· 6 min read · Features

Cost-effective driving - Follow the signs

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Even in a downturn the company car is too big a recruitment and retention tool to be scrapped.Nick Golding reports on alternative ways of reducing mileage and cutting costs.

Sky-high fuel prices have not just hit private motoring. Recent price hikes have pushed up the cost of running fleets by 19% in 2008 compared with 2007, according to the RAC. Combined with pressure on companies to reduce their carbon footprint, businesses are seriously starting to think about whether they can get by without company cars.

BT, for instance, has already found that by using teleconferencing technology to conduct meetings, it can dramatically cut the time its employees need to be behind a wheel travelling to meetings. It says it has already saved at least 97,000 tonnes of CO2 this year, while breakdown service company the AA claims it has reduced it carbon footprint by 212 tonnes over the past 12 months, by cutting out the commute and allowing staff to work from home.

While these policies are more about cutting back on the use of existing fleet cars, rather than scrapping them altogether, one company, Microsoft, is already taking the next logical step by offering alternatives to the company car. It doesn't just want to reduce miles driven, it seeks to cut the actual number of cars in its fleet.

"We're now offering a public transport allowance as an alternative to the company car," says Microsoft's HR staffing lead, Simon Heath. "We're not completely removing company cars, but we do encourage staff to take this allowance, rather than a car one, when they join the company."

Since being introduced in 2007, the public transport allowance has already reduced the number of company car users at Microsoft by 3%. This proves there are viable alternatives to any type of company car, but is this a vision of the future, and is the company car really under threat?

One area where cutbacks could be seen is in pool cars - those that tend to be available for employees to use on business as and when they deem it necessary. Pool cars tempt employees to drive to meetings or get behind the wheel on short journeys that could be completed by public transport.

Robert Kingdom, Masterlease's head of marketing and business development, says: "We are seeing rising unemployment and some companies are finding themselves with spare cars that usually just get dropped into the pool fleet. We may see a reduction in business from these companies."

If employers continue to count pennies, and realise cars can be cut without affecting business, there could be a knock-on effect for the fleet providers in the market. Many of them seem unconvinced. "I don't see corporate fleets reducing too much in the UK. Instead I see companies just utilising their existing fleets more, and making cars more effective in terms of cost and CO2 emissions," explains Hitachi Capital Vehicle Solutions' product development manager, Steve Pinchem.

And some companies are certainly showing signs of this at the moment. Network Rail, for instance, is testing in-car technology, also known as 'telematics', to help drivers use fuel more economically. The telematics allow employees to map out their journey with satellite navigation and miminise the risk of getting lost and wasting fuel. Chuck Ives, head of fleet at Network Rail, explains: "Alternatives are being evaluated (at Network Rail), and these include engine speed limiters and telematics. Our strategy has already demonstrated that we can reduce our impact on the environment and help deliver cost savings to the business."

The Environment Agency (see box, page 50) is one organisation that has worked hard to reduce the actual number of vehicles in its own fleet, and it believes others should follow its lead in cutting out cars where it can and streamlining in the areas where they are essential for business use.

According to the Environment Agency, it is not essential business drivers that need to be looked at first, it is employees who receive a car as a benefit that must be targeted for possible cuts, if companies are going to make an impact on cost and carbon emissions.

Head of internal environment management Julian Feasby says: "I think companies should be reducing the number of perk cars they offer, but there is a trade-off to be made, and businesses still want to be able to attract the best people to a job."

The near-permanent feature of the company car as a recruitment tool is the reason many think the fleet will not be downgraded overnight. It is a brave employer that would axe the car completely. Indeed when provider Masterlease recently surveyed its clients, over a quarter (28%) said that they would consider leaving their current job if another job offered a better car benefit.

"Employees see their company car as part of their status," says CFC Solutions' marketing team leader Alison Southcombe. "It would be a huge disincentive to remove the company car in the current economic climate, when staff are experiencing pay freezes." That said, she adds, "employers are still taking action in other areas: many are now restricting the cars staff choose, limiting them to economic, 'green' cars."

This last trend has meant the fleet market is moving away from the traditional cash allowance car scheme, where employees are given a sum of cash to fund their own vehicle. This was itself originally seen as the alternative to the traditional company car scheme, where an employee selects a car from a list organised by the employer.

The traditional cash allowance has its advantages, mainly because employees have freedom of choice over the vehicle they drive. But cracks appeared in such schemes when drivers started to select unsafe and high-polluting cars, over which companies had no control. To remedy this many companies are now either placing rules and restrictions around cash allowance schemes, or are encouraging staff to return to the traditional and easy-to-regulate company car system.

Kingdom explains: "In the past few years we have seen cash being offered as a replacement for the traditional company car, and most people who wanted to move across have done so, but for duty-of-care reasons companies are now trying to move essential business drivers back to company cars."

Whichever move the company opts for, whether it's a migration back to the company car, a move towards a more efficient management of the fleet, or getting rid of the car altogether, the objective is always the same: reduce mileage and save money.

And as companies become more and more expert at reducing miles and saving money along the way, it is inevitable that at some point down the line someone will ask the question: 'Do we really need that car?'

Cadbury rewards eco-friendly travel

Cadbury has an environmental agenda that runs through the entire company, from cutting out excess packaging for its products to reducing the amount of CO2 that its company drivers produce.

Cadbury's head of corporate responsibility, Alison Ward, explains: "Clearly transport is a big area where we can cut CO2 and this could be a big win for the company. If we can reduce carbon usage on company transport we will be able to start to save the business money as well."

To cut the number of miles that employees drive and the amount of CO2 produced, the confectionery business has set up a number of schemes that aim to persuade drivers to leave their cars at home.

At its Uxbridge office in west London, for example, Cadbury has had video-conferencing technology installed so that employees do not have to commute to the workplace for meetings.

There is also a car-sharing scheme for employees travelling to the same workplace or the same meeting. Those that take this up are rewarded with small but useful bonuses.

"Employees who either share a car to work or who have an environmentally-friendly vehicle get to park near the front of the work car park, which is particularly useful as parking is quite strict," Ward says.

Employees are also eligible for help in financing alternatives to using a car to get to work.Ward. "When we moved to Uxbridge, those using public transport received financial rewards to encourage them to continue commuting in this way," says Ward.

Environment Agency sets targets for reducing mileage

In 2005 the Environment Agency set itself the target of reducing its overall fleet mileage by 25% by 2012. To achieve this goal it set individual targets for each team within the organisation.

"Last year we reduced our mileage by 4,000,000, which saved us around £700,000. You can save a packet and put that money back into environmental projects," explains head of internal environment management Julian Feasby.

The environmental targets are now ingrained in the organisation's culture and all employees are clear on what they must do to keep their mileage down. Targets are even discussed between managers and members of staff at employee appraisals so that they are treated as seriously as teamwork and organisational skills.

The Environment Agency tries to make it as easy as possible for staff to understand how they can help to keep miles down, and it has now published a 'hierarchy' for reducing miles.

"At the top we had things like conducting meetings over the telephone as opposed to driving to meetings, followed by using public transport, and car-sharing, for instance," adds Feasby.

To encourage healthy competition among employees, a league table showing which teams are reducing their miles the most is published and shared, to help people aspire to reach the top. According to Feasby, the target-led approach is straightforward to install within any company where employees are used to hitting goals as part of their everyday work. "If you have a company that is keen on, or used to, hitting targets then this is a good way of reducing mileage and saving money," he says.

Since the project began in 2005, the Environment Agency has not only managed to cut its fleet miles, but has also removed vehicles, and this will continue to happen for as long as possible, without it affecting the way the organisation operates.

Feasby adds: "Since 2005 we have cut in the order of 5% to 10% (miles), and this will continue as far as is sensible. However, we acknowledge we still have a job to do and we can't undermine that."