As more and more regulations aimed at getting combustion engine vehicles off the roads are being introduced, companies are faced with the challenge of restructuring their car fleet. In this blog, we’ll go over some things to consider when making the transition from conventional to electric vehicles (EVs) – something that undoubtedly will become a critical part of reducing companies’ CO2 emissions.
One of the most polluting industries in the world
The car industry is an immensely environmentally harmful industry. According to Greenpeace, the car industry produces more greenhouse gas (GHG) emissions than the entire EU, and its overall carbon footprint accounts for 9% of the world’s CO2 emissions. Accounting for 23% of global energy-related greenhouse gas emissions, the transport sector is the fastest-growing contributor to climate change. The health effects are dire, as traffic is the greatest source of air pollution, and responsible for 4.5 million premature deaths globally.
Eliminating scope 1 emissions: reduction is key
Today, many companies are committing to carbon neutrality by 2050 and setting Science Based Targets (SBTs). In order for these targets to really be “science-based”, a key requirement is to align scope 1 emissions with a 1.5°C decarbonization pathway[i]. In simpler terms, this means that companies need to start reducing their internal emissions drastically – and it needs to happen now. Scope 1 emissions, which are the so-called ‘direct’ emissions of a company, typically come from stationary combustion, mobile combustion, fugitive emissions, and process emissions. For the vast majority of companies, stationary combustion (ie. burning fossil fuels in factories) and mobile combustions (ie. burning fuel in company cars) are the main sources of scope 1 emissions – and most firms will have a remarkable share of these emissions coming from company cars.
One of the most impactful things firms can do to reduce emissions stemming from their company vehicles is to reduce the size of their fleet. Did you for example know, that on average, European cars are parked 92% of the time and when in use, only 1.5 out of 5 seats are occupied? If you suspect similar patterns in your company, it might be time to re-evaluate whether you really need all the cars you currently have to your disposal. Alternative solutions to think about include ride-sharing, or providing employees with incentives to use mass transit or other forms of transportation, such as bikes. For any remaining cars in the fleet that are deemed absolutely necessary, electric alternatives should be considered. As the pandemic has taught us, conducting your meetings online might also be a practice worth continuing.
EVs to help meet the 2030 deadline
Besides reducing the number of cars on the road, switching to EVs will be necessary if we are to achieve a net-zero world by 2050 and a significant emissions reduction by 2030. Battery electric vehicles have substantially increased in popularity as the price has continued to decrease, and more and more people are aware that this will be the only acceptable car in a few years’ time. As part of the Green New Deal, the EU has launched the Euro 7 initiative to develop stricter emissions standards for all petrol and diesel cars as well as other vehicles such as busses and trucks. The EU has also been said to be aiming for a ban on the internal combustion engine vehicle as of 2035 .
Meanwhile, several countries are taking swift action to phase out fossil fuel vehicles. In December 2020, for example, the Danish Parliament passed a tax plan aimed to help bring at least 775,000 electric and hybrid cars on the road by 2030. The plan includes a gradual increase in taxes on combustion engine cars and lower taxes for electric vehicles and their charging stations. The plan also includes a complete ban on the sale of new fossil-fuel-powered cars from 2030 onwards.
EV100 is a global initiative led by The Climate Group that works toward making electric cars the new normal by 2030. The initiative currently has 109 members who have committed to electrifying their directly controlled fleet, place requirements for EVs in service contracts, and install EV charging stations at all premises to support staff and customers to use EVs, all by 2030. Several large companies are already committing to switching to an entirely electric car fleet, just like Ørsted did back in 2019 when it became the first Danish company to join the global EV100 initiative. Other Danish companies are also making similar commitments, with Vestas and Grundfos committing to the transition by 2025 and Novo Nordisk by 2030.
Note: EVs are not a cure-all
While most scientific reports conclude that EVs are better for the environment than conventional vehicles and release substantially less GHG emissions (even when taking the production of the battery into account), it is necessary to highlight that EVs aren’t unproblematic, and certainly not a cure-all.
Precious metals such as lithium and cobalt are used to produce the battery cells, and unfortunately, battery manufacturing as we know it today comes with daunting environmental and social costs. Extracting and processing the raw materials does not only require large quantities of energy and water, but has also been linked to issues with child labour – particularly in the Republic of Congo, where about 70% of the world’ cobalt is produced. On a positive note, chemists are researching ways to minimize or even replace lithium and cobalt altogether and in the meantime companies can put pressure on the suppliers of EVs to ensure sustainably sourced materials.
An additional important point is that EVs are only really as green as their power sources. The overall environmental footprint of an electric car is largely dependent on the electricity used to charge its batteries: for example, charging at a coal-powered station (in contrast to one powered by renewable energy) will naturally increase the EV’s CO2 footprint. Therefore, the benefits of EVs can fluctuate depending on the electricity source.
The risks of not transitioning
However, EVs are still an important part of the solution to a low-carbon transport world. And there are many good reasons to transition sooner rather than later, as not making the switch to EVs poses significant business risks.
Narrowing EV price gap
Due to strengthened environmental regulation and increasing petrol prices, it is almost unavoidable that conventional vehicles will become pricier as time goes by. While purchasing a brand new EV currently still costs more than purchasing a combustion vehicle, a report by the U.S. Department of Energy and calculations by the CNBC show, that over the average lifespan of a car (200,000 miles), owning an electric car generally costs less than owning a similar petrol-only model. Bloomberg NEF predicts, that EVs might reach parity with combustion vehicles already in 2025 (- 2028, in the most pessimistic scenario). Price parity, in this case, refers to the point at which an automaker can theoretically build and sell an EV with the same margin as a comparable combustion vehicle, assuming no subsidies are available.
Fossil fuel restrictions
Many cities have started implementing low emission zones and fossil-free streets, which means that companies can’t keep using petrol and diesel cars everywhere. Currently, there are more than 250 low-emission zones in Europe where access for some polluting vehicles is prohibited or deterred. Zero-emissions zones are areas where all internal combustion engines are banned, which have already been implemented in some London neighbourhoods between certain hours. Amsterdam, Brussels, London, Madrid, and Paris are all seeking to phase out diesel cars and internal combustion engines vehicles over the next few years by implementing zero-emissions zones. Over a decade ago, Denmark introduced several low-emissions zones in its four largest cities. In line with the City of Copenhagen’s goal to become carbon neutral by 2025, it aims to test zero emissions in the next few years.
New environmental policies, reporting standards, and frameworks will continue to motivate investors to push companies for sustainability-related data disclosure. Customers are becoming more engaged with the non-financial performance of firms too, with many expecting the companies they support to lower their emissions. In a 2020 Deloitte consumer survey, 23% of the respondents said they will switch to buying products from an organization that shares their values on environmental issues, and 65% said they expect CEOs to do more to make progress on issues such as reducing carbon emissions, tackling air pollution, and making business supply chains more sustainable.
Steps to keep in mind when making the switch to EVs
For those companies making the switch and setting science-based targets, here are a few things to consider and a potential path to be taken.
- Carry out a fleet review of current cars and include them in your GHG inventory. Maybe some are already EVs or hybrids.
- Undertake an analysis, investigating what your vehicle requirements are (purpose of journeys, vehicle size, average distance, max distance etc.)
- Based on your findings, first assess whether you can minimize the number of cars in your fleet (in combination with practicing greener driving techniques!). Reduction is key, so only once this has been evaluated, you should look into options for transitioning to EVs.
- Once you’ve decided to go electric, get everyone onboard: involve the employees, get their take on it, and build hype. Having everyone on the same page will minimize confusion.
- Consider your infrastructure: When implementing charging stations, make sure that your site has enough power (coming from renewable sources – obviously) to be able to charge the vehicles (factor in that employees might switch to EVs as well and maybe visitors such as clients and shareholders might do that too). Plan out the space and know where your chargers will go while ensuring that everyone can access them.
- Review the latest EVs that are available within your budget in the locations you need to use them.
As technology and regulation scale up, the case for EVs will become even stronger. With the increased decarbonisation of electricity grids worldwide, EVs can be implemented at a fast pace to contribute to reducing greenhouse gas emissions worldwide. For companies setting emissions reductions targets and seeking to align with SBTi standards, switching your car fleet is a crucial step in the right direction.
[i] A well-below 2 degree pathway is still accepted by Science Based Targets initiative for scope 1 emissions but this will become obsolete after July, 2022