MDIA-p3-01-4-PERSPECTIVES

MULTI DIMENSION IMPACT ACCOUNTING
MDIA-p3-01-PERSPECTIVES-150618.odp Peter Burgess (c) All rights reserved
MDIA
PERSPECTIVES

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

PERSPECTIVE ...
An object looks very different depending on the
position of the observer. But it is the same object
nevertheless.

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.

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.

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.
* When it was first described by John Elkington

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

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.

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.

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.

HISTORY …
HOW THE THREE SEGMENTS HAVE
CHANGED OVER TIME

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

Hum
an
Capital
Man
Built Capital
Natural Capital

Trajectory to disaster!
This must be changed
to this …

PEOPLE progressing
MBC* efficient
PLANET healthy
* Man Built Capital … Man Built Structures and Systems

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?

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?

How must the components of MBC be
changed to get best possible results?
How can people in organizations
collectively make better decisions?

How can PEOPLE make better decisions?

Part of the answer is
BETTER METRICS

Multi Dimension
Impact Accounting
(MDIA)

MDIA tracks impact on
ALL* the components of
the system …
* Not just the money based financial metrics

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

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

The next slide shows the elements
of the system by segment …

Financial
Capital
Human
Capital
Man Built
Capital
Natural
Capital
Sun
Financial
Capital
Human
Capital
Man Built
Capital
Natural
Capital
Money FoodGovernmentNature (life)
Sun
Nature (life)
Capital Market
Value
Water
Laws. RulesNature (life)Land
Shelter
InfrastructureWater Clothes
IndustryNature (life)Air
Health
MiningEcoservices
Education
Energy Skills
Waste
RecreationRetail
Culture
Logistics Religion
Knowledge
Technology
Security
Energy
Mobility
Profit
More Elements of the MDIA Framework

Things change over time …
STATE* changes
* Think the 'State of the Union' message that the President
of the United States delivers each year to Congress

These 3 slides explain the concept of
STATE and FLOW …
or in accounting terms:
BALANCE SHEET and PROFIT AND LOSS

STEADY STATE

POSITIVE PROGRESS

DETERIORATION OF STATE

Integrate this idea into the multi
capital MDIA framework …

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 --->

Practically every organization on the
planet has financial accounts that
record money transactions and
report money related performance …

Financial accounts describe
economic activity in money or
financial terms while completely
ignoring impact on everything else

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

The next slides show how IMPACT
must be incorporated into the data
architecture …

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
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

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 …

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

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.

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

Integrated accounting for IMPACT
requires the reporting boundary to
extend to all the extremities of the
system in one coherent system.

This represents how Integrated
Impact Accounting will work for a
reporting entity …

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.

A world with no economic activity is
represented by this …

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

A world with just one economic
activity will look like this …

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

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 ...

So …
the ORGANIZATION is represented in
this way …

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

An organization with many
operations looks like this …

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

And a PRODUCT aggregates in a
very similar way …

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

The money accounting presentation
of the SUPPLY CHAIN may have this
form …

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...

… and the IMPACT ACCOUNTING for
the SUPPLY CHAIN needs to look
something like this …

MBC
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

The progress and performance of a
PLACE is also a result of the
aggregation of many economic
activities …

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

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).

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

Small decisions by people make all
the difference

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

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

PEOPLE need easy access to data
that will improve the decisions they
make …
● for themselves;
● for society; and
● for the environment.

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

FINAL WORD
There are more dimensions than just
money!
There are more perspectives than
just the corporate organization!

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

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