2008 Corporate Responsibility Report

How we are creating a smarter foundation for a sustainable future

Supplier Diversity

As a major purchaser of goods and services, PG&E recognizes the unique opportunity and responsibility we have to contribute to California's economic vitality by utilizing women-, minority- and service-disabled-veteran-owned business enterprises (WMDVBE). Accordingly, we continue to make it a priority to integrate diverse suppliers into our supply chain, and to raise the bar for our efforts.

In 2008, PG&E continued its momentum and, for the third year in a row, exceeded the CPUC's cumulative target for diverse spending. The CPUC target is for PG&E, and the state's other investor-owned utilities, to strive to reach 21.5 percent of the Utility's overall spending with diverse certified firms. PG&E achieved diversity spending of 23.9 percent—the Utility's highest achievement in the 28-year history of our supplier diversity program and representing more than $754 million in spending with WMDVBEs. Moreover, PG&E accomplished this growth despite a significant 15 percent increase in the overall purchase base.

The Utility increased its spending in all three WMDVBE categories. Spending increased by $95 million with minority business enterprises, $55 million with women business enterprises and $6 million with service-disabled-veteran business enterprises.

Yet 2008 brought many challenges as PG&E implemented new strategic priorities, such as improving reliability and focusing on new power generation projects that are not readily served by diverse suppliers. Further, PG&E's focus on consolidating the number of its suppliers and reducing costs drove much of the Utility's sourcing effort. Together, these factors often made it a challenge to introduce new suppliers and increase our diversity spending.

PG&E rose to the challenge, consistent with its long-standing commitment. We continued to encourage our prime contractors to utilize WMDVBEs by setting subcontracting goals and requiring subcontracting plans on major contracts. PG&E also encouraged prime contractors to partner with and mentor smaller diverse firms. PG&E's 3rd Annual Supplier Conference provided additional opportunities, including a matchmaking session between PG&E's prime contractors and potential WMDVBE subcontractors.

We also reached out to prospective WMDVBEs at more than 50 outreach events in 2008 and continued to aggressively promote the program through a quarterly newsletter, website presence and key partnerships. For example, we continued our work with organizations that support the growth of WMDVBE suppliers, such as ethnic chambers of commerce and various veteran business organizations.

PG&E also continued to help new WMDVBEs grow and develop, awarding more work to those that demonstrate quality, cost competitiveness and service. For example, PG&E worked to grow its business with All American Logistics, a shipping company, from truck load shipments to intermodal and oversize loads—reducing costs to PG&E by more than 60 percent in the process.

Top priorities for 2009 include once again exceeding the CPUC's goal of 21.5 percent by strengthening the roles of supplier diversity "champions" throughout the company, continuing to support and develop new diverse suppliers, setting aggressive subcontracting goals with our contractual agreements and identifying opportunities to break larger jobs into portions more suitable for WMDVBE contractors, consistent with company guidelines.

Diverse Supplier Spending Targets
Category
CPUC Target (%)
Utility’s 2008 Results (%)

Minority Men
12
11.85

Minority Women
3
3.86

Minority Business Enterprise (MBE)
15
15.71

Women Business Enterprise (WBE)
5
7.32

Subtotal Women, Minority Business Enterprise (WMBE)
20
23.03

Service-Disabled-Veteran Business Enterprise (DVBE)
1.5
0.87

Total WMDVBE
21.5
23.90