We all know that going green costs money, but that we’ll see the return on investment in the long run. And whilst most fleet managers know this to be true, convincing procurement can be a challenging task.
So exactly where and how much will you save? What difference will this truly make to the bottom line of your business? Unfortunately, there’s no one-size-fits-all answer, but there are some very strong guidelines and examples in the industry that fleet managers can use to clarify the benefits to your business in the long run.
Fleet management is all about return on investment (ROI). If you replace a vehicle, do vehicle repairs, maintenance checks and driver training courses, you have to justify the cost. The question is always: if I spend money on this, how much will I get in return? And with ‘green’ fleets, the spend versus return is scrutinised more diligently than most other areas, simply because many of the techniques and technologies are new. Thankfully, a lot of research has gone into green ROI over the past few years, so fleet managers now have a lot more statistics at their disposal.
1. Green will mean the difference between gaining or losing clients
According to an article published on Fuels News, “Hartman Group reported in 2015 that “84% of American consumers report they consider sustainability when making purchase decisions. Giant consumer brands, such as Walmart, UPS, and FedEx, have adopted alternative fuel vehicles, including renewable diesel, CNG, and electric vehicles, to help improve their brand image.”
So for argument’s sake, let’s take that 84% at face value: that means companies who don’t make the move to green their fleets now, stand to lose 84% of their business. While companies who take the necessary steps now, stand to grow their business by 84%. The exact ROI depends on your company’s turnover and the amount you spend on greening your fleet, but either way, it’s going to equate to an impressive return on investment.
Even in South Africa, this is no longer a ‘maybe’ – your clients are increasingly going to demand a lower carbon footprint, and the fleet industry is always one of the first targets. Companies who choose to start gradually investing in improved efficiency now, are going to reap the benefits and win the most lucrative clients.
2. Delays reduce ROI
Last year Geotab published an article that highlights the dangers of COI (Cost of Ignoring). According to the article (and US statistics), the below are good examples of the cost of ignoring or delaying necessary green investments in your fleet:
- Fuel (Controlling Runaway Fuel Costs): The U.S. Department of Energy reports that rapid acceleration and heavy braking can reduce fuel economy by up to 33% for highway driving and 5% on city roads; while idling and speeding can also have drastic impacts on MPG (Miles Per Gallon). Combined with an effective driver coaching initiatives, telematics can minimize aggressive driving behaviours and reduce fuel costs by as much as 14%.
- Maintenance (Reducing Repairs and Maintenance): Planned maintenance is a standard part of vehicle ownership, but unplanned repairs, due to aggressive driving and vehicle misuse are an unnecessary cost. In addition to the cost savings resulting from fewer scheduled maintenance appointments, a non-scheduled maintenance interruption can result in lost profits of between $400 to $700 per day. The Organization for Economic Co-operation and Development (OECD) reports that telematics technology can help a company reduce these scheduled and unscheduled maintenance and repair incidents by as much as 14%.
Although the above examples make use of US statistics, local fleet managers will know that the same principles apply in most countries around the world. Both of the points above (Fuel-saving and maintenance) are measures associated with greening your fleet.
3. You’re already seeing your green ROI
With ‘green trends’ in the spotlight and massive pressure on the fleet industry, it’s easy to lose sight of the fact that fleet managers have been seeing a return on their green investments for years – they just weren’t labelled as ‘green’ yet. Every step you’ve taken to reduce fuel consumption, downtime, tyre wear, and to improve driving efficiency have been investments in greening your fleet. Arguably, all fleet managers would have seen decent ROI figures along the way.
Although there’s no official index for exactly how being green will save your ROI, fleet managers will have plenty of internal data to support their green ROI pitch. Percentages will differ for each individual fleet, but ensuring ROI simply means investing in green measures that optimise your fleet and make sense with your budget and long-term business goals.
When you take into consideration all of the points above, the best investment fleet managers can make in terms of ROI is methods to accurately collect and interpret data. Without the data, you can’t accurately calculate ROI, or make crucial decisions that will help you effectively green your fleet and ensure your ROI doesn’t suffer along the way.