L5M5 Sample Exam

✅ Correct Answer: Labour standards risk

Explanation:
Child labour is a breach of internationally recognised labour standards, such as those set by the International Labour Organization (ILO). It represents a social and ethical risk in global supply chains.

Why the other options are wrong:
❌ Environmental risk – Relates to emissions, waste, or resource damage, not labour practices.
❌ Financial risk – Concerns cost volatility, insolvency, or currency risk.
❌ Contractual risk – Involves legal enforceability or terms, not labour exploitation.

🧠 Summary: Child labour is a labour standards and ethical risk that requires urgent corrective action.
📖 Source: CIPS L5M5 Study Guide – Ethical risks in global supply chains (pp. 35–42).

✅ Correct Answer: To ensure transparency on forced labour

Explanation:
The Modern Slavery Act requires organisations to report on steps taken to prevent forced and trafficked labour in their supply chains. Including this clause ensures suppliers commit to compliance.

Why the other options are wrong:
❌ Prevent financial fraud – Managed through anti-bribery/corruption controls, not modern slavery law.
❌ Avoid greenwashing claims – Greenwashing is about environmental misrepresentation, not labour exploitation.
❌ Transfer all supply risk – This law targets ethical supply risks, not all contractual risks.

🧠 Summary: The Modern Slavery Act promotes ethical transparency and supplier accountability for labour standards.
📖 Source: CIPS L5M5 Study Guide – Legal & regulatory frameworks (pp. 55–60).

✅ Correct Answer: Third-party certification

Explanation:
FSC (Forest Stewardship Council) certification is an independent, internationally recognised scheme that ensures responsible forestry practices. It represents a third-party assurance mechanism.

Why the other options are wrong:
❌ Industry coalition – Refers to multi-stakeholder groups like Sedex or ETI.
❌ Internal audit – Conducted by the organisation itself, not by external parties.
❌ Risk transfer – Moves risk to another party, e.g., via insurance, not certification.

🧠 Summary: FSC is a third-party certification ensuring sustainable timber sourcing.
📖 Source: CIPS L5M5 Study Guide – Tools for ethical sourcing (pp. 70–76).

✅ Correct Answer: Greenwashing

Explanation:
Greenwashing occurs when organisations exaggerate or misrepresent their environmental or sustainability efforts to gain reputational advantage without real impact.

Why the other options are wrong:
❌ Supply disruption – Involves delays or shortages in delivery.
❌ Outsourcing risk – Relates to reliance on external suppliers.
❌ Labour exploitation – Concerns human rights or working conditions, not misleading claims.

🧠 Summary: Misleading sustainability claims are a reputational risk known as greenwashing.
📖 Source: CIPS L5M5 Study Guide – Ethical risks in sourcing (pp. 40–44).

✅ Correct Answer: Supplier collaboration and development

Explanation:
Working proactively with suppliers through training and capacity-building is an example of collaboration for ethical improvement, not just risk policing.

Why the other options are wrong:
❌ Risk transfer – Relies on clauses/insurance, not development.
❌ Termination – Ends relationships, not improves them.
❌ Passive compliance monitoring – Observes but does not build supplier capability.

🧠 Summary: Ethical sourcing is strongest when organisations engage and develop suppliers, not just monitor them.
📖 Source: CIPS L5M5 Study Guide – Collaboration and engagement (pp. 82–89).