FreightWaves recently chatted with Josh Raglin, chief sustainability officer for Norfolk Southern (NYSE: NSC), about why and how companies like the Class I railroad have adopted sustainability initiatives in recent years. The interview was edited for clarity.
FreightWaves: Just what is sustainability?
Raglin: Think of it at a basic level. Sustainability is closely aligned with stewardship. It’s about the wise use of resources, and those resources come in many forms: money, material, fuel, time. John Elkington first developed the concept of the triple bottom line in the 1990s. … It was about creating win-win [situations]. The essence of that is doing things that are good for people — that’s the social effect. And good for the planet — that’s the environmental effect. And good for profits, which is the economic effect. And so, we can measure sustainability projects and initiatives through these environmental, economic and social benefits.
FreightWaves: How has the possibility of stricter environmental regulations affected Norfolk Southern’s view on sustainability?
Raglin: It’s not environmental regulations that have pushed us toward sustainability. Sustainability is about being proactive, not necessarily responding, in situations and in partnerships with our environmental groups. … Norfolk Southern is trying to get ahead of regulation. Sustainability is about doing things that are good for the economy.
FreightWaves: Norfolk Southern is involved in a number of sustainability initiatives. Why?
Raglin: As we consider our shareholders, investors are looking for transparency. They also want companies with lower risk.
Employees want to work for companies where they feel like they’re making a difference. They want to be part of a broader mission. They want to have loyalty and pride for their company.
For our customers, of course they’re looking for opportunities for us to improve service through these increased efficiencies, and at the same time they’re taking a closer look at their emissions. They want to lower their emissions in shipping, and we can offer them that opportunity.
For the communities that we operate in, sustainability is an expectation now and we work hard to maintain that relationship.
FreightWaves: Can you explain the rationale behind Norfolk Southern’s involvement with Operation Clean Sweep (OCS) [a pledge that companies have signed to ensure that plastic pellets/nurdles don’t get dispersed accidentally]?
Raglin: It was an opportunity that a few customers brought to us and wanted us to consider. We’re transporting products often in the customers’ railcars. We’re just the immediate transporter of those products … [but] we really took a look at what are the opportunities at Norfolk Southern, at the same time asking what is happening in the environment in terms of nurdle pollution.
For our employees, it’s about raising awareness. … It’s obvious if it’s a tanker car leaking fluid. But if you see an aggregate that’s dropped a little bit of rock on the ground, you might not think about it.
What about plastic pellets? For us, it’s about creating videos to educate our employees, especially those involved in transportation, on the potential harm of these pellets. But it’s also about reinforcing operating rules. Our role as a shipper is to continue to inspect these cars prior to moving them to ensure that they’re properly closed. And if they’re not, then we notify the customer and there’s an opportunity for them to correct the defect right then.
We’ve got 16 bulk transfer facilities for plastic pellets on Norfolk Southern’s network, and we’ve verified that all of them have taken the OCS pledge as well. And so for them it’s about implementing best management practices, which OCS put out there. What we’ll do is work with our distribution services team to conduct periodic inspections of these bulk transfer facilities.
FreightWaves: What is the Living Shoreline Initiative?
Raglin: The living shoreline is on the banks of the Elizabeth River in Norfolk, Virginia, near the Lamberts Point Coal Terminal. Most of Lamberts Point is dedicated to rail lines and to loading facilities for ships, but there is an area there by the shoreline that’s about nine acres, and there was 1,500 feet of shoreline that had been severely eroded. Most of the erosion has been since 2003.
The goal for this project was, the erosion was getting close to one of the access roads, and so we had several different options here. One of the conservation groups that we work with in the Norfolk area is the Elizabeth River Project, and they’ve been a promoter of living shorelines versus a traditional bulkhead or an armored shoreline. Not only are those items very expensive to implement, they really don’t provide habitat for the aquatic ecosystem.
So when we looked at it, we looked at what’s another opportunity there. So that’s when we looked at doing a living shoreline. It accomplishes the goal of stabilizing the shoreline, but it also provides a habitat for various species. We’re already seeing shore birds showing up at that location, and the project was only completed at the end of July. If you look at the sustainability lens and what is the value, the value is that it saved us $3 million. And at the same time we were able to protect our property, which provides more value, and we were able to create habitat along the Elizabeth River.
FreightWaves: Is the living shoreline about putting vegetation back into the area?
Raglin: There was wave action that kept eroding the shoreline, so we put some rocks … to break up the wave action, and then we backed that up with sand. And then we planted two kinds of marsh grasses to fill in that area. It’s going to create an area of coastline resiliency and allow that coastline to naturally protect itself. … The waves are a combination of natural waves and that coming from the vessels.
FreightWaves: What are some of Norfolk Southern’s efforts to reduce CO2 emissions?
Raglin: Our largest environmental impact is from diesel in locomotives. Just last year we used around 450 million gallons of diesel. That’s our second-largest expense behind payroll. So any improvement we make not only helps the bottom line but also helps the atmosphere.
We’ve been tracking our locomotive fuel efficiency since 1987. By 2015, we had made a 20% improvement in fuel efficiency. We challenged ourselves in 2015 to set a five-year goal to make an additional improvement of another 8.6%. And through the various initiatives we’ve undertaken, I feel we’ll meet that goal this year. We measured that in terms of how many gallons of diesel does it take to move a thousand gross ton miles? And our goal for this year is 1.17 gallons for every thousand ton miles.
There’s a number of efforts in our operations team — very concerted efforts to reduce fuel consumption — and we’ve made really, really great strides this year in meeting this goal, especially in 2020. All the challenges we’ve had would be a tremendous accomplishment because of the headwinds we faced with lower volumes, which negatively affects your gross ton miles. But we’ve reduced our diesel usage more than the gross ton miles reduced. And that’s been through initiatives.
A lot of it is the energy-management systems on the trains, lower emissions and coaching the engineers on utilizing the throttle gauge. We’ve also got distributed power on our trains as well. And we’ve reduced our locomotive fleet size. We’ve definitely gotten rid of the older locomotives that were not quite as fuel efficient. And with our conversion of locomotives from DC [direct current] to AC [alternating current], locomotives have more horsepower.
One of the essences of PSR [precision scheduled railroading] is running longer trains. Running longer trains is much more fuel efficient. Our total Scope 1 and Scope 2 greenhouse gas emissions were just under 5 million metric tonnes (MMT), with over 90% of that being locomotive diesel. It’s actually our lowest total since we started calculating emissions in 2009. Emissions intensity target has improved by 13%.
When you talk about railroading, you’ve got to think it’s the most efficient surface transportation way to move freight. By choosing rail last year, our customers avoided generating 15 MMT of emissions, which is huge. That’s the equivalent of what 5 million acres of pine forests would sequester in a year, or 3.3 million vehicles. Or 1.7 million homes. It’s a substantial reduction. As companies continue to set climate goals around lowering their emissions, rail can be part of that solution.
FreightWaves: Was there any sort of third-party guidance involved when you set your emissions target?
Raglin: The current target we set was in 2015, and that was probably done internally if I had to guess. … Third-party guidance is a trending item that’s happening now with companies, and that’s where you have a party come in and help you. … That’s where we’re having internal discussions right now. This is the last year of our five-year goal, and so we will establish a goal not only for fuel efficiency but also for emissions. And so, we are considering science-based targets.
FreightWaves: Is there anything else that you’d like to mention?
Raglin: The one thing that we’ve been doing that’s been getting a lot of press recently is our forest carbon offsets. Norfolk Southern has been a leader in that area going back to 2009. We developed two different forest carbon projects. The first was on our own property in South Carolina. It was a 10,000-acre project, and that project so far has sequestered over 350,000 metric tonnes of CO2 from the atmosphere. We’ve sold some of these offsets on the California compliance market and utilized the revenue to offset our expenses for maintaining that forested ecosystem. We do have a number of endangered species of woodpecker at that property and so it helps with the management of the property for not only that species but also the other species a well.
The second project is the Trees and Trains initiative. Norfolk Southern was the first corporate investor of that project back in 2011. The project spans parts of six states going up and down the Mississippi River. Historically, there were over 25 million acres of hardwoods up and down that river. But now, there’s less than 5 million. GreenTrees has started reforesting the land that was converted to agriculture back into forestry, and they’ve been working with private landowners.
Norfolk Southern invested in that project, and so far, our trees have generated over 250,000 carbon credits for us. The trees, as they continue to grow, are storing another 50,000-75,000 tons of CO2 a year. That creates another opportunity for Norfolk Southern. The program altogether is going to generate over 1.1 million tons of carbon credits. And we’ve got several options for those credits. We can offset our own emissions or we could potentially offer those emissions to customers. … There’s an opportunity to sell those credits to other companies as well, such as those in the air industry, the oil and gas industry.
There’s a lot more awareness now for corporate climate goals. There’s potential regulation out there I think for some companies, especially the larger emitters, in the form of a federal carbon cap-and-trade program or a carbon tax. But I think rail is uniquely positioned in that regard. We are an efficient and reliable and safe mode. We move large loads of freight, and we do it in a very efficient manner.