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What's driving fleet electrification?

Climate change is the main reason for us all to start reducing our emissions. However, our attitudes and behaviours are more likely to be directly affected by international, national and local policies and programmes. Here, we provide an overview of some of these key drivers of change:

 

International Policy
International Policy
UK National Policy
UK National Policy
Environmental, Social and Governance goals
Environmental, Social and Governance goals
Sustainability Disclosure Requirements (SDRs)
Sustainability Disclosure Requirements (SDRs)
The Energy Savings Opportunity Scheme
The Energy Savings Opportunity Scheme
Government procurement requirements
Government procurement requirements

International policy

COP26 in Glasgow

As COP26 (the global climate conference in Glasgow) demonstrated in 2021, there is an international effort underway to mitigate the effects of climate change. These effects are undeniable and, in many cases, terrible. As the Sixth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC) put it:

“It is unequivocal that human influence has warmed the atmosphere, ocean and land. Widespread and rapid changes in the atmosphere, ocean, cryosphere and biosphere have occurred.”

Fossil-fuelled vehicles have been a major part of this problem. Even though emissions reduced when the world introduced COVID-19 restrictions, transport in general still accounts for just over a fifth1 of all global carbon dioxide (CO2) emissions – and road transport accounts for three quarters of that. In fact, in the UK, transport has decarbonised at a slower rate than all other sectors over the past few decades, and is now the highest emitting sector. So cleaning up our vehicles is an essential part of the fight against climate change.

This was reflected at COP26 by a day devoted to transport, with one of the biggest outcomes being a declaration on “accelerating the transition to 100% zero emission cars and vans,” which included the commitment to “work towards all sales of new cars and vans being zero emission… globally by 2040 and by no later than 2035 in leading markets”. It was signed by various countries, cities, organisations, and vehicle manufacturers such as Ford and Mercedes-Benz.

Although this declaration is not legally binding, it is still a significant landmark. There is now a broad, international movement to phase out fossil-fuelled vehicles over the next decade.

 

UK national policy

Successive British Governments have introduced numerous measures to encourage the uptake of EVs. These have included grants to reduce the cost of both the vehicles and the charge points required to power them; reforms to the systems of Vehicle Excise Duty (VED) and Company Car Tax (CCT) to include new, lower bands for zero-emission vehicles; and, of course, the 2035 (previously 2030) ban on petrol and diesel cars and vans.

Government have introduced measures to encourage the uptake of EVs.

One of the most significant national policies in the years ahead will be the expansion of the public charging network. This has already progressed at great pace in recent years: 

Public charging points increased in the five years to end 2021

The Conservative Government has also pledged to invest money so that “everyone is within 30 miles of a rapid electric vehicle charging station”.

However, the most significant policy may well be the expansion of Clean Air Zones (CAZs). These are areas where special action is taken to limit pollution from road traffic. Some are charging CAZs, which impose fees on dirtier vehicles. Some are non-charging CAZs, which rely on other measures, such as improved road layouts or cycle lanes.

With the introduction of its Ultra-Low Emission Zone (ULEZ) in 2019, which has since been enlarged, London has effectively been operating a charging CAZ for years. But other cities, including Bath, Birmingham and Portsmouth, have since introduced CAZs of their own – with many more set to follow in the years ahead.

In fact, CAZs could even get stricter in future. Oxford City Council is currently piloting a Zero Emission Zone (ZEZ) and aims to fully implement one across the city centre within the next couple of years. A ZEZ imposes fees on all petrol and diesel vehicles travelling through it, with only zero-emission vehicles spared. If other CAZs turn into ZEZs in future, then all fossil-fuelled vehicles could end up facing charges.

EVs are, of course, one of the best ways of futureproofing yourself against these changes.

Environmental, Social and Governance goals

Companies have subscribed to ESG – Environmental, Social and Governance – goals for many years. However, more recently, the E-part has come to take on greater meaning. With a global effort underway to limit climate change, businesses know that they need to get serious about making environmental improvements in their own operations.

For the most part, this means decarbonising. Companies don’t just need to report on their current emissions, according to three categories:

  • Scope 1. The greenhouse gas emissions that a company causes directly - for example, by running its vehicles.
  • Scope 2. The emissions that a company causes indirectly - for example the production of the energy that it uses.
  • Scope 3. Another form of indirect emissions, but related to the entire value chain - for example, the emissions caused by the company's suppliers.

These are illustrated by the diagram below.

ESG-graphic-1

As a business, you have a level of control of your Operational Scope 1 and 2 emissions which you can start to address by amending your policies around procurement and business processes ensuring the selection of lower emission options. In relation to your fleet, these can include company cars, cash allowance option, grey fleet and the source of electricity you use to charge your vehicles. We recommend starting with the creation of a carbon baseline to ensure you can monitor and report the impact your strategies are having on reducing your emissions. Regarding a majority of the Scope 3 emissions, these indirect business emissions can be addressed by ensuring suppliers adhere to your policies focused on decreasing emissions throughout your entire supply chain. 

EVs are a crucial part of this process, and not just because fossil-fuelled transport is the worst emitter of greenhouse gases in the UK.3 Unlike other parts of the decarbonisation process, such as cleaning up a globe-spanning supply chain, shifting to EVs can happen quite easily. It is perhaps the quickest and most impactful way for a company to expedite their decarbonisation programme.

 

Sustainability Disclosure Requirements

In 2021, the Government published a roadmap for the introduction of Sustainability Disclosure Requirements (SDRs). These SDRs incorporate, strengthen and add to existing regulations. This will mean that businesses have to do more to disclose the environmental impact of their work, as well as provide details on how they intend to move towards Net Zero.

The SDRs will, at first, be targeted at corporates and the financial services sector. They will also be phased in over years (subject to parliamentary approval), with the first steps taking place in 2022. These steps include a new mandate for certain companies to publish climate-related financial information in line with the recommendations of the Task Force on Climate-Related Financial Disclosures (TFCD).

An increasing number of companies will be covered by the SDR legislation over time, and – as they are – even more companies will come under pressure to be transparent about their own environmental goals. This is yet another reason why organisations ought to take their ESG goals seriously, both in terms of their ambition and their deliverability.

Sustainability Disclosure Requirements (SDR)

 

The Energy Savings Opportunity Scheme

 

The Energy Savings Opportunity Scheme (ESOS) was brought into effect by the British Government in 2014. It places a legal requirement on certain large businesses in the UK to audit their energy use – and identify areas for efficiency gains – at least once every four years. After two previous deadlines for performing this task, one in 2015 and one in 2019, the “Phase 3” compliance deadline is 5 December 2023.

According to the latest information on Gov.uk4, the qualifying businesses are UK companies that, as of 31 December 2022, either:

  • employ at least 250 people; or
  • have an annual turnover of over £44 million, and an annual balance sheet total of over £38 million.

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Companies belonging to corporate groups that include a qualifying business must also participate in ESOS, as must any qualifying UK-registered establishments of overseas companies. Any business that does not meet its ESOS obligations, and fails to report to the Environment Agency, could face a fine of up to £50,000 – plus £500 for every day they remain non-compliant.

The ESOS audits can cover the energy used by a company’s transport (as well as their buildings and industrial processes) – so, for many businesses, the process will end up identifying EVs as a means of more efficient energy use.

It ought to be noted that, while ESOS audits are mandatory for qualifying businesses, acting on the recommendations that come out of them is not. However, with all of the factors driving fleet electrification, ESOS may provide another rationale for fleet-led decarbonisation.

 

Government procurement requirements

As of 30 September 2021, all Government procurement contracts worth over £5 million are subject to a “Procurement Policy Note” known as PPN 06/21. This means that any bidding supplier has to provide a “Carbon Reduction Plan” as part of their bid – expressing not just their commitment to achieving Net Zero by 2050 but also the measures that they will have in place during the period of the contract.

There is a lot of similarity between the provisions of this Carbon Reduction Plan and the reporting done for ESG purposes. For example, as part of the plan, bidding suppliers must provide their current Scope 1 and Scope 2 emissions, as well as part of their Scope 3 emissions. They also have to set out the environmental management measures that they already have in effect.

The PPN itself contains a template for a Carbon Reduction Plan.5

As with ESG goals, EVs can help companies to satisfy the requirements of PPN 06/21 – and not just for contracts that involve a supplier’s fleet. Because the Carbon Reduction Plan is concerned with the overall steps that a company is taking toward Net Zero, an electric fleet counts whether it is involved in the contract or not.

 

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Olivia Withington                                                                   Jonathan Southall
Demand Generation Marketing Executive                    Demand Generation Manager
e. roadtozero@aldautomotive.com                                e. roadtozero@aldautomotive.com
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