2012 Sustainability Report

An Overview of Norfolk Southern's 2012 Sustainability Report

This is Norfolk Southern’s fifth annual corporate sustainability report. It discloses the railroad’s significant environmental, economic, and social impacts to provide stakeholders a way to assess our commitment to corporate sustainability. Our stakeholders include shareholders, customers, employees, government and industry partners, and the communities we serve.

The report reflects the company’s ongoing efforts to achieve balance between our business imperatives and our desire to mitigate the environmental impacts of railroad operations. We strive to deliver top-notch service to customers and earn a solid return for shareholders, while respecting the interests of employees, communities, and the environment with which we are connected. Our long-term success as a company requires that we meet our present business needs without compromising the ability of future generations to meet their own needs.

 

The Big Picture of Sustainability: Rail’s Environmental Advantage

By doing what we do best – providing customers safe, timely, and cost-efficient freight transportation – Norfolk Southern is keeping the economy moving and offering a green transportation solution. Because our railroad operates the most extensive intermodal rail network on the East Coast, we are well positioned to contribute to the nation’s economic growth and environmental health.

Scientific research and government accounting of greenhouse gases by emissions sources demonstrate that rail is the most environmentally friendly way to ship goods over land. A recent independent study for the Federal Railroad Administration concluded that trains on average are four times more fuel efficient than trucks on a ton-mile basis. That means moving goods by rail instead of over the highway reduces greenhouse gas emissions by 75 percent on average per ton-mile.

 This text is replaced by the Flash movie.

{interactive-link}

On Target: Making Progress

Two years after announcing a goal to reduce greenhouse gas emissions by 10 percent per revenue ton-mile between 2009 and 2014, we have reached nearly 60 percent of the goal.

In 2011, we lowered emissions by 2 percent per revenue ton-mile of freight. Added to the 3.9 percent reduction in 2010, we have reduced emissions by 5.9 percent per revenue ton-mile. 

We attribute the continued reduction to strategic efforts to improve our operations, including actions taken to reduce locomotive fuel burn and emissions, upgrade our locomotive fleet with more fuel-efficient engines, and increase the energy efficiency of railroad offices and facilities.

This text is replaced by the Flash movie.

2011 Carbon Footprint

In 2011, Norfolk Southern Corporation’s business activities generated slightly more than 5.4 million metric tons of carbon dioxide equivalent emissions while delivering more than 191 billion revenue ton-miles of freight for customers.

The railroad’s diesel-burning locomotive fleet, which operates in road, local, and yard service, generated roughly 89 percent of the railroad’s CO2 equivalent emissions, or 4.8 million metric tons.

Our second largest source of emissions resulted from electricity usage at company-owned facilities, including terminals, yards, and shops. Our use of electricity generated 277,068 metric tons of CO2 equivalents, or 5.1 percent of total greenhouse gas emissions.

During 2011, our average locomotive fuel efficiency, as measured by revenue ton-miles per gallon of fuel, dipped slightly. Our revenue trains moved a ton of freight an average 407 miles on a gallon of diesel fuel, down from an average 413 miles in 2010, a 1.4 percent decline.

We attribute the decline in large part to record-setting winter storms that disrupted network efficiencies, rising freight demand requiring more trains, and  shifts in traffic mix leading to higher engine operating horsepower.

Emissions Reduction

Because locomotives account for most of our greenhouse gas emissions, much of our focus is on technologies and techniques to improve fuel economy and reduce emissions of the locomotive fleet.

We are working on a range of initiatives to achieve our carbon-reduction goal.

Environmental Performance

Green connections: Norfolk Southern is strengthening our connections with communities and the environment to ensure the impacts we leave will be positive for generations to come. We strive to be the industry leader in fuel conservation, emissions reduction, efficient energy use, recycling, and environmental partnerships.

A strategy to conserve and restore

To reduce our carbon footprint, Norfolk Southern has focused on locomotive and facility energy use, our two largest sources of emissions. However, we have adopted a broad approach to reduce our business impacts on the environment. Beyond strategic operational programs, the railroad is working with private and public partners on reforestation and other projects to sequester carbon and mitigate the potential impact of our unavoidable business emissions.

“Conservation in a nutshell is the wise use of resources,” said Josh Raglin, general manager facilities. “We’re going to use natural resources; we just have to be smart about how we use them.”

Here’s a quick look at three projects that are part of our carbon mitigation strategy:

‘Trees and Trains’ 

Norfolk Southern’s collaboration with GreenTrees® to reforest 10,000 acres of former woodlands in the Mississippi Alluvial Valley demonstrates our approach to carbon mitigation – preserving the environment while creating economic value. This project is creating environmental and economic benefits for multiple stakeholders, including customers, employees, and residents of the communities we serve, and wildlife.

Extending the Reach of The Longleaf

Longleaf pines, one of North America’s most threatened forest ecosystems, are part of Norfolk Southern’s heritage. The 6,000-acre longleaf pine forest at our Brosnan Forest conference facility near Charleston, S.C., is more than a century old and is home to the largest U.S. population of endangered red-cockaded woodpeckers on private lands.

To help restore this important ecological habitat to its Southeast U.S. range, the Norfolk Southern Foundation provided $25,000 in 2011 and committed the same amount in 2012 to The Longleaf Alliance to develop a longleaf growth and yield model. The tool will help land owners and foresters project forest growth rates and mortality and the amount of carbon the trees store annually.

Helping to Recover Coal Mines

Norfolk Southern has partnered with The American Chestnut Foundation in its mission to restore American chestnut trees to native forests in the eastern United States.

In 2011, the Norfolk Southern Foundation awarded $15,000 to TACF to reforest abandoned coal mine lands in communities we serve. Along with the Appalachian Regional Reforestation Initiative and other partners, TACF reforested approximately 670 acres with mixed hardwoods, including American chestnuts, in Maryland, Virginia, Kentucky, West Virginia, and Pennsylvania. Reclaimed surface mines provide an excellent environment for American chestnut trees, which thrive in rocky soil with little competing vegetation.

Improving Energy Efficiency

In 2011, energy consumption – including lighting, heating, and cooling – was our second largest source of greenhouse gas emissions. To address these emissions, we have developed strategies to improve energy efficiencies across our 22-state network. This involves initiatives to equip office buildings and other facilities with more energy-efficient lighting, heating, and cooling systems. We also have incorporated sustainable designs and materials into new construction projects.

In the process, we have saved money on energy bills, improved the work environment for employees, and reduced our environmental footprint in the communities we serve.

Preserving the Environment

Norfolk Southern is committed to mitigating the impacts of our business activities on the environment. We partner with local governments and community groups to be a responsible environmental steward at the railroad facilities we operate. Norfolk, Va., our headquarter city, is a prime example.

Reducing Storm Water and Water Use

Norfolk Southern’s Lamberts Point coal transload facility sits on 425 acres overlooking the Elizabeth River in Norfolk. To help reverse declines in water quality caused by decades of past industrial activities along the riverbank, we have taken an active role in trying to restore and protect the river.

As part of our efforts, we designed a multimillion-dollar upgrade to Lamberts Point’s storm water treatment processes. We estimate the recycling feature will reduce our use of city water by more than 1.5 million gallons a month. With the exception of large storm events, we expect a 95 to 99 percent reduction in storm water discharge into the river.

Creating a Living Shoreline

To create a more hospitable environment for wildlife, we are developing plans at Lamberts Point for a living shoreline project. The effort will build up wetlands near abandoned piers, remove invasive species, filter storm water runoff, and encourage the growth of native vegetation that will support fish, shorebirds, and other animals. 

Economic Performance

Business connections: Norfolk Southern is committed to the delivery of goods in the safest, most cost efficient, and environmentally friendly way possible. We are investing in our rail infrastructure to help the nation remain competitive in a global economy.

Across a range of financial measures, Norfolk Southern in 2011 experienced a best-ever year in economic performance. We achieved new highs for revenues, operating income, net income, and earnings per share.

In addition, we maintained effective cost controls even as we added critical resources such as train and engine crews, handled increased traffic volumes, and managed higher diesel fuel costs. As a result, we posted an operating ratio of 71.2 percent, just shy of our all-time record of 71.1 percent, achieved in 2008.

Our railroad also remained at the forefront of job creation and economic development. Working with customers, states, and local economic development partners, we helped to locate new industries along our railroad representing $9.5 billion in customer investment with the potential to create 6,800 jobs and generate more than 152,000 carloads of rail business.

Public-Private Partnerships Address National Freight Needs

Our railroad is an industry leader in innovative transportation solutions. Norfolk Southern worked with state and federal officials to forge the rail industry’s first multistate public-private partnership in the mid-2000s to expand the nation’s freight rail network. Since then, we have developed additional partnerships. A primary benefit is to create more rail capacity to shift freight from increasingly congested interstate highways to safer, more efficient, and more environmentally friendly trains.

Through these partnerships, federal and state governments contribute a share of the costs of rail corridor projects based on the public benefits generated. These benefits include jobs for local communities, reduced highway congestion, potential for economic development, reduced costs on maintenance and new construction of roads and bridges, and an overall decline in fuel use and greenhouse gas emissions.

Improving our primary rail corridors is part of Norfolk Southern’s overall strategy to help us and the country conserve fuel and reduce greenhouse gases and other air pollutants.

Capital Projects Sustain Business

Norfolk Southern is making strategic capital investments to expand business opportunities and reduce the environmental impact of our operations. In 2011, we invested $2.16 billion in capital projects, an increase of nearly 50 percent over 2010. The rise in capital investment flowed mainly from three primary areas of focus: our locomotive fleet, facilities and terminals, and maintenance of track network.

Social Performance

Community connections: Norfolk Southern recognizes that our continued ability to thrive as a business is connected to the health of our communities, our environment, and our employees. Our corporate success reflects the dedication, talent, and hard work of our people.

NS Volunteers Help Sustain Communities

Throughout our 22-state system, Norfolk Southern employees participate in their communities in numerous ways. Among efforts in 2011, employees collected thousands of pounds of food for local food banks, landscaped parks and nature trails, read to children in schools and homeless shelters, and volunteered in their communities in numerous other ways. Our company encourages employees to give back to their communities, and they contribute time and talent to programs that enrich their neighborhoods and advance the company’s sustainability goals.

A Culture of Safety

Safety is ingrained in the culture of Norfolk Southern. In our SPIRIT values, which outline key principles of employee behavior, the “S” comes first for a reason. The other values of Performance, Integrity, Respect, Innovation, and Teamwork all link in some way to the importance of working safely.

Our safety efforts have evolved to include a grassroots process led by some 145 local safety and service committees in locations across the system. The committees are chaired by operations employees in our mechanical, transportation, and engineering departments. Department managers play a supporting role, attending committee meetings and providing resources as needed to carry out safety initiatives. This “bottom-up” approach has created an environment in which employees are more likely to participate in the safety process because they share much of the responsibility for its success.

Safest Employees in the Industry

For the 23rd consecutive year, Norfolk Southern in 2011 achieved the best employee safety record among North America’s largest railroads. For the year, our company recorded a safety ratio of 0.75 reportable injuries per 200,000 employee-hours of service. That’s the best injury ratio ever achieved by any of the large roads, earning employees an E.H. Harriman Gold Medal Award for safety performance.

Taking Safety to the Next Level

In 2011, following an independent review of our safety program, we began to implement change to improve safety and create a more positive atmosphere in our workplaces. It involves recognizing employees on a daily basis for working safely, using positive reinforcement to reward and reinforce the safe behavior that is essential to railroad operations. The goal is to create an environment where managers and employees are working hand in hand to enhance workplace safety and, in turn, improve the service we provide customers.

Good Jobs for Communities

Norfolk Southern is contributing to the economic vitality of our communities by offering good-paying career opportunities at a FORTUNE 500 company.

In 2011, we hired approximately 4,000 new employees across our network. A majority, more than 3,400, joined our agreement, or unionized, workforce, including conductor trainees, carmen, track laborers, machinists, and electricians. Conductor trainees made up the largest group of hires, at more than 1,900.

Helping Employees Stay Healthy

Norfolk Southern introduced WellNS four years ago to help employees make healthy lifestyle choices. The voluntary program is based on four aspects of good health: get regular medical screenings, quit tobacco use, get active, and eat nutritious food. In offices and field facilities across our network, those tenets are steadily becoming part of NS’ culture.

The efforts have attracted notice. Inside Business, a regional publication based in Norfolk, Va., site of our corporate headquarters, recognized Norfolk Southern in its Health Care Heroes 2012 edition for achievements in corporate wellness. The American Heart Association designated the railroad as a Platinum Fit-Friendly Company for encouraging a culture of physical activity and health in the workplace. The AHA also presented us with its Worksite Innovation Award for creatively implementing programs that promote physical activity. 

Awards and Recognition

Environmental

  • Earned Corporate Excellence award from the American Carbon Registry for our public commitment to reduce greenhouse gas emissions
  • Achieved the top ranking among railroads in the S&P 500 Clean Capitalism Ranking published by Corporate Knights, a media, research, and financial products company that focuses on clean capitalism
  • Placed No. 398 among 500 largest publicly traded U.S. companies in Newsweek magazine’s 2011 “Green Score” rankings, and No. 454 among the 500 largest global companies
  • Earned a certificate of environmental achievement by Safety-Kleen for oil recycling at our Juniata Locomotive Shop in Altoona, Pa.
  • Named to Inbound Logistics magazine’s 2011 list of top 75 “Green Supply Chain Partners”
  • Advanced to Model Level, the highest designation for businesses, in the Elizabeth River Project’s “River Stars” program in recognition of pollution prevention, innovative habitat management, and mentoring in environmental stewardship to protect the Elizabeth River in Norfolk, Va. 

Economic

  • Earned a Customer Service Award from UPS for transporting more than 18,000 loads without a single failure during UPS’ peak delivery season
  • Earned the Association of American Railroads’ Best Origin Automotive Facility in North America award for rail service provided by our Automotive Distribution Group at the Honda automotive facility in Lincoln, Ala.
  • Awarded a technical infrastructure commendation in the 2011 Brunel Awards International Railway Design Competition for our Heartland Corridor project

Social and Community

  • Awarded, for the 23rd consecutive year, the E.H. Harriman Gold Medal for best employee safety record among North America’s largest railroads in 2011
  • Named to Black Enterprise magazine’s 2011 list of 40 Best Companies for Diversity
  • Named to CivilianJob.com’s 2012 list of Most Valuable Employers for Military®
  • Ranked No. 19 on G.I. Jobs magazine’s list of America’s Top 100 Military Friendly Employers for 2011 
  • Received, for the 12th time and 10th consecutive year, a TRANSCAER® (Transportation Community Awareness and Emergency Response) National Achievement Award for our efforts in 2011 to prepare communities to respond to a possible transportation incident involving hazardous materials
  • TRANSCAER recognized nine Norfolk Southern employees for exceptional support of the national community outreach program to help communities prepare for and respond to possible transportation incidents involving hazardous materials
  • Earned a Gold Trailblazer Award from the United Way of South Hampton Roads for our 2011 fundraising efforts
  • Ranked No. 4 within the transportation and automotive industry on The Dave Thomas Foundation for Adoption’s 2011 list of Best Adoption-Friendly Workplaces

Our Business Profile

A Premier Rail Freight Transportation Service Provider

Norfolk Southern Corporation, headquartered in Norfolk, Va., is one of the nation‘s premier transportation companies. Its Norfolk Southern Railway subsidiary operates approximately 20,000 route miles in 22 states and the District of Columbia, serves every major container port in the eastern United States, and provides efficient connections to other rail carriers. Norfolk Southern operates the most extensive intermodal network in the East and is a major transporter of coal and industrial products.

Our Governance Structure and Management Systems

A vision for safety, service, success: Norfolk Southern‘s corporate policies and procedures guide our economic, environmental, and social performance toward a vision: To be the safest, most customer-focused, and successful transportation company in the world. 

A Corporate SPIRIT of Core Values 

At Norfolk Southern, our good name stands at the heart of who we are and have been for 182 years. Our people, customers, communities, and stockholders are important to us, and strong relationships with each of these groups are vital to our success. A set of core values, called SPIRIT values, define behaviors that are key to fulfilling our corporate creed and vision statement. Not intended to be limiting, the SPIRIT values – Safety, Performance, Integrity, Respect, Innovation, and Teamwork – provide a framework for Norfolk Southern‘s expectations for employee conduct. 

A Code of Ethics Supports Values 

The Thoroughbred Code of Ethics builds upon the SPIRIT values by providing us with a mutual understanding of how we are expected to conduct ourselves. Norfolk Southern‘s directors, officers, and employees are expected to conduct themselves in accordance with the SPIRIT values and code of ethics. By doing so, we maintain our good name and strong relationships with customers, stockholders, fellow employees, and the communities we serve. 

The Thoroughbred Code

Formal Policies and Procedures for Governance 

Our corporate policies and procedures provide detailed guidance for implementation of Norfolk Southern‘s SPIRIT values and The Thoroughbred Code of Ethics. Policies and procedures address topics related to economic, environmental, and social performance.

 

GRI Index

Norfolk Southern’s 2012 report conforms to established sustainability reporting guidelines of the Global Reporting Initiative. We declare that this report complies with the GRI’s 3.1 Level C reporting standards. Accordingly, the report discloses the railroad’s significant environmental, economic, and social impacts to provide stakeholders a way to assess our commitment to corporate sustainability. Our stakeholders include shareholders, customers, employees, government and industry partners, and the communities we serve. The GRI Index begins on page 91 of the report.