MDIA - PRESENTATION B - 140514c (work in progress)

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MULTI DIMENSION IMPACT ACCOUNTING (MDIA)
Peter Burgess
May 2014
peterbnyc@gmail.com
www.truevaluemetrics.org

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People (society)
Nature's
bounty
People built
constructs
The FRAMEWORK for Measurement
C:TVMwebsiteWebsiteTrueValueMetricsOrgTVM-papersMDIA-DiagramsMDIA-Presentation-B-140512b.odp

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This is NATURE'S BOUNTY. It is everything that
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is on the earth; and
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is in the earth; and
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comes from the sun.
NATURE'S BOUNTY is big but it is not infinite

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PEOPLE live on the planet earth.
Everything that people use to live their lives comes
from planet earth in some form or other
In the beginning PEOPLE were small relative to NATURE'S BOUNTY

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Over time PEOPLE constructed a complex that
enabled a better quality of life
In the beginning the PEOPLE BUILT complex was small relative
to NATURE'S BOUNTY.

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… and this PEOPLE BUILT complex grew bigger and
quality of life got better …

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… and this PEOPLE BUILT complex grew bigger and
quality of life got better … and population gets bigger …

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… until the system looks like this … and …

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… and then like this …
… with nature's bounty being compromised

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… quality of life being compromised …
… with nature's bounty being even more compromised

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… and eventually no human life
… and nature's bounty starting a million year recovery

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The FRAMEWORK for Measurement - II

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Beginning balance sheet
Period transactions
Ending balance sheet
This is the basic construct of money profit business accounting
The same construct may be used for value accounting

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The key idea is that you can measure progress
during a period by comparing the 'State' from
the beginning of the period (BOP) to the end of
the period (EOP).

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The underlying construct for MDIA is this:

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The purpose of MDIA is to be a system of
metrics for EVERYTHING … not just the metrics
for business profit, stock prices and GDP growth!
The PURPOSE of MDIA

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The purpose of MDIA is to be a system of
metrics for EVERYTHING … not just the metrics
for business profit, stock prices and GDP growth!
The metrics for everything must be as rigorous
for people and planet (environment) as conventional
accounting and corporate management information
systems are for profit performance.
The PURPOSE of MDIA

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You manage what you measure
The PURPOSE of MDIA

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When you change the way the game is scored,
You change the way the game is played.
The PURPOSE of MDIA

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you change the way the game is played.
Consider the case of basketball. There is a simple,
rigorous way of keeping score to know who wins.
The coach plans the game before the game starts.
Each play the coach reviews how it went.
Feedback … the coach changes the play to get
the best possible result in the next play.
Doing this … a good coach wins the game.
The PURPOSE of MDIA

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Every sport has sophisticated metrics ...
The PURPOSE of MDIA

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Every sport has sophisticated metrics …
But in the game of life … the only metrics are
wrong metrics!
The PURPOSE of MDIA

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This is not the first time!

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At the beginning of my career I worked on
the problem of 'computerization' and getting
old line managers to accept and adopt the
new fangled 'management information systems
and budgeting.
50 years later every well managed company
has very sophisticated MIS, budgeting and
control, all based on the central core the
company's financial accounting.

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Now the challenge is to get people and
organizations to adopt the metrics that are
needed so that the performance of society
is improved (optimized) and people have
a better quality of life while doing the least
damage to the environment.

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Now the challenge is to get people and
organizations to adopt the metrics that are
needed so that the performance of society
is improved (optimized) and people have
a better quality of life while doing the least
damage to the environment.
There are advanced mathematical constructs
for all sorts of things:
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Profit optimization;
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Capital market behavior;
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Advertising products and services;
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Weather forecasting;
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Selecting players for sports teams.
The PURPOSE of MDIA

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But in the game of life … the state of people
and the planet … there are very poor metrics
The PURPOSE of MDIA

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But in the game of life … the state of people
and the planet … there are very poor metrics
Metrics have to be:
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Easy to understand;
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Quick to produce;
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Low cost;
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Believable;
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Relevant;
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And the list goes on ...
The PURPOSE of MDIA

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The PURPOSE of economic activity is to sustain
and improve quality of life and standard of living.
The PURPOSE of Economic Activity

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People are at the center … organizations are
only a means to this end.

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High performance economic activity delivers
progress for people with the lowest possible stress
on the resources of the planet and damage to the
environment and natural ecosystems.

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The purpose of economic activity is to sustain
High performance economic activity delivers
progress for people with the lowest possible stress
on the resources of the planet and damage to the
environment and natural ecosystems.
This is not what has been taught at prestigious
business schools for the past 50 years.

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The core mission of the MBA education is
is to get prepared to manage an organization
so that it makes the most profit.

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More and more this has incorporated tools
for financial engineering that is so much
simpler than real engineering.

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More and more this has incorporated tools
for financial engineering that is so much
simpler than real engineering.
And so much less valuable for society!

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Conventional accounting is organization centric;
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It is only about money transactions;
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It is about impact of transactions on profit; and
●
It is about how profit impacts stock price.
Limitations of Conventional Accounting

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Decision are based on ROI … return on investment

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Decision are based on ROI … return on investment
EXTERNALITIES ARE IGNORED

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A big part of conventional accounting has been
turned over to 'gaming' the accounts so that
taxes are minimized.
This is a problem which has resulted in almost
all government entities on the planet being
short of money to do what they ought to be
doing.

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Conventional government accounting is
'cash based' accounting.
This is a system that is far less rigorous that
the 'accrual based' accounting that is used
for private sector businesses.
This system facilitates poor performance, and
worse, makes corruption way more difficult to
identify and stop.

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The ignored EXTERNALITIES are big and many:
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Impact on PEOPLE
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Impact on COMMUNITY / PLACE
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Impact on PLANET
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Resource depletion
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Environmental degradation

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The ignored EXTERNALITIES are big and many:
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Impact on PEOPLE
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Impact on COMMUNITY / PLACE
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Impact on PLANET
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Resource depletion
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There is also IMPACT that is associated with
PRODUCT
This flows all the way through the supply chain,
through use and into the post use waste chain.

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Product cost is only about the money transaction

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Product cost is only about the money transaction
But PRODUCT has a history through the supply
chain that is part of the 'trucost' of the product
which should be brought into account:
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People impact … good and bad;
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Taxes paid … or not paid;
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Raw materials consumed:
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Impact on resource depletion;
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Impact associated with energy consumed;
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Impact on environmental degradation;
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Resources applied to pro-good initiatives;
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Profits earned.

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The idea that what is good for business
is good for society is fundamentally wrong.
This may have been a reasonable proxy
for improved quality of life and standard
of living in the past … but that past ended
about 40 years ago.
Business Success -v- Social Success

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LABOR … because of improved labor productivity,
more production is possible with less labor, and
with less labor the role of labor in delivering quality
of life and standard of living is diminished.
We need to look at the world in a very different way

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LABOR … because of improved labor productivity,
more production is possible with less labor, and
with less labor the role of labor in delivering quality
of life and standard of living is diminished.
With more productivity PEOPLE should be having
a better quality of life than ever before.
This will only happen when the 'business model'
has people at the center and not profit.
See the Johnson and Johnson business 'credo'

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The Johnson and Johnson Credo.
Some things are written in stone …

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The Johnson and Johnson Credo.
EXTRACTS:
'We are responsible to the doctors, nurses and patients, to mothers
and fathers and all others who use our products and services …
'We are responsible to our employees …
'We are responsible to the communities in which we live and work …
'Our final responsibility is to our stockholders …
This was written in 1943 just before the company went public!

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COMMUNITY … because of technology it has been
possible to have globalization, and the role of the
local community has been diminished. This has had
a detrimental impact on quality of life.

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When issues like energy use are taken into account,
some of advantages of technology and globalization
are no longer positive.

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When issues like energy use are taken into account,
some of advantages of technology and globalization
are no longer positive.
When there is a local business payroll, the benefits
in the community are a multiple of the payroll. This
is sometimes referred to as the 'local multiplier'

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CONSUMPTION … poor people move up the socio-
economic ladder when they are able to earn enough
to buy things and consume more.
There is a point where more consumption has
relatively little impact on quality of life.

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There is more and more consumption, not because
it is needed to improve quality of life but because
the dominant corporate business model is based
on more and more sales to produce more and
more profit.

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There is more and more consumption, not because
it is needed to improve quality of life but because
the dominant corporate business model is based
on more and more sales to produce more and
more profit.
Whether or not this improves quality of life is of
no concern to most business organizations and
investors.

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PRODUCTS … it is products and services that are
the 'links' that are the modern economy.

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Products go around the globe … in the supply chain.
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Products get used around the globe
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Products become waste and pollute the globe

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Products are the 'node' where decisions are made
about 'to buy or not to buy' and 'to use or not to use'

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Products are the 'node' where decisions are made
about 'to buy or not to buy' and 'to use or not to use'
Products are used as raw materials for production
and become finished goods for sale.

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ECOLOGICAL SERVICES … the things that go on
in nature that are absolutely vital to the survival of
living things on this planet.
Without these, life would disappear.
These services are under stress. The environment
is in the process of changing far faster than at any
time in history … geological history, that is.
These services are ignored in conventional metrics,
both financial and economic. They must be taken
into account.

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GDP was introduced as a proxy measure for
economic activity in the 1930s. GDP as a
proxy for improved quality of life and standard
of living in may have been realistic in a world
where labor was a critical constraint … but
that ended somewhere around the 1970s.
GDP is a wrong measure of performance

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GDP was introduced as a proxy measure for
economic activity in the 1930s. GDP as a
proxy for improved quality of life and standard
of living in may have been realistic in a world
where labor was a critical constraint … but
that ended somewhere around the 1970s.
GDP growth is even worse as a measure of
socio-economic performance.

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These are better metrics:
GPI … Genuine Progress Indicator
GNH … Gross National Happiness

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These are better metrics:
MDIA is a better metric … but it is different
from GDP and these indicators.
These are macro indicators, while MDIA is
a management type metric.

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+ Personal consumption weighted by income distribution index
+ Value of household work and parenting
+ Value of higher education
+ Value of volunteer work
+ Services of consumer durables
+ Services of highways and streets
- Cost of crime
- Loss of leisure time
- Cost of unemployment
- Cost of consumer durables
- Cost of commuting
- Cost of household pollution abatement
- Cost of automobile accidents
- Cost of water pollution
- Cost of air pollution
- Cost of noise pollution
- Loss of wetlands
- Loss of farmland
-/+ Loss of forest area and damage from logging roads
- Depletion of nonrenewable energy resources
- Carbon dioxide emissions damage
- Cost of ozone depletion
+/- Net capital investment
+/- Net foreign borrowing
= GPI

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The term "gross national happiness" was coined in
1972 by Bhutan's King, Jigme Singye Wangchuck.
About 40 countries have embraced the idea, but it
remains too subjective for universal use.

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I was schooled in maths, physics and chemistry. At
university I studied engineering, and then studied
economics. Post university I became a Chartered
Accountant;
After audit experience, I have had a variety of
corporate management accounting roles, including
controller, budget manager, CFO, etc.
After corporate career, I became an international
management consultant, working on assignments
for World Bank, United Nations and private business
clients.
I have worked in more than 50 countries including
some of the richest places in the World and some
of the poorest. I have 'lessons learned' from all of
these experiences.
My background

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Some important concepts that drive the MDIA
approach to data, metrics and analysis
1) The basic ideas of chemistry … the chemical equations;
2) Newton's laws of motion;
3) Engineering thermodynamics;
4) Hydraulic flows;
5) Economic equilibrium;
6) Double entry accounting;
7) The concept of balance sheet and profit and loss account.
8) Value chains;
9) You manage what you measure;
10) There are limits to everything.
Key concepts built into MDIA

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MDIA is not the only initiative that is working on
improving the metrics used for business and
social decision making. Some of the these are:
1) GRI (The Global Reporting Initiative);
2) GIIRS (Global Impact Investment Reporting System)
launched by the B-Corp Institute;
3) IRIS (Impact Reporting and Investment System)
launched by GIIN (Global Impact Investing Network);
4) IR (Integrated Reporting) launched by IIRC
(International Integrated Reporting Council);
5) SASB (Sustainable Accounting Standards Board);
6) SROI (Social Return on Investment);
etc.
Other initiatives to improve reporting

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Some of the these are:
1) Trucost
2) CDP (formerly the Carbon Disclosure Project)
3) PUMA's Environmental Profit and Loss Account
4) TEEB (The Economics of Ecosystems and Biodiversity)
5) Natural Capital Coalition (formerly TEEB for Business)
6) ShrinkThatFootprint
etc.
More initiatives

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Most of the initiatives to improve reporting are
limited in scope, and almost universally have
the organization as the reporting entity.
MDIA has economic activity at the center with
people the primary beneficiary, and the natural
environment an integral part of the system.
MIDA is accounting … the basis for reporting

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MDIA is a multi-dimension system that accounts
for all the impacts of economic activity:
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on profit;
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on people;
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on planet;
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on place; and
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on product.
NB The data architecture for MDIA is designed to link
efficiently with easily accessible data in conventional
accounting and management systems.
MIDA is accounting … the basis for reporting

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Trucost is an organization that has made considerable
progress in quantifying 'trucost'. Trucost, the organization,
is based in the UK and has been associated with a number
of the ground-breaking studies of the impact of product on
the environment.
TruCost

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the environment.
One of these reports was PUMA's Environmental Profit and
Loss Account in 2010 that showed how little PUMA's owned
operations were impacting environment, but how much impact
on the environment was associated with the company's
supply chain.
TruCost

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the environment.
Another TruCost report was prepared for TEEB for Business
Coalition about the Top 100 Externalities of Business. This
report confirms the high natural capital cost that sectors like
coal power generation, iron and steel production, cement
manufacturing, cattle ranching, rice farming and wheat farming
have on the environment.
The TEEB for Business Coalition is now the Natural Capital Coalition
TEEB stands for 'The Economics of Ecosystems and Biodiversity'
TruCost

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ShrinkThatFootprint is an organization that is working
to inform society about the impact of ordinary day to
day decisions on the carbon footprint.
http://ShrinkThatFootprint.com
ShrinkThat Footprint

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Numbering the Triple Bottom Line (TBL) with
just three elements of Profit, People and Planet
sounds easy, but the reality is that society and
the economy are incredibly complex.
MDIA mapping

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the economy are incredibly complex.
In reality, predictive analysis of this level of
complexity cannot be done with any reliability
at all. There are simply too many variables.
MDIA mapping

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the economy are incredibly complex..
In reality, predictive analysis of this level of
complexity cannot be done with any reliability
at all. There are simply too many variables.
This becomes apparent in the following maps:
1) People at the Center
2) Organization at the Center
3) Product at the Center
4) Place at the Center
MDIA mapping

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MDIA map … People at the Center

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MDIA map … Organization at the Center

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MDIA map … Product at the Center

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MDIA map … Place at the Center

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The MDIA construct applied to malaria:
Note that the performance analysis is being done
at the community level where specific interventions
and specific impact are easy to measure

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The lowest cost data are data that already exist and may
simply be repurposed.
In an organization there are already conventional financial
accounts and a variety of key performance indicators and
other operating statistics. These existing data may be
linked to MDIA style impact analysis.
A growing amount of data are becoming available about
place. Such data needs to be organized so that it may be
used for MDIA analysis. Additional data may be needed.
A substantial amount of data are available about products
and services. Much of the data are related to product
profitability and advertising initiatives, but similar data may
be accumulated about all the impacts of products through
the product life cycle.
Social media has a focus on the individual. Some of these
data may be repurposed to support needed behavior change
And the achievement of better quality of life with reduced
lower impact on the environment.
The best data are low cost and high value

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Management by walking around
Early in my career I took part in a Du Pont training program
called 'Observation and Perception'. The trainees were
amazed at how little we saw before the course and how
much more we saw after the course. That was 50 years
ago and I still see a lot more than most people.
I have used 'walk arounds' as a an essential part of how
I work and how I learn things that will never appear in
formal reports and feedback systems.
A check with reality is very helpful.
Also advanced use of common sense.
The best data are low cost and high value

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A summary profit an loss account is going to have these elements:
* Revenues
* Cost of sales
* Gross margin
* Sales, general and admin costs
* Financial costs
* Taxes
* Profit
What do business accounts look like

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* Revenues
* Cost of sales
* Gross margin
* Financial costs
* Taxes
* Profit
It is not easy to determine impact on people and
planet from this summary information … but within
these numbers there is a lot of useful information.

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* Revenues
* Cost of sales
* Gross margin
* Financial costs
* Taxes
* Profit
It is not easy to determine impact on people and
planet from this summary information … but within
these numbers there is a lot of useful information.
This includes items like:
* Production / sales of products
* Payroll
* Purchase of products
* Purchase of energy
* Purchase of transportation

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Product is a key link that connects everything in the
modern global economy.
As product flows one way through the supply chain,
money flows in the other direction.
Product is used in an economic activity and new
Product comes out of an economic activity.
People make a 'buy' or 'not to buy' decision for a
product … and this, in turn sends a signal to the
producers and and the whole of the supply chain.
Product has a supply chain. Product also has impact
during use, and then in the post use waste cycle.
To a great extend use of product is an important
determinant of quality of life and standard of living.
Why is product important

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In conventional accounting product purchased and
sold is recorded based on a simple money transaction
at a price.
The elements of trucost that are included in the price
summarize everything that has happened as this
product has passed along the supply chain:
* materials
* energy
* payroll
* financial costs
* taxes
* pro-good expenses
* profit
There are also beneficial impacts arising as follows:
* benefits associated with payroll
* benefits associated with taxes
There are also negative impacts arising as follows:
* workplace safety
* resource depletion
* environmental degradation
What is the impact of product

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Why organizations are important
Organizations have organization which is missing
elsewhere in society. The processes used by
organizations are very important in the efficiency
of society and the economy.
Organizations have optimized for profit for the past
200 years, and this remains the dominant metric for
Performance.
Optimizing for profit (and profit alone) explains why
electricity is produced by low cost coal fired generating
stations with high GHG emissions rather than less
polluting alternatives.
This cannot change as long as money profit remains
the dominant metric. A cost of carbon pollution needs to
be costed into the cost of energy everywhere throughout
the energy supply chain.

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Place is important because all living is done in a place,
and all economic activity is done in a place.
It is possible to see things in a place. Without accounting
In a place, it becomes very difficult to have any meaningful
accountability.
Why place is important

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accountability.
In my own career I have spend a lot of time in different
places. What I have seen because of 'walking around'
in a place has given me a perspective on the performance
of society that has changed my life.
A specific example that I will never forget is the pollution
associated with international oil company operations in
the Niger Delta in Nigeria.

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accountability.
Another example are the places I have visited during the
catastrophic drought in the Horn of Africa in the 1980s.
I will never forget the impact that water has on life
itself. Yet rather little has been done to ensure water
security for all.

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Quality of life
Individual
Family
Friends
Community
National Society
Global Society
PRODUCTS AND SERVICES
Food
Water
Shelter
Clothing
Energy
Health
Education
Transport
Security
PEOPLE BUILT
CONSTRUCTS
NATURE'S
BOUNTY
Place (cities, towns, etc)
Business organizations
Industrial processes
Mining
Energy production
Built infrastructure
Governance institutions
Rule of law
Civil society organizations
Mineral resources
Energy resources
Land
Water
Air
Animal life (fauna)
Plant life (flora)
Resource depletion
Supplychain
trucost
PEOPLE
State of Place … impact on people,
resource depletion and environmental degradation
Profit of Business … impact on people,
Resource depletion and environmental degradation.
Impact of consumption
W
aste
chain
trucost
Standard values

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PEOPLE
Individual
Family
Friends
Community
National Society
Global Society
Food
Water
Shelter
Clothing
Energy
Health
Education
Transport
Security
HUMAN BUILT CONSTRUCTS
NATURE'S BOUNTY
Rule of law
Mineral resources
Energy resources
Land
Water
Air
Animal life (fauna)
Plant life (flora)
MDIA is based on the components
shown on the left
Note the hierarchy:
* People at the top
* It is products and services that deliver quality of life
* These are produced via human built constructs
* Everything depends in the end on nature's bounty
High performance is having PEOPLE with
a high standard of living and quality of life
AND
While making the least possible demand on
NATURE'S BOUNTY

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PEOPLE
Individual
Family
Friends
Community
National Society
Global Society
Food
Water
Shelter
Clothing
Energy
Health
Education
Transport
Security
NATURE'S BOUNTY
Rule of law
Knowledge
Mineral resources
Energy resources
Land
Water
Air
Animal life (fauna)
Plant life (flora)
People are at the top of the MDIA analysis.
There is progress when people get a better
quality of life (QoL) and standard of living.
More income and wealth is an element of
QoL, but it is not the only one.
Other elements are:
* Education, skills and experience;
* Employment;
* Access to job opportunities;
* State of health;
* Security;
* Access to food and other products
* Housing;
* Family and friends;
* Access to infrastructure;
* etc
What is the impact of people on the
environment? This is largely a function of
the consumption pattern of the people.

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PEOPLE
Individual
Family
Friends
Community
National Society
Global Society
Food
Water
Shelter
Clothing
Energy
Health
Education
Transport
Security
NATURE'S BOUNTY
Rule of law
Mineral resources
Energy resources
Land
Water
Air
Animal life (fauna)
Plant life (flora)
Note the role of products and services
In this framework.
It is products and services that give
people their quality of life and standard
of living.
Income or wealth makes it possible for
people to buy products and services.
Income comes mainly from employment.
Income may also come from the
investment of wealth.
Economic activities produce products and
services. These require investment, and
require labor.
Getting this in equilibrium in the prevailing
outdated monetary economy is difficult.
Money needs to be complemented by a
unit of value

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PEOPLE
Individual
Family
Friends
Community
National Society
Global Society
Food
Water
Shelter
Clothing
Energy
Health
Education
Transport
Security
NATURE'S BOUNTY
Rule of law
Knowledge
Mineral resources
Energy resources
Land
Water
Air
Animal life (fauna)
Plant life (flora)
Nature's Bounty is the foundation upon
which everything rests. It is the origin of all
the 'wealth' that presently exists for the
benefit of humankind.
For most of history economic activity has
been quite small relative to the environment.
Over the past 200 years growth of economic
activity now strains the natural environment.
* Depletion of natural resources;
* Depletion of water resources;
* Depletion of land;
* Depletion of forests;
* Depletion of mineral resources;
* Depletion of energy resources
* Depletion of biodiversity
* Degradation of the environment;
* Water pollution … rivers;
* Water pollution … oceans;
* Water pollution … aquafers
* Land … development
* Land … waste land fill
* Air pollution … particulates
* Air pollution … sulphur, nitrous oxides, etc
* Air pollution … greenhouse gases, CO2, methane

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PEOPLE
Individual
Family
Friends
Community
National Society
Global Society
Food
Water
Shelter
Clothing
Energy
Health
Education
Transport
Security
NATURE'S BOUNTY
Rule of law
Knowledge
Mineral resources
Energy resources
Land
Water
Air
Animal life (fauna)
Plant life (flora)
Note where business organizations are
in this framework. They are just one part of
the human built constructs
The purpose of such organizations is to
produce PRODUCTS AND SERVICES
in the most efficient way possible.
Efficient is defined as the most good (that
is valuadd, with the least consumption of
value.
This is similar to business profit and ROI
except substituting value units for money
There needs to be a mechanism to reward
investors when they invest for good just as
there is when they invest for profit.
Maybe this can be accomplished with a
construct like a Social Capital Market.

01:13 PM
PEOPLE
Individual
Family
Friends
Community
National Society
Global Society
Food
Water
Shelter
Clothing
Energy
Health
Education
Transport
Security
NATURE'S BOUNTY
Rule of law
Knowledge
Mineral resources
Energy resources
Land
Water
Air
Animal life (fauna)
Plant life (flora)
Place is a key component of MDIA because
it is place where everything of society and the
economy is located.
All economic activity is located in a place. The
economic activity is where people work and
get paid. People live in a place.
Pollution occurs in a place, and it may be
identified in a place by simple observation.
* Depletion of natural resources;
* Depletion of water resources;
* Depletion of land;
* Depletion of forests;
* Depletion of mineral resources;
* Depletion of energy resources
* Depletion of biodiversity
* Degradation of the environment;
* Water pollution … rivers;
* Water pollution … oceans;
* Water pollution … aquafers
* Land … development
* Land … waste land fill
* Air pollution … particulates
* Air pollution … sulphur, nitrous oxides, etc
* Air pollution … greenhouse gases, CO2, methane

01:13 PM
You only manage what you measure.
In order to measure, there must be a generally
accepted way to quantify value
Up to now the main thrust has been to put a
money value on different elements that go into
the making of impact.
While this may be helpful, it introduces all the
Issues associated with money.
MDIA simple quantifies ALL values relative to
each other, without any reference to how these
quantities exchange into money.
Quantification of Value - Standard Values

01:13 PM
A database of standard values is to be being built.
This database will be updated using a simple
crowdsourcing approach.
Small sets of 'standard values' will be presented
to users who will give their version of relative
values.
The database will be updated with additional
values.
Summary benchmark values will be calculation
from time to time to reflect the updated data

01:13 PM
The 'anchor' for the system of standard values
has been derived from the following:
A newborn child has a standard value of
1 million (1,000,000) standard value units (SVUs)
A human life has this standard value.
Depending on all the factors that are part of
the MDIA framework, this standard value adjusts
to reflect all factors that go into the quality of life
(QoL) of the individual.
A newborn child born to a relatively well-to-do family in (say)
Germany, will retain a value of 1 million SVU. On the other hand,
a newborn child born in a remote part of (say) Somalia will have
much lower value as a result of deficits in almost everything that
is needed to sustain the norm.

01:13 PM
More examples:
A newborn child born to a relatively well-to-do family in (say)
Germany, will retain a value of 1 million SVU. On the other hand,
a newborn child born in a remote part of (say) Somalia will have
much lower value as a result of deficits in almost everything that
is needed to sustain the norm.
A person in their 70s is unlikely to have retained a value of
1 million SVUs, in large part because expectation of life is now
quite short. The value may be something like 500,000. On the
other hand QoL may be quite good if health is good. However,
the moment that health deteriorates, the value drops dramatically
to (say) 200,000 or lower.
A person going through university has many threads associated
with their value. As they acquire more learning, the value goes up,
But there are expenses associated with the learning so another
component of the value goes down. If the job opportunities are
good the value tends upward, but if the job opportunities are poor
the value tends downward.

01:13 PM
My 'ah-ha' moment was when I became clear
about the difference between these three ideas:
Cost
Analysis of an Economic Activity

01:13 PM
Cost, Price

01:13 PM
Cost, Price, and Value.

01:13 PM
The way cost and price are used incorrectly in the media
is appalling, and as a result much of the discussion of
important issues is not at all useful.

01:13 PM
For example: Much of the discussion of the 'cost'
of healthcare is really to do with the price of healthcare

01:13 PM
For example: Much of the discussion of the 'cost'
of healthcare is really to do with the price of healthcare.
It was back in the 1980s that I first expressed the idea
that the biggest 'cost' in modern business and for
society in general and the economy is 'profit'!

01:13 PM
These are the money accounting elements:
●
Cost …........ cost of sales
●
Price …........ revenue
●
Difference … profit
These are the value elements of MDIA:
●
Value consumed;
●
Value produced / realized
●
Valuadd
Value is, of course, a multi-dimensional idea!

01:13 PM
These are the money accounting elements:
●
Cost …........ cost of sales
●
Price …........ revenue
●
Difference … profit
These are the value elements of MDIA:
●
Value consumed;
●
Value produced / realized
●
Valuadd
Value is, of course, a multi-dimensional idea!
Work by PwC in the UK is going in the same direction,
but broadly from an organization-centric perspective.

01:13 PM
Payroll … a cost for business
Every business person understands that in the money profit
accounts, the cost of payroll is an expense that reduces the
profits.

01:13 PM
Payroll … a cost for business
Every business person understands that in the money profit
accounts, the cost of payroll is an expense that reduces the
profits.
When productivity improvement makes it possible to reduce
the payroll, the the profits go up.

01:13 PM
Payroll … Impact for people and society
But the benefits derived from payroll are in society as well
as in the business.

01:13 PM
Payroll … Impact for people and society
But the benefits derived from payroll are in society as well
as in the business.
The impact on the individual when he/she loses his/her job and
no longer is earning $40,000 a year is bigger than the impact
on the business profit.
The individual and the family are not getting an amount
of $40,000 from the job remuneration.
The community does not have this money flowing through
the local businesses.
The profit of the organization has increased by some amount
… $20,000 (that is $40,000 less (say) $20,000 (the annualized
cost of the productivity improvement investment
The negative impact on society is $200,000 made up as follows:
* The impact on the individual … $40,000;
* The impact on the family … $40,000 ; and
* The local multiplier impact on the community
(probably between 2 and 4 (say 3) … $120,000

01:13 PM
Purchased materials
For the organization, purchased materials have a money cost,
and this cost reduces profit by the money cost of the purchases.
Efficient processes and product design reduces this cost and
increases profit.

01:13 PM
Purchased materials
For the organization, purchased materials have a money cost,
and this cost reduces profit by the money cost of the purchases.
Efficient processes and product design reduces this cost and
increases profit.
But purchased materials also carry within them the whole history
of the supply chain which must be taken into account. This may be
done using a trucost standard values. These incorporate the
value (supply) chain profile for each purchased material.
For MDIA there is the comprehensive 'value consumption' metrics
rather than simply 'money cost'.

01:13 PM
Products sold
For the organization, in the money accounting, the products sold
have a price, which translates into revenue. There is also money
based cost of sales and a computed gross margin and profit.
These products sold also carry within them the whole history of
the supply chain to this point.
From this it is possible to determine the impact on people and
planet associated with each product.
There is a positive social impact embedded in the product as a
result of jobs and pay. This may be offsets because of dangerous
workplace conditions and other issues.
There is a negative impact in the supply chain because of
impact on the environment
* Resource depletion …
* Environmental degradation … associated with extraction
* Environmental degradation … associated with transportation
* Environmental degradation … associated with refining
* Environmental degradation … associated with burning fuels

01:13 PM
Products bought
For a consumer, the price paid is the main metric.
The consumer is willing to pay the price because they think
that the 'value' of the product is higher than the price.

01:13 PM
Products bought
Usually a consumer does not give much thought to the
'trucost' of the product. Trucost is a cost that goes beyond
just money transactions, but incorporate externalities
that have impact on people and planet.
This is not part of the 'conversation”!

01:13 PM
Products bought
The perceived 'value' of the product would be different if the
'trucost' of the product was easily and generally accessible
as easily as everything else associated with selling the
product.

01:13 PM
Products bought
The perceived 'value' of the product would be different if the
'trucost' of the product was easily and generally accessible
as easily as everything else associated with selling the
product.
The key to this is 'easy'. Price is easy. Advertising makes
perceived value 'easy'. MDIA's standard values has to make
the 'trucost' value easy!

01:13 PM
Energy used
Energy is a critical input for the modern economy.
In the United States per capita GDP is around $50,000
and per capita carbon emissions associated with energy
use is around 20 tons CO2e.
In Europe the same GDP of around $50,000 is associated
with carbon emissions of around 8 tons CO2e.

01:13 PM
Energy used
This shows:
1) energy is a very important input
2) relative to Europe, the United States is wasteful
and/or terribly inefficient.
This shows also the importance of energy policy. The US
has had a low price low tax policy for energy. Europe has
had a high price high tax energy regime.

01:13 PM
Energy used
This shows:
1) energy is a very important input
2) relative to Europe, the United States is wasteful
and/or terribly inefficient.
This shows also the importance of energy policy. The US
has had a low price low tax policy for energy. Europe has
had a high price high tax energy regime.
In the end, the United States is at a global disadvantage.

01:13 PM
Energy used
While energy is a critical input for the modern economy,
fossil fuels have a significant negative impact on the
environment. These include:

01:13 PM
Energy used
The negative impact on society of renewable energy
sources is negligible compared to fossil fuels.
The world needs to embrace a paradigm change for
energy so that renewable energy becomes the norm
rather than the exception.

01:13 PM
Energy used
The negative impact on society of renewable energy
sources is negligible compared to fossil fuels.
The world needs to embrace a paradigm change for
energy so that renewable energy becomes the norm
rather than the exception.
Enough solar energy hits the planet every hour to power
the present energy intensive economy for a year!

01:13 PM
Analysis Formulations
For example: This is PwC in the UK

01:13 PM
Components of the PwC analytical framework
Business activities / Financial performance
●
Suppliers
●
Employees
●
Communities
●
Shareholders
●
Governments
●
Customers
Economic Impact
●
Intangibles
●
Exports
●
Investments
●
Profits
●
Payroll
Social Impact
●
Livelihoods
●
Health
●
Education
●
Empowerment
●
Community cohesion
Environmental Impact
●
GHGs and other air emissions
●
Water pollution
●
Waste
●
Land use
●
Water use
Tax Impact
●
Environmental taxes
●
Property taxes
●
Production taxes
●
People taxes
●
Profit taxes

01:13 PM
Analysis Formulations
For example: This is Kate Raworth (Oxfam)

01:13 PM
Accounting has been very successful over a very
long time in organizing large amounts of financial
data efficiently to manage large business
organizations.
Transaction information is organized into 'accounts'.
Accounts are either 'balance sheet' or 'profit and
loss accounts'.
Reporting for even very large organizations can
be summarized in a simple widely understood
manner.
MDIA does something very similar for every aspect
of the broader society, the economy and the
environment.
This is shown in the next few slides.

01:13 PM
May 2014
peterbnyc@gmail.com
www.truevaluemetrics.org
QUESTIONS?

MDIA - PRESENTATION B - 140514c (work in progress)

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