It also shines a light on the influence of sustainability on corporate strategy. It is well established that rail transport is the most efficient form of surface transportation. (I looked at passenger rail transport in a previous blog post.) Beyond that, BNSF has for years been pursuing a green strategy.
The company has for years been working to improve the energy efficiency of its operations and has achieved a 7.7% increase in fuel efficiency since 1999. It has deployed a variety of clean and energy efficient technologies, some of them experimental, in its trains and in its cargo facilities. It claims, for example, to be the first rail carrier in North America to use zero-emissions electronic wide-span cranes at some of its intermodal facilities. In 2007, BNSF became the first railroad to pilot the use of low-emissions, natural-gas hostler trucks to move containers at their Los Angeles Hobart Intermodal facility. BNSF is the first railroad in the world to develop an experimental hydrogen fuel cell switch locomotive.
The company has also been assiduous about engaging with business groups and non-profits on issues of climate change and sustainability. It voluntarily reports its greenhouse case emissions to the Carbon Disclosure Project and the Business Round table. The Carbon Disclosure Project ranked the company second in the Global 500 industrials category of its Carbon Disclosure Leadership Index, with a score of 85 out of a possible 100.
And Goldman Sachs singled the company out earlier this year in a report I wrote about that looked at the impact of climate changes on investment strategy and company performance. According to the Goldman report, BNSF ranks in the 90% percentile of the road and rail sector in return on capital, and gets the top climate change score. As Goldman Sachs has pointed out, while climate change may reduce demand for freight-intensive products it will increase the value of energy- and carbon-efficient transport.
Clearly many factors were behind Buffet’s decision to buy the railroad (including, he said, the fact that his father never got him a train set as a kid). But the company’s leadership position in climate change strategy and sustainability did not hurt.
What do you think?