Uneven Progress in Challenging Times
America’s racial wealth gap was created by deliberate policy choices based on race, and solutions that don’t consider race and ethnicity simply won’t work. 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 CPUC’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.
Greenlining’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 LGBTQ-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.
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, companies could still do more to increase their contracting with diverse suppliers. In 2019, figures reported by the companies to the California Public Utilities Commission show that:
- Only eight of the 22 companies included in our report improved their percentage of procurement dollars spent with Minority Business Enterprises in 2018. A broad gap remains between high performers and low performers—eight companies’ combined $593 million increase in dollar spending with MBEs offset the combined $372 million decrease by the other 14 companies.
- With the exception of AT&T California, AT&T Wireless and California American Water, the companies’ spending with Black- Owned Business Enterprises continued to be a challenge. The companies’ combined spending with Black-owned suppliers fell almost 10 percent, while the companies’ combined dollar spending with Black women-owned suppliers dropped almost 37 percent.
- While the companies’ spending on Asian American/Pacific Islander suppliers remained steady, just half of the companies showed improvement in this category.
- Less than half of the companies increased their spending with Latino suppliers. Overall dollar spending in this category declined by over $32 million and remains unacceptably low.
- The companies’ spending with Native American suppliers continued to see improvement, with 50 percent of companies reporting increased spending.
- The companies’ spending with women-owned suppliers stayed relatively flat in 2019, dropping by almost $13 million. Promisingly, dollar spending with minority women-owned suppliers increased by almost $201 million.
- The companies’ spending on LGBTQ-owned suppliers remained flat and still has a long way to go.
- The companies’ spending with disabled veteran-owned suppliers continued to slip.
This year, only two companies (Verizon/MCI and Verizon Wireless) exceeded 30 percent procurement with minority-owned businesses. While their results were inconsistent, the companies spent a combined $9.4 billion with businesses owned by people of color, a $220 million increase over 2018. For the past several years, the water companies have engaged in a joint effort to create data-driven best practices that are showing measurable results. The water companies’ grades reflect this increased commitment.
The contracting needs of specific companies can vary wildly, particularly from sector to sector. For example, a large part of electric utilities’ contracting involves electric line construction and maintenance work. There are, apparently, only two Black-owned contractors in the United States that do this work. While both of them are located in California, only one of them is certified as an MBE. This, of course, makes it difficult for electric utilities to contract with Black-owned suppliers for line construction work. In these instances, it is important for companies to identify, and help build the capacity of, companies that could potentially do the work.
The COVID-19 pandemic created a surge of demand for personal protective equipment for the companies’ employees, many of whom are essential workers. Many of the companies identified the need for PPE as a supplier diversity opportunity and sought out diverse suppliers that could pivot to making, storing and distributing PPE. The companies' response to the need for PPE is a shining example of supplier diversity done right, and we thank them for recognizing the importance of contracting with diverse businesses, especially in times of crisis.
Many of the companies also reported increased efforts to ensure that their contractors can weather the pandemic, including streamlining the invoicing process, accelerating payment, and in some instances, even making advance payments for work.