This case is based on three Learn How to Source blogposts regarding procurement compliance:
- The Pillars of Procurement Compliance.
- Understanding Non-Compliance. Stakeholders’ Reluctance
- Fostering a Compliance-Driven Culture
Table of Contents
In the Learn How to Source® eight‑step framework, procurement compliance must be woven into both the market‑analysis phase and the contracting phase to safeguard your company’s values and reputation. During Step 4 (RFI & down‑select), you begin to vet suppliers not only on capability and cost but also on ethical, environmental, and social standards—using tools like your Supplier Code of Conduct to filter out high‑risk candidates before they reach the RFQ. Then, in Step 6 (RFQ, negotiation & contracting), you reinforce those compliance requirements in your bid documents, negotiate clear commitments, and embed compliance clauses into the contract.
This case—“The Tale of Two Suppliers”—follows Alex and the sourcing team at Company A as they navigate these exact moments in the process. You’ll see how compliance checks at the RFI stage influence who receives the RFQ, and how contract‑level negotiations crystallize those compliance commitments into legally binding terms. As you work through this scenario, look for:
- How early compliance screening in Step 4 shapes your shortlist
- The way compliance requirements are articulated in the RFQ
- Tactics used in Step 6 to secure ethical guarantees alongside price and delivery terms
By the end of this case, you’ll appreciate why a strong ethical foundation isn’t just a final checkbox but a continuous thread—from initial supplier evaluation all the way through contract signature—that protects your organization and delivers long‑term value.
Case Narrative
Company A’s procurement team needs to replace a frame‑agreement for industrial packaging. In Step 4: RFI & Down‑Select, they send an RFI to ten potential suppliers. Alongside questions about capacity and lead times, they include a Procurement Compliance questionnaire covering labor standards, anti‑corruption policies, and environmental management.
- Supplier X submits a complete compliance pack: signed Code of Conduct acknowledgement, third‑party audit certificates, and detailed remediation plans for any gaps.
- Supplier Y provides only high‑level statements and no supporting evidence, though passes the gate..
Based on their responses, the team shortlists Supplier X and four others for the RFQ, including Supplier Y but with question marks regarding Procurement Compliance and connected risk.
In Step 6: RFQ, Negotiation & Contracting, the team issues their RFQ to the five shortlisted bidders. The RFQ document now embeds:
- Mandatory compliance clauses referencing Company A’s Supplier Code of Conduct
- KPIs for ethical performance (e.g., zero safety incidents, quarterly compliance reports)
- Penalty and remediation terms tied to any breach of those clauses
Although Supplier X’s unit cost was approximately 8 % above Supplier Y’s, Alex’s team conducted a Total Cost of Ownership analysis that incorporated compliance risk. Supplier X’s robust audit documentation and remediation plans meant a far lower risk of non‑compliance fines, supply disruptions, and reputational damage. When the team quantified potential penalties and the cost of emergency sourcing if Supplier Y later failed to meet ethical standards, those “hidden” costs more than offset the initial price difference. By choosing Supplier X, the team aligned with their Procurement Compliance objectives, securing both peace of mind and long‑term value.
Conclusion
This case underscores that Procurement Compliance is integral to a well‑structured sourcing process. By embedding compliance checkpoints in Step 4 and contract clauses in Step 6, buyers not only safeguard their organizations against ethical and operational risks but also reinforce a culture of integrity in every sourcing event.
Questions to be discussed regarding Procurement Compliance
A Supplier Code of Conduct is a critical document that outlines a company’s expectations regarding the ethical, social, and environmental standards of its suppliers. Integrating such a code into the procurement process enhances transparency, accountability, and sustainability across the supply chain.
Here are five discussion questions that could support the case and foster deeper understanding and implementation strategies regarding a Supplier Code of Conduct:
- How can a Supplier Code of Conduct be effectively communicated and enforced among current and potential suppliers?
- What specific ethical, environmental, and social standards should be included in the Supplier Code of Conduct to align with our company’s values and sustainability goals?
- How can we incorporate the Supplier Code of Conduct into our supplier evaluation and selection process to enhance transparency and make supplier selection more objective?
- What processes should be established for monitoring compliance with the Supplier Code of Conduct, and how can we address violations effectively?
- How can we encourage continuous improvement among our suppliers in terms of adherence to the Supplier Code of Conduct?
By addressing these questions, companies can strengthen their procurement processes, enhance supplier relationships, and ensure that their supply chains reflect their commitment to ethical, sustainable, and responsible business practices. Learn more about Supplier code of conduct (Online course).
Further Reading:
OECD Guidelines for Multinational Enterprises on Responsible Business Conduct.
Note: Illustration to the blogpost “Procurement compliance – case study 1” is created by Sora on April 19, 2025.