Delivering for the Long Haul FY2016 Sustainability Report Contents 1 Welcome to Aurizon 2 Sustainability highlights 3 Managing Director & CEO message 4 Sustainability at Aurizon 5 Aurizon’s sustainability priorities 8 Safety 12 Business Model 18 Future of Coal 24 Operational Efficiency 29 Customer Partnerships 32 Environmental Management 35 Community Engagement 41 Organisational Capability 44 Regulatory Environment 46 Governance at Aurizon 50 Employee datasheet 52 Glossary Welcome to Aurizon Aurizon is a top 50 ASX listed company, with over 6,400 employees, offering rail-based transport and infrastructure services across Australia. Our aspiration to deliver world-leading performance is underpinned by our three sustainability commitments: We’re committed to building a long-term sustainable business that delivers lasting value for our shareholders, customers, employees and communities. We aim to take the safest, most efficient and least resource-intensive approach to the services we provide. We apply a balanced view when assessing risk and making decisions, taking into account social, environmental and economic considerations. OUR SUSTAINABILITY SCORECARD Metric FY2011 FY2015 FY2016 FY2016 Aspiration Target year vs. FY2015 targets Total Recordable Injury Frequency Rate 22.3 2.4 4.2 76% 0 Ongoing (TRIFR) Notifiable environmental incidents 4# 2 1 50% 0 Ongoing Return on Invested Capital (ROIC) 4.4% 9.7% 8.6% 1.1ppt 10.5% (Avg) FY2016-2018 Operating Ratio (underlying) 88.0% 74.3% 74.8% 0.5ppt 70% FY2018 Workforce availability 95.8% 96.0% 96.1% 0.1ppt >97% End of 2019 Percentage of female employees 11.7% 15.3% 17.4% 2.1ppt 30% End of 2019 Greenhouse gas emissions intensity 9.9 8.6 8.1 6% 7.2 FY2020 (kgCO2e/’000GTK) Note: Metrics without long-term targets have not been included above. #FY2011 incidents data not available (FY2014 data shown). Legend: ■ Improvement in metric performance ■ Decline in metric performance Sustainability highlights Safety Operational Organisational Efficiency Capability Zero LTIs Locomotive productivity Improved female (Lost Time Injuries) in FY2016. increased participation from 15.3% to 17.4% at 30 June 2016 11% and Indigenous employees increased from and surpassed the 3.3% to 4.3%. Business Model US Class 1 railroad average Weighted average remaining for the first time. coal contract length of 17.4% Female participation 10.5 years. Customer Partnerships Regulatory Above and below rail Environment Future of Coal coal rate per tonne Australia became dropped by 7% in the world’s largest real terms since FY2012. 36% coal exporter increase in volumes for #1 in 2015. 7% the CQCN since FY2012, Coal rate per tonne demonstrating the benefits of an optimised supply chain. Community Governance Engagement We have voluntarily Doubled social adopted the Environmental return on investment in Management our Indigenous Tax pre-employment training program. Transparency Code 15% GHG emissions intensity and demonstrated our reduction target established. Please visit our online commitment to paying (from FY2015 baseline). Sustainability Highlights our fair share of tax. Managing Director & CEO message Welcome to Aurizon’s FY2016 Sustainability Report (Report). This Report discusses the resilience of Aurizon, its customers and its communities, as well as the demand for the commodities we haul. We see sustainability as key to our OUR COMMITMENT TO SAFETY Lance Hockridge business. It is central to finding new ways Managing Director & CEO of doing business, developing commercial Commitment to our values does not Aurizon solutions for customers, and creating waiver. How we go about our day-to-day value for shareholders. work and ensure the safety of our employees is as important as our OUR SUSTAINABILITY We continue to recognise the need to operational metrics and financial results. REPORTING JOURNEY improve productivity and to ensure the In the 2016 financial year Aurizon achieved competitiveness of Australian rail supply 12 months without a Lost Time Injury (LTI). Since we commenced sustainability chains. Our transformation also involves This compares with 92 LTIs in FY2010. reporting in November 2014, we have ongoing investment in organisational measured our performance through capability, the building of greater diversity While this is an unprecedented result, engagement with internal and external across our workforce, and the nurturing we readily acknowledge that safety stakeholders. In the last 12 months of innovation and technology-enabled performance requires relentless effort we’re delighted to have received improvements. and focus. For example, while our Total recognition from the Australian Recordable Injury Frequency Rate (TRIFR) Council for Superannuation Investors remains below the average of the North INVESTING IN THE FUTURE (ACSI) in their ‘Leading’ category, American Class 1s, it increased to 4.2 gained acceptance to the FTSE4Good in FY2016. Some recent examples of what we have sustainability index and improved done to invest in the long-term future our MSCI ESG rating from A to AA. for our business include: KEY CHAPTERS In January 2016 Aurizon also committed to the UN Global Compact (UNGC). the rail haulage contract extension I would like to direct your attention to We support the 10 principles of the for BHP Billiton’s Mount Arthur mine three key chapters in this, our third UNGC on human rights, labour, to 2028, supporting a high-quality Sustainability Report. Firstly, the Business environment, and anti-corruption; thermal coal mine by providing an Model chapter demonstrates the resilience this Report plays a key role in efficient, cost-effective and safe service of Aurizon’s business and the ongoing demonstrating our Communication of investment in our new Enfield strength of our markets of operation. Progress towards the UNGC. I was also intermodal terminal is improving Secondly, the Operational Efficiency honoured this year to receive, on behalf our ability to service national chapter highlights many examples of how of Aurizon, the UN Women’s customers with longer trains, technology is transforming our business Empowerment Principles — CEO Award shorter transit times and an and will continue to drive our competitive for Cultural Change for Empowerment. environmentally sustainable position. Thirdly, in the Future of Coal chapter, we provide new insights into how container supply chain We continue to seek ways to improve our changes in steel flows affect demand the reduction in fuel consumption Report and I encourage you to take the for metallurgical coal and review the across our train fleet through time to provide your comments and ideas potential implications of climate change technology and operational to us at [email protected] policy for Australia’s thermal coal exports. improvements, enabling our commitment to a GHG emissions intensity reduction target of 15% by 2020 (FY2015 baseline). FY2016 Sustainability Report PAGE 3 Sustainability at Aurizon At Aurizon we formally integrate sustainability into our key decision making processes. As a consequence, we treat sustainability “I see a critical role for this as a lens through which to consider the long-term strategy of Sustainability Report, and our business. our sustainability strategy more broadly, in setting the The strategic relevance of sustainability The involvement of the Aurizon Board is tone for good governance to Aurizon is clear — it reinforces the also central to advancing our sustainability in our organisation. importance of our social licence to operate efforts. Each year we present our and helps us identify the longer-term risks material sustainability priorities, and opportunities that affect our business that were identified through stakeholder The process of developing and the global economy. This gives us a engagement, to our Board. We then a sustainability report broader perspective which allows us to identify how these topics are to be requires consideration of think creatively and challenge ourselves. covered in our Sustainability Report, As you’ll see, while we discuss our historical which is approved by our Board prior our business through the performance, we also focus on future risks to release. This enables the commitment eyes of our stakeholders, and opportunities that inform our business of the Aurizon Board to effective risk and taking a view as to strategy. For us, sustainability is about management as a key element of looking out and reflecting inwards. business success and sustainability. the longer-term forces shaping our industry. Such a process improves our capacity for objectivity We have received the following recognition for our sustainability reporting efforts: and the evidence base upon which we make our decisions. I’m proud of the achievements cited in this Report and motivated by the areas in which we can clearly do better. This is an important period for the resources sector and one in which the notion of sustainability, in all its dimensions, has never been more critical. I trust this Report demonstrates our commitment to sustainable business practices and working collaboratively with the various sectors and customers we serve.” Tim Poole Chairman PAGE 4 Delivering for the Long Haul Aurizon’s sustainability priorities Sustainability is at the heart of Aurizon’s mission. We are committed to building a business that delivers lasting value for our shareholders, customers, employees and the communities in which we operate. APPROACH TO REPORTING “ACSI congratulates Aurizon Holdings “I acknowledge