ESG Q&A with CN
What is the visibility in achieving your emissions reduction goal(s) and can you provide us with concrete examples of how you plan to get there?
CN publicly reports the progress towards the company’s emission reduction goals on an annual basis. The information is provided in CN’s Delivering Responsibly data supplement, CDP response, TCFD Report as well as the Management Information Circular, where the company provides annual updates on the Climate Action Plan and shareholders have the opportunity to vote on the Plan..
Our science based target to reduce our GHG emission intensity by 43% per gross ton miles by 2030 based on 2019 levels, informs our low carbon transition plan and business strategy.
Specifically, we are focused on five key strategic areas to meet our target:
1. Investing in and Upgrading Our fleets: Cleaner, more fuel-efficient equipment enables us to decouple our business growth from GHG emissions. We continue to purchase new more fuel efficient locomotives, including 260 from 2018 to 2020.
2. Increasing Fuel Efficient Technologies: We equip our locomotives with innovative technologies to maximize locomotive operating effectiveness and efficiency, improving train handling, braking performance, and overall fuel efficiency, and therefore, carbon efficiency.
3. Leveraging the Use of Big Data: Investments in information technology enable deeper analysis to continue to identify, through big data analytics, additional opportunities for fuel conservation that will present opportunities for us to further reduce our emissions. For example, through our locomotive telemetry systems, we collect large amounts of data to improve performance and fuel conservation. In addition, HPTA uses the data from the systems to optimize a locomotive’s horsepower to tonnage ratio, further minimizing fuel consumption.
4. Enhancing Operating Practices: CN pioneered Precision Scheduled Railroading (“PSR”), an operating model to ship more freight in a tight, reliable and efficient operation. This highly disciplined approach to asset utilization is being enhanced by the deployment of incremental operating technology. Digital Scheduled Railroading (“DSR”) layers advanced technology and automation onto every aspect of our operations. Our Fuel Management Excellence (“FMX”) program provides information to track performance in real time and enables focused on the job training on practices that promote fuel conservation. We educate our train crews and rail traffic controllers on best practices from locomotive shutdowns in our yards to streamlined railcar handling, train pacing, coasting and braking strategies. Our locomotive engineers receive real time information on train characteristics, performance and terrain, through an Energy Management System (“EMS”), which computes the most efficient train settings and regulates speed. Capitalizing on our locomotive systems and advanced data analytics, and DSR initiatives, will help us identify additional opportunities for fuel conservation operating practices in the coming years.
5. Expanding the Use of Cleaner Fuels: Driven by regulatory requirements, the growth of the renewable fuel market presents an immediate opportunity to further reduce our emissions by using sustainable renewable fuel blends. In November 2021, CN announced that the company will be partnering with Progress Rail, a Caterpillar Company, and Renewable Energy Group (REG) to test high-level renewable fuel blends including both biodiesel and renewable diesel in support of the companies’ sustainability goals (CN news release).
Since 1993, we have enhanced our locomotive fuel efficiency, reducing our emission intensity by 43% and avoiding over 48 million tonnes of GHGs. In 2020, the Company achieve an all-time record fuel efficiency performance of approximately 4% improvement year-over-year. CN leads the North American rail industry, consuming 15% less fuel per gross ton mile overall than the industry average. In 2020, CN achieved nearly 90% of our short-term 2022 MOU target and over 7% of the medium-term science-based 2030 target.
(Source: 2021 Management Information Circular, p. 42; CN Dec 7 2021 CN Recognized with Prestigious ‘A’ Score for Climate Change; 2020 Annual report, p. 11, 2020 TCFD, p. 17)
You have a net zero by 2050 goal, but what are your interim milestones? What are the KPI’s we can track to monitor your progress?
In November 2021, CN announced its commitment to setting a target in line with a 1.5°C scenario and net-zero carbon emissions by 2050 in line with the Science Based Target Initiative’s (SBTi) Net-Zero Standard, submitting it for SBTi validation and publishing it within a maximum of 24 months. By doing so, CN was (I believe UP also announced) the first North American railroad to formally commit to having a net-zero target, joining the Business Ambition for 1.5°C and the United Nations’ Race To Zero campaign.
Our performance and progress are measured against short-term annual targets, 5 year interim targets as well as our 2030 science-based target.
CN has been publicly reporting its GHG emissions, climate change strategy, and year-over-year progress annually through its CDP reports since 2009.
In addition, CN has committed to a 6% intensity-based reduction in GHG emissions, measured against a 2017 baseline and over five years ending in 2022 through the renewal of a long-standing Memorandum of Understanding (MOU) with Transport Canada.
In April 2021, the SBTi approved CN’s commitment to reduce scope 1 and 2 GHG emissions by 43% per million gross ton miles by 2030 from a 2019 base year, and to reduce scope 3 GHG emissions from fuel- and energy-related activities by 40% per million gross ton miles by 2030 from a 2019 base year. CN’s Climate Action Plan and 2030 target are focused on five key initiatives: investing in locomotive fleet renewals, increasing the use of fuel-efficient technologies, leveraging big data analytics, enhancing our operating practices, and expanding the use of cleaner fuels.
CN’s annual Delivering Responsibly data supplement is aligned with rigorous international standards, such as the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), and the Greenhouse Gas Protocol. The annual Delivering Responsibly Data Supplement details relevant KPIs that can be tracked, including energy consumption, absolute scope 1, 2, and 3 emissions, the emissions intensities of our fleets, and progress against our medium-term science-based emissions target.
In 2021, the Company’s actions to reduce emissions, mitigate climate risks and to develop the low-carbon economy resulted in CN being one of only three Canadian companies listed on CDP’s prestigious Climate Change A List.
(Source: CN Signs the “Business Ambition for 1.5°C” and Joins the “Race To Zero” Campaign)
Is your company’s non-financial reporting treated with the same rigour (standards, auditing etc.) as financial reporting?
We are dedicated to continuously improving our sustainability reporting and believe that independent assurance leads to quality and process improvements.
Our environmental data related to GHG emissions from Scope 1 (locomotive emissions), Scope 2 (electricity consumption) and Scope 3 (locomotive fuel production, purchased goods and services, capital goods, and upstream transportation and distribution) were verified by PricewaterhouseCoopers to a limited level of assurance in accordance with the International Standards on Assurance Engagements 3410, Assurance Engagements on Greenhouse Gas Statements (“ISAE 3410”), issued by the International Auditing and Assurance Standards Board with guidance for the validation and verification of greenhouse gas assertions. The statements can be found at www.cn.ca/delivering-responsibly.
(Source: 2020 Data supplement, p.1)
Do you think the reporting and management of scope 3 emissions (upstream and downstream) is becoming an inevitable reality for global listed infrastructure companies? If so, what is your company’s plan to manage them?
At CN, we recognize that a large portion of our greenhouse gas (GHG) emissions and cost reduction opportunities lie outside our own operations and therefore we acknowledge the importance of assessing and reporting on scope 3 emissions tied to our operations.
For the past ten years, CN has been enhancing the company’s understanding of our scope 3 emissions, disclosing material categories through our Delivering Responsibly Data Supplement as well as our annual CDP responses. CN is continually seeking to enhance our emissions calculation methodology, adhering to the GHG Protocol Scope 3 Guidance, pursuing emerging best practices, and engaging our suppliers and customers to enhance the quality and completeness of our data. To ensure our data is credible, we engage an independent assurance provider to verify our annual GHG emissions report, including the four most material scope 3 emissions categories, in accordance with the International Standard on International Standard on Assurance Engagements 3410, Assurance Engagements on Greenhouse Gas Statements ('ISAE 3410').
In 2021, CN set an approved science-based scope 3 emissions intensity reduction target, committing to reduce scope 3 GHG emissions from fuel- and energy-related activities by 40% per million gross ton miles by 2030 from a 2019 base year, in alignment with the Science Based Target Initiative’s (SBTi) framework for the transportation sector.
(Source: Sustainability team)