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Thursday, March 30, 2017

Accounting for a crowded but sustainable planet

Posted by steve on April 4, 2012

We need to change the way we account for things as we hit the resource wall. We cannot continue to regard, from an accounting point of view, resources as infinate.
Her’s an attempt to form a sustainable approach:
In my last post I argued that:
Technology is a collection of inventions and capabilities to solve a problem or need.
Work is the application of technology to deliver a solution to the problem or need.
Sustainable technology is a collection of inventions and capabilities to solve problems in a way that preserves financial, natural and mineral capital. Sustainable work applies sustainable technology to delivering the services required to live.
Let us take a group of people and for sake of argument let us take a village of 100 houses with 300 residents, some under age. High up on the list of required services would be  – not in any order  – access to 1) housing 2) food 3) security, 4) clothing.
It is fairly easy to define all these services and  quantify and qualify them. Housing would be roof over head, certain number of square meters, temperature ranges, hygienic standard and number of days per year. Food, similarly, quantifies in terms of amounts and days of year and in terms of vitamin quantity taste etc.
We can also quantify and qualify the capital involved.

What would be a reasonable application of  financial capital?

Perhaps a break –even on investment in 30 years to coincide with the life expectancy of the buildings and machines?

How much capital should be employed?
Some examples:
  • For natural capital the out-take of say, trees would have to correspond with re-growth. The same would be true of soil quality – there should be no reduction in solid quality.
  • For any mineral resources reaching the settlement these should be balanced with those leaving. If iron is mined on the property it should remain available.
  • For human capital we could discuss what would be reasonable percentage to employ – if some people were not involved in the provision of the service than that is under –use. If everyone is involved and the provision is under standard then that is poor application of capital and technology.

How to measure capital?

If we make the total available as 100 then it is easy to create a figure. For example, we have used half of the world’s available oil and a third of the available coal and gas. We could have one figure for the present situation under “fossil fuel capital”.
For, say trees we could take the approach of the number of trees the year before last. (measured in cubic meters of wood or another measure)
For last year we could do the same and compare the two in a simple accounting equation:
Tree capital
  • Last year This year
    100       110
  • Change
  • Rate of change per year estimate.

Air Capital

Let us say that air capital at 100% is the “safe” ppm of 350 co2 and 400ppm is total depletion (100% minus 0% left)

  • Last year This year
    382= 32 over or – 9%                   393 =43 over or 12.2%
    64%     left    debt 95%                   14% left debt= 98%
  • Rate of change
    -50% per year
The approach could be applied to nations as well as counties, municipalities and estates and villages.

How to analyse performance?

Having established a view of capital we can turn to analyzing performance:
Performance measures for provision of services required:
  • Housing, food, clothing.
Capital balance
  • Capital employed, capital growth/reduction: Financial, human, nature, etc

One of the things I like about this model is that it forces accountants to see that increasing financial capital on one hand does not necessarily show improved performance if the corresponding reduction in natural capital or even services is negative.

We now have the basis of a model to discuss sustainable technology in its wider meaning. And we have measure we can apply to the activities of society. Providing services to an acceptable level and impacting capital within acceptable limits.
To understand the challenge a little more, take a look at the culb of Rome’s Limits to growth predictions:

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