Sustainability Report

The Pirelli Group Sustainability Report is the expression of a corporate culture based on the integration of economic, environmental and social choices, in accordance with the triple bottom line approach. For this reason, instead of being published separately, the description of Pirelli sustainable performance is included as an integral part of the Pirelli Annual Financial Report at December 31, 2013, of which it is Volume 3.

The Sustainability Report is prepared in accordance with the reporting guidelines published by the Global Reporting Initiative (GRI) – in the new version GRI-G4 and application of the most advanced option for sustainability reporting, defined comprehensive reporting.

The contents of the Sustainability Report are also based on the principles of inclusiveness, materiality and compliance with Standard AA1000, a tool for measuring the capacity of the company to integrate sustainable management in its corporate strategy, identification of “material” themes that are consequently significant to the business and its stakeholders, related management and transparent reporting.

More specifically, the analysis of sustainable performance is based on a set of Key Performance Indicators (KPIs), developed in accordance with the GRI–G4 indicators, the ten principles of the Global Compact (which Pirelli has adhered to since 2004) and what is periodically monitored by the leading sustainable finance rating agencies.

The management systems used to consolidate the data are the CSR-DM (Corporate Social Responsibility Data Management), HSE-DM (Health, Safety and Environment Data Management), SAP-HR (SAP Human Resources) and HFM (Hyperion Financial Management).

The Sustainability Report is approved by the Board of Directors of the parent company Pirelli & C. S.p.A. on a voluntary basis, since it is not prescribed as a mandatory statutory or regulatory obligation. The Board of Directors of the parent company also approves the sustainability strategies and plans that are presented to the market together with the Group business plan.

The Sustainability Report has been submitted for External Assurance certification by SGS Italia SpA.

Following below is a summary of the highlights of the Sustainability Report 2013 – Volume 3 of the Annual Financial Report, to which reference is made for detailed and complete discussion.

Chapter 1 is dedicated to the “Sustainable Value Creation Model” and describes the Sustainability governance approach adopted by Pirelli, its guiding principles, the policies drafted in support of the model, the organisational structure, and the long-term governance tools directly related to the capacity of the Company to generate and distribute value, with this including corporate governance, risk governance, reputation governance, compliance and the system for management of whistleblowing reports by stakeholders.

The materiality mapping of strategic sustainable growth issues for Pirelli is also presented. The mapping is the result of a sophisticated stakeholder engagement that allowed the expectations of the principal classes of Group stakeholders in relation to the cited issues to be compared with the criticalities attributed to them for success of the business according to the corporate vision. The result of the comparison is the strategic significance matrix, which reveals inter alia that stakeholder expectations are substantially aligned with the corporate vision.

Space is also dedicated to the Business Plan 2013-2017 presented by the top management of the Group to the financial community in London on November 6, 2013.

That Business Plan includes the Sustainability Plan containing specific economic, environmental and social targets, some of which reach as far as 2020.

These include a reduction in tyre rolling resistance, which will reach 40% of the 2007 figure in the car segment, a 58% reduction in the specific uptake of water with an expected saving of 2,700,000 cubic metres in the period 2014-2017, a 90% reduction in the injury incidence rate from 2009 levels, a 15% reduction in CO2 levels and an 18% reduction in Company energy consumption from 2009 levels, for an expected saving of about euro 25 million and 400,000 tons of CO2 in the period 2014-2017, a 95% waste recovery rate by 2020, with an expected savings of about euro 60 million by 2017 through the reuse of industrial discards. The sustainable performance assessments of the Company by leading global indices of sustainable finance and received recognition complete the report given in Chapter 1.

Chapter 2, which has a strongly economic focus, is dedicated to the added value created and distributed by the Company in 2013 (euro 2,218 million, up 0.3% from 2012), as well as a description of the sustainable performance reported in management of relations with shareholders, investors and the financial community, customers and suppliers.

A section is dedicated to each of the mentioned stakeholders, which provides a complete description of the adopted management and dialogue model, the activities performed in 2013 and the objectives and projects for 2014. Quantitative performance indicators are provided in support and illustrate the performance, for example in terms of increases of the share price on the stock market, the positive results of customer satisfaction surveys, the number of suppliers whose sustainability performance was audited by third parties, and the related outcome.

Chapter 3 is dedicated to the process and environmental performance achieved in 2013, as compared with the previous two years and in view of pursuing the targets that the Company has committed itself to meet by 2020. The “materiality” approach that characterises environmental impact governance is highlighted. This was made possible by having calculated – and reported – both the carbon footprint and the water footprint of the Group. The environmental impact of the tyre, considering the phases of its life cycle, is substantially determined by the usage phase. According to the considered environmental indicator (atmospheric emissions, energy consumption, impact on water resources), it varies from 75% to 95% of the total impact.

In regard to the process – which has a weight of less than 5% in terms of the environmental impact on the tyre life cycle – information is provided about the performance of Pirelli to reduce use of environmental resources.

Specific examples of this are the 10% reduction in specific uptake of water from 2012, the 1% reduction in specific emissions of CO2 and energy consumption, the 4% increase in waste recovery during 2013 from the previous year, raising the recovery rate to 80%, which is thus on track to achieving a recovery rate in excess of 95% that the Company intends to achieve by 2020.

Again in terms of materiality – the Model for Environmentally Friendly Management that characterises the entire product life cycle, from research and development of new raw materials to end-of-life is described.

The description dwells on the green performance characteristics of Pirelli tyres, i.e. tyres that can maximise respect for the environment and performance, whose total impact on net sales of tyres at December 31, 2013 was about 42.4%, up from 39.6% in 2012. This figure is on track to achieving the impact target of 48% of total tyre sales by 2017.

The chapter then highlights the green performance characteristics that the Company expects to achieve between 2015 and 2020, both for car tyres and truck and motorcycle tyres. In the car product, for example, tyre rolling resistance will decrease by 20% from 2013. The figure for 2013 was already 20% less than the 2007 benchmark figure.

Chapter 4 is dedicated to management performance in relation to the Internal Community and External Community.

The report on the Internal Community, which is comprised of Group employees, gives a detailed illustration of the composition and evolution of Pirelli employees during the three-year period 2013-2012-2011. The focus is in job category, geographical area of assignment, gender, average age, average job seniority, type of employment contract, new hires and separations from the Group. It shows, inter alia, that there was a net increase of 641 new employees at December 31, 2013 from a year earlier, and 1,533 new employees from December 31, 2011.

Proceeding to discussion of the adopted Responsible Management Model and related qualitative and quantitative performance, the report focuses on hiring, development, training, diversity, compensation, international mobility, internal communication, welfare, industrial relations, health and occupational safety.

Among the numerous indicators of quantitative performance in 2013, the following merit mention here:

  • the workplace accident frequency rate fell by 20% from the 2012 figure;
  • the average number of pro-capita training days grew, reaching an average of 7.2 days in 2013, compared with 5.1 in 2012.

In both of these cases, Pirelli met its 2015 target two whole years in advance, as previously communicated to the market with the Plan 2012-2104 and Vision to 2015.

The report on the External Community opens by describing the internationally significant activities for sustainable development in which Pirelli participated actively in 2013, including Global Compact Lead (where Pirelli belongs to the Steering Committee), CSR Europe (where Pirelli is part of the Board), World Business Council for Sustainable Development (where Pirelli is part of the Tyre Industry Project Group and the “Mobility 2.0” Project), the activity performed by the International Rubber Study Group (where Pirelli belongs to the Industry Advisory Panel) for drafting a standard on sustainability in the context of producing and transforming natural rubber, participation in the Campaigns of the European Occupational Safety and Health Agency (EU-OSHA).

A section is then dedicated to relations with institutions and public administrations, before presenting a detailed report on the philanthropic activities supported by Pirelli around the world to assist youths, training, health, the environment and culture.