Sustainability: Green fleets

Squaring the environmental circle

Paul Hollick, sales and marketing director of fleet management company Alphabet, looks at how businesses can get more from their company fleets.

For many businesses, environmental policy poses something of a dilemma. Promoting sustainability is clearly important from the perspective of corporate social responsibility; and customers increasingly want to see evidence of their suppliers’ green credentials.

But companies often view environmental commitments as an unwelcome burden that benefits society as a whole but doesn’t contribute to their own profitability. It's not that businesses are against sustainable practices; the problem seems to be a lack of clarity about whether investing in environmental measures delivers concrete commercial returns.

Perhaps that's one reason why a clear majority of respondents to the current Alphabet Fleet Management Report admitted that they had not set any environmental targets for their fleet operation, even though green issues ranked close to safety and costs among their top managerial concerns.

Why, then, are relatively few businesses tackling the issue directly? What might be holding them back?

Business fleets in the spotlight

To answer that question, it's useful to step back for a moment to take in the wider context of fleets and the environment. Transport accounts for 25 per cent of the UK's greenhouse gas emissions, putting fleet operators under the spotlight when it comes to delivering government CO2 targets.

At the same time, companies rely on vehicles to meet a plethora of needs, from servicing their customers to attracting and retaining essential skills. Government policy over the last decade has focused on persuading businesses and drivers to choose cleaner vehicles by progressively taxing their CO2 emissions. This tightening of carbon taxation has worked alongside CSR concerns, customer pressures (such as tender requirements) and the rising price of fuel to push the green fleet issue up the business agenda.

For their part, vehicle manufacturers have kept abreast of ever-tougher EU emissions targets by bringing out lower-CO2 models with the same the attractive driving dynamics of their less efficient predecessors. The outcome of all these trends has been a 25 per cent fall in the average CO2 emissions of new company cars since 2001.

£100,000 fuel cost saving

One doesn't have to be a polar bear to have a material interest in that CO2 figure. It has a direct bearing on fleet operating costs too. Fuel consumption and CO2 emissions are directly proportional, which means that the cost of filling up new fleet cars has fallen significantly over the last 10 years.

In fact, the improvement in CO2 emissions has neutralised something like nine-tenths of the impact of the rise in real (i.e. inflation-adjusted) road fuel prices over the same period. If it hadn't been for this green revolution in company cars’ efficiency, the yearly fuel bill of a business with 250 cars would have increased by an additional £100,000 or so in real terms between 2001 and 2011.

The benefits of an environmentally-driven fleet change don't stop there. Frugal ex-fleet vehicles now find a ready market among used car buyers. This boosts their residual values and helps to keep down company car lease rentals. But because these changes have unfolded gradually, many managers still haven't cottoned on to the commercial potential of pushing a green fleet agenda in their own business.

Car policy carbon caps

For instance, one straightforward green policy move is to steer employees into cars with lower running costs by restricting the choice list to models emitting less than a certain level of CO2.

Moving from an unrestricted car policy to one where car choices are capped at 130g/km of CO2, for example, should cut fuel and tax bills by between 10 and 20 per cent over three years. Introducing a cap needn't be controversial: drivers will pay less company car tax when they drive lower-CO2 cars and there's a wide choice of suitable models these days.

But when the Alphabet Fleet Management Report survey asked what businesses were doing about the environment, only 43 per cent of companies with green targets (that's 19 per cent of the whole sample) said they had imposed an emissions cap. Paradoxically, many companies reported that “change costs” and “driver inertia” prevented them achieving green fleet cost savings.

This highlights the lack of clarity over causes and effects in green business policy and helps explain why businesses often see sustainability as something that causes extra costs for them while someone else gets the benefit.

In fact, as we’ve seen, the causes and effects in green fleet management are heavily tilted in favour of businesses who actively aim to lower their environmental impact. Causing employees to choose lower-CO2 cars and to use them productively has the effect of reducing taxation and fleet operating costs.

Top green fleet policy moves

The three most widely-used green policy moves implemented by companies in the Fleet Management Report were:

- using lower-CO2 vehicles

- capping CO2 in the choice list

- capping business mileage in order to encourage staff to use the phone instead or share journeys more often

Buying carbon offsets (by using a fuel card linked to a tree planting scheme for example) came last on the list—probably because this approach entails paying twice to emit CO2 instead of avoiding the emissions in the first place.

The survey also suggests that “proactively green” fleets are increasingly turning to telematics (in-car measurement and transmission of acceleration, braking, geographic and other data) to manage vehicle use. While mainly used in vans to date, telematics is gaining foothold in car fleets to facilitate new productivity solutions such as in-house corporate car sharing schemes.

More productive, less expensive

There is no doubt that fleet environmental policy can, and should, be a ‘win-win-win’ situation with financial benefits for your business and your drivers, as well as a reduced impact on the planet. 

The key to making the most of green policy is to build a clear understanding of how taxation, car policy, driver expectations and CO2 emissions interact in your businesses. From there you can tailor greener provision of job-need and reward vehicles for higher productivity and lower costs. 

Alphabet is a multi-marque fleet funding company and part of the BMW Group. Operating in 19 countries, the company manages a fleet of over 100,000 vehicles in the UK and more 530,000 vehicles worldwide.

Paul Hollick, a member (MICFM) of the ICFM, has extensive experience of building and developing business in the fleet industry. He moved into his current role at Alphabet in 2007, where he is responsible for all new business activity and related support functions. He also has product responsibility for car hire, fleet risk, Motivational Leasing and environmental products, as well as its strategic consultancy offering.