Introduction: Why fleet decarbonization matters for sustainable business growth  

As companies navigate a business landscape defined by continuing disruption and uncertainty, decarbonization’s dual value of climate mitigation and long-term enterprise and financial resilience ensures it remains a business imperative. Indeed, few other corporate actions can simultaneously cut costs, open new markets, increase access to finance, reduce regulatory exposure, and bolster energy security.  

This second blog in our three-part series on operational decarbonization explores how companies can use tailored fleet management to reduce their emissions while also bolstering operational performance. As with our first blog on industrial heat, we highlight real-world case studies to bring fleet decarbonization to life and highlight its unique challenges and opportunities.

How to reduce fleet emissions and fuel costs with smart fleet management

Companies can drive significant reductions in both greenhouse gas (GHG) emissions and fuel costs through a focus on vehicle fleets (e.g., route optimization, electric vehicle adoption, alternative fuels, etc.). While exact solutions will vary by organization and jurisdiction, companies can develop tailored, value adding fleet decarbonization approaches with the right expert diagnosis.

For companies with large vehicle fleets, addressing transportation emissions is crucial to meeting sustainability goals. Still, the task can appear daunting. High upfront capital costs, significant operational impacts, and policy uncertainty often challenge companies and can slow progress. In the U.S., for example, the recent sunsetting of federal tax credits for electric vehicles will likely complicate corporate fleet management strategies that involve alternative fuel vehicles, although fleet/route optimization strategies remain value accretive. By contrast, in Europe and elsewhere, total cost of ownership (capital cost plus long run operating costs) of electrifying passenger car and van fleet can deliver impressive ROI. In one ERM project example, a pan-European manufacturing firm saw a 2.7 year payback through shift from diesel vehicle ownership to electric vehicle leasing.

Many of ERM’s clients also have fleets that span vehicle types which serve different purposes. Their fleet situations are further complicated because their vehicles are distributed across geographies and are at different stages of their useful asset life. Faced with these complexities, businesses struggle to identify a starting point for addressing fleet emissions.

Businesses can cut through these challenges by developing a strong fleet decarbonization strategy that breaks a fleet into component parts and identifies solutions for each, rather than pursuing a single, fleet-wide solution. For example, public incentives and low electricity prices in a given operating region might make certain fleet segments—such as light-duty vans or refrigerated trailers—well-suited for electrification, driving rapid financial upside.

Conversely, electrification in other fleet segments may be challenged by capital limitations, leading businesses to turn to renewable fuels that do not require significant infrastructure investment to achieve emissions reductions. Here, a “yes, and” approach enables more practical, scalable progress than an “either, or” approach.

The case studies we outline below exemplify how businesses have successfully applied this philosophy to reduce their fleet emissions.

Fleet decarbonization in action: 3 steps to get started  

To get started on fleet decarbonization, consider the following practical steps and read on to see how real-world companies are putting them into action.   

  • Conduct a fleet assessment: Identify the most impactful and cost-effective decarbonization opportunities across the fleet.  
  • Tailor your strategy: Implement a fleet decarbonization strategy tailored to business circumstances, rather than deploying a common approach across the organization.   
  • Build a phased roadmap: Do not try to do everything all at once. Build a practical, phased roadmap for fleet decarbonization that enables steady progress.  

Case study one

Challenge: 

  • A U.S.-based HVAC company’s fleet, comprised of passenger vans and trucks with significant towing requirements, represented more than 90 percent of the firm’s total GHG emissions.  
  • The company aimed to achieve fleet cost savings and simultaneous emissions reductions, all while avoiding significant operational changes.  

The solution:  

  • ERM’s financial and emissions modeling showed that while transitioning the entire company’s fleet to EVs would drive the largest GHG emissions reductions, such a transition would be cost-prohibitive. Instead, ERM identified vans as the fleet segment where emissions reductions would be most cost-effective.  
  • ERM proposed a pilot tailored to a subset of vehicle types, targeting vans in the U.S. state of Massachusetts (where the business had a higher concentration of vans and owned property to facilitate charger installation, thus reducing costs). After success in Massachusetts, the company expanded the pilot across the U.S.  
  • In addition to the pilot, ERM leveraged creative financing options to lower fleet transition costs. By leasing electric vans rather than owning them outright, the company could save money and limit capital outlay, while still reducing GHG emissions.  

The impact: 

  • This strategy identified levers to realize a 34 percent reduction in emissions intensity and $2.2 million in annual operational savings due to lower operations and maintenance costs and fuel spending. Furthermore, by switching to leased vans, the company could avoid capital expenditures of $80,000 or more per new van purchased. 

Lessons learned:  

  • Rather than waiting for the entire fleet to be electrification-ready, focus on the segments where you can make immediate progress. This incremental approach reflects the “yes, and” philosophy in action—electrify where it works now and explore other solutions across your fleet as you go. 
  • Location matters. Conduct a pilot for the fleet in a location with favorable conditions (e.g., concentration of particular vehicle types, strong EV infrastructure, etc.) and then apply lessons learned to other locations with similar characteristics. 
  • Consider leasing options for the fleet in addition to outright capital purchases of EVs and other low carbon vehicle types.  

Case study two

Challenge: 

  • A U.S.-based wholesale distributor aimed to reduce its Scope 1 and Scope 2 emissions by more than 25 percent. Although its fleet represented nearly three-quarters of these emissions, total electrification was not feasible because long-haul trucks composed a majority of its fleet and cost-effective low carbon alternatives were not yet available. 

The solution: 

  • ERM’s financial analysis showed that switching to renewable diesel would enable the company to reduce emissions without the significant capital costs associated with electrification.  
  • ERM also compiled a portfolio of producers that could supply renewable diesel and determined geographies where supportive regulatory frameworks would make the fuel cost-competitive with fossil diesel.   
  • ERM then recommended a tiered transition plan, where the company would first switch to renewable diesel in U.S. states where it achieved cost parity with fossil diesel, before expanding to more nascent markets.

The impact: 

  • By switching to renewable diesel, the company was able to reduce its emissions by 13 percent and cost competitively with fossil diesel, putting it on track to achieve its Scope 1 and 2 emissions reduction goal.  
  • Further, the renewable diesel solution offered 40 percent cost savings compared to electrifying the company’s entire fleet.  

Lessons learned:  

  • Even if total fleet electrification is not viable, do not rule out other paths to fleet decarbonization. By remaining flexible and adopting solutions aligned to specific contexts, businesses can achieve significant GHG emissions reductions.  
  • Public incentives can make a material difference to the economics of fleet decarbonization. 
  • Breaking fleets into segmented parts and applying bespoke solutions can help unlock faster decarbonization and overcome complexities that might otherwise slow progress.   

Case study three

Challenge: 

  • A European waste services provider based in Europe with an extensive refuse collection and street cleaning fleet set out to establish reduction targets for its Scope 1 and 2 emissions.
  • The company had to navigate fleet decarbonization across demanding duty cycles, short (8-10 years) contract lengths with its customers (primarily municipalities), and customer-imposed budget caps that limited the company’s ability to absorb capital cost uplift.
  • While an early adopter of electric refuse collection vehicles in some jurisdictions, its wider fleet was diverse with distinct operational requirements for different use cases. 

The solution: 

  • ERM conducted a detailed duty cycle analysis that found that off-the-shelf battery electric models would be suitable for some of the client’s operations; however, transitioning its most demanding operations would depend on future technology advancements.
  • ERM’s financial modelling showed that vehicles accounting for 17 percent of the company’s emissions could be immediately transitioned cost-effectively, while others would become cost-effective in the 2030s as upfront vehicle costs decreased.
  • ERM recommended a gradual fleet electrification program that would require upfront investment but would begin generating net returns for the company beginning inthe early 2030s.
  • To ensure the company maintained net income during its transition, ERM calculated the level at which contract prices for customers would need to increase and explored several levers for improving the business case for electrification, including longer contract lengths and shared charging infrastructure.  

The impact: 

  • By transitioning the fleet gradually instead of all at once, the company will be able to abate 50-70 percent of emissions by 2035 compared to an all diesel fleet.

Lessons learned:  

  • By accounting for diverse fleet operations, companies can develop tailored electrification plans that prioritize cost-effective solutions for the portions of their fleets that can be transitioned immediately, while also accounting for future actions that will enable them to transition their remaining vehicle types as technologies develop.
  • By viewing fleet electrification as a single investment, rather than a processes with multiple starts and stops for different vehicle types, companies can more rapidly and comprehensively deploy innovative business models to support decarbonization.   
  • Innovative contracting approaches allow fleet operators to transition their vehicles while also helping their customers overcome economic barriers.

Conclusion: Fleet decarbonization as a strategic imperative 

Decarbonization is a clear strategic imperative for companies looking to improve operational resilience and financial performance. Whether by reducing operational costs, guarding against energy price volatility, or enhancing brand reputation, operational emissions reductions can deliver broad business value.   

Using lessons learned from the case studies above, companies with large vehicle fleets can turn decarbonization from ambition to actuality, reaping benefits along the way. 

Key takeaways 

  • A “yes, and” approach to fleet decarbonization can deliver faster, more cost-efficient fleet solutions as markets and technologies evolve.  
  • Prioritizing actions that deliver measurable emissions cuts without disrupting operations or requiring significant upfront capital investment can help build organizational buy-in for fleet decarbonization. 
  • Knowing where public incentives, regional fuel economics, and local infrastructure converge and produce favorable implementation environments can bolster the business case for fleet decarbonization.