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Supply Chain

Responsible Purchasing

Pearson purchases in excess of £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 UN 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

Managing the environmental impacts arising from our supply chain was first identified as a priority in the 2002 Environmental Review. This focus has continued ever since.

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 takes 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 responsibility and 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, magazines and newspapers all use paper. 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. Pearson has:

This year, we have introduced our first set of quantitative targets relating to the environmental characteristics of the paper we purchase.

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 available 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.

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 and one third of forests in North America carry any type of certification.

Shortage of supply and growing demand 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 welcome the continued volume growth in the forests that carry certification. We use our influence as a purchaser of paper products to encourage and support this trend. 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 has now established a comprehensive database on the environmental characteristics of its paper supply chain. Work on this database began in 2003 with a pilot 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. Our database is now global and in 2004 covered over 380,000 tonnes of paper. This represents about 95% of all the paper we purchase and includes data from manufacturers, paper merchants and printers that purchase paper on our behalf.

The data collection process is lengthy and involved taking some three months 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:

A report on the characteristics of the paper purchased by the company in 2005 will be made available on the Pearson corporate website by end of April 2006. Recoletos left the group in early 2005 and their data will be excluded from both the 2005 figures reported and in any past statistics used for comparison purposes.

Certification

The purchase of timber from certified sources is a straightforward method to meet our policy commitments relating to legality and sustainability. We follow the assessment adopted by the UK Government which recognises:

The UK Government also recognises the Malaysian Timber Certification Council Scheme (MTCC) which is applicable in Malaysia. We do not purchase paper that uses Malaysian timber at present.

Of these four systems of certification, our preference is to purchase paper that has been certified under the Forest Stewardship Council scheme (FSC). However, for many of our grades of paper, FSC paper is currently unavailable or uneconomic to use. We continue to encourage our paper suppliers to adopt the FSC standard. This commitment is reflected in the targets we have set ourselves this year

Recycled Content

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 and 100% recycled is not always suitable for the printing equipment we use. Pearson has held discussions with suppliers with regard of increasing for recycled fibres in both book paper and newsprint. We recognise that the nature of Pearson products means that only limited further use of recycled content will be possible.

Targets

Our targets for 2005 were to:

Target

Target

Progress

  • Extend the database to cover the remaining direct supply to Pearson businesses.
    		•

    Achieved

  • Extend the Penguin UK pilot of contacting printers for paper supply data to Pearson Education in the UK
    		•

    Achieved

  • Continue to work with WWF to further develop this database in 2005.
    		•

    Achieved.

    (Our 2004 submission to WWF was independently certified)

  • Increase the proportion of certified paper, particularly FSC purchased by Pearson
    		•

    To be reported in April 2006

  • Increase the proportion of recycled pulp used in our papers
    		•

    To be reported in April 2006

    Based on our progress in 2005, our operating companies have set a series of targets relating for 2006:

    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, USA, 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 to meet its aims; the company joined the WWF UK Forest and Trade Network 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 coming from well managed forests which have been independently certified.

    As part of its membership, Pearson submits an annual report on the environmental characteristics of the paper we purchased. In 2005, our submission relating to our 2004 report was independently verified by URS, a specialist environmental consultancy, on behalf of the Network.

    We also agree an annual 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 also commit to eliminate material classified as unknown or unwanted under the WWF reporting template.

    Production

    In 2003, we committed to compile a central register of key paper suppliers and out-sourced printing relationships. We have added further printers to our register during the year and this objective is broadly complete. Printers are changed from time to time and the register will be kept updated.

    This register provides Pearson with a picture of the environmental performance of its printers. The register includes over 90% of our printers by value representing over 150 supplier relationships. This is up from 75% meeting our 2005 target to further extend the coverage of our process.

    Our process of surveying the environmental performance of our printers now includes the FT Group, Pearson Education and Penguin in North America and the Far East, Penguin UK and Les Echos in France. The survey covers:

    Over 90% of printer relationships contained in the database by value have been surveyed. The main findings from the survey are as follows:

    Indicator

    Indicator

    %age of printers that measure impact (2003)

    %age of printers that measure impact (2004)

    %age of printers that measure impact (2005)

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

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

    %age of printers that measure impact (2005)

    Water

    86%

    87%

    88%

    57%

    76%

    76%

    Ink

    95%

    94%

    94%

    71%

    79%

    80%

    Solvents

    91%

    90%

    88%

    76%

    85%

    83%

    Alcohol

    67%

    89%

    81%

    67%

    77%

    74%

    Energy

    81%

    90%

    89%

    71%

    84%

    84%

    Waste Production

    95%

    94%

    94%

    95%

    92%

    91%

    The percentage of printers with reduction targets has stayed static across most indicators. 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.

    We will continue to encourage our printers to introduce and monitor reduction targets.

    The findings from this survey provides the basis for production teams to discuss environmental impact with suppliers during 2005. In 2006, we plan to:

    In addition, Pearson people undertook visits to existing and potential printers in India and Korea. We also followed up visits made in earlier years to Australia, China, Malaysia, Singapore, parts of the UK, Western Europe and North America. 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. Our aim is to make further visits in 2006 in these and other countries where our books, magazines and newspapers are printed.

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

    Case Study

    R.R. Donnelley

    R.R. Donnelley is an important supplier to Pearson. Environmental initiatives adopted by the company include:

    • Use of low-VOC inks and solvents to reduce emissions to air
    • Investment in energy efficient equipment
    • Use of computer-to-plate technology eliminating wastewater discharge related to film processing
    • A range of packaging reduction initiatives including the use of shared pallets.

    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 DHL (incorporating Securicor) for 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.

    Discussions with DHL to explore the feasibility of running a pilot system to monitor the environmental impact of our distribution systems in the UK are ongoing.

    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.

    Our books are produced around the world requiring shipment from the printers to our warehouses. Maximising the container load is an important measure of environmental efficiency. A recent review of the performance of different parts of the UK business has identified an opportunity to improve efficiency. We have therefore set a target to increase the container load by 10% from Asia to the UK and the US.

    Contacts

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

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