80% of firms lack supplier due diligence measures

17 July 2020

Eight in 10 firms lack supplier due diligence measures – a key factor in preparing for risks and disruptions to supply chains, according to a report. 

The report by Ecovadis found while health crisis preparedness differed among industries, overall preparedness levels were “concerningly low”. 

Ecovadis analysed data from 35,000 suppliers from around the world to understand which parts of global supply chains were underprepared for health crises. 

Areas examined by Ecovadis included employee health and safety, working conditions, and supply chain due diligence.

According to the report, the least prepared for a health crisis was the wholesale, services and professionals industry, where 42% of suppliers lack any preparedness measures. 

“This relative lack of preparedness mirrors the industry’s historical focus on topics such as diversity and anti-corruption in its corporate sustainability efforts, compared to companies with operational manufacturing, whose health and safety efforts are more emphasised,” Ecovadis said.

The ICT and transport industries also displayed “significant shortcomings”, with 34% and 39% of suppliers respectively having no preparedness measures. The lack of preparedness in these areas risked “undermining downstream suppliers and processes, especially in high-efficiency supply chains with limited flexibility”, the report said.

However, suppliers in specialised heavy manufacturing (27% had no plans), advanced manufacturing (26%), and the construction industry (29%) fared better due to actions taken on employee health and safety. 

Suppliers showed the highest preparedness under the health and safety indicator with 56% implementing preparedness measures. But only 20% of companies had health crisis preparedness measures in place concerning supply chain due diligence.

“Neglecting supply chain due diligence during the Covid-19 pandemic limits management systems’ preparedness and introduces particular risks of disruption to multi-tier supply chains,” the report said. 

“As initial factory lockdowns are being lifted, a shortage of lower-tier parts continues to slow down the resumption of global production capacities. Upstream suppliers’ readiness to handle the health crisis is closely linked to the resilience of entire value chains, making supply chain due diligence a key area for action in addressing disruption risks.”

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