Corporate oversight and controls support our efforts to sustain and grow our business. We seek to establish strong corporate governance and responsible leadership through a clear framework of accountability and maintain effective oversight by designing clear bylaws, governance guidelines, policies, practices, and organizational structures.
Our commitment to excellence starts at the highest level of our organization with our Board of Directors, which oversees our leadership team and collaborates with them to establish and pursue business goals. For more general information on Corporate Governance at Group, please see our Investor Relations web site and our annual Proxy Statements.
Our Board is responsible for overseeing our overall ESG progress, including the execution of our climate change strategy. As part of our formal structure for ESG governance, the Nominating/Corporate Governance Committee oversees our overall ESG program and reporting, as well as our Board diversity. We continue to work to strengthen the diversity of our representation on the Board, regarding demographics such as gender, race, ethic, national background, geography, age, and sexual orientation, because we believe that diverse membership offers critical insights by leveraging a range of experiences and perspectives.
Additional Board committees maintain specific ESG-related responsibilities, including the following:
At least annually, executive leadership provides ESG updates to Board committees and/or the full Board. Topics may include introduction of new strategic ESG initiatives, progress on ESG projects and objectives, results of relevant studies and reports, current and emerging legislation, and trends in the industry.
The ESG Executive Oversight Committee, comprised of members of the executive leadership team across functional areas of the Company, is led by our VP of Customer Service & Chief Citizenship Officer and ESG Program Manager. The ESG Executive Oversight Committee’s purpose is to oversee Group’s overall ESG vision, management, and communications, as well as track progress of the strategies, policies, and practices relating to Group’s material sustainability issues. To further promote responsibility for ESG performance across our leadership team, our short-term incentive program links executive compensation to metrics related to ESG initiatives, including for water quality, emergency preparedness, workplace safety, and customer service.
We also have various ESG Working Groups dedicated to specific cross-cutting ESG focus areas. The Working Groups include officer sponsors, subject matter experts, and goal owners across the Company. These teams support the execution of our ESG strategies and objectives as well as facilitate cross-departmental collaboration for their areas of focus. The number of groups, meeting cadence, and areas of focus for the ESG Working Groups may evolve over time based on shifts in need. The ESG Executive Oversight Committee typically receives updates on the ESG Working Groups during their quarterly meetings. Additionally, there are several management committees, such as the Drought Steering Committee, that oversee our strategy for certain ESG-related topics outside of the formal ESG program governance structure.
Audit Committee
Enterprise Risk Management, Safety, & Security Committee
Nominating/Corporate Governance Committee
Finance & Capital Investment Committee
Organization & Compensation Committee
CEO
VP, Customer Service & Chief Citizenship Officer
ESG Executive Oversight Committee
ESG Working Groups and other relevant committees
20 Although the Nominating/Corporate Governance Committee oversees our overall ESG program and reporting, each of the four remaining Board committees maintain specific ESG-related responsibilities as well.
At the individual ESG topic level, the following table outlines governance responsibilities held by our departments, officers, and Board:
| Topic | Departments (Led by Directors and Managers) | Officers | Board Oversight |
|---|---|---|---|
| Climate Change, Energy, and Emissions |
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| Water Supply Management, Reliability, and Resilience |
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| Water System Efficiency |
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| End-Use Conservation |
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| Environmental Management and Compliance |
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| Community Support |
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| Stakeholder Engagement and Public Participation |
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| Emergency Preparedness and Response |
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| Drinking Water Quality and Customer Safety |
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| Water Affordability and Access |
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| Cybersecurity and Data Privacy |
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| Customer Service |
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| Diversity, Equality, and Inclusion |
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| Talent Attraction and Retention |
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| Training and Development |
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| Labor Relations and Management |
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| Compensation, Benefits, and Employee Wellbeing |
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| Workplace Health and Safety |
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| Ethics |
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| Public Policy and Political Involvement |
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| Responsible Sourcing |
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* While we take an interdepartmental approach to many of our ESG topics, Water Affordability and Access is particularly cross-cutting because all departments play a role in finding opportunities to reduce expenses that can ultimately impact affordability. Additionally, the Water Resource Sustainability Department leads our grant funding efforts.
Our Enterprise Risk Management (ERM) program supports our efforts to effectively mitigate ESG risks by incorporating material ESG topics into our ERM process and providing strategic recommendations to enhance performance. Through this program, we focus on strengthening our practices and assessing enterprise risks and mitigation controls annually to contribute to business continuity. Also, as part of the annual refresh of our program, we review best practices and top-tier risks of companies within our industry. Lead officers and departments oversee risk management of individual topics, and our Enterprise Risk Management, Safety, & Security Committee maintains responsibility for the overall ERM process and updates the full Board.
In support of continued improvement, we have initiated an operational review and assurance program to expand our current internal audit activities beyond financial compliance audits. The new program is designed to evaluate the implementation of operational policies and further integrates internal risk management and control opportunities into ESG matters. We performed a risk assessment pilot in 2021 and an operational review pilot for ESG in 2022. We intend to continue to advance this program in the future.
In addition to discussions that take place regularly with the Board of Directors and its committees on aspects of the business relating to our ESG-related focus areas—such as workplace safety, customer service, talent retention, and climate change—ESG program-specific items reviewed by the Nominating/Corporate Governance Committee in 2022 included:
Independent Board Committees
Independent Directors
Mandatory Retirement Age
Independent Lead Director
At Group, we seek to conduct our business in accordance with the highest ethical standards of corporate citizenship and to maintain our accountability through detailed policies and clear expectations, which are required to be adhered to by employees and leadership alike.
Our Business Code of Conduct and Code of Business Conduct and Ethics Policy of the Board of Directors provide expectations for maintaining the highest standards of personal and professional integrity at Group. The Business Code of Conduct, which applies to all employees, sets forth responsibilities related to compliance with laws, fair dealing, conflicts of interest, confidential information, and other ethical issues. To promote awareness of our standards, employees receive online ethics training annually. We may supplement this training by periodically offering live, in-person trainings as well.
Our Audit Committee annually reviews and updates the Business Code of Conduct. Additionally, the Nominating/ Corporate Governance Committee annually evaluates and enhances the Code of Business Conduct and Ethics Policy of the Board of Directors. Furthermore, we audit our policies, confirm that our employees have annually reviewed these ethical standards, and review any ethical issues. Our Internal Audit Department, which provides updates to the Audit Committee and senior management, assesses the effectiveness of the Company’s internal controls.
We utilize several incident reporting mechanisms and opportunities for employees to report ethical violations, complaints, or other concerns. Any form of retaliation against employees who report misconduct is prohibited, as set forth in our Business Code of Conduct. Employees or third parties may report breaches of the code or potential incidents through the following channels:
Our Human Rights Policy aligns with the UN Guiding Principles on Business and Human Rights. The Board of Directors oversees our Human Rights Policy, which covers topics related to ethical conduct, water affordability, workplace health and safety, equal opportunity, labor practices, and responsible sourcing.
Although we have not identified any material human rights risks associated with our direct operations or areas of impact, we are committed to working to mitigate any potential or unforeseen negative impacts. For example, we prohibit slave, child, or otherwise forced labor throughout our operations and supply chain. For additional information on how we protect fundamental human rights and conduct due diligence in our supply chain, refer to the Responsible Sourcing section.
As a water utility, we also recognize we have a responsibility to help support equal access for all human beings to drinking water that is safe, reliable, accessible, and affordable. We seek to do so by investing in infrastructure to source and deliver high-quality water to more communities, enhancing affordability, and preserving the availability and quality of water sources. We promote affordability through our ongoing efforts to minimize costs, provide financial support and flexible payment options, and encourage conservation to lower water bills. For further information, see the Water Affordability and Access section. We also engage regulators and advocate for provisions that protect affordability, customer convenience and access, and the quality of water resources. See the Public Policy and Political Involvement section for details.
To further demonstrate our dedication to protecting the human right to water, we supported legislation that created California’s Safe Affordable Drinking Water Fund to support reliable water service for communities. See our policy on our Commitment to Excellent, Affordable Service page on our web site for more information about our commitment to uphold the human right to water.
In 2022, we worked to enhance opportunities to report ethical concerns by establishing an online web form and QR code to supplement existing hotline reporting mechanisms. We also conducted live in-person training for managers on ethics and compliance reporting as a supplement to the annual online ethics training provided to all employees.
complaints through our incident reporting mechanisms, both relating to human resource-related matters and employee relations
substantiation rate
We utilize several incident reporting mechanisms and opportunities for employees to report ethical violations, complaints, or other concerns. Any form of retaliation against employees who report misconduct is prohibited.
Through our partnerships and regulatory engagement, we support policies that align with our values and our commitment to advance the interests of our customers, communities, employees, and stockholders.
Our political involvement is intended to be policy-driven, non-partisan, and transparent, to benefit our customers, communities, employees, and stockholders. We advocate for affordability, water quality, sustainability, and equality for our customers, as well as seek to safeguard our position as the leading provider of water service in our communities. In addition to our efforts to follow regulations and proactively engage policymakers, we endeavor to set clear internal expectations for our employees and align our activities with our values and objectives.
Leading our efforts, our Government & Community Affairs team is responsible for managing our political donations in accordance with local, state, and federal laws and regulations. The team also oversees two employee-funded Political Action Committees (PACs), which include the same five officers on each Board of Directors. For both PACs, our VP, Government & Community Affairs serves as the Executive Director, our VP, Customer Service & Chief Citizenship Officer is the Chair, and our CEO is the Vice Chair. The purpose of our federal PAC is to organize contributions to support qualified candidates who are running for federal office and may impact Group, our subsidiaries, employees, stockholders, or customers. Our state and local PACs perform the same function related to state and local offices in California.
We engage with industry organizations and trade associations, including the AWWA, CWA, Water Research Foundation, and NAWC, to prepare for emerging regulations and offer input on policies that may impact Group. Additionally, we regularly collaborate with the PPIC to conduct research and generate thought leadership.
Our advocacy efforts and focus areas can be found in public records, and we are required to file quarterly lobbying disclosure reports in accordance with California Government Code Section 86116. It is our policy in California to only use contract lobbyists, and none of our employees are registered lobbyists. Our lobbying focuses mainly on programs that address water-related issues. On our Advocacy page on our web site, we outline several of the core areas on which we focus, including:
We continue to work to integrate cloud-based tools into our processes and systems in order to better manage external relationships and track our political and regulatory outreach activities. For more information, see the Stakeholder Engagement and Public Participation section.
As part of our approach to monitor legislation, our Rates Department oversees our relationship with the utilities commission in each state and examines regulatory impacts. For more information, see the Water Affordability and Access section.
Our recent engagements on public policy included the following:
In 2022, we also launched The Cal Water Difference campaign, which includes our new www.calwaterdifference.com web site. This online resource highlights our recent advocacy efforts, our community engagement initiatives, and news about our progress.
We partnered with community-based organizations to promote access to safe, clean, and affordable drinking water.
We strive to strengthen reliability and responsibility throughout our supply chain by selecting suppliers that seek to mitigate their environmental impacts, align with our expectations for conduct, and reflect the diversity of our communities.
Group is the largest investor-owned water utility west of the Mississippi River, and we recognize our opportunity to generate positive impacts across our supply chain. In addition to applicable regulations, we require our suppliers to comply with our Supplier Code of Conduct, which incorporates principles from the United Nations Global Compact and references recognized standards and regulations, such as the U.S. Foreign Corrupt Practices Act; the United Nations Guiding Principles on Business and Human Rights; and the International Labor Organization Core Labor Standards.
Our Supplier Code of Conduct describes our commitments and expectations regarding anti-corruption, anti-bribery, fair dealing, conflicts of interest, protection of confidential information, workplace conduct and safety, environmental management, human rights and labor practices, supplier diversity, and compliance. It also encourages our suppliers to implement their own written code of conduct and adopt labor practices conforming to international and domestic regulations for their own supply chain. Read the full contents of the Supplier Code of Conduct on our Supplier Code of Conduct page on our web site.
During our initial screening of new suppliers, it is our policy to assess supplier compliance with our standards and to consider supplier diversity among a number of selection criteria. After selecting suppliers, we include conditions in our major contracts to help minimize the risk of negative impacts and enforce management practices related to hazardous materials; waste disposal; wetlands and local wildlife; fair labor; human rights; and health and safety.
Aided by a software solution and service designed to efficiently manage our supplier data, our supplier risk management program—which currently focuses on critical and high-risk suppliers in California—includes supplier risk segmentation, further supplier qualification, and ongoing monitoring. By segmenting suppliers into critical and high-risk categories, we can more easily define our focus areas for enhanced supplier engagement and risk management. We generally regard critical suppliers as those that may offer unique services, have high switching costs, or help prevent service interruptions. High risk suppliers are generally regarded as those that may be exposed to activities with stricter safety and security requirements, such as excavating or demolition activities, electrical work, hazardous waste disposal, or information security.
To further qualify suppliers within our supplier risk management program, we evaluate their regulatory, financial, health and safety, environmental, and cybersecurity performance. Our self-certification process includes an annual questionnaire and upholds our right to audit suppliers. We flag issues in our supplier risk management system, and the vendors are required to provide an explanation and a corrective action plan.
In alignment with best practices, it is our policy to establish ongoing communication with our key suppliers, collect information about their performance, and address any issues in a timely manner. If we determine that any vendors do not meet our standards, we may also engage our internal subject matter experts to address the concerns, where needed. We may issue stop work orders, terminate contracts, and/or add a supplier to our no-bid list if critical issues are repeated or remain unresolved.
We continue to train our employees to better understand our procurement policies and risk management processes. Our training covers ethical practices related to gifts and conflicts of interest; our inclusion requirement for competitive bidding; our approach to supplier diversity; and topics related to safety, environmental management, and security.
We maintain a Supplier Diversity Program designed to receive high-quality products and services while increasing our partnerships with women-, minority-, disabled veteran-, lesbian-, gay-, bisexual-, transgender-, and persons with disabilities-owned business enterprises. As part of our efforts to support economic inclusion, we strive to achieve the annual CPUC target for spending with diverse suppliers and engage leading practices to continually enhance our program.
Our Procurement Policy requires that at least one diverse supplier be invited to bid for every competitive bidding event, and we continue to evaluate the impact of this effort. Through our Supplier Diversity Program, we also support qualified suppliers in achieving certification through the CPUC’s Supplier Clearinghouse. For additional information about supplier diversity, see our annual supplier diversity reports filed with the CPUC.
We continue to exceed the federal subcontracting goals with small businesses on our Travis Air Force Base operations. Additionally, we aim to build on our Operation Contract with Travis Air Force Base and engage more HUBZone (Historically Underutilized Business Zone) suppliers.
To benefit our communities, we purchase locally when possible. Our 2017 Buy Local Study, which incorporated tags in our financial system for local suppliers in our service areas, continues to inform our approach. Using these results, we regularly assess local supplier participation as a percentage of our total procurement, monitor trends in our performance, and annually evaluate our investment in our local communities.
A wide variety of factors may impact our operations by threatening supply chain reliability. Disruptions may include natural disasters, geo-political or regional conflicts, economic recessions, shifting transportation patterns, and pandemics. In response, we monitor these factors to enhance our strategy to help manage the associated risks to our supply chain. As part of our approach, we may strengthen relationships with key partners, order materials in advance, increase stockpiling of inventory, diversify our supplier base, and engage local vendors, where possible. Our efforts aim to contribute to our service reliability and operational efficiency while preparing our business for emergency situations.
We completed the following actions in 2022 to help strengthen ESG performance in our supply chain:
In 2022, changing economic conditions and other global events contributed to supply chain challenges, including longer supply lead times, cost increases, construction labor shortages, and reductions in supplier stability. To mitigate current and future supply chain disruptions, we established specific task forces to implement programs that enhance the resilience of our supply chain. Activities to address disruptions included the following:
