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CIPS Managing Ethical Procurement and Supply (L5M5) Sample Questions:

1. EcoWear, a well-known apparel company committed to sustainability, has recently expanded its supply chain but failed to address key ESG issues, leading to the following concerns:
A supplier has been reported for using toxic dyes, causing environmental harm.
Another supplier has poor labor practices, resulting in worker strikes.
If these ESG issues remain unresolved, what are the most likely consequences for EcoWear? Select any TWO.

A) Reputational Damage: The company may face backlash from consumers and advocacy groups, harming its brand reputation and customer loyalty
B) Legal Benefits: EcoWear could benefit from reduced regulatory scrutiny and enjoy a more favorable legal environment
C) Increased Sales: Consumers are likely to overlook the issues and continue purchasing EcoWear products, boosting sales
D) Inability to secure or attract potential investments from banks

2. In an effort to enhance sustainability and ethical business practices, four companies have embedded Environmental, Social, and Governance (ESG) performance measures into their supplier agreements. Each organization has identified specific ESG challenges and established contractual requirements that suppliers must meet to align with corporate sustainability objectives.
Below is an overview of the ESG priorities for each company and the corresponding contractual terms:
Company 1:
This company has pledged to cut its carbon footprint by 40% by 2030. To achieve this target, it mandates that its suppliers actively contribute to emission reduction efforts. Suppliers are required to meet defined, measurable benchmarks related to carbon emissions and submit periodic reports detailing their progress on sustainability initiatives.
Company 2:
With a strong emphasis on fostering fairness and inclusivity, this company requires suppliers to align their payment structures and financial strategies with its commitment to equity. Suppliers must implement fair compensation policies, ensure timely salary disbursements via banking channels, and adopt ethical pricing structures that support inclusive hiring practices, particularly for underrepresented groups.
Company 3
Operating in industries prone to unethical practices, this company enforces stringent anti-corruption policies and financial transparency requirements for its suppliers. Suppliers must uphold rigorous governance standards, establish transparent reporting mechanisms, and comply with all anti-corruption regulations to ensure ethical business operations.
Company 4
This company is committed to making a meaningful impact on the communities in which its suppliers operate. As part of its contractual obligations, suppliers must actively participate in local initiatives that drive social and economic development. This includes contributing to community projects, generating employment opportunities, and supporting social welfare programs.
The four companies must establish contractual terms aligned with their respective ESG considerations, including a Community Benefit Clause, Key Performance Indicators (KPIs), Commercial Clause, and Governance Clause.
Match Column A with Column B from the following table:

A) Carbon Emissions: KPI as Performance Measure
B) Equality, Diversity, and Inclusion (EDI): Commercial Clause

3. Which of the following is an example where long-term availability of supplies is prioritized over short-term gains?

A) Choosing a new supplier that is initially more expensive than others in the market to expand the supply base and develop market capacity
B) Selling products manufactured to lower quality standards, resulting in lower unit prices
C) Cutting costs in the short term, ultimately leading to a reduced range and variety of suppliers in the market
D) Reducing quality standards in the short term, accepting that customer rejections will increase in the long term

4. A company frequently ships high-value goods internationally, and the logistics team identifies a significant risk of financial loss due to potential cargo theft or damage during transit. To mitigate this risk, the company hires an external freight forwarder who provides insurance coverage and assumes full responsibility for the goods while in transit.
What is the most appropriate risk management strategy in this scenario?

A) Tolerate
B) Transfer
C) Terminate
D) Treat

5. When developing an ESG policy, which of the following steps should be taken first?

A) Identify the need
B) Gather Information
C) Draft the policy
D) Consult with stakeholders

Solutions: