Oliver Wyman sees big opportunities—and possibly requirements—coming down the pipeline that will lead rail companies to focus more attention on sustainability and resource productivity. For starters, the environment in which rail operates is changing rapidly:
• End customers increasingly value sustainable products; for example, recently more than 50% voted at Coop’s homepage ( a large Switzerland- based food and grocery retailer) that they would be willing to pay more for completely sustainable food – including CO2-neutral supply chains
• Companies that focus on “local food” have enormous growth rates in the US. For example, Bright Farms cuts out the need for long-haul transportation by building large-scale greenhouses on top of local malls.
• NGOs like Carbon War Room have declared war on “dirty” transportation companies and already publish web pages such as http://shippingefficiency.org/, to enable increased transparency into maritime vessel energy efficiency. Global companies can use these pages to ensure their products are shipped sustainably. Land-based transport will be next.
• Highway and city congestion is increasing, fuel costs are rising, and governments and local cities are imposing increasingly tight regulations on emissions and CO2
Although some railroads already have sustainability and clean energy programs in place, particularly with an emphasis on new locomotive technologies and fuel management, they may be missing out on opportunities to more aggressively market the role they can play in a sustainable future. For example:
• Rail needs to market its low CO2-footprint per ton-km far more aggressively.
• Railroads may want to consider developing and branding “green” products or services, as is already common in other transportation sectors (like parcel).
• Rail companies should think about marketing and building sustainability-focused brands with end consumers, whose opinions can create pull with traditional freight B2B customers
• Consolidated deliveries into cities and last-mile distribution via rail will experience a renaissance and allow for new revenue opportunities.
To unlock these growth opportunities, railroads will need to:
• Ensure a “green” energy supply wherever possible
• Review guidelines for suppliers when purchasing equipment (design and choice of material is one of the key drivers for a closed circle economy)
• Think about even more sustainable operations (e.g., maintenance, waste disposal)
• Develop easier and cheaper intermodal transfers options (e.g., roll-on/roll-off)
The potential impacts could be substantial. For example, parcel companies, by creating “green” products, realized a 20-30% increase in margins. The CO2 footprint of vigilant companies can easily be reduced by 30+ percent. Urban environments can particularly benefit from increased usage of rail and ex-urban traffic consolidation: some cities have seen traffic speeds increase by 30 percent and emissions reduced by 20-35 percent by reducing through truck traffic.
Oliver Wyman has developed a new Sustainability & Resource Productivity Initiative which will support transportation, logistics, energy, manufacturing, and other industrial sectors in developing sustainability solutions worldwide. For more information, please visit www.oliverwyman/sustainability, or contact me at michael.lierow@oliverwyman.com.