How to measure the environmental impact of your fleet
Corporate sustainability commitments are forcing fleets to measure the environmental impact of their vehicle emissions. Here are 10 steps to fleet Greenhouse Gas Accounting.
1. What is Greenhouse Gas Accounting?
Greenhouse Gas Accounting is a way for businesses to measure and report their emissions of greenhouse gases that cause global warming and climate change. By measuring these emissions, businesses can start to manage them, establishing a baseline figure against which they can assess the success or failure of their policies to reduce carbon emissions, such as the adoption of electric vehicles.
2. Who sets the rules for Greenhouse Gas Accounting?
More than 90% of Fortune 500 companies use the standards set by the Greenhouse Gas Protocol (ghgprotocol.org).
By adopting the protocol, companies can report their sustainability performance in a way that allows investors, trades unions and stakeholders to compare one company with another, in the same way that GAAP accounting rules allow for financial comparisons.
3. Why is Greenhouse Gas Accounting important?
Businesses are making increasingly ambitious commitments to shrink their carbon footprints as part of their corporate social responsibility (CSR) agendas and as a commercial imperative to satisfy the demands of customers for more environmentally-friendly suppliers.
If you don’t make commitments to reduce CO2 emissions now, there is a risk that people and businesses will stop buying your products and services. It’s not mandatory, but more and more companies are doing it.
4. Is Greenhouse Gas Accounting compulsory?
The European Union’s Corporate Sustainability Reporting Directive, unveiled last year and likely to come into force in 2024 (based on 2023 financial year information) will force larger companies to report their impact on the environment. This will apply to an estimated 49,000 companies that meet at least two of these three criteria: €40 million in net turnover; €20 million on the balance sheet; and 250 or more employees.
5. How does Greenhouse Gas Accounting impact fleets?
Vehicles with internal combustion engines are often major sources of a business’s greenhouse gas emissions.
For comprehensive greenhouse gas accounts, a fleet needs a database in each country of operation that includes every vehicle, how it is funded (purchased, finance leased, operation leased), its fuel type and its WLTP emissions of three greenhouse gases - carbon dioxide, methane and nitrous oxide.
6. Can a fleet convert its fuel use into greenhouse gas emissions?
Fuel spend can provide an alternative source for calculating emissions, with figures available for the greenhouse gases produced by burning 1 litre of petrol, diesel, biodiesel, bioethanol and compressed natural gas.
However, to use these figures accurately requires a more detailed breakdown of fuel use.
You need a good reporting tool on the utilisation of the vehicle, or to ask employees to submit how many kms they drive for business, commuting and privately. Only business and commuting count towards a company’s carbon footprint.
7. What are Scope 1, 2 and 3 emissions?
Scopes are the basis for greenhouse gas reporting, and refer to three categories of emissions.
Scope 1 refers to the greenhouse gas emissions that a company makes directly, such as the fuel used by its vehicles.
Scope 2 are categorised as indirect emissions, and arise from the consumption of electricity purchased by a business, including power to recharge electric cars.
Scope 3 covers the emissions of both upstream raw materials and products that a company buys, as well as the downstream emissions of the products it manufactures. According to the Energy Advice Hub, Scope 3 emissions account for somewhere between 80% and 97% of total emissions for a large business.
Scope 1 and 2 emissions have to be reported today by large companies, but not Scope 3, although companies with a genuine determination to achieve net zero have to measure their Scope 3 emissions in order to understand their full impact on climate change.
8. Are fleet vehicles always Scope 1?
No. Confusingly, vehicles owned or finance leased by a company are Scope 1, but vehicles funded by operating leases are treated as Scope 3 because they belong to the leasing company.
9. How do businesses account for commuting?
Travel to and from work is considered a service that allows a business to operate, and therefore counts towards Scope 3 emissions. This covers employees using company cars or their own cars, as well as bus and train transport.
10. How can a fleet build a business case for lower emission vehicles?
Because of the investment required to put the right EV infrastructure in place, such as office and home chargers, and the fact that in some countries EVs are more expensive than petrol or diesel cars to buy, fleets have to accept that in the first two years their costs may increase, so fleet managers need to change their projections from three-five years to five to 10 years, then EVs become cheaper.
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