With the least eco-friendly company car fleets now costing businesses more through higher fuel costs and increased CO2-based taxation, the financial rewards of going green are instantly apparent. Many businesses are focussing so hard on fighting costs that they are neglecting sensible environmental policies, which in fact go hand in hand with long-term cost reduction.
Tax, fuel and CO2
Back in 2002, a direct link was established between a vehicle's CO2 emissions and the taxable benefit of running this ‘asset'. Coupled with this, the ongoing increase in fuel duty has also forged a greater bond between a business' environmental policy and its cost efficiency. As a result, choosing a ‘greener' fleet, with fewer inefficient vehicles, will help reduce your company's fuel bill, as well as making your fleet more tax-efficient.
The advantages of going green cannot be ignored, given that typically 15 to 25% of a fleet's annual spend will usually go on fuel alone. Once firms begin to understand that lowering CO2 is twinned with cost reduction then they're half way there to running a more efficient fleet.
Balancing cost, choice and responsibility
We encourage our customers to revisit their fleet policies so that employees are actively steered towards more efficient vehicle choices that not only have a positive impact on their personal spend, but also the company's carbon footprint and tax bill.
For example, the rate of fuel tax at the pump is not within our control, but firms can take giant leaps forward to reduce their overall fuel spend and taxable income.
Firstly, it would pay dividends to refine your employees' vehicle choice lists to bring on board more fuel efficient and low-emitting vehicles. Next, identify ways for drivers to cover fewer miles and, finally, work out how to buy fuel smarter on a consistent basis. Together, these improvements can significantly reduce costs on the balance sheet and improve shareholder value.
Investment where it pays
Failing to grasp the green fleet agenda could result in major scrutiny. Business investors, shareholders and regulators will increasingly turn their attention to the environmental credentials of your fleet and the impact this has on capital and operational costs.
Company directors have long been preoccupied with driving down costs and this should remain a business priority but, when the economy does pick up, some firms will be left with a costly legacy of underinvestment in CO2 reduction.
It's important that all fleet costs are captured in terms of whole life costs, and that means looking beyond the list price of a vehicle, or its monthly rental rate. Think about Employers' National Insurance, VAT, fuel, maintenance and higher tax bills for high CO2-emitting vehicles.
But many firms are short-sighted when it comes to business costs. Sooner or later the added long-term expense of poor vehicle choices could become too much to bear and investors in those businesses would be remiss not to come looking for answers.
Top tip for turning your fleet a cost-effective shade of green
Capping drivers' choice lists to low CO2 vehicles will usually stimulate improved rental costs, a lower fuel bill and reduced corporation tax. This can be implemented by imposing disincentives for employees choosing vehicles over the magic 160g/km barrier. The payoff derived from keeping vehicles below this threshold is lower corporation tax. Employees can also reduce their personal Benefit in Kind (BIK) payments by going a step further and benefiting from incentives for choosing cars emitting 120g/km or less.
Case study
As a market-leading source of best practice advice, Lex Autolease has not only helped its customers to improve their green credentials, but we've reduced our own carbon footprint by lowering the vehicle emissions on our fleet by over 12%, since 2008.
A review of our travel policy has also had a tremendous impact with 143,000 fewer journeys completed and teleconferencing volumes increasing by over 40%. In costs terms, this has helped reduce travel expenditure by an unprecedented 13%.
Steve Osbourne,
