Care. Bilancio Sostenibilità 2010 Volume 3 VOLUME 3 SUSTAINABILITY REPORT 2010 Volume 3 KEY PERFORMANCE INDICATORS 2010 - 2009 - 2008 All reported KPIs cover the pirelli scope of consolidation, unless otherwise indicated ECONOMIC AREA (in millions of Euro) 2010 2009 2008 ENVIRONMENTAL AREA 2010 2009 2008 Net sales * 4848,4 4067,5 4169,2 Energy consumption [GJ / tonFP] 14,15 15,01 14,13 of which tyre (%) 98,4% 98,2% 98,3% CO2 emissions [ton /tonFP] 1,002 1,050 0,987 3 Gross Operating Profit * 629,0 452,6 308,9 Water withdrawal [m / tonFP] 16,2 18,3 18,3 Operating Income* 407,8 249,7 102,4 Waste output [kg / tonFP] 140,5 136,2 142,7 % of sales 8,4% 6,1% 2,5% ISO 14001 certified operating tyre plants 100% 100% 96% Net income attributable to equity holders 21,7 22,7 (347,5) Earnings/(losses) per share 0,044 0,047 (0,065) SOCIAL AREA 2010 2009 2008 Capital expenditure 433 225 311 Pirelli scope to which SA8000 benchmark standard applies 100% 100% 100% % of sales 8,9% 5,5% 7,5% OHSAS 18001 certified operating tyre plants 90% 90% 87% number of ordinary shares (millions) 475,7 5233,1 5233,1 Accident FI (frequency index) 1,6 1,8 2,2 number of savings shares (millions) 12,3 134,8 134,8 Year-end headcount 29,573 29,570 31,056 Stock market capitalisation ** 3010,7 2154,8 1318,1 of whom % women holding managerial positions (Executives + Managers) 17% 17% 17% Gross global added value 1495,9 1293,3 919,0 Average number of training days per employee 6.3 5,1 5 of which external donations 3,6 3,3 2,6 ISO 9001 certified operating tyre plants 100 100 100 % of gross global added value 0,24% 0,26% 0,28% Group Whistleblowing Procedure reports of code of conduct violations 1,0 1,0 - Research and development expenses 150 137 156 Number of vendors subjected to independent sustainability audits 46*** 26*** - % of sales 3,1% 3,4% 3,7% ROE of Group 0,19% -0,93% -13,35% Gearing 0,22 0,21 0,43 Sales per employee (average) 160 138 148 * the data do not include the activities belonging to Pirelli & C. Real Estate (now Prelios) and Pirelli Broadband Solutions, discontinued in 2010; the previous periods (2009 and 2008) have been restated on a like-for-like basis. ** 46 and 26 values correspond to 50% volume of natural rubber purchased in 2009 + 50% of billings for services acquired in 2009 TARGETS SET IN 2009 SUSTAINABILITY REPORT FOR 2010 Legend: Under Way OK ECONOMICS Disposal of certain non-core subsidiaries to improve financial flexibility of Pirelli and support growth in core Tyre business (discontinuation of Pirelli & C. Real Estate S.p.A. - now Prelios S.p.A - and Broadband Solutions S.p.A.) Green performance product sales account for 37% of all sales at end of 2010 Consolidation of new Risk Management System INVESTORS AND FINANCIAL COMMUNITY Financial communication: implementation of Pirelli Equity Story for visibility with analysts and investors, with special focus on sustainability Holding “SRI” roadshows VENDORS Implementation of possible remedial plans for vendors audited in 2009 New independent audits: service providers corresponding to 25% billed in western countries; suppliers of raw materials, natural rubber and services corresponding to 25% of billings in countries of concern. Total: 58 audits CUSTOMERS Focus on information and dialogue - execution of opinion surveys Focus on information and dialogue - consolidation of active presence on principal platforms (Facebook, Twitter, Youtube) Road Safety training: “Safe&Go” 2010 campaign Updating of institutional website with focus on interaction with end customer ENVIRONMENT Mapping of Pirelli activities in areas protected for their biodiversity/World Heritage Sites/UNESCO Biosphere Reserves/Ramsar Convention Production of ecological silica from rice husks New Technological Centre of Settimo Torinese: double loop air treatment unit; adiabatic cooling unit; high-efficiency heat capture devices; use of thermal solar panels; photovoltaic park generating about 1 MWp; solar cooling EMPLOYEES Internal communication campaign targeting all Group employees in their own languages with the new versions of: “The Values and Ethical Code of the Pirelli Group”, the “Social Responsibility for Health, Safety and Labour Rights and Environment” Policy, “Quality Policy” New Group-wide opinion survey (previous one conducted in 2008) Leadership training and development course for all executives and a pool of other key managers, in accordance with the new programme developed by senior management Performance Management: creation, development and implementation of new sections dedicated to the employee and to the mapping of his technical competences, in a view of increasing compliance of performance evaluation system with the “Leadership” project Lean Manufacturing Programme: the new training programme dedicated to “Operations” and “Quality” professional families will be launched in early 2010. The aim will be to integrate “lean” methods and logic in managerial processes Revamping of Career Development Program Maintenance safety campaign with the European Occupational Safety and Health Agency EU-OSHA Reduction of frequency index FI (Pirelli Tyre Industrial) by 10% against 2009 (2010 industrial frequency index = 1.55) Increase in number of total training hours at HSE Campus: >100 hours Extension of HSE Campus activities to LATAM plants Definition of a new Group standard for maintenance activities EXTERNAL COMMUNITY Partnership with EU-OSHA for new Occupational Health and Safety Campaign Renewal of multi-year support for Slatina Hospital through exchange of know-how with Niguarda Hospital in Milan Focus on dissemination of business culture through Pirelli Foundation activity Initiation of new programmes in favour of the External Community by directly engaging Pirelli employees (active contribution by employee) Principal 2010 SUSTAINABILITY objectives for 2011, 2012, 2013, 2015 Legend: In progress Target year Mantenance ECONOMICS 2011 2012 2013 2015 Impact of sales of green performance products against total of group sales >45% Adjustment of production activities in rapidly developing economies (RDE), Latin America and mature markets, where each of the three areas will contribute 1/3 to Group profits in 2015 Technological upgrade of production sites and machinery (in 2015, 60% of production will be realised at sites and plants less than 10 years old). Pirelli will invest Euro 1.9 billion over next 5 years, increasing its production capacity and focusing on the premium market segment in rapidly developing economies, according to a “local for local” strategy aimed at improving product mix and efficiency and consolidating leadership in all market segments in Latin America. Maintenance of value of investments in research and development over next three years at about 3% of sales, representing one of the highest levels in the sector. INVESTORS AND FINANCIAL COMMUNITY 2011 2012 2013 2015 Communication focused on publicising gradual implementation of the new 2011-2013 Business Plan Steady increase of roadshows dedicated to Socially Responsible Investors VENDORS 2011 2012 2013 2015 Rewriting of sustainability clauses of contract to simplify syntax Training for all buyers on management of independent audits of vendors and deployment of remedial plans Vendors Portal: development, pilot project in Italy and first extension to other EMEA countries in 2011 Drafting of Pirelli Manual on management of supply chain Definition of new audits according to criteria established by local Pirelli facilities, while retaining central support and after the training mentioned above CUSTOMERS 2011 2012 2013 2015 Focus on dialogue with the end customer through web platforms and opinion surveys Launch of Engaging the Consumers project. On the basis of detailed analysis of all phases of procurement process, the project aims t o identfy and select Pirelli consumer targets exactly, on whom “consumer insights driven” plans and marketing activities are to be focused, with all of this serving Group growth strategies. Road safety information and training campaigns, according to the programme defined after signing the EU Safety Charter ENVIRONMENT 2011 2012 2013 2015 Entire range of tyre products free of highly aromatic oils worldwide Extension of Environmental Management System certificate to all activities at New Technological Centre Specific energy consumption -15% against 2009 value (by 2015) Specific energy consumption -13% against 2009 value (by 2011) Specific equivalent CO2 emissions -15% against 2009 value (by 2015) Specific equivalent CO2 emissions -9.5% against 2009 value (by 2011) Specific water consumption -35% against 2009 value (by 2015) Waste: -5% production, +5% recycling against 2009 values Complete substitution by Steel Cord Business Unit of all wood pallets in favour of plastic or metal ones Use of solvents in production processes -5% against 2009 value by extending solvent free technologies. EMPLOYEES 2011 2012 2013 2015 Focus on employee welfare: mapping and actions Analysis of gender differences in Pirelli, in its industrial sector and in the global evolutionary context in order to update the related Management System and then transfer it to the management of all other diversity elements for setting targets about increasing diversities among managers in medium and long term Pirelli will commission new independent SA8000® audits to be carried out at production plants in South America, China, Egypt, Turkey and Romania New online and paper Employer Branding campaign New Settimo Torinese industrial centre: 11 days of training pro capita on