Why corporations miss risks lurking in their supply chains 

In October 2016, following an investigation by the BBC which found that vulnerable Syrian children were making clothes bound for the UK, M&S said, 

“Ethical trading is fundamental to M&S. All our suppliers are contractually required to comply with our ‘Global Sourcing Principles’, which cover what we expect and require especially in terms of how workers are treated. We do not tolerate breaches of these principles, and we will do all we can to ensure this does not happen again. [M&S 2016 M&S investigation shows firms should take Modern Slavery Act seriously] 

What is critical in this statement was the emphasis on “does not happen again”. 

Why was this promise critical? Well, it was not the first time retailers have faced supply chain allegations for using child labour. In 1996 M&S faced similar allegations of child labour, this time from Morocco. Recurring supply chain issues continue to occur. 

If brands want to claim, “never again” they need the systems in place to back it up. Previously, this claim would be expensive and difficult to uphold, hence the caveat, “all we can”. 

In the future, through AI, this might become simpler. 

The modern complexity challenge 

Modern supply chains are complicated structures that can involve hundreds or even thousands of suppliers across multiple tiers.  

The deeper you go into the supply chain, the murkier it becomes. While companies may have reasonable visibility into their tier-one suppliers, they often have little to no insight into tier-two, tier-three, and beyond. It’s in these shadowy depths where the most egregious violations typically occur. 

Perhaps the most significant factor driving supply chain blind spots is the relentless pressure to minimise costs. Suppliers who can offer rock-bottom prices frequently do so by cutting corners on worker safety, environmental protection, and fair wages. 

Inadequate Due Diligence Systems 

Many companies approach supply chain risk management with outdated tools and methodologies. Audit systems may be designed to check boxes rather than uncover systemic problems. 

The typical corporate approach involves periodic site visits, document reviews, and standardised questionnaires – all of which can be easily gamed by suppliers who want to hide violations. Meanwhile, the most vulnerable workers – those most likely to face exploitation – are rarely given safe channels to report problems without fear of retaliation. 

Stakeholder pressure reality check 

Investors are increasingly incorporating environmental, social, and governance (ESG) factors into their decision-making. Consumers, particularly younger demographics, are demanding greater transparency and accountability from the brands they support. Governments worldwide are implementing new regulations that hold companies liable for violations throughout their supply chains. 

Recent legislative developments like the German Supply Chain Due Diligence Act, the EU’s Corporate Sustainability Due Diligence Directive, and similar initiatives in other jurisdictions are making supply chain transparency a legal requirement rather than a voluntary best practice. Companies that continue to operate with limited visibility into their supply chains are exposing themselves to significant legal, financial, and reputational risks. 

Conclusion 

The era of plausible deniability has ended. As supply chains become more scrutinised and regulations more stringent, companies can no longer claim ignorance about violations occurring within their networks. 

The risks of maintaining this wilful blindness – legal liability, reputational damage, operational disruption, and stakeholder backlash – far outweigh the costs of implementing robust oversight systems. 

The question isn’t whether companies can afford to implement comprehensive supply chain oversight – it’s whether they can afford not to.