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Date: 2019-07-16 Page is: DBtxt001.php list0300-Value-destruction-1

Definitions for TrueValueMetrics
Value Destruction

Value destruction is ignored in modern financial accountancy as well as the major macro-economic measures like GDP.

Value destruction is often associated with environmental costs that impact society, but do not have to be incorporated in the financial accounts of the corporate enterprise.

In recent times, more and more environmental regulations have made environmental degradation a cost to the enterprise and a drag on profit ... but the cost to society is still not part of the corporate accountancy and reporting system.

TVM, on the other hand, takes the cost to society and makes the cost explicit and associates this cost directly with the enterprise that is causing the value destruction.

Value destruction compounds to form a vicious cycle of increasingly difficult outcomes. Value destruction may start slowly, but if not corrected the compounding eventually takes hold, and it is very difficult to control.

In the complex reality of the economy, both value creation and value destruction are going on at the same time ... one offsets the other ... but there is always the potential for one of the other to get the upper hand. When it is value destruction that becomes dominant, the socio-economic outcome is catastrophic ... and this is what is happening in most poor settings and in societies where valueless money transactions have replace priceless real transactions.

An economic activity may be profitable, but this does not mean that the economic activity is value adding. Profits may be earned while the activity is value neutral, or the profit may be arising while the activity is destroying value.



The text being discussed is available at


TrueValueMetrics (TVM) is an Open Source / Open Knowledge initiative.
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