2017 Building America Report a Report to Communities on Our Social, Environmental and Economic Sustainability Progress
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UNION PACIFIC 2017 Building America Report A report to communities on our social, environmental and economic sustainability progress. About the Report Union Pacific’s mission of service defines us and drives our commitment to safely transport products across the country, provide good jobs, operate ethically and invest in our communities. This report details our progress in key areas supporting social, economic and environmental sustainability pillars: operating safely, strengthening communities, engaging employees and preserving the environment. We also summarize our 2017 financial performance. We used the Global Reporting Initiative’s global sustainability reporting standards as a guide to report our most material social responsibility issues. This publication focuses on initiatives and accomplishments from the 2017 calendar year and includes 2017 data, unless otherwise noted Table of Contents Letter to Stakeholders . 3 Operating Safely . 15 Preserving the Environment . .37 Rail Safety Maintenance . 15 Highlights, Challenges Our Company . 4 Positive Train Control . 18 and Opportunities . 37 Financial Performance . 5 Handling Hazardous Materials Safely . 20 Our Approach to What We Carry . 5 Best Employee Safety Performance Environmental Management . 37 Risk Oversight Approach. 6 for Third Year. 21 Environmental Risks . 38 Sustainability Management Approach . 6 Public Safety. 23 Fuel Efficiency. 39 Key Performance Indicators. 7 Incorporating Technology . 40 Stakeholder Engagement . 8 Strengthening Our Communities . 26 Energy Conservation . 41 Key Awards and Recognition . 9 Meeting Local Needs. 26 Biodiversity and Land Preservation . 43 Making a Difference Compliance. 43 Economic Impact . 10 in Our Communities. 28 Investing in Infrastructure . 10 Looking Ahead . .44 Creating Local Economic Opportunity. .11 Engaging Employees . 30 Local Economic Opportunities . 12 Embracing Employee Needs . 30 Enabling Innovation and Sustainability . 13 Developing Employees . 31 Generating Opportunity Embedding an Ethical Approach . .32 Through Our Supply Chain . 14 Embracing a Diverse and Inclusive Workplace. 33 Keeping Employees Healthy, Happy and Well . 35 On the cover: From top to bottom, a safety briefing in North Little Rock, Arkansas, and Laura Finch in Council Bluffs, Iowa. 2017 BUILDING AMERICA REPORT 2 Letter to Stakeholders Trust was a major theme in 2017 – trust in news, government and business. At Union Pacific, our reputation for having a passion for performance, high ethical values and dedication to teamwork is a source of pride. This report is part of the ongoing conversation with you, our stakeholders, who trust us to operate responsibly and transparently as we fulfill our promise to build America. It details the many ways we make a difference in the communities where we live and work – delivering goods Americans use every day; helping our customers be more efficient and sustainable; creating family-supporting jobs; building vibrant, safe communities; and attaining our overall goal to operate in an incident-free environment. Each section of this Building America Report describes key initiatives and reflects on 2017’s performance. We identified these materiality pillars by listening to our stakeholders and understanding what’s important, and why. • Economic Impact illustrates how Union Pacific drives economic growth in the 23 states where we operate through employment, capital investments and in-state sourcing efforts. • Operating Safely details our relentless efforts to maintain a safe railroad for our employees and the communities we traverse. It is equally important to educate our neighbors about safety near railroad tracks. • Strengthening Communities demonstrates our commitment to act for a greater good, giving back our time, money and expertise. Through these efforts, we can better connect with each other and make a positive difference for future generations. • Engaging Employees outlines our promise to create fulfilling careers with advancement opportunities, as well as promote healthy lifestyles. • Preserving the Environment highlights efforts to increase fuel efficiency, reduce carbon emissions, and build partnerships with communities and government agencies protecting Chairman Lance Fritz visits with Gang 9075 ecosystems across our network. System Laborer Chuck Fields at a leadership Our success is deeply rooted in innovation and a mindset of never being satisfied with current field visit in Clinton, Iowa. results. We challenge ourselves to look for new ways of doing things, in our daily tasks and on a global scale. For example, I’m proud of our team for creating SensorX – a smart sensor that measures vibration and rail movement, collecting 40,000 measurements a second. Originally designed to feed the precision needs of Machine Vision – an erector-set-like portal outfitted with high-speed cameras and lasers to measure 22 different components of passing rail cars for potential defects – the technology quickly turned into a stand-alone product. We continue evolving it, learning from results. In 2017, our Premium Operations team rolled out UP GO, a new mobile app similar to pre-check for airlines. It allows dray drivers frequently visiting our intermodal ramp in Lathrop, California, to verify information, reducing delays. We have not yet reached the app’s full potential, and I’m excited to see how we can use this tool to enhance safety and security, lower congestion and shorten lines – another step toward reducing emissions. Union Pacific’s sustainability efforts were recognized globally by CDP, receiving an A- and leadership status on the agency’s 2017 climate change survey. We are proud of this accomplishment and committed to finding new ways to further reduce climate change risk. Our dedication has never been stronger to driving a healthy environment, positively impacting society and supporting a growing global economy. Lance Fritz Chairman, President and CEO 2017 BUILDING AMERICA REPORT Table of Contents 3 Our Company Union Pacific Railroad is the principal operating company of Union Pacific Corporation (NYSE: UNP). We are one of America’s most recognized companies, with a heritage of building the country and a vision to keep doing so. Our rail network connects 23 states in the western two-thirds of the country, providing a critical link in the global supply chain. Over the last 10 years, from 2008 to 2017, Union Pacific invested $34 billion in our network and operations, supporting America’s transportation infrastructure and enabling economic growth. Vision Values Building America Performance Our vision symbolizes the Union Pacific experience for all the people Our passion, concentration and determination will drive our safety, whose lives we touch. It connects the importance of UP’s rail customer satisfaction and quality results. transportation to America’s economy, honors the generations that preceded us and is the promise for the generations that will follow. High Ethics Our reputation will always be a source of pride for our employees and Mission a bond with our customers, shareholders and communities. Teamwork Dedicated to Serve We are all part of the same team, and working together to reach our Union Pacific works for the good of our customers, shareholders, common goals is one of our strengths. Communication and respect communities and one another. Our commitment defines us and drives are the foundation of great teamwork. the economic strength of our company and our country. 2017 BUILDING AMERICA REPORT Our Company Table of Contents 4 Financial Performance Freight railroads are the backbone of the U.S. economy, supporting the livelihoods of employees in nearly every sector. Union Pacific’s diversified portfolio generates its operations’ profits and shareholder returns, further stimulating the economy. In 2017, we reported net income of $10.7 billion or $13.36 per diluted share, compared to $4.2 billion or $5.07 per diluted share in 2016. After adjusting for the impact of corporate tax reform which was passed prior to year-end, net income was $4.6 billion or $5.79 per diluted share*, 10 and 14 percent increases, respectively, compared to 2016. Our operating revenue was $21.2 billion compared to $19.9 billion in 2016, a 7 percent increase, and our adjusted operating income was $7.8 billion* compared to $7.3 billion, an 8 percent increase. Overall carloadings were up 2 percent in 2017 led by Industrial Products and Coal business unit increases of 12 percent and 6 percent, respectively, driven primarily by a robust increase in frac sand shipments. Automotive shipments were down 3 percent, resulting from lower domestic sales and reduced vehicle production, while Chemical and Agricultural Product shipments were both down 2 percent, as we experienced declines in our crude oil volumes and grain carloadings. Intermodal volumes were flat compared to 2016. * Non-GAAP results, adjusted to exclude Corporate Tax Reform impact. See Union Pacific’s website, under Investors, and select Annual Report 10-Ks to read the Feb. 9 filing for a GAAP reconciliation. What We Carry Union Pacific moves the goods American families and businesses use every day, including the food we eat, the cars we drive, the chemicals to clean our water and the NEARLY steel to build our communities. We have roughly 10,000 customers and work to deliver of freight hauled their products in a safe, reliable, fuel-efficient and environmentally responsible manner. Our railroad directly serves many of the fastest growing cities in the United States and by