Supplier Diversity and Small Business Results

PG&E’s dedication to supplier diversity is a core part of our business strategy and is an example of our commitment to enhancing economic vitality within our service area. In 2011, PG&E spent $1.61 billion with diverse suppliers, an all-time record. The spending accounted for 36.6 percent of the Utility’s total procurement budget, exceeding our goal of 34 percent. It capped a nine-year upward trend starting at 18 percent in 2003.

According to the CPUC, the Utility spent more on products and services from businesses owned by minorities, women and service-disabled veterans than any of the more than 30 other utilities and telecommunication companies in California. PG&E’s goal in 2012 is to spend 37.3 percent with diverse suppliers.

We increased our spending in all three DBE categories: spending increased by $335 million with minority business enterprises, $120 million with women business enterprises and $22 million with service-disabled veteran-owned business enterprises.

The table below summarizes our recent supplier diversity performance. It also captures our work with non-DBE 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 2009 Results (%)	Utility’s 2010 Results (%)	Utility’s 2011 Results (%)
Minority Men	11.2	14.4	16.7
Minority Women	4.0	5.3	6.4
Minority Business Enterprise	15.2	19.6	23.1
Women Business Enterprise (WBE)	9.1	11.3	11.7
Subtotal Women, Minority Business Enterprise (WMBE)	24.2	31.0	34.7
Service-Disabled-Veteran Business Enterprise (DVBE)	1.3	1.7	1.8
Total WMDVBE	25.6	32.7	36.6
Non-Diverse Small Business Enterprise	6.1	6.3	6.0
Grand Total	31.7	39.0	42.6

Category	2009	2010	2011
Utility’s Aspirational Target (%)	25.0	30.0	34.0
Total Diverse Spending (%)	25.6	32.7	36.6

Category	Utility’s 2009 Results	Utility’s 2010 Results	Utility’s 2011 Results
Supplier Diversity Spend	$928 million	$1,134 million	$1,611 million
Non-Diverse Small Business Enterprise Spend	$220 million	$219 million	$264 million
Total Spend	$1,148 million	$1,353 million	$1,875 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 60 percent, or $1.7 billion, during this timeframe, spending on diverse suppliers has nearly tripled, increasing 169 percent or $1 billion.

In addition, PG&E’s spending in every ethnic category has also increased significantly. In particular, our spending with service-disabled veteran-owned businesses (DVBE) reached a record 1.8 percent of the total, a 36.8 percent increase in spending over 2010. We achieved this result through a steadfast commitment to seek innovative ways to include DVBEs in our business. This included convening a cross-functional team to exclusively focus on developing DVBE opportunities. For example, the team worked with a non-diverse supplier to develop a business solution partnership that resulted in more than $2 million in new business for a DVBE in 2011.

Overcoming Key Challenges

These results are particularly significant in light of ongoing challenges. PG&E has devoted significant capital toward ensuring the safety of its gas pipelines and additional capital to continue generating energy for customers. The substantial investments required in these major infrastructure plans continue to pose a challenge in that few small or diverse suppliers are large enough to independently handle such projects.

PG&E responded to these challenges by encouraging prime suppliers (direct, non-diverse suppliers) to work collaboratively with diverse suppliers to serve PG&E on such large infrastructure and energy generation projects. The Utility was diligent in working with prime contractors and DBEs to examine the end-to-end supply chain of these projects, seeking the best opportunities for diverse suppliers to serve as subcontractors and business solution partners.

Through these efforts, we were able to increase the Utility’s diverse spending in 2011 by $477 million (or 42.1 percent), as our overall spending increased by $935 million (or 26.9 percent). This means that more than 50 percent of our increase in spending in 2011 was with diverse suppliers.

Institutionalizing Supplier Diversity within PG&E

We continue to focus on improving our internal business practices to drive results with supplier diversity.

This included working with a network of Supplier Diversity Champions, a group of employees with the responsibility of expanding supplier diversity 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 an internal newsletter, Powered by Diversity, as a way to share supplier diversity best practices and success stories directly with employees.

Strengthening our Supplier Relationships

PG&E’s commitment to supplier diversity serves as a catalyst to the growth and expansion of emerging and diverse firms.

A key area of focus is working with our largest prime contractors to engage diverse suppliers in subcontracting opportunities. In 2011, our prime suppliers reported more than $498 million in spending on diverse subcontractors. We achieved these results by asking prime contractors to set goals and report subcontracting monthly, detailing their progress toward these goals. Executive management also personally communicated with prime suppliers to drive diversity goal achievement. Audits ensured development and growth of our prime suppliers’ diverse subcontractors and business solution partners.

Another major area of focus is developing diverse suppliers. For example, in 2011, we sponsored five women and minority business owners for the UCLA Management Development for Entrepreneurs program. This intensive certificate program enables owners and managers of entrepreneurial businesses to develop management skills and strengthen their ability to build effective organizations.

We also expanded our technical assistance offerings, including Diverse Suppliers Go Green, an initiative focused on training diverse suppliers on ways to establish their own sustainability programs; measure, reduce and report their environmental footprint; and define their green business opportunities. The program featured a Green Policy Statement Contest and a robust online Green Business Toolkit. We also shared a Green Tenant Toolkit, which assists tenants and landlords in reaching sustainability goals within commercial buildings.

Building on this success, we launched Diverse Suppliers Go Global in 2011. This seminar, developed by WE Connect International, educates suppliers on the advantages of evaluating and participating in global supply chains and global markets.

We also continued the first dual International Organization for Standardization (ISO) 9001 and ISO 14001 web-enabled certification program, focused on the competitive advantages ISO quality certification provides for diverse suppliers. In 2011, one of PG&E’s woman-owned suppliers achieved certification and four more diverse suppliers expect certification in 2012.

Building Partnerships, Promoting Diversity

Our utility customers are among the most diverse of any utility in the nation, and when we leverage this diversity by including diverse suppliers in our supply chain, we optimize PG&E’s operations.

To do so, 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 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, community organizations 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 2011:

• DiversityInc—ranked eighth on the “Top 10 Companies for Supplier Diversity” list and ranked second on the “Top Five Regional Utilities”
• Hispanic Business—named among the magazine's “Diversity Elite 60” for the seventh time
• Women's Business Enterprise National Council—named one of America's Top Corporations for Women's Business Enterprises
• Northern California Minority Supplier Diversity Council—named “Corporation of the Year”
• Edison Electric Institute—presented the “Supplier Diversity Excellence” award for outstanding leadership
• Diversity Careers—selected as Readers Pick for Best Supplier Diversity Company
• US Pan Asian American Chamber of Commerce—named “Corporation of the Year”

Review additional recognition for diversity and inclusion.

Planning for the Future

In 2012, we plan to continue expanding our technical assistance program by introducing a new training program, ”Diverse Suppliers Are Safe,” an initiative focused on enhancing safety within the work environment. In addition, PG&E will continue to expand its focus on supplier development.

PG&E is also co-founder of the University of California’s Advanced Technology Management Initiative. The program, launched in 2012, will prepare diverse suppliers for participation in emerging technologies, such as those already being used to build a more intelligent electric grid. PG&E will provide annual scholarships to this graduate-level program.