GCS Grey Fleet Review Update

Green Fleet Reviewl Anonymised Example Ltd

Contents

SectionPage

Contents

Executive Summary

1Introduction and Background

1.1Organisational background

1.2Energy Saving Trust’s Fleet Consultancy Programme

2Carbon Footprint Comparison

3Example 2010 Recommendation Summary

4Positive fleet policies

5Total Fleet Ongoing Recommendations

5.1Introduce a driver training and education programme

5.2Introduce a mileage management policy

5.3Introduce and manage a travel hierarchy

5.4Establish a formal Fuel Management Programme

6Van Recommendations

6.1Investigate any opportunity to resize vans

6.2Specify speed limiters on vans

6.3Keep track of technology in alternative fuel vans

7Company Car Recommendations

7.1Manage the CO2 limit down

7.2Introduce a green bonus

7.3Improve driver information and advice

8Reduce emissions from the cash allowance cars

8.1Improve cash allowance fleet data

8.2Establish a minimum standards policy

8.3Consider the use of allowance incentives

9Car Fleet Profile Comparison

Appendix A – CO2e Methodology

Appendix B – 2010 Executive Summary

Appendix C – Example Travel Hierarchy

Executive Summary

The Energy Saving Trust(EST) undertook a Green Fleet Review for Example Company Ltd (Example) in December 2010. This put forward recommendations relevant to how Example could reduce cost and carbon from its fleet. Follow up meetings revealed that the company hadmade some changes but many of the recommendations were not acted upon.

During a meeting heldwith Example Company Ltd (Example) in 2014, the company requested a fresh reviewbased on the previous project with updated data in order to understand the position now, progress made since 2010 and recommendations which are still valid.

On the whole, the organisationhas a well-managed company car fleet structured around the use of Whole Life Costs and CO2 limits although there is still potential to reduce cost and carbon from the fleet by £218,000 and 502 tonnesrespectively.

As a large, managed fleet, Examplealready has some positive fleet policies in place and the average CO2 of the leased company car fleet is relatively low at 122g/km and has fallen significantly in the past 4 years. Since many of the recommendations from the previous Green Fleet Review remain unacted upon, opportunities remain to reduce emissions much further.

The 2010 Example Green Fleet Review

From the data provided by Examplefor the period from April 2009 to March 2010, we calculated the annual carbon footprint to be approximately 3,871 tonnes.This included both business and private use as no split data was available. There was also no data on the cash allowance element of the fleet so this fleet carbon footprint is newand should be included in addition.

The first main recommendations put forward to reduce their carbon footprint and achieve significant cost savings comes from taking a formal approach to fuel management which is focussed primarily on fuel consumption. Example appears to have the systems available to them for this with regards to both the company cars and the commercial vehicles. Example needs to establish a corporate culture that raises the profile of fuel consumption and creates greater awareness to employees of its financial cost and environmental impact.

The complete removal of the fully expensed fuel benefit was a priority for Example with all employees being moved to a recharge system based on proportional cost; this should also be applied to the van drivers who have opted for the private mileage benefit.

A principle action to reduce transport costs and carbon emissions should be the establishment of a mileage management policy together with the development of a culture focussed on achieving mileage reductions where appropriate and practical.

Although no data was provided, the cars being driven by the cash allowance employees are likely to be older, less safe and on average have official CO2 ratings that are significantly higher than the company cars. If Example intends to develop a sustainable car benefit policy then it faces the challenge of introducing over the next two to three years a formal cash allowance policy that mirrors (as much as possible) the company car policy.

If not, then where drivers have the option of taking a cash allowance in lieu of a company car it is likely that measures designed to reduce the company car carbon footprint will result, proportionally, in a greater increase in emissions from the cash allowance drivers.

Positives

Example operates a significant sized fleet which has been managed in partnership with lease providers so already has several positive features to the fleet policies. These include;

• Using Whole Life Costs (WLC) for company car grades.
• Having a CO2 cap above which drivers cannot select company cars.
• Allowing the drivers to trade down to less cost cars.
• Removing some (but not all) drivers who have private fuel paid.
• Having a basic travel hierarchy section in the driver policy.
• Have a pool car system and discouraging grey fleet use.

Fleet Comparisons 2010 V 2014

Example requested an updated picture of the fleet. In terms of carbon, the totalbusiness and private carbon footprint has increasedslightly from 3,871 tonnes in 2010 to 3,931 tonnes in 2014. The recent Best Foot Forward data provided did have a forecast split of 25% private and 75% business use for the company cars which represented 3,468tonnes. Whilst this will be closer to the actual business carbon footprint, it is not directly comparable. Nearly 8.2 millionbusiness miles were travelled at Example in 2014although we did not have afigure to work with in 2010.

The company car fleet in 2010 averaged 150g/km which was slightly high. The average CO2 of this fleet has reduced 19% to 122g/km which is positive, mirroring the reduction in the UK average car market during the same period. This has reduced over each of the last 4 years and the average of the company cars registered in 2014 is just 117g/km. Significantly, the average of the cars registered in 2014 is only 1g/km below the 118g/km of the cars registered in 2013 so the reduction has slowed. The highest emission car in the previous review was 200g/km and this has dropped to 159g/km.

The engine profiles have changed as the average size has reduced slightly from 2,017cc to 1,959cc which is positive. The few large conventional petrol engined cars have reduced in number from 3 to 2 smaller, relatively economical petrol engines. The drivers have also added 3 hybrids although the proportion of diesel engines in the fleet has not significantly changed.

The average age of the company car fleet is very low and has decreased from a low1.9 years in 2010 to an even lower 1.5 years in 2014. The oldest vehicle used in 2010 was just over 5 years old and this had dropped to just 3 years in the 2014 data.

On-going recommendations

Although Example has implemented some positive changes since 2010 and already exhibits some commendable best practice, there is still a significant opportunity for the company to reduce fleet carbon andcost further. In order to take full advantage of this opportunity the company needs to:

• Introduce a formal mileage management policyintroducing a travel hierarchy to reduce car mileage wherever possible and appropriate.
• Establish a formal Fuel Management Programme.
• Introduce a driver training and education programme to reduce fuel use in the cars and vans.
• Investigate any opportunity to resize vans and challenge each replacement requirement.
• Continue to reduce the CO2 limit on the company cars down to maintain reductions.
• Introduce a green bonus to incentivise the drivers to select more fuel and tax efficient company cars.
• Improve the data on the cash allowance company car fleet and establish minimum standards of the vehicles authorised to be used.

1Introduction and Background

1.1Organisational background

Founded in 1900 in Somewhere, Example is a UK based manufacturer and distributor of some sort of technologies, including potato peelers, garden sprinklers, nuclear plants, rubber ducks, champagne corks and spacecraft.

Today, Example is a subsidiary of another company, a global group that operates in over 70 countries worldwide employing over 10,000 people. 1,000 of these are in the UK.

1.2Energy Saving Trust’sFleet Consultancy Programme

This report on grey fleet and pool vehicles has been produced as part of the Energy Saving Trust’sGreen Fleet Consultancy programme. The purpose of this programme is to:

• Provide unbiased, practical best practice fleet advice.
• Review green fleet management practices.
• Increase fleet efficiency to reduce both fleet costs and the impact on the environment.

Overview of the benefits of green fleet management

Green fleet management can cover a number of issues but will generally include:

• Acquisition of cleaner vehicles.
• Minimising fuel consumption.
• Reducing vehicle usage.

The environmental benefits of green fleet management include:

• Reduced consumption of fossil fuels.
• Fewer CO2 and other exhaust emissions.
• Reduced contribution to congestion.
• Improved perception of the organisation from a corporate social responsibility perspective.

The business case for green fleet management is generally straightforward. As well as the environmental benefits outlined above to meet corporate social responsibility needs, green fleet management can also deliver significant cost savings through:

• Lower fuel costs by using cleaner vehicles, travelling fewer miles and driving more economically.
• Reduced road tax costs as this is graduated according to CO2 emission levels.
• Reduced employers National Insurance charges as these are based on company car CO2.

Green fleet practices also contribute to making the fleet safer. The policies and techniques adopted through green fleet management will reduce the risk of an employee being involved in an accident.

Scope and approach

The review covers vehicles that may be used on company business but is focussed specifically on the grey fleet and pool vehicles. An outline of the approach undertaken for Fleet Consultancy is shown below:

The recommendations within this review represent environmental best practice and therefore in order to achieve maximum benefit, it is recommended that the company adopt as many of these as possible.

Data received and reviewed

Following an initial meeting with Saddam HusseinfromExampleand Karl Anders of EST, a number of fleet specific data and document files were provided electronically.

We would like to take this opportunity to thank Saddam for his assistance in compiling and supplying thedata for this review.

These included:

• Carbon footprint data fromCIA project based on fuel use.
• Fleet list for company cars with Leasedrive including registration number, make, model, engine size, fuel type, date of registration, contract miles and CO2.
• Fleet list for company cars at Hezbollah division including registration number, make, model, engine size, fuel type, date of registration, contract miles and CO2.
• Fleet list for company cars at Disneyland division in Ireland including registration number, make and model.
• Baath Party expenses and travel policy.
• Company Vehicle Allocation/Fuel Card Provision policy - New Starters.
• Company Vehicle Allocation - New Starters/New Entitlement policy.
• Data on pool cars
• Other details pertaining to the fleet.

2Carbon Footprint Comparison

A CO2 footprint is a useful proxy for the management data available to the fleet operator for strategic decision making. This is because it relies on accurate information on all vehicles used for business, regardless of ownership in any given period. The less accurate the metric used to calculate a specific part of the footprint, the less robust the data is likely to be.

The methodologies used to compile this carbon footprint are contained in Appendix A at the end of this report.

2013/14Carbon Footprint

We were supplied with fuel and mileage data from the Baath Party carbon footprinting project for Example. This included averaging for missing vehicles that do not have fuel cards.

The methodology used assumes 100% of fuel use for the vans for business use and 75% of fuel use for the cars for business use. To maintain commonality in Example projects, we have therefore used these figures and used the EST Methodology to calculate the carbon footprint.

This carbon footprint therefore includes business use only. We would suggest that the 75% forecast for business mileage is high as other reviews would suggest that the proportion of business miles would be a smaller % of total mileage and the proportion of private miles would be higher.

The total carbon footprint based on total fuel use for both cars and vans (including both business and private mileage), was calculated at 3,931 tonnes.

2010 Carbon Footprint

Note: The fuel reported here included all private mileage (irrespective of whether it is recharged) as a mileage split / proportion was not provided.

Carbon Footprint Comparison

If we compare the total carbon footprints calculated for the two reviews based on total fuel use, the carbon footprint has increased slightly by 60 tonnes (2%). The van fleet contributes a constant 67% of each carbon footprint and the cars 33% of the footprint in each year.

The graph below compares the totalcarbon footprint for the two periods plus the business use forecast carbon footprint using a forecast of 75% business use of total mileage of the company cars as defined by the Hezbollah data.

3Example 2010 Recommendation Summary

The table below shows the original summary of recommendations from the 2010 Green Fleet Review undertaken forExample Group. The Executive Summary from this review is in Appendix B.

1. Introduce and manage a fuel purchase policy
2. Utilise the Xaaa reporting and online account management systems
3. Establish a fuel consumption reporting process
4. Increase the focus on fuel consumption by setting fuel economy benchmarks
5. Introduce a communication programme

1. Remove the fully expensed fuel benefit
2. Move to a proportional private mileage recharge system
3. Apply a proportional recharge cost system to the LCV private mileage

1. Introduce a targeted driver training and education programme
2. Review the commercial vehicle speed limiter policy

1. Establish accurate mileage reporting for all employees and vehicles
2. Incorporate and manage a travel hierarchy
3. Set an appropriate company mileage reduction target

1. Manage the CO2 limit down
2. Introduce a ‘cash back’ facility into the grade structure
3. Improve the driver information

1. Join the EST Motorvate Accreditation Scheme
2. Introduce and manage a formal cash allowance policy
3. Maximise the benefits from the telematics systems

*Note: Although we are confident that the actions recommended will result in savings in CO2 we cannot reasonably estimate an actual amount due to the number of potential variables.

4Positive fleet policies

Example operates a significant sized fleet which has been managed in partnership with lease providers so already has several positive features to the fleet policies. These include;

• Using Whole Life Costs (WLC) for company car grades.
• Having a CO2 cap above which drivers cannot select company cars.
• Allowing the drivers to trade down to less cost cars.
• Removing some (but not all) drivers who have private fuel paid.
• Having a basic travel hierarchy section in the driver policy.
• Have a pool car system and discouraging grey fleet use.

From discussions at our meeting we understand that Example has not adopted the recommendations from the first 2010 review in a major way although the internal approach is that it is now time to revisit the Green Fleet Review and the climate within the company is more likely to adopt recommendations to reduce emissions further.

The average CO2 of the company cars has significantly reduced, but this is based on manufacturer led developments and other than a reduction in the CO2 cap, the reductions has occurred automatically.

The Example company car fleet remains very young. The fleet data shows the turnover policy is requiring nearly all cars to be replaced within 48 months. The average age has dropped from 1.9 years in 2010 to 1.5 years in 2014 so it is reducing. The oldest car at the time of the first review was 5 year old but the oldest in this review has reduced to 3 years old.

This has had a significant impact on reducing the emissions of these cars over the past 4 years.

Data collated by the Society of Motor Manufacturers and Traders (SMMT) shows that the average CO2 emissions for new vehicles registered in the UK has been steadily reducing year on year as shown below:

The graph below shows that the average emissions of the Example company car fleet has reduced faster than the UK averages which is very positive.

5Total Fleet Ongoing Recommendations

5.1Introduce a driver training and education programme

A conservative 5% reduction in fuel consumption by the van and company car fleet as a result of improved driving behaviour could save in the region of 75,700 litres of fuelin total (66,750 litres ‘business use’),£75,625netand 174 tonnes of CO2 based on the current gross pump price (according to AA Fuel Price reports) of £1.36 per litre(£1.13 net) for diesel and £1.30 (£1.08 net) for unleaded petrol.