L5M5 Managing Ethical Procurement and Supply Questions and Answers

The L5M5 study guide highlights several tools procurement can use to embed ethics and sustainability into supply chains. These include benchmarking (A), which compares practices against best-in-class organisations; supply chain mapping (C), which provides visibility of all tiers of suppliers to identify risks; and on-site audits (D), which verify supplier compliance with ethical standards directly. Supplier preferencing (B) is a portfolio analysis tool used to understand suppliers’ perspectives, not specifically an ethical improvement tool. Cost analysis (E) is primarily financial and does not ensure ethical compliance. Procurement professionals must apply tools like mapping and audits to identify risks such as forced labour, environmental harm, or corruption.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, section on supplier evaluation and sustainability tools

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

A monopsony exists when there is only one buyer in a market but multiple sellers. For example, in the defence industry, a government may be the sole buyer of military equipment such as submarines. This contrasts with a monopoly, where only one seller dominates the market. The L5M5 study guide (p.127) explains that monopsony can create power imbalances, as the buyer holds significant leverage over suppliers, potentially leading to unfair contract terms. Ethical procurement requires recognising such risks and ensuring that dominant buyers do not exploit suppliers unfairly.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.127

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

CSR policies allow businesses to integrate ethical, social, and environmental concerns into their operations. The L5M5 study guide (p.28) highlights several benefits: an improved reputation (A), enhanced competitiveness (B) by differentiating the company, and a positive impact on wider society (D). However, CSR policies do not provide protection from all legal issues (C)—illegal activities can still occur despite having a policy. CSR (sometimes referred to as ESG in modern usage) builds stakeholder trust, supports compliance with global sustainability frameworks, and enhances long-term resilience. Procurement teams are particularly important in embedding CSR into supply chains by ensuring supplier compliance and accountability.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.28

Employee resistance to ESG policies typically arises because they may require changes to existing practices and operations. The L5M5 study guide (p.6) notes that employees often resist change, particularly if it disrupts established ways of working. While reduced profits (A) or stakeholder returns (C) may concern senior executives, they are less relevant to employee resistance. ESG policies usually enhance reputation, not create negative publicity (D). Procurement professionals must manage change carefully by engaging employees and suppliers, ensuring they understand the long-term benefits of ESG practices.

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

The UN’s 17 Sustainable Development Goals (SDGs) form the 2030 Agenda for Sustainable Development. They cover areas such as ending poverty (A), reducing inequality (B), and combatting climate change (C). However, eradicate unethical business practices (D) is not one of the listed goals. The L5M5 study guide (p.4) stresses that while business ethics are important, the SDGs are broader, covering social, environmental, and economic development priorities. Procurement professionals should be able to identify the SDGs, as supply chain policies are increasingly aligned with them to support global sustainability efforts.

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

The correct answer is that labour standards vary from country to country. According to the L5M5 study guide (p.85), while international conventions exist (e.g., ILO conventions), there is no single binding international law regulating labour standards across all nations. Instead, each country enforces its own rules regarding wages, hours, and working conditions. Some countries have strict protections, while others may have weak or poorly enforced standards. Therefore, procurement professionals must apply due diligence and supplier audits when sourcing internationally, as ethical risks arise in jurisdictions with lower labour protections.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.85

Alternative Dispute Resolution (ADR) mechanisms are encouraged in procurement as they save time, reduce costs, and preserve business relationships. The key ADR methods listed in the L5M5 study guide (p.188) include mediation, adjudication, and conciliation. These methods are designed as alternatives to litigation, which involves courts, legal judgments, and lengthy processes. Litigation is not an ADR method; it is the traditional approach, often more adversarial and costly. Procurement professionals are encouraged to adopt ADR whenever possible, as it helps maintain collaborative supplier relationships while resolving conflicts effectively.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, new edition p.188

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 MNE Declaration, also called the ILO Tripartite Declaration of Principles concerning Multinational Enterprises, sets out guidelines for multinational organisations to operate ethically and sustainably. The L5M5 study guide (p.267) explains that the Declaration prioritises formal economies (regulated, tax-paying, legitimate business environments) and host country labour, ensuring that local workers are not exploited. Informal economies and immigrant labour are recognised but not prioritised in the same way. The declaration is tripartite because it involves three groups: governments, employers, and workers’ organisations. Procurement professionals working internationally must be aware of these principles when engaging multinational supply chains.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.267

The Organisation for Economic Co-operation and Development (OECD) promotes economic development, international trade, and social protection policies. According to the L5M5 study guide (old p.66, new p.95), the OECD coordinates policy among member countries to improve economic performance and ensure financial safety nets. The WTO (A) focuses on trade rules, the UN (B) covers peace and development, and the ILO (C) focuses on labour rights. Procurement professionals should understand OECD guidelines for multinational enterprises, which influence global supply chain governance.

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

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

Knowledge transfer and Intellectual Property (IP) rights are often the most difficult elements to manage during contract termination. The L5M5 study guide (p.241) explains that physical assets and documents can be returned easily, but IP rights and tacit knowledge (e.g., processes, experience, trade secrets) are harder to transfer and may be contested between parties. Disputes may arise over ownership of IP developed during the contract. Procurement professionals must establish clear exit strategies early in the contracting process to address these issues and avoid disputes at termination. This ensures continuity and protects business interests while maintaining ethical standards.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.241

The practice described is known as Direct Trade. Unlike Fair Trade, which follows certification standards set by external bodies, Direct Trade involves companies directly sourcing from producers, often providing higher prices and more investment in local communities. The L5M5 study guide (p.309) explains that Direct Trade is particularly common in coffee and cocoa supply chains, where companies wish to build stronger, transparent, and ethical relationships with producers. It differs from Fair Trade in that it avoids third-party certification costs and focuses on building trust through long-term partnerships. Procurement professionals must understand both models when sourcing ethically in international markets.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.309

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

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

A Community Benefit Clause is also known as a Social Value Clause. The L5M5 study guide (p.126) explains that these clauses integrate economic, social, or environmental benefits into public sector contracts. For example, requiring the use of eco-friendly equipment or prioritising local employment. The Social Value Act 2012 formalised this requirement in UK public procurement. Procurement professionals must ensure such clauses are meaningful and enforceable to create real community benefits, not just tick-box exercises.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.126

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

The L5M5 study guide (p.190) explains that a warranty is a contractual term where breach allows the injured party to claim damages, but the contract continues. By contrast, conditions are fundamental terms—breach may allow termination and damages. Representations are statements made in negotiation, not binding terms, and innominate terms may be treated as conditions or warranties depending on the breach. Understanding the difference is crucial for procurement professionals when drafting and managing contracts, as it affects remedies and supplier relationships.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.190

The L5M5 study guide (p.71) explains that the legitimate motive for Low-Cost Country Sourcing (LCCS) is reducing operational expenses by accessing cheaper materials, labour, or manufacturing. However, this must be conducted ethically, balancing cost savings with environmental, social, and legal responsibilities. Options A and B reflect unethical practices, while C is irrelevant. Procurement professionals must carefully evaluate suppliers in low-cost countries to ensure compliance with ethical standards such as labour rights, environmental protection, and anti-bribery legislation. LCCS can create value but must not compromise sustainability or governance.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.71

The ILO defines child labour as work that deprives children of their childhood, education, or well-being. According to the L5M5 study guide (p.252), light work, such as assisting in a family business outside school hours, is not considered child labour if it does not interfere with education or harm physical and mental health. Charlie is attending school, completing homework, and only helping part-time in a family-owned shop. Therefore, this is not classified as child labour. The ILO guidelines make clear distinctions between exploitative labour (such as sweatshops or hazardous industries) and permissible family assistance.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.252

The Supply Chain Operations Reference (SCOR) model is a widely adopted framework for analysing and improving supply chain performance. According to the L5M5 study guide (p.149), advantages of SCOR include its universality across industries (A) and its ability to improve and communicate organisational decisions (C) by providing a common language and structure for supply chain processes. A limitation of SCOR is that it focuses primarily on internal processes and does not adequately capture wider external environmental or social factors (making option B incorrect). While SCOR can help identify cost-saving opportunities, it does not guarantee low costs (D). For procurement professionals, SCOR is an important tool for benchmarking performance and driving improvements in ethical supply chain management.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.149