CIPS L5M5 - Managing Ethical Procurement and Supply

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

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

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 L5M5 study guide (p.182) states that sustainability reporting and the adoption of ESG (Environmental, Social, Governance) principles can stimulate organisational change and innovation. By measuring and reporting on sustainability, companies often seek new technologies, processes, and supply models to improve performance and meet ESG commitments. Reporting is not mandatory in all cases, so option B is incorrect. While sustainability may improve reputation and sometimes costs, these are not the key focus of this question. CIPS guidance stresses that sustainability reporting can drive innovation—procurement can encourage suppliers to develop new sustainable practices, products, and approaches.

📖 Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.182

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

A touch point is defined in the L5M5 study guide (old p.85, new p.112) as a stage in the supply chain where risks or problems may occur, impacting costs or performance. Examples include transport (risk of damage or loss) and quality control (risk of defective goods). Identifying touch points enables procurement professionals to implement risk mitigation strategies, such as insurance, supplier audits, or contingency planning, thereby strengthening supply chain resilience.

📖 Reference: Managing Ethical Procurement and Supply (L5M5) Study Guide, p.112