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Ethical and Responsible Sourcing (L4M4)

Module purpose

On completion of this module, learners will be able to explain the options and associated processes available for sourcing with external suppliers. They will also examine the legal and ethical impact and the implications of sustainability, encompassing economic, environmental, social and governance factors on the final sourcing decision.

Module aim(s)

In any organisation, a significant element of procurement and supply activity is based around decisions to internally conduct activity or to source from an external supplier. The selection of the optimal external suppliers is a vital contributor to overall organisational success. This module enables professionals with roles in procurement and supply to formulate sourcing strategies and selection criteria to ensure that the organisation can make the best choice of external suppliers. This module explains options for sourcing, and examines the key processes that can be applied to the analysis of potential external suppliers to ensure sourcing arrangements meet sustainable, environmental, social and ethical goals.

Next steps

Starting a CIPS qualification programme means you will join the largest institute in the world for those working in procurement and supply. You can join as a student member online today. Once joined you can book your examinations online

Key Module Details

Icon showing the letter C, with CORE MODULE written below the circle.

Icon showing the number 60 and the word HOURS, with MODULE LEARNING TIME written below the circle.

Icon showing the letters OR, with OBJECTIVE RESPONSE EXAM written below the red-bordered circle.

Icon showing the number 6 and the word CREDITS inside a red-bordered circle.

Icon showing the number 1.5 and the words HOURS, with EXAM DURATION HOURS written below the circle.

Icon showing the number 60 and the word QUESTIONS, with IN THIS EXAM written below the circle.

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Learning outcomes, assessment criteria and indicative content

1.1 Identify the sourcing (pre-contract stages 1-8 in CIPS Procurement Cycle) process in relation to procurement

1.1.1Definitions of sourcing and outsourcing
1.1.2Make or buy decisions and the role of intracompany trading
1.1.3Strategic and tactical sourcing
1.1.4Costs and benefits of outsourcing
1.1.5Options and impacts of outsourcing non-core and core work or services

1.2 Differentiate between approaches to the sourcing of requirements from suppliers

1.2.1Single, dual and multiple sourcing arrangements
1.2.2Types and use of tendering
1.2.3Direct negotiations with suppliers

1.3 Define the options and trade-offs when sourcing requirements from external suppliers

1.3.1Typical criteria used to select external suppliers
1.3.2Impacts of different selection criteria on supplier selection
1.3.3Use and interpretation of indicators of profitability, liquidity, gearing and cash from financial statements to assess and make conclusions on the viability of suppliers

1.4 Define the award criteria that can be commonly applied when sourcing requirements from external suppliers

1.4.1Award criteria: price, whole-life asset management costs, technical merit, added-value solutions, environmental, social, governance and ethical

2.1 Analyse commonly used sources of information on market data that can impact on the sourcing of requirements from external suppliers

2.1.1Compiling spend data relating to suppliers
2.1.2Indices that measure economic activity and commodity pricing
2.1.3Secondary data relating to markets and suppliers
2.1.4Limitations of using financial statements that assess profits, assets & liabilities, and cash as selection criteria
2.1.5The role of credit rating agencies

2.2 Identify the key processes used for obtaining quotations and tenders

2.2.1Advertising requirements
2.2.2Requests for information or quotations
2.2.3The operation of tendering
2.2.4Formalised arrangements for tendering

2.3 Identify the processes that can be typically used to assess quotations or tenders

2.3.1Assessment of suppliers’ proposals
2.3.2The use of weighted points systems for assessment
2.3.3Assessment of environmental, social, governance and ethical elements of suppliers’ proposals
2.3.4Assessing added value
2.3.5Making recommendations
2.3.6Procedures for contract award

3.1 Compare the key legislative, regulatory and organisational requirements when sourcing in the not for-profit, private and public sectors

3.1.1Impact of international, national and local regulatory frameworks on the sourcing process
3.1.2The importance and impact of environmental, social and governance considerations of bribery, corruption, fraud, human rights and modern slavery in sourcing activities
3.1.3Role of regulation and accountability for procurement in public, private and third sector organisations

3.2 Compare the key legislative, regulatory and organisational requirements when undertaking international sourcing in the not for-profit, private and public sectors

3.2.1The regulatory challenges of importing including documentation, duties and tariffs, customs control requirements and exchange rate fluctuations
3.2.2 Implications of international sourcing: documentation, duties and tariffs and Incoterms ®
3.2.3Payment mechanisms, credit account, bills of exchange and letters of credit
3.2.4Customs control and clearance
3.2.5Applicable law and jurisdiction

3.3 Identify and apply environmental, social and governance practices that support responsible sourcing

3.3.1Application of the CIPS Code of Conduct
3.3.2Application of codes of practice supporting environmental, social and governance goals
3.3.3Contractual provisions, supplier monitoring and KPIs

3.4 Compare the use of audits and other feedback mechanisms to evaluate environmental, social and governance standards

3.4.1The use of audits to evaluate ethical standards
3.4.2Encourage dialogue with suppliers to secure improvements

3.5 Contrast processes and practices that the organisation could adopt to meet environmental, social and governance goals

3.5.1The triple bottom line – profit, people and planet
3.5.2Standards applicable to environmental, social and governance goals
3.5.3Reporting frameworks to include environmental, social and governance performance
3.5.4Define organisational value for money to include environmental and social outcomes

4.1 Apply environmental, social and governance principles

4.1.1Application of environmental, social and governance principles in a range of sectors: public, private and third sector
4.1.2Application of environmental, social and governance principles in a range of industries: primary, secondary and tertiary industries
4.1.3Use and application of supplier monitoring and KPIs to track and improve performance
4.1.4To be able to apply practical steps to achieve environmental, social and governance goals in a range of contexts: public, private and third sectors