Raz Godelnik ... Adjunct Professor at CUNY, the New School and the University of Delaware

Environment, Society & Governance - Value Rises, but the Language is Still Lacking triplepundit.com

A webcast from PwC shows how a new narrative is emerging faster than we might think. The bad news is that there are still plenty of obstacles ahead.

Peter Burgess ... Founder/CEO at TrueValueMetrics ... formerly international business and development consultant and corporate CFO

Money profit financial accounting is very powerful, and a tremendous tool for corporate management and the goal of high performance profit making.

As a tool for making modern society high performance in ALL the aspects that are important, the accounting tools are impotent, and no tinkering at the edges is going to change much of anything.

I have gone back to the basics starting off with trying to understand what is the purpose of economic activity. In my view, the purpose of economic activity is to make life better for people, to improve quality of life and standard of living.

Adam Smith suggested about 240 years ago that a market driven enterprise economy was going to deliver on this better than other forms of economic organization, but the enterprise at that time was very small and the market reflected the interaction of millions of decision makers. Nobody could game the Adam Smith market environment as they can game the modern 'so called' markets.

Before the industrial revolution ... and the agricultural revolution before it, it was difficult for everyone to find enough to eat, and it was clear that economic activity was very much linked to quality of life.

There is no question that technology and the use of energy have been a key factor in the improvement in quality of life over the past 200 years, and this has been helped to some considerable extent by the modern corporate organization and its ability to invest on a scale that improves productivity.

In my view academics, economists the accounting profession have failed to differentiate between the measures that fundamentally matter and those that are mere indicators that depend on correlation that may or may not change over time. GDP growth is such a stupid measure that anyone that utters it should be ashamed. GDP growth merely makes it easier for the business to make profit and have stock value growth.

We absolutely must understand the behavior of business as productivity is improved. The conventional business model for these times that productivity enables less labor and more profit is dangerous for society and for people's quality of life. More and more economic activity is dangerous for the environmental stability of the planet.

The idea that a company being sustainable is more profitable is only part of the picture. The metrics are incomplete. There needs to be metrics about impact on people and planet that are as rigorous as the metrics being used by corporate accountants ... the bean counters who are the gate-keepers of corporate efficiency.

There are many concepts in traditional money profit accounting that can be used to establish a new framework to account for and value the performance of economic activities. I call this architecture Multi Dimension Impact Accounting (MDIA). It is not a small increment to the prevailing system of accounting but a radically different architecture because it has to address the problem of bad actors ignoring their critics and going on their merry way with no consequences.

It is good news that the major accounting firms seem to understand the need to have metrics about things like sustainability, but in my view the motivation of the big firms is more about self preservation than it is about helping to improve the performance of society and the economy. I would like to be proved wrong on this, but the indicators suggest that I am right.

Peter Buirgess - TrueValueMetrics
Multi Dimension Impact Accounting