CIPS L5M5 Managing Ethical Procurement and Supply Exam Practice Test

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

ISO14000 is the family of standards for environmental management, making it the most appropriate for CSR (Corporate Social Responsibility). The L5M5 study guide (p.211) states that ISO14001, in particular, sets requirements for organisations to establish environmental management systems (EMS). ISO9001 relates to quality management, ISO22000 to food safety, and ISO31000 to risk management. For procurement, ISO14000 certification provides assurance that suppliers follow recognised environmental practices, making it highly relevant to CSR and ESG goals.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.211

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

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 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 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 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 Modern Slavery Act (2015) requires companies with a turnover above £36 million to publish a slavery and human trafficking statement. The L5M5 study guide (p.45) highlights this as a limitation because it excludes smaller businesses, even though they may also operate complex supply chains. The Act applies regardless of where supply chains are located (so A is incorrect), and compliance is mandatory (C is incorrect). Non-compliance can lead to civil proceedings (so D is incorrect). Procurement professionals must be aware of this threshold and ensure compliance in larger organisations.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.45

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.8) outlines the six key components of a CSR plan: CSR Assessment, CSR Strategy and Refinement, Implementation Plan and Activities (C), Commitment to Stakeholder Engagement (D), and Verification and Evaluation of Results (E). An introduction (A) and financial analysis (B) may support a CSR plan but are not listed as key components. Procurement professionals should ensure CSR plans are robust, measurable, and involve stakeholder engagement to gain legitimacy and trust.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.8

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

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

Social Security in the UK provides benefits such as sick pay, redundancy support, pensions, and maternity/paternity payments. The L5M5 study guide (p.93) specifies that payments can be made in cases of sickness (A), loss of employment (B), and retirement (C). Benefits are not provided simply for changing jobs (D) or marriage (E), as these do not affect financial or employment security. Procurement professionals need to understand social security systems, especially when working with international suppliers, since welfare provisions differ globally and affect labour conditions.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.93

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

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

ISO14001 is the international standard for Environmental Management Systems (EMS). The L5M5 study guide (p.277) explains that it requires organisations to establish frameworks for monitoring and improving their environmental impact. ISO9001 (A) relates to quality management, ISO28000 (C) to supply chain security, and ISO31000 (D) to risk management. For procurement, suppliers certified with ISO14001 demonstrate a commitment to reducing waste, emissions, and environmental risks, making this highly relevant to CSR and ESG.

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

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

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

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

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 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

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

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

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

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

The WTO’s main functions include setting international trade rules, facilitating agreements, resolving disputes between member countries, and supporting global trade liberalisation. It also works to promote economic growth and development, indirectly aiming for higher employment and better living standards. However, the WTO does not set or enforce labour standards—this role belongs to the International Labour Organisation (ILO), which specifically governs employment rights, child labour elimination, and health and safety at work. The L5M5 study guide (p.256) emphasises the importance for procurement professionals to distinguish between global trade institutions such as the WTO and labour-focused organisations like the ILO.

???? Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.256