Sustainability as a business model – pioneer Vossloh AG

Vossloh is a globally active and listed rail technology company headquartered in Werdohl, which today focuses on rail infrastructure in its core business. In the financial year 2021, the company’s sales could be fully attributed to the EU taxonomy regulation, thus underpinning the sustainability of Vossloh’s business model.

The company has a long tradition: in 1888, the blacksmith Eduard Vossloh founded the company of the same name in Werdohl. As early as 1883, Vossloh was working on behalf of the Royal Prussian Railway, producing spring washers for rail fastening. Through strategically driven acquisitions and the company’s IPO in 1990, the Group has developed into one of the world’s leading suppliers and technology leaders in rail fastening systems and in the switches and crossings segment. Vossloh’s activities are divided into the Core Components, Customised Modules and Lifecycle Solutions business units. The company’s product portfolio includes rail fastening systems, concrete sleepers and switch systems, as well as services related to rails and switches. It is applied in the areas of mainline, high-speed, heavy haul, mass transit and track properties. In Germany, Vossloh is a renowned and leading supplier of innovative technologies and related services for the rail market. In North America and Australia, Vossloh is also the leading manufacturer of concrete sleepers. The company owes this market position primarily to a successful restructuring, which was triggered by poor sales and profit figures in the early 2010s. The business units were overhauled, less profitable divisions were disposed of and sold. In 2020, the restructuring process came to an end with the sale of the Locomotives division.

Excursus traffic turnaround

On 24 June 2021, the German Bundestag passed the climate protection amendment, thus improving the objectionable Climate Protection Act. Germany commits to emitting at least 65 percent less CO2 emissions by 2030 than in 1990. In addition, Germany aims to be greenhouse gas neutral by 2045. As an interim goal, emissions from transport are to be reduced by 48.5 percent by 2030 compared to 1990. Germany is still far from reaching this milestone – so far, only 9 percent less greenhouse gas emissions have been measured in transport. While emissions from other segments have decreased over time, emissions from transport remain at a high level. At the European level, the European Green Deal calls for emissions to be reduced by a whopping 90 percent in 2050 compared to 1990. These goals can only be achieved with a massive modal shift to rail. And so the railways, by far the most environmentally friendly mode of transport worldwide, are increasingly becoming the focus of attention. With the European Year of Rail 2021 and the giving away of Interrail tickets to young people, the European Union has tried to make rail attractive as a means of transport for passengers. In Germany, too, there have been numerous campaigns to promote rail as a means of transport. However, the importance of rail in achieving the set climate targets and for the transport turnaround is not reflected in the share of rail in freight transport performance or in the development of the modal split in passenger transport in Germany.

What there seems to be agreement on is that the transport turnaround is urgently needed and entirely feasible. The problem is not getting more people to consider rail as a mode of transport or shifting more goods to rail, but the resulting saturation of the rail network. Rail transport hubs are already groaning under the strain and delays occur time and again. This is due to the outdated and partly dilapidated rail network in Germany. In a comparison of per capita investments in European countries, we regularly rank third to last.

Thinking into the future

In 2050, an estimated 9.7 billion people will populate the earth, 68 percent of whom will live in cities. Cities and their urban centres are expanding more and more, suburbs are becoming more populated. Commuter trains are increasingly at capacity, and the need for mobility due to urbanisation is steadily increasing. More people also means increased consumption. The number of goods to be transported is skyrocketing, and at the same time the issue of sustainability has become increasingly important with the scarcity of raw materials and the finite nature of resources.

Especially in cities, people rely on local public transport. Since rural areas have been connected to urban centres by rail, the car is becoming less and less important for mobility here as well.

In order to cope with the growing workload, the entire rail transport system is digitalised and trains are meticulously coordinated. Digital couplings, ATO and CBTC have long been an integral part of rail transport, and predictive maintenance is used to proactively monitor and counteract wear and tear on infrastructure and rolling stock.

Vossloh as a pillar of the transport turnaround

The scenario just described is based on the current megatrends of the rail industry: urbanisation, digitalisation and sustainability. These trends are constantly resulting in new technologies that bring us closer to the ideal goal of sustainable, non-exclusionary mobility. Against this background, the question arises as to what role Vossloh plays as a company in the current market structure and whether the company is equipped for the challenges and technological developments of the future. A look at the current annual report answers this question succinctly with a yes. Increased traffic volume in rail transport is accompanied by increased wear and tear. In addition, with an increased utilisation of the network and the rolling stock, a failure of the same can be tolerated even less – the time windows for necessary maintenance and servicing measures are shrinking. This is precisely where Vossloh comes in with its portfolio of products and services for the maintenance and repair market; the strategic realignment of recent years is paying off. In addition, there are products that minimise maintenance and servicing costs from the outset. To this end, the company invests heavily in research and development. With the implementation of a Group-wide innovation guideline and a Group Innovation Committee, the company’s R&D efforts are supported and further advanced. In general, research and development at Vossloh focuses on the current challenges of the rail market: on the one hand, the availability of railway lines is to be increased, and on the other hand, solutions are needed for the resulting noise developments and wear phenomena. In addition, the service life of the individual infrastructure components is to be extended. The focus here is on intelligent track and digital monitoring.

Conclusion

Especially in a sustainable industry like the rail market, sustainability is an issue. Vossloh recognised this at an early stage and took appropriate measures. The company tries to keep CO2 emissions as low as possible across its entire value chain and also focuses on sustainability in terms of energy supply in its German factories and plants. Vossloh was one of the first German companies to place a sustainability-oriented hybrid bond, the repayment amount of which is linked to the company’s sustainability performance. Vossloh’s sustainability efforts were decisive in winning several tenders. This clearly shows that sustainability as a business model works – especially in a sustainable industry such as the rail market.