Scope 3 Emissions Drive Change in the Car Hire Industry

In the car hire industry, Scope 3 emissions represent a significant portion of a company's total carbon footprint, often overshadowing direct emissions (Scope 1 and 2).

The indirect emissions, primarily resulting from the use of rental vehicles by customers, present unique challenges and opportunities for the sector as it seeks to reduce its overall environmental impact.

The most substantial source of Scope 3 emissions for car hire companies is the downstream emissions generated by customers using rented vehicles. The emissions fall under category 11 of Scope 3, which covers the "Use of sold products."

For instance, Europcar Mobility Group reported that an overwhelming 98% of its total carbon footprint in 2019 stemmed from customers' use of its vehicles. The statistic highlights the dominant role that Scope 3 emissions play in the car hire sector's environmental impact.

Scope 3 emissions typically dwarf direct emissions for car rental companies, sometimes accounting for over 90% of their total carbon footprint.

However, accurately measuring these emissions is a complex task. Car hire companies must estimate their customers' fuel consumption and driving patterns, often relying on assumptions and averages based on mileage data and fuel efficiency.

It introduces a margin of error in reporting, with some companies suggesting a 30-40% potential discrepancy in their Scope 3 emissions figures.

“We are committed to helping businesses and private motorists make the change from ICE to electric, through innovative tech-based solutions, electrification across our network, and a growing range of low and zero emission vehicles," comments Mark Newberry, Commercial Director & Sustainability for Europcar UK. 

“And we do not just ‘talk the talk’, we also ‘walk the walk’, with our rental fleet increasingly electrified as well as the integration of EVs into our own operations, such as for our Delivery & Collection service.

“Moving a business to a zero emissions strategy requires clear thinking, detailed planning and a hands-on real-world experience.

"Our carefully designed EV solutions are future-proofing the whole mobility process and already support many organisations as well as private motorists on their sustainability journeys.”

Pressure to reduce emissions

As the demand for more sustainable business practices grows, car rental companies are under increasing pressure to reduce their carbon footprint, including Scope 3 emissions.

The pressure drives companies to transition their fleets towards more fuel-efficient and electric vehicles. Moreover, there is a growing expectation for comprehensive emissions reporting, which includes detailed Scope 3 data.

As a result, car hire companies are working to improve their data collection and disclosure practices to meet stakeholder expectations.

To address the challenges of Scope 3 emissions, car hire companies are adopting several strategies:

• Expanding electric and hybrid fleets: By increasing the availability of electric and hybrid vehicles, companies can reduce emissions from vehicle use.
• Telematics and eco-driving initiatives: Implementing technology to monitor driving habits and encouraging customers to adopt more efficient driving practices can further reduce emissions.
• Supply chain collaboration: Car hire companies are partnering with vehicle manufacturers to minimise emissions in the production and delivery of vehicles, addressing upstream Scope 3 emissions.

The focus on reducing Scope 3 emissions is influencing the broader business strategies of car rental companies. For example, many are diversifying into car-sharing and other mobility solutions that may reduce overall vehicle usage and emissions.

Engaging with supply chain partners and customers to promote sustainability is becoming integral to the business model, aligning with long-term environmental goals.

As regulations evolve around emissions reporting and reduction, car hire companies must adapt to ensure compliance, particularly with regard to Scope 3 emissions.

Growing regulatory requirements are pushing companies to be more transparent in their reporting, ensuring that they meet both legal obligations and stakeholder expectations.

The path forward

Scope 3 emissions are a critical factor in the car hire industry, driving significant changes in fleet composition, operational practices and business strategies.

As the sector moves towards more sustainable practices, addressing these indirect emissions will be crucial for companies aiming to reduce their overall environmental impact, comply with evolving regulations and meet the growing expectations of customers and investors alike.

By focusing on reducing Scope 3 emissions, car hire companies can enhance their sustainability performance and secure a competitive advantage in an increasingly eco-conscious market.

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