BusinessCorporate FinanceFleet special: going green

Fleet special: going green

Saving the planet doesn’t have to cost you money ­- our reporter looks at how you can make green fleet pay

If a company uses fewer resources, it stands to reason that it should have
lower costs, but the potential financial benefits are even greater for companies
that take the long-term view of investing in the environment.

‘The business case for “greening” your fleet is fairly clear-cut,’ says Neil
Munro, head of new product development at vehicle management company
‘Drivers in lower-emission cars pay less tax, while fleets that reduce fuel
consumption and plan journeys more efficiently could cut thousands from their
running costs. Employers and employees can save a lot of money.’

Creating a green fleet policy doesn’t have to be difficult, as there are a
number of tried and tested schemes that make a real difference. Choice of
vehicle and fuel consumption are valuable starting points. This doesn’t just
mean a firm should put its staff in the smallest cars available ­ a 1.0-litre
supermini may achieve worse fuel economy than a car with an engine twice the
size, depending on how it is used.

If companies can persuade their drivers to care about the environment, it can
have a dramatic impact on fuel use, mileage and the costs of running the fleet.

Responsible driving

Independent tests by specialist testing company
Millbrook at a
GreenFleet Fuel Challenge event revealed the impact that driving style and
vehicle condition can have on fuel economy. The findings suggest that fleet
managers attempting to reduce running costs by downsizing their cars would
achieve better results by implementing driver training.

Part of the test involved driving a Toyota Avensis 2.2-litre diesel aggressi
vely around a track with the windows open, air conditioning on and tyre pressure
slightly lowered. An identical car was driven carefully round with the air cond
itioning off, windows closed and tyres correctly inflated. The
aggressively-driven car achieved 18.02mpg (miles per gallon) compared with
56.19mpg for the carefully-driven car. This equates to a fuel saving of more
than £4,000 over 24,000 miles.

The problem is how to educate drivers, both about their impact on the
environment and how they should go out of their way to make a difference.
‘Managing fuel is key to reducing a fleet’s environmental footprint, as the less
fuel consumed means fewer emissions,’ says Munro. ‘It also cuts costs; even
simple measures, such as using the cheapest petrol stations, checking tyres and
engines regularly and educating employees to drive more efficiently, could save
a fleet of 100 2.0-litre diesel vehicles about £12,000 a year.’

Leasing company Leasedrive suggests educating drivers with some hard facts.
For example, a car will produce roughly its own weight in CO2 within 6,000
miles. In addition, companies could show their employees how to ensure vehicles
are driven effectively. Speed is a factor: the faster a car is driven, the more
CO2 and nitrous oxide it produces. The most economical speed range is 40mph to

Good Reception

The good news is that drivers are receptive to change, with a study finding
that nine out of 10 would be prepared to change to a greener car. Financial
incentives may be more effective, such as highlighting fuel savings and offering
a better car if it’s green.

Encouraging staff to think about how they travel can also help. Research has
shown that 75% of professionals believe new technology will help them cut their
business miles.

Matthew Wright, head of marketing at the
Energy Saving
, says: ‘If every commuter worked from home one day a week, then they
would be able to help do their bit to save 20% of the energy we use every day.’

It shows that there are more imaginative ways to improve the efficiency of
fleets than buying a Toyota Prius. For example, clean doesn’t automatically mean
small. According to government figures, there are now more than twice as many
low-emission cars on UK roads compared to 2003.

In 2005, there were more than 270,000 cars emitting less than 120g/km of CO2
on the road, compared to 128,000 in 2003. And these represent a range of
vehicles, from super-minis to lower-medium contenders.

According to figures published in The Cost, a guide to the running
costs of more than 3,000 fleet cars available in the UK, published by Fleet
, companies have a huge choice of low-emission vehicles available.

There are currently 154 model variations that produce less than 120g/km of
CO2, the official benchmark for a low-emission car. These include the Toyota
Prius and Honda Civic hybrids, Citroën C1, Fiat Panda, Vauxhall Corsa, Renault
Modus and Toyota Yaris.

There are 887 vehicles producing less than 145g/km of CO2, the level at which
cars qualify for the lowest 15% band of company car tax before the 3% penalty
for diesel is added. These range from the Ford Focus to the Mercedes-Benz

Low CO2 emissions also mean high fuel economy, with some models achieving
more than 60mpg, which can lower fuel costs significantly. Even SUVs are going
green, with the Honda CR-V diesel capable of achieving more than 40mpg in
everyday driving, while, at the luxury end of the scale, the Lexus RX400h hybrid
SUV combines a V6 engine with electric power to reduce its emissions.

Despite having a 3.0-litre petrol engine with automatic transmission, it
claims a combined fuel economy figure of 34.9mpg. At low speeds, it can run
solely on electric power, turning the SUV into a zero-emission vehicle.

And the benefits go beyond just simple fuel savings. Choosing low-emission
cars also means lower tax bills for drivers and companies. The CO2-based company
car tax regime requires drivers to pay tax on a percentage of the value of their
vehicle. This percentage depends on the CO2 emissions of their vehicle ­ so the
lower the emissions, the lower the percentage a driver will have to pay tax on.

In addition, companies pay Class 1A National Insurance Contributions on the
driver’s tax liability at 12.8%, so savings for the driver mean savings for the

In addition, there are tax breaks for using cleaner fuels, such as biodiesel,
and vehicles that produce less than 120g/km of CO2 also receive 100% first-year
capital allowances, which can reduce corporation tax. If a firm chooses some of
the cleanest vehicles, such as hybrids or those running on liquefied petroleum
gas, it can also take advantage of a 100% discount on the London congestion

For a 100-vehicle fleet that takes advantage of all the potential savings
available, the cost reductions available could run into hundreds of thousands of
pounds ­ even before reductions on fuel costs are taken into account.

LeasePlan’s Munro believes there is a clear business benefit in going green.
‘Running a greener fleet makes your company more attractive from a corporate
responsibility perspective. Twenty Toyota Prius hybrids in the car park will
generally strike a better chord with the public than 20 gas-guzzling 4x4s,’ he

John Maslen is editor of Fleet News

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