MDIA – Product: Socio-Economic Linkages (140602)

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peterbnyc@gmail.com
www.truevaluemetrics.org
MULTI DIMENSION IMPACT ACCOUNTING (MDIA)
Product
Socio-Economic Linkage
@truevaluemetric

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C:TVMwebsiteWebsiteTrueValueMetricsOrgTVM-papersMDIA-DiagramsMDIA-Pres-B-Product-140602.odp
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 resources
are used and there is environmental degradation in the
product 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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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 the
product.
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 is
ignored by big business that sells bottled water and
consumers 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 equipment
6) Financial charges
7) Overhead and admin
8) Taxation (Benefit for society)
9) Profit (Benefit for owners)

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June 2014
QUESTIONS? FEEDBACK?
peterbnyc@gmail.com
www.truevaluemetrics.org
@truevaluemetric

MDIA – Product: Socio-Economic Linkages (140602)

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