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Supply Chain

Responsible Purchasing

Pearson purchases approximately £2 billion of goods and services from suppliers around the world each year. In 2001, Pearson made a series of commitments to extend its positive influence across its supply chain. These commitments formed part of our response to the Global Compact and covered labour standards and human rights as well as environmental responsibility. This section describes the progress we have made in linking environmental responsibility to our procurement strategy. Click here to read about our work on labour standards and human rights in the supply chain.

Our Impact

In the 2002 Environmental Review, we set the focus for our environmental activity for 2003 as managing our impacts through our supply chain. This focus has continued in 2004.

Pearson is a major purchaser of book paper and newsprint. We also have contracts with printers around the world to produce our books, magazines and newspapers as well as contracts with distributors and shippers to bring our products to market. We believe that our major environmental impacts are supply chain related, particularly relating to the supply of paper, production and also to distribution.

During 2002, we contacted 16,000 of our suppliers describing how our environmental policies affect our purchasing decisions and introduced them to our commitments under the Global Compact.

Introducing Environmental Responsibility as a Contract Requirement

Contracts are a vital tool in defining the nature of the relationship that we seek to build with our suppliers. It is in the contract that we outline the standards of performance that we expect from our suppliers as well as the commitments we make as a responsible purchaser. The standards we set our suppliers reflect the standards that we set for ourselves.

As part of our response to the Global Compact, Pearson introduced specific environmental clauses for inclusion in key contracts in 2002. These clauses form part of negotiations for new contracts and for existing contracts on renewal. Many of our contracts run for several years, so the process of introducing these clauses will take some time.

In many instances, legislative and regulatory controls along with industry and company initiatives have produced high standards of integrity among suppliers. Our approach seeks to reinforce the importance of high standards of integrity.

In 2003, we reviewed our clauses in the light of supplier feedback and the introduction by Pearson of a Code of Business Conduct. Some changes to the clauses were made including an explicit reference to the Code of Business Conduct.

Paper

Our books, newspapers and magazines help people learn and to access information. We have invested in new technology to provide paperless opportunities for our customers and readers to access our products. Nevertheless, we expect that our use of paper will continue to grow as a medium for delivering our products.

The amount of paper we use is determined by the news agenda of the day, our advertisers, the decisions taken by our authors, and the number of products we commission and sell. We therefore believe it is unrealistic to set targets to reduce total paper usage.

Nevertheless, we believe that we have a responsibility to incorporate environmental considerations into our paper purchasing processes. Paper has continued to be the priority issue within our wider programme of considering the environmental impact of our supply chain. In 2004, Pearson has:

Paper sourcing policy

Pearson issued a statement on paper sourcing policy in November 2003. This was revised during 2004 following a further period of consultation with our paper buyers, our paper suppliers and others to confirm the key issues. The policy covers the following:

The policy is disclosed on this Website.

Challenges & Dilemmas

Our products help people learn, relax and make informed decisions. Our social obligation to make our products accessible and affordable for our readers is our paramount responsibility. It is the purpose of the company.

Our primary environmental obligations with regard to paper purchase are also clear and are reflected in our paper sourcing policy.

One challenge in meeting our environmental obligations is that there is insufficient supply of independently certified timber entering the paper manufacturing supply chain. Only around a half of Europe's forests carry any type of certification and only one third of forests in North America. Shortage of supply can result in an "environmental premium" and we believe that to achieve our long-term goals, there will need to be changes to the way the market is structured that will erode and eradicate this premium.

We are using our influence as a purchaser of paper products. Through dialogue with our paper manufacturers, we discuss issues relating to our policy, our interest in data collection and how our policy relates to our commercial purchasing decisions. However, the industry is large and complex and it will take many years to change.

Data Collection

Pearson is committed to establishing a comprehensive database on the environmental characteristics of its paper supply chain. In 2003, Pearson piloted a data collection approach for the paper directly purchased from manufacturers by Penguin UK, Recoletos in Spain and the FT Group. This covered in excess of 100,000 tonnes of paper. In 2004, we have substantially increased the scale and scope of our data collection process. Our database is now global and covers over 380,000 tonnes of paper. This represents about 95% of all the paper we purchase. In 2003, our data was limited to the paper we directly purchased from paper manufacturers. This year, we collected data from manufacturers, paper merchants and Penguin UK gathered data from the printers that purchase paper on its behalf.

This process was a lengthy and involved task taking some three months and involved collecting data on some 200 grades of paper. The paper industry is large and complex. It is not easy to establish a chain from forest to product. Paper mills can both be integrated with sawmills and pulp mills or standalone. Some mills are supplied by hundreds of separate forest owners. There is still more to do in developing our database, but we have got the best picture yet on where our paper comes from. Our database includes:

This has shown that:

The level of recycled paper used by Pearson is driven by two main factors. Book paper grades must deliver shade, thickness, bulk and brightness to maintain the standards of touch and appearance of the printed book that readers demand. This limits the capacity to use recycled paper as book paper made of recycled fibre has a different feel from primary fibre. Second, the sources of supply of pink newsprint are limited. Pearson has held discussions with suppliers with regard of increasing for recycled fibres in both book paper and newsprint.

Targets for 2005 are to:

Paper supplier visits

We believe that environmental responsibility should be integrated into normal commercial practice. Our professional paper buyers and production management have visited suppliers in Canada, Spain, Scandinavia and elsewhere to discuss environmental practice among other issues. We have also carried out review visits with our paper manufacturers dedicated to dialogue on environmental issues. These allow us to communicate the principles outlined in our paper sourcing policy.

Within Pearson, environmental responsibility is now a regular item on the agenda of team meetings for paper buyers and production teams in Europe and North America.

During 2004, Pearson held a series of seminars with its production staff to further embed awareness and action across our purchasing teams. We believe that environmental expertise should be transferred to our production people who have the most regular contact with paper suppliers.

WWF UK Forest & Trade Network

In order to help Pearson meet its aims; the company joined the WWF UK Forest and Trade Network (Formerly known as the WWF 95+ Group) in 2004. This group actively promotes and facilitates increased trade in independently, credibly certified forest products and encourages good forest management worldwide.

Pearson has committed to work with WWF-UK to increase the proportion of forest products traded or consumed by us to coming from well managed forests which have been independently certified.

As part of its membership, Pearson agreed an action plan with WWF. This includes working with WWF to increase the supply of FSC certified paper available to Pearson and the wider publishing industry.

We will discuss our progress with WWF later in the year.

Production

In 2003, we committed to compile a central register of key paper suppliers and out-sourced printing relationships. A register has been established and has been further extended and updated during 2004. This has allowed Pearson to start to build a picture of the environmental performance of its printers. The register currently includes over 75% of our printers by value representing over 100 supplier relationships.

During 2003, the FT completed a survey of the environmental performance of its printers across the world. This process has been extended to other businesses including Pearson Education and Penguin in North America and Hong Kong, Penguin UK and Les Echos in France. The survey covers:

Over 80% of printer relationships contained in the database have been surveyed. The main findings from the survey are as follows:

Indicator

%age of printers that measure impact (2003)

%age of printers that measure impact (2004)

%age of printers with targets to reduce usage(2003)

%age of printers with targets to reduce usage(2004)

Water

86%

87%

57%

76%

Ink

95%

94%

71%

79%

Solvents

91%

90%

76%

85%

Alcohol

67%

89%

67%

77%

Energy

81%

90%

71%

84%

Waste Production

95%

94%

95%

92%

It is pleasing that the percentage of printers with reduction targets has increased across all indicators except waste. We are particularly concerned about the release of Volatile Organic Compounds (VOCs) in inks and solvents are managed effectively and where possible reduced. These indicators help us monitor performance. For 2005, we will look to:

The findings from this survey provides the basis for production teams to discuss environmental impact with suppliers during 2005

In addition, Pearson people undertook visits to existing and potential printers in Malaysia, Singapore, Australia, parts of the UK, Western Europe and North America. We also followed up visits made in 2003 to China and India. These visits provided an opportunity for Pearson to review performance standards in areas including environmental responsibility, health & safety, labour standards and human rights. The findings and issues identified have been discussed with our printers and are being managed as part of our normal commercial relationships. Further visits will take place in 2005 in these and other countries where our books, magazines and newspapers are printed.

Following the series of briefings carried out in 2004, environmental considerations will also form an integral part of all commercial supplier visits.

Case Study

Pearson works with our printer suppliers to reduce environmental impact. A standard industry practice is to order in excess of the required quantity. Pearson Education in North America has altered the over delivery policy to reduce the number of excess units delivered to our warehouses.

In 2004, our suppliers reduced over deliveries by around 260k units over the previous year. The target for 2005 is to eliminate a further 1m books based on 2004 volumes.

The initiative in 2004 saved 280 short tons of text paper. In addition, there are savings to cover stock, cartons, ink, hardcover materials, and the fuel used to ship the books to the warehouses.

Transport / Distribution

It is normal practice for our businesses to outsource distribution and shipment of our products to third party carriers. Pearson has very few commercial vehicles of its own. The main distributors in the UK and Europe continue to be Securicor and DHL for the books and TNT for the Financial Times.

In the US, we similarly outsource distribution with UPS being the main distributor. These distributors have environmental policies and use modern fleets of vehicles. We monitor environmental performance as part of the contractual arrangements.

In 2003, we held a meeting with DHL to explore the feasibility of running a pilot system to monitor the environmental impact of our distribution systems in the UK. Pearson is currently consolidating its Penguin and Pearson Education UK warehouse facilities into a new single site at Rugby. During 2005, we will look to integrate environmental data collection as part of this investment.

Case study: DHL

DHL distributes a range of Pearson products including the secure distribution of examination papers. Working with Future Forests, DHL has established a methodology for quantifying the greenhouse gas emissions associated with the distribution of their clients' products. We support this initiative and look forward to learning more about our indirect environmental impacts in a way that may enable us to better address them. DHL and Securicor merged their businesses late in 2003.

Contacts

If you have any questions on Pearson's environmental review, please contact:

Alan Miller
Pearson plc
80 Strand
London
WC2R 0RL
Email: alan.miller@pearson.com
Telephone: 020 7010 2221