Greening Our Supply Chain

Strengthening Our Business Practices and Systems

One important area of focus is establishing strong internal processes and infrastructure to manage our suppliers’ environmental performance. For example, we continue to increase the percentage of requests for proposals (RFPs) that include a set of “green” criteria. In fact, this percentage has grown from 30 percent in 2007 to 88 percent in 2010—exceeding our target of 75 percent.

We also set milestones and track the environmental performance of 100 suppliers through a standard scorecard and recurrent review process. These suppliers include the most strategic suppliers for our business (with the exception of fuel suppliers), including those with whom we spend significant dollars and those that are critical to our operations. We also challenge these suppliers to develop unique initiatives that will help PG&E reduce its supply chain carbon footprint.

We also ask our top tier suppliers to participate in an annual survey issued by the Electric Utility Industry Sustainable Supply Chain Alliance, a consortium of 16 utilities formed in 2008 to drive environmental performance and advance sustainable business practices among industry suppliers. The survey gives PG&E data on important aspects of our suppliers’ environmental performance, including greenhouse gas emissions, energy and water usage, waste and materials management. Leveraging the survey results, PG&E works closely with our suppliers to identify environmental opportunities.

Working with Suppliers to Pursue Innovation

Our suppliers have achieved environmental improvements across a spectrum of projects. For example, CH2M Hill earned PG&E’s 2010 Green Supplier of the Year award for its support of a pilot partnership between PG&E and the California Department of Toxic Substances Control focused on more sustainable environmental remediation. Working under close regulatory oversight, we continue to explore using a standard set of sustainability criteria when designing and implementing cleanup strategies.

Other suppliers have continued to actively engage with PG&E. For example, S&S proposed to bring eco-friendly degreasers and janitorial cleaning products to our fleet maintenance and facilities team. Another supplier, Black & Veatch, suggested conducting a study to design and develop future substation buildings that will be more energy-efficient and cost-effective.

Partnering with Industry Peers

PG&E continues to be an active leader in the Electric Utility Industry Sustainable Supply Chain Alliance, a consortium we co-founded in 2008 as a way to work collaboratively with other utilities and organizations on greening our supply chain. The Alliance focuses on non-fuel suppliers.

The Alliance established a supply chain operations greenhouse gas emission and energy consumption reduction goal of 10 percent by 2015 using a 2008 baseline of nearly 3 million MMBTUs. The Alliance also committed to having a majority of participating member suppliers establish a voluntary greenhouse gas emission reduction goal by the end of 2012. PG&E is actively involved in the Alliance’s working teams to educate suppliers on the programs available to assist them in establishing greenhouse gas reduction goals.

Additionally, PG&E’s senior vice president and chief procurement officer will serve as Chair of the Alliance in 2011, leading the development of a strategic and operating plan to better focus the Alliance’s objectives on developing green standards and driving adoption of those standards by the industry’s supply base.

Focusing on Our Carbon Footprint

To better understand the environmental life cycle impacts of the products and services we purchase, PG&E is collaborating on a multi-year project with researchers at the University of California, Berkeley and Climate Earth, a carbon accounting consultancy in San Francisco.

The project will yield greater visibility into the greenhouse gas emissions of our supply chain and help identify promising opportunities for emission reductions. We completed the project’s first phase by identifying the top 50 products and services in PG&E’s supply chain with the highest greenhouse gas emissions (excluding contracts for power generation). We then selected a short-list of the top five suppliers, for which we will complete in-depth case studies to identify detailed opportunities to reduce emissions.

This pilot study will facilitate greater collaboration and form a sustainable framework in which PG&E and its suppliers can collectively develop targeted climate action plans to reduce supply chain emissions, both upstream and downstream.