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Date: 2024-06-24 Page is: DBtxt003.php L0900-TVM-OVERVIEW-01
TrueValueMetrics (TVM) is a framework to facilitate improved accounting, analysis and reporting of activities and impacts throughout the socio-enviro-economic system. TVM builds on the core concepts of conventional financial accounting. TVM uses them to account for impacts on social capital and natural capital as well as just financial or economic capital and link how different activities may be good for economic performance while doing social and/or environmental damage. It is accounting for everything in a coherent, comprehensive way.

The metrics that have dominated decision making for a very long time are GDP growth. business profit performance and stock market prices. Kitchen table issues like quality of life are almost totally ignored as well as catastrophic damage to the environment. While there was a time when there was a strong correlation between per capita GDP and quality of life, that era is long gone as people have become richer and also because of significant income and wealth inequality.

Over 25 years ago, the idea that business performance should be judged based on a 'triple bottom line' (TBL) rather than only its profit performance was promulgated, but it is only quite recently that business has embraced the idea. In addition to TVM, there are many other initiatives to facilitate reporting of performance beyond just the financial performance. TVM aims to be more closely linked with conventional financial accounting, more comprehensive and more relevant for decision making througout the socio-enviro-economic system.

The TBL is not only about the profit performance of the business, but also the impact the business activities have on people and planet. With TVM there is both a balance sheet perspective to explain progress and an activity perspective to understand and manage performance. Essentially progress is the change in state over time. Progress is the improvement in the balance sheet, a balance sheet for social capital, natural capital and economic capital. Performance is how much resource is consumed in order to achieve progress. Performance is accounted for using detail about costs and contribution.

TVM does not use monetization as the metric for social and environmental impacts but unrelated units of measure that are constant over time and changes in financial market conditiong.

The TVM framework may be applied for a variety of perspectives: for the individual person or household, for a community, a place a small business, a very large business, and product and all the steps in the life cycle of the product, its supply chain, production, use and post use waste chain. Every item or entity in the socio-enviro-economic system may be accounting for using a TVM value profile, a numerical profile similar to a balance sheet that describes the cumulative impact of the entity on all the capitals.

TVM enables consideration of issues where what is good from one perspective is not from another. For example, (i) reducing the payroll is good for profit performance but bad for employees; (ii) increasing production is good, but this also increases pollution which is bad.
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