L5M5 Managing Ethical Procurement and Supply Questions and Answers

The L5M5 study guide (old p.67, new p.95) explains that there is no limit to compensation claims for breaches of the Equalities Act 2010. By contrast, unfair dismissal claims (not linked to discrimination) are capped at the lower of £83,682 or 52 weeks’ gross pay. Discrimination claims, however, are unlimited, reflecting the seriousness of breaches. Procurement professionals must ensure suppliers comply with equalities legislation, as non-compliance can lead to unlimited liability and reputational damage.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.95

The ILO (International Labour Organisation) is an agency of the United Nations (UN), not the WTO. The L5M5 study guide (p.249) explains that the ILO promotes labour rights globally, sets international standards, and provides mechanisms for complaints and representation. Its principles include eliminating child labour, eradicating forced labour, and promoting safe and fair working conditions, including maternity protection. By contrast, the WTO (World Trade Organisation) deals with trade rules and disputes, not labour standards. This distinction is essential in procurement, as professionals must understand which bodies regulate trade versus labour practices.

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

Stakeholders are categorised based on their relationship to the organisation. The L5M5 study guide (p.105) explains that connected external stakeholders are outside the organisation but directly linked through financial or contractual relationships. Banks (financiers), investors (shareholders), and consumers (customers) fall into this category. Internal stakeholders (A) include employees and management, while external stakeholders (B) are broader groups such as regulators and communities without direct contracts. "Connected internal stakeholders" (C) is not a valid classification. Procurement professionals must identify and manage stakeholder expectations to maintain ethical, transparent supply chains.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.105

The correct answer is Yes, ABC can stop work. The L5M5 study guide (p.189) explains that where a clause states "of the essence," it means the condition is fundamental to the contract. Non-payment under a "Payment is of the Essence" clause is considered a material breach of contract. This allows the injured party (ABC) to terminate the agreement and/or claim damages. In construction contracts, timely payments are essential because they enable contractors to pay subcontractors. Historically, "pay when paid" clauses caused major problems for smaller firms, leading to reforms and the introduction of stricter "essence" clauses to protect them. Thus, DEF Developers’ failure to pay entitles ABC to stop work legally.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.189

The disadvantage of subcontracting is less control over performance. The L5M5 study guide (p.156) notes that while subcontracting allows access to specialist expertise, it creates additional risks for project delivery, as the main contractor remains accountable for subcontractor performance. Problems such as delays, quality issues, or non-compliance can occur, and these are more difficult to manage indirectly. Increased costs (A) are not always true since subcontracting can be cost-effective, while lower quality (B) depends on subcontractor capability. Compliance with the law (D) is a requirement, not a disadvantage. Procurement professionals must carefully manage subcontractors through clear contracts, monitoring, and accountability measures.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.156

The L5M5 study guide (p.185) explains the distinction between regulatory documents. Guidelines are advisory documents providing best practice but are not legally binding. Regulations and statutes (A and C) are legally binding, and directives (B) are binding once incorporated into national legislation. Procurement professionals must be able to differentiate between binding legislation and advisory guidelines to ensure compliance. While guidelines help shape ethical practices, failure to follow them usually does not carry legal penalties.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.185

The L5M5 study guide (p.210) specifies that independent auditors must be approved by a certified body (B) and have sector-specific knowledge (C) to assess compliance effectively. While qualifications (D) may be desirable, there is no universal "auditor qualification," and experience (A) varies by sector. CIPS also stresses the importance of auditor qualities such as independence, objectivity, and integrity. For procurement, selecting the right auditor ensures credible, reliable assurance of supplier compliance with ethical and sustainability requirements.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.210

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 L5M5 study guide (p.7) highlights key benefits of sustainability, including increased productivity, reduced waste (A), and gaining competitive advantage (B) in the marketplace. Sustainable practices often improve efficiency, reduce resource consumption, and build stronger reputations, which attract customers and investors. Options C and D are incorrect, as weakened performance and higher spending are not benefits; instead, sustainability enhances resilience and long-term cost savings. Procurement professionals must position sustainability not as a cost burden but as a driver of efficiency, innovation, and brand strength.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.7

Total Landing Costs include all costs incurred to bring goods to the buyer’s location. According to the L5M5 study guide (old p.81, new p.107), these include delivery costs (B), currency conversion costs (C), and import duties (E). Motor insurance (A) and disposal costs (D) are post-delivery expenses and not part of landing costs. Procurement professionals must calculate total landing costs to make accurate sourcing decisions and avoid hidden expenses that can erode cost savings from international procurement.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.107

The World Fair Trade Organisation (WFTO) recognises Fair Trade items through either the product certification route (A), where only the product is certified, or the integrated supply chain route (C), where the entire supply chain is Fair Trade compliant. The L5M5 study guide (old p.223, new p.300) emphasises that these approaches provide flexibility for businesses while ensuring ethical standards are upheld. Manufacturer route (B) and audit route (D) are not official WFTO pathways. Procurement professionals should understand these routes when sourcing ethically certified goods.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.300

The STEEPLED analysis tool examines external macro-environmental factors: Social, Technological, Economic, Environmental, Political, Legal, Ethical, and Demographic. The L5M5 study guide (p.55) confirms that “D” stands for Demographic, reflecting population trends, age structures, and workforce availability. This addition evolved from the earlier PESTLE model, later extended to STEEPLE and STEEPLED. Procurement professionals use this tool to assess external risks and opportunities that may affect supply markets and ethical sourcing.

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

Effective supplier evaluation must align with ESG policies. The L5M5 study guide (p.80) highlights that procurement should establish performance management frameworks (A), ensure that KPIs reflect ESG objectives (B), and carry out regular risk assessments (D). While certifications such as ISO9001 and SA8000 (C) are valuable, requiring them universally may exclude smaller, ethical suppliers unable to afford certification costs. Option E is unethical and discriminatory, as not all low-cost country suppliers use forced labour. A balanced, risk-based approach ensures ethical compliance while supporting sustainability goals.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.80

The correct answer is Adversarial. The relationship spectrum described in the L5M5 study guide (p.151) outlines different approaches to supplier relationships: transactional, adversarial, tactical, and partnership. An adversarial relationship exists where both parties compete rather than collaborate, often trying to maximise their own benefit at the expense of the other. This type of relationship is common in short-term, price-driven procurement arrangements but is not conducive to long-term collaboration or ethical supply chain practices. Partnership relationships (A) involve cooperation and shared goals, transactional (B) are short-term and arms-length but neutral, and closer tactical (C) involve selective collaboration. Procurement professionals are encouraged to move away from adversarial relationships to more cooperative models where possible.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.151

The role of an International Procurement Organisation (IPO) is to provide sourcing intelligence to companies operating globally. The L5M5 study guide (p.66) explains that IPOs identify the most cost-effective manufacturers worldwide, enabling buyers to reduce operational expenses and increase efficiency. They do not force organisations to relocate operations (A), nor are they primarily focused on logistics (C). While due diligence may be part of supplier selection, running background checks (D) is not the main purpose of an IPO. In practice, IPOs support centralised sourcing strategies and leverage international supplier markets to achieve best value.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.66

The economic pillar of the Triple Bottom Line refers to the creation of financial value while maintaining responsibility toward stakeholders. The L5M5 study guide (p.179) explains that sustainability in procurement is not only about compliance with social and environmental standards but also about ensuring financial viability. Activities such as delivering shareholder returns, managing costs, and achieving long-term profitability fall under the economic dimension. "Legal" is not one of the TBL pillars, and while law supports governance, it is not itself a sustainability principle. Therefore, creating value for shareholders through responsible economic performance is clearly categorised under the economic aspect of TBL.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.179

The International Labour Organisation (ILO) is a specialised UN agency founded in 1919 to promote labour rights and improve social protection. The L5M5 study guide (p.87) confirms that the ILO’s mission includes eliminating child labour, eradicating forced labour, and promoting fair wages and safe workplaces. It does not set trade rules (that is the WTO), nor was it created to drive globalisation. For procurement professionals, understanding the ILO is critical when assessing supplier practices against international labour standards, especially in global supply chains.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.87

Porter’s Creating Shared Value (CSV) concept integrates Corporate Social Responsibility (CSR) with philanthropy (B), meaning that companies can generate economic value while simultaneously creating social value for communities. The L5M5 study guide stresses that businesses can strengthen competitiveness while advancing social and economic conditions where they operate. Unlike traditional philanthropy, CSV embeds social impact into core business strategy rather than being a peripheral activity. Procurement professionals can apply this by selecting suppliers who deliver both economic efficiency and community benefits.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, section on CSR and shared value

The World Fair Trade Organisation (WFTO) has a set of 10 principles designed to ensure fair and sustainable trade. These include providing opportunities for disadvantaged producers, ensuring the payment of a local living wage, promoting gender equity, and rejecting child labour and forced labour. The L5M5 study guide (p.295) confirms that the WFTO focuses on disadvantaged producers in developing countries, differentiating it from organisations like the ILO, which sets broader labour standards, and the OECD/EU, which focus on economic or political cooperation. Procurement professionals may encounter WFTO-certified suppliers, especially in commodities like coffee, cocoa, and handicrafts.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.295

The L5M5 study guide (old p.93, new p.114) makes a clear distinction between demand forecasting and supply forecasting. The statement given in the question is actually a definition of demand forecasting, not supply forecasting. Supply forecasting is focused on gathering data about current suppliers and external trends that may impact availability of goods and services. This can include political issues, natural disasters, or supplier financial stability. Option D instead refers to price forecasting, which is another distinct activity. Procurement professionals use supply forecasting to assess risks, build resilience, and anticipate potential disruptions in supply markets.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.114

The UK Modern Slavery Act 2015 requires companies with an annual turnover of £36m or more to publish an annual Anti-Slavery and Human Trafficking Statement. The L5M5 study guide (p.90) confirms that Ben’s company, with a turnover of £20m, does not meet the threshold and is therefore not legally required to publish a statement. However, even if not legally required, organisations are encouraged to act responsibly and voluntarily demonstrate compliance with ethical labour practices. Procurement professionals must be aware of turnover thresholds and ensure compliance when operating in larger organisations.

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

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

The UN Global Compact is primarily aimed at businesses. The L5M5 study guide (p.258) clarifies that while NGOs and other organisations can engage, the Compact is designed to encourage corporate responsibility in human rights, labour, environment, and anti-corruption. Since 2003, cities and public sector organisations can also join under different frameworks, but businesses remain the main focus. For procurement, this means suppliers aligned with the UN Global Compact are more likely to demonstrate compliance with global ethical standards.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.258