Supplier Diversity
At PG&E, we recognize that an ongoing commitment to supplier diversity is essential to our success as a business. Working with diverse suppliers allows us to engage in more creative and innovative solutions to the challenges we face, enhance the diversity of businesses in California and enrich the communities where our customers and employees live and work.
Through our Supplier Diversity Program, PG&E has been working for 30 years to bring more women-, minority- and service-disabled veteran-owned business enterprises (WMDVBE) and small businesses into our supply chain. By doing so, PG&E is making a positive difference in the communities where we work and live, improving the products and services that we provide our customers and supporting our broader commitment to diversity and inclusion.
Supplier Diversity and Small Business Results
More than 400 employees came together to celebrate PG&E’s 30-year commitment to supplier diversity at an event honoring employees from across PG&E for their role in helping exceed the 30 percent supplier diversity target.
Following a keynote address from CPUC President Michael Peevey, Steve Coleman, director of sourcing for Transmission and Distribution at Pacific Gas and Electric Company, received the President's Award for his role in driving supplier diversity results in energy delivery and engineering operations to an all-time high of $345.8 million, representing one-third of the company's total diverse spend. Other award categories included best supplier diversity results for percentage spend, highest year-by-year increase by dollars and supplier diversity breakthrough of the year.
PG&E’s commitment to supplier diversity is a core part of our business strategy. In 2010, we achieved our best performance to date for diverse spending—exceeding our aspirational goal of 30 percent for an all-time high of 32.7 percent, or $1.13 billion in spending with diverse suppliers. This caps an eight-year upward trend starting at 18 percent in 2003. For 2011, we have voluntarily raised the bar further with an aspirational goal of 34 percent.
We increased our spending in all three WMDVBE categories: spending increased by $131 million with minority business enterprises, $64 million with women business enterprises and $10 million with service-disabled-veteran-owned business enterprises. In particular, our spending with service-disabled veteran-owned businesses reached a record 1.7 percent of the total, a 21 percent increase in spending over 2009.
The table below summarizes our recent supplier diversity performance. It also captures our work with non-WMDVBE small businesses. As with diverse companies, small businesses are a vital source of jobs and economic activity in the communities we serve.
Supplier Diversity and Small Business Results
| Category | Utility’s 2008 Results (%) | Utility’s 2009 Results (%) | Utility’s 2010 Results (%) |
|---|---|---|---|
| Minority Men | 11.9 | 11.2 | 14.4 |
| Minority Women | 3.9 | 4.0 | 5.3 |
| Minority Business Enterprise | 15.7 | 15.2 | 19.6 |
| Women Business Enterprise (WBE) | 7.3 | 9.1 | 11.3 |
| Subtotal Women, Minority Business Enterprise (WMBE) | 23.0 | 24.2 | 31.0 |
| Service-Disabled-Veteran Business Enterprise (DVBE) | 0.9 | 1.3 | 1.7 |
| Total WMDVBE | 23.9 | 25.6 | 32.7 |
| Non-Diverse Small Business Enterprise | 6.6 | 6.1 | 6.3 |
| Grand Total | 30.5 | 31.7 | 39.0 |
Supplier Diversity and Small Business Spending
| Category | Utility’s 2008 Results | Utility’s 2009 Results | Utility’s 2010 Results |
|---|---|---|---|
| Supplier Diversity Spend | $754 million | $928 million | $1,134 million |
| Non-Diverse Small Business Enterprise Spend | $209 million | $220 million | $219 million |
| Total Spend | $963 million | $1,148 million | $1,353 million |
A Growing Commitment
Over the last five years, PG&E has demonstrated a strong and growing commitment to incorporating supplier diversity into its procurement process. While the Utility's total spending on suppliers has increased 52.7 percent, or $1.2 billion, during this timeframe, spending on diverse suppliers has more than doubled, increasing 130.5 percent or $642 million. In addition, PG&E’s spending in every ethnic category has also increased significantly.
As PG&E works toward our goal of 250 MW of new utility-owned solar power, we are leveraging the expertise of diverse suppliers. Last year, this included awarding the project site preparation work to two diverse firms, totaling $5 million in spending for 2010 and 2011. We have also forecast greater than 60 percent supplier diversity results—or more than $100 million in spending—for 2011.
Overcoming Key Challenges
These results are particularly significant in light of ongoing challenges. The difficult economic climate continues to challenge PG&E’s efforts to expand its supplier diversity results as diverse suppliers can face cash flow and access to capital issues that make it difficult to expand operations. Additionally, substantial investments required in infrastructure projects continue to pose a challenge because few small or diverse suppliers are large enough to independently handle major projects such as energy generation.
PG&E responded to these challenges by working with prime suppliers and diverse suppliers to drive costs down while continuing our commitment to expand opportunities for competitively qualified diverse suppliers. Through these efforts, we were able to increase Pacific Gas and Electric Company’s diverse spending in 2010 by $205 million (or 22.1 percent), as our overall spending declined by $160 million (or 4.4 percent).
Institutionalizing Supplier Diversity Within PG&E
To achieve our ambitious supplier diversity goals, we continued to focus on improving our internal business practices last year.
This included maintaining a network of Supplier Diversity Champions, a group of employees with the responsibility of driving supplier diversity results within our lines of business. Through monthly meetings with senior leadership, these employees set supplier diversity goals, developed strategies, shared best practices and monitored progress toward achieving improved supplier diversity results.
We also increased our employee training and outreach, including publishing a quarterly newsletter, Powered by Diversity, as a vehicle for sharing supplier diversity best practices and success stories directly with employees.
Strengthening our Supplier Relationships
PG&E continues to offer the “Diverse Suppliers Go Green” training program across our service area, reaching a broad base of suppliers and earning positive feedback from attendees.
In 2010, we continued to work with our largest prime contractors to engage diverse suppliers in subcontracting opportunities. In fact, our prime suppliers reported more than $264 million in spending on diverse subcontractors in 2010. We achieved these results by asking prime contractors to set goals and report subcontracting monthly, detailing their progress toward these goals. Audits ensured development and growth of their diverse subcontractors and business solution partners.
We also launched “Diverse Suppliers Go Green,” a program focused on training diverse suppliers on ways to become more competitive by establishing their own sustainability programs; measuring, reducing and reporting their environmental footprint; and defining their green business opportunities.
We also launched the first dual International Organization for Standardization (ISO) 9000 and ISO 14000 web-enabled certification program focused on the value of ISO quality certification to diverse suppliers. Additionally, we hosted workshops to assist diverse suppliers with obtaining certification from the CPUC Clearinghouse.
Engaging with Others
PG&E’s customer base is one of the most diverse of any utility in the nation, and we are aligned with our state policymakers’ goals of widening opportunities for minority-owned businesses.
In 2010, we became the first California utility to include minority-owned investment banks in a taxable bond offering through our partnership with two leading minority-owned investment banks in an offering of $250 million of senior notes. This financial transaction reflects our strong commitment to increasing supplier diversity and our broader commitment to diversity and inclusion.
The banks included Blaylock Robert Van LLC, an African-American owned investment bank based in Oakland, California, and Samuel A. Ramirez & Co., Inc., a Hispanic-owned investment bank headquartered in New York, in addition to Morgan Stanley & Co. Inc. and Barclays Capital Inc., which participated in the bond offering as joint book runners.
This ground-breaking deal demonstrates PG&E’s leadership in providing opportunities to qualified minority enterprises and a commitment to helping foster the growth of California’s economy.
PG&E actively engages with a variety of organizations at the local, state and national level to promote supplier diversity. Last year, this included participating in outreach events to meet and promote diverse firms, introduce prime suppliers to the diverse supplier community and learn and share best practices with other peer companies.
We also worked to address challenges to diverse businesses in low utilization areas through our active engagement with groups such as the California Utilities Diversity Council, which brings together a broad group of utilities and the CPUC on a shared mission to leverage California's diversity resources. Other key organizations include the National Minority Supplier Development Council, the Elite Service Disabled Veteran Owned Business Network and the Women’s Business Enterprise National Council.
We also continued to work with community-based diverse business advocacy organizations to locate diverse suppliers that can work with PG&E as direct contractors and subcontractors.
Earning Recognition
PG&E Corporation and Pacific Gas and Electric Company earned recognition from an array of supplier diversity stakeholders and supporters in 2010 for our commitment to supplier diversity:
- California Hispanic Chamber of Commerce—recognized PG&E for its supplier diversity goal achievement
- Diversity, Inc.—Ranked No. 10 on the 2010 Top Companies for Supplier Diversity
- Elite SDVOB Network Award—For reaching 1.3 percent, or $48 million, with service-disabled veterans in 2009
- Minority Business News—Member of “Corporate 101” (a listing of top companies for supplier diversity) and “Best of the Decade” (for being an industry leader in supplier diversity)
- Northern California Minority Supplier Development Council—Corporate Executive of the Year, Corporate Buyer of the Year and Council Champion Award
Planning for the Future
In 2011, we plan to continue enhancing the supplier diversity program by strengthening our technical assistance program for diverse suppliers, focusing on supplier development in areas of growth for PG&E, such as renewable energy and continuing to carefully analyze and address the areas of our supply chain that pose an ongoing challenge for supplier diversity. We will also continue to work with our prime suppliers to identify new opportunities to engage diverse suppliers.
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