FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun Sun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun


Sun

FINANCIAL ACCOUNTS

ACCOUNTING FOR EVERYTHING



BOP EOP


Employee Benefits

Employee Payroll

Other expenditures

Asset use costs

Depreciation

Financial expenses


Taxation

Profit



HUMAN CAPITAL ADD


employee?




and this process


Degradationof land



Impact on climate


Solid waste

Resourcedepletion



FOR

Negativeimpact

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun Sun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun

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.



Sun

BOP EOP

Sun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun SunSun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun

Financial Accounts describe Financial Impact

Financial Costs

Financial Profit

Financial RevenuesFinancialBalance

Sheet

BOP

FinancialBalance

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


Sun

BOP EOP

Sun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun SunSun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun

Financial Accounts describe Financial Impact

Financial Costs

Financial Profit

Financial RevenuesFinancialBalance

Sheet

BOP

FinancialBalance

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

The next series of slides ...STATE BOP … ACTIVITY … STATE EOP

Shows how an individual optimizes his/her performance relative to quality of life … but at the same time is having a lot of impact on everything else.



ACTIVITIES OF AN INDIVIDUAL

Input ofHumanCapital:

Time, Effort,Skill, Ability, Knowledge

ImprovesSociety

ImprovesMBSS

Pro GoodActivities

Buy and UsePRODUCTS

e.g. Food, EnergyShelter, Transport

Pro MoneyActivities

e.g. Paid Work

Non-ImpactRecreation

FinancialCapital

HumanCapital


NaturalCapital

Sun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun

ImprovesQoL andHumanCapital

WASTELiquidGasesSolids

NaturalCapital

Depleted

MaybeimprovesFC in HC

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun

INPUTS ACTIVITIES BADImpact

State-EOPState-BOP

GOODImpact

Use ofMBSS

Use ofNaturalCapital

Use of Solar


Job-Money Work

Housing

Health

Time

Skills

Income

Recreation

Education

ProGood Work

Energy

PLUS opportunities

Improvessociety

Food

Clothes

ResourceDepletion

EnvironmentalDegradation

BOP EOPThe Individual

Sun

BOP

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun

PERSONALASSETS

Energy

Health

Enjoyment

Skills

Experience

Family

Shelter

Friends

Money

Stuff

QUALITYOF LIFE

Sun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun

PERSONALASSETS

Energy

Health

Enjoyment

Skills

Experience

Family

Shelter

Friends

Money

Stuff

QUALITYOF LIFE

PRODUCTSuse MBSS

PRODUCTSImpact NC

PRODUCTSUse

MBSS

PRODUCTSimprove QOL


Sun

Small decisions by people make all the differenceBOP EOP

Sun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun SunSun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun

MEWHATI BUY

WHEREI WORK

WHEREI LIVE

The supply chain for PRODUCTS

HOW I USETHINGS

The post usewaste chain

Decisions about whatI buy or don't buy are of great importance!


Sun

Use of Pesticides

Use of Land

The IMPACT of FOOD

Use of Water

Use of Fertilizers

Air Pollution

Use of Growth Hormonesand Antibiotics

Use of Energy

Use of Equipment

Use of Labor Inputs Money Price

Money Profit

Money Cost

True Value

Value Add

True Cost

Sun

BOP

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun SunSun

EOP

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun

Good food improves wellness

Wellness improves quality of life


GOODImpact


Sun

Use of Land

The IMPACT of ENERGY

Use of Water

Use of Finite Resources

Air Pollution

Use of Energy

Use of Equipment

Use of Labor InputsMoney Price

Money Profit

Money Cost

True Value

Value Add

True Cost

Sun

BOP

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun SunSun

EOP

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun

Good food improves wellness

Wellness improves quality of life

Undue influenceand corruption

Land and waterpollution


GOODImpact


Sun

LAND USE

Sustainable agricultureWater purification

About LAND USE

Wetlands

Intensive monoculture

Coastal mangrove

Urban infrastructure

Roads, Parking Lots

There is a limited amount of landThere are multiple possible uses

Money Profit

Land is a factorin improving

human capital, producing goods

and services, locating MBSS,and providingvery criticalecosystemservices

Suburban sprawl

Housing

Tropical forestHabitat

Industrial operations


Sun

BOP

FinancialCapital

HumanCapital


NaturalCapital

Sun SunSun

EOP

FinancialCapital

HumanCapital


NaturalCapital

Sun


Sun

WATER USE

Food productionuses water

Beverage productionuses water

About WATER USE

Water is essential to LIFENothing is more important

Household wateruse essential

Industrial processesuse water

Rainfall and freshwater are abundant

in some placesbut not everywhere

Household wastealso pollutes

Waste water pollutionfrom processesa critical issue

Important forall processes to

treat water beforedischarge

Water is abundant,but most has toomuch dissolved

salts to be potable


Sun

BOP

FinancialCapital

HumanCapital


NaturalCapital

Sun SunSun

EOP

FinancialCapital

HumanCapital


NaturalCapital

Sun


Sun

EMISSIONS

SO2 … acid rain

CO2-Greenhouse Gas

About ATMOSPHERIC POLLUTION

Air pollution has many forms, all of which are more or less detrimental to people and planet

Particulates

MH4-Methane-GHG

Some emissionshave a direct

impact on health

Nitrous oxides

Freon-ozone layerdamage

Some emissionsare greenhouse

gases that causeglobal warming

The atmosphere is not an infinite free

dump for undesirableand toxic emissions

All emissionshave a cost


Sun

BOP

FinancialCapital

HumanCapital


NaturalCapital

Sun SunSun

EOP

FinancialCapital

HumanCapital


NaturalCapital

Sun


MBSSMan-BuiltStructures& Systems

Sun

NaturalCapital

FINANCIAL ACCOUNTSHuman

Capital

MBSSMan-BuiltStructures& Systems

Sun

NaturalCapital

HumanCapital

Economic Activity … Process Accounts



BOP EOP


Employee Benefits

Employee Payroll

Other expenditures

Asset use costs

Depreciation

Financial expenses


Taxation

Profit



HUMAN CAPITAL ADD


employee?




and this process


Degradationof land



Impact on climate


Solid waste

Resourcedepletion



FOR

Negativeimpact


The next slidesSTATE BOP … ACTIVITY … STATE EOP

How to apply the MDIA core concepts to the supply chain:● First thinking it terms of money profit● Secondly adding in the impact on people, society and the environment.



Sun

FINANCIAL ACCOUNTS

Economic Activity … Process Accounts



BOP EOP


Employee Benefits

Employee Payroll

Other expenditures

Asset use costs

Depreciation

Financial expenses


Taxation

Profit


Sun

FinancialCapital

HumanCapital


NaturalCapital

Sun SunSun

FinancialCapital

HumanCapital


NaturalCapital

Sun


MBSS

NaturalCapital

HumanCapital

PRODUCT … the SUPPLY CHAIN

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

FINANCIAL ACCOUNTS EACH STEP OF THE SUPPLY CHAIN

Cost = Price stage 1

Costs Stage 2

Profit Stage 2

ImpactStage 1

ImpactStage 1

ImpactStage 1

Cum Costs

Cum Profit

Price Stage 2

ImpactStage 2

ImpactStage 2

ImpactStage 2

Cum Impact

Cum Impact

Cum Impact

Cost = Price stage 2

Costs Stage 3

Profit Stage 3

Cum Costs

Cum Profit

Price Stage 3

ImpactStage 3

ImpactStage 3

ImpactStage 3

Cum Impact

Cum Impact

Cum Impact

FinancialDimension



MBSS

NaturalCapital

HumanCapital

PLACE … Where people live and work … where impact can be seen

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

FINANCIAL ACCOUNTS EACH STEP OF THE SUPPLY CHAIN

ImpactStage 1

ImpactStage 1

ImpactStage 1

FinancialDimension


The next slide:

A graphic from the MIT PROMISE initiative

… and then how the same type of thinking might be applied in the MDIA framework.

Like most analysis initiatives the MIT PROMISE looks at performance from the perspective of the company and its owners. Other stakeholders are ignored.





Sun

BOP EOP


Sun

FinancialCapital

HumanCapital


NaturalCapital

Sun SunSun

FinancialCapital

HumanCapital


NaturalCapital

Sun


Sun


Sun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun SunSun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun


Sun


Sun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun SunSun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun


Sun


Sun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun SunSun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun

Product

Place

Supply Chain

Process

Organization

Enablingenvironment

Society


Sun


Sun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun SunSun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun


Sun


Sun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun SunSun

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun


Sun

External Resources Create Impact Value

Sun

BOP

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun SunSun

EOP

FinancialCapital

HumanCapital

Man BuiltCapital

NaturalCapital

Sun

Moving forward … Request for collaborationMoney 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 … [email protected]


Some links and contact information: Peter Burgess … [email protected]

Peter Burgess LinkedIn profilehttps://www.linkedin.com/in/peterburgess1

Link to TrueValueMetrics.org websitehttp://www.truevaluemetrics.org/

Link to navigation for MDIA slidesetshttp://www.truevaluemetrics.org/DBadmin/DBtxt001.php?vv1=list0200-Burgess-p3-Slidesets


mailto:[email protected]

https://www.linkedin.com/in/peterburgess1

http://www.truevaluemetrics.org/

http://www.truevaluemetrics.org/DBadmin/DBtxt001.php?vv1=list0200-Burgess-p3-Slidesets

Date post:	18-Jul-2015
Category:	Data & Analytics
Upload:	peter-burgess
View:	142 times
Download:	0 times

Mdia p3-01-core-concepts-150420

Data & Analytics