Supplier Due Diligence: Why You Need to Know Who You’re Doing Business With
- Robert
- Sep 18
- 4 min read
Updated: 3 hours ago
Table of contents
In case you don't have time to read the whole article, here is a short video summary:
Knowing your suppliers goes far beyond compliance. It’s about protecting your reputation, preventing disruption, and making sure your partners are as reliable as they say they are. In 2025, supplier due diligence isn’t just good practice - it’s a strategic necessity.
This article explains what supplier due diligence is, why it matters, the main drivers you need to consider, how technology is transforming the process, and the practical steps you can take to keep your supply chain safe and compliant.
What is Supplier Due Diligence?
Supplier due diligence is the process of verifying that your suppliers are legitimate, trustworthy, and compliant with both regulatory and internal standards.
That means checking business registrations, financials, certifications, and reputational risks - but also digging deeper into ethical practices, ESG performance, and cybersecurity readiness.
The key is proportionality: the depth of due diligence should match the level of risk. For a small, one-off supplier, a basic check may be enough. For strategic partners who carry a big share of your supply chain, you’ll want a much deeper assessment.
Why Supplier Due Diligence Is Essential
Today’s supply chains face risks from all directions: bankruptcies, cyberattacks, geopolitical shifts, climate events, and currency volatility. Without visibility into who you’re working with, you’re operating blind.
There are four main drivers for supplier due diligence:
1. Regulatory
Laws like the UK Bribery Act and the US Foreign Corrupt Practices Act (FCPA) require companies to take active steps to prevent corruption, bribery, and money laundering. Failing to vet suppliers can make you legally liable.
2. Financial
Working with unstable or fraudulent suppliers can result in heavy financial penalties, lost contracts, or even criminal liability. Due diligence helps mitigate this.
3. Reputation
Public scandals linked to suppliers - like poor labor practices or environmental damage - can quickly spill over to your brand, even if you weren’t directly responsible.
4. Strategic
Weak links in the supply chain can disrupt your entire operation. Knowing supplier risks ahead of time helps prevent business interruptions and protect revenue streams.
Building a Supplier Due Diligence Framework
There’s no single way to “do” due diligence. The level of effort depends on the supplier’s importance, contract value, and potential risks.
Basic Due Diligence: This is the starting level, suitable for suppliers with low spend or low strategic importance. It usually includes: Quick checks, document reviews, basic risk flags.
Enhanced Due Diligence: For critical suppliers; those that handle sensitive information, supply essential components, or account for a large share of your spend - a more structured and detailed process is required. This typically covers: Financial checks, legal history, ESG practices, and site visits.
For small suppliers, spending weeks on checks doesn’t make sense. For critical suppliers, cutting corners could cost millions. The art of due diligence lies in striking the right balance between cost, time, and risk.
The Role of Technology in Supplier Due Diligence
Traditional due diligence was built for a slower, less connected world. In today’s global supply chains, technology is the engine that makes modern due diligence effective and scalable.
Automation of Checks
Instead of weeks of manual verification, automated platforms can cross-check registrations, sanctions lists, and certifications in seconds.
Real-Time Risk Monitoring
Global watchlists and financial databases are integrated to alert you if a supplier suddenly faces lawsuits, bankruptcies, or sanctions.
Centralized Supplier Data
All supplier information lives in one secure platform - no more scattered spreadsheets and email chains.
Analytics and AI
Advanced tools help detect patterns, anticipate risks, and even recommend alternative suppliers before disruptions occur.
Collaboration Tools
Suppliers can directly upload documents, complete digital questionnaires, and update compliance details, creating a transparent audit trail that regulators love.
In short, technology doesn’t replace due diligence. It amplifies it - making it faster, more accurate, and continuous rather than one-off.
5 Steps to Ensuring Supply Chain Compliance
Once you’ve got your framework in place, follow these practical steps to implement supplier due diligence effectively:
Check business registrations and public records – verify legal existence and ownership.
Verify certifications and accreditations – ISO standards, ESG certifications, or industry licenses.
Conduct supplier interviews or site visits – ask tough questions and observe operations directly.
Speak to customers and partners – references can reveal red flags no report will show.
Bring in third-party experts – independent due diligence reports for critical or high-risk suppliers.
Keep in mind, though, that supplier due diligence is an ongoing process. This is why we recommend you also:
implement an underlying data structure and ensure you’re collecting all the relevant data
make sure your data is always accurate and up to date
use data analytics to manage supply chain risk, identify potential areas of exposure, and protect your company’s reputation
What Information Should You Collect?
A due diligence checklist can run hundreds of points, especially in mergers and acquisitions. For procurement, the essentials typically fall into these categories:
General Company Data
Financial Information
Corporate Agreements
Legal & Compliance Records
Intellectual Property & Product Data
Insurance Coverage
Litigation History
Human Resources & Labor Practices
Environmental Impact
Customer & Marketing Information
Internal Controls & IT Systems
Sales & Operational Data
Support Services & Pricing Structures
So what kind of information should you look for?
You can find our due diligence checklist to download.
Ensure Compliance with Prokuria
Managing supplier due diligence manually is resource-draining and error-prone. That’s where Prokuria comes in.
With Prokuria’s supplier management solution, procurement teams can:
Automate supplier document collection and verification
Set up alerts for expiring certifications
Monitor risks continuously with up-to-date data
Keep all supplier information centralized and audit-ready
Want to simplify supplier due diligence while protecting your supply chain? Book a free demo with Prokuria today.