(... continued from Part 1)
In Part 1 of this two-part series, we discussed the current state of the rail-served industrial market. In the face of economic uncertainty, the relative strength of the industrial market was paced by fewer – but larger – projects requiring more creative logistics solutions. Rail’s safety and efficiency have played major roles within industrial transportation solutions, yet another benefit of rail is receiving increased consideration: positive ESG impact. Environmental, Social, and Governance (ESG) considerations are actively shaping the future of industrial markets. ESG conversations shape market activity and resource allocation. These discussions are catalysts, lightning rods, and opportunities as companies across the industry evaluate their operational efficiency, sustainability, and their companies’ impact on their communities. ESG considerations shape emerging industries, project siting and construction, and future supply chain needs.
Emerging industries tied to electric vehicles (EVs) and renewable fuels are dominating industrial development. By 2030, it is estimated by Reuters that automakers are planning to spend close to $1.2 trillion to produce EVs, including the necessary battery and raw material supply chains. These innovators are keenly focused on the environmental benefits of their products, and they covet complementary environmental benefits throughout their supply chains. Rail delivers ESG solutions on two key fronts: fuel efficiency and reduced emissions by removing trucks from public roads. Rail continues to provide vastly superior fuel efficiency than trucks. Coupled with a 4:1 cargo ratio of trucks to rail cars, site selection consultants are acutely focused on rail-served properties. This increased demand underscores the need for prudent site allocation to protect the limited rail-adjacent sites and warehouses available for development.
ESG’s influence on project siting and construction is leading to increased community engagement, greater operational buffer zones, and conscientious utility decisions. Industries are recognizing the value of being better neighbors and are seeking larger parcels that create a “buffer” between company operations and its existing community surroundings– schools, homes, and shopping. For rail providers, this puts increasing importance on the proper allocation of the larger parcels along their rail lines. Open and frequent dialogue with the local economic development organizations and communities is essential. In addition to new community-friendly sites, more companies are considering green energy sources like wind and solar. To accommodate alternative energy requests, railroads should maintain good working relationships with the local utility companies and understand what’s possible. Rail providers have always been knowledgeable partners about zoning and utility options for development along their lines and this information has never been more timely for prospective customers.
ESG is shaping safe, sustainable, and efficient supply chains that grow with communities and rail is poised to play a key role in these comprehensive logistics solutions. As customers and site selectors continue to explore community-friendly operations, rail operators have a unique opportunity to showcase the ESG benefits of rail. There is a tremendous opportunity for rail to be a leader in this space. By proactively engaging industries that are driving market demand, recognizing the role that ESG is playing throughout the project siting and construction process, and effectively telling rail’s superior sustainability and safety story, rail operators will play a central role in shaping supply chain solutions for 2023 and beyond.