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CSR Case Study:

Canadian Railway

Re-engaging with communities

FINAL DRAFT

Prepared for: Interdepartmental Working Group on Corporate Social Responsibility (CSR)

Corporate Social Responsibility: Lessons Learned Final CPR Case Study

1 Corporate Overview

Canadian Pacific Railway (CPR) is ’s second largest Class 1 railway1, and ’s sixth largest. Headquartered in , , the railway provides freight transportation services to businesses and consumers over a 22 000-kilometre network in Canada and the USA. Its mainline network serves major Canadian ports and cities from to , and key centres in the US Midwest and Northeast. CPR serves virtually every major , from the resource-based industries of the West, to manufacturing and consumer markets in central Canada and the northern USA. Main commodities include grain, , lumber and potash, as well as manufactured products such as cars, household appliances, food and furniture. CPR’s main competitors are other nearby railways, motor carriers and to a lesser extent marine carriers.

Established in 1881 to extend the country’s railway system from the east to the west coast, is Canada’s oldest continuously operating railway. The company soon developed into the country’s first conglomerate, owning its own chain of hotels, shipping fleets that included the world class Empress passenger liners, steamships and ferries on both coasts, the nation’s largest trucking company and an international airline. As well, the company owned total or controlling interest in large enterprises involved in real estate, and smelting, forest products and coal. During most of this period, CP and its main competitor Canadian National (CN) provided both freight and passenger services to most points in Canada. In 1977, both companies left the passenger rail service, when the federal government set up to amalgamate the companies’ intercity and remote passenger services.

In October 2001, CPR became a publicly traded company as part of a major restructuring of its parent company Canadian Pacific in which its five major businesses in rail, shipping, oil, mining and hotels were spun off.

CPR’s revenues in 2001 were $3.7 billion and it employed 15 840 people in North America.

2 Business Context

Railways are the backbone of Canada’s transportation system, providing the most economical method of moving containers and bulk commodities over great distances, and playing a crucial role in the country’s export sector. They also played a crucial role in the country’s expansion from east to west, and were a major factor in joining in 1871. For the first half

1 According to ’s 1999 annual report, entitled 1999, Class 1 railways are generally defined to include CN and CP (in the case of freight railways) and VIA Rail (in the case of passenger railways). They have considerably higher revenues than the next class of carriers, Class 2 railways which are regional railways (usually provincial, such as B.C. Rail) or short line railways (which usually consist of a former of a Class 1 carrier). As the name would suggest, short line railways operate over limited segments of .

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Corporate Social Responsibility: Lessons Learned Final CPR Case Study of the 20th century, railway remained the main means of communication between the east and west and the primary mover of people and goods across the country. Rail began to see its share of the total transportation market decline following II, with the advent of good transcontinental and inter-provincial road infrastructures and inter-city trucking. Trucks now dominate many areas where rail once prevailed, particularly intercity movements of non-bulk traffic over distances less than 1300 kilometres2. However, rail has maintained its dominance as a long-distance carrier of forest products and bulk commodities such as iron ore, coal, grain and potash.

As an extension of the country’s manufacturing and natural resources sectors, railways contribute approximately $10 billion annually to the Canadian economy. In 2000, Canadian railways transported some 300 million tonnes, equivalent to approximately 60 percent of surface goods by volume and provided direct employment to 41 000 people and indirectly to another 50 000. Many rail employees work for locally operated and managed regional short-line railways, providing significant employment in rural centres throughout the country.

With the exception of passenger rail, Canadian railways are for-profit, privately held companies, which along with US freight railways, which distinguishes them from the rest of the world where railways are, for the most part publicly owned, entities. CN and CPR dominate the Canadian rail freight business, handling 71 percent of the country’s freight traffic in 2000. In 1996, changes in the regulatory environment allowed CN and CPR to devolve major portions of their systems to short-line and regional operators in order to concentrate on their main east-west and north-south lines to the USA. Today, some 75 companies are involved in the rail freight businesses, two-thirds of which were established as separate entities in the last 15 years.

New forms of intermodal transport services are emerging at shipper locations without rail sidings and for shipments that are small or time sensitive, which are allowing the railways to recapture traffic previously lost to . These new forms include terminals where truck trailers are transported by rail, effectively combining the efficiency of with the flexibility of road transport. The railways have arranged with major shippers to locate warehouses and distribution centres within or adjacent to intermodal terminals thus reducing the need for highway haulage. In recent years, CPR has made such arrangements with Sears, and Consolidated Fastfrate and signed two high-profile (one with The Bay and one with DaimlerChrysler) to transfer short- to medium-distance highway traffic to its Expressway intermodal service. Both CN and CPR have seen their share of intermodal traffic increase in recent years to the point where it is now the industry’s largest line of business3.

2 Hackston, David and Charles Schwier. March 2002. Railway Industry Profile. Research and Traffic Group, Industry Canada.

3 Bill Rowat. 2002. Rail’s Intermodal Services: An Innovative Business and Public Policy Solution. Presentation at Canada’s Railways: Building on the Blue Print Canadian Transportation Agency Meeting, March 7, 2002, Hull, . (http://www.railcan.ca/en/pre_pub/Presentations/default.htm)

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Corporate Social Responsibility: Lessons Learned Final CPR Case Study

Key environmental issues for the transportation industry in general relate to air pollution, accidents, climate change, noise and vibration. Compared to other modes of transportation, however, by rail has significant environmental advantages, particularly in terms of greenhouse gas (GHG) emissions. Railway also provides an alternative to the pervasive and rapidly increasing problems of pollution, congestion, land use and massive infrastructure costs associated with road transport.

As a means of transporting goods and people, rail stands to benefit as Canada implements is obligations under the Kyoto accord, which commits the country to reducing its greenhouse gas (GHG) emissions to 6 percent below 1990 levels. It is estimated that transportation activities account for 27 percent of Canada’s GHG emissions and that, in a business-as-usual scenario, will increase 50 percent by 2020. Although rail currently carries approximately 60 percent of surface goods by volume in Canada, its contribution to total GHG emissions is low at 4 percent. In its Options Paper, the Transportation Climate Change Task Force notes that the GHG emissions associated with rail is less than 20 grams per tonne-kilometre, while that for trucking was more than 100 grams.

Good financial performance of the industry over the last decade has allowed the Canadian railway industry to invest in new , new lightweight cars with greater cubic and weight capacity, information systems, intermodal terminals, track and signal improvements to improve efficiencies. It is possible that with further innovation and improvement, rail could reduce its emission below 1990 levels by 2010. These new investments are positioning the industry well to accommodate traffic growth and to become an important player in Canada’s strategy to address climate change4.

Emission of smog-causing nitrogen oxides (NOX) are also a concern. Canadian railways have signed a memorandum of understanding with Environment Canada that provides for a maximum NOX emission of 115 kilotonnes per year. If railway traffic grows due to diversion from other more emission-intensive modes, the permissible emission limits might be increased. The latest estimates of industry fuel consumption and emissions (October 2000) indicate that the railways are meeting their commitments.

Other externalities associated with railways consist of noise and air pollution from gaseous and particulate matter. The external costs of noise include reduced value of land and property which has become a particularly pressing issue for the industry as poor communications with municipal planning authorities have resulted in residential and commercial properties being developed in close proximity to existing rail lines.

Safety has always been a top priority for the industry. Although rail transportation compares well to road transportation in terms of accidents per billion passenger kilometres travelled5, the potential for

4 Bill Rowat. 2002. Rail’s Intermodal Services: An Innovative Business and Public Policy Solution. Presentation at Canada’s Railways: Building on the Blue Print Canadian Transportation Agency Meeting, March 7, 2002, Hull, Quebec

5 International Union of Railways. 2002. Industry as a Partner for Sustainable Development: Railways. UNEP: Industry Sector Report to the World Summit on Sustainable Development, Johannesburg, South Africa.

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Corporate Social Responsibility: Lessons Learned Final CPR Case Study much bigger accidents involving the transportation of dangerous goods is an ongoing concern for the industry. Rail companies must spend significant resources—typically, 20 percent of net income—to keep their lines clear of plant growth, which if left unattended, can lead to accidents and even fires. The herbicides that the industry uses, while approved by the government, can run into opposition from municipalities that have banned the use of such substances, even though municipalities have no jurisdiction over railways. Other sources of accidents are crossing (involving motor vehicles where roads cross rail tracks) and trespassing.

3 Working With Communities: Canadian Pacific Railway’s Relationship with the Federation of Canadian Municipalities

Canadian Pacific Railway left the passenger business 24 years ago in 1977 when the federal government established Via Rail to take over most of CN and CPR’s passenger operations. During the intervening years, both companies concentrated on their main business of providing freight transportation. As an industry essential to the nation’s economy, with right of way under federal regulations, the rail companies did not need to concern themselves with much more than efficiency and what the competition was charging. With no pressing need to establish its legitimacy with the public or understand the broader business environment in which it operated, CPR, along with the freight rail industry in general, lost touch with the communities and municipalities through which its tracks ran.

However, as towns and cities grew up around rail lines, and neighbourhoods, schools, businesses and hospitals were built next to the railways, CPR began to come under increasingly vocal opposition to its operations over noise and commotion, railway/road crossings, and the aesthetic appearance of its facilities. In the past, the process for resolution of such issues was discretionary, often proceeding to third-party mediation, regulatory agencies or the courts; a costly exercise for all involved. Although CPR has the power of pre-emption under federal regulation and contributes significantly to hundreds of Canadian municipalities through taxes and jobs, the company realized that it needed to develop a collaborative approach with communities that focused on early resolution of disputes before they escalate beyond the local level.

The need to do so was brought home by a derailment of CPR cars in Red Deer, Alberta, in February 2001, which released anhydrous ammonia into surrounding neighbourhoods and led to an evacuation of 5000 people, about of a third of the city. The company mobilized quickly and began working closely with city officials to respond to the emergency. When it was all over, and people were back in their homes, CPR and the City of Red Deer held a news conference. One of the reporters asked when the rail company would be moving its tracks away from residential neighbourhoods. The mayor of Red Deer stepped forward to defend the company saying that the city bore some responsibility, since it had approved residential zoning next to the tracks and had not required developers to put in the necessary precautions (triple pane gas, air vents out the other side away from the tracks, etc.) that would have helped mitigate the effects of the derailment. CPR felt the response in Red Deer would

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Corporate Social Responsibility: Lessons Learned Final CPR Case Study have been much more negative, had they not developed good relations with city hall, businesses and colleges in the community of Red Deer. The experience made it clear that constructive dialogue and building relationships were key to resolving issues effectively. It also brought to light the absence of any land use planning guidelines related to railways and communities.

A problem for the company in moving ahead with addressing proximity issues and re-engaging with communities related to sheer numbers. In Canada, CPR’s tracks run through more than 400 communities, and the company simply did not have the resources to deal with each on a one-on-one basis. Having lost touch with their stakeholder groups for close to 25 years, they needed some mechanism for communicating broadly and effectively with the communities living along the rail corridor. At the same time, the power of municipalities, who were working through the Federation of Canadian Municipalities to pressure the government to address chronic problems related to under- funding and crumbling infrastructures. FCM, which represents more than 1000 urban and rural municipal governments across Canada, was becoming increasingly critical of the rail industry. CPR saw this as an opportunity to approach FCM about working together to address community concerns and reaching out to the hundreds of communities through which the company’s lines ran.

In 2000, CPR began what was to become a productive partnership with FCM and the Canadian Association of Municipal Administrators (CAMA), an organization that represents professional municipal managers. This led to FCM and CPR signing a memorandum of understanding (MOU) in May 2001 committing the organizations to develop a collaborative process through which municipalities and the railway could work to reduce the costly intervention of courts and regulators in the resolution of community-based disputes and to engage other industry players in turning the model into an industry-wide standard. The new CPR-FCM model was first tested on a housing development proposal next to CPR's mainline in Brandon, . Based on this and other successful pilot projects in 2001, elements of CPR's dispute resolution and proximity management models became the basis for developing an industry-wide standard.

In May 2002, FCM, the Railway Association of Canada and CAMA signed a memorandum of understanding to pursue "good neighbour" approach to preventing, and resolving, disputes that can occur when people work and live too close to each other. The MOU, which recognizes shared responsibility between the railways and municipalities, commits the parties to develop: consistent local dispute mechanisms across the country; land use planning guidelines to deal with proximity issues and best practices related to changes in rail operations. While the parties to the agreement have still to work out the details of implementation, the process started by CPR and FCM has reopened a dialogue that will benefit all through collaboration rather than confrontation on issues related to the co- existence of railways and communities.

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Corporate Social Responsibility: Lessons Learned Final CPR Case Study

4 Canadian Pacific Railway’s CSR Journey

Canadian Pacific Railway is a company steeped in tradition and history of having played a central role in unifying the country from east to west. For most of its 120 years, the company has viewed its role in society as one of ensuring the nation’s prosperity by providing it with the most economical means of transporting key commodities between industries and export markets.

While the company was an early adopter of an environmental policy and management system in 1990, its approach to community affairs remained for the most of the decade focused on issues management and corporate donations. Community affairs is handled by the company’s communications department, one of the longest standing in corporate Canada. While the department employed an official spokesperson, it was until recently run by non-professional communicators whose main function was to keep the company out of court and out of the media. Because the company had no formal mechanisms for communicating with communities and their representatives, a gap in understanding between the rail company and communities began to grow.

A major turning point in the company’s CSR journey occurred about four years ago when the executive committee realized that that it needed a new approach for addressing community concerns, and that the communications and public affairs function was missing from the executive table. In 1998, the company hired an experienced professional communicator to fill the newly created position of vice president, communications and public affairs. The new vice president established a team of dedicated individuals to work on CSR and the railway-community interface. CPR now has a core group of dedicated individuals who deal with community issues based out of its communications and public affairs department with a voice on the executive committee.

The new team looked at what other companies were doing in the field, and decided that the company should approach CSR by working collaboratively with communities to build relationships. Over the last decade, front-line workers and operations managers have had their community duties stripped away, and were told to concentrate on running the railway. One of the biggest tasks facing the CSR team is to reintroduce into the job descriptions of employees and front line managers duties related to community relations and to them in the tools needed for engaging and interfacing with stakeholders. In this regard, developing a productive relationship with the Federation of Canadian Municipalities has been a big boost to the program.

Another turning point, occurred in 2001 when CPR was spun off from its parent company . At this time the Enron scandal was unfolding, which had the effect of putting corporate governance and the relationship between publicly traded companies and their stakeholder groups high on the agenda. In response, CPR’s new board established a board-level committee to focus on governance, with a mandate to look at issues related to the environment and communities. As well, the reorganization and spin-off provided CPR with an opportunity to shape its own

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Corporate Social Responsibility: Lessons Learned Final CPR Case Study community investment strategy. Until this time, the company’s donations program had been administered through the Canadian Pacific Charitable Foundation which attempted to balance the interests of the parent company’s five subsidiaries. CPR’s new corporate donations program called Community Connect is more sharply focused on community relations and aligned with the company’s business objectives. It has been streamlined to ensure charitable dollars are invested more strategically for longer-lasting community benefits.

In 2001, the company issued its first Social Responsibility Report, where it reports on its environment and social performance. In addition to its role as a tool for communicating with external stakeholders, the report is helping the company raise the profile and understanding of CSR at all levels within the company. Tyra Henschel, CPR’s General Manager, Communications and Public Affairs, notes that the company had more than 10 000 people visit their Social Responsibility Report in the 10 weeks following its posting on the company website, which is revealing in terms of the importance of CSR to the public.

5 Corporate Social Responsibility at Canadian Pacific Railway

Canadian Pacific Railway refers to its sustainability activities officially as social responsibility, although it also uses the terms corporate citizenship and corporate social responsibility in company literature and press releases. For CPR, social responsibility is about going beyond regulations and providing good returns to shareholders. It believes it has a responsibility to communities, not only because two-thirds of its employees and pensioners live and work in these communities, but also because it is good for business. The company views CSR as an evolutionary process where companies look at their core businesses to evaluate how they can use their resources and special assets to contribute to sustainable communities. While philanthropy remains one way the company can make a difference in communities, it is not the focus of social responsibility at CPR.

CSR at CPR is underpinned by its corporate values statement (Box 1) which was developed a number of years ago in consultation with employees. Three of the values deal explicitly with the company’s relationship to communities. The company has enshrined these values in its code of business ethics which requires, among other things, that company operations include communities in their corporate, departmental, team and individual business objectives. Engineers and others involved in new project development must now sign off on a community consultation component, much like they do on technical specifications and codes. For unionized personnel, CSR objectives are integrated through the performance management system (PMP). This year for the first time, community relationship development (CRD) objectives have been integrated into the business plans of every operations service area of the company, who must work with the communications and public affairs group to resolve two community issues by year’s end. Emerging issues are flagged through the company’s toll- free community line.

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Corporate Social Responsibility: Lessons Learned Final CPR Case Study

Responsibility for CSR is handled by several Box 1: CPR’s Corporate Values groups within the company: the corporate Integrity / Trust communications and public affairs group— We earn and maintain trust by delivering on commitments responsible for community consultations and to all employees, customers, unions, communities and other social issues, administering the corporate investors. donations program and preparing the corporate We further our own interests through collaborative social responsibility report—the environmental behaviors. affairs department responsible for Our actions are consistent with our words. environmental management and the health and safety group. The latter two groups include We recognize that people want to do their best, and that we all contribute to CPR's success. community consultations and communications Respect in carrying out their responsibilities. We treat each other with respect and dignity. CPR keeps abreast of emerging issues in CSR We support an open and honest work environment where through its membership in business differences are valued and all employees are given equal organizations such as the Conference Board of opportunity to contribute and develop.

Canada and by participating in CSR-related Through our commitment to health, safety and the environment, we strive for the well being of all our conferences and seminars. CPR is also a employees and their families, and the sustainability of the member of Responsible Care, which requires company. companies to establish community advisory Drive for Results panels. We share a sense of urgency and passion for excellence in the achievement of high quality results.

6 CSR Program Areas at In our decisions we balance the need for short-term results Canadian Pacific Railway with our requirement for long-term success. We follow through on commitments and ensure individual 6.1 Environment and group accountability.

We take pride in our accomplishments and recognize the Canadian Pacific Railway environmental success of individuals, groups and the company. management system (EMS) is based on the five Leadership Through Teamwork elements of the ISO 14001 EMS standard: We achieve co-operation and teamwork across policy; planning; implementation and operation; organizational boundaries through open communication and shared business objectives. checking and corrective action and management review. Its environmental We expect people to foster co-operation, commitment and trust. protection policy, upon which its EMS is based, was formulated and endorsed by senior We develop effective partnerships for achieving success with all our employees, customers, unions, communities management in 1990. Following the and investors. endorsement of the policy, CPR took an Improvement and Innovation inventory of its sites, facilities and operations to We foster an environment where new ideas flourish. identify areas of significant environment impact. Each year, CPR’s Environmental We encourage learning, initiative and creativity. Services Department develops an annual We focus on continuous improvement to meet and exceed the needs of customers, employees and investors. 9 / 19

Corporate Social Responsibility: Lessons Learned Final CPR Case Study corporate environmental plan, which outlines strategies and programs designed to address the environmental Box 2: CPR’s Environmental Protection issues identified. These are are supported by performance Policy measures and metrics which allow the company to Canadian Pacific Railway is committed to monitor improvement. Each department within the conducting its operations and activities in a company integrates the plan into its business objectives manner that: for the year. In its 2001 environmental plan, the company Protects the environmental health and is addressing a range of environmental issues, including: welfare of its employees and other persons who may be affected by its operations and • Climate Change (GHG emissions). activities.

• Chemical and Waste Management (including Protects the natural environment to meet the hazardous liquid and solid wastes). needs of today without hindering the ability of society to meet future needs. • PCB Management.

• Asbestos Management. Meets or exceeds environmental requirements of government applicable to its • Storage Tank Management (to address potential leaks operations and activities. and spills). Keeps employees and the public informed • Locative Fuelling (to reduce and contain spills). about its environmental plans through communications programs. • Wastewater Management.

• Ozone Depleting Substances.

• Site Remediation.

• Integrated Vegetation Management.

• Wildlife and Aquatic Protection.

• Environmental Audits and Incident Reporting.

CPR’s website contains detailed information on what the company is doing to address these issues and historical data showing performance trends. In January 2002, following management review of environmental performance, CPR’s board of directors made a decision to include environmental metrics into the bonus system for senior management. This sends a strong message from senior management to the rest of the company about the importance of improving environmental performance and will help drive responsibility for meeting targets deeper into the organization.

In 2002, CPR became a member of the chemical industry’s Responsible Care program, which requires member companies to set up community advisory panels (CAPs) to address environmental and safety concerns. The decision to join was made in 1998 and was driven both externally and internally.

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Corporate Social Responsibility: Lessons Learned Final CPR Case Study

Externally, many of CPR’s clients and shippers were already members of Responsible Care, and although they did not make membership a requirement for doing business with CPR, it was clear to the company membership could become a competitive issue. Internally, the company realized that it already met or exceeded many of the requirements of Responsible Care, and so becoming a member would provide third-party recognition for what the company was already doing.

CPR is also addressing a number of environmental issues on a voluntary basis. These include storm water run-off and pollution, site remediation and pesticide use.

Storm water is the run-off from industrial sites where chemicals, grease, oil and other contaminants can mix with water and affect nearby fish-bearing waters. The management of storm water run-off is currently a big issue in the USA. Under the US Clean Water Act, industrial facilities, which are defined to include Class 1 railways, must file for storm water pollution permits (SWPP) from state governments. The application for an SWPP must outline pollution prevention measures the facility has in place to ensure that storm water leaving the property meets water quality objectives. While regulations governing storm water run-off do not as yet exist in Canada, CPR is in the process of reviewing its Canadian sites to ensure that it has the infrastructure in place to manage storm water. Doing so will keep the company ahead of any future regulatory activity in this area.

Site remediation is a big issue for a company that has been in operation for more than 120 years. For more than a century, day-to-day railroad activities have impacted subsurface soils and ground water at many sites. Heightened environmental awareness, the introduction of more stringent environmental regulations and the desire to identify potential land liabilities led CPR to adopt in 1990 a voluntary program to systematically characterize, prioritize and manage sites with subsurface contamination. In 1995, the company set aside $200 million to finance remediation of these sites by 2009. As of 2001, 112 sites in Canada and 391 sites in the USA were at various stages of remediation, and 55 sites had concluded remediation.

For safety reasons, railway operators are required by federal regulation to control vegetation growth on their tracks. If not managed properly, growth of vegetation on track ballasts of the railway can undermine its integrity which can lead to serious accidents such as derailments. The most cost- effective method available for controlling vegetation over more than 22 thousand kilometres of track is the regular application of federally approved herbicides. Although operating within their rights under existing regulation, this practice has come into direct conflict with municipal by-laws in a number of communities. In a number of cases, municipalities have taken the company to court, sometimes as far as the Supreme Court of Canada for a ruling. While the courts have ruled in favour of the company, CPR has realized that it must do a better job at engaging concerned communities to avoid lengthy and costly court hearings. It has now become standard company practice to hold open houses in communities with professional risk communicators to work through the issues at stake with concerned communities. As well, the experience led the company to develop an integrated approach to vegetation management that combines brush cutting, mowing, herbicides, biological control and a new computerized “weedseeker” technology. The new technology targets noxious weeds growing on

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Corporate Social Responsibility: Lessons Learned Final CPR Case Study the ballast section of the track, sparing the need to spray the entire track. CPR has also identified environmentally sensitive areas, including domestic wells and pesticide-free zones, along its right-of- way, where it observes restrictions in the use of herbicides. This approach allows the company to respond to community concerns over herbicide use, and at the same time meet safety objectives.

CPR has just recently (in 2002) issued guidelines for environmentally responsible purchasing. The guidelines consist of a checklist of product and supplier attributes that procurement should consider in their purchasing decisions. Among other things, the guidelines emphasize the life cycle aspects of products and the 4 “Rs” of reduce, reuse, recycle and recover, and whether the supplier has an environmental management system in place. The guidelines recognize that a thorough cost analysis is required to ensure the products and services are made available at competitive prices and that the environmental benefits provided by the product or service do not undermine overall performance.

While CPR has no immediate plans to adopt a standard reporting format such as the Global Reporting Initiative’s Sustainability Reporting Guidelines, the company is working with its peers to develop a common set of metrics with which Class 1 railways can benchmark. Important metrics include those that could be used for monitoring storm water pollution and air pollution. CPR is in its sixth year of participation in the Railway Association’s Emissions Monitoring (LEM) Program, which monitors nitrogen oxide emissions from Canadian rail carriers against an annual voluntary cap of 155 kilotonnes. The program also monitors carbon monoxide, particulate matter, carbon dioxide and sulphur dioxide. CPR is addressing its air emissions by renewing its locomotive fleet, reducing idling times and upgrading operations and infrastructure.

6.2 Community and Broader Society

Community Consultations

Community consultation and communication are a key aspect of CPR’s approach to social responsibility. While it has been much less of a priority in the past, the company has reinvigorated the process as an important means to resolving disputes, improving relations and understanding between the industry and the public and helping the company improve its safety and environmental performance. As mentioned earlier, an important break-through was when the company approached the Federation of Canadian Municipalities to develop community-based dispute resolution processes and a relationship wherein municipalities and the railway both recognize they have a role to play in finding solutions.

Community Connect Line

In 2001, CPR established a toll-free number across Canada and the USA to give the public and municipal officials a single point of contact for questions and concerns about the company’s operations. All calls are recorded and traced through to resolution. The toll-free line is an important part of CPR’s community relations program which has allowed the company to identify emerging issues and address these more proactively than it has been able to in the past. In cases where the

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Corporate Social Responsibility: Lessons Learned Final CPR Case Study company is planning a significant operational change or construction of new facilities, CPR will work with municipal officials to determine appropriate community involvement and communication.

Community Consultations on Environmental Issues

In response to a number of community concerns over specific environmental issues, CPR has set up special action committees which are proving to be an effective model for dealing with community environmental concerns. An example is the Action Committee on Coal Dust set up to address concerns related to coal dust escaping from en route from the coal mines of the interior of British Columbia to Roberts Bank, where it is shipped to the Japanese market. The committee brings together members from the coal industry and the railway to coordinate efforts to control coal dusting. It has led to improved use of dust suppressants and car loading by the mines, the installation of a secondary spray station about mid-way in the journey, and a reduction in speed of the trains as they pass through communities. The committee holds open-houses in communities along the corridor to explain how the industry is addressing the problem and has established a toll-free number for reporting coal dusting incidents. The toll-free number allows the industry to move quickly to determine and correct the cause of the incident. Callers are given an update within one business date on action that the company is taking. The company has found that explaining to communities what they are doing and actively seeking their input are cost-effective in resolving disputes. In 2002, a comprehensive air-monitoring program will be conducted to measure levels of coal dusting.

Corporate Donations

A challenge for any company with operations that extend across the entire country is that the definition of community can be so broad as to dilute the effectiveness of its donations program. To address this, CPR’s new donations program called Community Connect channels donations through national organizations with broad geographic reach such as the United Way, which supports a wide variety of projects that deal with pressing social issues, and the Canadian Association of Food Banks, which works to alleviate hunger across the country.

CPR has chosen hunger as a focus area in its donations strategy, and once a year operates a Holiday Train that crosses the country stopping in communities along the way to raise awareness and collect money and in-kind donations, which are then distributed to the needy through food collection agencies. Now in its fourth year of operation, the Holiday Train has raised $893 000 and helped collect more than 73 tons of food. The train also raising awareness of CSR wihin the company by providing an opportunity for employees, customers and communities to come together to help people in need.

6.3 Safety

The safety record for rail transport is high compared to other modes of transport, particularly road (passenger cars and trucks). Despite the relatively low risks associated with rail transport, the potential for large high-impact accidents, when they do occur, and the nature of work has meant that the industry has put in place some of the world’s most comprehensive safety procedures and

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Corporate Social Responsibility: Lessons Learned Final CPR Case Study programs. Not surprisingly, CPR considers safety Box 3: How We Do It to be its number one priority, with a goal to be “recognized as the safest railway by employees, Ten strategies form the backbone of our safety unions, customers, shareholders, regulators, management processes. Local management and suppliers and communities.” Its safety procedures Health and Safety Committees develop tactics and and programs are comprehensive and address action plans to support these strategies: both internal safety issues—such as workplace injuries related to handling heavy materials and Demonstrating a commitment to health and safety. exposure to dangerous substances—and external safety issues—such as accidents and derailments, Communicating safety expectations and results. preparing communities for emergencies, and working with customers to improve their safety Ensuring proper training and orientation. performance. Each year, the company develops a health and safety plan which sets performance Involving employees and union representatives. targets for the year and safety principles for achieving the targets. This approach has resulted Complying with safety policies, rules, regulations in steady improvements in most areas, and for the and standards. fourth year in a row, CPR leads North American Class 1 railroads in train accident performance. Understanding and mitigating risks. Comprehensive information on CPR’s safety Correcting safety failures. programs and performance is provided on the company’s website. A few examples have been Ensuring employees are medically fit to work. selected for more detailed discussion below.

Safety Management System Recognizing safety successes.

In March 2001, new regulations from Transport Responding to community and customer concerns. Canada came into force requiring all railway companies to develop safety management How Management Supports the Health and Safety systems. While most elements required by the Plan new regulation were already in place, CPR was required to formalize these into a risk assessment Health and Safety leadership on the property. and management protocol, which outlines a hierarchical process for conducting risk Resources to support the safety action plans. evaluations whenever a safety concern is identified or when changes are made to existing Audits of processes, procedures and sites. policies, projects and procedures or new ones added. The new regulations also requires the Implementation of risk assessment and safety action plans. company to begin reporting annually to the Minister of Transport on its performance towards From CPR’s 2002 Health and Safety Plan safety targets and the effectiveness of its risk

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Corporate Social Responsibility: Lessons Learned Final CPR Case Study management and control strategies.

Employee Involvement

CPR’s safety framework is the cornerstone of the company’s bottom-up safety planning process. In 2001, CPR directly involved more than 1000 employees in the planning and implementation of measures aimed at enhancing workplace safety. CPR also involves its labour unions in developing safety-related policies and programs, as mandated under new requirements in the Canadian Labour Code enacted in 2000. In 2001, members of CPR’s Health and Management Committee performed seven on-site inspections. These walkabouts provide employees with additional opportunities to talk with senior management directly about their safety initiatives and provide suggestions. Employees are recognized annually for their safety initiatives at a company dinner and again during senior management visits to sites.

Employee Training

A key part of CPR’s health and safety program is employee training. The company operates annually a large number of training programs for employees and managers covering existing safety management procedures, policies and responsibilities, industrial hygiene (to protect employees from environmental exposures), ergonomics (to reduce injuries from overexertion and physical fatigue), switching operations and mountain and heavy trade train operations, to name a few.

Community Outreach and Emergency Preparedness

Despite all precautionary measures, accidents do happen. To prepare for such an eventuality, CPR has developed a network of emergency response contractors and emergency response plans in all areas of its operations. The company conducts regular training exercises with shippers, emergency response personnel, employees and contractors to prepare them for a coordinated response in the case of an emergency. Plans are tested and evaluated annually in mock emergency exercises. These exercises are used to revise emergency response plans as required.

In addition to formal emergency response drills, CPR conducts between 20 and 30 emergency response planning exercises with communities in North America. It also supports formal community advisory panels (CAPs) which provide an open channel of communications between citizens, governments and site management to discuss issues of concern that community members may have about facilities. The CAPs are independent bodies that are required as part of the company’s membership in Responsible Care, but are not controlled by the company itself.

Public Safety

Each year in Canada, several hundred collisions and trespassing incidents occur at road-railway crossings and along the tracks, many of which result in death. To address the problem, CPR participates in public safety initiatives in cooperation with multiple levels of government, public safety

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Corporate Social Responsibility: Lessons Learned Final CPR Case Study organizations, community groups, unions, the police and other railway companies. These programs combine enforcement, early warning systems and public education and awareness. CPR participates in Direction 2006, a special government-industry initiative whose goal is to reduce collisions by 50 percent by 2006, and in Operation Lifesaver, a public education program that concentrates on raising awareness through workshops, public service announcements and school visits.

CPR Police Force conducts its own community enforcement and public outreach programs. A number of toll-free numbers have been set up to allow the public to report blocked or uneven crossings, stalled vehicles and public safety and crime-related incidents. The call centres receive more than 7000 calls a year. CPR’s Police Services has stepped up enforcement to tackle the problem of vehicle drivers who deliberately disobey rail crossing signs and signals. Together with railway managers, operations employees and unions, they developed the Near Collision Reporting System, under which train crews identify and report vehicles involved in near collisions. Driver safety information is included in the infraction notice sent to the registered owner of the vehicle.

Customer Safety

CPR developed a customer safety handbook in 2001 to provide basic safety information to the employees of customers who work on or around railway equipment. The handbook, which is available online, is part of an effort to help lower the frequency of customer-caused train accidents (such as those caused by improperly balanced car loads) and injuries to customer and CPR employees. Full implementation of this customer-oriented initiative is expected by the end of 2002.

7 Key Drivers and Benefits for Canadian Pacific Railway

As is the case with other companies, quantifying the bottom-line benefits of CSR programs is a challenge for Canadian Pacific Railway. However, the company’s CSR group notes a number of benefits that flow from its CSR work.

Licence to Grow. Even though CPR has pre-existing right of way and has owned most of its properties long before neighbourhoods sprung up nearby, the company has found that pursuing a “good neighbour” approach with communities and working with them to address concerns arising from co-existing in close proximity has made it easier to develop these properties when the time comes. For example, CPR owns a track of land at in the BC lower mainland, which for many years was far from any residential or commercial neighbourhoods. By the time the company decided to move forward on developing the land into an intermodal terminal, residential neighbourhoods had been built in close proximity. The developers of the residential properties had never fully advised buyers that they were living next door to CPR property. Instead of taking the line that it had pre-exiting rights to develop the Pitt Meadows terminal, CPR decided to approach the communities and worked through an advisory panel of local residents and city council to address concerns related to aesthetics, noise and lighting. The approach is helping CPR address community concerns and move forward on its Pitt Meadows intermodal terminal. CPR points to other rail

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Corporate Social Responsibility: Lessons Learned Final CPR Case Study operators who have not taken this approach with communities with the result that their plans to bring into operation their intermodal terminals were held up by opposition from neighbouring communities.

Risk & Cost Avoidance. By spending the resources and time upfront to consult with communities and demonstrating a willingness to work to find a compromise on issues such as the use of herbicides, the company can avoid risks related to lengthy court battles and other disputes, which are costly, disruptive and resource-consuming, even if the courts rule in favour of the company. As well, the company believes every dollar spent on a proactive basis working with communities on safety and emergency preparedness pays for itself ten-fold in the event of an incident.

Anticipating and Avoiding Regulations. By taking a more proactive approach to community relations, the company, in collaboration with FCM, has developed its own approach to dispute resolution that keeps things at the local level, and avoids the need for governments to impose top- down solutions and regulations. As well, by looking beyond compliance—for example, in dealing with storm water run-off, which is not currently regulated in Canada—the company is positioning itself well to deal with future regulations that may be in the pipeline.

Competitive Advantage. CPR feels its proactive approach to environmental and social issues will give it competitive advantage. Although its decision to become a member of Responsible Care was not driven by any customer requirements, it will likely make it a preferred partner with its customers who are members of Responsible Care.

Communities Becoming More Vocal. Communities are becoming more vocal in their complaints against the railway industry in general. This has brought community and social issues into spotlight, and has driven changes within the company towards a more pro-active approach to community relations. Communities will become more vocal as the “baby boomer” generation retires and start participating more actively in community issues and advocating for a way of life that they want to preserve.

8 Organizational Success Factors and Challenges

There are a number of internal factors and practices that are helping CPR embed CSR into its day-to- day business practices:

Clearly Defined Metrics & Targets. CPR has been successful at improving its environmental performance using an environmental management system where progress is measured against targets set on an annual basis. Social metrics are much less well developed than the environmental metrics that have been in use for more than a decade. CPR is currently working on developing social metrics to help it manage and measure its social performance.

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Corporate Social Responsibility: Lessons Learned Final CPR Case Study

Senior Management Involvement. Involving senior managers and employees in its annual Holiday Train has helped with getting buy-in for CSR across the company. It has also helped reconnect the company with its community stakeholders.

Senior Management Accountability. In a January 2002 decision, CPR’s board of directors incorporated performance metrics related to environment and community into the bonus structure of some members of the executive committee. Responsibility for reaching the performance targets is shared. To meet the targets, the vice presidents involved must extend responsibility to front line and operations managers.

Senior Management Commitment and Governance. A difficulty in reintroducing a community focus into the job functions of front-line employees has been in making the business case in a company that has performed well for 120 years without having to worry about community issues. It has been a challenge to convince people internally because of the absence of a business case. This is changing as senior management has begun to show support for CSR. CPR’s has become an advocate of working with communities and has made statements to the effect that doing so is good for business. The company’s CEO Rob Ritchie has delivered presentations on social responsibility at numerous events such as the annual meeting of the Federation of Canadian Municipalities in front of hundreds of delegates, and has been quoted in news releases and the media. These statements send a strong message to the rest of the company that social issues are important and help overcome barriers related to scepticism on the part of staff. As well, the company recently brought the vice president of communications and public affairs onto the executive committee. CSR, which is part of the communications and public affairs function, now has a voice at the executive table.

External Recognition. In recent years, some of CPR’s most ardent critics have written letters to the board and senior management congratulating on them on the company’s new approach to community relations and encouraging them continue in this line. Such positive feedback is important in reinforcing the notion that CSR is good for business and in pushing CSR internally.

Employees are Major Shareholders. When CPR was spun off from its parent company in October 2001, they made a share offering to employees. Sixty percent of employees own shares in the company which creates a strong incentive to think of the consequences of how they conduct their business.

Social Responsibility Report. Until recently, employees’ perception of CSR has been that it is an ad hoc initiative that will eventually be displaced by other priorities . The company’s decision to issue a social responsibility report sends the message that CSR is an initiative that is here to stay and helps create a greater understanding among company employees of what CSR is and how it relates to their core business.

Code of Business Ethics. Performance of employees is now measured on how they live up to company values. Everyone except the unionized personnel has to sign off on the company’s values

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Corporate Social Responsibility: Lessons Learned Final CPR Case Study annually in the form of its code of business ethics. For unionized personnel, company values are integrated into the performance management system (PMP).

Performance Objectives in Business Plans. This year, the company has added a community consultation component to the process of signing off new projects. As well, community relationship development (CRD) objectives have been included in their business plans of every service area of operations, who must work with the company’s CSR team on resolving two community issues by the end of the year.

9 Role of Government

Canadian Pacific Railway identifies a number of ways in which governments can support the company and others in corporate social responsibility:

• The government could improve coordination between departments. The company has found that it has at times been caught between regulations.

• The government could sponsor research to help companies develop the business case that is needed to convince management and shareholders of the value of CSR. There is a lot of anecdotal information to support the business case, but what is really missing is the quantitative analysis that clearly demonstrates the returns on investing in community and social issues.

• The government could help raise expectations inside and outside by making statements on the importance of CSR. However, expectations should not be raised through more regulations.

• The government could encourage more companies to take up CSR by creating tax incentives and other rewards for companies that are actively pursuing CSR, such as reduced reporting and regulatory requirements.

• The government could help companies in developing performance metrics, for the social dimension of CSR. As well, the government could help by developing guidance on how this information could be collected.

• Case studies and other reports that highlight best practice and the benefits of CSR practices (such as reporting) are helpful as companies struggle with the how and why of engaging in CSR. Online resources would also be useful.

• The government could sponsor or organize workshops and training courses for companies on CSR.

• The government could support the development of CSR programs and courses at business schools and universities. Graduates of these programs would help build capacity in Canadian business for dealing with CSR.

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