Procurement in Practice: “Our suppliers must take ESG targets as seriously as we do,” says AECOM Head of Procurement
- Environmental, Social, and Corporate Governance (ESG)
- Procurement Services
- Supplier Management
To kick off a new year of conversations with CPOs and heads of procurement and supply who are happy to share their everyday roles, challenges and visions with peers (and procurement solution and service providers), we talked to an international procurement lead who has some important asks of the supply base.
Angus Craig is Head of International Procurement at global infrastructure consulting firm AECOM. Sitting at number 189 on the Fortune 500 list as one of America’s largest companies, AECOM amassed $13.3 billion of professional services revenue during fiscal year 2021. It delivers professional services throughout the project lifecycle – from planning, design and engineering to program and construction management. Through projects spanning transportation, buildings, water, new energy and the environment, it is a leader in helping to solve some of the world’s most complex challenges.
Craig’s role, which covers all regions outside of the Americas, is not only to deliver more value through the supply chain and oversee the most efficient way to execute the entire source-to-pay process for the organization, but to engage with the supply base to jointly help achieve the organization’s target of science-based net zero by 2030. While all GHG emissions are in scope, the complexity of Scope 3 means it has received the most attention from the cross-functional team.
“AECOM is an ESG leader in its sector” he explained, “defined by its Sustainable Legacies strategy. We have several net zero programs that intersect with this strategy, for example, moving to electric vehicles (Scope 1) and working with landlords to move to renewable energy tariffs (Scope 2). When it comes to Scope 3, that category involves the whole supply chain, which includes a diverse range of mostly services that we consume ourselves and which we engage to support the delivery of projects for our clients. AECOM has developed a further category, ScopeX™, a process developed to reduce carbon through design services to clients. It considers embodied and operational carbon across the entire project life cycle. Aside from these initiatives, AECOM is offsetting residual carbon by creating our own nature-based solution projects.”
As head of procurement his role in the ESG agenda involves differentiating suppliers based on their ability to support the Sustainable Legacies strategy. He aims to make that information available to the business so they can take more informed decisions with their clients, something that can be a big differentiator for the organization.
Suppliers must recognize the importance of buyers’ ESG goals
“For me,” he said, “the important thing is how we take our ESG ambitions and apply them in the real world. That means working with like-minded suppliers. We’ve issued an RFI to a sample of our suppliers to understand what their net zero plans are, and we have seen a massive variation in response. Some suppliers completely understand the question, have plans in place and are keen to share them, because they also see that as a differentiator. Some suppliers either have no plans or see the request as a threat.
“But this is something that is a very high priority for us, for the organization and certainly from a procurement perspective, because it’s an important value-add that really enables us to expand our value proposition to the business, going beyond hard dollar savings. So it’s imperative that our suppliers comply with and share our vision to embed sustainability and ESG into everything we do.”
This is much more of a challenge for the services sector than for the manufacturing industry. A consultancy has no production line and the number and type of suppliers is not finite.
“In this we are also complying with our clients’ ESG wishes, which is why we expect our suppliers to comply with ours. But when the type and number of suppliers you work with is so great, it becomes a much more complicated challenge and a very different proposition.”
Two main ESG challenges for the services sector
Craig is battling a couple of challenges: one he feels is endemic to the ESG agenda, the other is specific to his industry.
“Something I believe is often missing from the whole net zero conversation,” he said, “is the whole ‘echo chamber’ effect, where those people who are truly committed to it assume everyone else is too. But in my experience there are large sectors of the economy that are still struggling to understand what exactly it is they need to do.
“Another challenge pertinent to the construction industry, is that projects are large and therefore command a large amount of resource. The number of suppliers for certain specialist jobs can be limited. This reinforces procurement’s role of gaining a better understanding of the organizations we work with, whether around commercial aspects or health and safety or sustainable practices, so that we can make better decisions about who we engage with and influence. And that can be quite a time-consuming activity.”
Craig sees procurement as facilitators across projects who have to identify where commonality exists and present a complete picture to the supply base, but he sees technology as an enabler to that. “Clearly we need access to robust and transparent procurement technology for our P2P process, for our risk assessment of suppliers, for market intelligence and for data analytics. It’s essential to keep on top of the right technology to turbo charge what we’re doing and help us deliver for the business.”
Technology and people are the answer
Alongside harnessing technology, he sees building team capability and business interaction as the key to achieving procurement’s and therefore the business’ goals.
“I want people who can not only provide category expertise, but who have the passion and drive to allow us to engage fully with the business and the supply chain.
“It’s important to develop a standard approach as much as possible, and I don’t mean procurement-by-numbers. I mean standard and legally-compliant RFP templates with the right terms and conditions that embed our ESG requirements. We invest a lot of time using our technology to obtain a better understanding of our spend data. But the challenge is putting all those elements in place so that when we do engage with stakeholders and suppliers, we are able to build a momentum that allows us to respond quickly to queries and requests, and have the right processes already in place.
“Another area that is very important right now is our program ‘sourcing for success (S4S).’ This is about improving governance around sourcing. We developed the sourcing strategy with our sponsor and then met with the VPs of operations to get it endorsed and agree the resource requirements. It’s really important to get all the right people in agreement before we embark on a project. It needs regular reviews to make sure any issues get raised and are tackled head on.
“Equally important is celebrating our success at the end of a project. We try to publicize it as widely as possible when we make a good deal; it gives us a way of showing what good looks like. It’s important to improve people’s perception of what we are doing and get recognition for it outside of our own four walls. A big part of that is identifying the sponsor from the business right from the start, so that when we do get a great result the sponsor knows how we got there and shares in the success. AECOM is a consultancy, and therefore a people-based business, so it’s important that those people are recognized for their successes. From my perspective it’s about positive reinforcement, because it’s much easier to motivate people when you can show them what they are aiming for.
“When you showcase your achievements, success is self-perpetuating and more people want to stay in procurement or indeed join it. So I was delighted to hear how one team member put it: ‘There are scratches on the door outside to come in, not on the inside to get out!’”
A good leader needs good data
During his many years as a consultant, Craig learnt that building rapport and using data to remove some of the emotion around procurement decisions are vital.
“It’s often quite difficult to promote the procurement agenda,” he said. “It might be that we want to consolidate our suppliers, or get better pricing in place, or make sure we have the right T&Cs, and this might not be the business priority; their priority is to get the job delivered to standard, under-budget and on time. We have to identify where there is overlap between us and the business agenda and demonstrate that good procurement practice is also good business practice. And the biggest driver of good procurement is data, including ESG and carbon emissions data — that goes for any business.
“First you need a really clear idea of what you want to achieve, then it’s about harnessing technology to gather the data that allows you to make much better decisions and drive compliance to your policies.
“Procurement traditionally has focused on negotiations and T&Cs, but I believe the future now lies in how you utilize technology to engage with suppliers in a deeper way. AECOM is a great example of this; we strive to understand suppliers and their ESG initiatives, and calibrate and quantify their answers so we can add that to the award mix, because it’s a top priority for us.”
Many thanks to Angus Craig and to AECOM for sharing their expertise, insights and learnings, and look out for more practitioner-related commentary on a diverse set of issues as we feature a CPO each month on Spend Matters.
If you are looking for procurement services providers to help you with your 2022 decisions, try our Procurement Services Market Directory .
- Environmental, Social, and Corporate Governance (ESG)
- Procurement Services
- Supplier Management