Understanding the True Cost of Paper to a Company

I recently worked on an engagement to support a major Canadian institution in understanding the true enterprise-wide cost of paper and I can say with certainty that most organizations truly misunderstand the impact that paper has on the bottom line.

More often than not, the financial benefits of paper reduction initiatives are calculated only by accounting for the savings related to the cost of paper that is no longer purchased. And that’s understandable because that’s the cost most procurement managers see. But this approach leaves a substantial amount of hidden savings related to the reduction of that paper – those incurred in its management, which range from $0.21 to $0.45 per sheet – on the table yet plain out-of-sight, much like how the narrow tip of an iceberg that sticks out of the water unintentionally obscures the true magnitude of the threat (or opportunity, in this case). This misunderstanding then manifests itself in relegating paper reduction initiatives to low-priority projects that do not warrant the limited time and resources of busy executives.

And let’s face it – paper just isn’t all that glamorous. The environmental and sustainability policies of companies aren’t often top-of-mind for consumers in making the purchasing decision. They want innovative and tailored products, and this is where the focus of executives has traditionally been. But along the ever-continuing journey to trim excess, paper has increasingly found itself in the spotlight, driven by technological advances that reduce its need, the impetus to reduce cost and, to a lesser extent, the desire of companies to be seen as more environmentally conscious because their customers demand that they be.

Calculating the cost of paper management is inherently challenging. It’s easy to quantify the savings from purchasing less paper, but understanding how paper moves through the enterprise’s value chain and calculating how much one can actually save by eliminating the need to photocopy, distribute, store, retrieve, eliminate processed paper is another thing altogether.

The Paper Lifecycle

The first step in understanding the true cost of paper begins with understanding the Paper Lifecycle.

The Paper Lifecycle, as we have defined it, has six components:

It’s important to conceptually recognize that the costs associated with paper do not end when the paper is purchased from the vendor and shipped to the office. In fact, we have discovered through rigorous analysis and research that the cost of the paper itself accounts for only a fraction of its fully loaded cost. Rather, it is the expenses related to the processes that paper is put through once it has reached the office where the majority of its costs are incurred.

But we have to be pragmatic as not all paper can be removed, nor is paper reduction not without its challenges. For one, not all paper is easily reducible. Some – such as marketing collateral – may support critical business objectives in markets where digital remains the secondary communication choice of target segments. It’s also worth noting that potential savings – even if quantifiable – may not be realizable nor deposited back into the cost centers of individual business units, and so the incentive for most managers to care is simply lacking. Many organizations also lack the appropriate configuration management and digitization systems to make paper reduction meaningfully occur, and adopting new practices inherently takes time and requires the careful management of change. But these obstacles shouldn’t by themselves wholly dissuade. The reality remains that substantial benefits are nevertheless captured within the parameters of the enterprise, and thus the senior leadership team of an organization would be well-served to understand how paper impacts their company’s cost structure. 

To understand how your company can better estimate the true cost of paper to your organization, contact us.