We consider social, environmental and ethical (SEE) risks no differently to the way we manage any other business risk, so their evaluation and mitigation is incorporated into our general risk management framework.

Our 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 SEE risks, to our group control function on a semi-annual basis. The results of these reviews are reported via the audit committee to the board. This reporting is supplemented by risk review sessions – facilitated by our internal audit function – with the operating companies and the Pearson Executive Committee. In 2005, we carried out an independent review of the SEE risk processes in our UK businesses.

Consistent with prior years, our 2006 risk assessments did not identify any significant under-managed SEE risks. Nor did any of our most important SEE risks, many concerned with reputational risk, change year on year, however we have identified data privacy as an increasing risk.

• Journalistic/author integrity: fundamental to both our newspaper and publishing operations. Our newspapers have clearly articulated journalistic policies and procedures covering journalistic standards of conduct.
• Freedom of speech: within the book publishing businesses, editorial and legal review processes are in place to ensure that our authors' independence and freedom of speech is respected and maintained, whilst protecting us legally and on copyright infringement.
• Ethical business behaviour: our widely published Code of Business Conduct outlines how we behave as a business. To ensure compliance, we ask employees on an annual basis to confirm that they understand the Code and to report any breaches. Our confidential whistle-blowing help lines are another vehicle by which unacceptable behaviour, including fraud, can be reported. All incidents are investigated by the head of internal audit and reported to the relevant senior management and audit committee.
• Compliance with UN Global Compact standards: as a signatory to the UN Global Compact it is important that both we and our suppliers comply with these guidelines. Our greatest exposure is where we source printed material from developing countries, where less rigorous standards may apply. Both operating company and corporate employees regularly visit suppliers in these countries to ensure compliance. In 2006 we wrote to our top 850 global vendors re-emphasising our commitment to the UN Global Compact and our Code of Business Conduct.
• Environmental impact: compared to many other businesses we do not believe that our products have significant environmental impact. However, wherever possible we strive to understand the effect of printed material on the environment. We work with suppliers to use renewable sources of paper and recycled paper where available and economically viable. In the UK, we are lead participants in an industry-wide initiative involving both publishers and retailers, which looks at the process of book returns – a feature of our industry.
• People: people are key to our business. Our human resource policies are designed to attract and retain talented and motivated employees who enjoy and contribute to the growth of Pearson.
• Data privacy: the protection of an individual's data, whether for customers or employees, is becoming increasingly challenging as legislators and industry governance standards, e.g. PCI credit card requirements, look for increased protection and absolute assurance that an individual's data is protected. This is an area that poses increasing reputational and financial risks as more of our business moves to digital and online formats. We have always taken our responsibilities in this area seriously. We have initiated programmes to further enhance the security of our systems to ensure that we are compliant with data privacy requirements.

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