TVA p3 DRAFT B

WORKING
DRAFT - B
File: TVA-p3-DRAFT--160414.odp Peter Burgess (c) All rights reserved
TRUE VALUE ACCOUNTING

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
enable better metrics for the complex
socio-enviro-economic system that
we all live in. Metrics are powerful,
but they must be the right metrics.

Complex system … competing agendas

We live in a very complex
socio-enviro-economic
system …

Simply put … my position
is that the socio-enviro-
economic system that we
live in, is dangerously
dysfunctional

… and one of the reasons
for this is that we are
managing the system in
the wrong way ...

… and with the wrong
metrics.

This is a complex system
… and CHANGE will only
come about if there is a
systemic solution.

Peter Drucker, a well known
management guru famously said:
“You can't manage
what you don't
measure”

My contribution to
systemic change is work
on design, development
and deployment of a
better system of metrics.

TRUE VALUE
ACCOUNTING

I call this …
True Value Accounting

… a system based on the
time tested concepts of
conventional accounting
but expanded to include
accounting for IMPACT

A big problem is that
MONEY as a measure will
never work …

A measure should not
change over time but
always be the same!

MULTI DIMENSION IMPACT ACCOUNTING
COMPONENTS OF US MONEY SUPPLY

This slide shows what has
happened to M1, M2 and
M3 from 1959* to 2007
* My formal training in economics ended in 1961 … Peter Burgess!

US FEDERAL RESERVE ASSETS

This slide shows the
huge increase in the
balance sheet (assets)
of the Federal Reserve
in the USA since the
Great Recession

And this slide shows
the changes around the
time of the financial
crisis in 2007 and 2008

The amount of money in
the system has increased
in a dramatic way since
2008 …

A good unit of measure
does not change based
on the decisions of any
person or institution!

… what does this really
mean?

My conclusion is that
more than anything else,
we are measuring the
cumulative stupidity of
modern economic norms.

More evidence …
There is the problem of
GDP … Gross Domestic
Product

The Genuine Progress
Indicator (GPI) is a better
measure, but hardly part
of the conversation …

GPI (green) has been
going down for around 50
years, while GNP (red)
has been going up.

Business likes GDP … its
so much easier to make
PROFIT when the money
economy is growing.

I thought today I would
focus on a the elements
of True Value Accounting
that start with the letter P

Components of this Complex System
… the set that starts with the letter P
PROFIT
PROSPERITY
PEOPLE
POPULATION
PAYROLL
PRODUCT
PROCESS
PLACE
PLANET
POLLUTION
PRODUCTIVITY
PERSPECTIVE
PROGRESS
PERFORMANCE
PRICE
PLANNING
PURPOSE

The challenge is to
understand how all these
pieces fit together …

… and then to have units
of measure that enable
the numbering of all the
STATES and FLOWS in
the system …

I see the system as a
Socio-Enviro-Economic
system …

SOCIO is about PEOPLE
and everything that goes
into Quality of Life.

ENVIRO is about PLANET
and everything about the
environment and nature

ECONOMIC is about all
the Man Built Systems
and Structures (MBSS)
and about Man Built
Capital (MBC) ...

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

Over time the three
segments of this system
have evolved like this …

AT THE START THERE WERE FEW PEOPLE,
LITTLE MAN BUILT CAPITAL AND PLENTY OF
NATURAL CAPITAL THAT WAS AVAILABLE
FOR EXPLOITATION.

Hum
an
Capital
Man
Built Capital
Natural Capital

OVER TIME MORE PEOPLE, MORE MAN
BUILT CAPITAL AND EVENTUALLY TOO
MUCH PRESSURE ON NATURAL CAPITAL

This is a trajectory to
disaster … an existential
threat that is being ignored
by most of those with power
and influence.

This must be changed to
this …

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

Trajectory to disaster!
Over time it looks
something like this.
Period 1-8 past and present
Period 9-12, a future scenario

Period
1 2 3 4 5 6 7 8 9 10 11 12
HC
MBC
NC
HC
MBC
NC
HC
MBC
NC
HC
MBC
NC
HC
MBC
NC
HC
MBC
NC
HC
MBC
NC
HC
MBC
NC
HC
MBC
NC
HC
MBC
NC
HC
MBC
NC
HC
MBC
NC

PROFIT is a good place
to start … in part because
profit is a big piece of the
problem.

Making PROFIT has a
role in generating
PROSPERITY

… BUT making PROFIT
is only a small part of
this complex system.

PRODUCTIVITY

… where PRODUCTIVITY
is defined as making
more product (that is
goods and services) for
less labor …

… in other words more
PRODUCTIVITY means
more PROFIT … which is
a plus for PEOPLE who
are investors …

… yet PRODUCTIVITY
also means less
PAYROLL … which is a
negative for PEOPLE
who work for a living …

Over the past 40 years
since the 1970s almost
all the gains from
PRODUCTIVITY have
gone to investors and
not to working people …

PERSPECTIVE

… so change in
PAYROLL looks very
different depending on
the PERSPECTIVE.

… for PEOPLE a bigger
PAYROLL is better …
while for the PROFIT of
the organization, a lower
PAYROLL is better …

Because PROFIT, which
is measured in units of
money, is the dominant
metric of business and
economics …

… it is PROFIT that is the
driver of decisions. The
main and only PURPOSE
of business has come to
be the making of PROFIT.

… but the measurement
of PROFIT using only
MONEY transactions,
ignores IMPACT on
PLANET

… and the measurement
of PROFIT using only
MONEY transactions,
also ignores IMPACT on
PEOPLE

TRIPLE
BOTTOM
LINE

TBL (Triple Bottom Line)* is an
initiative to put PROFIT,
PEOPLE, and PLANET
into business decisions.
* An idea promulgated by John Elkington in 1995

… and now there is a
flurry of initiatives to
improve corporate
reporting of IMPACT …

GRI
IR
SASB

The Global Reporting
Initiative (GRI) is
probably the most
widely used.
Now based in the Netherlands

Integrated Reporting (IR)
is perhaps better, but not
as widely used yet.
An initiative from the UK

SASB (Sustainability
Accounting Standards
Board) is an emerging
initiative in the USA.
An initiative from the USA

There are a multitude of
emerging initiatives to
address different
specialized aspects of
impact …

IMPACT
INVESTING

The idea of IMPACT
INVESTING has been
around for around 20
years … but it has never
taken off

SRI
ESG
CSR
Sustainability
Shared Value

SRI … Socially
Responsible Investing

ESG … Environment,
Social and Governance.

CSR … Corporate
Social Responsibility

Sustainability …

Shared Value …

All of these are aiming in
the right direction … but
are not supported by
effective management
metrics …

… and they keep the
business organization as
the focus of performance.

BETTER
MANAGEMENT
METRICS

There has been massive
exponential growth in the
amount of data …

… and this has been
used very effectively in
the corporate world to
improve performance to
make more profit …

I have always argued that
the best management
information is the least
information to make the
right decision quickly …

So how do we start to put
management metrics into
play for everything in the
system

Start with the 3 main
segments …

Fundamentals of the Socio-Enviro-Economic System
Human
Capital
Man Built
Capital
Natural
Capital
Hum
an
Capital
Man
Built Capital
Natural Capital

Human
Capital
Man Built
Capital
Natural
Capital

Financial
Capital
Human
Capital
Man Built
Capital
Natural
Capital
Man Built
Capital
Natural
Capital
Human
Capital
Split out Financial
Capital from other
components of
Man Built Capital

Financial
Capital
Human
Capital
Man Built
Capital
Natural
Capital
SunSun
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

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

It is must be appreciated
that all financial value …
wealth … comes from
exploiting nature and
people …

Modern MBSS (Man Built
Systems and Structures)
makes this exploitation
very efficient.

So how to make metrics
more effective …

STATE
and
FLOW

This starts with being
very clear about what is
STATE and what is FLOW.

This has already been
done in corporate
business accounting
with double entry and
accruals.

The BALANCE SHEET is
all about STATE

The P&L* ACCOUNT is all
about FLOW.
* P&L ACCOUNT = PROFIT AND LOSS ACCOUNT

PROGRESS

PROGRESS is an
improvement in STATE

STEADY STATE

POSITIVE PROGRESS

DETERIORATION OF STATE

To measure PROGRESS,
simply measure STATE
at the Beginning and the
End of the Period …
BOP and EOP

PERFORMANCE

In general …
PERFORMANCE is the
relationship between
RESOURCES used and
PROGRESS achieved.

PERFORMANCE
depends on
PERSPECTIVE

PROFITS and RETURN
on INVESTMENT are key
measures of corporate
performance.

In general PROFITS and
INVESTOR WEALTH
have been achieved at
the expense of PEOPLE
and PLANET

Progress in improving
QUALITY of LIFE should
be the main measure of
PEOPLE and SOCIAL
performance.

Progress in remediating
the ENVIRONMENT
should be taken into
account … but HOW?

Progress in reducing
existential risks to the
functioning of the whole
system … again HOW?

The answer is there has
to be quantification of
everything that matters!

PRODUCT
and
PROCESS

There must be standard
value profiles for all
PRODUCTS … goods
and services … that
everyone buys and uses.

There must be standard
cost and value profiles
for all the PROCESSES
in the supply chain used
to produce PRODUCTS.

GOVERNMENT
ACCOUNTING

Government accounting
is mainly done on a CASH
BASIS, something not
allowed for business
accounting for 100 years!

… because of this it is
easy to game the system,
and corruption flourishes.

… and meaningful
reporting of government
performance does not
exist …

PRIORITIES

PEOPLE … like this baby

PEOPLE … parenting …
what we get and what we give!

PEOPLE … access to
EDUCATION …

PEOPLE … access to
HEALTH SERVICES …

PEOPLE … elder care …
something that every
senior should be able to
access …

PLACE … where we all
live and work and play …

PLACE … where air and
water pollution originates
and has to be stopped …

PLACE … where land use
issues can be addressed

PRODUCTS

PRODUCTS … that we
buy and use to support
the quality of life we want

PRODUCTS … that come
through a SUPPLY CHAIN

PRODUCTS … that have
both good and bad
impacts during USE

PRODUCTS … that have
further impact during the
post use WASTE CHAIN

PROCESSES

PROCESSES … that are
used to make PRODUCTS

PROCESSES … and make
PROFITS for PEOPLE who
are investors …

PROCESSES … and need
PAYROLL which gives
income to PEOPLE who
work for their living …

PROCESSES … that use
POWER with all its
associated impacts …

PROCESSES … that
cause AIR POLLUTION
with all its consequences

PROCESSES … and use
WATER and also cause
WATER POLLUTION with
all its consequences

PROCESSES … and in
too many cases degrade
the LAND

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:
http://www.truevaluemetrics.org/DBadmin/DBtxt001.php?vv1=N1-Slidesets-p3
More about the True Value Metrics initiative is at:
http://www.truevaluemetrics.org/DBadmin/DBtxt001.php?vv1=list0100-MainNav
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) or webpage involved.

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:
http://www.truevaluemetrics.org/DBadmin/DBtxt001.php?vv1=list0100-MainNav#1

TVA p3 DRAFT B

Recommandé

Recommandé

Contenu connexe

Tendances

Tendances (14)

Similaire à TVA p3 DRAFT B

Similaire à TVA p3 DRAFT B (19)

Dernier

Dernier (20)

TVA p3 DRAFT B