From Sustainability to Supplier Diversity: Your Fleet as a Strategic Asset
Navigating the world of fleet management can be complex — particularly when tasked with leading strategic initiatives like decarbonization and supply chain diversity. Successfully managing these complexities requires a delicate balance of innovation, strategy and proactive problem-solving.
As organizations transition their fleets toward vehicle electrification, adopting an integrated approach to fleet management unlocks significant value now and into the future. The outcome? A more sustainable and efficient fleet that reduces its environmental impact while improving the bottom line.
Transitioning to EVs
Global sales of electric vehicles (EVs) increased by approximately 60 percent in 2022, surpassing 10 million for the first time. As a result, one in seven passenger vehicles purchased in 2022 was an EV. Most companies are no longer discussing if fleets should move toward electrification; they are asking when — and setting dates to realize this critical environmental, social and governance (ESG) commitment.
The main drivers of EV adoption are two-fold: achieving sustainability goals and controlling the total cost of ownership (TCO).
Meeting environmental targets. A gradual shift toward fleet electrification is the key to driving an organization’s sustainability objectives. Opting for vehicles with zero tail pipe emissions may be the most effective starting point — beginning with the replacement of aging fleet assets. This transition can effectively reduce greenhouse gas emissions (GHGs) and improve air quality in areas where these fleets are active.
Moreover, given the significant involvement of governments in the electrification process, it is imperative for companies to maintain a proactive approach to stay ahead of the curve. Indicators point to (1) pending regulations that could ban the sale of internal combustion engine (ICE) vehicles, (2) enforcement of more stringent corporate average fuel economy standards and (3) requirements for companies to disclose their use of ICE vehicles. The sooner fleets are transitioned to EVs, organizations can be better prepared to comply with these policies.
To bring this transition to life, cross-collaboration within the company is vital. This involves working closely with several critical groups to pilot, test and understand how EVs can be integrated into the existing fleet. Developing a comprehensive strategy enables successfully meeting the organization’s sustainability objectives.
Reducing operational costs. In general, a fleet’s TCO, which includes net depreciation, fuel and maintenance, typically makes up more than 80 percent of fleet expenditure, Element Fleet Management’s 2023 Market Pulse Report found.
As organizations transition to EVs, advancements in battery technology and substantial savings on fuel and maintenance costs can significantly reduce their overall expenses. It is anticipated that by 2025, light-duty vehicles will reach TCO parity, while medium- and heavy-duty (MHDVs) vehicles will achieve this milestone in 2027 — making MHDVs across all classes cheaper in terms of cost per mile, according to the Environmental Defense Fund’s 2022 Electric Vehicle Market Update.
Considerations for EV Adoption
Overall, fleet electrification is an elaborate process, and successful implementation is dependent on meeting various readiness factors.
It is paramount the fleet managers understand vehicle financing, charging strategy, change management for drivers, and pilot driver selection, along with the capabilities and limitations that EVs have. It is equally important to assess available incentives and optimize fleet performance using telematics solutions.
Setting EV quotas is a scalable and cost-effective approach to promote EV adoption.
Expanding Supplier Diversity
Along with the transition towards EVs, supplier diversity continues to be a growing area of interest in 2023 for those chartered with fleet oversight, according to Element Fleet Management’s 2023 Market Pulse Report.
Many companies are either currently executing strategies to attain diverse supply chain goals or in the planning phase of launching a related diversity, equity and inclusion (DE&I) program. While larger fleets (those with 2,000 or more vehicles) are at the forefront of planning or executing strategies to increase supplier diversity, small- and medium-size fleets can get ahead by strategizing such opportunities.
To date, the value of supply chain diversity has been well documented — from promoting innovation that expands market relevance to lowering production costs that improve margins. However, the most desired outcome for organizations remains being a meaningful steward and conduit of thriving local communities.
Collaborating with a reputable fleet management company can help organizations identify and leverage these opportunities to optimize their bottom line. For more information, visit elementfleet.com.
