This document discusses the need for multi-dimensional impact accounting (MDIA) to measure the impacts of economic activity from various perspectives, beyond just financial metrics. MDIA would track impacts on financial capital, human capital, man-built capital, natural capital, and other dimensions. It presents the MDIA framework and accounting approach, showing how each economic process or activity affects and changes the different capital stocks and perspectives over time. The goal is an integrated accounting system that is meaningful from every perspective in the socio-economic system.
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TVA p3 00 PERSPECTIVES 151005
1. TVA-p3-00-PERSPECTIVES-151005.odp Peter Burgess (c) All rights reserved
PERSPECTIVESMEASURING PROGRESS AND PERFORMANCE OF
THE SOCIO-ENVIO-ECONOMIC SYSTEM FROM
EVERY POINT OF VIEW
TRUE VALUE ACCOUNTING
2. CONTEXT
This slideset is a Work-in-Progress
and will be updated from time to time.
It is part of a series that aims to
describe the extremely complex
socio-enviro-economic system that
we live in, and how this system can
be made to work better.
TRUE VALUE ACCOUNTING
3. PERSPECTIVE ...
An object looks very different
depending on the position of the
observer. But it is the same object
nevertheless.
MULTI DIMENSION IMPACT ACCOUNTING
5. In the complex global socio-enviro-
economic system, multiple
PERSPECTIVES are essential ...
One perspective … that of the
business organization … is not
enough, but that is really all there is.
MULTI DIMENSION IMPACT ACCOUNTING
6. Multiple PERSPECTIVES are
essential ...
● an ORGANIZATION perspective (which
already exists for money transactions)
● a PEOPLE perspective;
● a PROCESS perspective;
● a PRODUCT perspective; and,
● a PLACE perspective.
MULTI DIMENSION IMPACT ACCOUNTING
7. TRIPLE BOTTOM LINE (TBL)
The idea of the Triple Bottom Line …
PROFIT, PEOPLE and PLANET has been
around since the 1990s*.
This is good, but while it broadens the
scope of the metrics it is limited to the
single perspective, that of the
ORGANIZATION.
MULTI DIMENSION IMPACT ACCOUNTING
* When it was first described by John Elkington
8. THE CHALLENGE
The challenge is to have a data system
that is meaningful from every perspective
of the socio-enviro-economic-system.
Hence, the need for a data framework that
has Multi Dimensions and enables Multi
Perspectives
MULTI DIMENSION IMPACT ACCOUNTING
9. THE TVM-MDIA SOLUTION ...
MDIA uses concepts from conventional
double entry accounting where there are
both Balance Sheet and Profit and Loss
Accounts.
The building block for MDIA is similar …
State1 → Flow → Process → Flow → State2
… a scheme that can be applied to every
economic activity in any setting anywhere.
MULTI DIMENSION IMPACT ACCOUNTING
10. This MDIA building block will:
● Aggregate to enable summary
reporting; and
● Enable drill down to activities that
are relevant at every subsidiary
level down to the individual level.
MULTI DIMENSION IMPACT ACCOUNTING
11. SOCIO-ENVIRO-ECONOMIC
● SOCIO is the PEOPLE dimension.
Everything should result in people
progressing.
● ENVIRO is about NATURE and the
ultimate source of everything that
people can ever have.
● ECONOMIC is the Man Built Structures
and Systems (Man Built Capital) that
have been built to enable progress.
MULTI DIMENSION IMPACT ACCOUNTING
12. HISTORY …
HOW THE THREE SEGMENTS HAVE
CHANGED OVER TIME
MULTI DIMENSION IMPACT ACCOUNTING
13. YELLOW:
The PEOPLE piece … Human Capital (HC)
DIRTY BROWN:
The ECONOMIC piece … Man Built Capital (MBC)
GREEN:
NATURE, ENVIRONMENT … Natural Capital (NC)
MULTI DIMENSION IMPACT ACCOUNTING
COLOR KEY
23. SO …
How do we go from an economy where there is
a singular focus on PROFIT to something that
embraces ALL the dimensions of the global
complex socio-enviro-economic system?
How do these all come together as a single
coherent system?
MULTI DIMENSION IMPACT ACCOUNTING
24. SO …
What is the PEOPLE perspective?
What is the ORGANIZATION perspective?
What is the PRODUCT perspective?
What is the PROCESS perspective?
What is the PLACE perspective?
How do these all come together as a
single coherent system?
MULTI DIMENSION IMPACT ACCOUNTING
25. How must the components of MBC be
changed to get best possible results?
How can people in organizations
collectively make better decisions?
MULTI DIMENSION IMPACT ACCOUNTING
26. How can PEOPLE make better decisions?
MULTI DIMENSION IMPACT ACCOUNTING
27. Part of the answer is
BETTER METRICS
MULTI DIMENSION IMPACT ACCOUNTING
29. MDIA tracks impact on
ALL* the components of
the system …
MULTI DIMENSION IMPACT ACCOUNTING
* Not just the money based financial metrics
30. MULTI DIMENSION IMPACT ACCOUNTING
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
Making MDIA coherent with Socio-Enviro-Economic System
Human
Capital
31. Note that FINANCIAL CAPITAL
has been separated out from the
other parts of the MBC segment
Note also the addition of SUN to
enable metrics about renewables
MULTI DIMENSION IMPACT ACCOUNTING
32. The next slide shows the elements
of the system by segment …
MULTI DIMENSION IMPACT ACCOUNTING
33. MULTI DIMENSION IMPACT ACCOUNTING
Financial
Capital
Human
Capital
Man Built
Capital
Natural
Capital
Sun
Financial
Capital
Human
Capital
Man Built
Capital
Natural
Capital
MoneyFood 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
More Elements of the MDIA Framework
34. Things change over time …
STATE* changes
MULTI DIMENSION IMPACT ACCOUNTING
* Think the 'State of the Union' message that the President
of the United States delivers each year to Congress
35. MULTI DIMENSION IMPACT ACCOUNTING
These 3 slides explain the concept of
STATE and FLOW …
or in accounting terms:
BALANCE SHEET and PROFIT AND LOSS
39. Integrate this idea into the multi
capital MDIA framework …
MULTI DIMENSION IMPACT ACCOUNTING
40. 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
Economic Activity
or
Process
Transformation --->
41. Practically every organization on the
planet has financial accounts that
record money transactions and
report money related performance …
MULTI DIMENSION IMPACT ACCOUNTING
42. Financial accounts describe
economic activity in money or
financial terms while completely
ignoring impact on everything else
MULTI DIMENSION IMPACT ACCOUNTING
43. 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
44. The next slides show how IMPACT
must be incorporated into the data
architecture …
MULTI DIMENSION IMPACT ACCOUNTING
45. 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
46. 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
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
47. 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
48. Because of the way double entry
accounting works … the operating
accounts (P&L) for an economic
activity or process result in changes
to the Balance Sheet of the entity …
MULTI DIMENSION IMPACT ACCOUNTING
49. 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
Financial Costs
Financial Profit
Financial Revenues
Financial
Balance
Sheet
BOP
Financial
Balance
Sheet
EOP
50. Economic operations also have
IMPACTS on human capital (people),
on man built capital (MBC) and
natural capital (environment / planet)
… but these are outside the
'reporting boundary' for the entity.
MULTI DIMENSION IMPACT ACCOUNTING
51. 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
52. Integrated accounting for IMPACT
requires the reporting boundary to
extend to all the extremities of the
system in one coherent system.
MULTI DIMENSION IMPACT ACCOUNTING
53. This represents how Integrated
Impact Accounting will work for a
reporting entity …
MULTI DIMENSION IMPACT ACCOUNTING
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 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
55. 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
56. A world with no economic activity is
represented by this …
MULTI DIMENSION IMPACT ACCOUNTING
57. 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
58. A world with just one economic
activity will look like this …
MULTI DIMENSION IMPACT ACCOUNTING
59. 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
60. 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 ...
61. SO …
the ORGANIZATION is represented in
this way …
MULTI DIMENSION IMPACT ACCOUNTING
62. 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
63. An organization with many
operations looks like this …
MULTI DIMENSION IMPACT ACCOUNTING
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
ORGANIZATION
with many operations
65. And a PRODUCT aggregates in a
very similar way …
MULTI DIMENSION IMPACT ACCOUNTING
66. 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
67. 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
68. The money accounting presentation
of the SUPPLY CHAIN may have this
form …
MULTI DIMENSION IMPACT ACCOUNTING
69. 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.
70. … and the IMPACT ACCOUNTING for
the SUPPLY CHAIN needs to look
something like this …
MULTI DIMENSION IMPACT ACCOUNTING
71. 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
72. The progress and performance of a
PLACE is also a result of the
aggregation of many economic
activities …
MULTI DIMENSION IMPACT ACCOUNTING
73. 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
74. 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
75. 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
76. Small decisions by people make all
the difference
MULTI DIMENSION IMPACT ACCOUNTING
77. 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
78. 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
79. 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
80. This is very different from most of
the data that is easily accessible for
PEOPLE that only has the corporate
purpose of selling more product ...
… no matter what the impact on
PEOPLE, PLANET or PLACE
MULTI DIMENSION IMPACT ACCOUNTING
81. FINAL WORD
There are more dimensions than just
money!
There are more perspectives than
just the corporate organization!
MULTI DIMENSION IMPACT ACCOUNTING
82. MULTI DIMENSION IMPACT ACCOUNTING
Sun
PERSPECTIVE
Sun
BOP
Financial
Capital
Human
Capital
Man Built
Capital
Natural
Capital
Sun SunSun
EOP
Financial
Capital
Human
Capital
Man Built
Capital
Natural
Capital
Sun
83. 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:
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) involved.
http://www.truevaluemetrics.org/DBadmin/DBtxt001.php?vv1=N1-Slidesets-p3
TRUE VALUE ACCOUNTING
84. 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:
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TRUE VALUE ACCOUNTING