TRUE VALUE METRICS
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Accounting for ALL the Capitals
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STUFF
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INPAGE >>> (1) How the World Works (2) STATE - All Capitals (3) FLOW - Activities (4) MANAGEMENT
SITE NAVIGATION >>> SITE-NAVIGATION (0) TVM-BRIEF (1) How the World Works (2) STATE - All Capitals (3) FLOW - Activities (4) MANAGEMENT
Double Entry AccountabilityTM
for PEOPLE, PLANET and PROFIT
FACING UP TO CHRONIC UNSUSTAINABILITY
METRICS TO MAKE THE WORLD A BETTER PLACE
TRANSPARENCY / ACCOUNTING / ACCOUNTABILITY
WE WANT TO MAINTAIN AN OPEN KNOWLEDGE MODEL
A MODEST DONATION WOULD BE OF HUGE VALUE!
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SECTION I
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HOW THE WORLD WORKS
SOCIO-ENVIRO-ECONOMIC SYSTEM
IT'S A COMPLEX WORLD!
Managing complexity is difficult. In modern times, the system has been managed for the benefit of those who own financial capital. The dominant economic metrics have been GDP growth, corporate profit growth and stock market wealth. Management metrics have been aligned to these same goals, and have been very effective.
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THESE METRICS ARE USED FOR DECISION MAKING
GDP GROWTH CORPORATE PROFITS STOCK PRICES
AND THE RESULTS ARE FAR FROM SATISFACTORY
IN FACT, THE RESULTS ARE CATASTROPHIC
ECONOMIC INEQUALITY ENVIRONMENTAL DEGRADATION EXTREME WEATHER
Luxury Yachts Homeless camp Deforestation Ocean plastic Eye of storm Hurricane
While there has been impressive financial performance, it has come at the expense of catastrophic inequality with far too many left behind, degradation of the environment and climate instability with extreme weather events.
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TAKE INTO ACCOUNT ALL THE CAPITALS
GOING BEYOND FINANCIAL CAPITAL AND MONEY WEALTH
SOCIAL
CAPITAL


SOCIO
NATURAL
CAPITAL


ENVIRO
ECONOMIC
CAPITAL


ECONOMIC
Social and economic progress has been achieved over the past 200+ years by expoiting natural capital. All value originates with nature and everything depends on nature. This is unsustainable, but technological innovation can (must) be used to change things for the better.
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ACTIVITIES have IMPACT on ALL the CAPITALS
AGRICULTURE / FOOD
The flow of food is of immense importance. It is essential for life itself, and the flow has impact on society and the wellness of people, on the degradation of the environment and is also a big employer and wage payer as well as an economic source of profit.
ENERGY
Energy has been essential for the amazing progress realized since the beginning of the industrial revolotion, but the damage to the environment has not been accounted for, and now poses an existential threat to almost everything that have been normal for thousands of years.
PLACE
Where people live, and how they live is important for quality of life. The management of place needs to be a holistic process taking into consideration social impact, environmental impact and economics. Good infrastructure and the availability of services are essential.
WORK
Workers should be paid a decent wage that reflects a fair allocation of the benefits of productivity between workers and owners. This has not happened since the 1980s. Companies must be held accountable for their payroll profiles, including the payrolls that are embedded in their material and product flows.
MATERIAL / PRODUCTS
The flow of material from extraction to eventual post use waste has a variety of impacts on society and the environment at every stage. All of this should be accounted for and all the actors should be held accountable in a meaningful way. Every material and every product whould have a standard value profile to enable this accountability.
SOCIAL IMPACT Income flows and consumption support quality of life
The contributions people make are both paid work and a variety of unpaid valuable services.
There is net benefit AND change to capitals (hopefully positive)
ENVIRONMENTAL IMPACT Ecosystem services are a source of all value
System changes are happening faster now that at any time in history
Extreme weather events have become more frequent and dangerous
ECONOMIC IMPACT There are operating costs for all economic activities
There are benefits from economic activity
There is net benefit AND change to capitals (hopefully positive)
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MANAGE ALL THE ACTIVITIES AND ACTORS
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CONSUMPTION DRIVING THE MODERN ECONOMY
CONSUMPTION IMPACTS OF PRODUCTION
Quality of Life
SOCIO
Pollution
ENVIRO
Profit
ECONOMIC
Consumption is driving the modern economy. It looks like success as long as the depletion of natural resourcs and the degradation of the environment is ignored.There is strong correlation between better quality of life and more consumption in poor economies, but less so in mature rich economies. Rich economies are increasingly associated with catastrophic pollution, waste, inequality and inefficiency.
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MOST ACTORS ARE PEOPLE ... WHO SHOULD BE HELD ACCOUNTABLE
PEOPLE HAVE A VARIETY OF DIFFERENT ROLES
MANAGE SO THAT EVERYONE IS ACCOUNTABLE
AS INDIVIDUALS

Live life ... work & family
IN ORGANIZATIONS

Do the work ... make the decisions
AS INVESTORS

Allocate financial resources
Prevailing metrics and financialization have had mixed results ... very good economic ouitcomes for an elite few, but extremely disappointing for everyone else. The concentration of wealth and power is fueling global discontent in very destabilizing ways, including social discontent and anger at the establishment elites and increasingly out-of-control climate instability.
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NATURE IS ALSO AN ACTOR ... AND SHOULD BE RESPECTED
NATURE PREDATES PEOPLE BY BILLIONS OF YEARS
AND IS THE SOURCE OF ALL VALUE
FOR EXAMPLE NATURE MAKES A FISHERY SUSTAINABLE
JUVENILE NURSERY INDUSTRIAL FISHERY SEAFOOD MARKET
  • Natural Capital is foundation for this fish and food flow
  • Economic Activity captures fish, employs fisherfolk and earns profit.
  • Social Capital benefits from employment and food
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CONSIDER ALL THE PERSPECTIVES
NOT ONLY PROFIT, BUT ALSO PEOPLE, PLACE & PRODUCT
PROFIT

Economic goal
PEOPLE

Men, women & children
PLACE

Where people live
PRODUCTS

Quality of Life
There is valueadd when there is a positive balance from every perspective. Profit alone is not enough, people should also progress. And the progress of people is enhanced by the characteristics of the place. Products impact everything. The production of products is a factor in the generation of profits. The consumption of products is a factor in the quality of life of people. Not least, the place influences where products may be and are produced.
BUT ALSO CATASTROPHIC DAMAGE TO SOCIETY AND THE ENVIRONMENT
GEOPOLITICS
WAR / DESTRUCTION
WATER SHORTAGE
DEATH from DROUGHT
EXTREME WEATHER
GETTING WORSE
POLLUTION
NATURE AT RISK
The value destruction associated with a wide range of negative externalities are ignored in the assessment of investment and the performance of the modern economy. Taking these matters into consideration changes the picture of performance dramatically and explains the modern crisis of confidence in leadership.
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CONSIDER THE RESULTS
SINCE WWII, GREAT FINANCIAL PERFORMANCE TILL 1970s
PRODUCTIVITY UP
WAGES UP

From end WWII to around 1980
STRONG
GDP GROWTH

GDP growth has been very strong
CAPITAL MARKETS
STOCK VALUES UP

Stock market has been spectacular
ESSENTIAL
HOUSING

More decent housing to around 1980
BUT MOST WORKERS IN THE WEST LEFT BEHIND SINCE THEN
PRODUCTIVITY UP
WAGES FLAT

From around 1980 to present time
GDP GROWING
GPI FLAT

While GDP is up, progress (GPI) is flat
GROWING
INEQUALITY

More obscene luxury
ESSENTIAL
HOUSING

Slums proliferating since 1980
AND NATURAL CAPITAL BEING DANGEROUSLY DEGRADED
RESOURCE
DEPLETION

Mining for natural resources
ENVIRONMENTAL
DEGRADATION

Deforestation for palm-oil plantations
INDUSTRIAL
POLLUTION

GHGs, liquids and solids
CLIMATE CHANGE
EXTREME WEATHER

Extreme weather
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IMPERATIVE FOR RADICAL ACCOUNTABILITY
EVERYTHING FOCUSED ON PROFIT PERFORMANCE MAKES NO SENSE
We talk about profit and money and wealth But not about low wages, poverty and deprivation And how the system is rigged in favor of the wealthy And all sorts of abysmal hidden corporate behavior
The only group that are protected systemically are investors ... everyone else nay be lied to with impunity. It is called the First Amendment. But there is nothing to stop society from doing RADICAL ACCOUNTABILITY so that misfeasance in every aspect of society is exposed.
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SECTION II
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STATE
THE STATE OF ALL THE CAPITALS
SOCIAL
CAPITAL


SOCIO
NATURAL
CAPITAL


ENVIRO
ECONOMIC
CAPITAL


ECONOMIC
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SOCIAL CAPITAL
THE STATE OF SOCIETY
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THREE SEGMENTS OF SOCIAL CAPITAL
HUMAN CAPITAL RELATIONSHIP CAPITAL LOCATIONAL CAPITAL
Individual
The basis for everything important ...
Family / Community
The family an important part of the social structure
Place / Community
The place factors into quality of life

Individual ... Human Capital
Quality of life at the individual level
Past: Value emerging from childhood, parenting, education, healthcare, family and friends, experience ...
Present: Current situation, job and earnings, family and friends, housing, health, wealth, etc. ...
Future: How well prepared. Possibilities in the place.
Family & Friends ... Relationship Capital
The family and friends are important parts of the social structure
The relationships associated with family, friends and connections magnifies or diminishes human capital.
A good idea that is never shared has no value, but the network effect of many connections may make it valuable.
Place / Community ... Locational Capital
The place factors into quality of life ... the place really matters.
A high potential place augments social capital and is diminished by a low performance place.
A really smart place is driven by strategy where the potential of people is well understood and used to good effect.
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PEOPLE ARE THE ACTORS IN THE SYSTEM
It is people (actors with identities) that must be held accountable.
AS AN INDIVIDUAL
AND/OR AS FAMILY
AS AN INDIVIDUAL
IN AN ORGANIZATION
AS AN INDIVIDUAL
MAKING INVESTMENTS
AS AN INDIVIDUAL AND/OR AS FAMILY
The individual, and family and friends are at the center of everything. Everyone should be progressing towards a better life, both individually and collectively. Individuals should have the freedom to succeed, but enough support never to fail.
AS AN INDIVIDUAL IN AN ORGANIZATION
Most economic activity is driven by decisions made in the corporate business setting. These decisions are made by people and it is people that must be held accountable. Better decisions will be made when there is effectiving numbering of social, environmental and economic performance.
AS AN INDIVIDUAL MAKING INVESTMENTS
It is also individuals that make investment decisions that allocate financial resources. Better socio-enviro-economic performance will be achieved when stock prices are decoupled from profit performance, but rather linked to social, environmental and economic performance.
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NATURAL CAPITAL
NATURE / SOURCE OF ALL VALUE
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SIX SEGMENTS OF NATURAL CAPITAL
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LAND
WATER
AIR
RESOURCES
BIODIVERSITY
ECOSYSTEMS
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LAND
There is a limited amount of land on the planet. Land is one of the key planetary limits. It is vital that land is used in a sustainable manner rather than being degraded in the interest of unsustainable economic performance.
WATER
Without water, life as we know it cannot exist. In conventional economics, water is undervalued because for a big part of history it has been abundant and easily accessed. This is changing and water must now be valued more appropriately.
AIR
Clean air is good for human health as well as fauna and flora. Many steps have been taken to reduce the problem of air pollution that we can see, but not enough for the air pollution like CO2 that we cannot see, yet still dangerous.
RESOURCES
Natural resources have helped power the industrial revolution and enabled massive improvements in quality of life, but there are limits because of both depletion and egradation of natural capital. Better use of resources is essential.
BIODIVERSITY
Biodiversity is important. Humankind has emerged over millions of years as a result of massive biodiversity and complex evolution. The future of life depends on the continuing health of the biosphere in all its manifestations.
ECOSYSTEMS
There is genius in the way ecosystems have evolved over millions of years to stabilize natural systems in a way that has enabled life as we know it. We should be concerned that in the past 200 years this stability is being compromised.
  • Nature is the source of ALL value
  • To improve quality of life, nature has been exploited, depleted and degraded.
  • Nature is rapidly degrading but ignored in conventional financial and economic analysis.
  • This is NOT sustainable.
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ECONOMIC CAPITAL
ECONOMY
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THREE MAIN SEGMENTS OF ECONOMIC CAPITAL
FINANCIAL

Adding to wealth is dominant goal ...
PHYSICAL

Tangible physical structures ...
INTANGIBLE

Important elements for quality of life ...
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FINANCIAL CAPITAL
THE FINANCIAL ECONOMY
CORPORATE PROFITS Profits up CAPITAL MARKETS Stock Prices Up INEQUALITY Inequality Up
In modern times, the dominant economic metrics have been GDP growth, corporate profit growth and stock market wealth. Management metrics have been aligned to these same goals, and have been very effective. The outcome for wage earners had not been as good and there has been a massive increase in inequality. TrueValueMetrics seeks to enhance accountancy to include Social Impact and Environmental Impact.
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MOST WORKING MIDDLE CLASS OUTCOMES NOT GOOD
STOCKS UP
Stock market has been spectacular
WAGES FLAT
Productivity grows but wages flat.
GDP growing / GPI flat
While GDP is up, progress (GPI) is flat
AND IMPACT ON NATURAL CAPITAL IGNORED
RESOURCE
DEPLETION

Mining for natural resources
ENVIRONMENTAL
DEGRADATION

Deforestation for agriculture
CLIMATE
INSTABILITY

Extreme eather events
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PHYSICAL CAPITAL
THE PHYSICAL (REAL) ECONOMY
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LAND & BUILDINGS INFRASTRUCTURE PROCESSES EQUIPMENT
WORKING CAPITAL
  • Modern engineering and technology is deployed and exploited to improve profit performance.
  • Rather little technology is deployed to make society and the world a better place.
  • The modern 'real' economy is pretty amazing, but not so much in the news (Western news, that is).
  • Many of the more amazing things are going on in the Middle East (e.g. Dubai) and Far East (China).
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LAND AND BUILDINGS
COMMERCIAL FARMLAND HOTEL APARTMENTS ROW HOUSES SUBURBAN Buildings represent a big part of the physical economy, and are a big part of life. They have a long life and require a substantial amount of materials to build. They are where people live their lives. Buildings have impact on the environment during construction and again during their life because of operational energy use.
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INFRASTRUCTURE
BRIDGES ROAD RAIL PORTS WATER TELECOM Infrastructure makes a big difference to a place. The lack of infrastructure is one of the root causes of poverty in a place. Infrastructure has substantial cost to build, but long life means that infrastructure benefits accrue over a long time. The question of pubic or private ownership of infrastructure is an important ongoing debate.
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MINING AND MANUFACTURING PROCESSES
MINING I MINING II IRON & STEEL
CONCRETE
PETROCHEMICALS
PULP & PAPER
Processes make products which are needed to satisfy the needs of people ... but the social and environmental efficiency of processes is not accounted for effectively. Business understands the profit performance of processes, but without better metrics, social and environmental improvement get ignored.
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MACHINERY, EQUIPMENT & VEHICLES
SHIPS AIRCRAFT BUSES
AUTOMATION
MINING
OIL & GAS
The performance of machinery, equipment and vehicles has progressed enormously over the last century. Human brawn is no longer an important part of the production process, rather it is the machine that gets the work done. In the future is is not only going to be the brawn of the machine but also the brain of the machine. The challenge is to make this a benefit to society, the environment and the economy.
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PRODUCTS / WORKING CAPITAL
SHIPPING TRUCKING
FULFILLMENT
WAREHOUSE
RETAIL
E-COMMERCE
Working capital is a vital component in the economy enabling the efficient function of essential organizations. Technology has enabled substantial improvement in the operation of the supply chain and indeed has made possible global logistics that have become a key part of the modern economy.
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INTANGIBLE CAPITAL
THE INTANGIBLE ECONOMY
Some of the things that make life worth living
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KNOWLEDGE CAPITAL INSTITUTIONAL CAPITAL CULTURAL CAPITAL
CAMBRIDGE UNIVERSITY GOVERNMENT / RULE OF LAW ARTS / RELIGION / ETC
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KNOWLEDGE CAPITAL
EDUCATION / RESEARCH / TECHNOLOGY
KNOWLEDGE
Albert Einstein
EDUCATION
Cambridge
BIO-TECH
Genetic code / DNA
AUTOMATION
Auto Assembly
DIGITAL TECH

Quantum Computing
AEROSPACE

Space Shuttle
It is human imagination that makes knowledge possible. Humankind now has more easy access to knowledge than at any time in history in all sorts of fields. This knowledge has the potential for both good and bad ... nuclear power or nuclear bombs ... digital distribution of news or dangerous misinformation ... cures for disease or biological warfare ... and so on. There are huge possibilities if well used.
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INSTITUTIONAL CAPITAL
GOVERNANCE / RULE OF LAW / ORGANIZATIONS
Legislation Companies Police Courts Military Accounting The challenge of ordering society in an effective way has been in play for a very long time, and getting this right continues to be a subject of great debate. What is clear is that when the enabling environment of governance, rule of law and organizations becomes dysfunctional, quality of life rapidly degenerates and the system won't work.
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CULTURAL CAPITAL
MUSIC and ARTS / RECREATION / RELIGION
Music Drama Opera
Dance
Religion
History
Cultural capital comprises all sorts of activities that give pleasure and make life worth living. They nourish the soul. Culture is not a core part of conventional economic and financial analysis, but it should be because it is such an important component of quality of life. To have a sustainable world there is a need for less materialism, and more cultural activity.
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SECTION III
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FLOW
INPUTS ... ACTIVITIES ... OUTPUTS
ACTIVITIES / ACTORS / PERSPECTIVES
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STREAMS / STRANDS / STRINGS
WHAT ARE ALL THE IMPACTS FOR THE LIFE CYCLE OF PRODUCTS?
NATURE EXTRACTION
SUPPLY CHAIN PRODUCTION
USE
POST USE
Everything that is used to support a high standard of living and quality of life has a long supply chain, then production and distribution, then use, and then a post use waste chain. For metrics to be meaningful, all of these stages must be brought into account.
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CONSIDER ALL THE PERSPECTIVES
EMPOWER ALL THE ACTORS
AND ACCOUNT FOR IMPACT ON ALL THE CAPITALS
TECHNOLOGY

Enabler of progress
ORGANIZATIONS
More than profit
PEOPLE

Men, women & children
PLACE

Where people live
PRODUCTS

Quality of Life
Some people are very fortunate, and others less so. The accident of birth should not be the main determinant of success and a happy productive life. There should be opportunity for everyone. The characteristics of the place make a big difference to quality of life. The choices people make regarding the products purchased and consumed impact the person, the economy and the environment.
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ROLE PLAYED BY TECHNOLOGY
PRODUCT CONSUMPTION IS A DRIVER OF THE MODERN ECONOMY
CONSUMPTION
PROCESSES
MATERIALS
ENERGY
PAYROLL
Consumption is driving the modern economy. It looks like success as long as the depletion of natural resourcs and the degradation of the environment is ignored.There is strong correlation between better quality of life and more consumption in poor economies, but less so in mature rich econmies. Rich economies are increasingly associated with waste, luxury and inefficiency.
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ROLE PLAYED BY CORPORATE ORGANIZATIONS
ALL HAVE SUBSTANTIAL IMPACT ON SOCIETY AND THE ENVIRONMENT
DIGITAL TECH
Google
OIL & GAS
ExxonMobil
AERO ENGINES
Rolls Royce
BANKING
HSBC
ENGINEERING GE FOOD Unilever
Most of the global economy comprises products that are produced by very big organizations that are complex with multiple factories in many different locations, and supply chains that span the globe. It is not easy to understand these companies in a way that makes it possible to hold them accountable for their behavior. Nevertheless, despite their complexity, they are able to communicate their profit performance to investors, but not their social impact nor their environmental impact, even where these are material. This has to change.
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ROLE PLAYED BY INDIVIDUAL PROCESSES & FACTORIES
WHAT IS THE IMPACT ON SOCIETY AND THE ENVIRONMENT?
MINING
LOGISTICS ENERGY
ELECTRICITY PRODUCTION
OIL REFINERY
Every sector, every industry, has become very specialized and over a long period of time has been optimized for profit performance. Profit performance has been exceptional for decades, but too little attention has been paid to social and environmental issues. This must change. Process improvements are essential and must focus in improving social impact and environmental impact as well as merely being more profitable.
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MANAGE FOR THE SECTORS / INDUSTRIES
WHAT IS THE IMPACT ON SOCIETY AND THE ENVIRONMENT?
MINING
LOGISTICS ENERGY
FOOD - Vegetables HOUSING HEALTH
AG-GRAIN
PRODUCTION
REFINERIES
FOOD - Meat EDUCATION HEALTH
AG-LIVESTOCK RAIL ELECTRICITY CLOTHES MOBILITY HEALTHCARE
Every sector, every industry, has become very specialized and over a long period of time has been optimized for profit performance. Profit performance has been exceptional for decades, but too little attention has been paid to social and environmental issues. This must change. Process improvements are essential and must focus in improving social impact and environmental impact as well as merely being more profitable.
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PEOPLE ... THE ULTIMATE ACTORS
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PEOPLE AS CONSUMERS
Food - Vegetables Food - Meat Housing Clothes Mobility Recreation
More consumption correlates to a better quality of life up to a certain level. Beyond that level more consumption may well have negative consequences, as for example too much food may result in obesity and diabetes or worse.
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PEOPLE AS CONTRIBUTORS
AS INDIVIDUALS ... Live life ... Work & family
Every individual is different, both in what they are capable of doing and how they want to live their lives. People should have the freedom to succeed in all sorts of good ways, and should be helped so that they never fail. People need the facts about themselves and everything around them.
IN ORGANIZATIONS ... Do the work ... Make the decisions
Companies are important drivers of the economy. Within companies it is people that make the decisions, and for many decades the dominant metric for success has been profit without taking into consideration impact on society and nature. This must change. Profit performance on its own is not enough!
AS INVESTORS ... Allocate financial resources
The allocation of capital shapes the future of the economy. People make the decisions about what investments should be made and have been guided mainly by the potential for growth of financial wealth without taking into consideration issues relating to society and the environment. These other issues matter.
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PLACE
THE CRITICAL VALUE ADD FROM LOCATIONAL CAPITAL
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CITIES / COMMUNITIES
Cities and Communities are where people live their lives
MAIN ST.
SCHOOLS CHURCHES POLICE RECREATION HOSPITALS
SUBURB
UNIVERSITIES HOUSING FIRE RELAXATION PERSONNEL
All living is local. Everything is needed in the place to enable a decent quality of life (QoL). Everything is interconnected. Nothing important can be missing ... multi-sector is essential. When the place is dysfunctional life is much more difficult.
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COUNTRIES
More than 200 countries ... with vastly different characteristics
There is plethora of data averaged at the country level. These data at the country level useful for broad comparisons, not so much for management of performance and decision making. Specifics of different locations within a country are essential for better allocation of resources and problem solving.
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PRODUCTS
PRODUCTS IMPACT PEOPLE AND ORGANIZATIONS AND NATURE
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NEEDED FOR A DECENT QUALITY OF LIFE
Food - Vegetables Food - Meat Housing Clothes Mobility Recreation
More consumption correlates to a better quality of life up to a certain level. Beyond that level more consumption may well have negative consequences, as for example too much food may result in obesity and diabetes or worse.
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PRODUCTS START WITH NATURE AND HAVE A LONG LIFE CYCLE
NATURE SEA
STEEL
EATING
WASTE RECYCLING
NATURE ROAD
REFINING
CONSUMING
LANDFILL RECYCLING
EXTRACTION
RAIL
POLLUTION
DRIVING
FLOODS
NO WASTE
Products enable consumption that improves quality of life. The production of products is a critical economic activity and source of profit for companies. Production and products are only sustainable if they do not degrade the environment. Most modern industrial process are catastrophically unsustainable. Smarter processes are needed together with smarter products, smarter consumers and systems to enable a circular economic model.
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SECTION IV
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MANAGEMENT
MOVING THE NEEDLE ON IMPORTANT ISSUES
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Peter Drucker famously said you manage what you measure ...
Peter Drucker famously said 'You manage what you measure'
This is undoubtedly true ... in the corporate world, the components that go into making profit are measured intensely in order to improve profit performance ... and it works!
Unfortunately, we don't do anything like the same amount of measuring in order to improve society and avoid degrading the environment ... and we don't have any easy way of talking about social performance and environmental performance in the same way that we are able to talk about corporate performance and investment portfolio performance. This has to change
We argue that you had better measure the right things
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ABOUT THE TVM INITIATIVE
image missing Numbering the Triple Bottom Line

Accounting for ALL the Capitals
image missing
TRANSPARENCY and ACCOUNTABILITY
METRICS TO MAKE THE WORLD A BETTER PLACE
ACCOUNTING FOR EVERYTHING THAT MATTERS
MANAGEMENT TO MOVE THE NEEDLE
  • Uses the core concepts of conventional accountancy.
  • Enhances the concepts to address the issue of social impact.
  • Also incorporates the impacts linked to environmental changes.
  • Considers multiple perspectives beyond the corporate reporting entity.
  • Accounts for impacts of any activity on social, natural and economic capitals.
  • Accounts for energy use in processes and embedded in products.
  • Acccounts for social impact associated with profile of payroll.
  • Accounts for impacts that have material impact on sustainability.
Data at the Center Data Everywhere
These schematics were drawn around 1995 early in the days of electronic data collection. What was expensive then, has now become relatively low cost. However, the challenge remains to make use of data in a meaningful way so that better decision get made.
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THE TRENDS ARE CATASTROPHIC
ACCOUNTING FOR SOCIAL, ECONOMIC AND NATURAL CAPITALS
COLOR CODE DISTANT PAST PRESENT NOT GOOD FUTURE COLLAPSE
What science shows is that nature is the foundation for everything. Most of the time there is a complex natural balance or equilibrium, but periodically it gets out of balance and many changes take place very rapidly until another equilibrium is found. Because of humankind's economic activity we have arrived at a tipping point and the equilibrium has been disturbed. It is impossible to predict what future the changes will be .,.. but we do know that there will be massive change and it is unlikly that humankind will have the capacity to do very much about it. BE WARNED! GDP growth will aggravate this crisis, not solve it, but smart policy and technological investment and deployment might mitigate the problem significantly. Inaction is criminal.
Aggregated Socio-Enviro-Economic Trends
What has been happening ... What needs to happen in the immediate future
THE WHOLE SYSTEM THE ACTUAL PAST A NO CHANGE FUTURE A BETTER FUTURE
More and more DEPLETION and DEGRADATION of NATURAL CAPITAL is UNSUSTAINABLE
⚫ Productivity and profits have increased ECONOMIC CAPITAL substantially over decades.
⚫ Meanwhile massive increase in inequality has compromised SOCIAL CAPITAL.
⚫ Most industrial activity has resulted in dangerous degradation of NATURAL CAPITAL.
⚫ Continuing in this way is an existential risk. There is a scientific consensus that massive changes are essential.
⚫ A better way is essential ... a system that enables prosperity without environmental damage
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ELEMENTS OF THE TVM INITIATIVE I
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A KEY CONCEPT FOR EFFICIENT NUMBERING FOR MANAGEMENT
THERE MUST BE A BASIS FOR COMPARISON
THERE MUST BE AN EASY WAY TO MEASURE PROGRESS RELATIVE TO THE FIXED BASIS
Conventional accountancy has used 'standard cost accounting' and 'variance analysis' for decades. It is a very powerful way of reporting about a fixed normal and variances from the normal. For the TVM accounting enhancement the same basic concept has been expanded for all the elements associated with everything. There is a lot of detail, but the reporting summary is very short and simple.
MATERIALITY
Paying attention to everything makes effective accountability impossible. Rather most of the attention should focus on issues that are the most material, and every effort made to improve these matters.
EASE OF IMPROVEMENT
Initiatives to improve performance should avoid using resources where improvement is very expensive or impossible. Some improvements are relatively quick and easy and can start to move the needle.
STANDARD VALUE PROFILE
TVM is developing a small number of standard value profiles (SVPs) as a reference basis for major components of the socio-enviro-economic system. The number of these SVPs will be increased over time after their operational effeciveness has been confirmed.
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THREE KEY PERFORMANCE MEASURES APPLICABLE EVERYWHERE
ENERGY USE
THE UNSUSTAINABILITY OF THIS ENERGY USE
Energy is a foundational element for life and almost all economic activity.
One easily accessible measure of energy consumption is the money spent to buy energy.
For reference, it is possible to calculate what a sustainable amount of energy would cost.
Finally, the level of unsustainability may be calculated. The average for all the USA is likely to be around 5 ... meaning that if everyone in the world consumed like the average American, there would need to be 5 planets.
PAYROLL PROFILE
WHAT IMPACT ON SOCIETY
Inequality is one of the biggest issues of our time. It is caused in large part because people who work for a living are being paid too little and people who own things are being rewarded too richly.
A payroll profile shows several things:
(1) the way payroll costs are distributed between those at the top and those at the bottom.
(2) the distribution of the embedded payroll in the products between different parts of the supply chain / legal entities / countries.
MATERIAL FLOW
WHAT UNSUSTAINABILITY FOR THIS FLOW?
The size of an economic activity is related in good part to the mass or volume of the material flow associated with the activity. The flow of material contains an embedded amount of social impact and environmental impact as well as economic cost which change as the material flows through the socio-enviro-economic system. These flows are drivers of good and bad impact throughout the system and a measure of the unsustainability of the system.
TAX PROFILE
WHAT IS THE SCALE OF TAX OPTIMIZATION?
Many executives believe that a company has a duty to minimize taxes as much as possible and permitted by law. This may be a correct legal position, but it is a flawed moral and ethical position and a formula for a failing world. Taxation is essential in support of government and its vital services. Reasonable profits (a reasonable return on assets employed) should be taxed at a quite low rate, but high profits relative to return on assets employed should attract a much higher tax rate. Paying taxes is a corporate social responsibility.
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ELEMENTS OF THE TVM INITIATIVE II
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ENHANCED ACCOUNTANCY
TVM uses the core framework of conventional accountancy, that is balance sheet accounts and profit and loss account accounts to account for the financial impact (money and profit) of a reporting entity. The same basic concepts are used to account for social and environmental impact using separate value metrics for social impact and environmental impact. The TVM approach may be applied to all of the actors in the socio-enviro-economic system.
RADICAL ACCOUNTABILITY
There has been accountability of business to the owners (investors / stockholders) with periodic reporting and audit. In the modern day it is time for business to become accountable for impacts on society and the long term sustainability of the environment.
MOVING THE NEEDLE ON IMPORTANT ISSUES
Talk is easy, but moving the needle requires a framework for management involving data, plans, action, review and feedback. The fastest progress is achieved with rapid iterations of small steps at the lowest level of the pyramid.
USING DATA TO ENABLE BETTER DECISIONS BY ALL THE ACTORS
Big data may be used for academic research, but data for better decisions is often very different. Data should help with understanding and enable rapid action to remove constraints and move the needle rapidly in the right direction.
METRICS / MULTIPLE UNITS OF ACCOUNT
Money is used to measure economic performance. Something else is needed to measure and account for social performance and environmental performance. TVM is building on the existing detail measures to establish summary metrics for these dimensions.
EXTERNALITIES / EVERY PERSPECTIVE OF THE SYSTEM
In conventional financial reporting, all externaities are ignored. In TVM the externalities are brought into account as well as addressing how the measure of performance changes with different perspectives. For example, profit up but social performance (wages) down.
STANDARD VALUE PROFILES BASIS FOR COMPARATIVE PERFORMANCE
TVM standard value profiles (SVPs) are the basis for comparative performance not only for economic performance (profit) but also social performance (social benefits) and environmental performance. SVPs may be used everywhere in the system
USING PAYROLL PROFILES TO UNDERSTAND SOCIAL IMPACT
Inequality has grown dramatically in the past several decades because top managers and owners have been rewarded too much and workers paid too little. TVM payroll profiles show this and better enables payrolls to be managed.
USING ENERGY CONSUMPTION TO REDUCE UNSUSTAINABILITY
The modern consumption economy is catastrophically unsustainable already with relatively few people middle class and rich. Much of this is assocated with energy throughout the supPly chain and during use. TVM energy profiles enable better management of this problem.
USING MATERIAL FLOWS TO ADDRESS OUT OF CONTROL PRODUCTION
Modern industry is consuming resources and stressing the ecosystem in an unsustainable way. Many major material classes exceed the planetary boundaries of sustainability by a large margin. Every business, production system, product and user must be held accountable.
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THERE IS AN IMPORTANT IDEA IN ACCOUNTANCY THAT IS VERY POWERFUL
Balance sheet improvement over time is progress. Measure the changes, and you measure progress.
NO CHANGE IN BALANCE SHEET
STEADY STATE
GROWTH IN THE BALANCE SHEET
POSITIVE PROGRESS / VALUEADD
DIMINUTION OF THE BALANCE SHEET
VALUE DESTRUCTION
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CONVENTIONAL ACCOUNTANCY IS WELL ESTABLISHED
Good accounting embraces both P&L Accounts and Balance Sheet Accounts
Profit and Loss Account (P&L A/C) P&L A/C with Balance Sheets
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TVM Enhanced Accounting also embraces the impacts on externalities
Add Good Impact Deduct Bad Impact Report both Good and Bad
Enhancing the Profit and Loss Account
Adding in the BAD impacts Adding in the GOOD impacts
Combined Financial Impact plus the Externalities
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Only Financial / Only Entity Enhanced / Only Entity Enhanced plus impact on State
Profit and Loss Account with Enhancement
Conventional Entity Focus TVM Enhanced Focus with Externalities
TVM Enhanced Focus with ALL the CAPITALS
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ALL ACTIVITIES (PROCESSES) CHANGE ALL CAPITALS (STATE)
These reflect more and more detail about the framing and inclusion of externalities
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THIS IS BASIS FOR ACCOUNTING FOR EVERYTHING
Everything is summarized along the same lines as a financial consolidation
Enhanced Reporting for any Entity Which also may look like this
Processes / Entities adding up to a PRODUCT
Processes / Entities adding up to a PLACE
Processes / Entities adding up to an ORGANIZATION
Various elements adding up for a PERSON
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ABOUT PETER BURGESS
Peter Burgess grew up in post-war Britain. He was born in Lancashire, spent the war years in the suburbs of London, and after the war moved to rural Devonshire. He was educated at Blundell's and played schoolboy rugby for the English Public Schools against Scotland before entering Cambridge. His academic training was in engineering and economics, and later a professional qualification as a Chartered Accountant. He migrated to the USA in 1967. He worked in corporate financial management until 1978, then as an independent consultant. He did intensive consultancy work with the World Bank, the UN and corporate clients, doing assignments in over 50 countries. He was an early adopter in the field of EDP and later personal computers and applied information technology. In recent years he has become deeply concerned that modern leadership is not effective and without the right focus and management tools ... hence his current work with TrueValueMetrics (TVM).
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