Progress report 2011

United Nations Global Compact

A progress report on Pearson's performance

Pearson is a founding signatory to the Global Compact and we are pleased to reaffirm both our commitment and our ongoing support for its 10 principles.

Pearson is a commercial organisation with a social purpose: to help people progress in their lives through learning. The principles of the UN Global Compact are an invaluable guide helping shape our activities and so positively benefit our employees, investors, customers, partners, and the communities where we live and work.

Each year, signatory companies to the Global Compact communicate on their progress against the 10 principles. This document combined with the relevant sections of our website, our annual report and our corporate responsibility report together form our communication on progress for 2011.

This document sets out the Pearson specific commitments we made relevant to the Global Compact and provides highlights on how we are doing. The links to relevant sections of our website describe our policies, systems of management and measures of performance. Our corporate responsibility report provides the detail of our sustainability performance and also describes the targets we set ourselves relevant to the Global Compact.

Since 2000, the Global Compact has successfully engaged many thousands of global companies in considering their responsibilities towards labour standards, human rights, environmental management and in tackling corruption. As a former member of the Advisory Council, Pearson is proud to have played a role in this success by guiding the early development of the Global Compact

We are a global business with a growing international footprint. Participation in the Global Compact continues to provide an important framework for Pearson as we develop and grow, and are pleased to continue our support and engagement.

Robin Freestone
Chief financial officer (and Board member responsible for corporate responsibility)

Highlights from 2011

This communication on progress provides links to the sections of our website and to our corporate responsibility report that describe in full our performance against the Pearson commitments. Some highlights from 2011 are:

• We were named for a fifth year as media sector global leader in the Dow Jones Sustainability World Index.
• We have been a member of the FTSE4Good indices since their introduction.
• Pearson remains ranked 'Platinum', the highest tier in the Business in the Community (BITC) Corporate Responsibility Index.

Human Rights

Human rights:  our approach and progress in 2011

Principle 1

• Our Code of Conduct describes the standards that we set ourselves. Compliance is reviewed annually and material issues reported to the audit committee and the Board. The Code of Conduct also sets out accountability and responsibility for ensuring compliance with the Code within Pearson.
• Pearson participates in UN Global Compact Leaders Summits and consultations and is a member of the Global Compact Network in the UK - a group dedicated to implementing the principles and attracting additional companies to join the Compact.
• Pearson in the UK is a founding member of Publishers Resolution for Ethical Manufacturing Standards (PreLIMS). PreLIMS has introduced a common set of standards relating to labour standards & human rights. The PreLIMS model continues to be used by our purchasing departments around the world. Independent audit against the standards is integral to the approach together with a process for remediation for suppliers that do not meet the standards. We sit on the PreLIMS steering group and together with industry partners work on further enhancing and developing these standards.
• Our standard terms of business for key suppliers incorporate the Global Compact principles within our contracts.

Principle 2

• Each year, our chief executive officer sends everyone in the company an e-mail strictly about the Pearson Code of Conduct, highlighting some areas, making sure everyone is paying attention to it and understands it; and each member of staff has to reply.  This year, as in most years, a small number of minor concerns have been raised and reported to the Pearson Audit Committee.
• As part of our risk reporting systems, Pearson operating companies review and report on their business risks, including social, environmental and ethical (SEE) risks, to our group internal audit function on a semi-annual basis. The results of these reviews are reported via the audit committee to the board. The last review of SEE risks took place in December 2011.
• We report on our SEE process in our annual report. Our 2011 risk assessment did not identify any significant under-managed SEE risks, nor have any of our most important SEE risks, many concerned with reputational risks, changed year on year. These are: journalistic/author integrity, ethical business behaviour, intellectual copyright protection, compliance with UN Global Compact standards, environmental impact, people and data privacy
• Our businesses report on their performance against each of the commitments we set relating to human rights and labour standards. The survey does not cover sales offices or joint ventures where Pearson does not have management control.

Labour standards

Labour standards:  our approach and progress in 2010

Principle 3

• Each of our operating divisions has dedicated human resources teams who ensure compliance with local laws and Pearson standards.
• Pearson employees are participants in trade unions across the group.
• Representation takes many forms, for example, in Europe we have an Employee Forum in which employees and senior executives discuss the strategic development of the company.

Principles 4 and 5

• Our human resources teams are responsible for ensuring compliance with our commitments with regard to the responsibility of Pearson businesses as employers.
• We have set the standards we expect of all our suppliers and for our key suppliers; we continue to introduce specific clauses relating to these standards into our contracts. These standards include the rejection of forced and compulsory labour and a minimum age to work on Pearson projects in line with ILO Core Conventions.
• We have written to many thousands of our suppliers to advise them of our commitment to the Global Compact, and our Code of Business Conduct.
• This year, we started the introduction of a new Vendor Relationship Management (VRM) online system to manage many aspects of our supplier relationships, including proof of certifications and accreditations for existing suppliers and as a condition of business for potential suppliers.
• We carry out an ongoing programme of supplier visits to assess compliance with the Global Compact and our own standards. These visits complement independent third-party audits commissioned through schemes such as PreLIMS and reinforce our commitment to the abolition of child labour and all forms of forced and compulsory labour.
• Our process for new supplier selection includes communication to prospective business partners on our commitment to the abolition of child labour and all forms of forced and compulsory labour as an integral part of our terms of business.
• Improvement targets are reported in our corporate responsibility report.

Principle 6

• Pearson efforts on diversity have been recognised through a number of awards. Pearson was awarded the FTSE Executive Women award by Opportunity Now. In the US, Pearson was once again included on the 100 Best Companies for Working Mothers list for the 11^th time.
• We have benchmarked our programmes against best practice through participation in surveys and studies by Opportunity Now, the Human Rights Campaign and Working Mother among others.
• We are continually updating our diversity websites for both internal and external users with news stories from across the business. This year, we launched a new global collaboration tool featuring a dedicated diversity space to encourage the sharing of ideas and opinions.
• Affinity groups such as women in leadership provide support, information and access to mentors.  
• We reviewed the role that our Diversity Councils and leaders play in furthering our programmes across our operating businesses.

Environment

Environment:  our approach and progress in 2011

Principle 7

• Pearson continued with its commitment to be climate neutral, first achieved in 2009. For 2011, the commitment covered our directly controlled company operations as at 31st December 2010. For 2012, our climate neutral commitment has been extended to include businesses acquired during 2011
• Our Environmental Executive Committee chaired by Robin Freestone, a main board director, and attended by senior personnel, continues to oversee our global activity on environmental matters

Principle 8

• Our UK businesses continue to be accredited against ISO14001, the international environmental management standard and the Carbon Trust Standard.   Our businesses in Australia attained accreditation against ISO14001.
• Our global greenhouse gas (GHG) emissions absolute total in 2011 of 185,000 metric tonnes of carbon dioxide was 12% lower than what was reported in 2009.
• Through a combination of GHG reduction, the purchase of green electricity and a commitment to offsets, we met our climate neutrality target. Climate neutrality is underpinned by a series of environmental targets.
• Our reuse/recycle rate for unsold books was in excess of our ongoing target of 95%.
• Our environment funds in the UK and the US funded projects including installing solar panels at our distribution centre at Cranbury, New Jersey and a wind turbine at our offices at Owatonna, Minnesota. We have set a target for a minimum of a further two renewable energy generation projects at Pearson facilities for 2012.

Principle 9

• Dorling Kindersley and Penguin in the UK both retain Forest Stewardship Council (FSC) chain of custody certification allowing their books to also carry the FSC label.
• Our businesses in North America became the first major US publisher to attain FSC chain of custody.
• We were the first global publishing company to publicly disclose our policy with regard to the environmental characteristics of the paper we purchase.
• As well as certification systems such as FSC, we have our own procedure to track paper back through the production process to the original forest allowing us to verify the sustainability of the papers we use
• We are a member of the WWF Forest & Trade Network and through this group work with WWF and other company members to improve environmental standards of paper purchase.
• We continue with partnerships to raise awareness on climate change issues and provide opportunities for readers to get involved. An example is the FT which has entered into a partnership with Children's Tropical Forests UK (CTF) to invest in and raise funds for the purchase and protection of a substantial area of primary tropical rainforest in Costa Rica. Pearson selected CTF as a partner in its climate neutral programme. Pearson in the UK again worked with the Woodland Trust on its engaging Seeds for Trees initiative benefiting 2,000 primary schools.

Anti-corruption

Anti-corruption:  our approach and progress in 2010

Principle 10

The guiding document through which Pearson manages its compliance to this principle is the Pearson Code of Conduct.  The key characteristics of the Code are:

• Reporting.  Material issues are reported to senior management and to the audit committee.
• Independence. Group Legal Counsel and Group Internal Audit have responsibility for the management of the Code. A confidential whistleblowing process is in place for employees to raise issues. All incidents are investigated by the head of internal audit and reported to the relevant senior management and audit committee.
• Awareness. An annual e-mail is sent to all employees to confirm Pearson compliance with the Code of Conduct.
• Training. We have developed a specific training module relating to the Code of Conduct and in particular raising awareness on our standards with regard to working against all forms of corruption. This is mandatory for operations in high risk countries.
• Scope. Our code extends to and includes our suppliers and business partners

IMPLEMENTATION - FISCAL YEAR TO DECEMBER 2011

The key elements for Pearson in furthering our compliance with the Global Compact principles are:

• Board accountability. Robin Freestone, chief financial officer was the Executive Board member responsible for the Pearson response to the Global Compact during 2011. Robin Freestone chairs the corporate responsibility steering group which brings together senior executives to review our sustainability performance.
• Integration with corporate strategy. Corporate responsibility was one of the discussions that formed part of the strategy session in the April 2011 meeting of the Board.
• Transparency. We report annually both in our annual report and through our corporate responsibility report on our sustainability strategy, risks and opportunities.
• Stakeholder engagement. We report on our key stakeholders and examples of how we engage with them in our corporate responsibility report.
• Practitioner engagement. Networks in the UK and US guide implementation of aspects of the Pearson response and reporting on performance. The UK and the US are our most significant centres of employment and our global operations report into our businesses in these countries. For example, we have environment committees in the US, the UK, South Africa, Canada, Australia and India.
• Clarity of commitment. Pearson commitments under the Global Compact form part of our corporate governance and risk management procedures and are placed in the public domain.
• Independence. Our environment data is separately verified.
• Risk management. Operating companies are responsible for managing their own risks. As part of our risk reporting systems, they review and report on their business risks, including Social, Environmental and Ethical (SEE) risks, to our group internal audit function on a semi-annual basis. The results of these reviews are reported via the Pearson Audit Committee to the Pearson Board. This reporting is supplemented by risk review sessions - facilitated by group internal audit - with the operating companies and the Pearson Management Committee.

How does Pearson intend to build on its commitment?

We believe that openness and transparency are the most important levers for improving our performance.

Our objective is to meet the criteria for the Global Compact Advanced Level. As far as possible, Pearson uses existing communication channels and management processes to review, improve and demonstrate our progress. We will continue to use the Pearson website and the Annual Report as our primary means to engage our stakeholders. We also report on corporate responsibility issues in a dedicated section of our corporate website.

Contact

For further information, or if you have any questions or comments, please contact, Peter Hughes, head of corporate responsibility at Pearson plc on peter.hughes@pearson.com.

Peter Hughes is the senior executive for corporate responsibility matters at Pearson and is the secretary for the corporate responsibility steering group.