Utility companies are embracing supplier diversity as a path to increasing competitiveness in a transforming marketplace.
By James Hsu

As the energy industry transforms, it is leading to a more locally-based network of utility companies serving communities, many of which are multicultural. National Grid is a good example of a regional natural gas and electricity company serving a specific area and recognizing the importance of supplier diversity for connecting with, growing, and improving the communities it serves in New York, Rhode Island, and Massachusetts.

The utility industry's focus on including minority and women-owned businesses in the supply chain has produced a variety of strategies that are built on the belief that competitiveness is strengthened through inclusion. Diverse suppliers bring new perspectives and ideas to an established industry that is undergoing a transformation.

Putting Commitment into Action
The utility sector came into the spotlight in June 2016 when an Ernst & Young 2016 industry report found a lack of gender diversity in senior-level positions and women accounted for only 16 percent of board members. Though this report concerned one aspect of workforce diversity, it brought attention to the industry diversity gap which extends to the supply chain.

Diverse organizations, like the Women's Business Enterprise National Council (WBENC), have joined the effort to diversify the energy industry. In autumn 2017, WBENC launched the WBENC Energy Executive Program (EEP) to assist women-owned businesses to become valued participants in the global energy supply chain. The EEP program is underwritten by Shell Oil Co., making this a corporate strategy and a commitment to increase the participation of diverse businesses in the supply chain.

Utility and energy companies are developing a wide variety of strategies. National Grid, for example, has developed a dynamic business strategy that includes assisting diverse suppliers with certification, sponsoring business development programs, offering supplier mentorship programs, and providing programs to increase access to capital.

The utility sector is undergoing a transformation as part of the larger energy industry transformation. In the past, the utility sector was largely protected from disruption, making it a stable industry that people could count on to provide power when it was needed.

Today, the same companies are faced with many disruptive forces. Two of those forces are technology and consumer awareness of the environmental impacts of energy production. Utility companies need to produce cleaner energy, assist residential and business customers with embracing energy-efficiency measures, comply with increasing government regulation, maintain service reliability despite increasing electricity demands, and improve customer service. They must also stay current with technology which includes smart grid technologies, other green technologies, and increasing production of electric vehicles.

Improving Communities Through Supplier Relationship Building
In the past, electricity consumers had little say in utility operations, but today communities are more informed and more active in addressing their needs. Traditional supply chain approaches did not focus on diversity, yet diversity is precisely what the utility sector needs in order to connect with the communities they serve.

Traditionally, a utility business developed technologies in-house, but that limits the ability to modernize and keeps the business inward focused. Given the complexity of the operating environment, capital requirements to modernize, and the need for greater capabilities, it makes sense to leverage external skill sets found in suppliers. Adding diversity brings new perspectives, creativity, new technologies and important community connections.

Utility companies use numerous strategies to build diverse supply chains. Duke Energy won the 2017 Edison Electric Institute's Excellence Award for the company's efforts to advance purchasing opportunities for diverse suppliers, particularly for its innovative approach to relationship-building.

The highest quality supplier diversity programs today go way beyond developing registration portals. Business strategies should be proactive in reaching out to MWBEs. Duke Energy's strategy includes hosting business development events, sponsoring educational workshops and industry seminars, and promoting the personal and professional development of supplier representatives. When given the award, Edison Electric recognized that Duke Energy has proactively sought diverse suppliers, and the efforts have made a lasting positive impact on "economic development locally, regionally, and nationally."

The utility sector is a complex sector in a state of transition. Suppliers need a deep understanding of the energy industry in order to compete for business, and the best way for them to gain that understanding is for utility companies to offer or sponsor educational programs in various communities. These programs provide information on the utility industry, operations, strategies and policies, and they also offer opportunities for personal interaction. This is also a strategy to attract MWBEs in the technical arena. In many ways, supplier training and development programs enable diverse suppliers to gain knowledge of the utility sector value chain.

Opportunities as Diverse as the Supply Chain
Another message the utility companies should send to the community is that there are many opportunities for diverse suppliers.

An example is LEM Products, a woman-owned manufacturer of safety and industrial-grade tags, labels, and signs. The diverse supplier has a product area that is specifically focused on the energy industry. The company manufactures ANSI- and OSHA-compliant products that address the concerns of utility companies, like signs that are weather-resistant or contribute to increased safety. In addition to products for the utility sector, there are products for oil and gas, nuclear, and wind sectors.

The National Utilities Diversity Council's "Best Practices Supplier Diversity Toolkit" offers some helpful ideas for advancing supplier diversity in the utilities, telecommunications, and cable and broadband industries.

There are many examples of utility companies that are leaders in supplier diversity. For example, Southern California Gas Co. offers a Supplier Showcase to educate suppliers on the contracting process. Experience has shown that early integration into the contract process increases diversity in the supply chain. Georgia Power educates suppliers on its communication process. Sprint offers supplier networking events. Pacific Gas & Electric connects prime suppliers and potential diverse subcontractors.

Each utility business needs to develop a strategy that reflects its needs and the community it serves. Diverse suppliers need to take advantage of the outreach efforts of utility companies. There are many opportunities for diverse suppliers in this traditionally non-diverse sector.