L5M5 Managing Ethical Procurement and Supply Questions and Answers

While LCCS can reduce costs, it also presents risks. The L5M5 study guide (p.72) identifies disadvantages such as inventory risks (C) from longer lead times, different laws and regulations (D) creating compliance challenges, and currency fluctuations (E) impacting costs unpredictably. Low infrastructure costs (A) and scalability of production (B) are advantages, not disadvantages. Procurement professionals must weigh cost savings against these risks and implement mitigation strategies such as dual sourcing and currency hedging.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.72

The Deming Cycle (also known as the PDCA cycle) is a continuous improvement model. The correct sequence is: Plan, Do, Check, Act. According to the L5M5 study guide (p.276), it is used within ISO14001 and other management systems to improve processes iteratively. "Plan" involves identifying improvements, "Do" implements them, "Check" monitors results, and "Act" standardises successful changes. Procurement professionals apply this cycle in supplier management and sustainability programmes to ensure continuous improvement.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.276

A competitive advantage is something that makes one organisation more attractive than its competitors. The L5M5 study guide (p.62) highlights reduced lead times as a clear competitive advantage because customers value speed, reliability, and efficiency in delivery. While high profit margins (B) and ROI (C) are outcomes of strong performance, they do not necessarily attract customers. Brand reputation (D) is important but is considered a broader intangible asset rather than a direct competitive advantage in procurement. Reduced lead times demonstrate operational excellence, helping procurement gain a strategic edge in the marketplace.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.62

SA8000 is an internationally recognised certification standard for social accountability. It requires organisations to adopt management systems to monitor compliance with social standards, including child labour elimination, safe working conditions, and fair wages. According to the L5M5 study guide (p.264), one disadvantage is the cost of implementing and maintaining the management system, which can be resource-intensive for smaller organisations. SA8000 is not industry-specific, is recognised globally, and is applicable to both large and small organisations. However, the investment in audits, training, and compliance documentation can be significant, making this a barrier for some companies.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.264

A compliance audit evaluates whether an organisation adheres to regulatory requirements, security policies, and internal risk management procedures. The L5M5 study guide (p.207) highlights that this is distinct from external audits (conducted by outsiders), third-party audits (commissioned independently), and benchmarking audits (comparing against industry peers). Procurement professionals must use compliance audits to ensure suppliers meet legislative and regulatory standards, reducing risks of non-compliance, fines, and reputational damage.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.207

The International Labour Organisation (ILO) has defined core labour standards. According to the L5M5 study guide (old p.60, new p.88), these include freedom of association (A) and payment of a living wage (B). Other standards include the right to unionise, elimination of forced labour, and restriction of child labour. Equal opportunities (C) and protection from job insecurity (D) are important labour rights but not classified as core ILO standards. Procurement professionals must ensure suppliers comply with these standards to avoid reputational, legal, and operational risks.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.88

The Eco-Management and Audit Scheme (EMAS) is a voluntary EU framework that supports organisations in improving environmental performance. The L5M5 study guide (p.279) explains that EMAS helps organisations by:

Focusing on continuous environmental performance improvement (A),

Allowing proof of compliance with environmental legislation (C),

Enhancing reputation and stakeholder trust (D).

However, it does not guarantee increased profits (B), and there are costs for audits and registration (E). EMAS can give organisations a competitive advantage by demonstrating environmental responsibility. For procurement, it helps in supplier evaluation, especially within the EU.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.279

The concept of the Triple Bottom Line (TBL), also referred to as the "3Ps," is a framework that assesses organisational success through People, Planet, and Profit. These dimensions highlight the balance between social equity (people), environmental stewardship (planet), and economic performance (profit). According to the CIPS L5M5 study guide (p.3), procurement and supply professionals are expected to incorporate sustainability into decision-making processes, ensuring that business practices do not only create economic value but also deliver positive social and environmental impacts. "Product" and "Placement" are not part of the TBL model, as they are marketing-related concepts, not sustainability measures. This principle ensures procurement strategies align with corporate responsibility and long-term sustainable growth.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.3

Bribery involves offering something of value to influence decision-making improperly. According to the L5M5 study guide (p.47), inviting a buyer to play golf during a tender (A) and donating to a politician to influence voting (B) are clear examples of bribery. A Christmas gift (C) may sometimes be considered borderline depending on company policies, but it is generally not categorised as bribery unless intended to influence. Paying invoices early (D) is not bribery. Procurement professionals must comply with anti-bribery policies and legislation such as the UK Bribery Act to maintain integrity.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.47

The Health and Safety at Work Act 1974 requires UK employers to ensure that working conditions are safe and that risks to health are managed. According to the L5M5 study guide (p.6), this includes duties such as accident prevention, safe use of equipment, and training employees. While the Working Time Regulations (A) relate to working hours, the Companies Act (B) covers corporate governance, and the Disability Discrimination Act (D) focuses on preventing discrimination, only the Health and Safety at Work Act specifically ensures safe conditions. Procurement professionals must be aware of this when selecting and monitoring suppliers, particularly in high-risk industries.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.6

Globalisation is driven by a variety of factors, including cost, technology, and regulation. A cost driver is a factor that helps organisations reduce expenses and achieve financial efficiency. According to the L5M5 study guide (p.56), one of the most significant cost drivers is the opportunity to build economies of scale, where larger production volumes reduce per-unit costs. While improvements in technology (A) and relaxed trade rules (C) are drivers of globalisation, they are not specifically cost-related. "Value for stakeholders" (B) is broader and not strictly a cost driver. Procurement professionals should recognise economies of scale as a primary cost incentive for international sourcing and trade.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.56

In the Kraljic Matrix, leverage items are high value but have many suppliers and low switching costs. The L5M5 study guide (old p.108, new p.154) explains that buyers have strong negotiation power in leverage situations and can achieve cost savings without high risk. Bottleneck items (B) are low-value but high-risk due to limited suppliers, routine items (C) are low-value and low-risk, and strategic items (D) are high-value and high-risk. Procurement professionals must use leverage strategically to maximise value.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.154

Fair Trade organisations protect producers economically by ensuring a minimum price for raw materials, regardless of market fluctuations. The L5M5 study guide (old p.224, new p.303) explains that this stabilises producer incomes against volatile commodity prices, tariffs, or currency risks. While Fair Trade also involves better working conditions and community investment, the primary economic safeguard is the guaranteed minimum price. Procurement professionals should recognise how Fair Trade contributes to supply chain stability and resilience.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.303

The Wine and Agricultural Ethical Trade Association (WIETA) is an organisation promoting fair trade and ethical practices in South Africa’s wine industry. The L5M5 study guide (p.262) outlines WIETA’s principles, which align with ILO standards. These include prohibition of forced labour, ensuring working hours are not excessive, and providing regular employment rather than temporary or exploitative contracts. Options D and E are not accurate—no workplace can be entirely free of risk, and sick pay is determined by national legislation, not WIETA. Procurement professionals working with agricultural sectors should be aware of such sector-specific ethical trade associations.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.262

SWOT analysis examines both internal factors (Strengths and Weaknesses) and external factors (Opportunities and Threats). According to the L5M5 study guide (p.55), SWOT is a strategic tool for assessing organisational drivers and making informed procurement decisions. In contrast, STEEPLED analyses external macro-environmental factors (social, technological, economic, environmental, political, legal, ethical, demographic). GDP (Gross Domestic Product) is an economic indicator, not an analysis tool, while ABC analysis categorises suppliers or inventory based on importance and value, not internal strategic drivers.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.55

SA8000 is a globally recognised certification standard for Social Accountability. The L5M5 study guide (p.264) confirms that it measures compliance with ethical labour practices such as child labour elimination, safe working conditions, fair wages, and working hours. It does not cover quality (A), environmental management (B), or risk management (C). For procurement professionals, SA8000 provides assurance that suppliers operate ethically, helping organisations meet CSR/ESG commitments across supply chains.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.264

The United Nations (UN) launched the 2030 Sustainable Development Agenda, which includes the 17 Sustainable Development Goals (SDGs). The L5M5 study guide (p.4) emphasises that these goals cover social, environmental, and economic priorities, including poverty reduction, climate action, decent work, and responsible consumption. NATO, ISO, and ILO play important roles in governance, standards, and labour rights but are not responsible for the SDGs. For procurement professionals, the SDGs provide a global framework to align ethical supply practices with wider sustainability objectives.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.4

The UN Global Compact is based on ten principles derived from UN declarations. According to the L5M5 study guide (p.249), the areas covered are: human rights (A), labour standards, environment (B), and anti-corruption (C). "Racism" (D) is not listed specifically; instead, the Compact addresses non-discrimination as part of labour rights. "Minimum wage" (E) is not a universal standard in the Compact, though labour standards cover fair conditions of work. Procurement professionals should align supply strategies with these principles to support global sustainability and ethical practice.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.249

The Modern Slavery Act 2015 introduced a requirement for companies with turnover above £36 million to publish annual slavery and human trafficking statements, disclosing actions to ensure transparency in supply chains. The L5M5 study guide (old p.62, new p.90) stresses its role in combating forced labour and human trafficking. While the Companies Act (A) focuses on governance, the Working Time Directive (C) regulates working hours, and the Health and Safety Act (D) ensures workplace safety, only the Modern Slavery Act addresses supply chain transparency.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.90

Fraud risks in procurement typically include practices such as bid rigging (collusion to manipulate tenders), phantom suppliers (fake companies created to siphon money), and deliberate duplicate payments (processing false or repeated invoices). However, accepting presents is classified as bribery, not fraud. The L5M5 study guide (old p.139, new p.50) explains that fraud involves intentional deception for personal gain, while bribery relates to improper inducements or gifts. Procurement professionals must distinguish between fraud and bribery because both undermine ethical procurement but require different controls. For example, fraud prevention requires audit trails and segregation of duties, while anti-bribery policies require clear rules on gifts and hospitality.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, old p.139, new p.50

Expert Determination is a dispute resolution process in which parties appoint an independent expert to decide on a technical matter. According to the L5M5 study guide (p.236), this method is best for disputes involving specialist knowledge, such as intellectual property, chemical formulas, or engineering specifications. The expert’s decision is legally binding. It is not chosen based on contract value (A), geographic scope (B), or interpersonal disputes (D). Procurement professionals should recognise Expert Determination as an efficient way to resolve highly technical disputes without lengthy litigation.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.236

When cost is the overriding priority, suppliers may compromise on sustainability. The L5M5 study guide explains that cheap materials may be unsustainably sourced (e.g., timber from non-certified forests). This is particularly highlighted in the old syllabus under LO 3.4, which noted risks when cost or speed is prioritised over ESG. Procurement professionals must balance cost, quality, speed, and sustainability to avoid reputational damage and unethical practices. Focusing solely on cost undermines long-term ESG commitments.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, section on sustainability vs cost priorities

The ILO Fundamental Principles of Human Rights apply to governments, as ILO conventions must be ratified and enforced at the national level. The L5M5 study guide (p.271) contrasts this with frameworks aimed at businesses: UN Global Compact (A), SA8000 (C), and OECD Guidelines for Multinational Enterprises (D). Governments are responsible for implementing and enforcing ILO standards, while businesses align with other voluntary or certification frameworks. Procurement professionals must understand which standards apply to suppliers and which are obligations for governments when working internationally.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.271