Our mission is to improve lives by providing safe, reliable and sustainable energy solutions in every market we serve. Our suppliers play an important role in helping us achieve our sustainability objectives. Promoting acceptable working conditions, environmentally responsible management and ethical behavior are all key parts of our commitment. To ensure we deliver on that commitment, it is important to ensure our suppliers are aligned with our values and have standards as high as ours.

We hold our suppliers and contractors the same high ethical standards we have. The AES Ethics & Compliance Program takes a risk-based approach that categorizes suppliers based on the potential risk of the transaction involved. The risk profile of an engagement determines the required pre-engagement due diligence and any conditions of engagement, such as requirements for certifications, acknowledgements, training, and engagement structure. This allows us to address the material risks for the engagement and to tailor provisions to mitigate perceived risks. We strive for continuous improvement and support our suppliers if performance improvements are needed. Learn more about our Ethics and Compliance Program.

Procurement Requirements

We have a very diverse and unique portfolio of businesses and market environments. Despite the market and regulatory differences that exist across our businesses, we feel it is important that each business ensures all of its procurement activities are carried out in complete alignment with our values and operational standards.

Our AES Supply Chain team is committed to establishing relationships with our suppliers under the highest standards of integrity and business ethics as well as compliance with local and international laws.

Our procurement guidelines define AES business practices and expectations worldwide. We promote a transparent and fair environment for potential suppliers to participate in our bidding processes. Together with our Ethics and Compliance Program, our safety and environmental guidelines and our local teams, we strive to ensure our process includes sustainable practices that support our environment, our stakeholders and the communities we serve.

Review our Procurement Handbook for more information.

Supplier Evaluation Program

To evaluate qualitatively and quantitatively new and existing suppliers we use diverse tools depending on the complexity and/or criticality of the transaction. One of such tools is STACE - Safety and Sustainability, Technical, Alignment, Cost, Execution- a scorecard that enables employees of our businesses to evaluate supplier proposals and performance in a fair and consistent manner. Additionally, in 2016 we launched the pilot of the Supplier Sustainability Survey through which suppliers provide information related to sustainability in their activities (environmental, social and economic).

The pre-qualification supplier process includes financial, ESG factors and Compliance with laws. Existing suppliers are evaluated and audited for their environmental, safety and labor practices. In both cases it is necessary to prequalify and meet all requirements in the STACE Evaluation matrix and no safety, labor or environmental finding in audits.

Sustainability criteria included in the evaluation process are tailored to the specifics and location of the work, materials and/or services provided. These can include the following:

  • Code of conduct
  • Sustainability reporting tools and score
  • Environmental metrics and performance
  • Safety metrics and performance
  • Commitment to not use forced or child labor
  • Emergency business continuity
  • Risk management
  • Commitment to non-discrimination

Supply Base Risk Management

To manage risk in our supply chain, we have established a standard that includes, among other things:

  • Contingency Plans: We understand that supply chains play a key role in minimizing the downtime associated with asset failure, since unexpected high impact events may have substantial negative impact on the business. To manage possible scenarios, we have adopted guidelines to create contingency plans and/or procedures to identify and respond to incidents and emergency situations, and maintain continuous operation of critical assets. Proper mapping of critical suppliers is included as part of the spend analysis activities, and the inclusion of alternative sources is done in collaboration with internal users and engineering and operations units.
  • Inventory & Criticality Relation: Our businesses include criticality assessment for the different assets and parts on inventory (according to business maturity) as well as proper planning tools to ensure availability and replenishment according to lead times. Our businesses monitor inventory levels and work with operative areas to ensure parts are available as needed. Monthly reports are monitored to track inventory levels, material requirement planning and future assets interventions.
  • Asset Management: Assessment of supplier performance enables the identification of a) issues to be addressed via corrective action plans, and b) best practices to be recognized and duplicated.

Performance Indicators

To improve performance, the AES sets annual objectives aligned with the overall business strategy. Below are the key performance indicators (KPIs) for our supply chain activities.


Inventory optimization ensures the availability of the goods that are needed and reduces the risk of stock outs by focusing on demand planning activities.

The inventory target is set and reviewed on an annual basis to incorporate changes in the portfolio. In past years, AES has exceeded inventory reduction targets:

  • 2016: An additional 2.3% reduction of inventory levels compared to target.
  • 2017: An additional 21.4 % reduction of inventory levels compared to target.
  • 2018: An additional 2.1% reduction of inventory levels compared to target.
  • 2019: An additional 0.9% reduction of inventory levels compared to target.

Spend Management

Our goal is to have at least 25% of our spending with suppliers managed under contracts in our centralized database, rather than as stand-alone purchases. This allows stronger management of KPIs.


Savings expectations are set on a long-term basis, with an official target set annually during the budget review process. In past years, AES has exceeded its saving targets:

  • Supply chain savings for 2019 were below the target by less than 10%
  • Supply chain savings for 2018 exceeded the target by 10%
  • Supply chain savings for 2017 exceeded the target by 44%
  • Supply chain savings for 2016 exceeded the target by 45%
  • Supply chain savings for 2015 exceeded the target by 57%

Sustainability Principles

Using the following principles, our supply chain professionals drive sustainability and social responsibility excellence across our businesses:

  • Diversity and Inclusiveness: Engages different categories of suppliers.
  • Environment: Refers to supply management actions and decisions that promote protection and preservation of the health and vitality of the environment in which the organization operates including water, land natural resources, flora, fauna and the people who are directly or indirectly related to our businesses’ operations.
  • Ethics and Business Values: The standards of our Supply Chain Management group are founded on our ethics and compliance policies and procedures, as well as our Code of Conduct.
  • Health and Safety: Relates to the condition of being protected or free from the occurrence or risk of injury, danger, failure, error, accident, harm or loss and complying with our safety and health programs.
  • Human Rights: All supply chain procedures and actions will aim to facilitate our businesses’ compliance with local labor laws and create the mechanisms that will encourage the observance of human rights such as child labor restrictions or any other type of regulation.