L4M8- LO4- Application of ESG principles

Question 1

What is due dilligence?

Answer 1

The process of ensuring a prospective supplier is who they claim to be and is capable of delivering the services the the standard required.

Includes:
Financial checks
References
Legal set up

Question 2

What is ESG?

Answer 2

Environment Social Governance

A measurable sustainability assessment. It refers to the principles, procedures and activities that can impact on people and/or the wider natural environment as well as the governance that determines the organisations values and behaviours.

Need to consider not only your own organisation but also those that you will be working with

Question 3

What are the key ESG considerations?

Answer 3

Bribery
Corruption
Fraud
Cartels
Child Labour
Modern Slavery
Sustainability (Triple bottom line)
Environment
ED&I
Values
Human Rights

Question 4

What is bribery?

Answer 4

Offer of a gift or financial gain to persuade, influence or incentivise a decision

Question 5

What is corruption?

Answer 5

Dishonest conduct often by senior members within an organisation. Can include bribery

Question 6

What is fraud?

Answer 6

Financial deception

Question 7

What is a cartel?

Answer 7

A group of organisations that work together to prevent competition, raise prices and gain control of a market

Think about milk pricing across major grocers where they agreed to raise the price of milk impacting consumers and ultimately fined £116m

Question 8

Why is ESG important to each sector?

Answer 8

Private sector- Policy is scrutinised by investors and consumers so failure to consider ESG could result in reputation damage, reduced investment and reduced sales

Public sector- media and public scrutiny may result in unjustifiable use of public money

Tertiary- exist to promote social, environmental or cultural objectives and failure to adhere to ESg ultimately contradicts their purpose

Question 9

What is sustainability?

Answer 9

Holistically considers the governance of an organisations environmental, social and economic viability to ensure they exist for the long term whilst meeting the needs of the present

Often encompassed by the triple bottom line or 3Ps- People, profit, planet

Question 10

what is ED&I?

Answer 10

Equality Diversity & Inclusion

Defined as equality ensuring that every individual has fair and equal treatment in opportunities regardless of their background, identity or experience.

Question 11

What are human rights?

Answer 11

Principles based on shared values that are accepted as belonging to all individuals, regardless of background

Question 12

How can the 3 dimensions of the triple bottom line be measured?

Answer 12

Profit: Amount of money made, organisations net worth
E.g. a vegetable packing operation generates enough money to expand and increase its number of employees

People: Social value, perception in the community/globally
e.g. A large call center donates its end of life computers to a local youth club

Planet: Impact on environment, policies on recycling/sustainability
e.g. A driving instructor uses a hybrid car to reduce emissions

Question 13

What is a social impact and give factors that measure it

Answer 13

This is the effect an organisation can have on the community and its stakeholders. Overall, organisations should strive to make a positive social impact and can be formed of many elements.

Impact investing-Impact investing involves making investments to help create beneficial social or environmental effects while also generating financial gains.

Health

Social entrepreneurship- a person who pursues novel applications that have the potential to solve community-based problems

Human and civil rights

Education

Public sector and public policy

Corporate social impact

International development

Environmental sustainability

Non profit and social enterprise

EXAMPLE: Ocado have a policy called ‘Planet Together’ which is focusses on net zero by 2040, making healthy eating easier, supporting food charities, responsible packaging and future proofing of the supply chain

Question 14

An organisations social impact is made up of what?

Answer 14

Ethical behaviour
Environmental behaviour
Sustainable behaviour
Political and legal behaviour
Economic
Cultural
Technological
Donations

All sectors should have a positive social impact

Question 15

What is social value?

Answer 15

The output from a contract that benefits society at large rather than the purchaser or end user

Question 16

How does Ethical behaviour contribute to social value?

Answer 16

Good ethical conduct, compliance with a code of ethics, international standards and any regulations will result in an organisation behaving in an appropriate way, resulting in good for the society

Good ethics results in lower staff turnover as it will be considered a better place to work

If you have a bad reputation you will find it hard to recruit and maintain a workforce. For a charity it may also affect donations

Question 17

How does environmental behaviour contribute to social value?

Answer 17

Society expects organisations to take responsibility for its waste

Environmental behaviour is demonstrated through its approach to pollution, how it deals with waste and its recycling policy

If you create pollution then it will have a negative social impact on the local or even global community.

If products are in non recyclable packaging they may not be purchased- EXAMPLE- think about packets of crisps on the floor

Many third sector organisations exist with the purpose of tackling environmental issues

Question 18

What is a third sector organisation and what is a tertiary sector?

Answer 18

Third sector organizations (TSOs) are non-governmental, non-profit organizations that are not part of the public or private sectors. They are also known as the voluntary and community sector, civil society, or charities.

Tertiary sector organizations are businesses that provide services to consumers and businesses. The tertiary sector is also known as the service sector, and it is the third sector of the economy.

Question 19

How does sustainable behaviour contribute to social value?

Answer 19

Relates to the triple bottom line.

If being sustainable the organisation shows the community that it is actively replenishing the resources and will have a favourable impact on society

Those removing or damaging natural resources will likely have a negative impact and therefore a damaging reputation

Question 20

How does economic behaviour contribute to social value?

Answer 20

Economic behaviour includes pricing and inflation/interest rates

In the private sector the aim of an organisation is to make a profit but should be competitive (EXAMPLE- think about price matching).

If prices are perceived to increased for unjustifiable reasons then it would have a negative impact on consumers (EXAMPLE- think about profiteering)

If you charge unfair prices you often see negative media coverage (EXAMPLE- think about exploitation of farmers)

Question 21

How does political and legal behaviour contribute to social value?

Answer 21

Politicians influence or create legislation which organisations must adhere to. These include taxes, salary, working hours, trade regulations, quality standards

If an organisation is not paying its taxes it is likely going to get a bad reputation. EXAMPLE in 2013 Global firms such as Starbucks, Google and Amazon have come under fire for avoiding paying tax on their British sales.

If organisations are associated with political parties there could also be a culture of negative social value as people may feel forced or unable to purchase

Question 22

How does cultural behaviour contribute to social value?

Answer 22

The way an organisations culture is portrayed is through 6 elements.

if these elements are deemed to be unacceptable within the community then the impact would be a negative one

If there is support for workers, training knowledge, offering apprenticeships, sponsoring positive events then it can demonstrate they care about current and future employees

Question 23

What are the 6 elements of culture? SPORCS

Answer 23

Symbols (logo)

Power structures (who has power)

Organisation structure (e.g. finance tends to be hierarchical)

Control systems (how are staff rewarded and governed)

Rituals and routines (When is the lunch hour, national behaviours e.g. in spain a siesta is normal)

Stories (history, background, legacy)

Question 24

How does technological behaviour contribute to social value?

Answer 24

Organisations are often under pressure to keep up with the numerous technological advances which can be seen as a positive social impact as it could create jobs in technology

However, technology can also result in a lack of requirement for human input so jobs could be lost (example- self scan checkouts)

Question 25

How does donating/giving behaviours contribute to social value?

Answer 25

This is not just down to the third sector. Actively working in the community and being involved in projects and events that contribute towards a positive social impact EXAMPLE ocado supporting community shop

Question 26

What is the result of poor social value?

Answer 26

Reduced brand loyalty Difficulty in recruiting Negative media coverage Reduced sales/profit Reputational damage

Question 27

What is the result of good social value?

Answer 27

High employment Fair wages Low pollution Sustainability of resources Engagement and involvement with local people and organisations With good social value results it is likely that you will keep a good customer base and maintain a good reputation. Third sector can continue to get donations and public sector will receive less public scrutiny/bad media coverage

Question 28

Give some examples of sectors and how they could measure social value/impact?

Answer 28

Agriculture- higher yields through technology and training Education- Greater number of learners wishing to get qualifications Training- more skilled workforce in the community Pollution- Lower noise, smell and emissions Average wage- more money in the community Employment- greater number of people in work

Question 29

Give examples of accreditations that suppliers could have that show a commitment to ESG?

Answer 29

A statement could be provided during supplier identification, evaluation or selection which demonstrates the commitment. May want to check the professional register of an organisation which is a list managed by the awarding body detailing all the individuals/ organisations who are members or hold an accreditation Carbon trust CIPS Fairtrade Rainforest alliance IEMA ILO Red tractor LEAF ETI Anti slavery international

Question 30

What is the Bribery Act 2010 and who does it apply to?

Answer 30

Applies to: Companies registered and trading in UK Companies registered in UK and trading overseas International companies trading in the UK Offences: Offering, promising or giving an advantage Bribery of a foreign public official Failure to prevent a bribe from being paid

Question 31

Which procedures can be put in place to prevent bribery?

Answer 31

Procedures should be clearly defined and documented and made available to every individual Top level commitment from high level executives Risk assessments- regular checks on the likelihood of bribery Due diligence- documented procedure should cover and be enforced throughout the supply chain Communication- ongoing training and updates Monitoring and reviewing

Question 32

What is a facilitation payment?

Answer 32

A form of bribery in which a sum of money is payable to speed up or secure the performance of an action. In some cultures it is normal practice

Question 33

What affects does bribery have on the marketplace?

Answer 33

Markets do not function properly (eg. think about PPE scandals and VIP lanes which have been subject to questioning) Competition is reduced Transparency is reduced Suppliers lose business Buyers make decisions that do not add value Prices are often higher

Question 34

Give examples of how bribery can present itself?

Answer 34

Applies to all sectors: Securing of a contract gaining knowledge Winning of an order Ignoring poor performance Obtaining falsified documentation

Question 35

What is a kickback?

Answer 35

A kickback is an illegal payment intended as compensation for preferential treatment or any other type of improper service received. The kickback may be money, a gift, credit, or anything of value. Paying or receiving kickbacks is a corrupt practice that interferes with an employee's or a public official’s ability to make unbiased decisions. Kickbacks are often referred to as a type of bribery.

Question 36

Give examples of what corruption may include?

Answer 36

Bribery Deception- deliberate effort to present false information, withhold information or influence ay stage of the procurement cycle which would be detrimental to certain parties Abuse of power Embezzlement- taking of money or property by a person to whom it has been entrusted (e.g. think of captain toms daughter)

Question 37

What are the 6 styles of influencing? CUREAI

Answer 37

Coalition- united approach supported by team members Upward appeal- requesting input for senior management Rational persuasion- Bringing in logic and facts to clarify Exchange- trading favours Assertive- forceful, directive, using deadlines Ingratiating- charm/flattery

Question 38

What are French and Ravens types of power?

Answer 38

Reward: Involves offering something the other party wants, such as a contract, access to markets, or other benefits Coercive: Involves the threat of negative consequences, such as withdrawing from a deal, imposing sanctions, or damaging reputation Legitimate: A base of power Expert: Involves using knowledge, technical expertise, or unique insights to sway the other party Referent: Involves building rapport and trust with the other party Informational: Also known as persuasion,

Question 39

Give an example of embezzlement?

Answer 39

The taking of money or property by a person to whom it has been entrusted Questions over Nicola Sturgeons husband, Peter Murrell who was chief executive of the SNP and misuse of SNP funds of £667k which was meant to be used for independent movement The daughter of Captain Sir Tom Moore admitted her family kept profits from three books he had written - reported by The Sun to be £800,000. Hannah Ingram-Moore told TalkTV's Piers Morgan, in an interview due to air on Thursday evening, that her father wanted them to get the profits from book sales

Question 40

What are some examples of fraud?

Answer 40

Kickbacks- money or gifts paid to the bribe taker for services performed Corrupt influence- accepting or ordering more than what is genuinely required Collusion- Groups of suppliers working together to submit multiple bids and splitting the profit between them Bid rigging- contract has been pre agreed to the supplier prior to the RFQ or tender process Invoice fraud- charging suppliers or customers a higher labour cost than what was actually done Subs- changing the product or service to something under the agreed contract False claims- filing false documentation for damages to suppliers, tax returns or governments to insurance companies

Question 41

What are human rights?

Answer 41

Statutory ways in which an individual expect and should be treated. These should be carefully examined when assessing the ESG of procurement Include: Dignity Fairness Respect Equality Freedom Relate to the following: Sexual orientation Gender Religious beliefs Cultural values Ethnicity Nationality 5 basic rights are: Right to equality Freedom from discrimination Right to life, liberty and personal security Freedom from slavery Freedom from torture

Question 42

What are the 5 basic rights according to the universal declaration of human rights?

Answer 42

Procurement professionals should investigate suppliers policies and practices in relation to the treatment of their workers and associated supply chains. Right to equality Freedom from discrimination Right to life, liberty and personal security Freedom from slavery Freedom from torture

Question 43

What is Modern Slavery?

Answer 43

Modern slavery is the illegal exploitation of people for personal or commercial gain through force, coercion, or other means. Includes: Human trafficking Bonded labour- aka debt bondage Forced labour Child labour Domestic slavery Common examples are found in UK in car wash companies, hospitality and thing like nail bars EXAMPLE- think about workers in berry picking and seasonal workforce

Question 44

What is ISO 14001?

Answer 44

an international standard for environmental management systems that helps organizations reduce their environmental impact

Question 45

What 4 factors should be considered when thinking about environment impact?

Answer 45

Pollution- think about emissions, noise, smell, logistics, waste disposal Renewable energy- produced from rain, wind, sun, water, (example with DGM when they put solar panels on top of the office) Recycling- dont want everything going to landfill, packaging that can be recycled (think about IFCO or paper packaging with berryworld, or reuse concept for pasta and rice on Ocado) Sustainability- malthusian trap, may be a paper company that replants trees

Question 46

What is the Malthusian trap?

Answer 46

Suggestion in 1798 that increased population would eventually hit a tipping point where resources are extracted quicker than they can be replenished

Question 47

How can ESG practices be monitored?

Answer 47

KPIs Scorecard/dashboards Regular reviews Up to date accreditations Up to date with legislation Media awareness

Question 48

Give some examples of KPIs that can measure ESG practices

Answer 48

How many complaints have you received around diversity How much packaging you use is recyclable What percentage of your energy is renewable How many employees leave each year How many additional deliveries are there per order? Awareness of pollution related challenged

Question 49

Give examples of behaviours that negatively impact ESG

Answer 49

Inhumane working conditions Recyclable waste dumped at landfill Unequal treatment Disposal of hazardous waste in water ways Unacceptable living conditions for animals

Question 50

Give potential outcomes of negative ESG behaviours

Answer 50

Suppliers closing down Shortage of products price rises Reputation by association stakeholder backlash Loss of investment Reduction in sales/profit

Question 51

What is a reporting framework?

Answer 51

A set of criteria used to measure an organisations performance. Often they are based on financial reporting e.g. Cash flow statement Profit/loss Statement of financial position Shareholder value Predicted versus achieved sales Future budget However, organisations will not be judged solely on financial outcomes. The impact it has on the environment, social factors, governance are also important. E.g. social value will impact brand reputation, pollution, potential for higher yields, better community training.

Question 52

Give qualitative and quantitative measures of ESG

Answer 52

Qualitative: Stakeholder perception reputation good ethical practices Benefit to the economy Quantitative: Reduction in emissions Funding donated Training courses delivered Percentage of resources replaced Think of NPS scores for Ocado

Question 53

Why would a JIT model have a negative ESG impact?

Answer 53

Although the organisation will benefit from lower stock holding (storage and insurance), help cash flow and there will be less waste in terms of materials, there can be negatives for example the need for more deliveries and packaging Ocado use a JIT model, meaning in theory we have lower stock holding costs but higher number of deliveries

Question 54

What would be some negative effects of holding too much inventory?

Answer 54

Cost of storage Wastage/spoilage Insurance Sunk costs Reduced flexibility Risk of obsolescence Lower profits- Excess inventory can impact profit margins.

Question 55

With increased international trade organisations are looking for global standard. Give different ISOs for ESG standards

Answer 55

ISO14001 environmental management ISO26000 for social responsibility and sustainability ISO20400 sustainable procurement ISO37001 for anti bribery UK have the BSI- British standards institute America has ANS- American national standards

Question 56

What is ETI?

Answer 56

Ethical trading initiative We support businesses to identify and reduce human rights risks in supply chains, through support, guidance, and collaboration across our membership.

Question 57

By removing waste from the supply chain organisations can improve environmental aspects of ESG. Give examples of how this could be done?

Answer 57

Transport Inventory Motion Waiting Over processing Over prod Defects Skills

Question 58

What are the key things that someone in procurement needs to consider to ensure ESG is covered?

Answer 58

Engaging stakeholders Collaboration and cooperation Analytics/KPIs WLAM Social impacts Ethics Sustainability Environment Value for money Governance Antibribery and corruption Compliance

Question 59

What was the UK governments resources and waste strategy in 2018?

Answer 59

Reduce waste: The strategy sought to minimize waste and promote resource efficiency. Support recycling: The strategy aimed to support a well-functioning recycling infrastructure and increase recycling rates. Tackle food waste: The strategy sought to halve food waste by 2030. Address plastic pollution: The strategy aimed to address the environmental impacts of plastic packaging. Extend producer responsibility: The strategy aimed to ensure producers pay the full costs of recycling or disposing of packaging. Introduce a deposit return scheme: The strategy aimed to increase the recycling of single-use drinks containers. Encourage longer-lasting products: The strategy aimed to encourage manufacturers to design products that last longer.

Question 60

What is a code of ethics?

Answer 60

A set of morals, principles and values set out by an organisation to state what it deems as acceptable behaviour and conduct. It can outline the values and missions of the organisation to show how professionals should perform within their role

Question 61

What is Nolan's 7 principles in public life? ALOOSHI

Answer 61

Many organisations adopt the seven principles into their code of ethics to establish the principles on which values and behaviours should be based Accountability Leadership Openness Objectivity Selflessness Honesty Integrity

Question 62

What social aspects would a code of ethics cover?

Answer 62

Modern slavery Human rights Bribery, fraud, corruption ED&I Mission statement and values Conflicts of interest Whistle blowing Non compliance

Question 63

What is a conflict of interest? How do you deal with them?

Answer 63

Conflicts of interest can affect any sector and cause reputational damage This is where a person within an organisation stands to gain something personally from a business transaction or opportunity. This could be financial, professional, materialistic, personal or prejudicial Best way to deal with them is to include detail in the code of ethics: Disclose any suspected conflict of interest to management Avoid situations where conflicts of interest occur

Question 64

What is the CIPS code of conduct?

Answer 64

Expected that all CIPS members are expected to follow. It outlines the actions and behaviours that CIPS members must follow. It promotes ESG principles and responsible, ethical sourcing in the procurement and supply chain Enhance and protect the standing of the profession- No unethical or irresponsible sourcing Maintain the highest integrity in business relationships- act professionally and disclose any conflicts of interest Promote the eradication of unethical business practices- conduct due diligence on suppliers and report any concerns Enhance the proficiency and stature of the profession- gain knowledge and setting positive examples Ensure full compliance with laws and regulations- comply with the countries laws

Question 65

Give detail about the CIPS code of conduct stage 1: Enhance and protect the standing of the profession:

Answer 65

Summary: Never engaging in unethical or irresponsible sourcing and related activities Never engaging in conduct, both professional and personal, which would being CIPS into disrepute Not accepting gifts or inducements Not allowing offers of hospitality or with a vested interests to influence my business decisions Understand that behaviours outside of work may influence how I am perceived as a professional

Question 66

Give detail about the CIPS code of conduct stage 2: Maintain the highest standard of integrity in all business relationships:

Answer 66

Summary: Always acting in a professional manner, disclosing any concerns or conflicts of interest and keeping the confidence of all parts of the supply chain BCDE Be truthful Confidential Declare conflicts of interest Ensure accurate info given Reject improper business behaviour Never use my position of authority for financial gain Declare any conflicts of interest Ensure information I give is accurate and not misleading Never breaching confidentiality Striving for genuine fair and transparent competition Being truthful about my skills, experience and qualifications

Question 67

Give detail about the CIPS code of conduct stage 3: Promote the eradication of unethical business practices

Answer 67

Summary: Regularly and thoroughly conducting due diligence on suppliers, reporting any concerns and keeping up to date with regulations by expanding my knowledge Foster awareness of human rights, fraud, corruption Responsibly managing any business relationships where unethical practices come to light Undertaking due diligence on supplier relationships in relation to forced labour and human rights abuses Continually developing my knowledge of forced labour, human rights, fraud, corruption

Question 68

Give detail about the CIPS code of conduct stage 4: Enhance the proficiency and stature of the profession:

Answer 68

Summary: Continually striving to gain knowledge through professional development and setting positive and ethical examples Develop knowledge and increase personal skills Foster the highest standards of professional competence Optimising the responsible use of resources which I have influence over

Question 69

Give detail about the CIPS code of conduct stage 5: ensure full compliance with laws and regulation

Answer 69

Summary: Complying with the countries laws to which the procurement function has agreed and if there is no agreed law, ensuring that the CIPS code of conduct is followed at all times Adhering to laws Fulfilling contract obligations Follow CIPS guidance of professional practice