How Sedex is Enhancing Supply Chain Transparency
In the procurement and supply chain landscape, emphasis is commonly placed on overseeing physical products stemming from manufacturing and agriculture.
Yet, service-based supply chains, encompassing sectors such as cleaning, logistics, catering and security, frequently escape the rigorous scrutiny afforded to their physical counterparts.
These operations inherently possess labour-related risks that demand due diligence from procurement professionals.
Sedex, a sustainability platform focused on supply chains, is currently testing an adapted version of the SMETA (Sedex Members Ethical Trade Audit) methodology specifically for use with service providers.
SMETA is a well-established audit tool aimed at examining working conditions across various supply chains. The adaptation is set to enable companies to extend their oversight capabilities into service sectors often regarded as lower-risk but equally important.
Compliance challenges in service procurement
Procurement executives have primarily targeted product-based industries for due diligence efforts, often relegating service suppliers to the margins.
The gap forms a significant blind spot in risk management frameworks. Sedex's research highlights that 15.5% of service suppliers could represent high sustainability risks. These providers, frequently found in sectors like logistics and security, operate across dispersed sites and unconventional hours, complicating risk oversight.
The intricate nature of these services often impedes direct oversight. Many service operations rely on subcontractors, which obscures insight into their labour conditions.
Subcontracting can elevate the risk of inadequate worker protections – an issue compounded by Sedex's finding that 15% of its registered supplier sites lack measures to ensure subcontractors adhere to basic labour standards.
Optimising risk management for services
In response to these sector-specific challenges, Sedex's innovative SMETA version aims to acknowledge the distinctive logistical and structural attributes of service-based supply chains.
In a bid to enhance oversight, the methodology now includes explicit checks for headquarters and the actual service locations.
The effort supplements the Service Provider Self-Assessment Questionnaire (SAQ) that Sedex introduced in 2024. This dual approach attempts to sketch a comprehensive picture of labour conditions within service supply networks.
The tailored SMETA audit introduces additional criteria addressing the intricacies involved with subcontracting, thereby reflecting its added challenge and risk.
Ross Heritage, Sedex's Chief Technology Officer, says: "Service providers are an essential part of supply chains – yet they often fall outside of traditional risk assessments. Less than 3% of Sedex-registered sites fall within these industries.
"We’re bringing the robustness of the SMETA methodology to provide a practical due diligence solution for these activities – enabling better risk management, more responsible practices and more resilient supply chain operations."
Strategic procurement through service oversight
Addressing labour risks within service supply chains is not merely a matter of ethical responsibility, but constitutes an operational necessity.
Instability resulting from inadequate conditions can jeopardise the entire supply chain chain, resulting in potential operational disruptions across cleaning, logistics or security services.
This emphasises the necessity of integrating these services into procurement risk assessments thoroughly.
Furthermore, the landscape of expectations is evolving, with regulators and investors intensifying their focus on ethical sourcing. Companies that neglect to scrutinise their service providers expose themselves to reputational and legal vulnerabilities.
By extending the rigour of SMETA audits to the service sector, Sedex aims to fortify enterprises against these risks by enhancing the transparency and accountability of service-based supply chains.
