DIALOG - TPB - MR - TF
About the development of True Value Acccounting / Multi Dimension Impact Accounting
Mark Roest / Tim Foresman
Dear Mark / Tim
Happy New Year ... and thanks for this dialog. It makes a pleasant change from the 'news' in the media!
I went to this event in Manhattan last Thursday run by the Global Sourcing Council ... another initiative that has some of the right ideas by probably unlikely to get much traction!
I went to this event in part to meet Evan Harvey of Nasdaq (Sustainability) and Arnaud Brohe of CO2logic (Carbon Accounting) ... both of who are starting to overlap with the work I am trying to do. Another part was to listen in on a dialog about how corporate initiatives and the new SDGs were going to fit together. In the end I was rather unimpressed because the conversation was not very much different than it had been a couple of decades ago!
So Mark, it was only then I got to look at all the material you forwarded to me and Tim ... and then to try and figure out what I knew already and what was new. The good news is that there are many more people interested in these issues than a decade ago ... and the technology is a huge amount more powerful ... but the improvement in UNDERSTANDING of how the global socio-enviro-economic system works and how to measure PROGRESS and PERFORMANCE and how to use data in a way that gives incentive for better decisions is not developing so fast.
I am encouraged that there is a growing interest in PLACE which has been part of my agenda since I was in South Sudan in the 1980s ... and saw the amazing difference in the area around Juba and the area around Yei ... and the changes that resulted from quite modest flows of development investment (mainly through UNHCR as a result of the Ugandan refugee population). Over time I came to realize that the UN agencies and the World Bank were mainly organized around sector specialties which works in terms of technical understanding ... but if I live in a PLACE, I want to have access to ALL the sectors that I need in my place ... roads and schools and clinics and trade and employment and water and food and ... and ... and. The absence of an essential sector makes a decent quality of life impossible.
If we knew as much about the economics and the society and the ecosystem in a place as we know about everything that goes into making a profit in an organization the world would be a much better place ... but money profit accounting is not good enough for the analysis of progress and performance of place ... rather we need a framework of accounting that reflects the change in state (balance sheet) of the place where the balance sheet includes the state of people and the state of the ecosystem as well as the state of money wealth in the place.
I am still guided by something I learned early in my career when I was a corporate CFO and subsequently was called on to run a factory. By using relevant data in a very specific way it was possible to get far better decisions than when we merely ranted about how poor the performance was and how it should be much better dammit! Most people have little idea how to design data systems so that they are effective for decision making ... but without this data are not very much use. So the data architecture that I want to see has to be useful when disaggregated for decision making and easy to summarize for broader overview assessment. The former is needed to change behavior ... the latter is needed to keep politicians and policy makers occupied.
My thinking on all of this is getting much clearer ... though my presentation ( as in my website) remains pretty messy ... and I still have not completed my thinking about how the generalized architecture of a data system can be quantified in a coherent way. This quantification is not measuring in money ... but in several relatively simple measures around quality of life for people and ecosystem performance for nature.
Thank you for alerting me to this again ... it is very much appreciated. I would be happy to talk some more about all of this at your respective conveniences.
Dear Tim / Mark
Time flies ... I think it was something to do with the Woman's March ... or was it the inauguration!
... and donkeys are worse than horses ......
In many ways I have been incredibly fortunate ... I read engineering before economics and then later trained as a Chartered Accountant. Engineering requires some rigor around facts and measures (otherwise the plane won't fly, the bridge will fall down, etc) ... economics I found to be incredibly sloppy in its approach to numbering, but it really didn't matter because goals were quite fuzzy. To my surprise accounting (double entry accounting) was very rigorous, very principled and very much like the metrics of engineering thermodynamics. I was quite successful as a very young CFO because I had some understanding that you improved profits by fixing the factory or redesigning the product, not merely fiddling the books.
My initiative to do independent consulting was not very successful ... the idea that an Englishman could tell an American company what to do was pretty silly (back in the 1970s) and most of the work that came my way was international ... which then resulted in work with the UN and the World Bank ... and a huge learning curve. Clearly my idea of corporate management information and that of the UN was very different ... and though I did quite a lot of work in the development and humanitarian assistance field ... eventually my criticism of the system caught up with me, or perhaps I simply aged out of the system, or both. My advocacy for better accountancy as a solution to corruption did not help. Nevertheless I did some fascinating work with the UN/World Bank in more than 50 countries including places like Malawi, Namibia, Afghanistan to name just three.
The good news is I learned a lot ... not least is that we need a PEOPLE focused socio-enviro-economic management information system that also has a data architecture that works for NATURAL CAPITAL in all its forms and for everything else that has been put together ... something I call PEOPLE BUILT SYSTEMS which comprise our FINANCIAL CAPITAL system, all the PHYSICAL CAPITAL systems and structures, and INTANGIBLE CAPITAL that comprises enabling environments, laws, governance, knowledge, institutions, etc etc.
PEOPLE are the central focus, and they live in a PLACE, and they work in an ORGANIZATION, and they use PRODUCTS to support their QUALITY OF LIFE.
NATURE supports everything. All FINANCIAL WEALTH has its origins with NATURE, and all PHYSICAL CAPITAL has been transformed in some ways (PROCESSES) from NATURE.
PRODUCTS flow through a supply chain (I prefer a supply stream) accumulating their own profile (cumulated balance sheet, if you will) going from process to process, from organization to organization, from place to place and eventually are the buy or not to buy decision for PEOPLE in support of their quality of life.
PROCESS needs to be better understood ... the goal needs to be not so much to have a profitable process, but a process that is efficient from the point of view of impact on both society and the environment. The United States has some very profitable processes, but at the same time some of the most inefficient in terms of social and environmental impact.
ORGANIZATIONS already have very powerful accounting for all their money transactions and related reporting. There are rapidly growing efforts to improve the reporting around social (CSR, ESG, etc) and environmental (IR, GRI, etc) matters, but in general these systems are not accounting but something far less rigorous. My goal is to get to a system that is based on standard impact profiles rather like standard costs that flow through impact accounts.
PLACE is where PEOPLE live and everything else happens. The QUALITY OF LIFE for PEOPLE is the most important characteristic of a PLACE while doing the least amount of damage to the ENVIRONMENT / NATURAL CAPITAL. All sorts of PEOPLE BUILT SYSTEMS are required to support QUALITY OF LIFE and all sorts of PRODUCT flows.
So ... the big question! What is going to be the best way to get information about a PLACE so that better decisions can be made for the benefit of the PLACE and the PEOPLE in the PLACE. How should information be collected? How should information be stored? How should information be used?
The good news is that technology is a whole lot more powerful than when I first installed a mainframe computer in 1967 .. 4K of memory and the size of a Starbucks coffee shop. At this point technology does not seem to be the constraint, but much more my own capacity to know what to can do and how to do it. I really do not have much interest in data per se, but a deep interest in what can do to help make better decisions.
All the best
The text being discussed is available at