What is the Cost of Not Transitioning to an Electric Fleet?
Organizations face myriad challenges when it comes to sustainability initiatives, not least of which is how they manage and deploy their corporate or institutional fleet of vehicles.
For CFOs, procurement professionals and fleet managers tasked with fiscal as well as environmental and sustainability goals, however, transitioning away from gas- and diesel-powered vehicles can meet at least three major goals.
Save Money While You’re Saving the Planet
It’s hard to find a business, institution or government entity that isn’t working toward some kind of sustainability objective, starting at the United Nations with the 17 Sustainable Development Goals that include Sustainable Cities and Communities and Climate Action to combat climate change, to local initiatives like the Transformative Urban Mobility Initiative (TUMI).
CFOs and their teams are directly impacted by these efforts. It may be safe to say that everyone wants to do the right thing, but it’s a harder conversation if the “right” thing costs significantly more than the “usual” thing.
Let’s look at fleet electrification as an example of where innovations and demand have led to near cost-parity between the old way, e.g., a traditional, internal-combustion engine (ICE) vehicle, and the new electricity-powered or -supported vehicle.
Not only are acquisition or lease costs now roughly the same, but the long-term total cost of owning an electric (EV) or a gas/electric plug-in hybrid (PHEV) is effectively proving to be less than a traditional ICE vehicle due to lower maintenance and fewer repairs. A University of Michigan study pegged the TCO of electric at less than $490 per year in the United States, almost 60% less than the estimated $1,117 annual cost of owning and operating a gas vehicle.
With innovations in electricity production expected to reduce the price of electricity and battery technologies extending the life and storage capacity of a charge, costs of going electric are likely to keep going down.
Now, couple the potential for cost savings with the immediate — the minute you transition one vehicle to EV — result in CO2 reduction, and there’s a win for the business as well as the environment.
Sustainable Mobility Is a Quick Win for Reducing Air Pollution
According to the International Energy Agency, emissions from transport — primarily road, rail, air and marine transportation — accounts for nearly a quarter (24%) of global CO2 emissions.
The World Business Council for Sustainable Development (WBCSD) found that 50% of the vehicle miles travelled globally is attributed to moving people. Even if we just target making commuting zero emission, it would remove 880,000 tons of carbon dioxide from the atmosphere, based on the estimated 6.7 billion vehicle miles attributable to people going to and from work.
Now the pandemic showed us — in real time — what the impact of lower commuter-related travel could mean: Global CO2 emissions dropped by 5.8% in 2020, the largest reduction since World War II.
Every single passenger car emits on average 4.6 metric tons of carbon dioxide every year. That’s the equivalent of recycling 1.6 tons of garbage instead of sending it to the landfill, and of planning 6 acres of forest to offset the pollution.
The fact is, removing even one traditional vehicle makes a difference, and cities and companies around the world can make a dramatic, near-immediate impact when they transition to electric and hybrid fleets.
Become Part of a Sustainable Trading Network
Back in the 1990s and early 2000s, Walmart was among the companies that led the way to revolutionize supply chain management. By demanding its trading partners meet stringent inventory and distribution goals, it effectively changed the way manufacturers collaborated with their retail partners and how they worked up the supply chain with their partners.
When it comes to sustainability, those same kinds of demands are changing business and trading relationships around the world.
In just one example, a major global coffee company has delivery services in every country in which they ship their coffee capsules. In addition to their own goals to become 100% carbon neutral, they have also set sustainability targets for their delivery partners. Trading partners who can’t comply lose their business.
In order to keep the customer, their Portugeuse shipper immediately launched a study of their corporate fleet to determine what vehicles could be electrified and in what timeframe. This took into account factors such as route distances, delivery schedules, availability of charging stations and customer needs. It found that 90% of the company’s fleet of 3,900 vehicles could be transitioned to electric without delay.
Let’s put that one act into context. Removing 3,510 gas- and diesel-powered vehicles from the road will remove nearly 18,000 tons of carbon dioxide from the air. And this company was able to keep its contract with a lucrative customer.
That’s just one trading partner.
Join the Fleets in Transition Movement
It’s not just companies asking their trading partners to step up to more sustainable mobility. Governments around the world are demanding zero- and reduced-emissions behaviors for urban zones and beyond.
And studies have shown that companies with sustainable business practices typically have happier employees, are able to attract and retain workers of all ages and levels, and seem to find better, more talented staff.
For CFOs and heads of procurement who make business-critical decisions, a fleet transformation offers a near-term answer that will lower the total cost of mobility while decarbonizing the organization’s mobility footprint and contributing to a company culture that is primed for new opportunities and growth.