As a business based on ideas, our direct environmental impact is limited, but we are committed to understanding the effect we have on the world around us and to setting targets to manage and reduce that impact. Environmental responsibility is not new to Pearson. We introduced an Environment Policy back in 1992. This was reviewed and updated in 2000 and again in 2004. The full policy can be viewed at www.pearson.com/environment. We are also guided by the UN Global Compact's principles on the environment.

For us, our impact falls into two distinct areas – aspects under our direct control, and areas where we can exert influence over the practices of our suppliers. Areas of greatest direct impact for Pearson are energy use, unsold product, waste and business travel. The most significant environmental issues in the supply chain relate to the purchase and use of paper, use of third-party printers and distribution.

In 2006, we made good progress in furthering environmental management within the company. Here are some highlights:

• We continued to improve the quality and quantity of the data collected and reported within our environmental report.
• We have added to our environmental register of major printers which now covers 169 printers in 22 countries.
• We use our database of the sources of wood, certification methods to set improvement targets.
• For a second year we were ranked top of our sector by Business in The Community in the Environment Index.
• We reported on our progress to the UN as part of our commitment to the Global Compact.
• We communicated to our staff the actions being taken by Pearson companies to lessen the impact of climate change.
• Our businesses introduced initiatives to report, explain and engage our stakeholders to lessen the impact of climate change.

We are on target to reduce electricity and gas use levels across the company by 10% by the end of 2008.

The environmental considerations relating to the purchase of paper continue to be a priority for us. Following our introduction of a paper purchasing policy in November 2003, Pearson has further developed its responsible paper sourcing practice. As part of an action plan on responsible paper sourcing agreed with the WWF UK Forest & Trade Network, we established a database on the environmental characteristics of the paper we purchase. We have also met a number of our key suppliers and manufacturers of paper to discuss and review environmental issues including certification and increasing the recycled content in the paper we use in our books. We will report on the volume of paper that we used that was independently certified in our 2006 paper report which will be published in May 2007. We expect this to rise from 42% in 2005.

A particular highlight for 2006 is that Penguin in the UK has secured Forest Stewardship Council (FSC) chain of custody certification which will allow its books to carry the FSC logo. Penguin has researched and sourced FSC certified paper, jackets and covers where these are available.

Our full environment report includes detailed performance data relating to our energy and water use, waste reduction and recycling, business travel and emissions to air relating to our operations. The report can be found at www.pearson.com/environment.

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