MDIA – Product: Socio-Economic Linkages (140602)

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MULTI DIMENSION IMPACT ACCOUNTING (MDIA)

ProductSocio-Economic Linkage

@truevaluemetric

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PRODUCT - Socio-Economic Linkage

MDIA aims to be a simple way to measure socio-economic progress and performance and to provide a way for decisions to be optimized by everyone.

There are three 'pieces' that have to be brought together:

(1) People … what people need and want

(2) Planet … resource depletion, environmental degradation and biodiversity issues

(3) and between these, the Man Built Constructs … everything that man has constructed … governance systems, business organizations, infrastructure, knowledge, metrics, etc.

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PRODUCT - Socio-Economic Linkages

PRODUCT is one way in which these 'pieces' come together. Product is part of the essential flow that is the economy and that supports our standard of living.

PRODUCT is used by PEOPLE to maintain and sustain standard of living and quality of life.

PRODUCT has impact on PLANET because resourcesare used and there is environmental degradation in theproduct supply chain, in the use of products and in the post use waste chain.

PRODUCT impacts the MAN BUILT ENVIRONMENT. It is an input into production processes, an output from production processes, something to sell and a generator of profit.

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It is PRODUCT … goods and services … that enable a high standard of living and good quality of life.

Products included food, energy and water that are absolutely essential, not to mention being the materials that go into housing and all sorts of infrastructure.

For most of human history, having more products meant having a better quality of life and standard of living.

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For most of human history, having more products was constrained by the capacity to produce.

The capacity to produce was limited by the ability of labor to produce the quantities needed.

The industrial revolution was all about productivity and enabling labor to produce more mainly by using more energy.

Eventually productivity made it possible for people in industrialized countries to have way more product than they needed.

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The same situation does not apply in a poor economy. In a poor economy there is low Productivity, less use of energy and much heavier constraints on production.

The same linkages that apply in a productive economy do not apply in a poor economy.

In a poor economy, people have less product than they need.

But people do not have the wealth or income to purchase as much product as they need.

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MDIA attaches metrics to PRODUCT

It is common for PEOPLE to know the price of a PRODUCT

It is quite uncommon for PEOPLE to know the cost of the PRODUCT, and the profit that is built into the price.

Hardly anyone has any idea what impact of PRODUCT has on PEOPLE and PLANET.

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Decisions about product are made in 2 places:

PEOPLE choose to buy or not to buy a PRODUCT

These decisions are made based on advertising (done by business to promote a product), the price of the product and its perceived value (often influenced by friends on social media)

BUSINESSES choose to make and sell a PRODUCT

Business decisions about PRODUCT are made in an environment where PROFIT is the dominant metric for measuring performance.

If PEOPLE will not buy a PRODUCT, the product will not be produced

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In a business, management knows about the PROFIT of the PRODUCT.

In business, the main metrics about a PRODUCT relate to how the product can be delivered at lower cost and how the customers can be encouraged to buy more of the product.

Most BUSINESSES will choose to make and sell a PRODUCT as long as it is profitable.

Impact on society and the environment are not part of the required business calculus.

Business calculus will change when investors and capital markets make IMPACT as important as PROFIT.

This won't happen until IMPACT is quantified as rigorously as PROFIT

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There needs to be radical reform of the metrics used for PRODUCT analysis and management.

Decision makes need metrics so that they know:

1) How much the product is GOOD for PEOPLE?

2) How much the product is BAD for PEOPLE?

3) How much the product is GOOD for the PLANET?

4) How much the product is BAD for the PLANET?

5) How big are the IMPACTS of the PRODUCT'S SUPPLY CHAIN on PEOPLE and PLANET?

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There needs to be radical reform of the metrics used for PRODUCT analysis and management.

Decision makes need metrics so that they know:

1) How much the product is GOOD for PEOPLE?

2) How much the product is BAD for PEOPLE?

3) How much the product is GOOD for the PLANET?

4) How much the product is BAD for the PLANET?

5) How big are the IMPACTS of the PRODUCT'S SUPPLY CHAIN on PEOPLE and PLANET?

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Decisions about PRODUCTS are made in two areas of the economy:

1) By users of the products

These people need the product for some reason

2) By producers of the products

These people see profit potential in producing theproduct.

Everyone that makes decisions relative to the product must be held accountable for everything that relates to the product in its supply chain

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PRODUCT – TruValue Insanity

What is an example of socio-economic insanity?

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Bottled Water.

PRODUCT – TruValue Insanity

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Bottled Water.

Yes … there are times and places where bottled water is valuable and may be a life saver.

But for everyday use in New York City, the use of bottled water makes no sense at all.

PRODUCT – Bottled Water

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Bottled Water.



Except that bottled water is exceptionally profitable


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Bottled Water.



Except that bottled water is exceptionally profitable.

And maybe just a LITTLE BIT bit more convenient for the user.


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Bottled Water.



Except that bottled water is exceptionally profitable.

And maybe just a LITTLE BIT bit more convenient for the user.

The HUGE environmental cost of bottled water isignored by big business that sells bottled water andconsumers that buy bottle water.

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Water use … more then twice the water in the bottle is used in the supply chain for the bottle and the energy used in the logistics.

Petroleum use … about a quarter of a bottle of oil (petroleum) is used to make the bottle and power the vehicles used in the logistics.

Waste … most bottles end up in landfill or with other plastic in rivers and oceans

Payroll … way more people are needed for bottled water distribution than piped water. This is a positive but not the driver of the industry.

The industry is driven by the PROFIT. The raw material is nearly free. The packaging and the logistics rather modest in cost. The price … not a big deal in a convenient and fast society that easily buys into fads!

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Water use … MDIA is establishing a standard unit so that the value of water is quantified. Water is increasingly scarce and water quality degradation a growing problem.

Petroleum use … MDIA is establishing standard measures to account for resources depletion and environmental degradation in a simple coherent way based on a standard unit defined in relation to a metric ton of Carbon Dioxide emission (CO2e)

Waste … MDIA is establishing standard measures for impact on the environment during the post use waste cycle.

The MDIA quantification is based on standard units. These serve to simplify performance measurement on top of deep technical information and science. These units are not '$' or money units … though they will convert exchange to money at some point in the future

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Every PRODUCT must have a set of quantified label metrics that show data about:

1) Price Clear unit price (meaningful for comparison)

2) Purpose Value for end user – impact on quality of life

2) Risks Impact on quality of life

3) Labor profile Cost of labor

Socio-economic benefit from labor

4) Resource use profile Virgin material -v- recycled material Energy use / environmental impact Post use waste chain impacts Land and water impacts

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Every PRODUCT must have profile that informs about the life cycle including supply chain, use and post use waste chain.

PRICE 'explodes' into the following elements: The price of a product includes these elements. Each of the elements has a money cost that impacts the money economy and profit AND a set of impacts on people and the environment through the life cycle. 1) Virgin material use (Resource depletion)2) Other materials (Explosion of profile info)3) Energy use (Explosion of profile info)4) Payroll and benefits (Benefit for employees, families and community)5) Use of plant and equipment6) Financial charges7) Overhead and admin8) Taxation (Benefit for society)9) Profit (Benefit for owners)

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June 2014

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www.truevaluemetrics.org@truevaluemetric


Economy & Finance

MDIA – Product: Socio-Economic Linkages (140602)