2017 Annual Report
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PRESENTATION OF 2017 PIRELLI INTEGRATED ANNUAL REPORT
The Pirelli 2017 integrated report (Annual Report 2017) aims to provide a comprehensive overview of the process of creating value for the Company's Stakeholders, as resulting from the integrated management of the financial, productive, intellectual, human, natural, social and relational capitals. Reporting reflects the business model adopted by Pirelli, which is inspired by the United Nations’ Global Compact, the principles of Stakeholder Engagement set forth by the AA1000, and the Guidelines of ISO 26000.
The financial capital, which comprises the company’s financial resources, drives the sustainable management of the other capitals and is in turn influenced by the value created by the latter. In 2017, business operations generated an EBIT adjusted (before non-recurring and restructuring expenses and before amortization of intangible assets related to assets recorded as a result of the Business Combination) and before start-up costs equal to 927 million euro (17.3% the EBIT Margin Adjusted), up 10% from the previous year on a like-for-like basis.
In turn, the Company's productive capital, which includes 19 tyre factories in 13 Countries in four continents, is managed in a perspective of environmental efficiency, with targets by 2020 in terms of a reduction of the specific indices of energy consumption, CO2 emissions and water withdrawal and an increase in waste recovery. In this regard, in 2017 vs 2016, Pirelli has registered a reduction of the energy specific consumption by 4%, a decrease in water withdrawal of 14%, a reduction of specific CO2 emissions by over 4% and an increase of 5% of renewable electrical energy used, reaching 43% on total electricity used, compared to the 38% of 2016. Waste recovery reached 93%, efficaciously pursuing the target of “zero waste to landfill”.
All this has helped to achieve efficiencies on costs amounting to 46.6 million euro in total.
The research and development activities, which have always been at the heart of Pirelli's strategy, contribute substantially to the improvement of environmental efficiency along the entire product life-cycle, from the innovative raw materials to the process, distribution, use and up to the end of life of tyres. In 2017, Pirelli invested 221.5 million euro in research and development (4.1% of revenues) of which 199.9 million euro destined to High Value activities (6.5% of High Value revenues). In turn, Pirelli’s Green Performance products, which combine performance and respect for the environment, at the end of 2017 represent 42% of total tyre turnover (40% in 2016 and 32% in 2015). Focusing only on High Value products, the percentage of Green Performance rises to 52%.
The strong investment in innovation also feeds Pirelli’s intellectual capital, which comprise a total portfolio of active patents gathered in 715 families concerning innovations of product, process and materials, as well as a brand recognised worldwide
The evolution of the cited capitals is closely related to the commitment, the competence and the dedication of the human capital, at the heart of the Company’s growth. Merit, ethics and sharing of strong values and clear policies, dialogues, attention to welfare and diversity are accompanied by advanced instruments to attract and retain the best talent. The investment in the “culture of health and safety at work” and in training is fundamental, with an accident frequency index that in 2017 decreased by 18% compared to 2016 and an investment in training that reached 8 average days per employee, thus surpassing for the fifth consecutive year the target of 7 average-per-capita days as envisaged by the Sustainability Plan.
Pirelli’s social and relational capitals are based on the continuous and transparent dialogue that the Company maintains with its Stakeholders. During 2017, particular importance was given to the consultation of the relevant stakeholders (among which international NGOs, Pirelli’s main natural rubber suppliers, traders and farmers in the supply chain, automotive customers, international multilateral organizations) in order to issue the Pirelli Policy on Natural Rubber.
In methodological terms, the drafting of the Annual Report 2017 took into consideration the Integrated Reporting principles contained in the framework of the International Integrated Reporting Council (IIRC), the Financial Statements and Consolidated Financial Statements were drawn up according to IFRS international accounting standards, and the sustainability performance meets the GRI Standards and the provisions of the Legislative Decree of December 30, 2016, no. 254.
1Figure obtained by weighing the value of sales of Green Performance tyres on the total value of sales of Group tyres. Green Performance products identify the tyres that Pirelli produces throughout the world and that fall only under rolling resistance and wet grip classes A, B, C according to the labelling parameters set by European legislation. The new calculation criterion introduced in 2017 required a restatement on previous years.
2High Value products are determined by rims equal or greater than 18 inches and, in addition, include all “Specialties” products (Run Flat, Self-Sealing, Noise Cancellation System).
2016 Annual Report
2015 Annual Report