Corporate Social Responsibility at Pacific Gas & Electric Company

Mills College- “It Pays to be Nice”

April 2009

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In these economic times, companies face many challenges in staying successful

Compliance Risk Mitigation Cost Savings Marketing / Brand

Reputation with Customers Operational Excellence Financial Metrics

Long-term StrategyRewarded Shareholders

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A View Back in Time

• The business of business is business

• Giving Back Programs disassociated from business objectives

– Eliminate appearance of:

• conflicts

• self-interest

• self-promotion

• Changing business world, e.g. competitiveness, customer expectations

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Prevailing Wisdom

• “…focus has been on the tension between business and society rather than on their interdependence.”

• “The result is often a hodgepodge of uncoordinated CSR and philanthropic activities disconnected form the company’s strategy that neither make any meaningful social impact nor strengthen the firm’s long-term competitiveness.”

Strategy and Society: The Link Between Competitive Advantage and Corporate Social Responsibility by Michael E. Porter and Mark R. Kramer

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CSR is becoming more important in how stakeholders value the long-term prospects of companies.

Source: Sustainable Asset Management, November 2008

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How markets compare and value CSR initiatives will be critical to its success within a company.

CSR = Being Good

CSR = Competitive Advantage

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PG&E focuses on CSR as one of its core values

The Corporate Responsibility Report highlights some of the ways we are striving to fulfill our global responsibilities and meet our ethical obligations. This accountability starts with our 15 million customers, nearly 20,000 employees, investors, regulators, partners and communities within California. It ultimately extends to everyone who shares PG&E’s interest in ensuring a clean, secure energy future.

Peter A. DarbeeChairman of the Board, CEO and President,PG&E Corporation

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The leading

utility in the United States

Delighted Customers

Customer Focus

• We act with integrity and communicate honestly and openly

• We are passionate about meeting our customers’ needs and delivering for our shareholders

• We are accountable for all of our own actions: these include safety, protecting the environment, and supporting our communities

• We work together as a team and are committed to excellence and innovation

• We respect each other and celebrate our diversity

OUR VISION

OUR GOALS

OUR STRATEGIES

OUR VALUES

Energized EmployeesRewarded Shareholders

Environmental Leadership

Operational Excellence

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What We Do

• From Earth Day to Change a Light Campaign…

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Mission and Key Strategies

To be the leading corporate citizen in the diverse communities we serve by:– Sharing our energy expertise and resources to promote solutions

for the communities we serve– Expanding our community partnerships and philanthropic initiatives

to create more environmentally sustainable communities– Engaging the commitment and involvement of our employees and

retirees in the intersection of the needs of our communities and PG&E’s business interests

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How?

• Clear, meaningful demonstration of commitment of the company’s values

– Environmental leadership

• Community engagement, particularly with underserved communities

– Issues important to the community; business issues of importance to the company

• Employee engagement—”energized” employees and retirees who are our ambassadors

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Focus Areas for Community Leadership

Workforce developmentEnvironmental leadershipWeather emergency supportOutreach to both diverse and underserved communities

Company priority √Community need √Strategic, territory-wide impact √Engages diverse communities √Ability to leverage resources √Marketing/PR opportunities √

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Community Relations

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Community Engagement

• Freeze hits the Central Valley 1/11/07• Governor declares state of emergency

– $1 billion dollar impact to growers– 12,000 farm and packinghouse workers to lose jobs

• PG&E Relief Plan includes donations to food banks, increase in REACH Plus credit, and community assistance days

• Community Relations takes the lead in planning Community Assistance Days

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Orange Cove Community Outreach Day

• Community Partners– City of Orange Cove provides facilities and community outreach– EOC provides bilingual volunteers and on-site LIHEAP assistance– Fresno Food Bank provides groceries on-site

• Results– Over 500 households participate– 324 REACH Plus applications completed; $46,973 awarded in credits to

customers– 86 CARE applications completed– Media coverage by KFSN, KGPE, Univision, freelance reporter working for

NPR– 15-20 PG&E energized volunteers; employee food drive generates about 1,000

food items

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Volunteer Program

www.pgevolunteers.com

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Volunteer Program Components

Volunteer Events

Company-sponsored: Signature events. Staff time and company resources are utilized to plan, promote and manage these strategically aligned volunteer activities. Events include (but not limited to):

Earth Day

Habitat for Humanity

Junior Achievement

Red Cross

Salvation Army

Employee or retiree sponsored: Events proposed and managed by an employee's or retiree's, including fundraisers not necessarily aligned with business objectives. Supported only as volunteer program staff assistance and company resources are available. Events aligned with 5Es will have the highest priority for these resources.

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Volunteer Program Components

Program Initiatives

Executive Nonprofit Board Participation

Team Building Events

Recognition of Volunteerism

Frederick W. Mielke Awards

Enhanced Community Service Awards

Jefferson Awards

New Employee Orientation

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PG&E’s employees volunteer throughout the service area

In 2008, our employees volunteered more than 1,730 hours

at food banks throughout the service territory

2008 marked our seventh consecutive Earth Day partnership with the

California State Parks Foundation

MORE THAN GIVING…GIVING BACK

Campaign for the Community

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RESULTS!

2008 2007 Increase

Total $’s $4,100,000 $3,889,649 7.8%

Donors 7699 7079 8.7%

Philanthropy

A Financial Investment in Our Communities

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CSR = Philanthropy?Philanthropy = CSR?

• Philanthropy is not a standalone issue

• Critical element of how a company demonstrates its corporate citizenship

• Maximize business and societal benefits through alignment of philanthropy programs with business strategy

• Find the shared value

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Shift Happens

• Shifts:

– Metrics

– Results and social impact orientation

– Refocused giving

– Visibility and maximizing corporate brand

• Reputation

• Competitive Edge

• Stakeholder engagement

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PG&E Environmental Program Strategy

• Signature Programs

• “Green” grants to community partners

• Leveraging opportunities for other utility programs, e.g. energy efficiency, low income programs, etc.

• Volunteer opportunities as part of the grantmaking

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Signature Programs

• Existing Programs

– Solar Schools- largest program of its kind:100 schools, 2000 teachers trained, 100,000 students benefiting

– Solar Habitat- an exclusive partnership

– PowerPathway™

• Programs Under Consideration

– High School Academy Program

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PG&E’s 2008 Charitable Spend: $18.7 Million

Benchmarking Charitable Contributions (% of Pre-Tax Earnings from Operations)

2008 Charitable Contributions Breakout

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PG&E Charitable Spending History

9.4 9.1 9.1 8.7 8.4 8.6

19.7

6.7

2.93.9 3.6

7.5

18.718.3

14.7

11.9

0

2

4

6

8

10

12

14

16

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1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Milli

ons

of D

olla

rs

Company Spending Foundation SpendingTotal Spending Campaign for the Community

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Community Reach: Santa Cruz Predatory Bird Research Group

Mission of Santa Cruz Predatory Bird Research Group:To use the example of the Peregrine Falcon recovery as inspiration for tackling today’s environmental challenges

PG&E’s Part:• For several years, Peregrine Falcons had used PG&E’s San Francisco

downtown headquarters as a nesting spot• In 2005, PG&E partnered with the UCSC PBRG to build nest boxes and install

web-cameras to document the peregrines’ life cycle• In 2009 the female peregrine laid four eggs; we hope that each will be fertile• UCSC scientists band a leg of each new peregrine chick to trace its

development

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Community Reach: National Parks Foundation

• Lead sponsor of NPF’s “Parks Climate Challenge”

– High school students from underserved communities will learn about climate change at North Cascades National Park

• Students selected from high schools in the Bay Area, Seattle, Colorado, Chicago, and Washington, DC

• NPF will collaborate to produce an “Electronic Field Trip”

• Kick-off event in Washington, DC

– Local high school students participate in a Climate Change-related service project

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Habitat Build in Biloxi Contest

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BUILD A GREAT COMPANYTHEN HELP BUILD A

GREAT WORLD

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Questions?