In 2005 Pearson employed 34,000 people around the world and many more people are engaged by our main suppliers. We want Pearson to be known as a company that is brave, imaginative and decent. To help guide us, we have our Code of Business Conduct. This outlines the standards we expect not only of our employees, but of everyone connected with our company, including partners and suppliers.

We are also guided by the UN Global Compact's ten principles on labour standards, human rights, business ethics and the environment. Pearson became a founding signatory to the Global Compact at the United Nations in 2000 and served on the Advisory Council.

Our business

We have applied the Global Compact to our own business and created our own set of guidelines on labour standards and human rights which we use to assess and report on our performance. These guidelines are:

• Diversity: we offer equal employment opportunities to all. The people we recruit and promote are selected on merit and suitability, and are not discriminated against because of gender, race, origin, background, religion, marital status, sexual orientation, disability or age.
• Employment conditions: we comply as a minimum with the relevant laws relating to employment and employment conditions in each country where we operate. Subject to relevant laws in the countries where we operate, we fully respect the right of our people to freedom of association and representation either through trade unions, work councils, or any other appropriate forum.
• Workplace violence: we are satisfied that we have systems in place to deal with physical and verbal abuse, or the threat of it, and any other form of intimidation within our workforce.
• Exploitation of labour: we recognise that labour standards and conditions may vary from country to country. Pearson companies conduct business in many of the poorer countries of the world where living standards are low. Where Pearson companies directly control their activities in a country, we ensure that our people have satisfactory wages and working conditions, and that there is no exploitation of labour. Working terms take account of local economies.
• Human rights: our products are produced and manufactured across the world and sold in many countries, often by companies we do not own which are operating on our behalf. In the course of conducting business in 'high risk areas', we are committed to ensuring that we are not complicit in human rights abuses and continue to monitor this. If we were to find ourselves inadvertently implicated in human rights abuses, we would take immediate steps to rectify the situation.

Five years ago, with the assistance of independent consultants, we put in place a procedure to assess our performance against these guidelines. We carry out an annual survey among our human resources professionals focusing on these guidelines. The 2006 survey covered 92 business operations in 48 countries. Together, the business operations surveyed employ over 30,300 people out of a universe of over 34,000 employees. The survey report can be found at: www.pearson.com/community/progresscommunication.htm

Based on this report, employee feedback to our Code of Business Conduct and our social, environmental and ethical risk assessment processes, we can confirm that we have continued to meet the guidelines we have set ourselves.

Our suppliers

Pearson spends over £2bn each year with our suppliers. Our most significant categories of supply are:

• Paper
• Production, primarily printing
• Distribution

The majority of our significant suppliers are located in North America and in Western Europe. However, some of our suppliers, particularly those providing print and production services are based in less developed countries. As our Code of Business Conduct and adherence to the Global Compact imply, we have certain principles we expect of all our suppliers wherever they are in the world. Since signing the Global Compact, 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.
• Included specific contractual commitments relating to labour standards and human rights in our key contracts, particularly those that relate to paper supply, printing and distribution.
• Managed an ongoing programme of supplier visits to assess compliance with the Global Compact.
• Worked with the UK book publishing industry to introduce common standards on labour standards and human rights.

In addition to our own programmes, Pearson is a strong supporter of industry co-operation to set common supplier standards. Industry co-operation has the dual advantage of increasing our influence as well as reducing the compliance costs for our supplier partners. This is why Pearson was one of the founding members of Publishers Resolution for Ethical Manufacturing Standards (PRELIMS) in the UK. PRELIMS introduced a common set of standards based on an existing model developed by the toy industry. All signatories commit to work only with printers that sign up to the standards, including an independent audit.

We set a number of business targets in this area for 2006. Here is how we performed against them:

For 2007, our targets in this area are:

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