It is often said that innovation and sustainability go hand in hand. Frequently, changes brought about by new business models and the rise of novel technologies can in turn create a raft of positive outcomes for company stakeholders and the broader environment.
This does not necessarily mean that innovation automatically equates to sustainability. Sometimes there is a trade-off. If not planned carefully for example, a hydroelectric dam may provide distant rural villages with much-needed electricity, yet simultaneously displace local communities.
Such trade-offs remind businesses that when they do aspire to make gains through technology, these must not be at the expense of people or the planet. Ideally, they should enhance both. For instance, when PTT Global Chemical Public Company (GC), Thailand’s largest integrated petrochemicals company, began its pilot project to digitise its accounts payables in 2021, its overarching goal was twofold – to make time and cost improvements to internal processes, while simultaneously ensuring suppliers would benefit from these enhancements as well.
Increased efficiency and accessibility
Prior to the project, the company’s accounts payables process of receiving invoices and paying them was typically long and laborious, occupying several hundred manhours each month. As is the case today, GC was serviced by more than 1,000 suppliers, most of them based in Thailand. The arrival of the COVID-19 pandemic added unwanted disruption as well.
Many of these suppliers are small and medium-sized enterprises (SMEs) that continue to issue invoices manually, and who are reliant on payments from GC to pay their own salaries and outgoings. Unfortunately, access to credit to fund daily operations remains limited for such businesses in Thailand.
The importance of SMEs to the nation’s economy cannot be underestimated. Prior to the pandemic, some three million SMEs prospered in Thailand, accounting for 99.8 per cent of the country’s total number of companies, while generating 14 million jobs. In 2019, SMEs accounted for 45 per cent of national GDP, worth about $215 billion. With timely payments to GC’s suppliers at risk, this threatened their viability, as well as the income for employees at these SMEs, who rely on salaries to pay for everyday needs like food, housing and medical care.
Partner support
With the two-pronged goal of alleviating the inefficiencies typically associated with manually managing GC’s accounts payables and ensuring that suppliers are paid promptly, the company set out with the ambitious task of automating its payments process – from procurement, through to request-for-proposal, purchase order issuance, invoice entry, and payment dispatch. As part of this solution, the company sought to explore invoice financing facilities for its suppliers.
Motivated to unlock this pain point, GC approached Standard Chartered Thailand for support. “The bank was the company’s principal cash management provider and was already supporting GC for vendor payments and collections,” explains Pattaralada Sa-Ngasang, Chief Financial Officer of GC. “Standard Chartered has built a reputation for successfully helping clients to automate their treasury operations, leveraging its own digital platforms and capabilities.”
Together, GC and Standard Chartered Thailand implemented a pilot blockchain-based solution to improve the procure-to-pay cycle – by enabling real-time reconciliation and eliminating manual payment processes. The solution leveraged an application programming interface (API)-based banking channel, rather than traditional host-to-host (H2H) connectivity or internet banking. Ultimately, both technologies would be game-changers.
Fast, secure and cost-effective
The use of blockchain is well suited to payments. Not only does the technology keep a single record of each transaction that cannot be tampered with, it is also highly resilient to cyberattacks.
In the case of GC’s accounts payables, an invoice is sent to the company, which is automatically cross-checked against its procurement and goods received records. Once matched, invoicing information is entered into the supplier’s account ledger, and payment is automatically dispatched to the supplier’s bank account on the due date – thus significantly reducing the payments process timeline.
Use of an API-based banking channel is also noteworthy in terms of access, time and cost. Typically, H2H connectivity works to a predetermined schedule, and can take several minutes or longer to transfer files from banks to their corporate clients. H2H connectivity also involves labour-intensive implementation and configuration with a company’s enterprise resource planning (ERP) or treasury management system. Conversely, GC’s API solution enables full, unrestricted access 24/7 in real time, and was easily configured with the company’s ERP system.
Social upside
Treasury staff at GC also benefit from digital payments to suppliers. Employees who once spent their time manually inputting payments data and other such information, now find themselves able to perform more strategic and higher value roles. Not only are they more productive, they now have access to in-depth insights, performing tasks with greater accuracy, as well as offering improved supplier relations. Digitalisation of manual tasks has also led to greater employee engagement. All of these factors help to make the payments process more profitable for the business.
Similarly, for many of GC’s suppliers, there are multiple advantages to this new solution. With GC digitalising its accounts payables, suppliers are in turn able to provide detailed information to potential lenders – as well as leverage the relationship they hold with Standard Chartered to access new lines of credit.
Access to financing not only supports business growth, by enabling suppliers to invest in new technology and facilities, it also allows these SMEs to invest in additional staff, thus providing further income to local communities. “Our new payments system not only ensures that GC’s suppliers thrive, it also has a significant impact on people employed by these SMEs, who rely on these businesses for income and livelihood,” says Pattaralada Sa-Ngasang. “The impact of our procure-to-pay solution is therefore far-reaching. Well beyond banking, there are enormous social benefits to be enjoyed.”
A bright future awaits
The decision to digitalise payments also aligns with GC’s commitment to the United Nations’ Sustainable Development Goals (SDGs). SDGs are designed to mitigate global challenges pertaining to the environment, society and economies by 2030. GC is focused primarily on assisting SDG 13 on Climate Action; SDG 12 on Responsible Consumption and Production; and SDG 9 on Industry, Innovation and Infrastructure. To meet these goals, the company has pledged to reduce its greenhouse gas emissions by 20 per cent by 2030; halve its dependence on current water sources by 2032; and continue to dispose zero industrial waste to landfill, among other measures. By providing more timely income to suppliers and their employees, the company is also indirectly supporting the efforts of suppliers in contributing to SDG 1 on Poverty Alleviation; SDG 8 on Decent Work and Economic Growth; and SDG 3 on Good Health and Well Being.
Indeed, a bright future awaits GC and its suppliers. Complementing procure-to-pay, the company and Standard Chartered plan to roll out a fully integrated end-to-end solution for its accounts payables in the near future. This rollout will involve more vendors as well.
“By implementing a best-in-class blockchain-powered payments system, GC is pioneering a new chapter in how technology can be deployed to bring about ground-breaking change to its own internal processes, while at the same time, extending real socio-economic benefits to its suppliers and the communities that they support,” lauds Plakorn Wanglee, Chief Executive Officer of Standard Chartered Thailand. “Not only is it helping to further the interests of Thailand’s economy, it is also enhancing the nation’s capabilities in terms of technological innovation, our precious environment, and Thai society as a whole.”
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