Practice Free L5M5 Managing Ethical Procurement and Supply Exam Questions Answers With Explanation

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

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

A Retention of Title Clause states that ownership of goods remains with the seller until full payment is made. According to the L5M5 study guide (p.190), Orange Ltd legally retains ownership of the fruit delivered until Juicy Boots settles payment. This clause protects suppliers, particularly SMEs, from non-payment risks. Signing for delivery does not override the clause, and timely delivery is irrelevant. Retention of Title is an important risk management tool in procurement contracts.

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

Competitive advantage refers to unique capabilities that give an organisation an edge in the market. The L5M5 study guide (old p.39, new p.63) explains that superior IT systems fall under process advantages, as they directly influence how efficiently orders are taken, materials are managed, and operations are executed. Culture (A) refers to organisational values and behaviours, IP (C) refers to patents or trademarks, and People (D) refers to skills or talent. For procurement, recognising process-driven advantages helps identify supplier strengths and strategic sourcing opportunities.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.63

The L5M5 study guide (p.258) explains that blue washing refers to organisations associating with the UN Global Compact to appear legitimate while failing to implement its principles. The term comes from the blue colour of the UN flag. In contrast, greenwashing (A) is when companies exaggerate their environmental credentials. Blue washing is a reputational risk because it undermines genuine CSR initiatives and public trust. Procurement professionals must ensure that CSR commitments are backed by verifiable actions rather than symbolic gestures.

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

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 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 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

The Ethical Trading Initiative (ETI) is a leading alliance focused on improving working conditions in global supply chains. The L5M5 study guide (p.260) explains that ETI membership comprises:

Private businesses (such as retailers and brands),

Non-Governmental Organisations (NGOs), and

Trade Unions.

This tripartite approach enables collaboration between commercial, labour, and social interests to improve standards. Governments are not direct members, although their legislation can influence ethical trading. Public sector bodies may adopt ETI principles but are not core members. ETI’s Base Code, founded on ILO conventions, outlines key principles including no forced labour, freedom of association, and fair working conditions.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.260

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 L5M5 study guide (p.194) confirms that On Time In Full (OTIF) delivery is a standard performance metric but is not an ESG measure. ESG measures include waste reduction (E), social value (S), and ED&I (S), which assess ethical, social, and environmental responsibilities. Procurement professionals must distinguish between operational KPIs and sustainability-focused KPIs to ensure contracts drive both efficiency and ethical responsibility.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.194

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

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

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 L5M5 study guide (p.181) explains that sustainability-related measures, such as ESG, are only mandatory in some countries, not universally. For instance, the UK has legislation banning single-use plastic straws, while other countries may not. International organisations like the UN and ILO promote sustainability, but they cannot impose legislation globally—any treaty or framework must be ratified into national law. This means compliance is fragmented and varies across jurisdictions. Procurement professionals must therefore remain vigilant, as sourcing internationally exposes them to differing sustainability obligations and standards.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.181

ISO14001 is an international standard for environmental management systems. According to the L5M5 study guide (p.277), one disadvantage is that ISO does not set environmental performance targets itself; instead, it requires organisations to define their own targets. This means some organisations may set very easy or minimal goals, limiting actual environmental improvement. Option A is incorrect as ISO14001 applies consistently across industries. Option C is a requirement, not a disadvantage. Option D is an overgeneralisation—while some firms misuse it for "greenwashing," many genuinely use it to improve sustainability.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.277

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 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 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

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

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