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Date: 2019-07-16 Page is: DBtxt001.php L07-08-TVM-MANAGEMENT



OVERVIEW #8
TVM / MANAGEMENT
MOVING THE NEEDLE ON IMPORTANT ISSUES
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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
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TRANSPARENCY and ACCOUNTABILITY
METRICS TO MAKE THE WORLD A BETTER PLACE
  • TVM uses the core concepts of conventional accountancy.
  • Enhances the concepts to address the issue of social impact.
  • Also incorporates impacts on the environmental.
  • Considers other perspectives beyond the corporate organization.
  • Accounts for energy use impacts flowing through processes and embedded in products.
  • Accounts for good and bad impacts associated with payroll.
  • Accounts for impacts of gross material flows through the system.
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DATA TO DRIVE DECISIONS
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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CONVENTIONAL FINANCIAL ACCOUNTING EMBRACES
BALANCE SHEET & PROFIT AND LOSS ACCOUNT
TRUE VALUE METRICS ENHANCES ACCOUNTING TO
INCLUDE IMPACT ON SOCIETY AND THE ENVIRONMENT
ANOTHER IMPORTANT IDEA IN ACCOUNTANCY
Balance Sheet (B/S) improvement over time is progress.
Measure B/S 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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ACCOUNTING FOR EXTERNALITIES
ALL THE SOCIAL, NATURAL and ECONOMIC CAPITALS
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THE MACRO TRENDS ARE CATASTROPHIC
ACCOUNTING FOR SOCIAL, ECONOMIC AND NATURAL CAPITALS
COLOR CODE DISTANT PAST PRESENT NOT GOOD FUTURE COLLAPSE
These are the aggregated Socio-Enviro-Economic Trends
What has been happening and what needs to happen to have a better 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
  • ECONOMIC CAPITAL has increase substantially over decades because there have been productivity increases.
  • At the same time there has been a massive increase in inequality that has compromised SOCIAL CAPITAL.
  • There has been dangerous degradation of NATURAL CAPITAL. There is an almost universal scientific consensus that massive changes are essential.
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.
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MANAGEMENT IS ABOUT MOVING THE NEEDLE
MORE EFFICIENT ACTIVITIES / BETTER DECISIONS BY ACTORS
  • ALL ACTIVITIES MUST REDUCE NEGATIVE EXTERNALITIES
  • ALL ACTORS MUST DO THEIR PART AND BE HELD TO ACCOUNT
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SECTION IV
GO TOP SITE NAVIGATION More SECTION IV
MANAGEMENT
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ABOUT THE TVM INITIATIVE
ENHANCED ACCOUNTANCY
TVM uses the core framework of conventional accountancy, that is balance sheet accounts and profit and loss account accounts to account for not only financial impact (money and profit), but also social impact and environmental impact.
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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TrueValueMetrics (TVM) is an Open Source / Open Knowledge initiative.
It has been funded by family and friends plus donations from well wishers who understand
the importance of accountability and getting the management metrics right.
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