Closing the Blind Spot: Managing Risk in Service Supply Chains

Tom Sewell

Social Sustainability Manager

4 Jun 2025

About 4 mins

When businesses discuss supply chain risk management, attention typically focuses on product suppliers and raw materials. Due diligence conversations about manufacturing origins and working conditions are now commonplace – and rightly so. However, there’s a critical blind spot in many companies’ supply chain due diligence efforts: the service providers businesses rely on daily, often operating on-site and frequently overlooked in risk assessments.

Why service supply chains aren’t risk-free

Many procurement teams perceive service contracts as ‘low-risk’ because they don’t involve overseas manufacturing or complex global supply chains, and work often occurs on company premises. However, essential services – including cleaning, catering, security, construction and road transport – frequently carry significant human rights risks, often involving:

· Low-paid, insecure employment with workers on temporary contracts, supplied by third-party labour agencies, or working informally

· Minimal oversight, with work occurring outside core business hours or in mobile environments

· Hidden subcontracting, where accountability becomes diluted and oversight weakened

· Vulnerable worker populations, particularly migrant workers and minority ethnic groups who face higher risks of labour exploitation

Without proper service provider risk assessment, these conditions can enable serious labour abuses, potentially implicating your business directly – even when employment relationships are outsourced.

Subcontracting: A supply chain risk multiplier

In many service supply chain arrangements, the company you contract isn’t employing the workers on the ground. Subcontracting is both common and opaque, creating multiple challenges:

· Wages become diluted as each subcontracting tier takes a margin

· Training and vetting standards vary dramatically or disappear entirely

· Supply chain accountability becomes fragmented, making issue resolution difficult

As subcontracting tiers multiply, labour exploitation likelihood increases whilst workers’ ability to report abuse decreases. This isn’t theoretical – the International Transport Workers Federation documents “mass exploitation and inhumane working conditions” within European road transport, where extensive subcontracting has enabled excessive hours, poor accommodation, and illegal wage deductions, particularly affecting Eastern European drivers.

Due diligence for service providers: A regulatory requirement

International business and human rights frameworks make clear that companies bear responsibility for risks across their entire value chain – not just product supply chains. Both the UN Guiding Principles on Business and Human Rights and OECD Due Diligence Guidance emphasise understanding and addressing risks in all business relationships, including services, subcontractors, and on-site operations.

For businesses serious about managing human rights risks, comprehensive service provider compliance must be integral to due diligence processes.

Supply chain risk assessment: Key questions for service contracts

When evaluating service contract arrangements, consider these critical questions:

· Is this high-skilled work performed by well-compensated professionals, or low-skilled work relying on vulnerable, low-wage workers?

· How many subcontracting layers exist, and what oversight mechanisms are in place?

· What working conditions do service workers face, and how is this monitored?

· Are there clear escalation processes when workers raise concerns?

Practical steps for service supply chain management

· Map your complete service provision: Document not just contracts, but identify who actually delivers work on the ground.

· Integrate services into risk assessment processes: Apply the same rigorous supply chain due diligence standards used for goods to all service providers.

· Build transparency into service contracts: Include obligations to disclose subcontracting arrangements, limit excessive tiers, and secure audit rights for service operations.

· Include service providers in social compliance programmes: Prioritise service provider audits and self-assessment questionnaires for higher-risk arrangements.

· Establish worker feedback channels: Provide safe, accessible grievance mechanisms for service workers to report concerns.

Addressing the service provider gap: New tools and solutions

Recognising the critical need for service-specific due diligence tools, Sedex is developing new solutions to help businesses better manage these previously overlooked risks. We’re soon launching SMETA audits specifically designed for service providers, addressing the unique challenges and risk factors that traditional manufacturing-focused audits don’t adequately cover.

This new service provider audit methodology will provide standardised assessment frameworks tailored to the realities of service work – from cleaning and security to transport and construction. Unlike generic audit approaches, these tools recognise the distinct risk profiles, working arrangements, and compliance challenges inherent in service operations.

Additionally, Sedex offers tailored assessment questionnaires specifically designed to evaluate service provider risks. These tools enable businesses to conduct preliminary risk screening of their service suppliers, identifying high-risk arrangements that require deeper investigation and ongoing monitoring.

These developments represent a significant step forward in closing the service supply chain audit gap, providing businesses with the practical tools needed to extend their due diligence beyond traditional product suppliers.

Conclusion: Closing the service supply chain blind spot

Service supply chains may be less visible than raw materials or finished goods, but this doesn’t reduce their risk profile. The proximity of service workers to your operations, combined with limited visibility and widespread subcontracting, creates a unique risk combination that many businesses continue overlooking.

If your organisation is committed to comprehensive supply chain risk management, service providers can no longer remain a blind spot in your due diligence processes. Effective service contractor compliance isn’t just good practice – it’s essential for protecting both workers and your business reputation.

Ready to strengthen your service supply chain due diligence?

Don’t let service providers remain a blind spot in your risk management strategy. Contact Sedex today to learn how our upcoming SMETA audit methodology for distributed workforces and our risk assessment questionnaires can help you identify, assess and manage risks across your complete supply chain.