As cyber threats evolve, businesses must stay ahead of emerging risks. The European Union has introduced the NIS2 Directive to strengthen defences and address growing security challenges.
This directive mandates stricter cybersecurity requirements for essential and important entities across the EU. The main goal of NIS2 is to improve cybersecurity in important industries such as energy, transport, healthcare, finance, water management and space. A key part of NIS2 is its focus on supply chain security.
This is an update to the 2016 NIS Directive. The regulation has officially started on 17 October 2024.
Businesses depend on a network of suppliers, service providers, and vendors. This makes supply chain weaknesses (SolarWinds Attack; NotPeya Attack, MimeCast Certificate Compromise etc.) a significant target for hackers. A single weak link can lead to widespread disruptions, data breaches, and regulatory non-compliance. Understanding how NIS2 impacts supply chain security is vital for ensuring business continuity, protecting sensitive data, and maintaining compliance.
Why Supply Chain Security Matters for NIS2 Compliance
Supply chains are a crucial part of modern business operations, but they also present significant cybersecurity risks. Compliance now goes beyond protecting internal systems, it also includes making sure that third-party vendors meet cybersecurity standards to protect critical infrastructure.
Many organisations hire outside help for important services like IT support, cloud storage, and logistics. This creates many ways for cyber threats to enter. Attackers frequently target suppliers with weaker security measures to gain access to larger organisations, leading to devastating consequences. A 2021 report from the European Union Agency for Cybersecurity (ENISA) revealed that supply chain attacks were increasing four times faster than the previous year, with nearly 66% of incidents targeting supplier code.
NIS2 requires businesses to take a proactive approach to supply chain security. The directive mandates that organisations identify, assess, and mitigate security threats across their supply chain.
Organisations that fail to assess and manage supplier risks face severe penalties, operational disruptions, and reputational damage. Penalties can be up to €10 million or 2% of global sales for essential entities. For important entities, fines can reach €7 million or 1.4% of their sales.
Key Supply Chain Security Requirements Under NIS2
1. Strengthened Supply Chain Risk Management
NIS2 mandates that businesses actively manage risks associated with third-party suppliers. Organisations must:
- Assess supplier security practices and identify weak points.
- Apply security measures based on the risk each supplier presents.
- Continuously monitor and respond to supplier-related security threats.
2. Supplier Cybersecurity Responsibility
Businesses can no longer assume suppliers have sufficient cybersecurity in place. Under NIS2, companies must:
- Set clear security expectations in vendor contracts.
- Conduct regular audits to ensure supplier compliance.
- Remove non-compliant vendors that pose security risks.
3. Incident Reporting and Response
Quick and transparent reporting is essential under NIS2. Companies must:
- Establish clear communication channels for reporting security incidents.
- Ensure rapid detection and response to supplier-related breaches.
- Work with vendors to manage cybersecurity risks proactively.
What If Your Business is a Supplier But Not Directly Covered by NIS2?
While NIS2 primarily targets essential and important entities, businesses that operate as suppliers to these organisations must also take compliance seriously. Many large companies are enforcing NIS2 cybersecurity policies in their supply chains. Suppliers that do not meet these standards may lose contracts and business opportunities.
Even if a company does not have to follow NIS2, not aligning with its principles can create risks in the supply chain. Larger businesses may ask suppliers to show strong security measures. They might need to pass security audits and follow data protection rules to keep their contracts. This shift means that compliance is no longer just a regulatory concern—it is a business necessity.
For suppliers, aligning with NIS2 provides several advantages:
- Stronger Business Relationships: Meeting cybersecurity expectations increases trust with clients and reduces the risk of contract termination.
- Competitive Advantage: Suppliers that proactively implement strong cybersecurity practices may stand out in the market, gaining preference over non-compliant competitors.
- Reduced Security Risks: Strengthening internal security reduces the risk of cyberattacks, downtime, and reputational damage.
Challenges Businesses Face in Securing Their Supply Chain
Despite the clear importance of supply chain security, many organisations struggle with implementing effective controls. One of the biggest challenges is the sheer number of vendors that businesses work with. Large enterprises often have thousands of suppliers, each with varying levels of cybersecurity maturity. Tracking and ensuring compliance across such a vast network can be overwhelming.
Cost is another major barrier. Strengthening supply chain security requires investment in risk assessments, cybersecurity tools, and ongoing monitoring.
Many businesses, especially smaller suppliers, may lack the resources to meet NIS2’s strict requirements. This can create security gaps.
Another common issue is lack of consistency. Different suppliers may follow different security protocols, making it difficult to ensure consistent security standards across the supply chain.
Organisations must establish clear, standardised requirements and communicate them effectively to all vendors. You can achieve this by including security expectations into contracts, conducting regular compliance reviews, and requiring vendors to demonstrate their adherence to security frameworks.
How Businesses Can Strengthen Supply Chain Security for NIS2 Compliance
Achieving NIS2 compliance requires a multi-layered approach to cybersecurity, with a strong focus on securing the supply chain. Start by doing a supply chain security assessment. This helps find possible threats and set up a risk management plan.
Businesses should group suppliers by their risk level. They should focus on security for those with access to sensitive data or important systems.
Organisations should also implement robust endpoint security measures to protect all devices within their network. Cyber criminals often take advantage of weak points in endpoints to access business systems. This makes endpoint security crucial for NIS2 compliance. Making sure all endpoints, even those managed by third-party vendors, have current security protections helps stop potential breaches.
Additionally, employee and supplier security awareness training is crucial. Many cyberattacks, such as phishing scams, rely on human error to succeed. Training staff and vendors on good security practices can help businesses lower the risk of security breaches. This is especially true for breaches caused by social engineering tactics.
Email security is another essential area of focus. Many supply chain attacks originate from compromised email accounts, leading to unapproved access and data breaches. Implementing advanced email security measures, such as email filtering, domain verification, and anti-phishing solutions, can help prevent attackers from infiltrating supply chain networks.
Finally, collaboration is key. Businesses must work closely with their suppliers to ensure mutual security controls.
Sharing threat intelligence, coordinating incident response plans, and establishing clear communication channels enhance the overall security posture of the supply chain. By building a culture of cybersecurity, organisations can create a stronger network of suppliers. This network can better meet NIS2 requirements.
Conclusion
The NIS2 Directive introduces a new standard for cybersecurity compliance, extending requirements across internal systems and entire supply chains.
This change is important for business continuity and meeting regulations. However, it brings clear challenges, especially for smaller organisations in the supply chain. Limited resources, a lack of cybersecurity experts, and complex compliance rules can make NIS2 alignment feel hard.
Sharp IT Services is here to make that journey easier. We begin with risk and gap assessments. This helps you see where your organisation stands with the directive. We then guide you through every step with clear advice, pre-defined documentation, and structured process controls that reduce the burden on your internal teams.
We offer more than just consultancy. Our services include backup and disaster recovery, endpoint protection, email security, security awareness training, and ongoing compliance monitoring to ensure businesses meet NIS2 standards. For organisations without security teams, we offer ongoing support. This helps you stay protected and continue to remain compliant.
Whether you’re a directly regulated business or a supplier within the NIS2 ecosystem, Sharp IT Services delivers the support you need to stay secure, scalable, and audit ready. Learn more at Sharp IT Services - NIS2 Compliance.
