MULTI DIMENSION IMPACT ACCOUNTING File: Characteristics-of-an-Economic-Activity.odp Peter Burgess (c) All rights reserved MDIA PERSPECTIVES
Jul 18, 2015
MULTI DIMENSION IMPACT ACCOUNTING
File: Characteristics-of-an-Economic-Activity.odp Peter Burgess (c) All rights reserved
MDIAPERSPECTIVES
TRIPLE BOTTOM LINE (TBL)This idea of the TBL is that a company should not only be looking at the 'profit' performance but also impact on people and planet:● PROFIT;● PEOPLE;● PLANET.
This good, but it is only the perspective of the ORGANIZATION.
MULTI DIMENSION IMPACT ACCOUNTING
PERSPECTIVESA unique object can look very different depending on the position of the observer. Our socio-enviro-economic-system is complex and multiple perspectives are needed:● a PEOPLE perspective;● an ORGANIZATION perspective;● a PRODUCT perspective; ● a PLACE perspective;● etc.
MULTI DIMENSION IMPACT ACCOUNTING
THE CHALLENGEThe challenge is to have a data system that is meaningful no matter what aspect of the socio-enviro-economic-system is being measured, and no matter what perspective is in play. Hence, the need for a Multi Dimension and Multi Perspective data framework.
MULTI DIMENSION IMPACT ACCOUNTING
THE METRIC SOLUTION● MDIA is borrows from conventional double entry accounting where there are Balance Sheet and Profit and Loss Accounts.
● The building block for MDIA is similar: … State1-Flow-Process-Flow-State2 that can be applied to every economic activity in any setting anywhere.
Conventional double entry accounting is very good for money transactions, but ignores non-money transactions and externalities!
MULTI DIMENSION IMPACT ACCOUNTING
THE METRIC SOLUTION (cont.)
● This MDIA building block will aggregate to enable summary reporting; and
● enable drill down to activities that are relevant at any and all subsidiary levels down to the individual level.
MULTI DIMENSION IMPACT ACCOUNTING
SOCIO-ENVIRO-ECONOMIC● SOCIO is a PEOPLE perspective. Everything should result in people progressing.
● ENVIRO is about NATURE and the ultimate source of everything that people can ever have; and,
● ECONOMIC is the man built structures and systems (MBSS) that have been built to enable progress.
MULTI DIMENSION IMPACT ACCOUNTING
YELLOW: The PEOPLE piece
DIRTY BROWN: MBSS (MAN-BUILT STRUCTURES AND SYSTEMS)
GREEN:NATURAL CAPITAL, NATURE'S BOUNTY
MULTI DIMENSION IMPACT ACCOUNTING
SO …What is the PEOPLE perspective?What is the ORGANIZATION perspective?What is the PRODUCT perspective? What is the PLACE perspective?
How must the MBSS be changed to get the best possible results?
How can PEOPLE make better decisions?
MULTI DIMENSION IMPACT ACCOUNTING
MULTI DIMENSION IMPACT ACCOUNTING
ELEMENTS OF THE SYSTEM by SEGMENT
FinancialCapital
HumanCapital
Man BuiltStructures& Systems
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
Note that FINANCIAL CAPITAL has been separated out from the other parts of the MBSS segment
Note also the addition of SUN to enable metrics about renewables
MULTI DIMENSION IMPACT ACCOUNTING
THE METRIC SOLUTION● The building block for MDIA is the idea of State1-Flow-Process-Flow-State2 that can be applied to every economic activity;
● It will aggregate to enable summary reporting; and
● It will enable drill down to activities that are relevant at the individual level;
● It will function for every PERSPECTIVE.
MULTI DIMENSION IMPACT ACCOUNTING
THE NEXT SLIDE SHOWS:
(1) … STATE at the Beginning of the Period (BOP)
(2) … STATE at the End of Period (EOP)
(3) … a financial profit and loss about the economic activity or flow that links the two states
MULTI DIMENSION IMPACT ACCOUNTING
MULTI DIMENSION IMPACT ACCOUNTING
Sun
FINANCIAL P&L ACCOUNT
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
PROFITSun
FinancialCapital
HumanCapital
Man BuiltStructures& Systems
NaturalCapital
Sun SunSun
FinancialCapital
HumanCapital
Man BuiltStructures& Systems
NaturalCapital
Sun
COSTS
But the financial accounts are only about money transactions, nothing about impact on people and planet and externalities ignored!
Financial accounts are also from the perspective of the organization.
MULTI DIMENSION IMPACT ACCOUNTING
MULTI DIMENSION IMPACT ACCOUNTING
Sun
BOP EOP
Sun
FinancialCapital
HumanCapital
Man BuiltStructures& Systems
NaturalCapital
Sun SunSun
FinancialCapital
HumanCapital
Man BuiltStructures& Systems
NaturalCapital
Sun
Financial Accounts describe Economic Activity
Financial Costs
Financial Profit
Financial Revenues
FinancialBalance
Sheet
BOP
FinancialBalance
Sheet
EOP
MULTI DIMENSION IMPACT ACCOUNTING
Sun
BOP EOP
Sun
FinancialCapital
HumanCapital
Man BuiltStructures& Systems
NaturalCapital
Sun SunSun
FinancialCapital
HumanCapital
Man BuiltStructures& Systems
NaturalCapital
Sun
FINANCIAL ACCOUNTSDESCRIBE ECONOMIC
ACTIVITY IN FINANCIAL OR MONEY TERMS
WHILE COMPLETELYIGNORING IMPACT
ON EVERYTHING ELSE
Financial Accounts describe Economic Activity
MULTI DIMENSION IMPACT ACCOUNTING
Sun
FINANCIAL P&L ACCOUNT
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
PROFITSun
FinancialCapital
HumanCapital
Man BuiltStructures& Systems
NaturalCapital
Sun SunSun
FinancialCapital
HumanCapital
Man BuiltStructures& Systems
NaturalCapital
Sun
COSTS
MULTI DIMENSION IMPACT ACCOUNTING
Sun
ADD positive impact not accounted forBOP EOP
REVENUESProducts Sold X Price
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 BuiltStructures& Systems
NaturalCapital
Sun Sun
FinancialCapital
HumanCapital
Man BuiltStructures& Systems
NaturalCapital
Sun
FINANCIAL P&L ACCOUNT
REVENUESProducts 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
MULTI DIMENSION IMPACT ACCOUNTING
Sun
DEDUCT negative impact not accounted forBOP EOP
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
File: MDIA-Framework-004-150411-WIP.odp Peter Burgess (c) All rights reserved
FinancialCapital
HumanCapital
Man BuiltStructures& Systems
NaturalCapital
Sun Sun
FinancialCapital
HumanCapital
Man BuiltStructures& Systems
NaturalCapital
Sun
FINANCIAL P&L ACCOUNT
REVENUESProducts 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
MULTI DIMENSION IMPACT ACCOUNTING
Sun
ACCOUNTING FOR EVERYTHINGBOP EOP
REVENUESProducts Sold X Price
VALUE to buyerEquals
HUMAN CAPITAL ADD
Wages and benefitsWhat value to
employee?
Pro-good expendituresWhat value to society?
TaxationWhat value to society?
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
POSITIVE IMPACT NOTACCOUNTED
FOR
Negativeimpact
FinancialCapital
HumanCapital
Man BuiltStructures& Systems
NaturalCapital
Sun Sun
FinancialCapital
HumanCapital
Man BuiltStructures& Systems
NaturalCapital
Sun
FINANCIAL P&L ACCOUNT
REVENUESProducts 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
This framework needs to be applied as a PEOPLE perspective:
(1) … STATE (quality of life) at the Beginning of the Period (BOP)
(2) … STATE (quality of life) at the End of the Period (EOP)
(3) … all the activities or flows that had impact and changed the state (quality of life) during the period
MULTI DIMENSION IMPACT ACCOUNTING
This framework needs to be applied as a PLACE perspective:
(1) … state of the place at the Beginning of the Period (BOP)
(2) … state of the place at the End of the Period (EOP)
(3) … all the activities or flows that had impact and changed the state of the place during the period
MULTI DIMENSION IMPACT ACCOUNTING
FOR A PRODUCT THERE IS:(1) … STATE of the PRODUCT at the Beginning of the Period (BOP)(2) … STATE of the PRODUCT at the End of Period(3) … all the activities or flows associated with the product that have impacts and changed state during the period
A product flows through a life cycle that includes supply chain, use, and post use waste chain. In the process there is impact on people, place and organization … and there is impact on people, profit and planet.
MULTI DIMENSION IMPACT ACCOUNTING
FOR A PRODUCT
A product flows through a life cycle that includes supply chain, use, and post use waste chain.
In the process there is impact on people, place and organization … and there is impact on people, profit and planet.
PRODUCT, that is goods and services, is the link that connects everything AND helps deliver Quality of Life for PEOPLE
MULTI DIMENSION IMPACT ACCOUNTING