Our supply chain strategy is focused on increasing the sustainability of our supply chain, promoting supplier diversity, championing a culture of ESG and improving our suppliers’ performance. We work to implement our strategy, while demonstrating high standards for ethics and integrity—all with the goal of driving business unit success and creating value for FirstEnergy.
Partner with suppliers to achieve our goals and demonstrate the value of a sustainable supply chain
Expand our roster of diverse suppliers through a targeted diversity program
Empower employees to champion our sustainability initiatives and create a culture that values ESG
Develop a program focused on improving supplier performance, achieving goals and managing supplier risks
For our supply chain-related metrics, please visit our ESG data table.
Diversity is a core value inherent to our company’s business operations, and increasing supplier diversity is a major component of our Supply Chain group’s business objectives and long-range strategies. It helps us to provide business opportunities to traditionally underrepresented suppliers and advance inclusive economic growth in the communities we serve.
Our Supplier Diversity Program ensures the development of mutually advantageous relationships with businesses owned and operated by minorities, women, veterans, members of the LGBTQ community, individuals with disabilities and individuals in HUBZones. Through the program, we strive to make our supplier base as diverse as our customer base, and we work with governmental agencies, diverse business advocacy groups and peer companies to identify diverse suppliers for potential opportunities. We also strive to continually increase our dollars spent on diverse suppliers, and over the past three years (2018-2020), we have exceeded our targets for diverse supplier spend. In continuation of these efforts, we have established a goal to achieve 20% of our Supply Chain spend with diverse suppliers by 2025.
In 2021, we launched our Diverse Supplier Development program, which is a two-year program designed to provide minority-owned businesses in our service area with support and coaching from FirstEnergy supply chain experts and business unit leaders. Candidates are vetted to ensure there is an opportunity for them to work with FirstEnergy as a direct Tier I or Tier II supplier. The program includes training modules on topics such as working safely with FirstEnergy, understanding the terms and conditions of their contract, mastering our supplier bid technology and more.
Additionally, the program links the suppliers with relevant business unit leadership to facilitate relationship building. By the end of the program, participants will have worked with FirstEnergy’s business units and supply chain experts to develop an understanding of our supplier standards, management system and bid process. Our goal is to position these suppliers for success and improve their probability of winning supply contracts.
We successfully brought five minority-owned businesses into the inaugural 2021 Diverse Supplier Development program and look forward to identifying candidates for the 2022 program.
For additional metrics on our Supply Chain spend, please visit our ESG data table.
Our Supplier Diversity Program contributes directly to the communities where our employees and customers live and work. Our 2020 Economic Impact Study (based on 2019 data) highlights the benefits derived from our supplier diversity initiatives. It’s estimated that FirstEnergy’s engagement with small, minority-owned, woman-owned and veteran-owned businesses led to over $1.8 billion in contributions to the U.S. economy and sustained more than 10,700 jobs.
This notable impact is the sum of three effects: direct purchases by FirstEnergy from its small, minority, women and veteran suppliers; indirect activities within these companies’ supply chains; and the downstream effects that result from employees of these companies, and those of companies within their supply chains, spending their wages in the wider consumer economy.
We continue to develop inclusive procurement practices that provide opportunities to diverse businesses and, in turn, enable greater representation, employment and economic advancement for minorities, women, veterans, members of the LGBTQ community, individuals with disabilities and individuals in HUBZones.
In addition, we have a responsibility to ensure the security of our supply chain and serve our customers. To that end, we implemented an ad hoc cross-functional team in February 2020, including Risk and Supply Chain members, to conduct bi-weekly surveys of our key suppliers. These regular surveys, which occurred through June 2021, enabled us to proactively mitigate supply chain disruptions related to COVID-19 and stay ahead of potential delays or other adverse impacts to FirstEnergy.
Our Supply Chain group also continues to focus on sourcing materials made in the United States. This effort mitigates supply chain risks, such as transportation and shipping, long lead times and the cost of potential or emerging tariffs. We’ll continue to focus on domestic sourcing and developing the localized aspect of our supply chain. We value the positive economic impact these choices can make on our region and communities in the form of jobs and business opportunities.
Ethics and integrity are central to our Supply Chain group. Our Supplier Code of Conduct establishes business standards our suppliers must meet in their day‐to‐day activities and reinforces our expectation that suppliers use good judgment and act with integrity in their business dealings with FirstEnergy. The Supplier Code of Conduct and our FirstEnergy Code of Conduct are embedded in the purchase orders we establish with each of our suppliers.
Our Supply Chain group has improved supply chain management and oversight functions. This includes a re-organization effort that established a Vice President position, as well as three director-level Supply Chain positions. These changes enable the integration and centralization of our procurement, analytics and standards, and material operations functions, creating better coordination of material fulfillment and more strategic alignment to drive cost savings.
In addition, we’ve developed stronger oversight of consulting agreements. We’re implementing a Spend Control Tower (SCT) for select supplier categories, including consulting, professional services and legal services, that will determine how and when our employees enter into consulting agreements. As part of the process, employee spend requests in these supplier categories will require detailed information for review, including safety, compliance and risk considerations, as well as a detailed cost analysis. After holding a meeting to evaluate new spend requests, the SCT committee approves, denies, delays or requests further information for the spend request, as appropriate.
FirstEnergy is an active member of the Electric Utility Industry Sustainable Supply Chain Alliance, a group of utility companies and industry suppliers that work together to improve environmental performance and advance sustainable best practices.
As part of participation in the Alliance, we piloted the addition of a sustainability section in our supply chain Request for Proposals (RFP). This section comprises questions that help us to assess suppliers’ sustainability focus.