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[3-min read] Minimising hidden risks in your supply chain

Sub-contracting is very common in manufacturing, particularly in garment production where shorter production cycles and increasing pressure to bring products to market faster have led to a rise in the number of suppliers turning to sub-contractors to meet tight deadlines.

When properly monitored and managed, sub-contracting poses no harm to the supply chain. However, unauthorised sub-contracting can significantly increase risks for buyers and workers.

Unauthorised sub-contracting refers to work that is outsourced to production sites that have not gone through compliance audits and whose workers are often placed in dangerous, unfair, and non-compliant working conditions. These unauthorised production units often lack proper management governance and worker exploitation occurs frequently, which can damage a brand’s reputation if it is exposed by NGOs or the media. In some cases, the brand can even be held liable for labour law violations.

Over the last two decades, brands and retailers have invested heavily in social compliance through factory audits, training programmes, and supplier engagement initiatives. However, these efforts are worth nothing if unauthorised contracting is taking place.

In order to avoid unauthorised sub-contracting and eliminate these hidden risks in the supply chain, buyers are adopting different approaches. In the Ethical Trading Initiative’s 2019 report Enhance supply chain traceability and tackle unauthorised sub-contracting (UAS) to improve worker wellbeing, 72% of surveyed companies said they had developed clear policies to prevent unauthorised sub-contracting. These include measures such as defining sub-contracting, developing a sub-contracting approval policy, due diligence procedures, clearly stating the consequences of violation, and setting out correction plans.

In addition to implementing company policy, buyers often leverage the expertise of independent service providers to conduct relevant audits. At Eurofins | AQM, we have developed Product Verification Services (PVS) to assure buyers that all production will take place at the declared factory. Through an audit process that consists of document review, employee interviews, and on-site observation of the whole production line, we provide our clients with critical insights and alert them to any unauthorised sub-contracting their supplier may be engaging in.

Preventing unauthorised sub-contracting is both a corporate social responsibility obligation and essential for compliance. All businesses need to take steps to minimise the risks associated with this practice – just because you don’t know about it doesn’t mean it isn’t happening.