Engaged Tracking Blog

The challenges of corporate ESG reporting

20/12/16 11:56 / by Ravi Patel

Interview with Peter Hughes, Director of Sustainability, Pearson

peter-hughes


Peter Hughes is Director, Sustainability at Pearson, the world's leading learning company having joined in January 2011. He has overall responsibility to lead on corporate responsibility work at Pearson focusing on environmental responsibility, supply chain and stakeholder engagement. Peter was previously a Director at Corporate Citizenship specialising in corporate responsibility strategy and programme management.

Pearson is the world's largest education company, with over 35,000 employees in more than 70 countries helping people of all ages to make measurable progress in their lives.

Pearson’s emission reduction strategy is built around climate neutrality as an overarching goal and within that to measure, reduce and then offset the emissions relating to its directly controlled operations. Through efforts to reduce energy use and business travel, Pearson reduced its climate footprint at the end of 2015 by 15% for Scope 1 and 2 compared to 2014. Its focus is to reduce absolute GHG emissions by 50% by the end of 2020 (using 2009 as the base year).

In 2015 Pearson worked with Corporate Citizenship to conduct a detailed benchmark of the environmental sustainability strategies of Pearson’s peers and competitors. Pearson’s 2015 Sustainability Report was a watershed marking its new approach to sustainability. It also highlights Pearson’s commitment to continuously improving its reporting practices.


Pearson’s 2015 Sustainability Report was something of a watershed. To what extent was the detailed benchmarking against peers and competitors driven by the needs and concerns of stakeholders looking for more transparency on ESG risks and opportunities?

The timing of the review in 2015 was driven by three things:

      • Pearson is transitioning from a physical book publisher and into a digital learning company. We recognised that this shift is also changing our environmental footprint.
      • The external policy environment (post COP21 and the launch of the Sustainable Development Goals). There is an increasingly expectation that companies identify and adopt forward-looking metrics and ESG factors to determine their impact on the planet.
      • Expectation from stakeholders around data transparency and accurate disclosure – this led to us to benchmark our performance against competitors and other leaders.

Starting from the broad macro SDGs, we identified those areas of most concern to stakeholders along with those most relevant to the sustainability of our business.  As part of the process, we were informed by our stakeholders, which included senior executives, the investment community, employees, government, the academic community, learners, NGOs and our suppliers.


We understand Pearson is looking to introduce “total carbon footprint reporting”. That is, to move beyond direct emissions to capture carbon impacts across its digital and physical value chain. Looking beyond Business Travel and Fuel and Energy Related Activities, which Scope 3 categories does Pearson regard as both material and influenceable?

We have two distinct supply chains. One relates to physical book production and this is more material as there is an extensive manufacturing and distribution process involved.

The other is our fast-growing digital business, which has a very different footprint. For this part of our business, analysis shows that a lot of the emissions aren’t in the supply chain but in the ‘value chain’, in terms of how learners are engaging with the content and the mediums they use to absorb it (e.g. laptop, computers, mobile phones etc.) This relates to Scope 3, category 11 – Use of Sold Products.

On the physical side, it is easier to engage our suppliers and distributors in order to map out our scope 3 emissions. There are quantifiable data points within the print business.

On the digital side, we only have limited data specific to Pearson. There are a lot of proxy data points emerging - where organisations are taking different categories of spend to estimate Scope 3 footprint - but these proxies are quite broad. There is a broad challenge on how to gather more robust and reliable scope 3 data, something that is especially difficult to do for digital businesses.


ET Index Research produces the most comprehensive ranking of the world’s largest listed companies according to the carbon intensity of their activities. Through the ranking process, we try to shine a light on companies around the world that are failing to put Scope 3 information into the public domain. In cases where a company is not reporting complete information, we apply an inference system. The highest reported emissions figure from any company within the same sector is applied to the non-disclosing company. In the case of Scope 1 and 2 emissions, the inference is carried out at the most granular industry level possible. For Scope 3 emissions, the inference is carried out at the Scope 3 category disclosure level.

With only 2% of companies publically disclosing a comprehensive Scope 3 inventory in 2015 it looks as though companies need an additional incentive to disclose. Do you agree?

Mandatory backing of Scope 1 and Scope 2 emissions in the UK Companies Act 2006 is something we supported.  Scope 3 is an area where companies should be aspirational and try and capture data. But where companies are at the moment, there’s a long way to go.

There have been a number of initiatives that have been helpful around this. One of them is the CDP which has traction in large part because it has the backing of the investment community.

Corporates adopting science-based targets will help create further momentum around this and will provide the context for mandatory reporting rules to come in further down the line. So watch this space!


Pearson is demonstrating strong leadership when it comes to renewable energy sourcing, consistently ranking in the top 50 largest purchasers of electricity from renewable sources in the United States. How important will the market be in the context of a Trump presidency in terms of scaling up access to renewable energy and do you have any advice for smaller companies in the United States who may already be struggling to procure renewable energy to power their data centres?

Pearson’s position on renewable energy purchase is related to the underlying issue of climate change.  We will continue to drive renewable energy procurement around the world because we see this as a strategy that can have a meaningful impact. We are an active member of the RE100, which sends an important market signal that we take the goal for sourcing renewable electricity use, very seriously.

We are proud of being in the top 50 largest purchasers of electricity from renewable sources in the United States. We sit alongside our customers in that education institutions such as universities also feature in this list.

In the USA, the energy market offers opportunities for smaller companies to embrace renewable electricity purchase. There is the traditional route of purchasing through local utilities or you can tap the market for renewable energy credits (RECs).

 

Ravi Patel

Written by Ravi Patel