Fleet: environment - costing the Earth?

The three flavours of the month for fleet managers are environment, health
and safety, and fuel costs.

Focussing on these can lead to savings. With tax and national insurance
contributions concessions on cars with lesser CO2 emissions this one is a no
brainer, and all the studies mentioned in this piece show there has been a
significant upswing in green issues colouring fleet decisions.

Although a cost in the short term, health and safety can, in the long term,
by cutting down on accidents and wear and tear also be a cost saver. And
although fuel costs are coming down no one is complacent – a whole plethora of
measures are being used to encourage drivers to buy at cheaper rather than more
expensive outlets.

Typically on the health and safety issue T-Mobile is installing a driver
safety and fleet risk management product in 240 of its 800-strong company car
fleet. The company will use ‘drive-diagnostics’ safetycentre’ in the vehicles
following a short trial during the summer. The system uses a sensor fitted in
the car that recognises certain manoeuvres or ‘events’, such as excessive
braking, corner handling, acceleration and lane changing.

It identifies high-risk/high-cost drivers, encourages better driving habits
and lowers risk, liabilities and costs, the mobile phone operator claims.

Elsewhere, small business owners are today more interested than ever in the
environmental impact of purchasing their company car.

Fuel efficiency and safety join environmental concerns in Bibby Financial
Services’ annual transport survey as the top factors companies consider when
purchasing a vehicle for their business.

Today’s green conscience has erased the old perception of the entrepreneur in
a red convertible with speed, performance and image taking a backseat, according
to Bibby.

Just one in three owners and managers say they look for status and image from
their car purchase, while nearly two thirds claim that environmental concerns
are now their top motivation.

‘Business owners now have a more balanced perspective with factors such as
family, the environment and cost all featuring more highly when purchasing a
vehicle,’ David Robertson, chief executive of Bibby Financial Services, says.
‘Expenditure on items such as cars all impact the bottom line and the costs will
go beyond the initial purchase and may be a burden for many years.’

Robertson points out that firms can chose other environmentally friendly
travel options, such as car share schemes and hybrid or electric cars. ‘For
those that are looking to make an immediate difference, simple steps such as
driving to the speed limit and removing the roof rack when it’s not necessary
all help reduce fuel consumption, and therefore the environmental impacts.’

Given the amount of prestige, rather than environmentally friendly, cars that
executives drive one has to doubt how deep and real some of these declared
greener tendencies are.

The annual Alan Jones Associates Survey into company cars found that only 8%
of companies had an environmental policy relating to their car fleets. But this
was an improvement on the 5% figure in 2005. One indicator of a switch to
greener driving is the sales of hybrid cars.

Despite these cars’ very high profile, not least with Hollywood stars in the
driving seat, sales of the market leader, the Toyota Prius, have stalled both in
the UK and more significantly in the US. Buyers it seems are put off by the
higher costs the vehicles have (about £1000 more) than the petrol only models.

Graham Farquar, a director of Ernst & Young, also says there is more lip
service than reality in moving over to greener fleets.

‘The tax incentives just aren’t big enough to make it worthwhile. What I have
been noticing is that several of the smaller fleet owners are now thinking of
leaving the employee car ownership scheme and going back to company cars as the
savings/administration ratio just isn’t worthwhile.’

Campaign for lower emissions

The Energy Savings Trust is spearheading the government’s campaign for more
efficient use of energy and a reduction in emissions. Fleet drivers are a
priority. ‘Roughly half of all the cars bought each year are bought by
business,’ says Nigel Underdown, head of transport advice at the Energy Trust.

The average company car driver covers roughly twice as many miles a year as
the average private motorist. Getting to grips with the business fleet will also
have a bearing on what everyone else will be driving, Underdown says: ‘Fleet
cars generally go on to the private market at two or three years of age. If we
can encourage business buyers to specify greener vehicles, then they will
ultimately flow into the consumer market.’

The job of taking those messages to companies falls to independent
specialists, who provide free consultancy on behalf of the Energy Saving Trust.
One is Chris Chandler of Hampshire-based Fleet Audits. He has no illusions about
the main attraction of the service, saying: ‘The way to appeal to business is to
say ‘cut carbon, cut costs’.’

And there are savings to be made. Whitbread Group plc is a case in point;
since an Energy Saving Trust-led rethink of its fleet it has been saving
£200,000 a year and 1,600 tonnes of CO2. In four years the Whitbread fleet’s
average mpg has increased from 34 to 41 and annual mileage per car is down by
6%.

Fleets enforcing a ‘diesel-only’ policy have almost doubled in three years,
according to research from Arval. Arval, one of the UK’s leading fleet and fuel
management companies, has found that 31% of fleets are now implementing
diesel-only policies, a dramatic rise from last year’s figure of 25% and 16% in
2003. A variation of the diesel only policy, namely ‘diesel for all except
senior staff’, is in place in another 17% of fleets, up from 13% last year.

The survey also reveals that diesel growth is ‘outstripping’ fleet manager’s
own estimates. In Arval’s 2004 survey, fleet managers predicted that 58% of
their fleets to be diesel vehicles by the end of 2005 and 65% by the end of
2006. In reality, the 2005 survey reveals that diesel currently accounts for 66%
of vehicles among fleets, and the expectation among fleet managers is that 71%
of fleet vehicles will be diesel by the end of 2006.

Over half (56%) of the fleet managers surveyed believe the move to diesel has
led to an overall reduction in fuel spend. A total of 21% revealed they had made
detailed calculations before implementing a diesel-only policy with an average
savings calculation of around 20% of annual fuel spend.

Almost 40% of fleet managers reported that there were no ‘perk’ cars as part
of their fleet, up from 33% in 2004. In turn, the number of ‘perk car only’
fleets has reduced from 7% in 2004 to 4% in 2005. In terms of total mileage, 9%
of fleets reported that mileage had increased in 2005, a decrease was reported
in 5% of fleets and 86% said that mileage was flat.

Total business mileage in 2005 was reported to be up in 14% of fleets, down
in 7% and flat in 79%. This year, 8% of fleets expect total mileage to increase,
5% expect a decrease and 87% expect mileage to remain flat.

Mike Waters, head of market analysis at Arval, also believes that bio-diesel
does have a role to play, but cautions against believing all the hype:
‘Bio-diesel has a place in the market going forward, but it is important to sort
the reality from the myth. The best place to take advantage is by purchasing the
standard mix which is available on the forecourt.’

Phil Peace, marketing director of vehicle leasing and fleet management
company Velo, points out that while environmental concerns are forcing down
fleet costs, health and safety concerns are pushing costs the other way, at
least in the short term. He is also quick to emphasise the VAT advantages of
contract hire and the NIC and tax advantages of cars with lower CO2 emissions.

‘In one of our clients, a pharmaceutical company with over 500 cars, they hav
e not only gone over to an employee car ownership scheme but only cars with 35+
mpg get the full benefit. Those with under 30mpg do not benefit at all. This
move alone is saving them £250,000 a year. Other companies are doing discount
deals with petrol chains and using fuel cards as ways of keeping their petrol
costs down. A 10% saving in petrol costs can be an enormous saving. Encouraging
drivers not to use the motorway stations is a major objective.’

Making an impact

HBOS as part of its responsible employer programme has calculated that 7% of
the environmental impact it makes in the course of doing its business comes from
business travel. It has calculated that each year its people in the course of
their banking business travel 78.6 million miles. A breakdown reveals that 4% of
these are by train, 54% by air and 42% by road. The bank is proud to say that
every four years when its fleet is renewed it goes for cars with lower CO2
emissions. The company also promotes car sharing.