7 minute read
The drive to decarbonise
PROFESSIONAL, delivery and operational fleets, consisting of light commercial vehicles and/or passenger-carrying vehicles, are a significant contributor to global CO2 emissions.
However, businesses are increasingly looking to decarbonise their fleets, with many of the world’s leading companies committing to switch to electric vehicles (EVs) by 2030.
Therefore, it is up to fleet owners – whether they are the head of operations in a large logistics or delivery company, a sustainability manager in a utility provider, procurement lead at a leasing business or the head of HR in a Fast Moving Consumer Goods firm – to act now, to future-proof their businesses and meet decarbonisation targets.
That said, many fleet owners are struggling to turn ambition into action. They feel overwhelmed, and do not know what the best solutions are, the best way to implement those solutions, or how to get the business buy-in required.
A key role to play The 2015 Paris Agreement committed the 196 participants at COP21 to limit the increase in global warming to well below two degrees Celsius (and preferably to 1.5 degrees Celsius), compared with pre-industrial levels. Subsequently, many countries, industries and individual organisations set targets for limiting their CO2 emissions, and began developing plans on how to reach them.
The transport sector has a key role to play in this. Road transport – particularly cars and vans – is an essential part of our lives, and the backbone of our economies, with most consumer products transported by road at some point in their delivery journey. Over 87 billion passenger miles were completed globally by private vehicles in 2022. However, these vehicles, albeit essential, are a highly visible source of emissions, being synonymous with fumes, noise and congestion. Pressure is increasing to rapidly reduce emissions in the global vehicle fleet.
Transport as a whole was responsible for 7,153 million tonnes (MT) of carbon dioxide (CO2) emissions in 2020, which is equivalent to 21% of all global CO2 emissions. Most transport emissions (78%) result from on-road transport.
Some forms of transport – aviation, shipping and heavy-duty freight – have been categorised as “harder-to-abate” sectors, because of the need for larger stores of energy, and difficulties to electrify. Solutions for lighter-duty
vehicles are comparatively clear, and while operational and market challenges still exist, the global fleet is already showing significant signs of change.
There are 1.3 billion passengercarrying vehicles (PCVs) and light commercial vehicles (LCVs) in use, which represents 95% of total vehicle volume (Exhibit 1). They generate 48% of total transport CO2 emissions – more than almost all other forms of transport combined. Ownership of such vehicles is split between personal and business users; this report focuses on those owned by businesses.
How these vehicles are used Business-owned light vehicles are used for four main purposes: 1. Delivery fleets – focusing on transporting goods; primarily for lastmile delivery.
2. Operational fleets – enabling workers to perform their job (e.g. moving construction workers and their equipment to job sites, or repair workers supporting customers in the field). 3. Professional fleets – provided to employees as a benefit. 4. Aggregator fleets – indirectly owned or operated vehicles, such as carsharing and ride hailing.
Of these, operational fleets represent the large majority, although they are highly fragmented with a large number of businesses with relatively small fleets. This is followed by delivery fleets, where there are fewer providers, but often with larger fleet sizes. Finally, we have professional fleets, which vary in size and prevalence depending on the country they operate in. Fleet owners across these three categories play different roles within their organisation, have varying degrees of influence, and different responsibilities and success metrics (Exhibit 2). This impacts decarbonisation decision-making, and the strategies and solutions that will best work for these types of fleets.
The case for change The case for fleet decarbonisation is becoming more and more compelling. Pressure is increasing from regulators, customers, employees and the broader societies in which business fleets operate. At the same time, new opportunities are arising: technology is improving, providing more alternatives to internal combustion engine vehicles (ICEVs), and these alternatives are becoming cheaper. This helps create the conditions required for fleet owners to credibly explore new solutions, and
EXHIBIT 1: GLOBAL NUMBER OF VEHICLES, SEGMENTED BY VEHICLE TYPE AND REGION 1.4 billion
VEHICLES
PASSENGER-CARRYING VEHICLES (PCVs)1
1,164
MILLION LIGHT COMMERCIAL VEHICLES (LCVs)
162
MILLION OTHER VEHICLES (E.G. HEAVY GOODS VEHICLES, BUSES, COACHES, TRACTORS AND TRAILERS)
73
MILLION
PCV private vs business ownership
1,071m 93m
PRIVATELY OWNED PCVs BUSINESS-OWNED PCVs LCV private vs business ownership
68m 94m
PRIVATELY OWNED LCVs BUSINESS-OWNED LCVs
0 50 100 0 50
PRIVATELY OWNED BUSINESS-OWNED OUT OF REPORT SCOPE
100 EUROPE CHINA UNITED STATES
INDIA REST OF WORLD
Sources: Tracking Transport (2021), IEA. | Final Van Statistics Great Britain (2020), Department for Transport. | Top Private Fleets (data sourced 2022), FleetOwner500 Light commercial vehicle production in China for 2010 to 2021 (2022), OICA, Statista. | Registered vehicles by country (2020), WHO. | Monitor Deloitte Analysis 2022. 1 This includes estimated two- and three-wheelers, although limited data available on this.
EXHIBIT 2: FOCUS SEGMENT FLEET-OWNER PERSONAS
Delivery fleet
Typically managed by Head of Fleet/Operations
Focused on transporting goods, including short- and long-haul delivery Fleet importance to business1
LOW HIGH
“My fleet is a finely tuned instrument.” Key challenges
•Reducing CO₂ footprint of fleet •Reducing total cost of mobility •Ensuring fleet meets customer expectations in most efficient way •Not knowing what decarbonisation support they need •Delays to repairs and replacement vehicles •Driver shortage and staffing challenges
Priority metrics
• Delivery times • Fleet cost • Fleet utilisation
Operational fleet
Typically managed by Head of Fleet/Operations
Focused on enabling workers to get to the job site, or from point A to point B Fleet importance to business
LOW
“We can’t waste money with out-of-action vehicles.”
HIGH
Professional fleet
Typically managed by Head of Benefits/HR/Procurement/Sustainability
Focused on providing workplace benefit to employees Fleet importance to business
LOW
“Fleet management is just one thing on my long to do list.”
HIGH Key challenges
•Reducing CO₂ footprint of fleet •Reducing total cost of mobility •Handling day-to-day operational issues – e.g. broken down vehicles •Maximising fleet value and vehicle utilisation (uptime) •Delays to repairs and replacement vehicles •Not knowing what decarbonisation support they need
Priority metrics
•Meeting customer Service Level Agreement requirements •Fleet cost •Fleet utilisation
Key challenges
•Reducing total cost of mobility •Managing multiple projects at once •Managing fleet risks and fraud •Reducing CO₂ footprint of fleet •Ensuring car/mobility scheme is meeting new employee ways-of-working requirements
Priority metrics
•Employee satisfaction •Employee retention •Fleet CO₂ emission reduction
Source: Fleet owner interviews. 1This illustration reflects how critical the fleet is to the fundamental business model – i.e. a fleet is a delivery businesses product. It is not an indication of how important these job roles are.
the impetus for those already taking action to accelerate their transition.
Meanwhile, government regulation on LCV and PCV emissions has intensified significantly in recent years. Over 50% of new vehicle sales are now in markets that have announced a full phaseout of ICEV sales in the near future.
Specific measures are also being applied at local and regional levels. For example, from 2030, petrol and diesel vehicles will be banned from entering Amsterdam, and Singapore is aiming to achieve 100% cleaner energy vehicles by 2040.
Regulatory pressure will only intensify, with some markets, such as the UK, bringing ICEV sales bans forward by up to 10 years.
The decarbonisation imperative is also shaping customer and employee decision-making. Forty percent of employees entering the workforce cite sustainability as a key factor for job selection, and one in five consumers prioritise sustainability when making transport choices. One delivery fleet operator noted this trend: “It is not even a differentiator at this point, it is starting to become about ability to operate.”
Although consumers in Europe have been leading the transition, behaviours and attitudes are changing globally. In India, 90% of surveyed consumers state they would be willing to pay more for CO2-neutral delivery, and 35% of surveyed Chinese consumers name sustainability as an important purchasing factor.
Reducing fleet emissions is moving from a preference to a necessity. Inaction could result in higher costs, loss of market share, or even business failure. These risks are compounded by recent supply issues, where wait times for EVs have in some cases been extended to 18 months. While these issues have been made more acute by short-term factors, such as the global semi-conductor shortage, interviewees expect these challenges to intensify, as demand increases from more fleets looking to meet decarbonisation targets.
As one large delivery fleet owner noted: “We have moved our targets forward; if we don’t start securing the vehicles we need today, there is a risk we won’t get them when we need them.” Indeed, there are gains to be made by being a fast mover. Actions today will define the future winners or losers.
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