While the initial investment needed to decarbonize your fleet may incite a tinge of hesitancy, once you run the numbers it becomes a very exciting prospect for the future of your fleet and your bottom line.
Carbon offsetting is the process by which an organization compensates for their CO2 emissions by taking specific actions - such as funding a reforestation project - that result in reductions in CO2 output elsewhere. These carbon-offsetting actions result in carbon credits for the company, which aid in meeting their emissions goals and government regulations. These programs are overseen by validation and verification bodies (VVBs) that help companies design, document, review, and measure the impact of their efforts. In return for environmentally protective or regenerative actions, VVBs reward companies with Verified Carbon Units (VCUs) that enable companies to pursue alternative energy and technology with dramatically less risk.
A VVB entity, such as Verra, verifies a company’s program in four steps:
- When their Verified Carbon Standard is selected for the program, its rules and requirements are laid out to the company and the project is built within that framework.
- The project is enacted for a specified interval.
- Once the project is completed it is reviewed by both Verra and an independent regulatory body that assesses the impact and validity of the program and data collected throughout.
- If the result receives approvals from both groups, the company is awarded VCUs in proportion to the program’s CO2 reduction or removal.
One of the most appealing aspects of VCUs - the fact that they are sellable and tradable - is where the largest financial benefit lies for businesses. One VCU, or carbon credit, is equivalent to one metric ton of CO2 saved by a company’s program. So, companies holding extra stock of VCUs can sell them to other entities that cannot reduce their emissions or have surpassed their regulatory limit. Then, that credit can then be used to compensate for one ton of CO2 produced by the purchasing company. In exchange, the selling company receives working capital to invest back into sustainability measures or other corporate priorities. And better yet, carbon prices continue to rise around the world.
An Environmental, Social, and Governance Score, or ESG Score, is a tool used by investors to evaluate the responsibility and sustainability of a particular company’s business. Environmental refers to a business’s energy use, pollution, waste, and management of environmental risks. Social pertains to a company’s relationship with its employees and societies, and includes working conditions and labor rights. Governance focuses on the internal control of a company and take into account corruption, taxes, and shareholder input.1 Finance organizations such as MSCI, research and analyze a company’s performance in these three criteria and use this to develop a score ranging from 0-100, which investors use to guide their decisions. And these scores have made a significant impact in Europe, for instance, where 88% of companies that scored well on sustainability saw increased capital investments.2
For companies with automotive fleets, the Environmental and Social scores can be improved with emissions saving technologies such as idle mitigation. These technologies improve existing Environmental scores by reducing both the consumption of limited natural resources and the production of greenhouse gases that contribute to climate change. Additionally, these same environmental factors could be used with a VVB to generate the valuable VCUs described earlier. In the Social category, these technologies improve the workplace for employees and society at large by reducing crews and passersby to exposure from harmful fumes and excessive noise. All combine to increase your bottom line and improve the health of your company. So, what are you waiting for?
“What Is ESG?” Nordea, March 31, 2021. https://www.nordea.com/en/what-is-esg.
“Why ESG Ratings Matter and How Companies Use Them.” Simply Sustainable, https://simply-sustainable.co.uk/insights/why-esg-ratings-matter-and-how-companies-use-them.
