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All Class Is are ratcheting up efforts on environmental, social and governance (ESG) initiatives. They are facing pressure from shippers, shareholders, government agencies and residents of the communities in their networks to be better environmental stewards, corporate citizens and engaged neighbors.
For Norfolk Southern Railway leaders, the primary ESG mission is to prove to all stakeholders that their organization is conscious about bettering the planet in a highly participatory, responsible and comprehensive manner. They realize the railroad’s actions can have both tangible effects and meaningful benefits.
Although they consider all three ESG components to be important, NS leaders are devoting a lot of manpower and other resources to “E” pursuits to integrate sustainability company-wide into daily operations. Ongoing efforts include on-the-ground activities, such as employing hybrid cranes at intermodal facilities and ECO switchers in yards; financing structures, such as a first-ever green bond issue; and strategies, such as new science-based targets for greenhouse-gas (GHG) emission reductions.
Customers increasingly are turning to the railroad for help with making their own supply chains greener, NS Chairman, President and Chief Executive Officer James Squires wrote in a column published in Progressive Railroading’s June issue. Many shippers are just starting their sustainability journey, so they need the assistance, while others are farther along the path.
“More than 25% of our customers have established public goals for carbon reduction through the CDP’s global disclosure system,” Squires wrote.
A large number of customers also now judge the Class I’s service in part according to sustainability performance.
“With increasing demand for sustainable transportation solutions from our customers … we need to do more,” wrote Squires.
That’s why the railroad has been focusing on sustainability for a long time — since 2007. NS was the first Class I to create a sustainability program at that time, and since has accomplished a lot, says Chief Sustainability Officer Joshua Raglin.
To notch more progress, the railroad is encouraging interaction, communication and input from all levels, and taking more measures to engage the workforce. For example, a corporate sustainability advisory council staffed with 18 department leaders is charged with fostering more collaboration on five strategic environmental pillars: carbon, facilities, circularity, suppliers and nature.
What used to be the three “Rs” — reduce, reuse and recycle — has been changed to circularity, says Raglin.
“We look at what we’re buying and what the end uses are. It’s all about how we can keep stuff from landfills,” he says.
All five pillars got a big shot in the arm in May, when NS closed a $500 million green bond offering to fund a number of projects designed to reduce carbon emissions. NS was the first Class I to issue green bonds, Raglin says.
Projects that can be funded with the proceeds include improving the locomotive fleet’s fuel efficiency, investing in new and expanded intermodal terminals, powering operations with cleaner energy, boosting the use of energy-efficient buildings and technologies, and supporting reforestation and landscape restoration work to offset carbon emissions.
Green bonds aren’t new — according to the Climate Bonds Initiative, $270 billion worth of green bonds were issued worldwide in 2020, Squires wrote in his column. The response from the financial community to the bond offering was substantial and buyer interest exceeded its size, he said.
“This is an important validation for investors, knowing their funds are going to projects with a positive environmental impact,” Squire wrote.
NS concurrently issued $600 million worth of 100-year bonds. Only a handful of companies have the staying power to earn that kind of investor confidence, Squires wrote.
The green bonds exercise was a crossfuncational effort that involved many departments, including finance, law, sustainability and corporate communications, says NS General Counsel-Corporate Nabanita Nag.
“It demonstrates our holistic approach to sustainability and ESG. It’s in every area of the company now,” she says.
There was no precedent to fall back on, so many things needed to be worked through, Nag says. The primary one was the green financing framework, which outlines the projects that are eligible for allocations, as well as reporting and other governance elements associated with the allocations.
“We had to understand what projects would be considered eligible projects as described in that framework,” says Nag.
Sustainalytics — a third party — assessed whether the framework was aligned with green bond principles published by the International Capital Market Association.
One of the key approved projects is an ongoing locomotive modernization program. NS for the past five years has been converting old DC-traction locomotives into modernized AC-traction units.
Known internally as DC2AC, the program targets a fleet of 1,200 DASH 9 series locomotives produced by GE and a small number of Electro-Motive Diesel SD70 units. By 2021’s end, the railroad expects to have modernized 500 units since 2016.
“Instead of buying new locomotives, which are expensive, we are retrofitting units that are 20 years or older. We can use two AC units to replace three DC units,” says Raglin.
Through DC2AC, the frame, engine, platform, radiators and air compressor of an older locomotive are retained, but controls, electronics, propulsion systems and other components are added or modernized. The main and auxiliary cabs, trucks, motors and control architecture are new, and the main alternator is reworked.
It takes about five weeks to complete one DC2AC conversion — from disassembly through painting and testing — at the Juniata locomotive shop in Altoona, Pennsylvania.
“These are pretty substantial updates,” says Tom Schnautz, NS’ vice president of advanced train control, whose responsibilities include locomotives, cars, positive train control, and communications and signaling. “The horsepower is the same at 4,400, but the tractive effort holds better and can maintain effort at low speeds. That’s where an AC unit shines.”
Just by modernizing controls, fuel usage in each locomotive is reduced 3.5%. Adding modern electronics helps cut fuel usage another 18%.
“Each gallon of fuel saved helps reduce emissions,” says Schnautz.
In terms of improving air quality, DC2AC retrofits can lower carbon dioxide (CO2) emissions by 500 tons per unit per year. NS can save another 183 tons of CO2 per unit annually because most of the steel in a locomotive is reused instead of needing to be produced in a steel mill, which produces emissions.
“It’s avoidance. It’s all about reduce, reuse and recycle — that circular economy,” says Schnautz.
NS also aims to up the ante on sustainability with the local locomotive fleet. For the past four to five years, the Class I has added 54 ECO yard locomotives and 23 ECO slugs at six locations.
The ECO switcher units feature modernized controls, auxiliary appliances, start-stop systems and other electronics that help reduce emissions and fuel usage. Forty-five ECO Locos and 23 ECO slugs were developed in partnership with local governments.
NS now operates 18 ECOs and 12 slugs in Atlanta; 16 ECOs and four slugs in Chicago; six ECOs and three slugs in Macon, Georgia; two ECOs and two slugs in Pittsburgh; two ECOs and one slug in Buffalo, New York; and one ECO and one slug in Rome, Georgia.
The ECO switchers are paired with slugs to improve tractive effort and braking power, says Schnautz.
“They go from six axles of power on the rail to 12 axles without adding engines or emissions, and at a lower operating cost,” he says.
Locomotives account for 90% of the railroad’s carbon emissions, so they are the prime focus of a new emission-reduction goal validated last month by the Science Based Targets initiative (SBTi).
The Class I has committed to reduce scope 1 and 2 GHGs 42% per million gross ton-miles by 2034 versus the level produced in 2019, which serves as the base year. SBTi determined the goal is in conformance with its criteria and recommendations.
To obtain the SBTi validation, NS could have followed one of two routes, including an absolute model that calls for reducing emissions 2.5% each year.
“But that’s not for us. We want to grow each year,” says Raglin.
Instead, NS opted to follow the second route of addressing overall intensity, such as by significantly lowering 1 and 2 emissions over the next 13 years.
“It’s an ambitious goal,” says Raglin.
As part of its 2015 strategic plan, NS had set a goal to improve fuel efficiency 8.6% by 2020, but exceeded it by reaching 9.4%, resulting in saving more than 130 million gallons of diesel and avoiding about 1.3 million metric tons of emissions.
The Class I also is equipping locomotives with smart energy management technology designed to automatically match horsepower to trailing tonnage and track terrain, and downsizing portions of its vehicle fleet or incorporating technologies in certain equipment to prompt more green results. For example, the railroad will switch out some trucks or equipment with models that are two sizes smaller, says Raglin.
In addition, NS is analyzing many types of fuel alternatives and low-carbon fuels, such as compressed natural gas, batteries and renewable diesel. Sometimes called green diesel, renewable diesel is a biofuel that’s chemically similar to petroleum diesel. It can help reduce carbon emissions intensity by 50% to 80% based on the feedstock, according to the California Air Resources Board (CARB).
“Renewable diesel is promising,” says Raglin. “We see it as a short-term solution.”
There’s another emerging emission-reduction tool that NS finds promising: diesel-electric hybrid cranes. The railroad is transitioning away from traditional diesel hydraulic cranes at intermodal terminals to save many tons of carbon emissions and hundreds of thousands of dollars in fuel costs.
The rubber-tired, hybrid gantry cranes supplied by Konecranes mostly operate on electricity. A supplemental diesel generator kicks in for high-intensity work, consuming only a quarter of the fuel used by old diesel hydraulic cranes.
Each hybrid crane — which also requires fewer repairs and has less down time — is expected to save about 22,000 gallons of diesel per year, or 440,000 gallons over its 20-year lifespan.
Five of the hybrid cranes now are in operation at NS’ 47th Street intermodal facility in Chicago. The Class I has 50 intermodal terminals and 68 cranes, and plans to replace more diesel-electric units with hybrids over time. The goal is to replace 19 cranes per year as they age out, says Raglin.
After all cranes are converted, fuel savings could reach 1.5 million gallons per year, and nearly 30 million gallons over 20 years. That translates to 222 metric tons of emissions per year per crane — or more than 1,000 metric tons for the five current cranes, according to NS estimates.
“Hybrid cranes cost more than traditional cranes, but you get the money back quickly through less diesel usage,” says Raglin. “They cost less to maintain because they have less mechanical components and they produce less noise, so they’re good for local communities.”
NS also is converting three hydraulic cranes to diesel-electric hybrid technology at its Greensboro, North Carolina, yard as part of a pilot project. The rebuilds cost 40% to 60% less than purchasing a new hybrid crane.
Yet another way NS is addressing sustainability is through a new less-than-truckload service now offered through its Thoroughbred Direct Intermodal Services Inc. subsidiary. Launched early in the second quarter, Thoroughbred Freight Transfer (TFT) provides truck and cross-dock solutions in a service that combines the strengths of intermodal and box-car transport.
TFT is designed to provide an array of flexible supply-chain solutions whether a shipper is consolidating products into a single-source solution or deconsolidating products from rail to multimodal options. The box-car service currently is offered in two corridors: Chicago-Atlanta and Atlanta-Miami.
“This is a trial run. We will add more corridors if it proves successful,” says Raglin.
TFT is a way to enlarge the network, take trucks off highways and gain emission impacts, he says. NS has found that its services each year eliminate about 10 billion truck miles, which is equivalent to 400,000 trips around the Earth.
The railroad also is gaining emission — and financial — impacts from nature-based sustainability solutions. Reforestation projects help restore natural landscapes and offset carbon emissions.
At Brosnan Forest, the Class I has a number of ongoing projects involving 20,000 acres. Owned by NS, the forest is located about 35 miles northwest of Charleston, South Carolina.
NS began reforestation programs more than a decade ago. The Class I has enrolled over 10,000 acres with the CARB in a project that has created more than 350,000 carbon credits since 2010. Carbon credits can be sold, so they have monetary value.
Brosnan Forest currently is sequestering another 30,000 tons of CO2 annually while generating additional carbon credits.
“We have sold some of these credits in the California compliance market to generate revenue, which offsets our expenses to maintain this forested ecosystem,” says Raglin. “We also get credits by restoring wetlands and streams.”
To advance its green pursuits even further, NS recently created two new positions: a group manager of supplier diversity and sustainability, and a director of fuel efficiency.
As of press time, NS officials continued to conduct interviews for the group manager, who will report to the sourcing department head. The chosen person will be responsible for the design, implementation and management of a program aimed at increasing partnerships with disadvantaged business enterprises (DBE) and suppliers that support corporate sustainability goals and objectives.
The manager will work with stakeholders and suppliers to identify ways to reduce NS’ carbon footprint and support suppliers’ efforts to reduce their carbon footprint; work with buyers during the RFP process to identify diverse suppliers for inclusion and participation in the bid process; and participate in outreach efforts with DBEs to further their understanding of the rail industry and how to be competitive in sourcing events.
“This is an example of how we are incorporating sustainability at the department level with new or expanded roles and positions, like the director of fuel efficiency and a senior communications manager for public policy, community and sustainability in our corporate communications department,” says Raglin.
As for the director of fuel efficiency, the railroad in late July installed Jamie Helmer in the new position. She previously served NS as manager of process improvements and manager of a locomotive shop, and has information technology experience.
There previously was no specific department or functions that managed all the pieces of fuel efficiency, which involves rules and policies, various technologies, start-stop features, top-of-rail friction modifiers and other elements, says Schnautz.
“This will drive progress with efficiency. We see the role as aggregating our initiatives and strategy aimed at lowering fuel use,” he says.
Railroads’ fixation on driving sustainability initiatives resembles the rail industry’s focus on safety in the 1980s, says Raglin. Safety eventually became ingrained into railroading culture and now rail is one of the safest industries in the world, he says.
The biggest payoff with efforts to become greener is volume and financial growth aren’t sacrificed as a result.
“You can have both success and sustainability — they don’t oppose each other,” says Raglin.
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