CHANGE DRIVERS

Financial Management, Sep 2008 by Prickett, Ruth

How much can the car industry do to reduce its greenhouse gas emissions? Ruth Prickett investigates Ford's sustainable development strategy.

"We see cutting emissions as part of the larger issue of sustainable development," says Andy Taylor, business development director at Ford of Europe. "We have to look at the whole issue of what we make and how we make it."

His company has seen a dramatic increase over the past 18 months in the number of fleet buyers demanding more environmentally friendly vehicles and information about the life-cycle emissions of Ford's cars. Taylor believes that the interest is being driven partly by a desire to buy greener products, but also by soaring fuel costs and other financial incentives, such as the proposal to exempt low-emission vehicles from the London congestion charge.

Many of Ford's big corporate customers are also under increasing pressure to report on their suppliers' carbon emissions, he says.

"They used to ask us simply whether our plants were certified to the ISO14001 environmental management standard, but now there is a new level of sophistication. It means that we have to know more about our processes," Taylor explains. "A car isn't like a banana. It might contain 10,000 components sourced globally, so it's difficult to quantify. But we are publishing data on the COs footprint of new vehicles we produce, such as the Mondeo and the Kuga. This information will gradually build up until it covers all of our vehicles."

But, while many consumers would like vehicles to be cheaper to run and more environmentally friendly, he says there is little evidence that they would be prepared to pay more to buy a more efficient car - although further fuel price hikes could change this. Regulatory developments are also promoting change, although Taylor believes that current emissions targets are more an administrative task than anything else at the moment. He expects these to become far tougher.

Assessing the carbon emissions of a vehicle over its lifetime can be misleading, he says, since 80 per cent of the total are produced when it is driven, not during its manufacture, and most fleet operators keep their cars for only a few years. But customers have become far more aware of green issues.

"Some companies are keen to make environmental statements. We expect green vans to become mobile adverts for firms with large fleets, such as those delivering to internet shoppers," Taylor explains.

Ford is keen to meet this demand from individual customers and fleet buyers. It has introduced a new line of ultra-low-emissions vehicles called Econetic. So far, people can buy a Focus or Mondeo Econetic. These will soon be joined by a Fiesta that promises a fuel economy rate of 75 miles per gallon.

Ford also produces vehicles that use biofuels. "These have been particularly successful in countries such as Sweden, where 80 per cent of Focuses sold are biofuel-compatible," Taylor says. "Of course, biofuels have recently come in for bad press, but this is highly unfair."

He believes that future breakthroughs in automotive technology will continue to cut emissions and improve efficiency, but he doesn't foresee radical changes in engine design over the next decade. Ford's ongoing improvement work includes collaborations with partners such as BP1 which is developing lubricants to reduce fuel waste caused by mechanical friction.

Ford is also investigating ways to generate energy in its plants and cut their emissions. It was the first car manufacturer to introduce solar power (on its plant at Bridgend) and in 2004 it built a wind farm at its Dagenham site. This produced all the power needed by the factory until recently, when it increased its production capacity. The company is putting up a further turbine to cater for this.

"It opened the management's eyes to what we could achieve, and we had a positive response from local residents, employees and the government," Taylor explains. "The wind farm made commercial sense and we could factor in other benefits, such as good PR and customer satisfaction. We're now looking at using turbines in our other European locations."

Ford competes with French car firms that use a lot of nuclear power, which emits little CO2. It is therefore considering alternatives at its facilities on the Continent, including hydroelectric power and innovative schemes such as channelling heat from a waste incinerator for its plant in Cologne and using heat from a petrol station and a McDonald's outlet to power a dealership in Sweden.

Whatever manufacturers do to reduce emissions, the way consumers use their cars remains crucial. A study in Germany estimated that the average driver could cut their car's fuel consumption by 25 per cent simply by driving more smoothly, moderating their speed, changing gear at the right time and not carrying unnecessary weight in their car.

As Taylor says: "We're struggling to find technology that cuts emissions by 0.5 per cent here and there; just think what the effect would be if all drivers cut their emissions by ten per cent through better driving? It's not only about what you drive; it's also about how you drive and how often as well."