How Asset Finance Companies Can Help Fleets Get to a Greener Future
With increasing regularity, corporations are adding sustainability goals to their business strategies. This new sense of corporate responsibility is in part being driven by changes in customer demand. Consumers are asking questions around the sustainability and environmental efforts of corporations when deciding with whom to do business.
In the case of trucking, shippers are starting to ask questions around the sustainability and environmental stewardship efforts of fleets, in some cases asking for fuel economy data as part of the shipping contract.
Before looking at what this green movement means for businesses that finance asset purchases, let’s take a step back. What exactly does “green” mean. The answer is that there is no universal definition. It often refers to things like greenhouse gas emissions, energy efficiency, renewable energy sources, waste management, natural resource conservation, etc.
One thing is clear though, if a company is telling a green story, it better actually being doing things that are helping to mitigate climate change. The days of greenwashing — making people believe that your company is doing more to protect the environment than it really is (Cambridge Dictionary) — are long gone. If a fleet — or a company financing fleet assets — is going to tell a green story, it better be able to back up its claim with evidence.
Clean transportation is a big part of more environmentally friendly economy. According to the Environmental Protection Agency, “Greenhouse gas emissions (GHG) from transportation account for about 29% of total U.S. greenhouse gas emissions, making it the largest contributor of U.S. GHG emissions.”
So, what role can equipment finance companies play in this move toward a greener future? They can start by helping their fleet customers do a fuel economy analysis and not just one that gives them the average fuel economy of the entire fleet. Rather, they need to know fuel economy and freight efficiency on an asset-by-asset basis. This information is critical to developing an asset replacement strategy.
Today’s newer commercial vehicles are more efficient and cleaner than ones made even five or six years ago. Truck manufacturers continue to push the fuel economy envelope sometimes spurred on by emissions regulations. In fact, GHG Phase 2 emissions standards are already in place for model year 2021 through model year 2027. These standards are expected to lower CO2 emissions by approximately 1.1 billion metric tons.
Knowing the freight efficiency of each asset will help you work with the fleet to develop an asset replacement strategy that takes the least efficient assets out of service while bringing in most efficient assets on the market.
Another way equipment finance companies can help is by encouraging fleets to begin testing alternative fueled vehicles whether hybrid diesel electric, battery electric, fuel cell battery electric, renewable CNG or diesel, etc.
Without incentives, it is harder to make the ROI case for some of these alternative fueled vehicles based on hard costs only, but make sure fleets are factoring in some of the soft cost values.
Not operating a green fleet could result in losing business from companies who expect their transportation service providers to embrace sustainable transportation. There is also the value in being perceived as having a green fleet and even the issue of driver retention. While some of these things can be hard to put a dollar value on, each fleet should attach some monetary value to them so they can properly evaluate their options.
When you read about all the developments taking place with truck electrification — all of the major truck OEMs have announced electric truck offerings — it becomes clear that at least some portions of goods movement are going to be handled by electric trucks. Encouraging fleets to dip their toes into the electric truck pool is another way equipment finance companies can be of service.
While not every fleet can be on the bleeding edge of every new technology, finance companies have some obligation to their existing customer base to make sure they are not technology laggards because there is no competitive advantage to being the last to adopt a new technology.
I think it is safe to say that we are well on our way to a cleaner, greener future and transportation will play a significant role in getting us there. Commercial lenders have an opportunity to take a leadership position and ensure that their customers are well positioned for that future.
At Corcentric, we stand ready to help any fleet bridge that gap. Now, more than ever, it’s crucial to make the right lease-versus-buy choice – those who do are more likely to emerge from the COVID crisis as industry champions positioned for growth. To learn how we can help, contact Corcentric today.