TrueValueMetrics ... Impact Accounting for the 21st Century


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Date: 2024-11-22 Page is: DBtxt001.php L0700-TVM-MM-MANAGEMENT-METRICS-01a

TRANSPARENCY and ACCOUNTABILITY
METRICS TO MAKE THE WORLD A BETTER PLACE

Management Metrics

	Numbering the Triple Bottom Line Accounting for ALL the Capitals
Double Entry AccountabilityTM for PEOPLE, PLANET and PROFIT for ALL the CAPITALS for ALL ACTIVITIES and ACTORS

Profit is the dominant metric for corporate management.
Social and Environmental values must also be in play.
This is the goal and purpose of TrueValueMetrics.

YOU MANAGE WHAT YOU MEASURE
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 and environmental performance in the same way that we are able to talk about corporate profit performance and investment portfolio performance. This has to change. This is the purpose of TrueValueMetrics.
We argue that you had better measure the right things

THE ESSENCE OF EFFECTIVE MANAGEMENT
KISS	Keep It Short, and Simple	MANAGEMENT IS NOT AN ACADEMIC EXERCISE, NOR A SPECTATOR SPORT
This is not easy 'Short and Simple' is incredibly difficult. Being 'simplistic' is counter-productive. Rather, there has to be a good understanding of how the system works, and what has to happen in order to 'move the needle'. My experience suggests that 'more and more' data is not very helpful, whereas more and more understanding is very valuable. Getting a more and more accurate 'average' does nothing to change anything, but knowing a lot about incidents of good performance and incidents of bad performance enables action (eliminate incidents of bad performance and replicate good performance) and the average moves in the right direction. Speed up meaningful feedback, and design data flows so that the process of collecting data also enables real time improvements. Avoid waiting for a complete time consuming analysis loop to implement onvious issues that should be fixed rapidly.

ECONOMIC REPORTING IS EVERYWHERE

Every business does financial accounting to measure their performance. Most have audits and are required to report financial performance
IBM	Microsoft	Oracle	HSBC	Amazon	WalMart
But there is little accounting for social and environmental impacts ... no matter how material. Most social and environmental reporting is only about public relations (PR) and maintaining reputational value

There is more reporting by corporate organizations than any other part of the modern socio-enviro-economic system, but the focus is all about financial performance and the impact for owners / investors. External impacts are ignored in conventional accounting and financial reporting. TVM builds on the existing conventional accounting making it possible to also report on the externalities that impact people, society and the environment.

There are many compliance rules for financial reporting as well as independent auditing to ensure the integrity of the reporting
More and more business organizations are preparing reports relating to corporate social responsibility (CSR) and sustainability, but there is a lack of standardization and meaningful numbering. More than anything else these reports tend to show how small the initiatives related to CSR and sustainability are relative to the scale of the profits.

Most of the reporting by business organizations is 'self-reporting' and also very much self-serving. There is an assumption that more and more profit is a 'good' objective, not matter the other consequences of earning this profit.

The increasingly common practice of reporting about CSR and sustainability has come about in defense of reputation, much more than it is reporting about the tangible amount of 'good' being done for society and the environment.

The main thrust of ESG (Environment. Social and Governance) advocacy is that good ESG will result in enhanced corporate financial value ... but this shows a terrible misunderstanding of the overall dynamic of the socio-enviro-economic system and the nature of value creation in the system.

SOCIAL AND ENVIRONMENTAL REPORTING IS NOWHERE

Every business does financial accounting to measure their performance. Most have audits and are required by law to report financial performance. There is little accounting for social and environmental impacts ... no matter how material. Most social and environmental reporting is more about public relations (PR) and maintaining reputational value to sell product and impress investors than it is to address the very real impacts of corporate social and environmental behavior. RESULTS ARE APPALLING Massive social and environmental degradation is everywhere!
			STARVATION / MALNUTRITION Mostly caused by war and violence, but increasingly also being caused by dysfunctional governing institutions and climate change.
Africa	North Korea	Somalia	More ...	Open L0700-XR-Food-Insecurity

			WAR / DESTRUCTION The value destruction associated with war is ignored in metrics like GDP ... though the production of the bombs that do the damage are included.
Aleppo, Syria	Sanaa, Yemen	Mosul, Iraq	More ...	Open L0700-XR-War
			DEATH ... WANTON KILLING The horror of killing ... genocide ... is tough to witness. But too many world leaders have been responsible for this behavior in both the distant and recent past.
Monrovia, Liberia	Darfur, Sudan	Rwanda	More ...	Open L0700-XR-Wanton-Killing
			URBAN DEGRADATION The modern 'for profit' market driven economy does not result in quality affordable housing, but rather extreme opulance or derelict properties and slums.
Detroit, USA	Modern slums	Kibera, Kenya	More ...	Open L0700-XR-Urban-Degradation
			AIR POLLUTION The modern 'for profit' market driven economy does not result in quality affordable housing, but rather extreme opulance or derelict properties and slums.
Electric power	Traffic pollution	Electric power	More ...	Open L0700-XR-Urban-Degradation
			SOLID WASTE POLLUTION Products are important to improve standard of living and quality of life, but most products post use then become waste that in many cases pollutes for a very long time. Better life-time design of products is needed.
Plastic pollution	Land fill	Plastic	More ...	Open L0700-XR-Industrial-Pollution
			WATER POLLUTION The pollution of streams and rivers is widespread with all sorts of industrial and agricultural toxins being dumped into them. There is little or no accountability for this obnoxious behavior.
Polluted water	Land fill	Plastic	More ...	Open L0700-XR-Industrial-Pollution
			LAND DEGRADATION Undeveloped natural land is very important for the operation of the global ecosystem, but more and more of natueral land is being developed either for agriculture or for industrial or urban development.
Mining	Deforestation	Desertification	More ...	Open L0700-XR-Degraded-Land
			CLIMATE CHANGE - DROUGHT Drought is bad for crops ... it is bad for livestock. After crops and livestock, it is bad for people. For everyone that depends on agriculture for their livelihood. drought can be a death sentence.
Somaliland	Ethiopia	Mali	More ...	Open L0700-XR-Degraded-Land
(TPB note: I worked with the United Nations during the drought in the Sahel of Africa during the 1980s. The drought at that time was a castastrophe, but it is probably worse today.)
			CLIMATE CHANGE - FLOODS Drought is bad for crops ... it is bad for livestock. After crops and livestock, it is bad for people. For everyone that depends on agriculture for their livelihood. drought can be a death sentence.
Somaliland	Ethiopia	Mali	More ...	Open L0700-XR-Degraded-Land
			CLIMATE CHANGE - WIND Drought is bad for crops ... it is bad for livestock. After crops and livestock, it is bad for people. For everyone that depends on agriculture for their livelihood. drought can be a death sentence.
Somaliland	Ethiopia	Mali	More ...	Open L0700-XR-Degraded-Land
			CLIMATE CHANGE - TEMPERATURE Global temperature has increased in the last 200 years many times more rapidly than at any other time in history setting the stage for mass extinction of living organisms of all sorts. The pace of change is increasing because of leadership inaction.
Somaliland	Ethiopia	Mali	More ...	Open L0700-XR-Degraded-Land
			CLIMATE CHANGE - SEA LEVEL RISE Ice melt from Greenland, Antactica and the Arctic is getting bigger much faster than scientists predicted aeveral decades ago. So far the actual rise is quite modest, but increased coastal damage is already being experienced.
Somaliland	Ethiopia	Mali	More ...	Open L0700-XR-Degraded-Land
			LOSS OF BIODIVERSITY Drought is bad for crops ... it is bad for livestock. After crops and livestock, it is bad for people. For everyone that depends on agriculture for their livelihood. drought can be a death sentence.
Somaliland	Ethiopia	Mali	More ...	Open L0700-XR-Degraded-Land

BETTER ACCOUNTING AND ACCOUNTABILITY IS NEEDED

Conventional financial accountancy should he the starting point.
It should not be limited as it is today to focus on informing investors about corporate performance
Rather is should be enhanced so that there is reporting about ALL activities and actors so that everyone is accountable in a useful meaningful way.

Data at the Center	Measuring Progress	Activities Change State	Enhanced Accountancy

Management is the Art of Making Changes to Achieve Improvement

Collect and Analyze Data to Understand How Things Work

Expand the GOOD ... Eliminate the BAD

More and More Data and Analysis is not Better Management

Measure Change in State and you Measure Progress

Beginning of Period STATE -- ACTIVITIES / FLOW -- End of Period STATE

Data at the Center

Data at the Center	Better State is Progress

Activity Impacts Capitals

Management is the Art of Making Changes to Achieve Improvement
Collect and Analyze Data to Understand How Things Work
Expand the GOOD ... Eliminate the BAD
Use data to plan and analyze what is working and what is not
... implement improvements as needed

The text being discussed is available at

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TrueValueMetrics (TVM) is an Open Source / Open Knowledge initiative. It has been funded by family and friends. TVM is a 'big idea' that has the potential to be a game changer. The goal is for it to remain an open access initiative.

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The information on this website may only be used for socio-enviro-economic performance analysis, education and limited low profit purposes Copyright © 2005-2021 Peter Burgess. All rights reserved.