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Accounts Payable: 12 Thoughts on Going Green

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Editor Coda
2021/12/13

Accounts Payable leaders have an opportunity to be very kind to the planet. With a difficult 18 months behind us, there has been talk about our legacy. Certainly, the most obvious theme to address on this score should be sustainability and going green. There is so much waste in Accounts Payable. Time, paper, money, energy. This document focuses on some eye-watering numbers illustrating a very clear cause-and-effect between AP activities and the cost to our planet.

We all know it. Billentis says it best: “Paper invoices are bad for the environment.” No one can disagree. We are all conceptually – excuse the pun – on the same page.

Now for some detail:

1.     sharedserviceslink calculates there are 8,000 shared services organizations globally. On average, these organizations receive 750,000 invoices annually. Roughly 60% are received as paper, or as PDFs which are then printed. This amounts to 3.6 billion paper invoices. The average invoice is 2 pages, so 7.2 billion sheets. This equals 36,000 tons of paper (200,000 sheets in a ton). 1

2.     Looking at water waste: according to popsci.com, 17,000 gallons of water are used to produce a single ton of paper. To produce 36,000 tons of paper, mills use 612 million gallons of water. Remember, we are just talking about the 8,000 shared services organizations globally.

3.     We generally like bright white paper. In the paper-making process, pulp is whitened with chlorine bleach. Chlorine bleach can be harmful to nearby aquatic life. This chemical has largely fallen out of favour with most mills, and is now regulated in some countries, but the only way to make sure no chlorine products are used in paper production is to use totally chlorine-free paper. If chlorine is used, the 17,000 gallons of water used per ton of paper cannot be re-used.2

4.     We congratulate ourselves on our recycling efforts, but, according to Forbes, it is the creation of paper that is costing the planet. Paper manufacturing produces sulphur oxides, nitrogen oxides and carbon dioxide, which contribute to acid rain, greenhouse gases and water pollution. And when we don’t recycle, we dump. According to The World Counts, 26% of waste dumped in landfill sites is discarded paper and cardboard. Furthermore, “when paper rots, it creates methane gas, which is 25 times as toxic as carbon dioxide.”

5.     When we do recycle, recycling paper still requires huge resource. Recycled paper can go on to create more paper. “Ah ha! We are taking care of the planet!” We’re not – some experts remain critical of paper recycling, arguing that its more energy-efficient to produce virgin paper than recycled paper.  (Research suggests this is not the case: recycled paper production releases 44% less greenhouse gases, produces 53% less wastewater and uses 100% fewer trees. 3 But there is, of course, still an environmental cost. If we can refrain from using paper – even recycled – we must.)

6.     One 45 ft. usable tree trunk can produce 10,000 sheets of paper (about 5,000 paper invoices). To service the 8,000 shared services organizations globally, we need 720,000 trees. Coniferous forests used to make paper are very thin and don’t have the same environmental benefits as other forests. By producing less paper, land used to grow coniferous trees can be repurposed for more environmentally friendly projects. 5

7.     Every paper invoice posted by a supplier and received by an Accounts Payable team carries a carbon footprint. To send a physical item requires fossil fuel today.

8.       Out of the Standard & Poor 500 companies, only 129 mentioned ESG (Environment, Social and Governance) in their quarterly calls in the fourth quarter of 2020. Just over 25 %. This number had increased from 79 in the third quarter of 2020. There is a climb, but it’s still a minority.6

9.     Some data-driven shared services and GBS organizations are focusing on their corporate environmental goals. One of Novartis GBS’s 5 goals is “Making Novartis a more green, climate-neutral company.” The team use the data, and data tools, to identify and eliminate waste.

10.  According to CFO.com, Caesars Entertainment has a CodeGreen program. The Finance team “aggregates and analyzes utility data to identify areas of misuse in water, energy, and waste consumption.”  As a result, Caesars reduced water consumption by 11% and energy usage by 15%.

11.  Electronic invoicing is a very obvious solution. When building a case for electronic invoicing, include your ESG benefits. Depending on your paper invoice volume, the planet savings could be impressive. Calculate how many trees and how much water is being saved. Maybe craft your e-invoicing communications around the green savings, and celebrate your e-invoicing milestones by planting some trees.

12.  E-Invoicing is often linked to Supply Chain Financing. Ask your suppliers to fulfil certain ESG requirements in order to qualify for your SCF program. Bridgestone partnered with EcoVadis, JP Morgan and Taulia to offer credit to suppliers who had met certain ESG requirements. EcoVadis rates the supplier on environmental credentials, and JP Morgan and Taulia work with Bridgestone’s suppliers to manage the financing. Alessandro Camporeale, Bridgestone EMIA’s raw material procurement director, says the response from the first wave of suppliers has been “positive.” Suppliers include companies from India, China, the US and Europe. As the project rolls out, suppliers in industries including transport and logistics will be in scope.7

The waste has to stop. For so many reasons. The invoice volumes associated with most shared services are nearly always big enough to build an attractive business case for e-invoicing. There is nearly always a financial case. Now examine the ESG case. It’s there. Based on the figures listed in this article you might be able to get your e-invoicing program moving sooner than expected. Move fast and go green in 2022.

This article was commissioned by Taulia.

 

1 cattlv.wnyric.org/

2 www.popsci.com

3 OCShredding.com

4 crownrms.com

5 Insight.factset.com

6 euromoney.com

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