1. 1. MULTI DIMENSION IMPACT ACCOUNTING MDIA PROCESS THE MAIN DETERMINANT OF SOCIO-ENVIRO-ECONOMIC EFFICIENCY File: MDIA-p3-12-0-PROCESS-150707.odp Peter Burgess (c) All rights reserved
2. 2. MULTI DIMENSION IMPACT ACCOUNTING WORK-IN-PROGRESS. SLIDESET STILL IN DEVELOPMENT. UPDATES WILL BE POSTED OVER THE NEXT SEVERAL WEEKS
3. 3. PROCESS IS EVERYWHERE ... MULTI DIMENSION IMPACT ACCOUNTING
4. 4. PROCESS uses inputs (labor, materials, energy, knowhow, natural resources, etc.) and in the process degrades the environment; PROCESS produces PRODUCTS (goods and services) that enable good quality of life and living standards. MULTI DIMENSION IMPACT ACCOUNTING
5. 5. The EFFICIENCY of the PROCESS determines the IMPACT on PEOPLE and PLANET. EFFICIENCY is not only the PROFITABILTY of the PROCESS but also how much GOOD IMPACT there is for PEOPLE and how little BAD IMPACT for SOCIETY and the ENVIRONMENT. MULTI DIMENSION IMPACT ACCOUNTING
6. 6. MULTI DIMENSION IMPACT ACCOUNTING Sun BOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun EOP EFFICIENCY AND EFFECTIVENESS Reference see MDIA - CORE CONCEPTS
7. 7. However MULTI DIMENSION IMPACT ACCOUNTING
8. 8. 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 in financial or money terms while completely ignoring impact on everything else.
9. 9. The next slides show how the data architecture has to be designed in order for IMPACT to be accounted for in a rigorous and logical way MULTI DIMENSION IMPACT ACCOUNTING
10. 10. 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
11. 11. 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
12. 12. 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 File: MDIA-Framework-004-150411-WIP.odp Peter Burgess (c) All rights reserved 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
13. 13. 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
14. 14. PRODUCT AND SUPPLY CHAIN The MONEY dimension of the supply chain is routine; however The IMPACT of the supply chain on SOCIETY (PEOPLE) and ENVIRONMENT (PLANET) are rarely implemented in a coherent manner. This is very big next step! MULTI DIMENSION IMPACT ACCOUNTING
15. 15. MULTI DIMENSION IMPACT ACCOUNTING PRODUCT flowing through 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 Financial Dimension Zero to start Initial Stage STATE STATEFLOWFLOW
16. 16. MULTI DIMENSION IMPACT ACCOUNTING MBC Natural Capital Human Capital PRODUCT flowing through 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 Zero to start Initial Stage STATE STATEFLOWFLOW
17. 17. 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 Activities PROCESS are responsible for changing the STATE of everything
18. 18. 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
19. 19. The next slide shows how the money P&L report describes the impact of the money transactions on the money balance sheet of the operation while the IMPACTS of the operations on society and the environment are ignored because they are outside the reporting envelope. MULTI DIMENSION IMPACT ACCOUNTING
20. 20. 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
21. 21. A better framework for reporting would be this MULTI DIMENSION IMPACT ACCOUNTING
22. 22. 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
23. 23. So think of all this miniaturized: MULTI DIMENSION IMPACT ACCOUNTING
24. 24. 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
25. 25. 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
26. 26. 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
27. 27. MULTI DIMENSION IMPACT ACCOUNTING Sun One of the PROCESSES in a PLACEBOP EOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun
28. 28. MULTI DIMENSION IMPACT ACCOUNTING Sun One of the PROCESSES in a PLACE and also a PROCESS in an ORGANIZATION BOP EOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun
29. 29. 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 A big ORGANIZATION is the aggregation of many operations or PROCESSES in many PLACES
30. 30. MULTI DIMENSION IMPACT ACCOUNTING Sun Everybody has a role in making this world of ours a better place BOP EOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun PEOPLE
31. 31. and specifically this mean making all the PROCESSES that are used to support our QUALITY OF LIFE more efficient not only to make more PROFIT but also to have a BETTER IMPACT on SOCIETY (PEOPLE) and ENVIRONMENT (PLANET). MULTI DIMENSION IMPACT ACCOUNTING
32. 32. For example OIL AND GAS ... attention to the use of ENERGY; attention to the matter of EMISSIONS into the atmosphere; attention to the matter of waste water and solid matter polluting the environment; attention to the matter of oil pollution during production and transportation: and a whole lot more. MULTI DIMENSION IMPACT ACCOUNTING
33. 33. MULTI DIMENSION IMPACT ACCOUNTING Sun BOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun EOPOIL REFINERY
34. 34. For example in AGRICULTURE ... better stewardship of WATER use; attention to pollution from run-off containing fertilizers, herbicides, pesticides, etc; more responsible use of animal medication to avoid risk of drug resistance important for human health; the issue of worker exploitation and workplace safety; and a whole lot more. MULTI DIMENSION IMPACT ACCOUNTING
35. 35. MULTI DIMENSION IMPACT ACCOUNTING Sun BOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun EOPIRRIGATION
36. 36. For example TRANSPORTATION ... attention to the use of ENERGY; attention to the matter of EMISSIONS into the atmosphere; attention to the matter of waste water and solid matter polluting the environment; and a whole lot more. MULTI DIMENSION IMPACT ACCOUNTING
37. 37. MULTI DIMENSION IMPACT ACCOUNTING Sun BOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun EOPCONTAINER SHIP
38. 38. For example OFFICE BUILDINGS ... attention to the use of ENERGY; attention to the matter of EMISSIONS into the atmosphere; and a whole lot more. MULTI DIMENSION IMPACT ACCOUNTING
39. 39. MULTI DIMENSION IMPACT ACCOUNTING Sun BOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun EOPCITY BUILDINGS
40. 40. For example HEAVY INDUSTRY ... attention to the use of ENERGY; attention to the matter of EMISSIONS into the atmosphere; attention to the matter of waste water and solid matter polluting the environment; the issue of worker exploitation and workplace safety; and a whole lot more. MULTI DIMENSION IMPACT ACCOUNTING
41. 41. MULTI DIMENSION IMPACT ACCOUNTING Sun BOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun EOPHOT STRIP ROLLING MILL
42. 42. For example MINING ... attention to the use of ENERGY; attention to the matter of EMISSIONS into the atmosphere; degradation of the land; attention to the matter of waste water and solid matter polluting the environment; the issue of worker exploitation and workplace safety; and a whole lot more. MULTI DIMENSION IMPACT ACCOUNTING
43. 43. 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 GOLD MINING IN PERU
44. 44. For example CONSTRUCTION ... attention to the use of ENERGY; attention to the matter of EMISSIONS into the atmosphere; attention to the matter of waste water and solid matter polluting the environment; the issue of worker exploitation and workplace safety; and a whole lot more. MULTI DIMENSION IMPACT ACCOUNTING
45. 45. MULTI DIMENSION IMPACT ACCOUNTING Sun BOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun EOPCONSTRUCTION IN THE MIDDLE EAST
46. 46. CONCLUDING OBSERVATION ... more than anything else improving the EFFICIENCY of PROCESS will change the trajectory of global socio-enviro-economic performance; in the past efficiency has simply been about less COSTS and more PROFIT; in the future EFFICIENCY has to be about better QUALITY OF LIFE for PEOPLE with very little of no damage to the ENIRONMENT (PLANET) MULTI DIMENSION IMPACT ACCOUNTING
47. 47. INTEGRATED FINANCIAL AND IMPACT ACCOUNTING ... integration of financial and impact accounting will make it possible for very much better decisions to be made. high efficiency can be rewarded and there can be social accountability for bad practices and low efficiency. MULTI DIMENSION IMPACT ACCOUNTING
48. 48. CHIEF PERFORMANCE OFFICER Maybe in the near future it will be possible to rename the CFO (Chief Financial Officer) to be the CPO the Chief Performance Officer, a C-level position that integrates both financial performance and the impact on society (people) and the environment (planet). MULTI DIMENSION IMPACT ACCOUNTING
49. 49. 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. MULTI DIMENSION IMPACT ACCOUNTING
50. 50. 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 MULTI DIMENSION IMPACT ACCOUNTING