Here to stay?

Marc Peeters and Barend van Bergen look at the ‘green fleet’
trend
 
 
 

The company car fleet is undergoing a transformation. Many fleet
managers are turning to more environmentally sound car fleets in
line with new sustainability trends within corporations. This trend
will have an inevitable impact on automotive OEMs: some will
benefit while others are likely to lose ground. Today, hybrid cars
like the Toyota Prius offer a viable choice for companies wishing
to project a greener image; but more traditional fleet car choices,
such as the luxury brands, have yet to offer strong environmentally
conscious solutions.
 But is the move to ‘green fleets’ part of a broader trend?
And how should fleet managers respond in their decision-making
process?
 
The drive for change
The shift to green fleets is currently visible among governmental
organisations and companies that are leading in corporate
responsibility, such as the large multinationals like TNT, BSkyB
and Rabobank. We see some key reasons for this shift:
• adopting a green fleet is a response to growing consumer
awareness and questions on company policy around climate
change
• the move to a greener fleet is a visible and concrete step
for a company, and is relatively easy to take, supported by the
increasing range of ecologically considered vehicles
• any company projecting an environmentally friendly brand
position must demonstrate this at every level where the brand is
visible – company car fleets are no exception.

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Consumers, carbon footprint and brand
In the past year there has been an evident tipping point among
consumers and institutions to provide climate change solutions,
spurred by government recommendation, such as the UK’s Stern
report, and by high profile media such as Al Gore’s documentary, An
Inconvenient Truth. According to a research conducted by DYG Inc.
for Ford motor company, “fuel economy” is now equal to “safety”,
and is a more important factor than “vehicle price” in consumer
vehicle purchase decisions. Closer to home in Europe, the sales of
eco-friendly cars increased by 25 per cent across EU-nations in the
first quarter of 2007, compared to the previous year. The
introduction of tax incentives is increasingly stimulating the
purchase and usage of eco-friendly cars.

 Many corporations have responded to these growing trends with
announcements and plans to become carbon neutral and to cut
emissions. A greener fleet is an effective means to reduce a
company’s carbon footprint. For example, in 2006, TNT calculated
its CO2 emissions from its fleet of 6,100 company cars at 43.5
kilotons. It aims to lower these emissions by 6 per cent by 2011
and has introduced stricter standards and behaviour change
programmes, such as employee incentives to buy ‘green’ cars, to
reach this goal. Another multinational, Rabobank, implemented an
‘ABC’ policy among its fleet of 4,800 vehicles in 2005 as part of
its corporate climate policy, whereby employees can only select the
most energy-efficient cars (with energy labels A, B or C).

  Brand perception for an organisation is also
influencing the green fleet shift. A car fleet is part of the
external brand image and a company risks losing credibility if it
claims to have an environmentally-friendly position while its
employees or management drive highly polluting cars. External green
visibility, through the car fleet, can also be used to enhance a
brand’s reputation. For example, BSkyB’s executive team drives
hybrid cars and its CEO, James Murdoch, drives a Toyota Prius. This
‘green’ position has also extended to the company’s suppliers,
where its preferred taxi companies drive hybrid cars.
 
Implementing policy
However, introducing greener car fleets can also be controversial.
Company cars are often part of an employee benefit package and
individuals may not be willing to change their buying choices for
the sake of a company policy. A person’s choice of car can also be
closely linked to the emotional brand perception and the status
that a particular brand brings. Going green, with a current limited
choice of vehicles, can result in trade-offs for a customer. At the
same time, there is strong societal shift against driving
high-polluting cars.

 Consequently, automotive OEMs are finding themselves in a
position where they must respond to fleet managers’ demands for
greener cars. It is clear that OEMs have very different green
portfolios and have not anticipated this influence in the same
manner. However, it is likely that choices will broader in the
coming year in response to consumer and company shifts.

 For companies willing to implement a green car policy the
following steps can be taken, based on current best practice:
• Introduce green policies for all drivers of company cars.
For example, TNT’s employees must report on their fuel usage and
distance, and every car owner must take a green driving course
within six months of receiving the car.
• Incentives work: some companies offer one-time payments of
around €3,000 to buy a ‘green’ car (that is, a hybrid, A or B
labelled model) or offer a €100 extra monthly budget for employees
choosing a ‘green’ car.
• Use an ABC listing across your car fleet to ensure that your
entire fleet meets environmentally-friendly criteria.
• Be clear about your green policy; make it visible to
employees through the intranet and other marketing means.
• “Tone at the top”: senior executives should set the example
for the entire organisation.
 
Conclusion
The trend to green fleets may seem to be just starting, but it is
likely that momentum will pick up quickly. We expect this trend to
extend beyond the larger, more visible corporations to smaller
businesses as it offers companies a simple way to action corporate
responsibility policies. Legal requirements and fiscal measures,
together with technological progress and increasing fuel prices,
will go hand-in-hand with increased consumer awareness.

 It remains to be seen how the different leasing companies
will respond to these changes, but these growing trends need to be
taken into account. Leasing companies should look at how
environmentally sound their current ‘green’ offer is and the
potential impact of environmental regulation on the composition of
their fleets. As usual, decisions taken by leasing companies today
will generally have an impact for the next three to five years.

Marc Peeters, associate director, KPMG IT Advisory; Barend
van Bergen, director, KPMG Sustainability