2022 Environmental, Social, and Governance Report

California Water Service Group logo which reads, Investing for Life. California Water Service, Hawaii Water Service, New Mexico Water Service, Texas Water Service, Washington Water Service.

This 2022 Environmental, Social, and Governance (ESG) Report and ESG Analyst Download (collectively the “2022 ESG Disclosures”) contain forward-looking statements within the meaning established by the Private Securities Litigation Reform Act of 1995. The forward-looking statements in the 2022 ESG Disclosures include the Company’s objectives, goals, targets, progress, or expectations with respect to ESG, sustainability, and corporate social responsibility matters, and business risks, opportunities, and plans. Because they are aspirational and are based upon currently available information, expectations, and projections, they are subject to various risks and uncertainties, including limitations on our ability to make ESG investments without the support of our regulators, and actual results may differ. Because of this, the Company advises all interested parties to carefully read and understand the Company’s disclosure on risks and uncertainties found in Forms 10-K, 10-Q, and other reports filed with the Securities and Exchange Commission (“SEC”). The Company undertakes no obligation to update any forward-looking or other statements, whether as a result of new information, future events, or otherwise, and notwithstanding any historical practice of doing so. The Company may determine to adjust any objectives, goals, and targets or establish new ones to reflect changes in our business.

Historical, current, and forward-looking ESG-related statements and data in the 2022 ESG Disclosures may be based on standards for measuring progress that are still developing, controls and processes that continue to evolve, and assumptions that are subject to change in the future.

The information included in, and any issues identified as material for purposes of, the 2022 ESG Disclosures may not be considered material for SEC reporting purposes, and the use of the term “material” in the 2022 ESG Disclosures is distinct from, and should not be confused with, such term as defined for SEC reporting purposes.

Due to the inherent uncertainty and limitations in measuring greenhouse gas (GHG) emissions under the calculation methodologies used in the preparation of such data, all GHG emissions or references to GHG emissions in the ESG Disclosures are estimates. There may also be differences in the manner that third parties calculate or report GHG emissions compared to the Company, which means that third party data or methodologies may not be comparable to our data or methodologies.

Website references and hyperlinks throughout the 2022 ESG Disclosures are provided for convenience only, and the content on the referenced third-party websites is not incorporated by reference into the 2022 ESG Disclosures, nor does it constitute a part of the 2022 ESG Disclosures. The Company assumes no liability for the content contained on the referenced third-party references.

Letter from the CEO

For us at California Water Service Group, “ESG” is shorthand for doing the right thing, a value that has been foundational to this Company since its inception nearly a century ago. These three little letters represent our commitment to identifying and mitigating risks to the business; taking care of people and the planet; holding ourselves to the highest ethical standards; and enhancing the quality of life for our stakeholders by being the best and most responsible water and wastewater utility we can be.

Headshot of California Water Service Group CEO, Martin A. Kropelnicki.

It is a shame that the specter of politics has recently and increasingly cast a shadow over the good work being done by many businesses in the name of ESG. As I’ve said to employees throughout the company, our ESG program is not politically motivated, nor is it an excursion from our proven business strategy. We invested time and resources into conducting an ESG materiality assessment because we are focusing on the ESG topics that are pertinent to us and vital to the long-term sustainability of our business. I’m pleased to report that we continued to make good progress in these key areas during 2022, including:

  • We completed an updated inventory of our greenhouse gas emissions in accordance with the Greenhouse Gas Protocol and committed to setting absolute, science-based Scope 1 and Scope 2 emissions reduction targets in 2024.
  • We invested approximately $328 million in infrastructure to improve resiliency, water quality, and sustainability.
  • We invested more than $6.1 million in water conservation rebates and programs for customers, helping them save approximately 180 million gallons.
  • We completed a fleet study to identify optimal replacement cycles and opportunities to downsize vehicles.
  • We cleared fire breaks around key facilities to minimize risk of wildfire damage and installed additional backup generators to enable us to operate during power interruptions.
  • We developed and refined contingency plans for operating our water treatment plants impacted by climate change-driven events, including fires, floods, and droughts.
  • We hosted 20 Emergency Operations Center training engagements in collaboration with communities across our service areas, better preparing us and our communities for enhanced coordination and resilience during emergency events.
  • We contributed more than $1.58 million to charitable organizations working to enhance the quality of life in our communities.
  • We hosted seven events in our communities to help low-income customers take advantage of our rate assistance and other programs.
  • We provided unconscious bias training to 95% of our employees.
  • We conducted surveys and focus groups to measure employee engagement, and developed a more formal and robust employee communication strategy.

Moving forward, the Board of Directors and I are committed to continuing our efforts to set goals, make progress, and communicate transparently on our ESG program. Sadly, there has been debate about the benefits of “ESG” and the long-term benefits for society. Despite this, we remain focused on our sustainability, citizenship, and corporate responsibility, because we believe that doing so is in the best interests of our customers, communities, employees, and stockholders.

Martin A. Kropelnicki,
President & Chief Executive Officer

About Us

California Water Service Group (Group, the Company, we, our or us) serves more than 2 million people in over 100 communities and is headquartered in San Jose, California. We are a leading provider of water and wastewater services and the third-largest publicly traded water utility in the United States (NYSE: CWT).

Group includes seven operating subsidiaries. California Water Service Company (Cal Water), New Mexico Water Service Company (New Mexico Water), Washington Water Service Company (Washington Water), and Hawaii Water Service Company, Inc. (Hawaii Water) are regulated public utilities that also provide certain non-regulated services. CWS Utility Services and HWS Utility Services LLC (collectively referred to as Utility Services) maintain non-utility property and provide non-regulated services to private companies and municipalities outside of California. Our seventh subsidiary, TWSC, Inc. (Texas Water), is a majority shareholder of BVRT Utility Holding Company (BVRT), which owns and develops wastewater and water utilities in Texas. The majority of our business consists of the production, purchase, storage, treatment, testing, distribution, and sale of water for domestic, industrial, public, and irrigation uses—and includes the provision of domestic and municipal fire protection services.Other services include wastewater collection and treatment. We also offer non-regulated services, such as water system operation, billing, and meter reading services under agreements with municipalities and other private companies. Additional non-regulated operations include the lease of communication antenna sites, lab services, and the promotion of other non-regulated services. Our 10-K includes more information about our operations and organization.

About This Report

Our 2022 Environmental, Social, and Governance (ESG) Report discloses activities from January 1 to December 31, 2022, representing our sixth year of ESG reporting. We align our disclosures with the Sustainability Accounting Standards Board (SASB) Water Utilities and Services Industry Standard, leverage the guidance of the Task Force on Climate-related Financial Disclosures (TCFD), and reference the 2021 Global Reporting Initiative (GRI) Universal Standards. Our 2022 ESG Analyst Download provides key performance metrics for our reporting topics.

Data and disclosures within this report cover all subsidiaries, unless otherwise stated. Since Texas Water does not have full ownership of BVRT, Texas operations are not included in our reporting. In this report, the terms “ESG” and “sustainability” are used interchangeably to indicate environmental, social, and governance practices that demonstrate our commitment and responsibility to managing our material issues. For additional information about this report, please contact our ESG Program Manager at sustainability@calwater.com.

Our Purpose

To enhance the quality of life for our customers, communities, employees, and stockholders

Our Core Values

  • Integrity
  • Safety
  • Agility
  • Service
  • Respect and Collaboration
  • Commitment
  • Innovation
  • Corporate Citizenship

Our Approach to ESG

We are dedicated to understanding and leveraging the interdependence of ESG interests and are proud of our contributions to a sustainable future. We aim to integrate our commitment to protecting the planet, caring for people, and operating with the utmost integrity into the fabric of our daily business activities. We believe this will support our long-term sustainability and business success and help us achieve our purpose of enhancing the quality of life for those we serve.

Our Focus Areas

Through our foundational 2020 materiality assessment, we prioritized ESG focus areas by researching the landscape of ESG topics, mapping impacts to our value chain, incorporating internal and external stakeholder feedback, and validating our findings with internal leadership. Our material and other high-priority ESG topics inform our ESG program, disclosures, objectives, corporate strategy, and stakeholder engagement.

In the context of this report, the terms “material” and “materiality” refer to ESG impacts consistent with the voluntary reporting standards with which we seek to align our ESG reporting, and should not be confused with what we consider “material” for the purposes of U.S. securities laws and the filings we make with the U.S. Securities and Exchange Commission (SEC).

Reporting Topics
N/A Environmental Social Workforce Governance
Most Material2 Water Supply Management, Reliability, and Resilience Drinking Water Quality and Customer Safety Diversity, Equality, and Inclusion Public Policy and Political Involvement
Water System Efficiency Emergency Preparedness and Response Talent Attraction and Retention Corporate Governance
End-Use Conservation Water Affordability and Access N/A Ethics
Climate Change, Energy, and Emissions Stakeholder Engagement and Public Participation N/A N/A
N/AN/A Cybersecurity and Data Privacy N/A N/A
N/A Community Support N/A N/A
High Priority3 Environmental Management and Compliance Customer Service Workplace Health and Safety Responsible Sourcing
N/A N/A Training and Development N/A
N/A N/A Labor Relations and Management N/A
N/A N/A Compensation, Benefits, and Employee Wellbeing N/A

1 The reporting topics are listed in priority order for each tier according to the results of the materiality assessment, with our most material ESG topics listed first. Each material topic is covered in detail throughout this report.

2 The “Most Material” topics were identified as most critical to both internal and external stakeholders with regards to business impact, risk, and opportunities. We view these topics as the most important to effectively manage, set goals for, and provide robust discussion of in our reporting.

3 “High-priority” ESG topics are those that did not necessarily emerge as the most material but were nevertheless identified as important topics to monitor and manage effectively. In some cases, these topics are areas our stakeholders viewed as standard business practice or areas that Group already manages well but must maintain.

Our Objectives

Set in 2021, our ESG objectives reflect our efforts to drive accountability, measure progress, and establish milestones that guide our performance. We developed these objectives to concentrate on topic areas that did not already have strong initiatives in place at Group. In support of these initiatives, we continue to engage with stakeholders, including our regulators, to advocate for ESG-related projects.

In 2022, we made the following progress toward our objectives. For additional information on our efforts related to each ESG objective, see the report sections linked below:

Material Topic Objectives 2022 Progress Update
Climate Change and Energy and Emissions Develop a company-wide electric vehicle strategy, including a plan to purchase 100% zero-emission passenger vehicles in California by 2035. We continue to implement our fleet sustainability strategy with a focus on California as the 2035 California Air Resources Board mandate prompts more ambitious action. These efforts include evaluating electric vehicle availability and their feasibility relative to our operations, which supports our work towards the 2035 goal.
Climate Change and Energy and Emissions By 2023, develop and begin implementing an enterprise-wide renewable power purchasing strategy to pursue opportunities to increase renewable electricity use and decrease Scope 2 greenhouse gas emissions. Our initial steps have included conducting research on the renewables market and potential opportunities in our areas of operation, as well as performing a desktop analysis of electrical demand to inform our renewable power purchasing strategy, which remains on track for completion in 2023.
Climate Change and Energy and Emissions In the next 10 years, invest no less than $5 million in emissions-reducing energy solutions, such as renewables and low-carbon energy sources. We are conducting energy audits of our office facilities throughout California, with the goal of updating our building sustainability plan and identifying optimal locations for solar energy investments that will also allow us to meet operational needs. Our pending renewable power purchasing strategy will help inform further renewable energy investments.
Climate Change and Energy and Emissions Set absolute, science-based greenhouse gas emissions reduction targets for Scope 1 and Scope 2 emissions by the end of the third quarter of 2024. We worked with an independent third-party to complete an updated greenhouse gas inventory in accordance with the Greenhouse Gas Protocol. This serves as a critical step in establishing a more thorough and complete baseline from which to set meaningful reduction targets.
Climate Change and Energy and Emissions By 2025, complete comprehensive data analysis and modelling, and set and publish targets for energy/greenhouse gas intensity of water sourced and/or delivered to customers. As part of our greenhouse gas inventory, we have completed initial calculations of our energy and greenhouse gas intensity of water produced (sourced) and disclosed those numbers in this report. We intend to continue to analyze these intensity metrics and use a data-driven approach to determine the appropriate targets. We believe these efforts will also facilitate our consideration of greenhouse gas emissions in our strategic decision-making about water source mixes.
Community Support By 2024, roll out an annual enterprise-wide Community Celebration Day to allow employees to spend a half day on a team community service project. Strive to achieve 50% employee and 90% district involvement in the first year. We have developed plans to pilot our first annual Community Celebration Day in 2023, with full implementation planned for 2024.
Diversity, Equality, and Inclusion By 2024, establish a partnership with at least one educational or community resource organization per region enterprise-wide, with the aim of creating more diverse candidate pools. We are part of a California Water Association group that intends to collaborate with community colleges to build a career pathway in the water sector. We have also identified a number of colleges across our regions with whom we plan to explore the potential for partnerships. Additionally, we continue to work with local schools and colleges in California, including Cristo Rey Jesuit High School, Santiago College, Gavilan College, San José State University, Cañada College, California State University Long Beach, and California State University, Bakersfield.
Emergency Preparedness and Response By 2024, establish formal partnerships with the State-specific Office of Emergency Services, Water/Wastewater Agency Response Network (WARN), and other essential utilities to improve coordination for large-scale emergency events and/or emerging threats. As of year-end 2022, we are members of and/or have signed agreements in place with the following entities:
  • The California WARN
  • The California Governor’s Office of Emergency Services mutual aid program
  • The New Mexico Water/Wastewater Agency Response Network
  • The Washington State Intrastate WARN
The state of Hawaii does not have a Water/Wastewater Agency Response Network in place, so we are proactively working with stakeholders in that state to assess the feasibility of developing a similar program. BVRT, the company of which our Texas Water subsidiary is a majority shareholder, has also signed a membership agreement with the Texas WARN.
End-Use Conservation Meet the water-use targets mandated by the State of California for each district effective in 2027. Final water-use targets for California are pending approval by the State Water Resources Control Board at the time of this report’s publication. Although the exact targets and timelines may change, we are preparing to comply with these objectives through our conservation program.
Stakeholder Engagement and Public Participation Starting in 2022, partner with community stakeholders to host customer engagement and education events in low-income communities to increase awareness of customer assistance and conservation programs. Host these events in each California district at least once every three years. In addition, engage key stakeholders to increase public trust, build partnerships, and understand external perspectives. We successfully hosted customer events in low-income communities in seven California districts. We intend to continue to host similar events in remaining districts over the coming years, aligned with our objective to offer these specific events to communities in each California district at least once every three years.
Water Supply Management, Reliability, and Resilience By 2035, increase the use of recycled water in our operations by no less than 5% of total water supply to customers. In 2022, recycled water accounted for approximately 3% of our total water supply. To reach 5%, we continue to invest in wastewater treatment infrastructure for high-quality water reuse and explore additional opportunities to purchase reclaimed water from wholesalers.