A 15 per cent reduction in CO2 specific emissions, an 18 per cent cut in energy specific consumption, a 58 per cent drop in water specific withdrawal and an increase in the waste recovery rate to reaching “no waste to landfill" – with goals as ambitious as these, corporate responsibility cannot be an add-on. Achieving such challenging targets by 2020 (against 2009 levels) means a sustainable approach has to sit at the centre of Pirelli's strategy and permeate the culture of the entire company.
Reflecting this, Pirelli integrates its sustainability, governance and financial reporting into a single annual report, a milestone for a journey that began with the company's first environmental report in 2000.
Sustainability as a management model
For most people the first thing they think about when they hear the word “sustainability” is the environment. But it means much more: sustainability involves balancing the interaction between a company's business model, its external and competitive environments, strategy, risk management and corporate governance. The different forms of capital a company employs – from the financial, productive and intellectual through to the human, natural and social – are all inter-related.
The types of capital cited could not evolve without adequate investment in Human Capital, which lies at the heart of the Company. Pirelli constantly invests in training, coming to 8.3 average days per employee as at the end of 2015, as well as in the culture of Occupational Health and Safety, with an injury frequency index which fell by 6% in 2015 compared to 2014 and by 73% compared to the 2009 figure, in line with the 2020 target that includes a decrease in the index of 90% compared to the base year 2009.
Merit, rules, ethics and sharing of strong values and clear policies, attention to welfare and diversity are combined with advanced tools to attract and retain the best talents.
“It is a matter of considering sustainability not as a specific issue but as a management model that is transferable to all the functions,” says Eleonora Giada Pessina, Pirelli Group Sustainability and Diversity Officer. “All the different capitals have to be managed in a responsible and sustainable way. Otherwise, the company's financial viability is at risk.”
Growth potential
Operating in a sustainable way can produce attractive savings: Pirelli's investment in environmental protection contributed to savings of €94.4 million in 2015. But sustainability goes well beyond making efficiencies: with the rise of the green economy it is also a significant opportunity for growth. Pirelli's Green Performance products, whose environmental impact is minimised both when they are made and when they are used, grew to 48 per cent of tyre turnover in 2015, up from 35 per cent in 2011.
New technology is key. In Brazil, for example, Pirelli has developed a manufacturing process to extract industrial silica from the main waste product of rice – the husk. Husk is currently underutilised and available in large quantities in many parts of the world.
Future proofing
Above all, perhaps, sustainability means looking to the future and being able to anticipate and plan for the long term – whether that be the impact of climate change, increased regulation or changing consumer preferences.
Take water for example. With growing evidence of global warming, cutting carbon emissions is top of the political agenda. But Pirelli has also set itself stringent water reduction targets. It believes water scarcity can be the CO2 issue of the future. If water becomes scarce in countries where it is not a high cost today then that will have a huge impact on companies. And for Pirelli, being sustainable also means being able to anticipate such risks in a responsible way.
Sharing best practice globally
At the same time, Pirelli believes in sharing best practice. In the past, a company's sustainability blueprint might have been considered part of its intellectual property. Now, with the rise of the “sharing economy”, a growing requirement for transparency and an imperative to make better use of resources and halt global warming, the onus is on companies to act for the common good.
As from 2014 Pirelli asks its key suppliers to join it in undergoing climate change performance monitoring, via the Carbon Disclosure Project. Suppliers managed to cut CO2 emissions by 116.5m tonnes, also recording savings of €793m.
The company is not only working with its supply chain. Pirelli's business model is inspired by the UN Global Compact, of which it has been a member since 2004 and which has since grown to become the world's largest corporate sustainability initiative. Pirelli sits in the Global Compact LEAD Steering Committee and within this it has been engaged to improve companies' communication on environmental, social and governance issues while also helping create tools for companies to embed sustainability practices.
As Pirelli Chief Executive Officer Marco Tronchetti Provera says: “Sustainability is a fundamental choice for Pirelli. It is fully integrated into the group's vision and strategies for growth, in all business areas and in all management decisions, everywhere in the world.”
