There’s been a great deal of talk lately about ESG—environmental, social, and governance. According to the Corporate Finance Institute (CFI), ESG is “a management framework to understand and measure how sustainably an organization is operating.” According to CFI, “ESG takes a holistic view that sustainability extends beyond just environmental issues.”
You may be wondering why a fleet should care about ESG. The reality is that more and more investors, shippers, and other stakeholders are looking at a company’s performance in this area to determine whether they want to do business. In addition, the Securities & Exchange Commission has proposed a rule to standardize the reporting of the efforts publicly held companies are making in the area of climate-related risks.
The proposed rule would mandate the reporting of Scope 1 and 2 emissions while reporting Scope 3 emissions would be voluntary. Scope 1 emissions are those that a company owns or controls and include things like emissions from manufacturing processes. Scope 2 emissions are indirect emissions that are still “owned” by a company and include things like the electricity a company purchases. Scope 3 covers indirect emissions that are not “owned” by a company, and this is where fleets come in. The emissions fleets generate are part of a shipper’s Scope 3 emissions.
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We are seeing more requests for proposals from shippers that contain questions about what fleets are doing to lower their emissions and reduce their carbon footprint. I believe that in the not-too-distant future, fleets that have not upped their sustainability game are going to lose business as shippers seek cleaner forms of freight movement.
The good news is that there are a lot of technology solutions available for fleets to consider, including clean diesel, compressed natural gas, battery-electric and hydrogen fuel cell trucks, biodiesel, and more. There is no one powertrain option that will work for every fleet, nor even one that will work for every duty cycle. However, I believe fleets need to start exploring the options that will work best for them today and make the proper purchasing decisions. This may mean operating with multiple fuel sources.
I also believe we are going to see lenders asking questions of fleets about their progress with ESG, and that information may, at some point, determine whether a fleet can get financing for its assets.
ESG is not going away, so fleets shouldn’t wait too long before they begin making it an important part of their business planning.
Patrick Gaskins, SVP of Corcentric Fleet Solutions, oversees both sales and operations for the company's fleet offerings. Gaskins joined the company in 2010, bringing more than 30 years of experience as a financial services professional in the transportation industry. He leads a team that works with a supply base of more than 160 manufacturers to help the country’s largest fleets manage all aspects of their fleet operations and fleet-related spend.
