MDIA-p3-01-1-WHY? WHAT? HOW?

MDIA
WHY? WHAT? HOW?
MULTI DIMENSION IMPACT ACCOUNTING

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

The GOAL is to design and
deploy a system of metrics for
management that accounts for
impact on people and planet as
rigorously as double entry
accounting accounts for
money transactions that
impact profit

Corporate money profit
performance over the past fifty
years has been impressive

But labor income over the past
fifty years … not so good

WHY?

The following slides
show some
important trends!

Corporate money profit performance over
the past fifty years has been impressive

Huge recent
economic growth
but a finite planet!

MDIA
Why? More reason!

YELLOW:
The PEOPLE piece … Human Capital (HC)
DIRTY BROWN:
The ECONOMIC piece … Man Built Capital (MBC)
GREEN:
NATURE, ENVIRONMENT … Natural Capital (NC)
COLOR KEY

Trajectory to disaster!
This must be changed
to this …

PEOPLE progressing
MBC* efficient
PLANET healthy
* MBC … Man Built Capital

MDIA
What?

MDIA is ETRICS
The double entry idea
is very powerful:

MDIA
is a system of metrics to
enable better management of
everything that matters.

MDIA
It is an extension of
conventional accounting and
builds on the amazing power of
the double entry system

State … B/S
Flow … P&L
New State … B/S

Put STATE side by side
and there is a very
useful time series:

Add more detail into the
STATE → FLOW → STATE
model and it might look
something like this:

STATE - BOP STATE - EOPPERIOD ACTIVITES

PROBLEM!
Conventional Accounting
only measures this part of
the total system:

Conventional money profit
accounting works very well for
financial performance … that is
impact on corporate profits
and stock value.

MDIA
How?

Sun
BOP EOP
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
FINANCIAL ACCOUNTING

Sun
BOP EOP
REVENUES
VALUE to buyer
Equals
HUMAN CAPITAL ADD
Wages and benefits
What value to
employee?
What value to society?
Taxation
Funds government.
Good 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
Employee Benefits
Employee Payroll
Other expenditures
Asset use costs
Depreciation
Financial expenses
Taxation
PROFIT
COSTS
FINANCIAL ACCOUNTING PLUS GOOD IMPACT

Sun
BOP 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
Employee Benefits
Employee Payroll
Other expenditures
Asset use costs
Depreciation
Financial expenses
Taxation
PROFIT
COSTS
FINANCIAL ACCOUNTING LESS BAD IMPACT

Sun
BOP EOP
REVENUES
VALUE to buyer
Equals
HUMAN CAPITAL ADD
Wages and benefits
What value to
employee?
What value to society?
Taxation
Funds government.
Good 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
Employee Benefits
Employee Payroll
Other expenditures
Asset use costs
Depreciation
Financial expenses
Taxation
PROFIT
COSTS
FINANCIAL ACCOUNTING PLUS GOOD & BAD

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
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

The first step is to design and
develop a data architecture
that is congruent with the
realities of the modern global
socio-enviro-economic system

Quality of Life and Standard of
Living for PEOPLE should be
measured with a system that is
just as powerful.

Resource Depletion should be
measured rigorously and
incorporated into all aspects of
Impact Accounting.

Ecosystem Services and Bio-
Degradation should be
measured rigorously and
incorporated into all aspects of
Impact Accounting.

The data architecture is already
in a relatively complete form.

A massive amount of scientific
data already exists and needs
to be mapped to the MDIA data
architecture.

New units of measure need to
be defined so that scientific
data may be converted into
these units of measure.

A characteristic of these new
units of measure is that they
will enable complex details to
be summarized easily for
reporting and substantive
discussion by the media.

The system will also facilitate
drill-down to a granular level
so that better decisions can be
made by everyone taking into
account not only the price and
profit but also the associated
impacts on society (people)
and the environment (planet).

These new units of measure
will NOT merely be a market
monetization of an element.
They will be new units that
have the properties of all
physical measures.

Standard Values need to be
established for EVERYTHING.

Standard Values have much
the same characeristics as
Standard Costs in commercial
cost accounting.

In cost accounting Standard
Costs are a way massively to
simplify costing without losing
much, if any, of the utility of the
cost accounting information.

Data about PRODUCTS needs
to be organized. The IMPACT of
every PRODUCT in the market
should be 'a click away'.

Data about the choices
PEOPLE make needs to be
organized so that there may be
ways for PEOPLE to earn
rewards for making choices
that are good for themselves,
the society and the enviroment.

Data business performance will
include IMPACT as rigorously
as there is accounting for
PROFIT.

PROCESS is also an element of
the data architecture. There
should be Standards for all
processes.

SUPPLY CHAIN may be built up
from PROCESS standards.

COMPANIES have financial
accounts. MDIA standards may
be used to convert financial
accounts to impact accounts.

But to what end?
Business managers have powerful metrics to
optimize PROFIT performance … and the
perceived VALUE of the company.
Conventional business metrics only focus on
the performance of the company from the
PERSPECTIVE of the COMPANY and its
OWNERS, not at all from any of the other
perspectives.

Conventional business metrics are inadequate
because they ignore important externalities
like …
The negative impact on PEOPLE:
… Efficiency means more production for less labor;
… Less labor is a negative for employees (society);
… Cost of occupational health and safety ignored.
The negative impact on the ENVIRONMENT
… Race to avoid environmental regulation;
… Costs to the environment are ignored;
… Impact on PLACE.

With impact accounting for
COMPANIES and also with
impact accounting for PLACES
it is less and less likely that
corporate misbehavior will
have zero cost. Nothing will be
out of sight!

Operating units of companies
and entities in the supply chain
can be held to account based
on information originating in a
PLACE

Accountability is a public
matter …

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-p3-01-1-WHY? WHAT? HOW?

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