Incremental Progress in a Swiftly Changing Landscape
As our country tackles problems that disproportionately affect communities of color, from income and wealth inequality to climate change, we must face the origins of these challenges head-on. Historically, when public utilities contracted with outside suppliers, they did so using an “old-boy” network, which denied economic opportunity to businesses owned by people of color and by other historically marginalized groups.
Always on the cutting edge, California and many of the companies that operate here have long recognized that diversity is integral to good business, and that a diverse workforce and diverse procurement investment can help companies venture into new markets and increase shareholder value. Nowhere is this culture more apparent than in the groundbreaking supplier diversity efforts taken on by utility companies under the guiding principles of the California Public Utilities Commission’s General Order 156. The California Public Utilities Commission’s model for promoting supplier diversity in the industries it regulates has withstood the test of time and, when the policy is made a priority by the sitting commissioners, it has generated unprecedented results.
Summary of Findings
California’s energy, telecommunications, and water companies remain at the forefront of supplier diversity achievements, with a “class average” well above their peers nationwide. However, there is still progress to be made. In 2018, figures reported by the companies to the California Public Utilities Commission show that:
- Most companies improved their percentage of procurement dollars spent with Minority Business Enterprises in 2018. However, a broad gap remains between high performers and low performers.
- The cable industry continues to neglect supplier diversity, with Comcast and Cox both receiving grades of F. Comcast’s contracting with minority suppliers dropped sharply this year.
- With the exception of Verizon, Cox, and Sprint, the companies’ spending with African American Business Enterprises continued to be a challenge.
- The companies’ spending on Asian American/Pacific Islander suppliers slipped.
- While over two thirds of the companies saw improvement in their spending with Latino suppliers, overall spending with those suppliers was still unacceptably low.
- The companies’ spending with Native American suppliers saw some improvement, with 50 percent of companies reporting increased spending.
- The companies’ spending with women-owned suppliers stayed relatively flat in 2018, and the companies’ spending with minority women-owned suppliers remained markedly lower than spending with women-owned suppliers overall.
- The companies’ spending on LGBT-owned suppliers saw some improvement, but still has a long way to go.
- The companies’ spending with disabled veteran-owned suppliers continued to slip.
This year, three companies exceeded 30 percent procurement with minority-owned businesses. In addition to the overall strength of 2018’s results, companies spent a combined $39 billion with businesses owned by people of color, an $8 billion increase over 2017.
While these results are impressive, several companies report internal pressure to reduce or eliminate their supplier diversity programs. In the face of leadership changes, budget cuts, shifts in corporate strategy and other internal changes, the benefits of supplier diversity remain relevant and necessary in the 21st century global economy.
Companies that report strong support from executive leadership and concerted efforts to include diversity at all stages in the procurement process continue to show strong results. In particular, companies that embrace supplier diversity best practices demonstrate strong results in traditionally underutilized categories. These industry leaders show that strong performance and consistent progress are, in fact, possible and set a strong example for their reporting peers.
It is particularly encouraging that 2018 saw overall strong results at a time when the energy and communications industries underwent significant shifts in the landscape. Utilities have grappled with the emergence of more community choice aggregators online1 and serving customers, as well as more frequent, larger, and more devastating wildfires across the state; these changes in the energy landscape raise necessary questions about the electrical grid’s reliability, affordability, and resiliency. Wireline and wireless companies have experienced a shift from regulation at the federal level to regulation at the state level, which may result in those companies having to adjust their business models in response to state-level regulation. Despite these challenges, many of the companies in those industries maintained or increased their supplier diversity spending
About Our Report
The Greenlining Institute’s Supplier Diversity Report Card grades California’s energy, communications, and water companies based on the supplier diversity reports the companies file with the California Public Utilities Commission. Our rankings are based on performance and improvement: Grades are primarily determined by the companies’ percentage spending, with adjustments made for significant increases or decreases compared to the previous year. We break down spending by ethnic categories, as well as minority women-, disabled veteran-, and LGBT-owned suppliers. We make recommendations based on what we see in the numbers and what we hear from the companies themselves about their programs and practices. We advocate for supplier diversity because it creates economic gains on all sides: It promotes economic development in diverse communities, and by increasing competition and diversity in the supply chain, generates a better return on investment for companies that meaningfully engage in it.