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A Beautiful Place
The Art of Manufacturing
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FINANCIAL RESULTS AND DOCUMENTS ARCHIVE
Annual Report 2021
A Beautiful Place
Chairman’s Letter
Executive Vice Chairman and CEO’s Letter
Manufacturing and Beauty
by Vito Mancuso
Italy, Settimo Torinese
Il giardino del tempo, pottery
by Giovanni Mengoni
Brazil, Campinas
Um Lugar Bonito, song and music
by Susy Garcia, Pinguim, Fernanda Broggi, Tony Felix
USA, Rome
Your Journey Starts at the Hands of Pirelli, graffiti
by Lisette Correa
Romania, Slatina
A Beautiful Place, classical music
by Andrei Cavassi
Cina, Yanzhou
Industry and Innovation, paper cutting art
by Tu Yonghong
The Factory Game
by Nadia Owusu
Notice of Shareholders’ Meeting
Corporate bodies
Presentation of 2021 IntegratedAnnual Report
5
09
10
14
18
22
23
26
27
30
31
34
35
38
39
42
47
48
50
Index Directors’ Report on Operations
Directors’ Report on Operations
Macroeconomic and market scenario
Significant events of 2021
Group performance and results
Research and development activities
Parent company highlights
53
54
56
58
69
72
Risk factors and uncertainty
Outlook for 2022
Significant events subsequent to the end of the year
Alternative performance indicators
Other information
74
81
82
83
84
Report on Responsible Management of the Value Chain
Consolidated non-financial disclosure
Report on Responsible Management of the
Value Chain- Consolidated Non-Financial
Disclosure pursuant to Legislative Decree of
December 30, 2016, n. 254
89
Methodological note
Economic dimension
Environmental dimension
Social dimension
90
99
119
149
Report on the Corporate Governance and Share Ownership
Report on the Corporate Governance and Share
Ownership of Pirelli & C. S.p.A. pursuant to
article 123-bis TUF
Glossary
Introduction
Company Profile
Information on the ownership structure
Compliance
Board of Directors
Processing of corporate information
Board Committees
Succession of Directors - Appointments and
Succession Committee
Remuneration Committee and Directors’
remuneration
191
192
193
193
195
200
201
210
210
214
215
System of internal control and risk management
- Audit, Risks, Sustainability and Corporate
Governance Committee
Interests of the Directors and Related-Parties
transactions
Board of Statutory Auditors
General Management Operations
Information flows to the Directors and Statutory
Auditors
Relations with Shareholders
Shareholders’ meetings
Changes since the end of the year
The Pirelli website
Considerations on the letter by the Chairman of
the Corporate Governance Committee
216
221
221
223
223
223
224
225
225
225
Report on the Remuneration Policy and compensation paid
Report on the Remuneration Policy and
compensation paid
241
Remuneration Policy for the 2022 Financial year
Report on compensation paid in 2021
245
269
6
Pirelli Annual Report 2021 Consolidated Financial Statements
Consolidated Financial Statements at
December 31, 2021
Financial statements
285
286
Explanatory notes
Scope of consolidation
292
372
Pirelli & C. S.p.A. Separate Financial Statements
Pirelli & C. S.p.A. Separate Financial Statements
at December 31, 2021
Financial statements
Explanatory notes
381
382
387
Annexes to the notes
Report of the board of statutory auditors to the
shareholders’ meeting
435
440
Resolutions
Resolutions
Proposal for approval of the financial statements
and allocation of the result for the year
Remuneration policy and compensation paid;
related and consequent resolutions
465
466
466
Three-year monetary incentive plans
For the Pirelli Group Management; related and
consequent resolutions and granting of powers
468
Certifications
473
474
d.
Independent auditors report on separate
financial statements
e. GRI e SASB Content Index and
f.
Correlation Tables
Independent auditor’s report on the
consolidated non-financial disclosure in
accordance with article 3, paragraph 10
of Legislative Decree 254/2016 and with
article 5 of Consob regulation 20267
adopted by resolution of January 2018
476
484
486
493
506
Certifications
a. Certification of the consolidated financial
statements pursuant to art. 154-bis of
Legislative Decree 58 of February 24,
1998, and pursuant to article 81-ter of
Consob regulation No. 11971 of May 14,
1999, as amended
Independent auditors report on the
consolidated financial statements
c. Certification of the separate financial
statements pursuant to art. 154-bis of
Legislative Decree 58 of February 24,
1998, and pursuant to article 81-ter of
Consob regulation No. 11971 of May 14,
1999, as amended
b.
7
Index Discover
A Beautiful Place
on pirelli.com
Pirelli Annual Report 2021
8
A
Beautiful
Place
A Beautiful Place is the factory, which is defined as beautiful because it can generate and inspire beauty.
The relationship between these two realities is deep, indeed “even intrinsic”, as the philosopher and
theologian Vito Mancuso argues in his essay, which opens the Pirelli Annual Report 2021, because
“manufacturing and beauty, or the economy and aesthetics, are related through a fundamental element
for both of them: materials”. And the transformation of material generates products and works of art,
productivity and splendour, thanks to the hands of man, because the factory and art are primarily
about “manufacturing”.
To underline this connection, we asked artists to visit some of our production plants in China, United States,
Romania, Brazil and Italy and allow themselves to be inspired by the architecture, the technology, people
and the sounds they encountered to create their works, made of material and genius.
The hands of the Chinese engraver Tu Yonghong carved the paper with precision to the nearest cen-
timetre, inspired by the sense of innovation and tradition felt at the factory in Yanzhou. Gestures
and movements similar to those of a scrawler, as he uses his hands to create the prototype of a tyre, a
unique work, carving out in the rubber the tread design that the computer created virtually.
Lisette Correa, a U.S. street artist, painted with spray paint and brushes two walls of the factory in Rome,
Georgia, where men and women who work there stand out in the foreground, smiling and united. “Because
– as Mancuso argues – for the manufacturing plant to become truly resplendent with authentic beauty, it
needs to be fed by the even more necessary beauty of those human relationships”.
The shapes and the architecture of the Settimo Torinese factory (Italy) inspired the potter Giovanni Mengo-
ni, who used his hands to shape a pot using the lathe and single firing at high temperature. The sounds and
the technology of the factories in Slatina (Romania) and Campinas (Brazil) instead inspired the music and
texts of the cellist Andrei Cavassi and the Brazilian collective comprising Susy Garcia, Pinguim, Fernanda
Broggi and Tony Felix.
Also combining the concept of manufacturing and creative beauty is the story of Ghanian and Arme-
nian-American writer Nadia Owusu, who recalls a game of construction and imagination capable of
nurturing the mind, called factory, which she used to play with her sister when she was little.
Besides, Mancuso is equally convinced that the contact between manufacturing and beauty is essential to en-
suring that our minds are not reduced to mechanical minds but remain human, that is to say free and creative.
9
A Beautiful Place
Chairman’s
Letter
Ning
Gaoning
Pirelli Annual Report 2021
10
Dear Stakeholders,
The strength of the group’s performance in 2021, when, along with the
rest of the global economy, Pirelli began to emerge from the stresses and
challenges of the most intense phase of the Covid 19 emergency and re-
lative containment measures, was a validation not only of the Company’s
defensive measures but also of the underlying business model. Beating
expectations in such a challenging context, as Pirelli did, is a testament
to the group’s underlying strength.
As the automotive sector relaunched activities, like other manufacturers,
it faced supply chain constraints as the companies it relies on restarted
operations and gradually ramped up production. The sector was parti-
cularly affected by the shortage of semi-conductors; however, Pirelli’s
strategic focus on high-end vehicles proved its resilience as carmakers pri-
vileged the production of their more valuable models. This was reflected
in the market dynamics from 2019 to 2021 when, as overall car production
decreased, the Prestige segment grew and the Premium segment returned
to almost pre-pandemic levels.
While developing its market position, Pirelli also increased its efforts in
sustainability that remains a core value and a pillar of the growth model.
In 2021, this environmental responsibility was recognized through nu-
merous international awards and achievements. These included Pirelli
being the only tyre maker at the global level to receive three stars in the
Environmental Accreditation Programme of the Federazione Interna-
11
Chairman’s Letter
zionale dell’Automobile – for fully integrating its sustainability strategy
in motorsport – and the world’s first to produce a tyre with natural rub-
ber certified by the Forest Stewardship Council. The company was also
confirmed in the Automobiles & Components sector of the Dow Jones
World and Europe Sustainability Indices, earned a position on the CDP
“Climate A list” for its contribution to the fight against climate change,
and launched a multi-year project in partnership with the NGO BirdLife
International to favour the production of sustainable natural rubber in
Indonesia.
Even as 2021 saw a return to some level of normality, in contrast to the
extraordinary events of 2020, the health emergency was not over. The
company continued with its programs to protect employees and ensure
workplace safety while contributing to prevention measures for the wider
community, with actions such as loaning structures to serve as public
vaccination hubs.
In 2021, Pirelli’s people were again the foundation of the group’s achieve-
ments, as they have been throughout the company’s 150-year history. Even
with the challenges of the period, Pirelli’s employees and management
were nonetheless able to apply their talent, dedication and effectiveness
to the full; and the group demonstrated that it is on a winning path.
Thank you to everyone at Pirelli and to our Stakeholders for their support.
Ning Gaoning
Chairman
Pirelli Annual Report 2021
12
Executive Vice Chairman
and CEO’s Letter
Marco
Tronchetti Provera
Pirelli Annual Report 2021
14
Dear Stakeholders,
We began 2022 reaching an important milestone: 150 years of company
life. A long journey made of industry, culture, tradition, technology and
passion that motivate the 30,000 people who each day help build Pirel-
li’s present and future. We have traversed three centuries of history and
marked the occasion, on 28 January 2022, despite the difficulties of the
external context linked to the pandemic.
The measures adopted allowed us to overcome the obstacles on our path
and end 2021 with results beyond our forecasts, which had been revised
upwards throughout the year. Revenues exceeded 5.3 billion euro, while
adjusted Ebit was above 800 million euro, with a margin of 15.3%, net pro-
fit over 320 million euro and cash generation before dividends 431 million
euro. We were able to achieve these results by increasing our focus on the
high end and specialties, cutting-edge products and efficiency programs.
Our ability to adapt the business model to the constant and rapid changes
of the economic context, already demonstrated during the health emer-
gency, will also be essential in handling the rising volatility stemming
from growing geopolitical tensions.
Our commitment to Research & Development remains a key factor, whe-
re the company invests 6% of High Value revenues annually, one of the
highest levels in the sector. There is also the significant commitment to
sustainability that is central to our strategy and led to our launching the
15
Executive Vice Chairman and CEO’s Letter
first FSC certified tyre in the world. In line with the goal of attaining
carbon neutrality by 2030, in 2021 Pirelli pursued the decarbonization
of the group’s value chain. The Company achieved the “Science Based
Target” for climate control at its locations four years ahead of schedule,
which will lead to a more ambitious update of the target.
The Pirelli brand was once again an important lever whose power we
constantly fed through our sports’ sponsorships, as well as the many cul-
tural projects and initiatives we supported. In terms of our identity, the
work of the Fondazione Pirelli, which houses our archives and history,
was also fundamental, as was Pirelli HangarBicocca, our art space that
helps observe and understand contemporary culture.
Thanks to all this, Pirelli is synonymous with safety, technology and relia-
bility, together with competition, aesthetics and entrepreneurial culture.
Today we are involved in more than 350 motorsport competitions, headed
by Formula 1, Superbike and the Rally world championship. Our brand
is also connected with the worlds of winter sports, football and sailing,
where Pirelli flanks Luna Rossa. After the suspension of the 2021 edition
because of the pandemic, we returned to publishing the Pirelli Calendar,
with the 2022 edition “On the Road” signed by Bryan Adams.
Thank you to all the people who enabled Pirelli to celebrate 150 years
while keeping its gaze constantly on the future. I wish us all, amid the
international difficulties of the moment, a return to a serene future.
Marco Tronchetti Provera
Executive Vice Chairman and CEO
Pirelli Annual Report 2021
16
17
Lettera del Presidente
Manufacturing
and Beauty
by Vito Mancuso
Vito Mancuso (Carate Brianza, 1962), a lay theologian and philosopher, was a professor
at San Raffaele University in Milan and Padua. He currently teaches as part of the
Master’s Degree in Meditation and Neuroscience at the University of Udine. He founded
and runs the “Ethics Laboratory” in Bologna. He is the author of numerous essays
on topics such as Hegel’s philosophy, diseases and pain, the nature of God, the soul,
love, thought, freedom, cardinal virtues, courage, fear and the meaning of life. In an
extensive essay, he presented the figures of Socrates, Buddha, Confucius and Jesus
in synopsis. His thinking can be defined as a “relational philosophy.” As regards the
aesthetic dimension, he has published La via della bellezza (The road to beauty) (Garzanti
2018). His last book is entitled La mente innamorata (The enamoured mind) ( Garzanti
2022). He has been an editorialist for La Stampa since 2022.
Pirelli Annual Report 2021
18
In the speech in praise of beauty given by a strange character by the name of Stepan Trofimovich,
Dostoevsky proposes a choice between “Shakespeare or a pair of boots, Raphael or oil”1. The first names
represent beauty, the second manufacturing, and from our own perspective too you can understand
that between the two realities the connection is in no way immediately apparent. However, it is our
experience, above all, which teaches us that you can very easily create and manage a manufacturing
plant without worrying in the slightest about beauty. It is true that there are some very beautiful
factories, with that charm generated by metal and glass, constructions with spacious, light and
harmonious architecture; it is even truer, though, that also in today’s world factories, which emanate
beauty, are in the net minority. Between manufacturing and beauty, it seems that people move in
completely different circles, universes that are parallel but never destined to encounter one another:
manufacturing evokes personal interests, investments, profits; beauty speaks of disinterestedness,
gratuitousness, expenditure. Nevertheless, in this article I shall claim that the relationship between
these two realities is deep, indeed intrinsic, because manufacturing and beauty, or the economy
and aesthetics, are related through a fundamental element: materials. And I shall start my claim by
clarifying the concept of beauty: what is beauty?
There are an infinite number of discussions on the subject, centred primarily on whether beauty
is something objective that everyone can recognise, or something subjective that changes
depending on the era and place involved. I am convinced that beauty, like divine intervention,
is indefinable, because its specific action is actually the contrary of defining something; it
equates, if you will permit this neologism, to “infiniting” something: opening it up to the
infinite. This is why, if we wish to say what beauty is, we do not have the words to express it,
and the most intense aesthetic experiences are filled with silence. An aesthetic experience is
always also an ecstatic experience. Nevertheless, we continually talk about beauty, and among
its many descriptions, I recall this one from Plato: “splendour of the Truth”2.
Factories too are reflective of truth, of what is effective, of solidity. They produce things, they do
so by using materials, and the material is always true. And the people who use it are sensitive to its
quality. Manufacturing and beauty, the economy and aesthetics, thus come together in the material,
because artists too are structurally sensitive to it insofar as there can be no art without material. The
transformation of material is the basis for both the economy and aesthetics; it generates products
and works of art, productivity and splendour.
Splendour derives from the Latin word splendeo, “to shine, to gleam, to shimmer”, with an
obvious reference to light; whatever is splendid must necessarily also be shining. Light thus
seems to be the principal constituent of beauty, which in mediaeval times not surprisingly was
called claritas. Beauty is the special luminosity that the material generates, it is the splendour
and loveliness of the truth, and as such it also points manufacturing in the right direction: a
product that is authentically beautiful has all the guarantees needed to be genuine, trustworthy,
and true too. The ancient Greeks at the beginning of our civilisation were the first to sense
this, by establishing that the connection between beauty and goodness (kalokagathía) is the
indicator that perfection has been attained. Goodness, in fact, should be understood primarily
not in the ethical sense but in the physical sense: it means capability, strength, solidity, usability,
functionality. In several Italian dialects too the adjective “good” means above all “capable”.
We are talking of values to which a manufacturing plant is particularly attentive, but, if this
is valid for its products, it cannot not be valid for its production sites also. For this reason, the
more a factory is well tended from an aesthetic point of view, the more people will pay attention
to the quality of its manufacturing and how good its products are. The link between beauty
and a manufacturing plant appears to be not so much a somewhat affected luxury that people
can happily do without, but rather an organic connection.
However, we need to take a further step forward by asking ourselves where beauty comes from. In
relation to this delicate disposition of existence that we call beauty, I believe that it arises primarily
from three sources: nature, art, and the human being. Here I shall focus on the last of these by saying
that a manufacturing plant is not just technical, it is also a place of humanity: it consists of human
beings who work together in close contact with one another day after day. In order for a factory to be a
place that produces beauty, it therefore follows that the human beings inside it should also be beautiful.
And when is a person, not as a natural phenomenon as such, but as a “human being”, beautiful?
As for the body with which we are endowed when we are born, nobody either deserves or does
not deserve it; it derives from nature and as such belongs to the first of the three sources of
beauty. It is rather the use of a person’s freedom that shows the authentic value of a human
1. Fëdor Dostoevskij, Demons, III,1,4 [1873], tr. by Francesca Gori, Garzanti, Milan 200815, p. 521.
2. See Plato, The Phaedrus, 250 B-D, edited by Giovanni Reale, Bompiani, Milan 20094, p. 119.
19
Manufacturing and Beauty
being, and therefore their particular beauty relates to their conscience, that is to say the use
they make of their intelligence and their freedom. A human being is beautiful insofar as they
are “human” when they are fair, good, intelligent, generous, courageous and loyal. Fairness,
goodness, intelligence, generosity, courage and loyalty illuminate the face of a person who
has these traits, rendering them beautiful. Putting these virtues into practice confers that
special, typically human, beauty which goes beyond the surface and reaches the heart, and is
the truest essence of each of us, making us “a beautiful person”.
My thesis therefore is that beauty is also produced in that special factory which is one’s conscience:
beauty is its most precious product. If this interior beauty is missing, the beauty of the factory,
however well it is tended, can end up being distant, cold, false and indeed hostile. In order for the
manufacturing plant to become truly resplendent with authentic beauty, it needs to be fed by the
even more necessary beauty of those human relationships, of those glances, of that empathy which
regulates and modulates interpersonal exchanges. For this reason, as well as looking after the exterior
of their manufacturing plant, the wisest entrepreneurs are those who also take care of its interior,
by cultivating the authenticity of relationships and the ethical dimension, not just among their own
co-workers but even ahead of that, obviously, within themselves.
The final step of my contribution is intended to warn people about something that constitutes
perhaps the greatest risk that a manufacturing plant can face, especially if it is very well tended
from a technical and aesthetic point of view: the celebration of technical excellence to such a
degree that it eliminates all contact with nature and with humanity. To explain what I mean
I shall quote a passage from the classic Taoist Chuang-Tzu dating back around twenty-four
centuries and written as part of a polemic with the Confucianists. It tells how one of the most
famous disciples of Confucius by the name of Zigong, having glimpsed an old peasant who
was working in his vegetable garden on the bank of the river in a rather unproductive manner,
said to him: “There is a machine to do what you are doing. In a single day you can irrigate an
area one hundred times bigger, with little effort and a much better result. Wouldn’t you like
to have it?”. The peasant first asked for some further explanations, then became indignant,
laughed sarcastically and finally replied calmly: “I heard my teacher say that where there are
machines there are mechanical problems; and where there are mechanical problems, there
are mechanical minds. When the mind is mechanical, simplicity is lost”. He therefore bade
Zigong farewell with these words: “I know about the machine of which you speak, but I would
be ashamed to use it”3.
Today we all are experienced enough to know that there are some extremely useful machines to help
us with our daily lives, that a manufacturing plant itself is a large machine composed of numerous
other machines, and that often in turn it produces more machines. The proposal by Zigong should not
be laughed at, far from it. Notwithstanding this, it is equally true that today there exist considerable
numbers of “mechanical minds”, and that, despite the presence of many machines which simplify our
lives both at work and in our homes, simplicity is often lost. The old peasant’s words are therefore worth
listening to attentively. The relationship between a manufacturing plant and beauty, and therefore
between a manufacturing plant and nature from which beauty principally derives, is essential to
ensuring that our minds are not reduced to mechanical minds but remain human, that is to say free
and creative.
3. Chuang Tzu (Zhuangzi), n. 12, edited by Augusto Shantena Sabbadini, Urra, Milan 2012, p. 109.
Author Vito Mancuso
Literary agency Sosia & Pistoia
Pirelli Annual Report 2021
20
Italy, Settimo Torinese
Piedmont
Pirelli’s presence in Settimo Torinese dates back to the early
1950s. Today the site is the most technologically advanced and
efficient factory of the Pirelli group in the world. It represents
excellence in the world of Industry 4.0, the new industrial
production paradigm based on the most complete digitalization
and efficiency in terms of product innovation, production
processes, attention to sustainability and the quality of the
working environment.
He has always lived in Umbria, a region located in the centre of Italy and bound to its ancient traditions,
where the artistic methods and craftsmanship have been handed down for centuries. After his studies at
the Painting Department of Perugia Academic Arts Institute, he worked together with many different
ceramic artisan companies, as a potter, mold maker and decorator. He has worked together with famous
artists and architects like Nello Teodori and Ugo La Pietra in the development and realization of their
projects. For long time he has been involved in research and innovation in the field of ceramics, studying
the traditional processing methods and their applications in contemporary design and furniture. His
expertise focuses on the production of Etruscan Bucchero, traditional Italian maiolica and terracotta as
well as stoneware and porcelain.
Pirelli Annual Report 2021
22
Il giardino del tempo, pottery
Giovanni Mengoni
23
Italy, Settimo Torinese
Pirelli Annual Report 2021
24
«Rethinking the beauty of “meaning” for the community,
projects us into an ever new dimension of observation
and reflection. This transformation of aesthetic thought
suggests to me new conceptual stereotypes, which do
not erase the past and are constantly reflected on the
communicative research that is linked to the passage
of time.»
25
Italy, Settimo Torinese
Brazil, Campinas
São Paulo
With 52 years, the Campinas plant is the Beautiful Place that
inspired the Brazilian composition. Producing tyres for South
and Central America, the competition module is one of three
Pirelli factories that, in the world, concentrates the production
of racing tyres.
Fernanda Broggi, 28 years old, is a singer, percussionist, vocal coach, professor and has four musical
works released in Brazil. Pinguim, as Irineu Filho is known, is 32 years old and started his guitar studies
at the age of 14 and works in the technical production area. Singer-songwriter Susy Garcia is a 34-year-
old Mexican woman in love with Brazil. Tony Felix, 33 years old, has been a musician for 19 years and has
already done projects in partnership with several national and international artists. For the first time, this
pool of talents came together to make art. And the inspiration was the Campinas factory, located in São
Paulo, which donated its sounds and hidden beauties so that the musicians could translate into music all
the stimulus that was awakened by this, although unusual, Beautiful Place.
Pirelli Annual Report 2021
26
Um Lugar Bonito, song and music
Susy Garcia, Pinguim,
Fernanda Broggi, Tony Felix
27
Brazil, Campinas
Pirelli Annual Report 2021
28
«A Beautiful Place was the inspiration. Like when you
stop seeing something you have looked at every day, you
go back and start looking again and at the same time you
also start to include all that feeling.»
29
Brazil, Campinas
USA, Rome
Georgia
Pirelli inaugurated the plant in Rome, Georgia, in 2002.
The factory is a robotized production facility focused on
premium specialty tyres. The Pirelli factory in Georgia is also
the first tyre plant in the world to be FSC-certified by the Forest
Stewardship Council.
Born and raised in Fort Lauderdale, Florida, Lisette Correa is a renowned street artist of the growing
Mural scene of Atlanta. Her alias is Arrrtaddict, a nod to the freedom of pirate movies she loved when she
was a kid. She is a proud Puerto Rican too. Her parents were raised in the Bronx and she is third generation.
Many of her works represent the culture of the indigenous people of Puerto Rico, like the “Somos Boricanos”
art, the biggest indigenous mural in the South and the first Puerto Rican and Taino mural in Atlanta. Her
first love was fashion design: before moving to Atlanta and dedicating herself to the street art, she lived
10 years in LA, working to make graphic apparel with some major brands. Lisette Correa sees everything
as a canvas and an opportunity to spread a message, to fight against injustice and inequality, to provide
representation through art, transitioning from t-shirts to streetwear, posters, billboards, and murals.
Pirelli Annual Report 2021
30
Your Journey Starts at the Hands of Pirelli, graffiti
Lisette Correa
31
USA, Rome
Pirelli Annual Report 2021
32
«With my work I really want to highlight the vibrancy
of people, bringing communities together as we are all
better as one. As society, we focus too much on skin
complexion, when we just really need to focus on the
inside, that is where we are more colorful. As an artist,
it is very important for me to make people feel happy:
that’s why my work is extremely bright.»
33
USA, Rome
Romania, Slatina
Olt
In Romania, Pirelli is present with a factory in Slatina, in the
Olt region, built as a Green Field project in 2006. Today the
site has a production that includes high value car tyres, and
represents excellence thanks to its production of Formula 1
and Motorsport tyres.
Andrei Cavassi is a musician with an incredible cultural heritage, his bloodline including Greek, Italian,
Hungarian and Romanian descent. He hails from a long line of classical musicians, marking the 4th
generation of artists in his family. Through the years, his performance mesmerized audiences on three
continents, from the Berliner Philarmonie, till Teatro Colon in Buenos Aires or Blue Note in Tokyo. Andrei
is the winner of the Gold Medal at the Vienna International Music Competition in 2019. He moved to Japan
to pursue his career, often coming back to Europe to perform upon request. As a vivid expression of his
artistic versatility, Andrei Cavassi was appointed World Ambassador for Maison Christian Dior. Andrei’s
incredible gift is to transpose the audience into a higher dimension, taking the public into a breathless and
amazing musical journey from the very first touch of the strings. His music is considered to be as versatile
as the voice of his cello revealing a magic realm where sound meets vibrance creating an absolute bliss.
Pirelli Annual Report 2021
34
A Beautiful Place, classical music
Andrei Cavassi
35
Romania, Slatina
Pirelli Annual Report 2021
36
«Art is one of the reasons that make us grow as individuals
and as a society. My dream is to make the world around
us and the world inside us a better place. I believe that
creativity and the desire to innovate are universal values
that drive all people who aim excellency. It inspires me to
get out or my confort zone and taking part of a project
that combines music and technology made me push my
creativity into a new direction.»
37
Romania, Slatina
China, Yanzhou
Shandong
Pirelli has been established in China since 2005. Among 3 local
factories, both the Yanzhou and Shenzhou factories are located
in HIXIH Industrial Park, Yanzhou, Shandong Province.
Pirelli APAC R&D and Innovation Center is also located in
the same industry park, deploying the latest innovations
and technologies.
With more than 20 years dedication in the creation of folk paper cutting art, Tu Yonghong is the
representative inheritor of paper cutting of intangible cultural heritage project in Shaanxi, China, who is
mainly engaged in the dissemination and exchange of folk culture and the design, development of cultural
and creative products. Since 1999, Ms.Tu has created more than 1000 paper cutting art works, won more
than 70 awards, and participated in over 100 cultural exhibitions.
In 2003, she started to organized paper cutting training and Intangible Cultural Heritage activities on
campus and in the community, playing a leading role in inheriting and developing folk paper cutting art.
Ms.Tu has accompanied government to various regions of the world for cultural and artistic exchange
activities for many times, which has been highly praised by the local cultural and artistic circles.
Pirelli Annual Report 2021
38
Industry and Innovation, paper cutting art
Tu Yonghong
39
China, Yanzhou
Pirelli Annual Report 2021
40
«After deeply understanding the brand culture, many of
my inherent cognition has been subverted and reshaped.
Creative thinking has gone through a long time. Finally,
based on “industry” and “innovation”, I created two works
to reflect such a brand that stands at the forefront of
the industry and attaches importance to tradition but
committed to continuous innovation.»
41
China, Yanzhou
The Factory
Game
by Nadia Owusu
Nadia Owusu is a Ghanaian and Armenian American writer and urbanist. Her debut
memoir, Aftershocks, was selected as a best book of 2021 by Time, Vogue, Esquire, The
Guardian, NPR, and others. It was one of President Barack Obama’s favorite books
of the year, a New York Times Book Review Editor’s Choice, and a 2021 Goodreads
Choice Award nominee.
In 2019, Nadia was the recipient of a Whiting Award. Her writing has appeared or is
forthcoming in The New York Times, Granta, The Paris Review Daily, The Guardian,
The Wall Street Journal, Slate, Bon Appétit, Travel + Leisure, and others.
Nadia is a director at Frontline Solutions, a consulting firm that helps social-change
organizations to define goals, execute plans, and evaluate impact. She lives in Brooklyn.
Pirelli Annual Report 2021
42
When we were children, my sister and I played a game we called factory. It involved disassembling
then attempting to reassemble our toys, kneeling side by side at the bench by the front door, where
our father sat to put on his work shoes. If he couldn’t find a shoehorn, he’d use a spoon.
In our factory, my sister and I also repurposed the cutlery, but less effectively, and sometimes
causing permanent destruction. We poked at little car wheels with forks and pried off our
dolls’ limbs with butter knives. We could have used our fingers, but the presence of tools, to
our minds, made our enterprise more realistic.
Where did we get the idea for this game? I don’t know. Probably a long-forgotten cartoon, perhaps
involving Christmas elves in Santa’s workshop. We’d never been inside an actual factory. Our father
worked for the United Nations, behind desks, in various offices in various countries – Tanzania, Italy,
Ethiopia, Uganda. We played at his job too, imitating him, picking up our red toy phone and saying,
confidently, “I’ve sent a Telex to headquarters.”
It was the 1980’s. We didn’t know then what a Telex was, and I still don’t, really. And, although
I knew that the organization my father worked for delivered food to people in natural and
manmade disasters, I couldn’t conceive of the mechanics. My father spent a lot of time reading,
writing, and using a calculator. He flew to Geneva or Dhaka for meetings or missions that were
too mysterious for my sister and I to reenact. Usually, he returned with Duty Free chocolates.
In hushed tones, he’d speak to my stepmother about refugee camps and rebels, but he’d fall
silent when he noticed me eavesdropping.
So, factory was a superior game. It was tactile, and playing it produced real consequences, which
my sister and I could see with our own eyes, and which we’d have to live with. Could we reattach the
helicopter propeller, and would it still spin? Did the babies look better or worse with their exchanged
heads?
Sometimes, when my sister and I had broken too much and felt regretful, we’d turn our factory
into a place of invention, using paper, plasticine, thread, coins, plastic bags, hair ribbons,
orange peel—whatever we could get our hands on. We worked in a frenzied, ad hoc, way, with
little, if any, initial vision.
“Look what we’re making,” we’d demand of any passing adult—our father and stepmother, their
friends. They’d take in our precarious monstrosities.
“Oh, lovely,” they’d lie. “What is it?”
Usually, being the elder by fourteen months, I was the spokesperson. I’d come up with something
on the spot: A time machine. A fairy hotel. A dragon catcher. A robot that could turn zucchini
(which both of us hated) into cotton candy.
As soon as I spoke the words, we believed them enough to see possibility, and even beauty, in what
we’d started. We’d resume our work with purpose. We didn’t have the language then, but now I’d call
it improvising. Through these games, we learned to trust our intuition, and to try to realize, with our
own hands, ideas and dreams we didn’t know we had. And, of course, we learned to fail. We came to
know failure as an important, inevitable, step. Nothing we invented ever worked. We ruined more
than we remade. But this was practice. Someday, when we were older, our processes would yield real
results. We believed this absolutely.
My sister grew up to be a person who makes art, but never for money. “That would take all the joy
out of it,” she says. Instead, to pay her bills, she waitresses. On her own time, she creates custom
jewelry for me and other people she loves. For my birthday two years ago, she drew me a charcoal
pencil portrait of our beloved grandparents who had recently passed away. She captured the gleam in
our grandfather’s eye and our grandmother’s dazzling smile. Recently, she painted a mural of black
and white shapes on a ramshackle shed in the backyard of her newly rented house in Austin, Texas,
transforming an eyesore into unexpected elegance.
I became a writer. I approach my work as a practice toward creating new possibilities and inventing
and transforming realities with words, even if only temporarily, and only in the imagination.
Last year, I held a copy of my first book in my hands. Finally, after years of trying and failing and
trying again, of indefiniteness, here was something both magical and material. I thought back to the
day when I’d opened a blank document on my laptop and typed the first sentence. I thought about the
friends who’d offered encouragement when I felt unable to translate what was in my head to the page,
and so considered giving up. I thought of my agent who’d believed in my book and sold it to a publishing
house, the editors who’d helped me revise it, the designers who’d drawn the cover, the printers, the
shippers, my mailperson who’d delivered the box to my doorstep. So many hands had done their part
then passed my book down to the next pair of hands—an assembly line of sorts.
I took a photo of the book on my phone and sent it to my sister. “Look at what I made,” I texted,
echoing our words from our factory days. I thanked her for being one of the people who’d made
it possible. She texted back that it was a glorious thing.
43
The Factory Game
I’ve also followed in my father’s footsteps. In graduate school, I studied urban planning and policy,
and I work on issues of poverty and inequality. But, while my father’s work was global, mine is focused
on cities in the United States, which despite this country’s wealth, are still places where too many
people struggle to survive. I’ve helped local governments to design education, housing, and workforce
programs.
Often, people say, “That sounds so interesting, but what exactly do you do all day?” I laugh
and reply that I talk on the phone and read and write reports. I make budgets and facilitate
trainings. The results of this work are far less manifest than what I imagined I’d be producing
all those years ago, during those games of factory. Sometimes, I wonder if I’ve made any
difference at all. Then, there are times when I’m reminded that the two careers that I’ve chosen
are not so distinct, not so separate, and that just because I can’t see something, doesn’t make
it unreal or impossible.
On a recent trip to New Orleans, I spent time at Studio Be, a 35,000 sq. ft. warehouse that is currently
the creative home of Brandan “BMike” Odums, a New Orleanian who works at the intersection of visual
art and activism. I was there to interview Odums and several other artist-activists from across the
United States about their visions for the future, and their efforts to address inequality, violence, and
racism, and to foster joy and belonging in their communities. I was struck by how clear they all were
about the need for physical spaces where people can come together to collectively imagine and build
the future, unconstrained by the present. By build, they meant things both tangible and intangible:
knowledge, sculptures, resources, connections, schools, hope, power, art installations, health centers,
musical scores, stories, and on and on.
The future, they emphasized, is created through the choices we make and the things we
create in the present. BMike spoke about how, in New Orleans, art is never a solitary pursuit.
It’s something done in and for community—a reference to how jazz and other forms of
improvisation are central to New Orleans’ culture. “Here, you play your horn in the hopes
that your neighbor will hear you, and maybe join you,” he said. And, perhaps that is true of all
our most vital processes. I couldn’t have played factory without my sister. Though I write alone,
I’m bolstered by others. I couldn’t conceive of the mechanics of my father’s work because I only
imagined his part. Day to day, it can be difficult to know if I’m making a difference, but I must
keep trying anyway. I trust that someone else will pick up where I left off. I’m but one person
along a long line, all of us trying, failing, improvising. I believe this absolutely.
Pirelli Annual Report 2021
44
46
Pirelli Annual Report 2021 Notice of Shareholders’ Meeting
The persons entitled to vote at the general shareholders’ meeting of Pirelli & C. Società per Azioni are called
to an Ordinary Shareholders’ Meeting in Milan, Via Agnello n. 18, at the offices of Studio Notarile Marchetti, at
10:30 a.m. on Wednesday, 18 May 2022, in a single call, to discuss and resolve on the following
AGENDA
1. Financial statements as at 31 December 2021:
1.1. approval of the financial statements as at 31 December 2021. Presentation of the consolidated financial
statements as at 31 December 2021. Presentation of the Report on responsible management of the
value chain related to 2021 financial year;
1.2. proposal on the allocation of the result of the financial year and distribution of dividends;
related and consequent resolutions.
2. Remuneration policy and compensation paid:
2.1. approval of the remuneration policy for 2022 financial year pursuant to article 123-ter, paragraphs
3-bis and 3-ter of Legislative Decree 24 February 1998 n. 58;
2.2. advisory vote on the report on compensation paid for 2021 financial year pursuant to article 123-ter,
paragraph 6 of Legislative Decree 24 February 1998 n. 58;
related and consequent resolutions.
3. Three-year monetary incentive plans for Pirelli Group Management:
3.1. approval of the monetary incentive plan for the three-year period 2022-2024 for Pirelli Group
Management;
3.2. approval of the adjustment mechanisms of the quantification of the objectives included in the monetary
incentive plans for the three-year periods 2020-2022 and 2021-2023 for Pirelli Group Management;
related and consequent resolutions and granting of powers.
47
Notice of Shareholders’ Meeting Corporate bodies
BOARD OF DIRECTORS1
Chairman
Executive Vice Chairman
and Chief Executive Officer
Deputy-CEO
Director
Director
Independent Director
Independent Director
Independent Director
Independent Director
Independent Director
Independent Director
Independent Director
Director
Independent Director
Director
Ning Gaoning
Marco Tronchetti Provera
Giorgio Luca Bruno
Yang Xingqiang
Bai Xinping
Paola Boromei
Domenico De Sole
Roberto Diacetti
Fan Xiaohua
Giovanni Lo Storto
Marisa Pappalardo
Tao Haisu
Giovanni Tronchetti Provera
Wei Yintao
Zhang Haitao
SECRETARY OF THE BOARD
Alberto Bastanzio
BOARD OF STATUTORY AUDITORS2
Chairman
Statutory Auditors
Alternate Auditors
Riccardo Foglia Taverna
Antonella Carù
Francesca Meneghel
Teresa Cristiana Naddeo
Alberto Villani
Franca Brusco
Maria Sardelli
Marco Taglioretti
AUDIT, RISK, SUSTAINABILITY AND CORPORATE GOVERNANCE COMMITTEE
Chairman – Independent Director
Independent Director
Independent Director
Independent Director
Fan Xiaohua
Roberto Diacetti
Giovanni Lo Storto
Marisa Pappalardo
Zhang Haitao
COMMITTEE FOR RELATED PARTY TRANSACTIONS
Chairman – Independent Director
Independent Director
Independent Director
Marisa Pappalardo
Domenico De Sole
Giovanni Lo Storto
1 Appointment: June 18, 2020. Expiry: Shareholders’ Meeting convened for the approval of the Financial
Statements at December 31, 2022. The current composition of the Board of Directors reflects the
resolutions more recently adopted by the Shareholders’ Meeting on June 15, 2021.
2 Appointment: June 15, 2021. Expiry: Shareholders’ Meeting convened for the approval of the Financial
Statements at December 31, 2023.
48
Pirelli Annual Report 2021
NOMINATIONS AND SUCCESSIONS COMMITTEE
Chairman
REMUNERATION COMMITTEE
Chairman – Independent Director
Independent Director
Independent Director
Independent Director
STRATEGIES COMMITTEE
Chairman
Independent Director
Independent Director
Independent Director
Marco Tronchetti Provera
Ning Gaoning
Bai Xinping
Giovanni Tronchetti Provera
Tao Haisu
Bai Xinping
Paola Boromei
Fan Xiaohua
Marisa Pappalardo
Marco Tronchetti Provera
Ning Gaoning
Giorgio Luca Bruno
Yang Xingqiang
Bai Xinping
Domenico De Sole
Giovanni Lo Storto
Wei Yintao
INDEPENDENT AUDITING FIRM3
PricewaterhouseCoopers S.p.A.
MANAGER RESPONSIBLE FOR THE PREPARATION
OF THE CORPORATE FINANCIAL DOCUMENTS4
Giorgio Luca Bruno5
The Supervisory Board (as provided for by the Organisational Model 231 adopted by the Company) is chaired by
Prof. Carlo Secchi.
3 Appointment: August 1, 2017, effective as of the date of the commencement of trading of Pirelli shares
on the stock exchange (October 4, 2017). Expiry: Shareholders’ Meeting convened for the approval of the
Financial Statements at December 31, 2025.
4 Appointment: Board of Directors Meeting on November 11, 2021. Expiry: jointly with the current Board
of Directors.
5 As indicated above, Giorgio Luca Bruno also holds the position of Deputy-CEO.
49
Corporate bodies
Presentation of 2021 Integrated
Annual Report
The Pirelli 2021 integrated Report (Annual Report 2021)
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,
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 comprise the company’s financial
resources, supply the sustainable management of other
capitals and is in turn influenced by the value created by the
latter.
In 2021, the management of the business produced an
adjusted EBIT6 of €815.8 million (€501.2 million in 2020) with
a margin of 15.3% (11.6% in 2020). Internal levers (volumes,
price/mix and efficiencies) more than offset the negativity of
the external scenario (raw materials, inflation and exchange
rate impact), enabling the company to achieve a better result
than expected (€770-800 million was the goal implicit in
the November target) and a adjusted Return of Investments
(ROI) of 17.6% (≥16% November target).
The Company’s productive capital, which
includes a
geographically diversified production structure with 18 plants
in 12 countries on four continents, is managed with a view to
environmental efficiency, with targets in terms of reducing
water withdrawal, energy consumption, CO2 emissions and
increasing waste recovery.
In line with the goal of achieving Group carbon neutrality by
2030, in 2021 the decarbonisation plan for Pirelli’s value
chain continued. In terms of absolute CO2 emissions (scopes
1 and 2) in 2021, Pirelli reached the well below 2°C Target
approved by the Science Based Target Initiative (SBTi) four
years ahead of schedule and asked the SBTi to upgrade it in
line with 1.5°C. Significant the use of renewable electricity:
100% of the electricity acquired by the Group in Europe
in 2021 is certified as renewable, 62% at global level. The
absolute emissions of the supply chain increased from the
pre-pandemic period, declining by 2.5% compared with 2019
and by 6% compared with 2018, the base year for the Science
Based Target Initiative for the supply chain (reduction target
-9% in 2025 compared with 2018).
The
research and development activities 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. Research and development expenses in
2021 amounted of €240.4 million (4.5% of sales), of which
€225.1 million was for High Value activities (6.0% of High
Value revenues). In turn, Pirelli’s Eco & Safety Performance
products, which combine performance and respect for the
environment, at the end of 2021 represent 63.1%7 of total
car tyre turnover (58% in 2020 and 55.8% in 2019). By
restricting the scope of the analysis to High Value products8,
the percentage of Eco & Safety Performance products rises
to 68.4% (63.8% in 2020 and 63.3% in 2019). Furthermore, in
2021, 49% of the new IP Code9 placed on the market a growth
of 10 percentage points of new IP Codes placed on the market
have parameters in line with the highest classes (A or B) of the
European rolling resistance labelling (which indirectly impacts
the energy efficiency of vehicles), 10 percentage points more
than in 2020 (70% the target for 2025). At the same time,
the percentage of new IP Code tyres produced globally with
values in line with the A or B European labelling values for wet
grip remained very high at 87% of the total. The average rolling
resistance of tyres produced by Pirelli worldwide decreased
by more than one percentage point with respect to 2020, with
a drop of 10.3% compared to 2015.
Significant efforts were made by Research & Development in
renewable and recycled innovative materials, which led Pirelli
fitting the Volvo Recharging Concept with a tyre containing
94% non-fossil materials (like silica from rice husks,
carbon black from recycling and bio-resin). Innovative and
sustainable materials for Pirelli include attention to people
and biodiversity, and it is with this conviction that last May
Pirelli presented the first tyre in the world with natural rubber
and rayon certified by Forest Stewardship Council (FSC),
destined for the BMW X5 Plug-In Hybrid. In 2021, Pirelli also
launched a multi-year project in partnership with the BMW
GROUP and the NGO BirdLife International to favour the
production of sustainable natural rubber in Indonesia through
a project that involves part of the rainforest of Hutan Harapan
(island of Sumatra). It aims to improve the quality of life of the
indigenous community and protect animals at risk.
in
investment
The heavy
innovation also fuels Pirelli’s
intellectual capital, as it has a portfolio of active patents
grouped into more than 685 families covering product,
process and materials innovations, as well as a globally
recognised brand.
These types of capital evolve thanks to the commitment,
6 EBIT reported excluding amortisation of intangible assets related to assets recognised as a result of
Business Combination, operating costs attributable to non-recurring, restructuring and one-off charges,
Covid 19 direct costs and charges related to the retention plan approved by the Board of Directors on 26
February 2018.
7 Figure obtained by weighing the value of sales of Eco & Safety Performance tyres on the total value of
sales of Group car tyres. Eco & Safety Performance products identify the car tyres that Pirelli produces
throughout the world and that fall under rolling resistance and wet grip classes A, B, C according to the
labelling parameters set by European legislation.
8 High Value products are determined by equal or greater than 18 inches and, in addition, include all
“Specialties” products (Run Flat, Self-Sealing, Noise Cancelling System).
9 Identification Product Code
50
Pirelli Annual Report 2021 competence and dedication of human capital, the heart
of the Company’s growth. Merit, ethics and the sharing of
strong values and clear policies, dialogue, attention to welfare
and diversity are accompanied by advanced instruments to
attract and retain the best talent. The number of management
positions held by women increased further in 2021 to 24.8%.
Investment in our ‘occupational health and safety culture’ is
paramount. The accident frequency index in 2021 stands at
2.0710, confirming the constant downward trend.
The main awards obtained in 2021 include:
→ in the motorsport and sustainability area, Pirelli was the only
tyre manufacturer in the world to receive three stars from
the Environmental Accreditation Programme promoted by
FIA, the International Automobile Federation, considered as
the maximum recognition for the commitment to reducing
the environmental impact in the context of FIA Motorsport.
→ confirmation of ESG Leadership position by the main
Sustainability Indices and Initiatives: Pirelli was awarded the
“S&P Global Gold Class” recognition in the Sustainability
Yearbook 2022, published by S&P Global based on
the results of the Dow Jones Sustainability Index 2021
assessments. The Company was reconfirmed among the
global leaders in the fight against climate change, being
placed on the CDP “Climate A list” and also obtaining the
maximum score of “A” in the CDP Supplier Engagement
Rating Leaderboard for the management of climate
issues along its supply chain. In conclusion, Pirelli was
reconfirmed, as the only company from the automotive
sector on the United Nations Global Compact Lead list,
which includes the companies identified as those most
committed to implementation of the Ten Principles of the
Global Compact of the United Nations.
The annual financial statements and the consolidated
financial statements have been prepared in accordance with
IAS/IFRS.
In the drawing up of the Annual Report 2020 the principles
of Integrated Reporting contained in the Framework of the
International Integrated Reporting Council (IIRC) have been
considered, the sustainability performance complies with the
GRI Standards, SASB Auto Parts Framework and with the
provisions of Legislative Decree no. 254 of 30 December
2016, following the process dictated by the principles of the
AA1000 APS (materiality, inclusivity and responsiveness). In
addition, this report includes the assessments required by
the European Taxonomy Regulation in its areas of application
(EU Regulation 2020/852 of 18 June 2020 and the related
Delegated Regulations (EU) 2021/2178 and (EU) 2021/2139.
ESEF REQUIREMENTS
(EUROPEAN SINGLE ELECTRONIC FORMAT)
This document has not been prepared pursuant to EU
Delegated Regulation 2019/815 (ESEF Regulation), which
was adopted in implementation of the Transparency Directive.
The document prepared pursuant to the ESEF Regulation
is available (only in Italian) on the website of the authorised
storage mechanism eMarket Storage (emarketstorage.com)
and on the Company’s website www.pirelli.com.
10 Accident Frequency Index based on 1,000,000 hours worked.
51
Presentation of 2021 Integrated Annual Report Directors’ Report
on Operations at
December 31, 2021
53
A Beautiful Place
Macroeconomic and market scenario
ECONOMIC OVERVIEW
For 2021, the global economy recorded GDP growth of +5.7%, having fully recovered from the decline recorded
during 2020 due to the pandemic, thanks to unprecedented monetary and fiscal support, to the gradual easing
of the restrictive measures imposed on mobility, to the progress of the global vaccination campaigns and to the
consequent rapid recovery in demand. Temporary supply constraints, linked to the speed of recovery and to
lockdowns, led to a significant increase in the costs of production factors and finished products, which was also
passed on to consumer prices during the second half-year of 2021.
In Europe, the success of the vaccination campaigns, particularly during the second and third quarters of 2021,
allowed for the gradual reopening of economic activity which contributed to GDP growth of +5.2% for 2021. This
trend slowed during the fourth quarter due to the spread of the Omicron variant, to the persistent supply-side
bottlenecks and to rising inflation (particularly energy).
GDP growth in the US (+5.7% for 2021) was bolstered by a combination of broad measures of support for the
economy, and by strong vaccination programme participation during the first part of the year, which eased
mobility restrictions and supported domestic demand. The trend for the fourth quarter improved significantly
(annualised GDP growth of +6.9%), particularly due to increased investment and exports, even though the
negative impacts of the Omicron variant, the persistent supply chain disruptions and higher inflation, led to more
moderate consumption levels.
ECONOMIC GROWTH, TREND CHANGES IN GDP
EU
US
China
Brazil
Russia
World
1Q 2021
2Q 2021
3Q 2021
4Q 2021
2021
2020
-1.1
0.5
18.3
1.3
-0.9
3.6
13.8
12.2
7.9
12.3
10.0
11.7
4.1
4.9
4.9
4.0
4.3
4.8
4.8
5.5
4.0
1.6
4.8
4.0
5.2
5.7
8.1
4.6
4.7
5.7
-6.0
-3.4
2.3
-3.9
-2.7
-3.4
Note:Change in year-on-year percentages. Final data, forecasts for Brazil, Russia and the World.
Source: National statistics offices and IHS Markit, February 2022.
In China, GDP growth of +8.1% for 2021 was characterised by a strong rebound at the beginning of the year
followed by the normalisation of activity, albeit with discontinuities due to COVID-19 outbreaks under to the
country’s “zero contagion” policy. During the second half-year, electricity shortages and a slowdown in the
housing market put a brake on economic activity, leaving the change in GDP for the fourth quarter at +4.0%
year-on-year.
In Brazil following the increase in external demand, which lent support to exports and economic activity during
the first part of 2021, recovery slowed due to uncertainty regarding the evolution of the pandemic, as well as
due to the impacts of the crisis in hydroelectric power generation, industrial production and rising inflation and
interest rates.
The Russian economy recovered quickly from the COVID-19 linked recession, with GDP returning to pre-crisis
levels as early as last summer. Preliminary estimates indicate that Russian GDP grew by +4.7% for 2021, thanks
to the return of foreign trade volumes to “pre-pandemic” levels and also to the recovery in energy prices.
EXCHANGE RATES
The euro/US dollar exchange rate averaged 1.18 in 2021, an appreciation of +3.5% compared to the previous
year. During the fourth quarter, however, expectations of a more restrictive monetary policy in the United States
compared to the Eurozone, favoured the US dollar, with the exchange rate averaging US$ 1.14 (-4.1% compared
to the same quarter in 2020).
54
Pirelli Annual Report 2021 The growth of the Chinese economy in 2021 was accompanied by the strengthening of the renminbi, which
averaged 6.45 against the US dollar, an appreciation of +6.9% compared to the average for 2020 (and by +3.3%
against the euro). This trend continued for the fourth quarter: the renminbi averaged 6.39 against the US dollar,
an appreciation of +3.5% compared to the same period of 2020 (+7.9% against the euro).
Rising inflation and political uncertainty weighed on the Brazilian real in 2021, which depreciated by -4.4%
against the US dollar and by -7.7% against the euro, (by -6.3% for the fourth quarter against the US dollar but was
stable against the euro).
Rising oil and natural gas prices, together with rising interest rates, sustained the gradual strengthening of the
rouble during the course of 2021, effectively limiting its year-on-year depreciation against both the US dollar
(-1.9%) and the euro (-5.3% against the euro).
KEY EXCHANGE RATES
1Q
2Q
3Q
41Q
FULL YEAR AVERAGE
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
US$ per euro
1.20
1.10
1.21
1.10
1.18
1.17
1.14
1.19
1.18
Chinese renminbi per US$
6.48
6.98
6.46
7.08
6.47
6.92
6.39
6.62
6.45
Brazilian real per US$
5.49
4.47
5.30
5.39
5.23
5.38
5.58
5.40
5.40
1.14
6.90
5.16
Russian rouble per US$
74.32
66.39
74.20
72.41
73.49
73.57
72.61
76.19
73.64
72.21
Note: Average exchange rates for the period. Source: National central banks.
RAW MATERIALS PRICES
Raw material prices rose steadily during 2021, following the generalised decline during 2020 due to the slowdown
in global demand in the early stages of the pandemic.
For 2021, the average price of Brent equalled US$ 70.8 per barrel, up by +64% from the average price for 2020.
This price increase during the second half-year of 2021 was also influenced by the shortage in natural gas in
Europe, and the closure of some coal-fired electric power plants in China which led to higher demand and prices
for gas and oil. Brent prices averaged US$ 79.8 per barrel during the fourth quarter of the year (+76% compared
to the same period in 2020).
For 2021, the trend for butadiene was similar to that of oil, with an average price that stood at euro 1,006 per
tonne, almost double compared to the average price recorded for 2020 (euro 1,192 per tonne for the fourth
quarter, +119% year-on-year).
The average price for natural rubber was US$ 1,678 per tonne for 2021, an increase of +27% compared to 2020.
Particularly during the fourth quarter of 2021, natural rubber prices returned to 2014 levels, reaching an average
of euro 1,729 per tonne (+12% compared to the fourth quarter of 2020).
RAW MATERIALS
PRICES
1Q
2Q
3Q
4Q
FULL YEAR AVERAGE
2021
2020
% var,
2021
2020
% var,
2021
2020
% var,
2021
2020
% var,
2021
2020
% var,
Brent (US$ / barrel)
61.1
50.9
20%
69.0
33.3
107%
73.2
43.4
69%
79.8
45.2
76%
70.8
43.2
64%
Butadiene (€ /
tonne)
Natural rubber
TSR20 (US$ /
tonne)
715
727
-2%
853
392
118%
1,265
382
231%
1,192
543
119%
1,006
511
97%
1,668
1,337
25%
1,653
1,107
49%
1,659
1,281
30%
1,729
1,545
12%
1,678
1,317
27%
Note: Data are averages for the period. Source: IHS Markit, Reuters
TRENDS IN CAR TYRE MARKETS
In 2021, the car tyre market grew by +7.7% globally; volumes still remain below pre-pandemic 2019 levels by
around 8%. Growth in the Parts channel (+9.7% vs. 2020) was supported by the recovery in mobility but the
market still remains below pre-COVID levels (-4.5% vs. 2019); the Original Equipment market (+2.1% vs. 2021,
-15.3% from pre-pandemic levels) is suffering from the impact of the semiconductor shortage on car production.
55
Directors’ Report on Operations There was a more marked recovery in demand for the Car ≥18” segment (+14.9% compared to 2020, +7.5% for
Original Equipment, +20.1% for the Replacement channel), which continued its growth to beyond pre-pandemic
levels (+5.4% growth in overall demand, -4.4% for Original Equipment and +12.9% for the Replacement channel
compared to 2019), also supported by an improved parc mix.
Market demand for the Car ≤17” segment (+6.1% compared to 2020) recovered from the lows of 2020, while still
remaining well below 2019 levels (-10.2% overall) in all regions.
TRENDS IN CAR TYRE MARKETS
% YEAR-ON-YEAR
1Q 2021
2Q 2021
3Q 2021
4Q 2021
2021
2021/2019
Total Car Tyre Market
Total
Original Equipment
Replacement
Market ≥ 18”
Total
Original Equipment
Replacement
Market ≤ 17”
Total
Original Equipment
Replacement
11.8
14.1
11.0
20.3
18.4
21.8
9.9
12.4
9.2
41.3
47.9
39.2
56.5
66.3
50.8
38.0
41.2
37.2
-5.1
-19.2
-0.1
-1.6
-15.0
7.9
-5.9
-21.0
-1.4
-5.3
-13.3
-2.1
0.7
-10.6
9.6
-6.7
-14.3
-4.1
7.7
2.1
9.7
14.9
7.5
20.1
6.1
-0.0
7.9
-7.5
-15.3
-4.5
5.4
-4.4
12.9
-10.2
-19.3
-7.2
Source: Pirelli estimates
Significant events of 2021
During January and February 2021, Pirelli repaid some debt maturities in advance, which had been scheduled
for 2021 and 2022 for a total of euro 838 million. In particular, a tranche of the “Schuldschein” loan was repaid,
with original maturity on July 31, 2021 for euro 82 million, plus a portion of the unsecured (“Facilities”) loan for
the amount of euro 756 million with original maturity in 2022. These repayments, for which part of the liquidity
raised in 2020 was used, made it possible to optimise the financial structure of the debt.
On February 25, 2021 Pirelli communicated the terms of the termination, effective February 28, 2021, of
the employment relationship with the General Manager and co-CEO Angelos Papadimitriou, which had been
announced to the market on January 20, 2021.
In accordance with the Pirelli Remuneration Policy, the Board of Directors granted to Mr Papadimitriou, in addition
to the amounts due by way of remuneration and other legal benefits accrued up to the date of his termination:
(i) 10 months’ of gross annual salary as a redundancy incentive, equal to the value of what would have been
the compensation in lieu of notice, based on conventional seniority recognised at the time of recruitment as an
executive; (ii) euro 100,000 gross by way of a general novative settlement, to be paid once the termination was
defined in accordance with the existing labour law procedures, as well as the maintenance until December 31,
2021 of certain non-monetary benefits granted at the time of recruitment as an executive. Mr Papadimitriou shall
remain bound for the two years following his termination of office as Director, to a non-compete agreement, valid
for the main countries in which Pirelli operates, in exchange for a consideration, for each applicable year, equal
to 100% of his gross annual salary, to be paid in eight deferred quarterly instalments starting from July 1, 2021.
The non-compete agreement includes a non-solicit clause as well as penalties in the event of any breach of the
obligations pursuant to the non-compete agreement. The termination of Angelos Papadimitrou’s appointment as
Director occurred on March 31, 2021.
56
Pirelli Annual Report 2021 On March 24, 2021 the Shareholders’ Meeting approved,
during an extraordinary session, the convertibility of the “EUR
500 million Senior Unsecured Guaranteed Equity-linked
Bonds due 2025” issued on December 22, 2020, as well as
approved a divisible capital increase, with the exclusion of
option rights, to service the conversion for a total counter-
value, including any share premium, of euro 500 million. On
the basis of the initial conversion ratio of the Bond Loan of
euro 6.235, this increase will correspond to the issue of a
maximum of 80,192,461 Pirelli & C. S.p.A. ordinary shares
(notwithstanding that the maximum number of Pirelli &
C. S.p.A. ordinary shares could increase depending on the
effective conversion ratio applicable from time to time).
Bondholders have the option as of May 6, 2021, based on the
Physical Settlement Notice issued by the Company on April
15, 2021, to exercise the right to convert the bonds into Pirelli
ordinary shares as provided for in the terms and conditions
of the bond.
On March 31, 2021, the Board of Directors approved the
2021-2022|2025 Industrial Plan, which had been presented
to the financial community on the same date, and also
approved the Financial Statements at December 31, 2020
which had closed with a consolidated net income of euro
42.7 million and a net income for the Parent Company of
euro 44 million. The Board of Directors resolved to propose
to the Shareholders’ Meeting convened for June 15, 2021, the
distribution of a dividend, also by way of withdrawing part of
the earnings accrued during previous financial years, of euro
0.08 per share for a total of euro 80 million.
On April 1, 2021, Pirelli announced that on March 31, 2021
it had received notification from ChemChina, informing
it that the latter had received notification regarding the
restructuring of ChemChina and the Sinochem Group Co., Ltd.
by the Assets Supervision and Administration Commission
of the State Council (“SASAC”), which foresaw for the
establishment of a new holding company by SASAC, which
will perform the duties of the transferor on behalf of the State
Council and the consolidation of Sinochem and ChemChina
into a new holding company. Following the completion of the
joint restructuring in September, ChemChina is now directly
controlled by Sinochem Holdings Corporation Ltd.
On May 19, 2021, Pirelli announced that it was the first
company in the world to produce a line of Forest Stewardship
Council (FSC) certified tyres, designed for the new BMW
X5 xDrive45e Plug-In Hybrid. The FSC Forest Stewardship
Certification ensures that natural rubber plantations are
managed in a way that preserves biological diversity and
benefits the lives of local communities and workers, while
at the same time ensuring economic sustainability. The
attainment of FSC Certification for natural rubber produced
from certified plantations, is just the latest milestone in Pirelli’s
long standing commitment to the sustainable management
of the natural rubber supply chain.
On June 15, 2021, the Company’s Shareholders’ Meeting
approved the Financial Statements for the 2020 financial
year, and resolved to distribute a dividend of euro 0.08 per
share, equal to a total dividend pay-out of euro 80 million
57
before withholding taxes. The dividend was placed in payment
on June 23, 2021 (with an ex-dividend date of June 21, 2021
and a record date of June 22, 2021). The Shareholders’
Meeting also confirmed the number of members of the Board
of Directors at fifteen, and - upon proposal of the Board of
Directors - appointed Giorgio Luca Bruno as new Director,
whose mandate will expire together with the other members
of the Board of Directors with the approval of the financial
statements at December 31, 2022. The Shareholders’
Meeting then appointed the Board of Statutory Auditors for
the 2021-2022-2023 financial years, which is made up of
Riccardo Foglia Taverna (Chairman), Alberto Villani, Teresa
Cristiana Naddeo, Antonella Carù (who maintains her position
as a member of the Supervisory Board) and Francesca
Meneghel as Statutory Auditors and Franca Brusco, Marco
Taglioretti and Maria Sardelli as Alternate Auditors. The
Shareholders’ Meeting also approved the remuneration
policy for 2021, and expressed its favourable opinion on
the Financial Report regarding remunerations paid during
the 2020 financial year, as well as approved the adoption
of the three-year 2021-2023 monetary incentive plan for
the management sector of the Group. Lastly, with reference
to the three-year 2020-2022 monetary
incentive plan
approved by the Shareholders’ Meeting of June 18, 2020, the
Shareholders’ Meeting approved the proposal to adjust the
Group’s cumulative Net Cash Flow target (before dividends),
and the possibility of normalising the potential effects on
the TSR (Total Shareholder Return) target for Goodyear’s
acquisition of Cooper (which took place at the beginning of
2021), which is included in the panel of reference for this
objective.
Also on June 15, 2021, the Pirelli Board of Directors, in
keeping with that which had been announced to the market,
appointed Giorgio Luca Bruno as Deputy-CEO, who was
granted powers for the operational management of Pirelli,
to be exercised in a vicarious capacity. The Board also
appointed Giorgio Luca Bruno as a member of the Strategies
Committee, confirming the number of its members at
eight. Consistent with that which was disclosed to the
market, Pirelli’s macroorganisational structure envisages
that DeputyCEO Giorgio Luca Bruno will report directly
to Executive Vice Chairman and CEO Marco Tronchetti
Provera, thus superseding the office of General Manager
and co-CEO, whose responsibilities had been entrusted ad
interim to the Executive Vice Chairman and CEO as of the
termination date of termination of the working relationship
with Mr Papadimitriou. The Executive Vice Chairman and
CEO is in charge of strategic and industrial direction and will
therefore continue to be responsible for: Strategic Planning
& Controlling, Investor Relations, Competitive, Business
Insight and Micromobility Solutions, Communication and
Brand Image, Institutional Affairs and Culture, Corporate
Affairs, Compliance, Audit and the Company Secretary. The
Deputy-CEO is attributed all the necessary executive levers,
in addition to the staff areas that do not report directly to
the Executive Vice Chairman and CEO. Reporting to the
Deputy-CEO is the General Manager of Operations, Andrea
Casaluci, to whom all business divisions and regions will
continue to report.
Directors’ Report on Operations The Board of Directors - following the unanimous opinion
of the Committee for Related Party Transactions, which
deliberated with the presence of all its members - also
unanimously approved the new Related Party Transactions
Procedure, which has been adapted to the new provisions on
related party transactions recently adopted by CONSOB.
On September 20, 2021 Pirelli was the only company in the
global Automobiles & Parts sector, confirmed by the United
Nations as a Global Compact LEAD. This year comprising
thirty seven companies, the Global Compact LEAD brings
together the world’s companies who are most committed to
implementing the Ten Principles of the United Nations Global
Compact.
On October 28, 2021 Pirelli announced the start of a three-
year project in the Hutan Harapan forest in Indonesia, in
collaboration with the BMW Group and BirdLife International,
which involves measures to support local communities, the
conservation of forests and the protection of endangered
animal species.
On November 11, 2021, the Board of Directors approved a
syndicated credit facility, to be finalised in the coming months,
for a total of euro 1.6 billion that will be used to refinance and/
or replace the bank credit facilities maturing in June 2022.
The operation allows for the optimisation of the debt profile
by extending maturity dates.
Also on the same date, the Board of Directors - subject to the
favourable opinion of the Board of Statutory Auditors and
the verification of the requirements set forth in the Articles
of Association - resolved to appoint Giorgio Luca Bruno,
effective November 11, 2021, as the Manager Responsible
for the Preparation of the Corporate Financial Documents,
replacing Francesco Tanzi who, as was announced to the
market, left the company on December 31, 2021.
Giorgio Luca Bruno holds 500 Pirelli shares.
On November 20, 2021 Pirelli announced that it was the
first and only tyre manufacturer in the world to have been
awarded the Three Star Certification of the Environmental
the
Accreditation Programme promoted by
International Automobile Federation. This is an award that
attests to the Company’s achievements in sustainability in
motorsport, achieved thanks to a supply chain that is fully
in accordance with environmental and social
managed
sustainability criteria.
the FIA,
On December 7, 2021 Pirelli was recognised as a global leader
in the fight against climate change, obtaining a place on the
2021 Climate A List drawn up by the CDP, the international
non-profit organisation that collects, disseminates and
promotes information on environmental issues. An “A” rating
is the highest that can be awarded and was only given to 200
companies out of 13,000 participants. This recognition by
the CDP is confirmation of Pirelli’s ongoing commitment to
environmental sustainability, whereby the Company has had
its CO2 emissions reduction target validated by the Science
Based Targets Initiative (SBTi) and has long since set a “carbon
neutrality” objective for 2030, which is also supported by the
target of sourcing 100% renewable electrical energy at global
level by 2025.
Group performance and results
In this document, in addition to the financial measures provided
for by the International Financial Reporting Standards (IFRS),
Alternative Performance Indicators derived from the IFRS
were used, in order to allow for a better assessment of the of
the Group’s operating and financial performance.
Reference should be made to the paragraph “Alternative
Performance Indicators” for a more analytical description of
these indicators.
* * *
Pirelli’s results for 2021 reflect the recovery in demand and
the implementation of the key programmes of the 2021-
2022|2025 Industrial Plan.
On the Commercial front:
→ strengthening of the High Value segment, with an
outperformance by Car ≥18” (+23% for Pirelli volumes
compared to +15% for the market); with even more
sustained growth for Car ≥19” (+28% for Pirelli volumes
compared to +24% for the market). Pirelli fully seized the
opportunities offered by the market recovery, by leveraging
a portfolio of products with a high technological content
which were further upgraded during the year and a
production and logistics structure capable of handling the
high volatility of demand;
→ increased exposure to the electric vehicle market, with
Original Equipment volumes at ~6x those of 2020;
→ consolidation of leadership in China in the high-end
products range:
→ both on the Original Equipment channel, thanks to
the strong exposure to Premium Car makers and
also to partnerships with the leading local Premium
manufacturers of electric vehicles;
→ and on the Replacement channel, where the recovery in
demand was intercepted through the distribution chain
and the strong development of online sales;
→ a recovery in sales for the Standard segment (+9% for Pirelli
Car ≤17” volumes compared to +6% for the market), with
the mix increasingly oriented towards higher rim diameter
products;
→ progressive price/mix improvement (+9.1% for 2021,
+16.3% in the fourth quarter of 2021 alone), which
reflected the price increases and the favourable
performance of the mix.
58
Pirelli Annual Report 2021 → volume growth (+15.7% at Group level, a target of
~+14%/~+15%) was especially supported by the High
Value segment (+20.2% compared to the target of
+17%/+18%), and sustained the recovery in demand in
the main geographical regions, and by the strengthening
of market share; Standard volumes were up by +11.2%
(a target of +11.5%/+12.5%);
→ an improved price/mix (+9.1%), which reflected the
above mentioned dynamics;
→ a negative impact, however, from the exchange rate
effect and hyperinflation in Argentina (-0.9%), affected
by the depreciation compared to 2020, of the US
dollar (-3.4%) and of the main currencies of emerging
countries against the euro (the Brazilian real at -7.7%
and Russian rouble at -5.3%), particularly concentrated
in the first half-year;
→ EBIT adjusted equalled euro 815.8 million (euro 501.2
million for 2020), with profitability at 15.3%, an improvement
compared to 11.6% for 2020. Internal levers (volumes, price/
mix, efficiencies) more than compensated for the negative
external scenario (raw materials, inflation, exchange rate
effect), making it possible to achieve results that exceeded
the Company’s expectations (the implicit objective of the
November net target had been euro 770/800 million);
→ net income/(loss) amounted to an income of euro 321.6
million (euro 42.7 million for 2020), and net income/
(loss) adjusted amounted to an income of euro 468.8
million, net of one-off, non-recurring and restructuring
expenses, COVID-19 direct costs and the amortisation of
the intangible assets included in the PPA;
→ the net financial position at December 31, 2021 showed
a debt of euro 2,907.1 million (euro 3,258.4 million at
December 31, 2020), with a solid cash generation before
dividends of euro 431.2 million (euro 248.8 million for
2020, euro 344.1 million for 2019), which was above the
target (euro 390/410 million). This trend was supported by
a markedly improved operating performance and by the
careful management of working capital.
→ a liquidity margin equal to euro 2,698.6 million.
On the Innovation front:
→ the homologation plan continued with the OEM partners,
with ~310 technical homologations in 2021, concentrated
mainly in the ≥19” range and Specialties;
→ the launch of six new product lines dedicated to the
Replacement channel to meet the different needs of
consumers.
For the Competitiveness Programme: Phase 2 of the
Efficiency Plan continued with gross benefits of euro 155
million (euro 70 million net of inflation) relative to:
→ product cost, with modularity and design-to-cost
programmes;
→ manufacturing, through the completion of the previously
announced optimisation of the industrial footprint and the
implementation of efficiency programmes;
→ SG&A, by leveraging, an optimised of the logistics and
warehouse network and the negotiation of purchases;
→ organisation, through the recourse to digital transformation.
For the Operations Programme:
→ the process of returning to optimum levels of plant
saturation continued, which at year-end were equal to
approximately 90%;
→ completed instead, were the restructuring programmes
in Italy, with the conversion of the Bollate factory from
Car Standard to cycling and in Brazil with the transfer of
motorbike production from Gravatai to Campinas, (which
allows for a more efficient supply for both the Latin American
market and the export channel) and the reorganisation
programme in Great Britain for the Burtonon-Trent factory,
which now focuses on semi-finished products.
For the Digitisation Program, efforts continued to transform
the Company’s key processes by 2023. This programme
will enable the real-time integration of the exchange of
information between the various corporate functions and its
partners/external customers through digital platforms, using
artificial intelligence models.
With regard to the Sustainability Programmes, reference
should be made to the Presentation of the Integrated Financial
Statements for 2021 and to the “Report on Responsible Value
Chain Management”.
Pirelli closed the 2021 financial year with results that
exceeded targets, which had been revised upwards twice
during the course of the year:
→ net sales amounted to euro 5,331.5 million, +23.9%
compared to 2020 (+24.8% growth net of the exchange
rate effect and hyperinflation in Argentina), with November
targets of euro ~5.1/~5.15 billion, thanks to a better than
expected commercial performance. In particular:
59
Directors’ Report on Operations The Group’s consolidated Financial Statements can be summarised as follows:
(in millions of euro)
2021
2020
Net sales
EBITDA adjusted (°)
% of net sales
EBITDA (°°)
% of net sales
EBIT adjusted
% of net sales
Adjustments: - amortisation of intangible assets included in PPA
- non-recurring, restructuring expenses and other
- COVID-19 direct costs
EBIT
% of net sales
Net income/(loss) from equity investments
Financial income/(expenses) (°°)
Net income/(loss) before taxes
Taxes
Tax rate %
Net income/(loss)
Eanings/(loss) per share (in euro per share)
Net income/(loss) adjusted
Net income/(loss) attributable to owners of the Parent Company
5,331.5
1,210.7
22.7%
1,085.7
20.4%
815.8
15.3%
(113.7)
(106.1)
(18.9)
577.1
10.8%
4.0
(144.3)
436.8
(115.2)
26.4%
321.6
0.30
468.8
302.8
4,302.1
892.6
20.7%
725.1
16.9%
501.2
11.6%
(114.6)
(107.7)
(59.8)
219.1
5.1%
(5.3)
(156.4)
57.4
(14.7)
25.6%
42.7
0.03
245.5
29.8
(°) The adjustments refer to one-off, non-recurring and restructuring expenses to the amount of euro 101.4 million (euro 99.3 million for 2020), to expenses relative to the retention plan approved
by the Board of Directors on February 26, 2018 to the amount of euro 4.7 million (euro 8.4 million for 2020), and to COVID-19 direct costs to the amount of euro 18.9 million (euro 59.8 million for
2020).
(°°) This item includes the impacts deriving from the application of the accounting standard IFRS 16 – Leases, on EBITDA to the amount of euro +103.0 million (euro +103.9 million for 2020), and
on financial expenses to the amount of euro -20.8 million (euro -22.3 million for 2020).
60
Pirelli Annual Report 2021
Fixed assets
Inventories
Trade receivables
Trade payables
Operating net working capital
% of net sales
Other receivables/other payables
Net working capital
% of net sales
Net invested capital
Equity
Provisions
Net financial (liquidity)/debt position
Equity attributable to owners of the Parent Company
Investments in intangible and owned tangible assets (CapEx)
Increases in right of use
Research and development expenses
% of net sales
Research and development expenses - High Value
% of High Value sales
Employees (headcount at end of period)
Industrial sites (number)
(in millions of euro)
12/31/2021
12/31/2020
8,912.4
1,092.2
659.2
(1,626.4)
125.0
2.3%
0.8
125.8
2.4%
9,038.2
5,042.6
1,088.5
2,907.1
4,908.1
345.6
122.4
240.4
4.5%
225.1
6.0%
30,690
18
8,857.1
836.4
597.7
(1,317.0)
117.1
2.7%
23.4
140.5
3.3%
8,997.6
4,551.9
1,187.3
3,258.4
4,447.4
140.0
68.5
194.6
4.5%
182.5
6.0%
30,510
19
61
Directors’ Report on Operations For a better understanding of the Group’s performance, the following quarterly performance figures are
provided below:
(in millions of euro)
Net sales
yoy
organic yoy *
EBITDA adjusted
% of net sales
EBITDA
% of net sales
EBIT adjusted
% of net sales
Adjustments: - amortisation of intangible assets
included in PPA
- non-recurring, restructuring
expenses and other
- COVID-19 direct costs
EBIT
% of net sales
1Q
2Q
3Q
4Q
TOTAL YEAR
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
1,244.7
1,051.6
1,320.1
764.8
1,414.5
1,277.4
1,352.2
1,208.3
5,331.5
4,302.1
18.4%
24.5%
72.6%
73.9%
10.7%
10.5%
11.9%
9.0%
23.9%
24.8%
266.5
244.2
307.4
23.7
320.1
309.4
316.7
315.3
1,210.7
892.6
21.4%
23.2%
23.3%
3.1%
22.6%
24.2%
23.4%
26.1%
22.7%
20.7%
223.5
220.2
278.5
(18.5)
304.8
276.8
278.9
246.6
1,085.7
725.1
18.0%
20.9%
21.1%
(2.4)%
21.5%
21.7%
20.6%
20.4%
20.4%
16.9%
168.8
141.1
208.6
(74.4)
221.4
213.7
217.0
220.8
815.8
501.2
13.6%
13.4%
15.8%
(9.7)%
15.7%
16.7%
16.0%
18.3%
15.3%
11.6%
(28.4)
(28.7)
(28.5)
(28.6)
(28.4)
(28.7)
(28.4)
(28.6)
(113.7)
(114.6)
(39.4)
(18.6)
(23.8)
(21.2)
(10.7)
(26.4)
(32.2)
(41.5)
(106.1)
(107.7)
(3.6)
97.4
(5.4)
(5.1)
(21.0)
(4.6)
(6.2)
(5.6)
(27.2)
(18.9)
(59.8)
88.4
151.2
(145.2)
177.7
152.4
150.8
123.5
577.1
219.1
7.8%
8.4%
11.5%
(19.0)%
12.6%
11.9%
11.2%
10.2%
10.8%
5.1%
Net income/(loss) from equity investments
(0.1)
(5.3)
2.1
0.7
(0.4)
(1.5)
2.4
0.8
4.0
(5.3)
Financial income/(expenses)
(40.0)
(32.5)
(31.8)
(40.6)
(35.1)
(40.2)
(37.4)
(43.1)
(144.3)
(156.4)
Net income/(loss) before taxes
57.3
50.6
121.5
(185.1)
142.2
110.7
115.8
81.2
436.8
57.4
Taxes
Tax rate %
(15.1)
(12.1)
(32.1)
44.9
(37.6)
(26.8)
(30.4)
(20.7)
(115.2)
(14.7)
26.4%
24.0%
26.4%
24.3%
26.4%
24.2%
26.3%
25.4%
26.4%
25.6%
Net income/(loss)
42.2
38.5
89.4
(140.2)
104.6
83.9
85.4
60.5
321.6
42.7
*before exchange rate effect and hyperinflation in Argentina.
Net sales totalled euro 5,331.5 million, a growth of +23.9% compared to 2020, or +24.8% excluding the combined
impact of the exchange rate effect and the adoption of hyperinflation accounting in Argentina (totalling -0.9%).
High Value sales accounted for 70.9% of total Group revenues (70.4% for 2020), consistent with the target
for the year.
The following table shows the market drivers for net sales performance:
Volume
of which:
- High Value
- Standard
Price/mix
Change on a like-for-like basis
Exchange rate effect /Hyperinflation accounting in Argentina
Total change
1Q
2Q
2021
3Q
4Q
Total year
22.2%
69.9%
(0.4%)
(7.3%)
15.7%
68.8%
72.9%
4.0%
73.9%
(1.3%)
72.6%
1.8%
(2.6%)
10.9%
10.5%
0.2%
10.7%
0.0%
(13.4%)
16.3%
9.0%
2.9%
11.9%
20.2%
11.2%
9.1%
24.8%
(0.9%)
23.9%
29.3%
15.4%
2.3%
24.5%
(6.1%)
18.4%
62
Pirelli Annual Report 2021 Pirelli volumes grew by +15.7% compared to 2020, with an increase in market share particularly for the High Value
segment: Pirelli recorded volume growth for the segment of +20.2%, with a +11.2% increase for the Standard segment.
Pirelli Car ≥18” volumes increased by +23%, compared with +15% for the market.
→ for the Original Equipment channel (Pirelli volumes at +21%, the market at +8%), growth was supported by
exposure to the Premium and Prestige segments, by the consolidation of the client base in North America and
APAC and by the growing demand for specific products for electric vehicles;
→ for the Replacement channel (Pirelli volumes at +25%, the market at +20%), the Company further strengthened
its market share in the main geographical regions, benefiting from the growth in High Value pull-through volumes
(Replacement demand for vehicles with Pirelli tyres as Original Equipment) and the launch of six new dedicated lines.
Pirelli Car ≥19” volumes rose sharply and recorded a growth of +28% against a market growth of +24%.
Pirelli Car ≤17” volumes recorded a more pronounced growth during 2021 (+9%) compared to the relevant
market (+6%), thanks to the strong recovery in demand in South America where the Company is a market leader.
Volume trends for the fourth quarter reflected the fall in global demand for Car tyres (-5%), mainly on the Original
Equipment channel (-13%), due to the shortage in semi-conductors. Demand on the Replacement channel (-2%),
was impacted by the volatility of macroeconomic scenario. Against this backdrop, Pirelli High Value volumes
remained unchanged from 2020, while the Standard segment declined by -13.4%.
For Car ≥18”, Pirelli confirmed its outperformance compared to the market (+4% for Pirelli volumes, +1% for
market volumes):
→ both for the Original Equipment channel (-5% for Pirelli volumes, -11% for market volumes) which was supported
by the greater penetration of Prestige and Premium OEMs and by new contracts in North America and APAC;
→ and the Replacement channel (+13% for Pirelli volumes, +10% for market volumes), particularly in North
America and APAC.
Within the Car ≤17” segment, the reduction in Pirelli volumes during the last quarter (-12%) was more marked than
that of the market (-7%), which was consistent with the Group’s strategy of reducing exposure to the segment.
The price/mix for 2021 rose sharply (+9.1%), which reflected:
→ the aforementioned price increases in an inflationary environment;
→ the improvement in the product mix, linked to the gradual migration from Standard to High Value and the
improvement in the mix in both segments (High Value and Standard).
Price/mix for the fourth quarter was at record levels (+16.3%), benefiting from the price increases and the
improvement of all mix components (product, channel and Region).
The negative exchange rate effect, which also took the application of hyperinflation accounting in Argentina into
account: -0.9% for 2021 (but +2.9% for the fourth quarter), was impacted by the appreciation of the euro against
the US dollar and the main emerging market currencies (particularly South America and Russia).
The performance for net sales according to geographical region was as follows:
2021
%
yoy
Organic Yoy*
(in millions of euro)
2020
%
Europe and Turkey
North America
APAC
South America
Russia, Nordics and MEAI
2,058.5
1,145.7
1,018.8
667.6
440.9
38.6%
21.5%
19.1%
12.5%
8.3%
Total
5,331.5
100.0%
* before exchange rate effect and hyperinflation in Argentina
17.2%
31.6%
17.6%
45.6%
25.6%
23.9%
17.6%
34.2%
16.0%
49.3%
26.7%
24.8%
40.8%
20.2%
20.1%
10.7%
8.2%
100.0%
63
Directors’ Report on Operations Net sales for the fourth quarter amounted to euro 1,352.2 million (euro 1,208.3 million for the same period in
2020), up by +11.9% year-on-year (an organic growth of +9.0%) and reflected the above trends.
EBITDA adjusted equalled euro 1,210.7 million (euro 892.6 million for 2020), with a margin of 22.7% (20.7% for
2020) and reflected the dynamics described in the following paragraph in terms of EBIT adjusted.
EBIT adjusted equalled euro 815.8 million (euro 501.2 million for 2020) with a margin of 15.3% (11.6% for 2020).
The contribution of internal levers (volumes, price/mix and efficiencies), more than offset the negativity of the
external scenario (raw materials, inflation and exchange rate effect). More specifically:
→ strong volume growth (euro +266.6 million);
→ price/mix (euro +282.7 million) which more than compensated the increase in the cost of raw materials
(euro -211.9 million including the relative exchange rate effect) and the negative impact of the exchange rate
effect (euro -11.5 million);
→ the positive effect of Phase 2 of the Competitiveness Plan which generated structural efficiencies which
amounted to euro 154.6 million, which more than compensated:
→ inflation (euro -85.0 million);
→ the reversal impact of COVID-19 Measures (euro -30.7 million equal to the balance between euro -79.7
million in higher discretionary costs relative to activities suspended during 2020 due to the pandemic and the
benefits derived from the increased utilisation of production plants which amounted to euro +49.0 million);
→ amortisation and depreciation (euro -11.0 million);
→ the increase in other costs (euro -39.2 million, mainly concentrated in the first quarter), being the balance between
higher R&D and marketing costs for the High Value segment (euro -32.0 million), increased accruals (euro -51.2
million) for the long and short-term management incentive plans (the latter cancelled in 2020) and the benefit
(euro +44.0 million) derived mainly from the rebuilding of inventories, consistent with the recovery in sales volumes.
For the fourth quarter of 2021, EBIT adjusted equalled euro 217.0 million, thanks to the contribution of the price/
mix, which offset the impact of raw materials by 1.4 times. The EBIT margin adjusted equalled 16.0% (18.3% for
the fourth quarter of 2020) and reflected:
→ the increased impact of inflation on the costs of production compared to the targets for the year (approximately
euro 10 million more), linked mainly to logistics and energy costs;
→ the reversal impact of COVID-19 Measures (the net balance amounted to euro -8.0 million for the quarter).
2020 EBIT Adjusted
- Internal levers:
Volumes
Price/mix
Amortisation and depreciation
COVID-19 cost cutting (reversal impact)
Slowdown (reversal impact)
Efficiencies
Other costs
- External levers:
Cost of production factors (commodities)
Cost of production factors (labour/energy/other)
Exchange rate effect
Total change
2021 EBIT Adjusted
1Q
2Q
3Q
4Q
TOTAL YEAR
141.1
(74.4)
213.7
220.8
501.2
(in millions of euro)
95.9
16.0
(4.0)
(25.0)
10.0
25.8
(58.1)
(11.1)
(10.8)
(11.0)
27.7
168.8
219.1
31.0
(2.0)
(29.4)
34.0
56.7
24.1
(27.6)
(21.2)
(1.7)
283.0
208.6
64
(5.5)
103.0
(2.0)
(16.3)
4.0
27.2
(4.0)
(75.0)
(18.6)
(5.1)
7.7
221.4
(42.9)
132.7
(3.0)
(9.0)
1.0
44.9
(1.2)
(98.2)
(34.4)
6.3
(3.8)
217.0
266.6
282.7
(11.0)
(79.7)
49.0
154.6
(39.2)
(211.9)
(85.0)
(11.5)
314.6
815.8
Pirelli Annual Report 2021 EBIT, which equalled euro 577.1 million (positive to the amount of euro 219.1 million for 2020), included:
→ the amortisation of the intangible assets identified during the PPA to the amount of euro 113.7 million
(substantially consistent with 2020);
→ non-recurring, restructuring expenses and other to the amount of euro 101.4 million (euro 99.3 million for
2020), mainly relative to structural rationalisation measures, in addition to the retention plan (approved by
the Board of Directors on February 26, 2018) to the amount of euro 4.7 million (euro 8.4 million for 2020);
→ emergency COVID-19 direct costs to the amount of euro 18.9 million (euro 59.8 million for 2020), mainly
relative to costs incurred for the purchase of protective personnel equipment.
Net income/(loss) from equity investments amounted to an income of euro 4.0 million, compared to the loss
of euro 5.3 million for 2020. Net income/(loss) from equity investments included dividends received in 2021
amounting to euro 2.3 million, plus the pro-rata result for the period for the Chinese joint venture Xushen Tyre
(Shanghai) Co., Ltd. and for the Indonesian joint venture PT Evoluzione Tyres, totalling a positive euro 1.0 million,
which was an improvement compared to the pro-rata result for the two joint ventures for 2020, which had
amounted to euro -5.9 million.
Net financial expenses for 2021 amounted to euro 144.3 million, compared to euro 156.4 million for 2020.
This decrease by euro 12.1 million, compared to the previous year, was mainly the result of higher expenses for
financial debt (euro +4.3 million) which was impacted by, amongst other factors, the effects of COVID-19 which
caused a temporary increase in the margin on the Group’s main bank credit facility. These higher expenses were
more than compensated by the benefits arising from financial management, mostly at local level (euro -16.4
million not related to debt).
At December 31, 2021, the cost of debt year-on-year (calculated over the last twelve months) equalled 2.38%
(1.94% at December 31, 2020), which reflected the aforementioned slight increase in financial expenses relative
to financial debt (euro +4.3 million), combined with the significant reduction in gross debt achieved during the
course of the year, thanks to cash generation and the repayment of financial debt during the first months of 2021,
to the amount of euro 838 million.
Taxes for 2021 amounted to euro -115.2 million against a net income before taxes of euro 436.8 million, with a
tax rate of 26.4%. For 2020, taxes had amounted to euro -14.7 million against a net income before taxes of euro
57.4 million (a tax rate of 25.6%).
Net income/(loss) amounted to an income of euro 321.6 million, compared to an income of euro 42.7 million
for 2020.
Net income/(loss) adjusted amounted to an income of euro 468.8 million, compared with an income of euro
245.5 million for 2020. The following table shows the calculations:
Net income/(loss)
Amortisation of intangible assets included in PPA
One-off, non-recurring and restructuring expenses
COVID-19 direct costs
Retention plan
Taxes
Net income/(loss) adjusted
(in millions of euro)
2021
2020
321.6
113.7
101.4
18.9
4.7
(91.5)
468.8
42.7
114.6
99.3
59.8
8.4
(79.3)
245.5
Net income/(loss) attributable to the owners of the Parent Company amounted to an income of euro 302.8
million, compared to the loss of euro 29.8 million for 2020.
Equity went from euro 4,551.9 million at December 31, 2020, to euro 5,042.6 million at December 31, 2021.
65
Directors’ Report on Operations Equity attributable to the owners of the Parent Company at December 31, 2021 equalled euro 4,908.1 million,
compared to euro 4,447.4 million at December 31, 2020.
The change is shown in the table below:
Equity at 12/31/2020
Translation differences
Net income/(loss)
Fair value adjustment of financial assets / derivative instruments
Actuarial gains/(losses) on employee benefits
Dividends approved
Effect of hyperinflation in Argentina
Other
Total changes
Equity at 12/31/2021
Group
Non-controlling interests
TOTAL
(in millions of euro)
4,447.4
114.6
302.8
27.5
61.0
(80.0)
33.6
1.2
460.7
4,908.1
104.5
11.3
18.8
-
-
-
-
(0.1)
30.0
134.5
4,551.9
125.9
321.6
27.5
61.0
(80.0)
33.6
1.1
490.7
5,042.6
The reconciliation between equity the Parent Company’s equity and the consolidated equity attributable to
the owners of the Parent Company is reported below:
Share Capital
Treasury reserves
"Net income/
(loss)"
TOTAL
(in millions of euro)
Equity of Pirelli & C. S.p.A. at 12/31/2021
1,904.4
2,692.1
Net income/(loss) of consolidated companies (before consolidation adjustments)
Share capital and reserves of consolidated companies
(before consolidation adjustments)
Consolidation adjustments:
- carrying amount of equity investments in consolidated companies
- intragroup dividends
- other
-
-
-
-
-
-
4,419.1
(4,633.8)
216.6
315.9
-
-
229.3
(229.3)
(5.8)
(0.4)
4,813.1
315.9
4,419.1
(4,633.8)
-
(6.2)
Consolidated equity of the Group at 12/31/2021
1,904.4
2,700.9
302.8
4,908.1
66
Pirelli Annual Report 2021 The net financial position showed a debt of euro 2,907.1 million, compared with a debt of euro 3,258.4 million
at December 31, 2020. It was composed as follows:
Current borrowings from banks and other financial institutions
- of which lease liabilities
Current derivative financial instruments (liabilities)
Non-current borrowings from banks and other financial institutions
- of which lease liabilities
Non-current derivative financial instruments (liabilities)
Total gross debt
Cash and cash equivalents
Other financial assets at fair value through Income Statement
Current financial receivables**
Current derivative financial instruments (assets)
Net financial debt*
Non-current derivative financial instruments (assets)
Non-current financial receivables**
Total net financial (liquidity) / debt position
(in millions of euro)
12/31/2021
12/31/2020
1,489.2
91.6
10.3
3,789.4
412.8
3.5
5,292.4
(1,884.7)
(113.9)
(81.8)
(38.8)
3,173.2
(4.6)
(261.5)
2,907.1
883.6
75.4
32.5
4,971.0
390.4
87.6
5,974.7
(2,275.5)
(58.9)
(102.6)
(13.4)
3,524.3
-
(265.9)
3,258.4
* Pursuant to CONSOB Notice of July 28, 2006 and in compliance with the ESMA guidelines regarding disclosure requirements pursuant to the Prospectus Regulation applicable from May 5, 2021.
** The item “financial receivables” is reported net of the relative provisions for impairment which amounted to euro 9.3 million at December 31, 2021 (euro 8.5 million at December 31, 2020).
The structure of gross debt which amounted to euro 5,292.4 million, was as follows:
12/31/2021
within 1 year
between 1 and 2
years
between 2 and
3 years
between 3 and
4 years
between 4 and
5 years
more than 5
years
Maturity date
(in millions of euro)
949.2
949.2
Use of unsecured financing
("Facilities")
Convertible bond
EMTN programme bond
Schuldschein
Pirelli & C. bank bilateral
borrowings
461.0
550.8
442.0
1,221.3
Sustainable credit facility
796.0
Other loans
367.7
358.8
Lease liabilities
504.4
91.6
-
-
-
99.9
-
-
-
550.8
422.1
124.8
-
5.7
71.8
-
-
-
-
996.6
-
3.2
62.5
-
461.0
-
19.9
-
796.0
-
54.9
Total gross debt
5,292.4
1,499.5
1,175.2
1,062.3
1,331.8
28.3%
22.2%
20.1%
25.2%
67
-
-
-
-
-
-
-
42.5
42.5
0.8%
-
-
-
-
-
-
-
181.1
181.1
3.4%
Directors’ Report on Operations At December 31, 2021 the Group had a liquidity margin equal to euro 2,698.6 million, composed of euro 700
million in the form of non-utilised committed credit facilities and euro 1,998.6 million in cash and cash equivalents,
including financial assets at fair value through the Income Statement to the amount of euro 113.9 million. The
liquidity margin of euro 2,698.6 million guarantees coverage for maturities for borrowings from banks and other
financial institutions, until February 2024. Considering also the Company’s optional right to extend the maturity
of the unsecured “Facilities” loan by a further two years (therefore until June 2024), this coverage would be
guaranteed until June 2024.
Net cash flow, in terms of change in the net financial position, was positive to the amount of euro 351.3 million
(euro 248.8 million for 2020) and included the payment of dividends amounting to euro -79.9 million (no
dividends were paid in 2020). Net cash flow for the year can be summarised as follows:
1 Q
2 Q
3 Q
4 Q
TOTAL
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
(in millions of euro)
EBIT adjusted
168.8
141.1
208.6
(74.4)
221.4
213.7
217.0
220.8
815.8
501.2
Amortisation and depreciation (excluding PPA
amortisation)
Investments in intangible and owned
tangible assets (CapEx)
97.7
103.1
98.8
98.1
98.7
95.7
99.7
94.5
394.9
391.4
(89.8)
(56.6)
(63.0)
(24.8)
(60.5)
(24.7)
(132.3)
(33.9)
(345.6)
(140.0)
Increases in right of use
(26.7)
(22.9)
(23.2)
(24.1)
(9.7)
(15.2)
(62.8)
(6.3)
(122.4)
(68.5)
Change in working capital and other
(717.2)
(861.2)
73.3
131.9
(61.7)
(173.0)
756.5
809.5
50.9
(92.8)
Operating net cash flow
(567.2)
(696.5)
294.5
106.7
188.2
96.5
878.1
1,084.6
793.6
591.3
Financial income / (expenses)
(40.0)
(32.5)
(31.8)
(40.6)
(35.1)
(40.2)
(37.4)
(43.1)
(144.3)
(156.4)
Taxes paid
(37.1)
(31.4)
(34.9)
(22.4)
(26.8)
(16.2)
(26.8)
(20.7)
(125.6)
(90.7)
Cash-out for non-recurring, restructuring expenses
and other
Differences from foreign currency
translation and other
Net cash flow before dividends,
extraordinary transactions and investments
EU electric cables market cartel sanction
(Acquisition) / Disposals of investments
Net cash flow before dividends paid by the Parent
Company and impact of convertible bond
(28.9)
(20.7)
(40.4)
(28.2)
(33.4)
(42.4)
(19.0)
(27.5)
(121.7)
(118.8)
15.9
27.6
(14.9)
(19.5)
11.4
14.5
13.0
(6.7)
25.4
15.9
(657.3)
(753.5)
172.5
(4.0)
104.3
12.2
807.9
986.6
427.4
241.3
-
3.8
-
-
-
-
-
-
-
-
-
-
-
-
(33.7)
-
(33.7)
-
3.8
-
(653.5)
(753.5)
172.5
(4.0)
104.3
12.2
807.9
952.9
431.2
207.6
Impact of convertible bond
-
-
-
-
-
-
-
41.2
-
41.2
Net cash flow before dividends paid
by the Parent Company
(653.5)
(753.5)
172.5
(4.0)
104.3
12.2
807.9
994.1
431.2
248.8
Dividends paid by the Parent Company
-
-
(79.3)
-
(0.5)
-
(0.1)
-
(79.9)
-
Net cash flow
(653.5)
(753.5)
93.2
(4.0)
103.8
12.2
807.8
994.1
351.3
248.8
Net cash flow before dividends paid by the Parent Company amounted to euro 431.2 million, a marked
improvement compared to euro 248.8 million for 2020 and to euro 344.1 million for 2019. This trend was mainly
supported by the improved operating net cash flow equal to euro 793.6 million (euro 591.3 million for 2020,
euro 807.5 million for 2019), which reflected:
→ EBIT adjusted which amounted to euro 815.8 million (compared to euro 501.2 million);
→ investments in tangible and intangible assets (CapEx) amounting to euro -345.6 million (euro -140 million
in 2020), aimed mainly at High Value activities and at the constant improvement of the mix and quality in
all factories;
68
Pirelli Annual Report 2021 → increases in the right of use by euro -122.4 million (euro
-68.5 million for 2020), mainly due to the signing/renewal
of medium-term lease contracts for some of the Group’s
strategic warehouses in the regions of Europe and North
America;
→ cash generation related to working capital/other of euro
50.9 million for 2021 (euro -92.8 million for 2020). This
improvement compared to 2020 was mainly due to the
careful management of working capital, with:
→ inventories accounted for a 20.5% share of net sales, a
slight increase compared to the figure for 2020 (19.4%)
and consistent with 2019. This increase was attributable
to an increase in raw materials (raw materials accounted
for 3.3% of sales in 2021, 2.5% in 2020 and 2.2% in
2019), with the aim of mitigating potential supply chain
risks in an extremely volatile macroeconomic context
characterised by uncertainties regarding international
transport. This increase was offset by the efficient
management of finished products, which accounted
or 15.7% of sales in 2021, which was stable compared
to 2020 (15.6%), but had decreased compared to 2019
(17.0%). The greater efficiency in the management of
finished product inventories was mainly attributable
to the structural measures put in place in terms of the
integration of information with customers, and to the
resulting higher visibility of demand trends, as well as
greater production flexibility;
→ significant cash generation for trade payables, which
benefitted from organic growth as a result of business
recovery, as well as the low level of investments carried
out in the last quarter of 2020. The ratio of trade
payables to net sales at December 31, 2021 was 30.6%,
consistent with the 2020 financial year at closing and
down from the 32.3% for 2019;
→ cash absorption for trade receivables was slightly higher
than for 2020, due to the recovery of business. Trade
receivables accounted for 12.4% of net sales which
was consistent with 2019 and a marked improvement
compared to 2020 (13.9%).
Net cash flow improved by euro 102.5 million compared
to the 2020 financial year and equalled euro 351.3 million
(euro 248.8 million for 2020) and included, in addition to that
described for operating cash flow, the following impacts:
→ financial expenses to the amount of euro -144.3 million
(euro -156.4 million for 2020);
→ taxes paid to the amount of euro -125.6 million (euro -90.7
million for 2020);
→ cash-out for non-recurring, restructuring expenses and
other to the amount of euro -121.7 million (euro -118.8
million for 2020);
→ differences from foreign currency translation and other
to the amount of euro +25.4 million (euro +15.9 million
for 2020);
→ dividends paid to the amount of euro -79.9 million (no
dividends were paid in 2020).
For the fourth quarter of 2021, net cash flow was positive
in the amount of euro 807.8 million (euro +994.1 million for
the fourth quarter of 2020), thanks to the usual seasonality of
working capital, consistent with the historical trend.
Research and
development activities
Pirelli Research and Development
- which counts
approximately 2,000 personnel, equal to approximately
7% of the Group’s human resources between the Milan
headquarters and its twelve technology centres located
all over the world - constitutes a central phase for the
development of new products, and allows a direct relationship
with markets with end users and with the R&D centres and
factories of the main vehicle manufacturers, which are
located in the same geographical regions. Pirelli’s Research
and Development model, implemented according to the
“Open Innovation” model, is complemented by a series of
collaborations with external partners - suppliers, universities
and the vehicle manufacturers themselves - in order to
anticipate technological innovations in the sector, direct
research and development activities and meet the needs of
the end user. During the course of 2021, collaboration began
with the Milan Polytechnic for the integrated use of their
dynamic simulator with the static simulator at the Pirelli R&D
centre in Milan for virtual tyre development activities. Pirelli’s
Eco & Safety approach aims to maximise its environmental
performance while maximising safety for people at the same
time, by embracing the entire life cycle of the product with a
view to a circular economy characterised by a reduction in
the environmental resources used, especially where these are
non-renewable. In this context, Eco & Safety Design is at the
heart of Pirelli’s innovation strategy.
Research and development expenses for the 2021
financial year totalled euro 240.4 million, (4.5% of net
sales), of which euro 225.1 million was destined for High
Value activities (6% of High Value revenues).
Pirelli also continued to develop its CYBER™ technologies
which, thanks to the sensors inside the tyre will contribute in
making essential information available for the improvement
of vehicle performance and driving safety. In 2021, for the
first time in the world, a vehicle (the McLaren Artura) was
fitted with sensorised tyres as Original equipment. The Pirelli
Cyber Tyre system consists of a sensor in each of the tyres
and software integrated into the car’s electronics.
INNOVATION IN PRODUCTS,
MATERIALS AND PRODUCTION PROCESSES
In order to develop new products specifically designed to
satisfy the needs and technical specifications of its customers,
Pirelli has established relationships with major Prestige and
69
Directors’ Report on Operations Premium vehicle manufacturers. At the IAA Mobility 2021
International Motor Show in Munich, almost 1 in 3 (29%)
of the electric cars on display, were fitted with Pirelli tyres.
Also on display for the first time were the world’s first Forest
Stewardship Council (FSC) certified tyres. Pirelli P ZERO
tyres containing FSC certified natural rubber and rayon were
fitted to the new BMW iX5 Hydrogen and BMW X5 xDrive45e
Plug-In Hybrid.
Pirelli is the absolute leader in the Prestige segment with a
market share that exceeds 50% for Original Equipment. Pirelli
is also the leading supplier to brands such as Aston Martin,
Bentley, Ferrari, Porsche, Maserati, McLaren and Pagani
Automobili. For example, in 2021, the P ZERO Corsa tyres
were developed specifically for the new Porsche Cayenne
Turbo GT as Original Equipment. Pirelli P ZERO Slick tyres
were instead chosen by Dallara to equip the exclusive Stradale
EXP, a version of the Stradale designed for track use, thanks
to an increase in power to 500 hp and a weight of just 890 kg.
In the Premium segment, on the other hand, the privileged
relationship with companies such as Alfa Romeo, Audi, BMW,
Mercedes, Jaguar, Land Rover and Ford continued.
In 2021, the P ZERO beat the leading manufacturers in the
Ultra High Performance segment for the second time in a
major comparative test organised by the British Evo Magazine,
which is one of the most arduous tests on the market for key
aspects such as handling, braking and acceleration in both dry
and wet conditions.
New product launches in 2021 include:
→ the new Cinturato All Season SF2, an all-season tyre that
ensures compliance with winter regulations at all times
and safe driving in all weather conditions, as revealed by
the tests carried out by the TÜV SÜD certification body -
which awarded this tyre the Performance Mark - and by
the comparison tests carried out by Dekra with the tyres
of the main competitors;
→ Pirelli Powergy, a summer tyre for the Replacement channel
aimed at modern crossovers, SUVs, sedans and MPVs,
created thanks to the latest simulation technologies fine-
tuned by Pirelli;
→ Cinturato Winter 2, a winter tyre for medium-sized cars and
CUVs that offers performance that is among the best on
the market, in all winter driving conditions, as confirmed by
tests conducted by the TÜV SÜD certification body, which
also awarded this tyre the Performance Mark. With the
Cinturato Winter 2, therefore, Pirelli wraps up the complete
renewal of the Cinturato family, following presentation
of the new Cinturato P7 summer tyre in 2020 and the
aforementioned Cinturato All Season SF2 in early 2021.
In the Motorcycle sector, the DIABLO ROSSO™ IV was
presented in February: the fourth generation of the DIABLO
ROSSO™ family of high-performance tyres, is designed for
supersport, naked and crossover motorbikes as well as for
road sports use. The technological features, which enable it
to achieve better grip levels, precise feedback and vehicle
control even in the wet, consist of a dual tread with a high
silica content for the front axle and a dual-compound or three-
compound tread with a Cap&Base pattern for the rear axle.
The innovative profiles, derived from experience in the FIM
Superbike World Championship, are characterised by a multi-
radius design that improves tyre handling.
For Cycling, Pirelli presented a new family of clincher tyres – the
P ZERO – which is divided into the P ZERO Race, the product
designed for pure performance and the P ZERO Road, the
alternative for those looking for a more durability oriented all-
round tyre, which replaces the P ZERO Velo, Pirelli’s first clincher
launched in June 2017. The objective of further improving grip,
smoothness and comfort has been achieved, using the same
tread pattern and compound as the Tubeless Ready version
of the same name. SmartEVO, the compound based on a
ternary blend of functionalised polymers, has been tested by
the top World Tour teams with whom Pirelli is a partner. The
construction of the casing, in 120 TPI Nylon, is innovative and
is characterised by a wider protection belt: the TechBelt Road,
comprising of an additional layer of Aramid fabric underneath
the compound, which increases puncture protection in varied
conditions of use. The P ZERO Road clincher was specifically
developed as a multi-purpose tyre. It differs from the Race tyre
in its tread pattern with narrower and longer grooves and with
its EVO Compound, which makes it a more versatile tyre with
a more durability-oriented performance. Pirelli then completed
its line of tyres dedicated to road cycling by introducing the
new P7 Sport clincher to the market, geared towards greater
robustness and durability than other tyres in the Pirelli road
range, in fact it features a 60 TPI Nylon casing with TechBELT.
The tread features the new PRO Compound, with a formulation
geared towards mileage and grip and a special tread design
that has many more sipes to reduce the warm-up phase of
the tyre compared to the P ZERO Race, which benefits grip,
even in colder conditions. Pirelli also launched SmarTUBE:
the new inner tube with technology derived from the tubulars
developed for the World Tour teams and now available for all
clincher tyre models, made of thermoplastic polyurethane
(TPU), a latest generation material chosen for its excellent
performance compared to traditional butyl. In fact, SmarTUBE
features a weight reduction of up to 70% compared to the
already light latex chambers. The lower mass of the wheel
results in better responsiveness from the bike, particularly
when climbing and accelerating. Lastly, Pirelli initiated the
development of a new line of tyres, specifically dedicated to
the world of gravity racing, with the involvement of Fabien Barel.
70
Pirelli Annual Report 2021 COMMITTENT TO MOTORSPORTS
in recognition of its commitment to sustainability in Motorsport.
Motorsport has always played a first order role in Pirelli’s
history. The Company has been involved in competitions for
115 years, starting with the feat achieved in 1907 by Prince
Scipione Borghese, who won the Paris-Beijing motor race
in an Itala fitted with Pirelli tyres. Today, Pirelli participates
in more than 350 competitions each year and 2022 will be
particularly important for technical innovations. These include
the introduction of 18 inch tyres in the FIA Formula 1 World
Championship, tyres made for hybrid cars in the FIA World Rally
Championship and a new range of products across several
classes for GT competitions.
Formula 1, which has seen the presence of Pirelli since the start
of the World Championship in 1950 and in the role of Global
Tyre Partner since 2011, which has been confirmed until 2024,
is preparing for a technological revolution. After more than
half a century, tyres will change size from 13 to 18 inches and
will play a key role together with the single-seaters developed
according to the new regulations, which will reintroduce the
ground effect. The 18 inch tyre is a completely new project
which has involved all elements of the tyre, from profiles to
structure to compounds, with a wider window of use. Its design
required more than 10,000 hours of indoor testing, more than
5,000 hours of simulation and more than 70 solutions which
were developed virtually to create the 30 specifications tested
by almost all the teams, across a total of more than 20,000
kilometres. The new 18 inch tyres are more similar to the tyres
used daily by drivers around the world and this will give Pirelli
the opportunity to transfer all the technologies derived from
Formula 1 to road products. Pirelli has also been present in
rally racing since the inaugural season of the World Rally
Championship in 1973 and in the role of sole tyre supplier from
2021 to 2024. The relentless technological evolution during
the 2022 season will be particularly marked by the introduction
of new hybrid engines for the WRC cars. Pirelli has evolved its
entire range of P ZERO, Scorpion and Sottozero tyres to cope
with the extra weight and increased power of the new WRC1s.
In Gran Turismo, a single family of tyres, the P ZERO DHF, has
been designed to cover the specific needs of all GT racing
classes (GT2, GT3 and GT4).
Even the mono-brand championships - Ferrari, Lamborghini
and McLaren - will also use the upgraded products and the
TRANS-AM series will switch from 16 inch to 18 inch tyres
in 2022. Pirelli is the first and only tyre manufacturer in the
world to have been awarded the Three Stars Certification of the
Environmental Accreditation Programme promoted by the FIA,
Pirelli has been confirmed by the Dorna WorldSBK Organization,
in agreement with the FIM, International Motorcycling
Federation, as the Official Tyre Supplier for all classes of
the MOTUL FIM Superbike World Championship, up to and
including the 2023 season. This technical partnership, which
began in 2004, can claim the record for the longest running
single-brand tyre in the history of international motorsport
and has been continually supported by intense research
and development, which has succeeded in increasing the
competitiveness of the championship year after year. Beginning
with the 2021 season, Pirelli will also be the sole tyre supplier
for the newly formed Yamaha R3 bLU cRU European Cup.
Since 2004, Pirelli has brought a total of more than 1 million
racing tyres to the Superbike circuits, with the development of
750 new solutions during the period of collaboration stipulated
in the contract. Pirelli has won 76 world titles in motocross,
winning the world titles in the MXGP and MX2 classes, where
together with its riders it has occupied the top nine positions
in the overall standings and has been chosen by the VR46
Riders Academy as its technical partner and tyre supplier for
multiple training activities with road motorbikes, motocross
and e-MTB bikes.
For 2021, in the field of cycling, with the reconfirmation of
its agreements with the top UCI teams, Trek-Segafredo and
Team BikeExchange, Pirelli has added a partnership with a
third World Tour team: AG2R Citroën. This partnership with
the teams is also and above all aimed at product evolution, a
constant exchange of feedback on the tyres and the continuous
improvement in their performance, thanks to the suggestions
of the athletes. In particular, at the Giro d’Italia 2021, the P
ZERO RACE Tub SL was introduced, which is a new tubular
product aimed almost exclusively at professional cycling and
which took almost two years to develop in collaboration with
professional cyclists.
In road tests carried out by the teams, the new tyre demonstrated
that it improved the handling of the bike as well as the speed of
ascent (VAM) offering excellent protection against punctures
and greater control at high speeds.
For further information on the sustainability aspects of products
- also for Motorsport - and on new materials, reference should
be made to the section of the Annual Report entitled “Report on
Responsible Value Chain Management”, which constitutes the
Company’s consolidated non-financial Declaration pursuant to
Legislative Decree No. 254/16.
71
Directors’ Report on Operations Parent company highlights
The table below shows a summary of the main Income Statement and Statement of Financial Position figures.
Operating income/(loss)
Financial income/(expenses)
Net income/(loss) from equity investments
Taxes
Net income/(loss)
Financial assets
Net Equity
Net Financial Position
(in millions of euro)
12/31/2021
12/31/2020
(19.6)
(46.0)
230.3
51.9
216.6
4,693.6
4,813.1
1,694.6
9.1
(36.4)
39.7
31.6
44.0
4,681.1
4,651.1
1,891.0
Operating income/(loss) of the Parent company amounted to loss of euro 19.6 million, compared to an income
of euro 9.1 million for 2020. This decrease was mainly due to the negative impact of the provisions for the short-
term incentive plan for Management, which was cancelled in 2020 due to the COVID-19 pandemic and for the
long-term management incentive plans, which reflects the improved performances on the underlying parameters
of the plans.
Net financial expenses amounted to euro 46 million, compared to euro 36.4 million for the previous financial
year. This worsening was mainly due to increased financial expenses for financial debt which was impacted,
by amongst other factors, the effects of COVID-19, which caused a temporary increase in the margin on the
Company’s main bank credit facilities.
Net income from equity investments amounted to euro 230.3 million compared to euro 39.7 million for the
previous financial year. This increase was essentially attributable to higher dividends distributed by the subsidiary
Pirelli Tyre S.p.A. (euro 220 million in 2021 compared to euro 50 million in 2020).
Taxes for 2021 were positive to the amount of euro 51.9 million, compared to the positive amount of euro 31.6
million for 2020. This increase was mainly attributable to the recognition of deferred tax assets on temporary
differences that were generated during the year.
72
Pirelli Annual Report 2021 The following is a summary of the values of the main financial assets:
Investments in subsidiaries
- Pirelli Tyre S.p.A.
- Pirelli Ltda
- Pirelli Uk Ltd.
- Pirelli Group Reinsurance Company S.A.
- Pirelli Servizi Amministrazione e Tesoreria S.p.A.
- Pirelli International Treasury S.p.A.
- Other companies
(in millions of euro)
12/31/2021
12/31/2020
4,528.2
4,528.2
8.4
7.9
6.3
3.2
75.0
3.4
9.7
7.9
6.3
3.2
75.0
3.4
Total equity investments in subsidiaries
4,632.4
4,633.7
Investments in associates and other financial assets
at fair value through Other Comprehensive Income
- Eurostazioni S.p.A. - Roma
- RCS MediaGroup S.p.A. - Milano
- Fin. Priv S.r.l.
- Fondo Comune di Investimento Immobiliare Anastasia
- Istituto Europeo di Oncologia S.r.l.
- Other
Total investments in associates and other financial assets
at fair value through Other Comprehensive Income
6.3
21.9
21.2
2.8
8.0
1.0
61.2
6.3
14.0
15.9
2.8
7.9
0.5
47.4
Total financial assets
4,693.6
4,681.1
Equity went from euro 4,651.1 million at December 31, 2020 to euro 4,813.1 million at December 31, 2021, as
detailed below:
Equity at 12/31/2020
Net income/(loss) for the financial year
Dividends approved
Other components of comprehensive income
Other movements
Equity at 12/31/2021
(in millions of euro)
4,651.1
216.6
(80.0)
25.3
0.1
4,813.1
73
Directors’ Report on Operations The table below shows the composition of equity:
Share capital
Legal reserve
Share premium reserve
Concentration reserve
Other reserves
IAS reserve
Retained earnings reserve
Merger reserve
Net income/(loss) for the financial year
Total Equity
(in millions of euro)
12/31/2021
12/31/2020
1,904.4
1,904.4
380.9
630.4
12.5
133.7
7.5
504.2
1,022.9
216.6
4,813.1
380.9
630.4
12.5
133.7
(17.7)
540.0
1,022.9
44.0
4,651.1
Risk factors and uncertainty
The uncertainty of the macroeconomic environment, the instability of the financial markets, the complexity of
management processes and continuous regulatory changes, demands the capacity to protect and maximise the
tangible and intangible sources of value which characterise the Company’s business model. Pirelli has adopted
a proactive risk governance model, which through the systematic identification, analysis and assessment of risk
areas, is able to provide the Board of Directors and Management, the instruments needed, to anticipate and
manage the effects of these risks. The Pirelli Risk Model systematically assesses three categories of risks:
1. External Risks
Risks whose occurrence is outside the sphere of influence of the company. This category includes risks related
to macroeconomic trends, to the evolution of demand, to competitor strategies, to technological innovation,
to the introduction of new regulations and to country specific risks (financial, security related, political and
environmental risks), as well as the impacts linked to climate change.
2. Strategic Risks
Risks that are characteristic of the relevant business, the proper management of which is a source of
competitive advantage, or otherwise, a cause of failure to achieve economic and financial objectives. This
category includes risks linked to markets, to product innovation and development, to human resources, to
production processes, to financial risks and risks connected to mergers and acquisitions.
3. Operational Risks
Risks generated by the organisation and by corporate processes, whose occurrence do not result in any
competitive advantage. These types of risks include amongst others, Information Technology, Business
Interruption, Legal & Compliance, Health, Safety & Environment and Security related risks.
Transversal to the aforesaid risks are Corporate Social Responsibility, Environmental and Business Ethics
Risks. These are risks associated with the non-compliance with local and international regulations, best practices
and corporate policies regarding the respect for human and labour rights, environmental and business ethics and
can be generated by the organisation either as part of the relative value chain, or as part of the supply chain.
74
Pirelli Annual Report 2021 EXTERNAL RISKS
RISK RELATED TO THE MACROECONOMIC OUTLOOK
After the strong rebound of the global economy following the
recession caused by the pandemic, Pirelli expects a more
moderate pace of growth during the course of 2022 - with
the gradual normalisation of rates to pre-COVID trend levels.
This slowdown will affect both mature and emerging markets
and will be due to the effects of the Omicron COVID-19
variant (at least for the first few quarters of the year), on
higher energy prices and, more generally, the continuation
of a higher and more persistent inflationary scenario than
expected. In addition to this global scenario, there are also
elements peculiar to individual economies, such as the
expected economic slowdown in the People’s Republic of
China, due to the normalisation of the real estate market,
together with the impact on private consumption caused by
the containment measures linked to their zero-COVID policy.
Further elements of uncertainty also persist in connection
with geopolitical tensions, especially with regard to the
current Russian-Ukrainian crisis, as well as the emergence of
new variants of COVID-19. Lastly, with regards to emerging
markets, the risk of financial instability remains significant in
those countries with a high level of public debt, also in light
of the impact of the current health crisis on public finances.
COUNTRY RISK
Where appropriate, Pirelli adopts a local-for-local strategy,
creating a productive presence in rapidly developing countries,
in order to respond to local demand with competitive industrial
and logistical costs. This strategy is aimed at increasing the
competitiveness of the Group, as well as to allow the Group
to overcome potential protectionist measures (customs
barriers or other measures such as technical prerequisites,
product certification and administrative costs related to
import procedures, etc.). In context of this strategy, Pirelli
operates in countries (Argentina, Brazil, Mexico and Russia)
where the general politico-economic situation and tax
regimes may prove unstable in the future. Uncertainty also
persists regarding the future relationship between China
and the United States and, more generally, regarding the
medium-long term balance of current international trade
agreements, which could lead to an alteration of the normal
market dynamics and, more generally, in business operating
conditions. The Group constantly monitors the evolution
of risks (political, economic/financial and security related)
relative to the countries in which it operates, in order to
continue to adopt timely (and
if possible pre-emptive)
measures to mitigate the potential impacts of any changes
arising at local level. Furthermore, in situations of under-
utilisation of the production capacity of some factories, the
reallocation of production between Group manufacturing
sites is possible.
RISKS RELATIVE TO THE RUSSIA-UKRAINE CRISIS
At the date of this document, the outcomes and implications
of the Russia-Ukraine crisis remain uncertain. The tightening
of international sanctions is also having repercussions on
the economy of the Russian Federation in terms of growth
expectations, the currency market and the sustainability of the
domestic economic and financial system in the medium-term.
75
factors are compounded by
These
the additional
complications arising from the restrictive countermeasures
that the Russian government is preparing - and in some cases
has already implemented - in response to the pressure of
international sanctions.
The current situation is also bringing about rising prices
for energy, metal and agricultural commodities, with
repercussions on consumer price pressure and growth
prospects for the Eurozone. These elements of uncertainty
could lead to an alteration of normal market dynamics and,
more generally, of business operating conditions.
The Group has set up a “Crisis Committee” to constantly
monitor developments
in the Russia-Ukraine crisis, for
which it has already activated mitigation measures and a
contingency plan.
BREXIT RISKS
The Group constantly monitors potentially critical issues
(and their relative mitigation plans) concerning the new trade
agreements between the UK and the EU, which officially came
into force on January 1, 2021. These risks are both of a mainly
operational nature (related to possible delays in the supply
of raw materials and/or finished products) in the short-term,
while elements of structural uncertainty also persist which
are difficult to estimate. To date, it has been difficult to define
what the political and commercial relations between the two
trading areas will be in the long-term and therefore what the
impact will be for the automotive and auto parts sector both
on the UK domestic market and in terms of exports to the
European Union.
RISKS ASSOCIATED WITH
THE SHORTAGE IN SEMI-CONDUCTORS
The COVID-19 pandemic has led to a radical change in
the way work is done, resulting in, among other things, a
significant increase in demand for products and technologies
that are heavily dependent on semi-conductors. Not only
does this further exacerbate an already growing trend in
global chip demand, but it also depressed supply due to
prolonged lockdowns and related reductions in production
The pandemic effect was further compounded by the
occurrence of a catastrophic event at the plant of one of
the largest chip manufacturers, further depressing available
supply. The automotive sector, which is closely dependent
on the availability of semi-conductors on the one hand
and to a just-in-time strategy on the other, turned out to
be particularly vulnerable to this shock, with significant
consequences on the volumes produced and, indirectly, on
the demand for tyres by Original Equipment customers. This
imbalance between supply and demand for semi-conductors
is considered an emerging risk in that it could continue during
the course of 2022, also because of new COVID-19 variants
and their relative impacts on production, thereby continuing
to negatively impact the automotive sector. The Group
constantly monitors the elements of uncertainty connected
with this emerging risk, in order to continue to adopt timely
measures to mitigate any possible impacts on demand.
Directors’ Report on Operations CORONAVIRUS RISK (COVID-19)
Pirelli sells its products on a world-wide basis in over 160
countries and owns manufacturing sites located in different
countries, some of which are also significantly affected by the
COVID-19 (SARS-CoV-2) outbreak. Although there is broad
consensus on the gradual improvement of the global health
situation in the short to medium-term, this hypothesis contains
elements of uncertainty, some of them significant, mainly
linked to the evolution of new variants of the Coronavirus
(Omicron, Delta). If these risks were to persist during the year,
they could lead to an alteration in the dynamics of the market
and, more generally, in business operating conditions.
In terms of operational risks, Pirelli monitors, amongst other
things, potential risk events relative to both supply chain
resilience and the extensive use of new technological devices
used for remote working.
Lastly, the Group is following developments in the spread of
the Coronavirus through constant contact with national and
international organisations. The Company adopts check and
prevention measures in respect of all employees worldwide.
RISKS ASSOCIATED WITH THE EVOLUTION
OF LONG-TERM DEMAND
Mobility is undergoing an unprecedented evolution due to
technological changes (electrification of propulsion, driving
automation and digital connectivity), cultural changes
(increase in the average age of obtaining a driving licence, loss
of importance of owning a car, etc.) and regulatory changes,
often aimed at limiting the presence of polluting vehicles in
and around metropolitan areas. In addition to all this, during
the course of 2020, there was the health emergency linked to
the spread of COVID-19, which led, amongst other things, to a
forced and unexpected reduction in mobility and to the wide-
spread adoption of digital technologies aimed at remotely
managing many activities that used to be carried out almost
exclusively in person. To date, it has not been easy to predict
the long-term trends of this phenomenon and therefore
the potential impacts on the tyre sector. On the one hand,
in fact, certain types of mobility - such as daily commuting
over limited distances - will be strongly impacted, while on
the other, a possible reduction in the use of public transport,
together with a move to peripheral areas - even distant from
the workplace - could lead to an increase in the miles driven.
Pirelli constantly monitors these trends, both by analysing
studies and data available at global and local level and by
participating in webinars and national and international
conferences on the subject. The Group is also active in
specific projects together with other major players in global
mobility, such as the Transforming Urban Mobility Initiative,
promoted by the World Business Council for Sustainable
Development (WBCSD), which has been active since 2019.
RISKS LINKED TO CLIMATE CHANGE
Having joined the Task Force on Climate-Related Financial
Disclosures (TCFD) in September 2018, Pirelli applies all
the recommendations made in June 2017 by the TCFD and
is committed, on a voluntary basis, to the dissemination of
transparent reporting and the disclosure of any relevant
information on climate change related risks and opportunities.
To this end, Pirelli monitors these elements of uncertainty
through sensitivity analyses and risk assessments, to
assess and quantify the financial
impacts (risks and
opportunities) relative to climate change, in relation to IPCC
(Intergovernmental Panel on Climate Change) climate
scenarios, to IEA (International Energy Agency) energy
transitions and to put in place appropriate prevention and
mitigation measures to protect its business. In accordance
with the findings of the most recent Climate Change Risk
Assessment of the Group, in the short to medium-term there
are no significant risks relative to production processes or
to the markets in which Pirelli operates. On the other hand,
as regards a medium-long term scenario, the tyre sector
could be subject to a number of risks both of a physical
nature (extreme weather events with potential impacts on
the continuity of production at the plant sites), as well as of a
regulatory nature (possible effects on operating costs).
In contrast, opportunities were identified for an increase in
the sales of Pirelli Eco & Safety Performance products, which
are tyres with a lower environmental impact throughout their
life cycle.
For the full description of the eleven TCFD recommendations,
reference should be made to the section “Joining the Task
Force on Climate-Related Financial Disclosures (TCFD)” in
this report and Pirelli’s public responses to the CDP Climate
Change 2021 questionnaire.
RISKS RELATED TO PRICE TRENDS
AND THE AVAILABILITY OF RAW MATERIALS
Natural rubber, synthetic rubber and oil related raw materials
(particularly chemicals and carbon black) will continue to
represent a factor of uncertainty within the Group’s cost
structure, given the strong volatility recorded in recent years
and their impact on the cost of the finished product. For the
main raw materials purchased by the Group, possible price
scenarios are constantly simulated in relation to historical
volatility and/or the best information available on the market
(e.g. forward prices). On the basis of the different scenarios,
sale price increases and/or the different internal cost efficiency
recovery measures, (use of alternative raw materials, reduction
of product weight, improvement of the process quality and
reduction in waste levels) which are necessary to guarantee
the expected profitability levels, are identified.
RISKS LINKED TO THE COMPETITIVE POSITIONING OF THE
GROUP AND TO THE COMPETITIVE DYNAMICS OF THE SECTOR
The market in which the Group operates is characterised
by the presence of numerous operators, some of which
industrial resources and
have significant financial and
brands that enjoy a significant level of international or local
renown. To date, Pirelli is the only player in the tyre industry
which focuses solely on the Consumer market on a global
scale, with its single brand positioned in the segment
which interests the manufacturers and users of Prestige
and Premium vehicles. The intensification of the level of
competition in the sector in which the Group operates could,
in the medium to long-term, have an impact on its Income
Statement, Statement of Financial Position and Financial
Statements. High barriers to entry - both technological and
productive - provide structurally mitigating factors against
76
Pirelli Annual Report 2021 the potential intensification of the competitive arena in the
Group’s key sector. Added to this is the uniqueness of the
Pirelli’s strategy which is based - amongst other things - on
an extensive homologation based parc, which is focused on
the Prestige and Premium segments and an ever increasing
capacity focused on the High Value segment.
STRATEGIC RISKS
EXCHANGE RATE RISK
The diverse geographic distribution of Pirelli’s manufacturing
and commercial activities entails exposure to exchange
rate risk, both transactional and translational. Transactional
exchange rate risk
is generated by transactions of a
commercial and financial nature carried out by individual
companies in currencies other than the functional currency,
due to fluctuations in exchange rates between the time when
the commercial/financial relationship originates and the time
when the transaction is settled (collection/payment).
The Group’s policy is to minimise the impact of transactional
exchange rate risk linked to volatility and for this reason
the Group’s procedures provide that the Operating Units
are responsible for collecting all the relevant information
pertaining to positions subject to transactional exchange
rate risk (mainly represented by receivables and payables
in foreign currency). Coverage is then provided in the form
of forward contracts which are entered into, where possible,
with the Group’s Treasury. The managed positions subject
to exchange rate risk are mainly represented by receivables
and payables in foreign currency. The Group Treasury is
responsible for hedging the resulting net position for each
currency and, in accordance with the established guidelines
and predetermined restrictions, it in turn closes out all risk
positions by negotiating hedging derivative contracts on the
market, typically forward contracts. Of note is that, as part
of the annual and three-year planning process, the Group
formulates exchange rate forecasts for these time horizons
based on the best information available on the market. Any
fluctuation in an exchange rate between the time of planning
and the time when a commercial or financial transaction
originates, results in a transactional exchange rate risk on
future transactions. From time to time the Group assesses
the opportunity to carry out hedging transactions on future
transactions, for which it typically uses both forward buy or
sell transactions and optional risk-reversal type instruments.
(e.g., zero cost collars). Pirelli owns controlling interests
in companies that prepare their Financial Statements in
currencies other than the euro which is the currency used
to prepare the consolidated Financial Statements. This
exposes the Group to translational exchange rate risk, due
to the conversion into euro of the assets and liabilities of
subsidiaries operating in currencies other than the euro.
The main exposures to translational exchange rate risk are
constantly monitored and at present it has been decided to
not adopt specific hedging policies for these exposures.
LIQUIDITY RISK
The main instruments used by the Group to manage the risk of
insufficient available financial resources to meet the financial
and commercial obligations within the terms and deadlines
established, are constituted by one-year and three-year
financial plans as well as treasury plans, in order to allow for
the complete and correct detection and measurement of cash
inflows and outflows. The differences between the plans and
the final data are subjected to constant analysis. The Group
has implemented a centralised system for the management
of collection and payment flows in compliance with the
various local currency and tax regulations. The negotiation
and management of banking relationships is carried out
centrally, in order to ensure hedging for short and medium-
term financial needs at the lowest possible cost. Even the
procurement of medium to long-term resources on the capital
market is optimised through centralised management. The
prudent management of the aforementioned risk requires the
maintenance of an adequate level of cash or cash equivalents
and/or highly liquid short-term securities and the availability of
funds obtainable through an adequate amount of committed
credit facilities and/or the recourse to the capital market.
In addition to the available portion of the committed credit
facility (Revolving Credit Facility) totalling euro 700 million,
which at December 31, 2021 resulted as being completely
unused, the Pirelli Group resorts to the capital market to
diversify both products and maturities in order to seize the
best opportunities available from time to time.
INTEREST RATE RISK
Interest rate risk is represented by the exposure to the
variability in the fair value or the future cash flows of financial
assets or liabilities due to changes in market interest rates.
The Group evaluates, based on market conditions, whether
to enter into derivative contracts, typically interest rate swaps
and cross currency interest rate swaps.
PRICE RISK ASSOCIATED WITH FINANCIAL ASSETS
The Group’s exposure to price risk is limited to the volatility
of financial assets, such as listed and unlisted equities and
bonds, which represent 1.2% of the Group’s total assets.
Derivatives are not normally placed on these assets to limit
their volatility.
CREDIT RISK
Credit risk represents the Group’s exposure to potential
losses resulting from the non-fulfilment of the commercial
and financial obligations undertaken by counterparties. As
regards these commercial counterparties, in order to limit
this risk, Pirelli has put in place procedures to assess the
potential and financial creditworthiness of customers, to
monitor expected cash flows and to take any recovery action.
The aim of these procedures is to define customer credit
limits, whereby in the event that those limits are exceeded, the
rule to withhold further supplies is activated. In some cases
customers are asked to provide guarantees, mainly bank
guarantees issued by parties of the highest credit or personal
standing. Less frequently, mortgage guarantees may be
requested. Other instruments used for commercial credit risk
management is the taking out of insurance policies. A master
agreement has been in place, which was recently renewed
for the 2021-2022 two-year period, with a leading insurance
company for worldwide coverage of credit risk mainly related
to sales on the Replacement channel (the coverage ratio as
77
Directors’ Report on Operations of December 31, 2021 was equal to 72% (for the Group).
However, as regards the financial counterparties for the
management of its temporary cash surpluses, or for trading
in derivative instruments, the Group deals only with entities
of the highest credit standing. Pirelli does not hold public
debt instruments from any European country, and constantly
monitors its net credit exposure to the banking system and,
does not have any significant concentrations of credit risk.
there have not been any significant cases and such events
are however covered from an insurance point of view, any
occurrence could have a negative impact on the reputation
of the Pirelli brand. For this reason, tyres produced by Pirelli
are subjected to careful quality analysis before being placed
on the market and the entire production process is subjected
to specific quality assurance procedures, with constantly
upgraded safety and performance requirements.
RISKS ASSOCIATED WITH HUMAN RESOURCES
The Group is exposed to the risk of loss of human resources
in key positions or in possession of critical know how. To
address this risk, the Group adopts remuneration policies that
are periodically updated, also due to changes in the general
macroeconomic scenario, as well as on the basis of salary
benchmarks. Also planned are long-term incentive plans
and specific non-compete agreements (which also have a
retention effect), designed amongst other things, to fit the
risk profiles of the activities of the business. Lastly, specific
management policies have been adopted to motivate and
retain talent.
OPERATIONAL RISKS
RISKS RELATED TO ENVIRONMENTAL ISSUES
The activities and products of the Pirelli Group are subject
to numerous environmental laws that vary between the
countries in which the Group operates. These regulations
have in common their tendency to evolve in an ever more
restrictive manner, also due to the growing concern in the
international community over
issues of environmental
sustainability. Pirelli expects the gradual introduction of ever
stricter laws in relation to the various environmental aspects
on which companies may impact (atmospheric emissions,
waste generation, impacts on soil and water use, etc.), by
virtue of which the Group expects to have to continue to
make investments and/or incur costs that may be significant.
EMPLOYEE HEALTH AND SAFETY RISKS
In carrying out its activities, the Pirelli Group incurs
charges and costs for the measures necessary to ensure
full compliance with the obligations provided for by
the regulations on health and safety in the workplace.
Particularly in Italy the law relating to health and safety at work
(Legislative Decree No. 81/08) and subsequent amendments
(Legislative Decree No. 106/09) have
introduced new
obligations which have
impacted the management of
activities at Pirelli sites and the processes for allocating
liabilities. Failure to comply with the regulations in force entails
penal and/or civil sanctions against those responsible and,
in some cases of violation of health and safety regulations,
against companies, in accordance with the European model
of objective corporate responsibility that has also been
implemented in Italy (Legislative Decree No. 231/01).
DEFECTIVE PRODUCT RISK
Like all manufacturers of goods for sale to the public, Pirelli
could be subject to liability actions related to the alleged
defectiveness of materials sold, or may be required to
initiate product recall campaigns. Although in recent years
LITIGATION RISKS
In carrying out its activities, Pirelli may become involved
in legal, fiscal, commercial, trade or labour law disputes.
The Group adopts the necessary measures to prevent
and mitigate any consequences that may result from such
proceedings.
PERSONAL DATA PROCESSING RISKS
In the normal course of Pirelli’s business activities, personal
data on employees, customers (B2C and B2B) and suppliers
are processed. The treatment of personal data collected by
the Group companies is subject to the laws and regulations
applicable in the countries in which these companies operate
or are present. The Group has therefore put in place measures
to achieve full compliance with all applicable data protection
regulations (while maintaining as the reference legislative
framework, that which was
introduced by Regulation
(EU) 2016/679, the so-called “General Data Protection
Regulation” or “GDPR”, which came into force in May 2018),
thus mitigating the risk of proceedings before the regulatory
authorities and/or privacy litigation. Nevertheless, changes
to applicable legislation, the launch of new products onto
the market and, in general, any new initiatives involving the
treatment of personal data (or substantial modifications to
existing personal data processing operations), could involve
the need to incur significant costs, or require the Group to
revise its modus operandi with regard to compliance activities
in this area.
RISKS RELATED TO INFORMATION SYSTEMS AND NETWORK
INFRASTRUCTURE
The supporting role of ICT (Information and Communication
in supporting business processes,
Technology) systems
their evolution and development and the Group’s operating
activities was also confirmed during the course of 2021, as
being fundamental to the achievement of results. Work was
carried out in continuity with 2020 for the prevention and
mitigation of risks related to possible malfunctions of the
systems, through high reliability solutions and the protection
of the Company’s information assets by upgrading the security
systems against unauthorised access and the Company’s
data management solutions. On the other hand, some of the
processes for managing incidents were improved in order to
minimise the impact in terms of service unavailability. These
measures continued in order to bring the Server and Client
environments into compliance, through the constant and
progressive upgrading of the operating systems, in order to
reduce their vulnerabilities. Particular attention has been paid
to the renewal of infrastructural components characterised
by technological obsolescence, which could lead to an
increased risk of breakdowns and accidents, with an impact
on business activities.
78
Pirelli Annual Report 2021 The extensive practise of remote working in 2020 and 2021,
with its probable impacts also in the short to medium-term,
considering both the possible continuation of the pandemic
scenario and in light of changing work habits, entails for
the Company, an emerging exacerbation of cyber security
risk and risks connected to the capacity and resilience of
technological systems.
The Company has put in place risk mitigation measures for
both of these emerging risks, and closely monitors their
evolution. With regard to the emerging exacerbation of Cyber
Security risk during 2021:
→ consistent with the three-year Strategic Roadmap resulting
from the NIST Assessment, initiatives were implemented
aimed at increasing the Group’s cyber security posture.
Some examples: a new structure was defined and the
number of staff in the Cyber Security HQ function was
increased, the protection of Pirelli devices against the most
advanced threats was improved, and periodic committees
were set up with top management to share risks and
initiatives on the subject. A specific Operational Technology
Assessment was initiated to update the technical and
organisational security measures at the industrial sites;
→ periodic cyber security awareness and cyber readiness
initiatives were carried out, to provide users with training
and updates on the main cyber security risks, with particular
reference to emerging risk dimensions, including those
related to the extensive use of remote working and to
ransomware, through the provision of:
→ ad-hoc training sessions, designed both according
to the type of recipients and the specific risks to be
addressed (e.g. new joiners);
→ awareness sessions (Cyber Security Pills) on a bi-
weekly basis, through the publication of content on the
intranet and courses on the corporate training portal
(e.g. phishing, social engineering, ransomware, secure
browsing);
→ monthly sessions of phishing simulations (white phishing
campaigns) aimed at “preparing” users to recognise and
manage malicious e-mails.
→ Cyber Security Defence Center – CSDC:
In order to cope with the ever-increasing and changing
cyber security risk scenario, in 2021 activities were
further intensified to evolve the systems for monitoring
and managing security events and incidents. The Cyber
Security Defence Centre structure was set up in Italy, the
fulcrum of the Group’s defensive management which,
in real time, manages and implements the protective
measures necessary to ensure the security of Company
assets, by integrating Threat Intelligence services in order
to identify potential threats or security risks in advance
and to appropriately manage potential incidents or related
attacks.
Lastly, with regard to the emerging exacerbation of
technological risks linked to the extensive practice of
working remotely, the Digital Department took many
measures in 2021 aimed at supporting business activities,
by minimising the impact on users and ensuring their
security. Among the main actions was the strengthening
of the network to allow the increase in remote connections
(VPN); refresher courses were provided, with sessions in
Italian and English in collaboration with Learning Lab, on
the new Office365 technologies (Teams and OneDrive),
to increase the conscious use of online technologies;
investments were made for the modernisation of meeting
rooms to facilitate hybrid working methods; Softphones
were configured on PCs to remotely access telephone
extensions, even for Smart Working; and the Anti-Virus
system on all employees’ PCs was updated to minimise
Cyber Security risks.
Many activities were carried out in 2021 that directly or
indirectly led to the mitigation of security risks, specifically:
→ The “TIM Data Centre Closure” project was completed.
With this project the old Pirelli Data Centres hosted in the
TIM Data Centres in Cesano and Bologna were closed,
with the migration of the workloads partly to the Cloud
and partly to SuperNap’s Tier 4 Gold Data Centre, which
offers best-in-class service levels and security.
The migration of some of the workloads to the Cloud and
especially the migration of all central Disaster Recovery
solutions to the Cloud, has brought about cost efficiencies
and improvements in performance and service availability,
both under normal conditions and in the event of a disaster.
→ “Software Defined Data Centre” Project
The “Software Defined Data Centre” project continued,
with the objective of transforming traditional factory
data centres
into modern data centres based on
hyperconverged and software defined architectures,
increasing the flexibility and speed as required in the
development and deployment of business critical services
and applications. This transformation, which affected the
Kirov, Carlisle and Campinas plants last year, will affect all
Pirelli plants over the next two years.
→ Software Defined WAN Project
The SD WAN project ended in January 2021, activating
all 55 remote sites within its scope. With this Pirelli has
achieved:
→ greater total WAN bandwidth than before;
→ the elimination of the concept of backup; both lines
which connect to the remote site are active;
→ the optimised usage of links through the automatic
selection of the most appropriate link at that moment
on an application-by-application basis;
→ direct internet access enabled on each remote site;
→ improved network operations services through
automation and Zero Touch Provisioning;
→ a changed operations model from reactive to proactive,
which has improved traffic visibility;
→ an improved user experience across O365 applications
with more resilient and performant connectivity.
→ Operational support and Cyber Security services were
provided for Prometeon in accordance with contractual
provisions.
79
Directors’ Report on Operations BUSINESS INTERRUPTION RISKS
The territorial fragmentation of operating activities and
their interconnection exposes the Group to risk scenarios
that could lead to the interruption of its business activities
for periods which could be more or less prolonged, with
the consequent impact on the operational capabilities and
results of the Group itself. Risk scenarios related to natural
or accidental events (fires, floods, earthquakes, etc.), to
wilful misconduct (vandalism, sabotage, etc.), to breakdowns
in the auxiliary plants or to interruptions in the supply of
utilities, can in fact cause significant property damage and
the reduction and/or interruption of production, particularly
if the event concerns high volume or specific product (high-
end) production sites. Pirelli monitors their vulnerability to
catastrophic natural events (in particular flood, hurricane
and earthquake) and estimates any potential damage (based
on the given probability of occurrence) for all the Group’s
production sites. Analyses confirm an adequate monitoring
of business interruption risks, thanks to a complex series of
security measures, of systems for the prevention of harmful
events and for the mitigation of potential impacts on the
business, also in light of the current business continuity
plans, as well as the insurance policies in place to cover
property damage and any business interruptions which
the Group’s production sites might suffer, (the Group’s
insurance coverage may however not be sufficient in
compensating all potential losses and liabilities in case of
catastrophic events). Even Pirelli’s supply chain is regularly
assessed for potential business interruption risks.
RISKS RELATIVE TO THE FINANCIAL REPORTING PROCESS
Pirelli has also implemented a specific and articulated risk
management and internal control system, supported by a
dedicated Information Technology application, in relation
to the process of preparing the half-year, annual and
consolidated Financial Statements, in order to safeguard the
Company’s assets, its compliance with laws and regulations,
the efficiency and effectiveness of corporate operations, as
well as the reliability, accuracy and timeliness of its financial
reporting. In particular, the process of preparing financial
documentation
is carried out through the appropriate
administrative and accounting procedures, developed in
accordance with the criteria established by the Internal
Control - Integrated Framework issued by the Committee of
Sponsoring Organisations of the Tradeway Commission. The
administrative/accounting procedures for the production
of the Financial Statements and all other financial reports
fall under the responsibility of the Manager responsible for
the preparation of the corporate financial documents, who
verifies their adequacy and effective implementation on a
half-yearly basis. In order to allow for the attestation by the
Manager responsible for the preparation of the corporate
financial documents, a mapping has been carried out of
the companies and the relevant processes that feed and
generate information of an economic or financial nature.
The identification of the companies that belong to the
Group and the relevant processes, is carried out annually on
the basis of quantitative and qualitative criteria. Quantitative
identifying those Group companies
criteria consist of
which, in relation to the selected processes, represent an
aggregate value above a certain materiality threshold. The
qualitative criteria consist of examining those processes
and companies which, according to the assessment of the
Manager responsible for the preparation of the corporate
financial documents, may present potential areas of
risk, even though they do not fall within the quantitative
parameters described above. For each selected process,
the risk/control objectives associated with the preparation
of the Financial Statements and any related disclosures,
as well as with the effectiveness/efficiency of the internal
control system in general, have been identified. For each
control objective, punctual verification measures have been
provided for and specific responsibilities have been assigned.
A system of supervision of the checks carried out by means
of a chain attestation system has been implemented. Any
criticalities emerging from the evaluation process are the
subject of action plans whose implementation is verified at
subsequent closures. There is even the half-yearly issue of
a declaration by the Chief Executive Officer and the Chief
Financial Officer of each subsidiary on the reliability and
accuracy of the data supplied for the purposes of preparing
the Group’s consolidated Financial Statements. In the lead
up to the dates of the Board of Directors’ Meetings which
approve the consolidated data at June 30 and December
31, the results of the verification procedures are discussed
with the Manager responsible for the preparation of
the corporate financial documents. The Internal Audit
Department performs periodic audits aimed at verifying
the adequacy of the design and operability of the checks
carried out on sample companies and processes, selected
on the basis of the materiality criteria.
SOCIO-ENVIRONMENTAL RESPONSIBILITY RISKS
RISKS RELATIVE TO SOCIAL AND ENVIRONMENTAL
RESPONSIBILITY AND BUSINESS ETHICS
Risk governance at Pirelli is enterprise-wide and includes
the identification, analysis and monitoring of environmental,
social, economic/financial and business ethics risks that
are directly or indirectly attributable to the Company,
through Pirelli affiliates or in dealings with them, such as
those related to the sustainability of the supply chain. Prior
to investing in a specific market, ad-hoc assessments are
conducted on possible political, financial, environmental
and social risks, including those related to the respect
of human rights and labour laws. Alongside the ongoing
monitoring of the application of Pirelli’s internal regulations
regarding financial, social (particularly regarding human
and workplace rights), environmental and business ethics
on Group sites, which occurs through the periodic audits
performed by the Internal Audit Department, Pirelli has
adopted an ESG (Environmental and Social Governance)
risk mitigation strategy, also with regard to its own supply
chain which is periodically audited by specialised third party
companies. In both cases, if non-compliance is detected,
a remedial plan is provided for, whose implementation is
regularly monitored by the auditor. For further information
80
Pirelli Annual Report 2021 on the model used for managing sustainability risks along the supply chain, see the paragraph “Our Suppliers”.
For the governance aspects of human rights issues, see the paragraph “Respecting Human Rights”. For the
management of internal risk within the affiliates, see the section “Compliance with Legislative-Contractual
Requirements on Overtime, Rest, Association and Bargaining, Equal Opportunities and Non-Discrimination,
Prohibition of Child and Compulsory Labour” of the consolidated non-financial Declaration.
Outlook for 2022
Revenues
Ebit margin adjusted
Investments (CapEx)
% of net sales
Net cash flow
before dividends
Net financial position
NFP/Ebitda Adj.
ROIC
post taxes
(in billions of euro)
2021
2022E
5.33
15.3%
0.35
~6.5%
~0.43
-2.9
2.4x
17.6%
~5.6 ÷ ~5.7
~16% ÷ ~16.5%
~0.39
~7%
~0.45 ÷ ~0.48
~-2.6
≤2x
≥19%
MARKET OUTLOOK FOR 2022
Pirelli expects that 2022 will be characterised by sustained economic growth, albeit in a scenario that presents
elements of volatility linked to the progression of the COVID-19 pandemic, to inflationary pressures and to the
possible consequent monetary tightening, as well as the escalation of geopolitical tensions. Specifically, Pirelli
expects global GDP to grow by +4.4% and inflation of 4.1% (particularly accentuated in North America and
Europe), due to the increase in the costs of raw materials, energy and labour and in logistics costs.
For the automotive sector, global production for 2022 is expected to grow by +8.6% compared to 2021, with
even stronger growth for the Premium and Prestige segments (+10.5%) and other SUVs (+11.1%). Growth - even
more than forecast in the Industrial Plan - of the electric car segment share of total production (+7% vs. the Plan
estimate of +6%), especially for the Premium and Prestige segments (+16% vs. the Plan estimate +12%).
Given this scenario, global demand for car tyres is expected to grow by approximately +3%, with the High Value
segment once again proving to be the most dynamic, with volumes expected to increase by four times that of the
Standard segment.
For the High Value segment in particular, market expectations are as follows:
→ Original Equipment volumes ≥18” are expected to grow by approximately +9% thanks to the gradual
normalisation of the semi-conductor shortage;
→ Replacement volumes ≥18” are expected to grow by approximately +7%, driven by the restocking of dealer
inventories and the effect of new car registrations from previous years.
Less growth is expected for the Standard segment, where Original Equipment ≤17” (which is more affected
by the semi-conductor crisis than the high-end range) is expected to grow by approximately +5%, while the
Replacement channel is expected to grow by approximately +1.5% (due to the gradual shift of the car parc
towards the Premium range).
Pirelli will respond to a challenging 2022 by strengthening the levers already provided by the Industrial Plan.
Specifically, an even more selective approach is planned for Original Equipment, with a focus on higher rim
diameters (≥19”) and on Specialties, especially for the electric car segment. The Competitiveness Plan has been
81
Directors’ Report on Operations confirmed with gross benefits of euro 150 million, and these
efficiencies, together with price increases and an improved
mix, will more than offset the increase in the costs of raw
materials, in inflation of other production factors, and in
exchange rate volatility.
the collection of funds among employees. The investments
in the local market, excluding those linked to security, have
been halted. The activities of the factories in Russia will be
progressively limited to those needed to guarantee the
financing of salaries and social services for employees.
In light of the results achieved for 2021 and the scenario
forecast for 2022, Pirelli expects:
→ Revenues of between euro ~5.6 billion and euro~5.7
billion, with:
→ a total growth in volumes of between ~+1.5% and
~+2.5%: High Value Volumes are expected to increase
by ~+6%/~+7%; Standard volumes are expected to
decline by ~-3%/~-4%, consistent with the strategy of
progressively reducing exposure to this segment;
→ price/mix improvement by ~+5.5% / ~+6.5% thanks
to further price increases and a more favourable mix;
→ an exchange rate impact of between ~-1.5% /~-2%.
→ EBIT margin adjusted of between approximately ~16%
and ~16.5% considering the aforementioned dynamics;
→ Net cash generation before dividends is expected to be
between euro 450 million and euro 480 million, thanks to
the operating performance and the efficient management
of working capital;
→ Investments amounting to approximately euro 390 million
(~ 7%);
→ Net financial position equal to euro ~-2.6 billion with a
NFP/EBITDA adjusted ratio of ≤ 2 times.
With reference to tensions between Russia and Ukraine, Pirelli
has constituted a “Crisis Committee” to constantly monitor
the development of the Russia-Ukraine crisis for which
mitigation actions and a contingency plan have already been
activated, including the progressive production reallocations
of export flows to other Group plants. When the company
presented its preliminary 2021 results it announced an initial
analysis of the impact on 2022 guidance. That analysis
assumed the persistence of February level energy and oil
prices until the end of the year, as well as the potential impact
on local operations linked to imports and exports to and from
Russia of raw materials and finished goods.
In the analysis of this scenario, which does not take into
account the idea of a total interruption of the import and
export flows from Russia and a recessionary scenario in
Europe because of an escalation of geopolitical tensions,
the guidance for profitability and cash generation would
be positioned in the lower part of the range (EBIT Adjusted
around euro 890 million and cash generation before dividends
around euro 450 million).
Pirelli continues to monitor the evolution of the situation and
will inform the market if the forecasts shift significantly from
the assumptions of the initial analysis.
Pirelli is against this war and is supporting the Ukrainian
population with a donation of 500,000 euro and facilitating
82
Significant events
subsequent to the end
of the year
On January 28, 2022 Pirelli
launched the start of
celebrations, for the 150th anniversary of its foundation on
January 28, 1872 which will continue throughout 2022, with
an event at the Piccolo Teatro in Milan.
On February 1, 2022 Pirelli was awarded Gold Class
recognition in the 2022 Sustainability Yearbook published
by S&P Global, which examined the sustainability profile
of more than 7,500 companies. Pirelli obtained the “S&P
Global Gold Class” recognition in the ranking that is carried
out annually on the basis of the results of the Corporate
Sustainability Assessment for the Dow Jones Sustainability
Indexes of S&P Global. In 2021 Pirelli confirmed its position
among the excellent performers of the Automobiles &
Components sector, within the Dow Jones Sustainability
World and Europe indexes, with a score of 77 points against
a sector average of 31.
On February 21, 2022, Pirelli, in keeping with that which
had been announced to the market on November 11, 2021
finalised the signing of a euro 1.6 billion five-year multi-
currency bank credit facility with a pool of leading Italian and
international banks.
The new credit facility, which is geared towards the Group’s
ESG objectives, will mainly enable the Group to:
→ repay debt maturing in June 2022 (approximately euro 950
million at December 31, 2021) by using euro 600 million
from the new credit facility and the remainder from the
Company’s liquidity;
→ replace euro 700 million from an available and unused
credit facility maturing in June 2022, with euro 1.0 billion
from the new credit facility, thereby increasing financial
flexibility by euro 300 million.
This operation, which was finalised with improved terms and
conditions than for the credit facilities that will be replaced,
was consistent with the Company’s plans and allows for the
optimisation of the debt profile by extending maturity dates.
On February 23, 2022 Pirelli announced that it had been
assigned an “investment grade” rating by S&P Global Ratings
and Fitch Ratings. This follows the Company’s request
for a public rating, in keeping with the Group’s objectives
Pirelli Annual Report 2021 of optimising conditions of access to the credit market.
Specifically, Fitch Ratings assigned Pirelli an Investment
Grade rating of BBB- with a stable outlook, emphasising,
amongst other things, the solidity of the Company’s operating
margins and its ability to generate cash flow, which make it
possible to forecast a significant reduction in debt over the next
two to three years. The agency highlighted Pirelli’s leadership
position in the Premium segment, its consolidated know-how
for high-performance products, its exposure to aftermarket
activities that are less volatile than that of the Standard
segment and the reputation of its Brand. S&P Global Ratings
assigned an Investment Grade rating of BBB- with a stable
outlook, highlighting, amongst other things, the solid position
Pirelli holds in the Premium and Prestige markets, its ability to
efficiently utilise its manufacturing plants, which is reflected
in an EBITDA margin that exceeds the sector average and the
agency’s expectation of continuous debt reduction, through
the careful management of a solid free cash flow.
On March 4, 2022 Pirelli announced that will donate euro
500 thousand to help Ukrainian refugees affected by the
war. The company will also provide employees with a current
account to collect their donations as well. Pirelli strongly
condemns what is happening and stands by the people who
are suffering.
Alternative
performance indicators
This document, in addition to the financial measures provided
for by the
International Financial Reporting Standards
(IFRS), also includes measures derived from the latter, even
though not provided for by the IFRS (Non-GAAP Measures),
in compliance with the ESMA Guidelines on Alternative
Performance
(ESMA Guidelines/2015/1415)
published on October 5, 2015. These measures are presented
in order to allow for a better assessment of the results of
the Group’s operations and should not be considered as
alternatives to those required by the IFRS.
Indicators
→ EBITDA margin adjusted: is calculated by dividing the
EBITDA adjusted by revenues from sales and services. This
measure is used to evaluate operating efficiency, excluding
the impacts deriving from investments, operating costs
attributable to non-recurring, restructuring and oneoff
expenses, COVID-19 direct costs and expenses relative to
the retention plan approved by the Board of Directors on
February 26, 2018;
→ EBIT: is an intermediate measure which is derived from
the net income/(loss) but which excludes taxes, financial
income/(expenses) and the net income/(loss) from equity
investments. The EBIT is used to measure the ability to
generate earnings, including the impact arising from
investments;
→ EBIT adjusted: is an alternative measure to the EBIT which
excludes the amortisation of intangible assets relative
to assets recognised as a consequence of Business
Combinations, operating costs attributable to non-
recurring, restructuring and one-off expenses, COVID-19
direct costs and expenses relative to the retention plan
approved by the Board of Directors on February 26, 2018;
→ EBIT margin: is calculated by dividing the EBIT by revenues
from sales and services. This measure is used to evaluate
operating efficiency;
→ EBIT margin adjusted: is calculated by dividing the
EBIT adjusted by revenues from sales and services. This
measure is used to evaluate operating efficiency excluding
the amortisation of intangible assets relative to assets
recognised as a consequence of Business Combinations,
operating costs attributable to non-recurring, restructuring
and one-off expenses, COVID-19 direct costs and expenses
relative to the retention plan approved by the Board of
Directors on February 26, 2018;
→ Net Income/(loss) adjusted; is calculated by excluding
the following items from the net income/(loss):
→ the amortisation of intangible assets relative to
assets recognised as a consequence of Business
Combinations, operating costs attributable to non-
recurring, restructuring and one-off expenses,
COVID-19 direct costs and expenses relative to the
retention plan approved by the Board of Directors on
February 26, 2018;
→ non-recurring expenses/income recognised under
In particular, the Non-GAAP Measures used are as follows:
financial income and expenses;
→ EBITDA: is equal to the EBIT but which excludes the
depreciation and amortisation of property, plant and
equipment and intangible assets. The EBITDA is used to
measure the ability to generate earnings, excluding the
impacts deriving from investments;
→ EBITDA adjusted: is an alternative measure to the EBITDA
which excludes non-recurring, restructuring and one-off
expenses, COVID-19 direct costs and expenses relative to
the retention plan approved by the Board of Directors on
February 26, 2018;
→ EBITDA margin: is calculated by dividing the EBITDA by
revenues from sales and services. This measure is used
to evaluate operating efficiency, excluding the impacts
deriving from investments;
→ non-recurring expenses/income recognised under
taxes, as well as the tax impact relative to the
adjustments referred to in the previous points;
→ Fixed assets: this measure is constituted of the sum of the
Financial Statement items, “Property, plant and equipment”,
“Intangible assets”, “Investments in associates and joint
ventures”, “Other financial assets at fair value through other
Comprehensive Income” and “Other non-current financial
assets at fair value through the Income Statement”. Fixed
assets represent the non-current assets included in the
net invested capital;
→ Net operating working capital: this measure is constituted
by the sum of “Inventory”, “Trade receivables” and “Trade
payables”;
83
Directors’ Report on Operations → Net working capital: this measure is constituted by the
net operating working capital and by other receivables
and payables and derivative financial instruments not
included in the net financial position. This measure
represents the short-term assets and liabilities included
in the net invested capital and is used to measure short-
term financial stability;
→ Net invested capital: this measure is constituted by the
sum of (i) fixed assets and (ii) net working capital. Net
invested capital is used to represent the investment of
financial resources;
→ Provisions: this measure is constituted by the sum of
“Provisions for liabilities and charges (current and non-
current)”, “Provisions for employee benefit obligations
(current and non-current)”, “Other non-current assets”,
“Deferred tax liabilities” and “Deferred tax assets”;
→ Net financial debt: is calculated pursuant to the
CONSOB Notice dated July 28, 2006 and in compliance
with the ESMA guidelines on disclosure requirements
pursuant to the Prospectus Regulation applicable as of
May 5, 2021. Net financial debt represents borrowings
from banks and other financial institutions net of
cash and cash equivalents, of other current financial
assets at fair value through the Income Statement, of
current financial receivables (included in the Financial
Statements under “Other receivables”) and of derivative
financial instruments included in the net financial position
(included in the Financial Statements under current
assets, current liabilities and non-current liabilities, as
“Derivative financial instruments”);
→ Net financial position: this measure represents the net
financial debt less the non-current financial receivables
(included in the Financial Statements under “Other
receivables”), the current derivative financial instruments
included in the net financial position (included in the
Financial Statements under current assets as “Derivative
financial instruments”) and the non-current derivative
financial instruments included in the net financial position
(included in the Financial Statements under non-current
assets as “Derivative financial instruments”). Net financial
position is an alternative measure to net financial debt, but
which includes non-current financial assets;
→ Liquidity margin: this measure is constituted by the sum of
the Financial Statement items, “Cash and cash equivalents”,
“Other financial assets at fair value through the Income
Statement” and the committed credit facilities which have
not been non-utilised;
→ Operating net cash flow: this is calculated as the
change in the net financial position relative to operations
management;
→ Net cash flow before dividends and extraordinary
transactions and investments: is calculated by adding
the change in the net financial position due to financial and
tax management, to the operating net cash flow;
→ Net cash flow before dividends paid by the Parent
company: is calculated by adding the change in the net
financial position due to extraordinary transactions and the
management of investments, to the net cash flow before
dividends and extraordinary transactions and investments;
→ Net cash flow: is calculated by subtracting the dividends
paid by the Parent company, from the net cash flow before
dividends paid by the Parent company;
→ Investments in intangible and owned tangible assets
(CapEx): is calculated as the sum of investments
(increases) in intangible assets and investments (increases)
in property, plant and equipment, excluding any increases
relative to the right of use;
→ Increases in the right of use: is calculated as the increases
in the right of use relative to lease contracts;
→ Ratio of investments to depreciation: is calculated by
dividing the investments (increases) in owned tangible
assets with the depreciation for the period. The ratio of
investments to depreciation is used to measure the ability
to maintain or restore amounts for property, plant and
equipment;
→ ROIC: is calculated as the ratio between the EBIT adjusted
net of tax effects and the average net invested capital
net of provisions which does not include “Investments in
associates and joint ventures”, “Other financial assets at fair
value through other Comprehensive Income”, “Other non-
current financial assets at fair value through the Income
Statement”, “Other non-current assets”, the intangible
assets relative to assets recognised as a consequence of
Business Combinations, the deferred tax liabilities relative
to the latter and the “Provisions for employee benefit
obligations current and non-current”.
Other information
ROLE OF THE BOARD OF DIRECTORS
The Board of Directors is responsible for the strategic
guidance and supervision of the Company’s overall business
activities, with the power to direct the administration as a
whole and with the authority to take the most important
decisions in financial/strategic terms, or in terms of their
structural impact on management, or functional to the
exercise of Pirelli’s controlling and steering activities.
The Chairman is endowed with the legal representation of
the Company in legal proceedings, as well as with all other
powers attributed to him under the Articles of Association.
The Executive Vice Chairman and Chief Executive Officer are
exclusively delegated powers for the ordinary management
of the Company and of the Group, as well as the power to
make proposals regarding the Industrial Plan and financial
budgets to the Board of Directors, as well as any deliberations
regarding any strategic
joint
ventures to which Pirelli is a party.
industrial partnerships or
The Deputy-CEO is attributed the powers attributed to the
Executive Vice Chairman and Chief Executive Officer for the
ordinary management of the Company and of the Group, to
be exercised vicariously only in the case of the impediment,
even temporary, of the Executive Vice Chairman and Chief
Executive Officer.
84
Pirelli Annual Report 2021 The Board has internally instituted the following Committees
with advisory and proposal-making duties:
contain the provisions of the Shareholders’ Agreements
relative, amongst other things, to the governance of Pirelli.
→ Audit, Risk, Sustainability and Corporate Governance
Committee;
→ Remuneration Committee;
→ Committee for Related Party Transactions;
→ Nominations and Successions Committee;
→ Strategies Committee.
For more information on the role of the Board of Directors,
reference should be made to the Report on Corporate
Governance and Ownership Structure contained in the
2021 Annual Report, as well as other additional information
published in the Governance section of the Company’s
website (www.pirelli.com).
INFORMATION ON THE SHARE CAPITAL
AND OWNERSHIP STRUCTURE
The subscribed and paid-up share capital at the date
of approval of this Financial Report amounted to euro
1,904,374,935.66 and was represented by 1,000,000,000
indication of their
registered ordinary shares without
nominal value.
The Extraordinary Shareholders’ Meeting of March 24,
2021 resolved to increase the share capital in cash, by way
of a divisible payment, with the exclusion of option rights
pursuant to Article 2441, paragraph 5, of the Italian Civil
Code, for a total counter-value, including any share premium,
of euro 500,000,000.00 to service the conversion of the
“EUR 500 million Senior Unsecured Guaranteed Equity-
linked Bonds due 2025”, to be paid in one or more tranches
through the issue of ordinary shares of the Company, with
regular dividend entitlements, for a maximum amount of
euro 500,000,000.00 to exclusively service the “EUR 500
million Senior Unsecured Guaranteed Equity-linked Bonds
due 2025” issued by the Company, in accordance with the
criteria provided by the relevant Regulation, notwithstanding
that the final deadline for the subscription of the newly issued
shares is set as December 31, 2025 and that if, on that date,
the capital increase has not been fully subscribed, it shall be
deemed to have been increased by an amount equal to the
subscriptions received and from that date onwards, with the
express authorisation of the Directors to issue the new shares,
as and when they are subscribed. No fractions of shares will
be issued or delivered and no cash payment or adjustment
will be made in lieu of such fractions.
The shareholder Marco Polo International Italy S.r.l. -
pursuant to Article 93 of Legislative Decree No. 58/1998
- controls the Company with a 37% share of the capital, but
does not exercise management and coordination activities
over the Company.
Updated extracts are available on the Company’s website, of
the existing agreements between some of the shareholders,
indirect shareholders of the Company, which
including
For further details on the governance and ownership
structure of the Company, reference should be made to the
Report on Corporate Governance and Ownership Structure
contained in the 2021 Annual Report group of documents,
as well as other additional information published in the
Governance and Investor Relations section of the Company’s
website (www.pirelli.com).
WAIVER OF THE PUBLICATION OF INFORMATION DOCUMENTS
The Board of Directors, taking into account the simplification
of the regulatory requirements introduced by CONSOB in
the Issuer’s Regulation No. 11971/99, resolved to exercise the
option to derogate, pursuant to the provisions of Article 70,
paragraph 8 and Article 71, paragraph 1-bis of the aforesaid
Regulation, from the obligation to publish the prescribed
disclosure documents in the event of significant mergers, de-
mergers, capital increases through contributions of assets in
kind, acquisitions and disposals.
FOREIGN SUBSIDIARIES NOT BELONGING TO THE EUROPEAN
UNION (EXTRA-EU COMPANIES)
Pirelli & C. S.p.A. directly or
indirectly controls some
companies based in countries which do not belong to the
European Community (“Extra-EU Companies”), which hold
particular significance pursuant to Article 15 of CONSOB
Regulation No. 20249 of December 28, 2017, concerning
Market Regulations.
With reference to data at December 31, 2021, the Extra-EU
Companies controlled directly or indirectly by Pirelli & C.
S.p.A., which are of relevance pursuant to Article 15 of the
Market Regulations are:
Limited Liability Company Pirelli Tyre Russia (Russia); Pirelli
Pneus Ltda (Brazil); Pirelli Comercial de Pneus Brasil Ltda
(Brazil); Comercial e Importadora de Pneus Ltda. (Brazil);
Pirelli Tire LLC (USA); Pirelli Tyre Co., Ltd. (China); Pirelli
Otomobil Lastikleri A.S. (Turkey); Pirelli Neumaticos S.A.I.C.
(Argentina); Pirelli Neumaticos S.A. de C.V. (Mexico); Pirelli
UK Tyres Ltd. (United Kingdom) and Pirelli Tyre (Suisse) SA
(Switzerland).
Also pursuant to the same aforesaid provisions, the
Company has specific and appropriate Group Operating
Regulations in place which ensure immediate, constant and
full compliance with the provisions of the aforementioned
CONSOB Regulation.
the competent
Company managements provide the punctual and periodic
identification and publication of the relevant Non-EU
Companies pursuant to the Market Regulation and - with the
necessary and appropriate cooperation of the companies
concerned - guarantee the collection of data and information
and the verification of the circumstances referred to in the
In particular,
85
Directors’ Report on Operations aforementioned Article 15, ensuring the availability of the
information and data provided by the subsidiaries in the event
of a request by CONSOB. A periodic flow of information is also
provided for in order to guarantee to the Board of Statutory
Auditors of the Company, that the prescribed and appropriate
checks are performed.
Lastly, the aforesaid Operating Regulation, consistent with
regulatory provisions, governs the disclosure to the public of
the Financial Statements (that is the Statement of Financial
Position and Income Statement), of the relevant non-EU
companies, which are used to prepare the consolidated
Financial Statements of Pirelli & C. S.p.A.
It should therefore be noted that the Company has
fully complied with the provisions of Article 15 of the
aforementioned CONSOB Regulation No. 20249 of
December 28, 2017 and that the conditions required by the
same have been met.
RELATED-PARTY TRANSACTIONS
The Company’s Board of Directors, as part of the new listing
process initiated and completed during the 2017 financial
year, has once again approved the Procedure for Related
Party Transactions (“RPT Procedure”),
As part of the periodic revision of existing procedures, on
June 15, 2021, the Company’s Board of Directors - following
the unanimous opinion of the Committee for Related Party
Transactions, which had deliberated with the presence of
all its members - unanimously approved the new Procedure
for Related Party Transactions, which had been adjusted to
the new provisions on related party transactions adopted
by CONSOB pursuant to the amendments to the European
Shareholders’ Rights Directive II. The new Procedure came
into force on July 1, 2021.
Pursuant to Article 5, paragraph 8 of CONSOB Regulation
No. 17221 of March 12, 2010 as subsequently amended
and integrated, (most recently by CONSOB Resolution No.
21624 of December 10, 2020), concerning related party
transactions, it should be noted that during the 2021 financial
year, that no transaction of significant importance as defined
by Article 3, paragraph 1, letter b) of the aforementioned
Regulation, was submitted to the Board of Directors of Pirelli
& C. S.p.A. for approval.
The RPT Procedure can be viewed, together with the
other corporate governance procedures at the website
(www.pirelli.com). For more details on the RPT Procedure,
reference should be made to the section “Directors’
Interests and Related Party Transactions” included in the
Annual Report on the Corporate Governance and Ownership
Structure, contained in the Financial Statements group of
documents.
The information on Related Party Transactions as required,
pursuant to CONSOB Communication No. DEM/6064293
of July 28, 2006 is presented in the Financial Statements
and in the Note entitled “Related Party Transactions” in the
2021 Annual Report. Related Party Transactions, are neither
exceptional nor unusual, but are part of the ordinary course of
business for the Group companies and are carried out in the
interest of the individual companies. Such transactions, when
not settled under standard conditions, or dictated by specific
regulatory conditions, are in any case regulated by conditions
consistent with those of the market. Furthermore, they are
carried out in compliance with the RPT Procedure.
Also, there were no Related Party Transactions - or changes or
developments to the transactions described in the preceding
financial report - that have significantly affected the Group’s
financial position or results for the 2021 financial year.
EXCEPTIONAL AND/OR UNUSUAL OPERATIONS
Pursuant to CONSOB Notice No. 6064293 of July 28,
2006, it should be noted that during the course of the
2021 financial year, that no exceptional and/or unusual
transactions as defined in the aforesaid Notice, were carried
out by the Company.
COMPLIANCE WITH THE REGULATIONS
ON THE PROTECTION OF PERSONAL DATA
Following the entry into force of EU Regulation 2016/679
and amendments to Legislative Decree No. 196/2003
(introduced by Legislative Decree No. 101/2018), it should
be noted that the Company has completed, with the support
of the competent departments, all the activities necessary to
meet the new requisites of the law, including, amongst others,
the preparation of a Record of Processing Activities. The
Company has also appointed lawyer Alberto Bastanzio as the
Data Protection Officer (“DPO”), whose contact details were
duly communicated to the Guarantor for the Protection of
Personal Data on July 25, 2018. The DPO can be contacted,
other than at the registered office of the Company, also at
the following e-mail address: dpo_pirelli@pirelli.com. The
activities carried out by the DPO during the relevant reporting
financial year are described in detail in the “Annual Report of
the DPO” available at the registered office of the Company, to
which reference should be made for further details.
The Board of Directors
Milan, March 17, 2022
86
Pirelli Annual Report 2021 87
Directors’ Report on Operations Report
on Responsible
Management
of the Value Chain
Consolidated Non-Financial Disclosure pursuant to
Legislative Decree of December 30, 2016, n. 254
89
A Beautiful Place
Methodological note
This section of the Annual Report 2021, entitled “Report on
Responsible Management of the Value Chain” (hereinafter
“the Report”), constitutes the “Consolidated Non-Financial
Statement” of the Company pursuant to Legislative Decree
no. 254/2016 and explores the Sustainable Management
Model adopted by Pirelli, the governance tools to support
maintenance and creation of values, relationships with
Stakeholders and related connection with the development of
financial, productive, intellectual, human, natural, social and
relational capital, which was mentioned in the “Presentation
of 2021 Pirelli Integrated Annual Report”.
The Report reflects the integrated Business model adopted by
the Group, inspired by the United Nations Global Compact, the
principles of Stakeholder Engagement set forth by the AA1000,
and the Guidelines of ISO 26000. Reported information is
prepared in accordance with the Global Reporting Initiative
(GRI) Sustainability Reporting Standards, Comprehensive
option, SASB Auto Parts Sustainability Accounting Standard,
following the process suggested by the APS1000 APS
principles (materiality, inclusivity and responsiveness), and
considering the integrated reporting principles contained
in the International Integrated Reporting Council (IIRC).
In addition, this report considers the priorities reported by
the European Securities and Markets Authority (ESMA)
through the ESMA circular 32-63-1186 and includes the
considerations required by the European Taxonomy Regulation
in its fields of application (EU Regulation 2020/852 dated 18
June 2020 and the Delegated Regulations (EU) 2021/2178
and (EU) 2021/2139 connected to it). It should be noted that
the assurance activities by the Independent Auditors linked to
the latter involved verifying the preparation and publication of
the information required by Reg. 852/20, in compliance with
the indications given by Assirevi to the Independent Auditors
through the Document of Research No. 243 of February
2022, entitled “Auditor’s activity on the disclosure pursuant to
art. 8 of Regulation 2020/852 - Taxonomy Regulation”.
The set of GRI indicators covered by the Report is wider than
the list of specific material issues indicated in the materiality
matrix, and this in order to provide a more complete and
transversal view on the Company’s performance, for the
benefit of all Stakeholders.
The Report shows the sustainability performance of the
Group in 2021 compared to 2020 and 2019, with respect to
the targets set in the 2021-2022 Industrial Plan, 2025 Vision.
The Report, published annually, (the previous Pirelli Annual
Report was published in April 2021 with reference to the year
2020), is approved by the Group’s Board of Directors and
covers the same scope of consolidation of the Group.
The main information systems that contribute to the collection of
the data contained in the Report are: 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).
In terms of internal control of the contents of the Report, the
Company, through the Group Compliance function, has set
up a structured system that includes:
→ a dedicated Operating Procedure, in which the roles,
responsibilities and procedures to be followed by the Group
companies in order to ensure adequate management and
reporting of non-financial information are defined;
→ an internal control system aimed at providing an assurance
about the correct collection and reporting of non-financial
information, to which an additional assurance is added for
that information considered to be of particular relevance
since, for example, it falls within the Group Sustainability
Plan targets;
→ a third party verification through a circling activity, of all the
quantitative non-financial data reported in the Report with
the aim to conduct an independent verification of the NFD
data and the related source;
→ the signing of a letter of certification by the Top Management
concerning the data that are collected through the CSR-
DM information system and the paragraphs of the financial
statements of competence.
firm
(PricewaterhouseCoopers S.p.A.)
As regards external audits, the sustainability performance
accounted in the Report is subject to limited audit by an
independent
in
accordance with the criteria indicated in the International
Standard on Assurance Engagements 3000 - Assurance
Engagements other than Audits or Reviews of Historical
Financial Information (ISAE 3000), issued by the International
Auditing and Assurance Standards Board. For further
information, reference is made to the related Auditor’s Report
provided at the end of the Annual Report. As part of this
limited audit activity, the data relating to GHG (Greenhouse
Gas) emissions were also specifically analysed, including for
the purposes of the disclosure process to the CDP (formerly
the Carbon Disclosure Project).
The Report is structured into four macro areas:
→ an
introductory section related to the sustainable
management model adopted by the Company, Materiality
Matrix, Governance and Compliance policies and activities,
Stakeholder Engagement, long-term planning;
→ an “Economic Dimension”, in which the distribution of
added value is detailed along with the management and
performance relating to investors, customers and suppliers;
→ an “Environmental Dimension”, which describes the
management of environmental aspects and impacts
throughout the entire product cycle;
→ a “Social Dimension”, which brings together the paragraphs
dedicated to: governance of human rights, the internal
community and the external community.
At the end of the Annual Report 2021, before the Independent
Auditor’s Report mentioned above, the following summary
Tables are available:
→ the GRI Content Index, which shows the full list of indicators
accounted based on the GRI Standards, indicating the
relative page in the Annual Report 2021;
90
Pirelli Annual Report 2021 → a table of correlation between indicators accounted based
on the GRI Standards and the United Nations Global
Compact Principles;
→ the SASB Content Index showing the complete list of
indicators reported according to the SASB Auto Parts
Sustainability Accounting Standard, indicating the relevant
page within the 2021 Annual Report;
→ a table of correlation between the performance/targets of
the Group and the Sustainable Development Goals of the
United Nations on which the aforementioned performance
and targets have an impact;
→ a correlation table between the information contained in
the Annual Report and the topics indicated by Legislative
Decree no. 254/2016.
For any clarifications and further information on the content
of the Report, reference is made to the “Contacts” page of the
“Sustainability” section of the website www.pirelli.com.
MANAGEMENT MODEL
Pirelli Sustainability Model is inspired by the United Nations
Global Compact, the principles of Stakeholder Engagement
set forth by the AA1000 and the Guidelines of ISO 26000.
Responsible management by Pirelli runs through the entire
value chain. Every operating unit integrates economic, social
and environmental responsibility in its own activity, while
cooperating constantly with the other units, implementing the
Group strategic guidelines.
The main management systems adopted by Pirelli include
ISO 9001, IATF 16949, ISO/IEC 17025 in the area of Quality
Management, SA8000® for the management of Social
Responsibility at its subsidiaries and along the supply chain,
ISO 45001 for the management of Health and Safety in the
workplace, ISO 14001 for environmental management and
ISO 37001 on anti-corruption measures. The Company is also
inspired by the ISO 14064 for the quantification and reporting
of greenhouse gas emissions (GHG), the ISO 14040 family
rules for the methodology for calculating the environmental
footprint of the product and the Organisation and, specifically,
ISO 14067 and ISO 14046 for the determination of the
Carbon Footprint and Water Footprint. In December 2021, the
Company also renewed its independent certification (from
SGS Italia S.p.A.) regarding the compliance of its Sustainable
Purchasing Management model based on the ISO 20400
Standard (obtained during 2018).
Details on the coverage of these certifications and
methodological reference tools have been given in the
paragraphs
“Programmes of Compliance 231, Anti-
corruption, Privacy, Trade Compliance and Antitrust “, “Our
Customers”, “Our Suppliers”, “Environmental Dimension”,
“Industrial Relations” and “Occupational Health, Safety and
Hygiene” of this Report.
With reference to the Group’s Sustainability Governance,
the Board of Directors of Pirelli & C. S.p.A., supported in its
activities by the Audit, Risks, Sustainability and Corporate
Governance Committee, approves the objectives and targets
for sustainable management integrated in the Group Plan.
The Board of Directors also approves Pirelli’s Annual Report,
including the Consolidated Non-Financial Statement, which
is in turn subject to the supervision of the Board of Statutory
Auditors in accordance with Legislative Decree no. 254 of
30 December 2016. Within the Board of Directors, the CEO
is responsible for sustainability matters.
The strategic evolution of Group Sustainability is entrusted to
the Sustainability Strategic Committee, a body appointed in
2004, chaired by the CEO and composed of the Company’s
Top Management representing all the organisational and
functional responsibilities. The Committee has strategic
responsibility and holds ordinary meetings at least twice a
year. As of 2021, the Sustainability Strategic Committee is
being supported by a Sustainability Operational Committee
chaired by the Deputy CEO and consisting of the Company’s
Top Management, which will be responsible for the strategic
and operational management of the Group’s Sustainability
including, among others, Climate Change and
matters,
Diversity, Equity and Inclusion.
The organisational structure
is thus made up of a
Sustainability and Future Mobility Department reporting
directly to the Deputy CEO of the company, which has
oversight of the management at a Group level and proposes
plans for sustainable development to the Sustainability
Strategic Committee. The Group Sustainability & Diversity
Officer works in the Sustainability and Future Mobility
Department.
The Department receives support from:
→ a Sustainability Working Group made up of sustainability
referents within the different company departments in
order to guarantee constant monitoring and coordination of
strategic programmes with an impact on the competence
of specific departments;
→ Country Sustainability Managers & Diversity Managers
to oversee activities covering all Group affiliates. The role
of Country Sustainability Manager is held by the Country
CEOs, who report directly to them for the operational
management of Country plans.
SUSTAINABILITY PLANNING AND THE UNITED NATIONS
SUSTAINABLE DEVELOPMENT GOALS (SDGS)
Pirelli’s sustainable development planning aims to make a
tangible contribution to the global effort to achieve the 2030
Sustainable Development Goals (SDGs) presented by the
United Nations in September 2015.
In methodological terms, the process of sustainable planning
is characterised by specific operational steps aimed at
continuous improvement in performance: evaluation of the
context through benchmarks, dialogue with stakeholders,
needs raised by internal functions, identification of risks and
opportunities for growth, definition of projects and targets,
implementation, monitoring and reporting.
91
Report on Responsible Management In March 2021, Pirelli has published the Sustainability Plan
2021-2022 with 2025 and 2030 Vision, fully complementary
with the Company’s Industrial Plan. The Plan’s targets
have been defined in alignment with the materiality of the
Company’s socio-environmental impacts and in support of
the United Nations 2030 Sustainable Development Goals, as
further discussed below.
The targets and related performance of the Plan (for details
see the related sections in this Report) foresee in summary
the below figures.
At raw material level, for new product lines:
→ by year 2025: renewable materials > 40%, recycled
materials > 3%, fossil-based materials < 40%;
→ by year 2030: renewable materials > 60%, recycled
materials > 7%, fossil-based materials < 30%.
With reference to the evolution of the total product range,
by 2025:
sustainable management of the natural rubber supply
chain, in line with the dictates of Pirelli Policy and the
Global Platform for Sustainable Natural Rubber (GPSNR),
of which Pirelli is a founding member.
increasingly
In the Plan, a central role is dedicated to human capital,
the heart of the Company and of its ability to achieve the
set objectives. The culture of safety in the workplace will
continue to support the Zero Accidents objective, with an
expected accident frequency index of ≤ 0.1 by 2025. The
plan focuses on
innovative human capital
management. New marketing recruitment solutions for
STEM (Science, Technology, Engineering, Mathematics)
talents will be accompanied by experimentation with
increasingly smart working methods and training in new
digital skills, in an inclusive working environment capable of
meeting the challenges of the future in an agile manner. ESG
objectives, which are an integral part of the short- and long-
term incentive plans (with a weight of 20% of the LTI bonus),
will act as an enabler of positive tension towards achieving
the Group’s sustainability objectives.
→ more than 70% of new products will be in Rolling Resistance
Class A/B11;
→ more than 90% of new products will be in WetGrip Class
To support the achievement of Group targets, all Pirelli
commercial and industrial subsidiaries around the world have
a Country Sustainability Plan.
A/B;
→ growth in Eco & Safety Performance revenues with a
target of > 66% of total car sales and > 71% of High Value
products only12.
As noted above, the Plan targets defined in alignment with the
materiality of the Company’s socio-environmental impacts
affect the following SDGs in particular:
In terms of environmental efficiency of production processes:
→ with reference to CO2 emissions, by 2025 it is planned that
100% of renewable electrical energy purchased at Group
level should be renewable, as well as a 25% reduction in
absolute CO2 emissions compared to 2015 (Science Based
Target approved by SBTi in 2020); by 2030 it is planned
to achieve Carbon Neutrality (considering emissions from
electrical and thermal energy);
→ with regard to natural resource efficiency, the following
are also planned by 2025: reductions of 10% in specific
energy consumption (compared to 2019) and 43% in
specific water withdrawal (compared to 2015), as well as
achieving 98% of waste sent for recovery (zero waste to
landfill vision);
Regarding the sustainability of the supply chain:
→ reduction of absolute CO2 emissions from raw material
suppliers by 9% by 2025 compared to 2018 (Science
Based Target approved by SBTi);
→ adoption of increasingly advanced models of management
of the economic, social and environmental responsibility of
the supply chain with particular attention to the upstream
supply chain;
→ implementation of the Pirelli Roadmap relating to the
11 On all new ipcodes with Label, converting the non-European scales to the European classification.
12 High Value products are determined by rim sizes equal to or greater than 18 inches and, in addition,
include all “Specialties” products (RUN FLAT™, SEAL INSIDE™, PNCS™).
→ 3 - Good Health and Well-being;
→ 4 - Quality Education;
→ 5 - Gender Equality;
→ 6 - Clean Water and Sanitation;
→ 7 - Affordable and Clean Energy;
→ 8 – Decent Work and Economic Growth;
→ 9 - Industry, Innovation and Infrastructure;
→ 10 - Reduced Inequalities;
→ 11 - Sustainable Cities and Communities;
→ 12 - Responsible Consumption and Production;
→ 13 - Climate Action;
→ 15 - Life on Land
→ 16 – Peace, Justice and Strong Institutions
→ 17 – Partnerships for the Goals
For more information on the distribution and weight of
the contribution for each SDG, please refer to the graphic
representation of the materiality matrix proposed in the
paragraph “Materiality Analysis and Mapping” of this Report.
Please be aware that:
→ the Pirelli Sustainability Plan 2025 with 2030 vision is
published in the “Sustainability” section of the Company’s
website (www.pirelli.com);
→ at the end of the 2021 Annual Report, prior to the
Independent Auditors’ Report, are located the Summary
Tables including a correlation table between the Group’s
performance/targets and the United Nations Sustainable
Development Goals, on which the aforementioned
performance and targets have an impact.
92
Pirelli Annual Report 2021 STAKEHOLDER ENGAGEMENT
The role of Pirelli in an economic and social context is tied
to its capacity to create value through a multi-stakeholder
approach, i.e. through a sustainable and lasting growth that
can reconcile the interests and expectations of all those with
whom the Company interacts and especially:
→ customers, since Pirelli way of doing business is based on
customer satisfaction;
→ employees, who make up the wealth of knowledge and
driving force of the Group;
→ shareholders, investors and the financial community;
→ suppliers, with which it shares a responsible approach to
business;
→ competitors, because improved customer service and
market position depend on fair competition;
→ the environment, institutions, government and non-
government bodies;
→ the communities of the various Countries where the
Group operates on a stable basis, while being aware of its
responsibilities as a Corporate Global Citizen.
To the stakeholders mentioned, dedicated paragraph are
within this Report, to which reference is made for further
qualitative and quantitative study.
The interactions that take place between Stakeholders are
analysed in detail in order to manage relations with them
effectively in accordance with the AA1000 Model adopted by
the Company and with a view to creating lasting, shared value.
Dialogue, interaction and involvement are calibrated to meet
the needs for consultation with the various types of stakeholder
and include meetings, interviews, surveys, joint analyses,
roadshows and focus groups. Local feedback received from
Stakeholders contributed to the corporate evaluation of the
priorities for action, influencing the materiality matrix and the
development strategy set out in the Sustainability Plan.
During 2021, due to the state of health emergency
from Covid-19, engagement and dialogue activities with
stakeholders continued through digital channels, while
engagement activities that were supposed to have taken place
on-site and in person to be most effective were postponed.
with the importance of the same issues for the success of
the business according to the experience and expectations
of the Top Management.
Stakeholders have been involved through a request for
prioritisation of action on a selection of ESG issues relevant
for the development of the Company.
topics considered
relevant were pre-selected
The
considering their relevance to the automotive components
sector according to leading research and sustainable finance
bodies, their presence in the materiality mapping of car
manufacturers and car parts, the risks and opportunities
arising from regulatory developments with reference to
the UN Sustainable Development Goals to 2030 (SDGs).
To this end, the Sustainable Development Goals on which
the Company can contribute most through strategies and
actions developed considering the material issues assessed
have been represented in the matrix below.
For this reason we would like to emphasise that all the ESG
elements pre-identified through the aforementioned analysis
and present in the materiality mapping are material and
relevant to Pirelli’s development, albeit with greater or lesser
priority, as evidenced by the position of the different elements
within the matrix defined according to the results of the
interview process with Stakeholders and Management.
Given the complexity, the international extent of corporate
Stakeholders and the variety of their expectations, the panel
of Stakeholders of the Company from which feedback was
requested covered all the Regions in the world and included:
→ the major Original Equipment Customers;
→ more than 650 End Customers belonging to the most
representative markets;
→ the most important Dealers;
→ numerous Employees in the various countries where the
Group is present:
→ several Pirelli Suppliers;
→ the leading Financial Analysts;
→ national and supranational
institutions and public
administrations;
→ Media specialists;
→ international and local NGOs present in the various
Countries in which Pirelli has production activities;
→ Academic world and Universities that have collaborations
MATERIALITY ANALYSIS AND MAPPING
with the Group.
Pirelli’s materiality mapping was updated with consolidated
results
in January 2022, was then submitted to the
Sustainability Strategic Committee, the Board of Directors
Committee and the Board of Statutory Auditors and then
to the Board of Directors for publication in this Report. The
matrix was updated and published in 2022, replacing the
previous materiality mapping prepared in 2019.
The thorough Stakeholder Engagement activities allowed the
observation of the priorities assigned by the key Stakeholders
relating to a panel of sustainability topics critical for the Auto
parts sector, and therefore to compare these expectations
The main topics submitted for evaluation by Stakeholders are
as follows:
→ Climate Change and Greenhouse Gas Emissions Reduction;
→ Responsible Management of Natural Resources;
→ Biodiversity Protection;
→ Circular Economy;
→ Future Mobility;
→ Product Quality and Safety;
→ Product Environmental Sustainability;
→ Corporate Citizenship;
→ Human Rights;
93
Report on Responsible Management → Diversity, Equity and Inclusion;
→ Training and Development;
→ Occupational Health and Safety;
→ Stakeholder Satisfaction;
→ Talent Acquisition, Development and Retention;
→ Responsible Management of the Supply Chain;
→ Innovation;
→ Cybersecurity;
→ Business Ethics and Integrity;
→ Corporate Governance;
→ Financial Health.
The priorities among the significant issues expressed by Pirelli and its stakeholders on the above issues have
been represented in a materiality matrix showing, on the vertical axis, the expectations of several external and
internal stakeholders, while on the horizontal one, the importance that the Management attributes to individual
business success factors. The result of such consolidation is outlined below.
It should be noted that the consolidation of the materiality matrix at Group level tends, by its very nature, to deviate
significantly from the materiality matrix consolidated by the Group’s Subsidiaries at country level. Elements of
sustainability located in an area of minor materiality in the matrix at a Group level may be found to have major
materiality for a number of Countries and specific stakeholders who are more directly involved.
The reporting of material issues, related risks and opportunities to these topics and the methods for managing
them are reported in this Report, in the paragraph “Operational Risks” (of the Directors’ Report on Operations),
as well as in the paragraphs dedicated below to the various issues and Stakeholders.
Materiality mapping is a key element in the definition of the Group’s sustainable development strategies and as
such is considered in the definition of the Company’s multi-year strategic sustainability objectives.
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Responsible Management of the Supply Chain
SDGs: 8, 12, 16
Human Rights
SDGs: 5, 8, 10, 16
Circular Economy
SDGs: 3, 6, 8, 11, 12
Diversity, Equity & Inclusion
SDGs: 5, 8, 10
Biodiversity Protection
SDGs: 6, 15
Training & Development
SDGs: 5, 6, 10, 16
Responsible Management
of Natural Resources
SDGs: 3, 6, 7, 8, 11, 12
Climate Change & Greenhouse
Gas Emissions Reduction
SDGs: 7, 13, 15
Product Quality and Safety
SDGs: 3, 12
Product Environmental Sustainability
SDGs: 12
Occupational Health & Safety
SDGs: 3, 8
Innovation
SDGs: 8, 9
Business Ethics and Integrity
SDGs: 10, 16
Future Mobility
SDGs: 3, 11
Financial Health
SDGs: 8, 9, 13
Cybersecurity
SDGs: 16
Talent Acquisition, Development & Retention
SDGs: 5, 8, 10
Corporate Governance
SDGs: 5, 6, 10, 16
Stakeholder Satisfaction
Corporate Citizenship
SDGs: 8, 11, 16
High
Relevance for Pirelli
Very High
94
Pirelli Annual Report 2021
MAIN POLICIES
The Sustainable Management Model throughout the value
chain is reflected in the main Group Policies, published on
Pirelli’s website in multiple languages and communicated to
all employees in their local language.
In particular, the following Policies are recalled:
→ the “Group Values and Code of Ethics”;
→ the “Code of Conduct”;
→ the “Anti-Corruption” Programme;
→ the “Global Antitrust and Fair Competition” Policy;
→ the Group “Equal Opportunities Statement”;
→ the “Health, Safety and Environment” Policy;
→ the “Global Human Rights” Policy;
→ the “Product Stewardship” Policy;
→ the “Global Quality” Policy;
→ the “Green Sourcing” Policy;
→ the “Social Responsibility Policy on Occupational Health,
Safety and Rights and Environment”;
→ the “Global Tax” Policy;
→ the “Institutional Relations - Corporate Lobbying” Policy;
→ the “Global Personal Data Protection” Privacy Policy;
→ the “Group Whistleblowing - Group Reporting Procedure”;
→ the “Sustainable Natural Rubber” Policy, including the
dedicated Grievance Procedure;
→ “Pirelli Intellectual Property” (or IPR) Policy;
→ “Pirelli Social Media” Policy.
The contents of the aforementioned Policies and the related
methods for implementation are addressed in the sections of
this Report that deal with the related issues.
Next, a focus on the Compliance programmes “231”, “Anti-
corruption”, “Privacy”, “Trade Compliance”, “Antitrust” and on
the “Whistleblowing” policy.
PROGRAMMES OF COMPLIANCE 231, ANTI-CORRUPTION,
PRIVACY, TRADE COMPLIANCE AND ANTITRUST
With regard to the administrative liability of companies and
bodies provided for by Legislative Decree no. 231/2001
(hereinafter also the “Decree”), Pirelli has adopted an
Organization and Management Model (hereinafter also
Model 231) structured in a General Section, which includes
a review of the regulations contained in the Decree, of the
crimes relevant to the Italian companies of the Group and
the procedures for adopting and implementing the Model,
and in a Special Section, which indicates the corporate
processes and the corresponding sensitive activities for the
Group’s Italian companies pursuant to the Decree, as well as
the principles and internal control plans to supervise these
activities.
In 2021, Given the continuation of the public health
emergency situation declared in 2020 and continued in 2021,
the specific periodic monitoring information flows to the
Supervisory Board relating to the company’s management of
the Coronavirus emergency were maintained.
During the year, training and communication activities on the
current Organisational Model were completed for the entire
population of the Group’s Italian companies.
In addition, the process of communicating and implementing
the Group Anti-Corruption Programme continued in the
main Countries in which Pirelli operates. The Programme,
available in twenty-two different languages on Pirelli website,
is the corporate benchmark for the prevention of corruptive
practices and represents a collection of principles and rules
aimed at preventing or reducing the risk of corruption. In
the document, Pirelli principles already set out in the Ethical
Code and the Code of Conduct, including zero tolerance
of “corruption of public officials, or any other party, in any
guise or form, or in any jurisdiction even in places where
such activity is admissible in practice, tolerated, or not
challenged in the courts” are restated. Among the provisions
of the Group Anti-Corruption programme are a prohibition
in respect of recipients of the Code of Ethics from offering
gifts and other utilities that might meet conditions of a breach
of rules, or which are in conflict with the Code of Ethics, or
may, if made public, constitute detriment even only to the
image of Pirelli. Additionally, “Pirelli defends and protects its
corporate assets, and shall procure the means for preventing
acts of embezzlement, theft, and fraud against the Group”
and “condemns the pursuit of personal interest and/or that of
third parties to the detriment of social interests”.
As part of the anti-corruption programme implementation
process, mandatory country-specific training courses have
been made available through an e-learning platform. In
addition, a Group-wide anti-corruption training course was
prepared for the Purchasing Department to raise awareness
of the issue so as to make it easier for employees to identify
potential critical situations and activate the procedures set
out in the internal rules.
The activity aimed at analysing the profiles of corruption risk
and continued through the assessment of conformity with
local regulations in force in the Countries where the Company
is present, the verification of the adequacy of the corporate
oversight and the updating of the risk analysis.
Finally, specific procedures have been formalised on the
third party due diligence process through the analysis of
the activities, conducted in the main Countries, of gathering
and verifying information of an ethical, legal and reputational
nature relating to counterparties and aimed at identifying
potential compliance risks in advance.
During the year the certifying body performed audits of the
ISO 37001 Anti-Corruption Management System of Pirelli
& C. S.p.A. and Pirelli Tyre S.p.A., and of the Affiliates in
Russia, Brazil and Spain, renewing the certification previously
obtained.
Referring to the contributions made to the External
Community, Pirelli has for many years adopted internal
procedures defining the roles and responsibilities of the
involved functions, and the operational process of planning,
achieving monitoring and control of results of the initiatives
supported. Pirelli procedure specifies that it may not promote
95
Report on Responsible Management initiatives for the benefit of beneficiaries in respect of whom
there is direct or indirect evidence of failure to abide by the
human rights, workers, the environment, or business ethics.
“Pirelli Values and Ethical Code” set forth in their turn that
the Company “does not provide contributions, advantages, or
other benefits to political parties or trade union organizations,
or to their representatives or candidates, this without
prejudice to its compliance with any relevant legislation”.
institutional relations of
Concerning
the Group, and
especially activities of corporate lobbying, Pirelli has adopted
a Corporate Lobbying Policy for ensuring this is done in
abidance with principles ratified by the Ethical Code and
the Group Anti-Corruption Programme and in line with
International Corporate Governance Network principles and
in all cases in compliance with laws and regulations current in
countries where Pirelli operates.
In terms of prevention and control, the audits carried out
by Internal Audit Department at Group subsidiaries include
monitoring of crime risks, among which corruption and fraud
figure. In this regard, it should be noted that, with reference
to 2021, on the basis of the reports received through the
whistleblowing reporting channel, no cases of fraud were
ascertained to the detriment of the Company.
There were no cases of public legal action against the
company regarding corruption practices.
Additionally, during the course of 2021 the implementation
of the Functional Segregation model continued (so-called
Segregation of Duties), aimed at strengthening the system of
internal controls and preventing the committing of fraud.
it subscribes as supporter
Also in 2021, Pirelli supported the activities of Transparency
International, to which
in
educational area projects aimed at promoting an active role
of civic and moral education in strengthening civil society
against crime and corruption, believing that it is only through
proactive and firm actions of value promotion that a general
improvement in the quality of life can be achieved.
With reference to Privacy - personal data protection, in 2021,
the processing activities carried out by Group companies
based in the European Union, the Russian Federation, Turkey,
South Africa and Brazil were monitored in order to verify their
compliance with the applicable data protection regulations.
At the same time, a project was launched to implement
a personal data protection management model in all the
countries of the APAC region, due to the different legislative
changes. One of the main focuses of this project was Chinese
legislation.
Finally, during 2021, Pirelli was not involved in any proceedings,
investigations or inspections by data protection authorities,
either within the European Union or within elsewhere.
In relation to trade compliance issues, in 2021 Pirelli adopted
a management system to ensure compliance with the relevant
regulations in the performance of its business activities. This
management system was formalised with the updating of the
Global Sanctions Compliance Policy and the definition of an
operating manual (Global Sanctions Compliance Handbook).
In addition to this documentation, Pirelli has also developed
and implemented a risk-based system for the automated
monitoring of commercial counterparties (customers and
suppliers) using dedicated tools and platforms.
On the subject of Antitrust and in line with the provisions of its
Global Antitrust and Fair Competition Policy, Pirelli operates in
accordance with fair and proper competition for the purpose
of Company and at the same time, market development. In
this context, Pirelli constantly updates the Group’s Antitrust
Programme in line with international best practices.
Throughout 2021 Pirelli continued to
implement the
Antitrust Programme in the various Countries in which it
operates: online training activities were carried out, as well as
continuous business assistance to facilitate the management
of antitrust issues in the daily conduct of business activities
or relationships with other operators.
During 2021 Pirelli was not
in any antitrust
proceedings or significant investigations as participant in
anti-competitive conduct.
involved
FOCUS: REPORTING PROCEDURE - WHISTLEBLOWING POLICY
The Group Reporting Procedure, or Whistleblowing Policy
supports the Group’ internal compliance and control systems.
It is aimed at both employees and external stakeholders; it is
internally accessible through intranet and company bulletin
boards in the local language and externally through Pirelli
website.
The Policy governs the manner of reporting breaches,
suspected breaches and inducement to breaches in the
matter of law and regulations, principles ratified by the Code
of Ethics, including reports relating to equal opportunities,
discrimination and mobbing, in addition to all that is dealt
with in the aforementioned Group Policies, internal auditing
principles, corporate policies, rules and procedures, and any
other behaviour involving commission or omission of acts
that might directly or indirectly lead to economic-equity
detriment, or even one of image, for the Group and/or its
companies.
The reporting channel is also expressly referred to by the
Sustainability Clauses included in each supply order/contract
as well as being reiterated in the text of the different Group
policies published on the Company’s website.
Reports may be made also in an anonymous form and
protection of utmost confidentiality is at all times restated, as
too is zero tolerance in respect of acts of reprisal of any kind
against whoever makes a report or is the subject of the report.
Reports may concern directors, auditors, management,
employees of the Company and, in general, anyone operating
in Italy or abroad for Pirelli or engaging in business relations
with the Group, including partners, customers, suppliers,
consultants, collaborators, auditing companies, institutions
and public entities.
96
Pirelli Annual Report 2021 The e-mail box ethics@pirelli.com is made available to anyone wishing to proceed with an alert, which is valid for
all Group subsidiaries, as well as for the External Community, and is centrally managed by the Group Internal
Audit function which, in the Pirelli organisation, has a functional reporting to the Audit, Risks, Sustainability
and Corporate Governance Committee, made up of only independent directors, and to the Board of Statutory
Auditors of Pirelli & C. S.p.A.
Internal Audit Department has the task of analysing all reports received, even involving corporate functions felt
to be concerned for the activities necessary of verification, in addition to scheduling specific action plans. In the
event of a report being found to be grounded, adopting fitting disciplinary and/or legal actions is foreseen for the
protection of the Company.
In respect of reports received in the years 2021, 2020 and 2019, below is a summary table, followed by an in-
depth analysis of those pertaining to 202113.
2021
2020
2019
Total reports
Of which anonymous
Of which filed closed for being absolutely generic
Of which founded
59
35
12
12
50
17
3
20
77
29
7
25
Countries of origin of the reports ascertained
Argentina, Brazil and Romania
Argentina, Brazil, and UK
Brazil, Bulgaria, Dubai, Greece,
Italy, Romania, and Russia
Matter alleged in the reports ascertained
Violation of the Code of Ethics and/
or company procedures.
Violation of the Code of Ethics
and/or company procedures,
fraud against the Company or
third parties, employee claims,
discrimination.
Violation of the Code of Ethics and/
or company procedures, fraud
against the Company or third
parties, product quality anomalies,
discrimination.
Outcome of cases investigated
Review and integration of
processes where deemed fitting,
decisions by the functions
concerned and the Human
Resources Department.
Review and integration of
processes where deemed fitting,
decisions by the functions
concerned and the Human
Resources Department.
Review and integration of
processes where deemed fitting,
decisions by the functions
concerned and the Human
Resources Department.
During the course of 2021 the Whistleblowing procedure was activated 59 times. In particular:
→ the 59 reports were received from 6 different Countries (Argentina, Brazil, Italy, Romania, Turkey and the UK);
→ 92% of the reports (54 cases) were forwarded using the email address ethics@pirelli.com provided, while 8%
(5 cases) by sending a letter to management which dealt with informing Internal Audit Department as per
corporate rules;
→ 41% of the reports (24 cases) were signed whereas the remaining 59% (35 cases) were received in anonymous
form;
→ among the signed notifications, 5 were activated by external Stakeholders, all the 5 cases were related to
breaches of the Code of Ethics and/or company procedures. It is objectively impossible to confirm that there
were, in absolute terms, no further reports from external Stakeholders received as a number of reports were,
as specified, anonymous.
Of the 59 reports received during the 2021 year, at the beginning of 2022, 7 were found to be at the verification
and in-depth investigation stage, whereas 52 were found to have been concluded.
13 The data reported are related only to the consolidated scope of the Consumer business. Furthermore,
with regard to the 6 reports that were still in progress at the reporting date of the 2020 Annual Report,
following the conclusion of the verification activities in 8 cases no objective evidence was found to
consider the facts alleged to be true, while in 3 cases the partial veracity of the reports was confirmed and
the company intervened with specific plans aimed at removing the causes and/or improving the internal
control system.
97
Report on Responsible Management With regard to the 52 reports for which the audits were concluded, specific activities of verification involving,
where necessary, the corporate functions concerned were conducted, and based on the analyses carried out and
the documentation made available during the assessment, it emerged that:
→ in 40 cases objective corroborating evidence was detected such as to hold the facts contended in the reports
received to be true;
→ in the remaining 12 cases, the substantial truthfulness of the facts attributed was found, in particular, all 12
cases concerned violations of the Code of Ethics and/or company procedures. The Company has activated for
all cases, intervening with disciplinary sanctions (reprimands) and with actions aimed at removing the causes
of complaints and/or aimed at improving the internal control system.
In 2021 there was a slight fall in reports compared to 2020, although remaining at an even lower level than in
2019, likely to be linked to, and thus before, the Covid-19 health emergency period.
The Internal Audit Department periodically reported the reports received and the progress of the analyses carried
out to the competent corporate bodies of Pirelli & C. S.p.A.
GRIEVANCE MECHANISM NATURAL RUBBER
In 2021 the Pirelli Group made available to its Stakeholders a grievance mechanism for reporting violations of
the policy on the sustainable management of natural rubber throughout the supply chain. Reports, including
anonymous ones, are sent to the email address grievance.naturalrubber@pirelli.com and are treated confidentially.
98
Pirelli Annual Report 2021 Economic dimension
SHARING OF ADDED VALUE
The Values and Ethical Code of Pirelli ratify the commitment of the Company to operate to ensure responsible
development over the long term, while being aware of the connections and interactions between economic, social
and environmental dimensions. This is to wed the creation of value, the progress of the company, the attention
given to Stakeholders and the raising standards of living and quality of the environment.
“Added value” means the wealth created over a given reporting period, calculated as the difference between
the revenues generated and the external costs sustained in the period. Distribution of added value among
Stakeholders allows the relations there are between Pirelli and its main Stakeholders to be expressed by focusing
attention on the socio-economic system in which the Group operates.
DISTRIBUTION OF ADDED VALUE
Gross Global Added Value
2021
2,194,760
2020
1,674,788
(in thousands of euro)
2019
2,315,148
Remuneration of personnel
(1,101,913)
50.3%
(949,678)
56.7%
(1,072,167)
46.3%
Remuneration of Public Administration
(115,158)
5.2%
(14,693)
0.9%
(164,562)
Remuneration of borrowed capital
(144,281)
6.5%
(156,502)
9.3%
(109,480)
Remuneration of risk capital
-
0.0%
0.0%
(177,000)
7.2%
4.7%
7.6%
Remuneration of the company
(830,269)
37.5%
(548,726)
32.8%
(788,044)
34.0%
Contributions to the external community
(3,138)
0.1%
(5,189)
0.3%
(3,895)
0.2%
The added value created in 2021 is 31% higher than in 2020. Trends in the items determining gross global added
value, as shown above, are set out in the Directors’ Report and Consolidated Financial Statements section of this
Report, to which reference is made for further in-depth study.
CONTRIBUTIONS TO THE EXTERNAL COMMUNITY
The impact of expenses for corporate initiatives in 2021 for the external community on the net result of the
Group amounted to 1% (12.2% in 2020). The decrease in this ratio compared to the previous year is due to
lower contributions made during the year to the external community (in 2020, Covid-19 donations amounted
to €2,745,000, whereas in 2021 they were absent), which in turn were weighed on a higher Group net result
compared to the previous year.
The table below shows the expenses incurred in the last three years:
CCONTRIBUTIONS TO THE EXTERNAL COMMUNITY
(in thousands of euro)
Training and research
Social-cultural initiatives
Sports and solidarity
Total contributions to the external community
2021
2020
2019
755
1,918
465
3,138
738
1,441
3,010
5,189
691
2,136
1,068
3,895
For further study of the main initiatives supported by the contributions indicated above and related model of
governance, please refer to the paragraphs in this report devoted to corporate contributions and initiatives for
the external community. It should also be noted that the amounts allocated to trade associations amount to a
99
Report on Responsible Management total of €865,000. Trade associations, among their activities, interact with policy makers, but it is not possible
for us to estimate the share dedicated exclusively to lobbying activities. For more details on lobbying activities
with European institutions, see the paragraph “ETRMA - European Tyre and Rubber Manufacturers Association”.
TRADE ASSOCIATIONS
Assolombarda (Italy)
USMTMA - U.S. Tyre Manufacturing Association (USAi)
ETRMA - European Tyre Rubber Manufacturers Association (Europe)
wdk - Wirtschaftsverband der deutschen Kautschukindustrie e.V. (Germany)
ANIP - National Association of Tires Manufacturers (Brazil)
British Tyre Manufacturers’ Association (United Kingdom)
Other
Total Trade associations
(in thousands of euro)
2021
299
169
73
70
68
35
151
865
Lastly, in line with what is set forth in the Code of Ethics, Pirelli “does not provide contributions, advantages, or
other benefits to political parties or trade union organizations, or to their representatives or candidates, this
without prejudice to its compliance with any relevant legislation”. For this reason, contributions in these areas
are absent (zero). It should be noted that Pirelli’s institutional relations are permeated by criteria of maximum
transparency, legitimacy, and responsibility, both with respect to information disseminated in public venues and
to relations managed with institutional interlocutors in accordance with the Ethical Code and the Institutional
Relations - Corporate Lobbying Policy.
LOANS AND CONTRIBUTIONS RECEIVED FROM THE PUBLIC ADMINISTRATION
The main contributions received by the Public Administration in 2021 are shown below.
ROMANIA
The Company S.C. Pirelli Tyres Romania S.r.l. received a non-repayable grant of €28.5 million from the
Romanian state as an incentive for local investments, of which €3.0 million in 2021 (the incentives were paid
from 2018 onwards).
ITALY
The Company Pirelli Tyre S.p.A. obtained incentives from the Lombardy Region in the form of non-repayable
grants of €1.695 million and €2.462 million for the implementation of two Research and Development projects
on Safety and Smart Manufacturing. The first project has been completed, while for the second one €558,000
were received in the current year as the balance.
With reference to the agreement signed with the MiSE (Ministry of Economic Development) in the 2019
financial year for the facilitation of three Research and Development projects up to a maximum of €6.3 million
in the aggregate, in the current year the Company obtained the three respective decrees granting the subsidies
from MiSE.
RELATIONS WITH INVESTORS AND THE FINANCIAL MARKET
Pirelli engages in constant dialogue with shareholders, bondholders, institutional and individual investors, and
analysts at the major investment banks via the Investor Relations function and the Group’s Top Management,
promote communication that is equal, transparent, timely and accurate, in line with the provisions of the Group’s
Values and Code of Ethics.
100
Pirelli Annual Report 2021 During 2021, communication activities with the financial market continued with meetings and virtual roadshows
due to the Covid-19 pandemic. Particularly noteworthy was the presentation of the 2021-22 | 2025 Business Plan,
which was widely attended by the main Italian and foreign analysts and investors connected via video-streaming.
In line with international Best Practices, the “Investors” section of the Pirelli website is constantly updated with
information on strategy, business model, market performance and positioning with respect to competitors.
The interest of the financial community towards Pirelli is proved by the broad coverage of the stock by 20 of
the main national and international business banks and brokers and by the inclusion of the company in the main
indices, including FTSE ALL World, FTSE MIB, MSCI Small Cap and Listed Italian Brands.
The evaluation (Target Price) and the analysts’ estimates (Consensus) are published in the “Investors” section
on the company’s website and periodically updated, based on publications and model updates by analysts
covering the stock.
After a 2020 characterised by the health crisis and the consequent impacts of Covid on the real economy (due
to the lockdowns implemented in the main countries), in 2021 equity markets were characterised by a general
upturn, in a context of recovery of economic activity supported by the progressive diffusion of vaccines, and in
particular by the support of expansionary fiscal and monetary policies by governments and central banks. Pirelli
ended 2021 with a market capitalisation of €5.93 billion (average December capitalisation), up +40%14. This
compares with -14%14 for Continental, +20%14 for Nokian, +40%14 for Michelin, +51%14 for Bridgestone, +95%14,15
for Goodyear, and +25%14 for the EU Stoxx 600 A&P index.
Below is a summary of stock market performance since the beginning of the year:
1-Jan
29-Jan
26-Feb
26-Mar
23-Apr
21-May
18-Jun
16-Jul
13-Aug
10-Sep
8-Oct
5-Nov
3-Dec
31-Dec
Pirelli
Nokian
Michelin
Continental
Goodyear
Bridgestone
EU A&P Index
FTSE Mib
Source: Bloomberg
In 2021 Pirelli confirmed its commitment and contribution to a sustainable economy with a €400 million 3-year
loan, parameterised on the Group’s environmental sustainability objectives (CO2 emissions and sustainable
management of natural resources). The loan - which follows the debut on the ESG loans market in March 2020
- demonstrates the financial community’s appreciation of Pirelli’s financial strength and the environmental
commitments undertaken by the Group.
Pirelli’s commitment to the creation of sustainable value that characterizes the Company’s responsible
management and its economic, social and environmental performance allows it to be included with top industry
ratings in some of the world’s most prestigious sustainability stock market indices, including Dow Jones
Sustainability Index World and Europe and FTSE4Good, demonstrating in both their leadership in sustainability
in their segments, MIBESG, Ethibel Sustainability Index (ESI) Excellence Europe, ECPI, ISS ESG Rating and
MSCI ESG Rating.
With specific reference to the Dow Jones Sustainability indices, in 2021 as well as in February 2022 Pirelli was
recognised as S&P Global Gold Class in the S&P Sustainability Yearbook, with a score of 77 compared to a sector
average of 31. S&P Global’s awards are based on S&P Global’s Annual Corporate Sustainability Assessment for
S&P Dow Jones Sustainability Indexes World and Europe, which in 2021 analysed the ESG performance of more
than 7,500 companies in different sectors.
14 Stock market trend 1 January - 31 December; the value is net of dividend distribution and/or other
extraordinary transactions.
15 Goodyear’s stock market trend also benefited from the acquisition of Cooper (announced on 22 February
and completed on 7 June).
101
Report on Responsible Management In December 2021, Pirelli was reconfirmed in the Climate
A list of the CDP (formerly the Carbon Disclosure Project),
making it one of the global leaders in the fight against climate
change, as was also the case in 2020 and 2019. The “A” rating
is the highest score that can be awarded and was assigned
to only 200 companies out of the 13,000 that reported
their greenhouse gas emissions in 2021 through the CDP (a
non-profit organisation supported by over 590 institutional
investors, who manage assets worth over US$110 trillion) and
by more than 200 large buyers with a purchasing power of
US$5.5 trillion).
OUR CUSTOMERS
Pirelli is the only global tyre manufacturer entirely dedicated
to the Consumer market, which includes tyres for cars,
motorcycles and bicycles.
The company is focused on the High Value market and is
committed to developing innovative tyres and Specialties
and Superspecialties for a broad product portfolio. Sales
channels include:
→ Original Equipment, addressed directly to the world’s
leading car manufacturers;
→ Replacement, for the replacement of tyres on vehicles
already in circulation.
In the Original Equipment Vehicles, Sport Utility Vehicles (SUVs)
and light commercial vehicles segment, Pirelli can count on a
Premium customer market share of around 20% globally and
more than 25% in Europe; in the Prestige segment, which
ranks at the top of the range, Pirelli sits at around 50%.
In the Replacement segment, there are two broad types
of customers: Specialised Resellers and Distributors.
Specialised Resellers are tyre specialists operating on the
market in the role of independent businesses, specialised
dealers constitute a fundamental point of contact between the
Group and the end consumer. Particular attention is devoted
to specialised dealers in terms of shared development to
enhance the product offering integrated with a high-quality
level of service, in compliance with Pirelli values and consumer
expectations. In 2021, Pirelli can count on around 18,000
Loyal Resellers globally, with a particular concentration in
Europe, Asia-Pacific and South America (over 75% of the
total points of sale). The degree of affiliation varies according
to the market and the very presence of Pirelli, ranging from a
softer loyalty (Fidelity Club), whose main objective for Pirelli
is territorial coverage and for the dealer sales support; to
franchise programmes, in which through the exclusivity of the
partnership there is strong focus on business development
point of sale overall; up to the maximum degree of affiliation,
represented by the presence of points of sale owned by Pirelli
(301 points of sale worldwide).
Collection, Moto and Velo) and a series of customer-oriented
services such as car valets and courtesy cars, all immersed in
an environment that allows you to fully experience the Pirelli
World, being able to touch the most important assets such
as F1®, the Calendar and the partnerships of Pirelli Design.
By 2021, the P ZERO WORLD™ Network will identify over
100 stores in 2022 among Pirelli’s best customers, located in
the main countries of the world. Among these, 5 are already
active Flagship Stores (Los Angeles, Munich, Monte Carlo,
Dubai and Melbourne), while the remaining are authorised
dealers, with about 30 new openings planned for 2022.
fundamental
to
“Distributors” are partners who are
guaranteeing continuity in the supply of tyres to other
specialised and non-specialised resellers. They do so by
offering local delivery and distribution services throughout
the entire territory. With this in mind, Pirelli is activating several
programmes of close cooperation with the most important
market distributors worldwide.
CUSTOMER FOCUS
Customer focus is a central element of the Group “Values”
and “Ethical Code” and the “Quality Policy” and “Product
Stewardship Policy” of Pirelli. These documents outline the
company positioning and are therefore communicated to all
employees in the local language and are available in many
languages on the Pirelli website.
Among the essential elements of the Pirelli approach, the
following are highlighted:
→ consideration of the impact of its actions and behaviour
on the customer;
→ making use of every opportunity offered by doing business
to satisfy the customer’s needs;
→ anticipation of customer needs;
→ safety, reliability, high performance of products and services
offered, in accordance with local regulations and more
developed national and international standards applicable,
as well as excellence of production systems and processes;
→ information to customers and end users to guarantee an
adequate understanding of the environmental impacts and
safety features of Pirelli products, as well as of the safest
ways of using the product.
Pirelli also adopted a clear procedure to grant a feedback to
any customer claim, which involves immediate intervention
with respect to the interlocutor.
TRANSPARENCY, INFORMATION AND CUSTOMER TRAINING
In the context of advertising communication, Pirelli has
defined a traceable and transparent process for decisions
relating to advertising campaigns and related media planning,
both in the case of promotional activities managed centrally
and locally with central supervision.
Starting in 2016, and in line with Pirelli’s “Prestige” strategy, a
new retail concept called P ZERO WORLD™ was born, with the
aim of offering the best services to satisfy the most demanding
consumers. P ZERO WORLD™ offers its customers the
entire range of Pirelli products (Car, P ZERO™ Trofeo®, Pirelli
In terms of production of advertising campaigns and media
planning, Pirelli uses specific auditing and certification
structures that place the Company at the highest levels
in terms of transparency and traceability in its advertising
investment strategies.
102
Pirelli Annual Report 2021 The Pirelli Group endorses the IAB (Interactive Advertising
Bureau) and
is associated with the UPA (Associated
Advertising Users), among other things dedicating ongoing
commitment to support the Advertising Code of Corporate
Governance of the association. Through the UPA, Pirelli is
a member of the WFA (World Federation of Advertisers),
which commits participating firms to pursue honest, truthful
and fair competition and communication in compliance with
the code of conduct and self-regulation which they adopt.
Consumer protection is also guaranteed by the choice of
suppliers in the communication sector (creative agencies,
media centres, production companies) that in turn belong to
business and professional associations governed by ethical
codes regarding communication.
Pirelli provides information to customer-distributors and end
customers on a continual basis. This information concerns
both the product and related initiatives, and is disseminated
in a variety of ways, including digital channels, and this is
complemented by
in hard copy
format, as well as the range of offline and online training
activities.
information distributed
With 58 Car websites (in 31 languages) and 20 Motorcycle
websites (in 14 languages), online represents for Pirelli a
fundamental point of contact with the customer in the tyre
purchase process. These product websites, located not only
by language, but also for content, offer and promotional
activities, have the objective of informing and guiding the
consumer, in all countries where Pirelli markets its products,
to the points of sale where to buy the tyres. In 2021, these
websites attracted 12.8 million unique users, for a total of 17.4
million sessions and around 41.4 million page views.
A further digital touchpoint that brings the consumer to the
point of sale is represented by the Retail sites: present in 10
countries, it has intercepted 1.8 million users in 2021 (for a
total of 7.8 million page views) and generated about 158,000
appointment bookings, more than 97,000 calls to the dealer,
more than 24,500 contact requests via e-mail.
Also in 2021 Pirelli continued to inform its customers through
a Direct E-mail Marketing (DEM) programme whose main
objective is to provide an additional tool for communication,
training and ongoing contact with the trade. The DEMs aim to
inform trade customers of the main new products, the Company
and the courses available to become Pirelli Product Experts.
In addition, during 2021, information about the introduction
of new products was carried out through digital channels: the
new Cinturato family in Europe, the Scorpion AS+3 in North
America and the Seal Inside technology in Latin America
were presented to customers with digital events that
involved about 4,000 dealers and allowed Pirelli to convey
its innovation and technology in a new, fast and effective way.
During 2021, due to the instability linked to the COVID health
emergency, several of the major events (such as Autoshows,
Concours d’Elegance, rallies, etc.) that usually populate the
automotive world and that have always been the main focus
of Pirelli’s business plan were held “behind closed doors” or
under the aegis of restrictive anti-Covid protocols, limiting
the possibilities of activation, both in B2B and B2C terms.
Nevertheless, Pirelli was able to participate as a partner of
prestigious Car Manufacturers such as Pagani Automobili
in the 2021 edition of the prestigious “Rolex Monterey
Motorsport Reunion”, one of the main events of the
“Monterey Car Week”, as well as create five appointments of
the P Zero™ Experience, respectively at Silverstone, Mugello,
Red Bull Ring, Hockenheim and Thermal Club, which hosted
a total of 616 participants.
Pirelli continues its commitment alongside the sports most
in line with the prestige and high performance positioning
that characterise the Company and its products: this is the
case of the partnership launched in 2018 with Luna Rossa,
challenger of record in the America’s Cup 2021, to which
are added the sponsorship relations with FC Internazionale
Milano, which in 2021 achieved its 19th national title and
of which Pirelli will become Global Tyre Partner from the
2021-2022 season after 26 years on the nerazzurra jersey;
as well as consolidated partnerships with the Italian Winter
Sports Federation, the Ice Hockey World Championships
and the Alpine Skiing World Championships held in Cortina
d’Ampezzo in February 2021.
Customer training on the product was also intense in
2021 in all markets, through virtual delivery due to the
persistence of the Covid-19 pandemic. During the year,
almost 5,000 participations of dealers, belonging to the
30 main markets, in online training courses on the Pirelli
product, technology and tyre sales were recorded.
In order to support the product trainers, Pirelli continues
to develop a library of technical content developed for
classroom courses and the “TYRE CAMPUS™ Case”
instrument, which aims to concretely demonstrate the
characteristics of Pirelli tyres, the raw materials used for
their manufacturing and the benefits of the different treads.
With these tools, Pirelli trainers around the world can have
concrete and innovative support that allows customers to
personally understand and verify the key characteristics
and advanced technology of Pirelli products.
During 2021 there was an increase in the use of the online
training site TYRE-CAMPUS™, which now covers 30
markets in 17 different languages. To date, over 18,500
active users on the training platform. Training on the
product is provided in an engaging and customisable way
on the various types of distribution channel, with more
paths linked to the individual product families. In addition to
being involved in a modern and intuitive environment, users
are also involved in the obtaining of the “Product Expert”
certification which can be obtained and downloaded from
the site once all the training courses assigned during the
year have been completed.
103
Report on Responsible Management LISTENING AND EXCHANGING IDEAS WITH CUSTOMERS
AS SOURCES OF CONTINUOUS IMPROVEMENT
Customer relationships are managed by Pirelli principally
through two channels:
→ The local sales organization, which has direct contact with
the customer network and which, thanks to advanced
information management systems, is able to process and
respond to all information requirements of the interlocutor
on-site;
→ the Pirelli Contact Centres, nearly 30 worldwide with more
than 160 employees, performing business operations in IT
support and order management (inbound), telemarketing
and teleselling (outbound).
In 2021, the major social media channels of Pirelli have seen
an increase in the fan base. Pirelli’s presence on Facebook has
stabilised at over 2.6 million followers. On Twitter, the Pirelli
accounts have seen an increase in followers, reaching around
444,000 people, over 29% more than in 2020. An important
step forward was on Instagram, where the Pirelli channels
reach nearly 960,000 followers, an increase, year-on-year, of
more than 11%. Finally, there are more than 26,000 followers
of Pirelli on the main online video platform, YouTube, and over
570,000 followers on LinkedIn.
As for www.pirelli.com, Pirelli’s digital magazine, more than
320 articles were published in 2021 - 70% of which related to
product and motorsport issues and 30% to the dimensions
of the brand and company - attracting over 5.5 million visits
(55% of which were attracted through social networks) and
more than 4.8 million unique users. There is no shortage of
sustainability-related content in the publications, including
the ‘Thinking Ahead’ column or the article on the first FSC-
certified car tyre (“FSC™, on the green side of the world
since 1993”).
As for the Motorcycle world, Pirelli and Metzeler brands boast
a structured and widespread presence on the main social
networks: Pirelli brand, as well as on the Facebook channel
(with more than 988,000 fans connected to the Global Page
which includes 18 local pages) is on Instagram with over
165,000 followers and has dedicated profiles on Twitter and
YouTube. Significant for the business is the mobile application
DIABLO™ Super Biker, which has been completely renewed
and improved from the point of view of the usability and
functionality offered to the motorcyclist. The Metzeler brand,
in addition to its international website and geo-localised in
24 countries worldwide, which in 2021 intercepted 1.1 million
unique users, with a total of 1.5 million sessions and 4.6 million
page views, is present on Facebook with a Global Page that
has more than 437,000 fans and includes 16 local pages in as
many Countries. As with Pirelli brand, Metzeler has had active
Instagram, Twitter and YouTube profiles for years. The CRM
(Customer Relationship Management) project, in turn, has a
priority position given the passion for Pirelli products by the
registered community of motorcyclists: more than 473,000
for PIRELLI Moto and around 81,000 for Metzeler.
Pirelli Cycling, in turn, speaks with its consumers also through
a dedicated website. Immediately active in Instagram, Pirelli
Cycling bases its communication on digital activation in line
with the propensities of its target consumer.
Also in 2021 direct customer listening activities were carried
out both through the Brand Tracking survey in Pirelli’s Top
Market (Italy, Germany, United Kingdom, China and United
States) and through surveys to consumers with whom Pirelli
has a direct and constant dialogue thanks to structured
CRM activities. The ongoing changes made to this study
over the years have made it possible to refine and improve
the precision of business insights into the brand role, image
profile and characteristics of the different touchpoints that
influence the end customer’s purchase decision.
In terms of performance indicators, Pirelli considers Top
of Mind, Brand Awareness and Brand Consideration. With
reference to the Target Premium 18” Up represented by
Premium car owners which can mount tyres with rims equal
or higher than 18 inches, the analysis carried out in 2021 saw
Pirelli positioned among the main tyre brands: in second place
for Top of Mind, Brand Awareness and Brand Consideration in
the United Kingdom, in first place for Top of Mind and Brand
Awareness and second place for Brand Consideration in Italy,
third place for Top of Mind and Brand Awareness, and fourth
place for Brand Consideration in Germany. Outside Europe,
Pirelli is in fourth place for Top of Mind and in fifth place for
Brand Awareness and Brand Consideration in the USA; while
in China it was in third place for Brand Consideration, and
fifth place for Top of Mind and Brand Awareness.
QUALITY AND PRODUCT CERTIFICATION
ISO 9001: since 1970, the Group has had its own Quality
Management System introduced gradually at all its plants
and, since 1993, Pirelli has obtained certification of its
quality system under the ISO 9001 standard. The transition
process of its plants and the Headquarters to certification
according to the new ISO 9001: 2015 ended in September
2018. In 2019, all the certifications obtained were verified
by third-party bodies and kept active. In 2020, following the
pandemic situation related to Covid-19, the IAF (International
Association Forum) admitted the possibility of implementing
remote audits and extending the validity of expiring
certificates. Pirelli has guaranteed the implementation of
remote and field recertification and surveillance audits, where
possible, in accordance with IAF rules and in compliance with
the rules for the preservation of personnel health, established
by the country and the company itself. Also in 2021, due to
the continuation of the pandemic situation, the Company has
continued to carry out surveillance audits in accordance with
the procedures laid down by the relevant third-party bodies,
ensuring the continuity of the certifications obtained.
IATF 16949:2016: since 1999 the Group has obtained the
certification of its Quality Management System according to
the automotive scheme and subsequent evolutions. Following
the evolution of ISO 9001: 2015 and the new IATF 16949:2016
(Automotive Scheme became private), Pirelli achieved the
Quality Management System certification in 100% of its
eligible plants as at 31 December 2018In 2020, due to the
pandemic situation, the International Automotive Task Force
allowed remote audits starting on October 30, 2020. In
104
Pirelli Annual Report 2021 this case as well, Pirelli guaranteed the implementation of
surveillance and recertification audits in the field, and then
remotely, in accordance with IATF rules and in compliance with
the rules for the preservation of personnel health, established
by the country of origin and by the Company itself.
Also in 2021, due to the continuation of the pandemic
situation, the Company has continued to carry out surveillance
audits in accordance with the procedures laid down by the
relevant third-party bodies, ensuring the continuity of the
certifications obtained.
1993
since
17025:
the Materials
and
ISO/IEC
Experimentation Laboratory of Pirelli Tyre S.p.A. and since
1996 the Experimentation Laboratory of Pirelli Pneus (Latin
America) hold the Quality Management System and have
been accredited under the ISO/IEC 17025 standard. This
system is maintained in accordance with the standard in
force and the ability of the laboratories to perform accredited
tests is evaluated annually. In accordance with the rules for
transition to ISO/IEC 17025:2017, in 2019 Pirelli Tyre S.p.A.
Laboratory successfully obtained accreditation for the new
version. In 2020, the laboratory carried out its annual remote
surveillance audit as required by the Accreditation Body
Accredia and in 2021 in hybrid form.
The labs participate in proficiency tests organised by the
International Standard Organisation, by European Tyre and
Rim Technical Organisation (ETRTO) or by international
circuits organised by auto manufacturers. Specifically
with regard to car tyres, the focus on quality is confirmed
by Pirelli’s supremacy in numerous product tests. It is also
guaranteed by its collaboration on product development and
experimentation with the most prestigious partners (auto
manufacturers, specialised magazines, driving schools,
etc.).
The Product Certifications, which allow the marketing of
the same in the various markets in accordance with the
regulations laid down by the different Countries and, for some
markets, are managed directly by the Quality Function. The
prevailing certifications, obtained in Pirelli Group, concern
the markets of Europe, North America, South America,
China, Gulf Countries, India, Taiwan, Indonesia, South Korea,
Argentina and Australia (the latter only “on demand”, as it
considers both the DOT - Department of Transportation -
marking and the UNECE certificate valid), and involve all Pirelli
factories. These Certifications periodically require factory
audits by ministerial bodies of the countries concerned or
bodies delegated by them, with the aim of verifying product
compliance at Pirelli production sites.
In 2021 a number of Government and/or Type Approval
Authorities (e.g. for the China, Brazil, Uruguay, India and
Indonesia markets) carried out remote audits to verify
production compliance.
Due to the continuation of the pandemic situation, some
certifications were issued by third-party certification bodies
with delays (e.g. India, Argentina) without any impact on
business activities.
105
COMPLIANCE
Also in 2021:
→ no significant final penalties were levied and/or paid relating
to infringement of laws or regulations, including those
relating to the supply and use of the Group’s products and/
or services;
→ no cases emerged of non-compliance with regulations
or voluntary codes concerning information and labelling
of products/services which have led to the imposition of
sanctions and/or injunctions by the applicable authorities;
→ no cases of non-compliance with regulations or voluntary
codes concerning health and safety impacts of products/
services during their life cycle;
→ there were no documented complaints concerning both
violation of privacy and/or the loss of consumers’ data;
→ no recall campaigns have been implemented;
→ there were no bans or disputes on the sales of any Pirelli
product;
→ no non-compliance with regulations or voluntary codes
concerning advertising and sponsorship activities was
recorded. With regard to marketing-promotional activities,
and in particular prize competitions, a fine was imposed for
failure to comply in advance when an influencer offered
on two tickets his social channels (worth a total of €149)
provided by Pirelli for an event held at a motorbike circuit
in Italy. The case was settled with a payment of €1,291, the
legal minimum, with no further consequences.
PRODUCT SAFETY, PERFORMANCE AND ECO-SUSTAINABILITY
Pirelli’s Eco&Safety strategy places Safety for people and
technological solutions in support of the environment among
the essential values of its product offering and commitment.
In 2021 the Company confirmed its continued focus on the
development and marketing of tyres and technologies that
aim to increase safety and enhance the potential of cars in
tandem with attention to the environment.
In 2021 Pirelli marketed several product
lines. Several
replacement products were introduced for the European
market: CINTURATO ALL SEASON SF2, WINTER CINTURATO
2 and POWERGY. This concludes the renewal of the cinturato
family after the introduction of the new CINTURATO P7 in 2020.
The CINTURATO ALL SEASON SF2 is the new generation All
Season 3PMSF product, developed to offer maximum safety
levels in all weather conditions, as well as high mileage. The
product’s qualities have also been recognised in numerous
tests by specialist magazines, such as the British magazine
Tyre Reviews, which placed the product on the podium,
describing it as an excellent and balanced product. The
magazine also highlighted the product’s excellent Rolling
Resistance values, which confirm the company’s focus on
sustainability. In fact, the CINTURATO ALL SEASON SF2 has
some of the highest label values in its category: over 75% of
the range is in class B for rolling resistance, while the entire
product range is in class B for braking on wet surfaces.
Pirelli’s European offer has also been renewed for the Winter
segment, with the introduction of the new Cinturato Winter
2, the latest product in the CINTURATO family introduced,
Report on Responsible Management intended for modern CAR and CUV vehicles. The product
offers high performance on snow, excellent mileage as
well as reliable and safe performance in winter conditions
guaranteed by TÜV certification. The product is also equipped
with Seal Inside and ELECT technologies; and labelled class
B-C for rolling resistance values and B for wet grip values.
The POWERGY is the new Pirelli product line for urban
cars and SUVs for summer applications: the smart choice
for consumers looking for the quality of a premium brand,
the safety of a Wet Grip class A product and at the same
time attention to the environment (Rolling Resistance class
B). In fact, the product offers excellent levels of safety and
sustainability, providing the consumer with reduced fuel
consumption in total safety on wet roads.
SUV/Pick-up on/off road segment. The product guarantees
excellent levels of safety, driveability, and efficiency. In
addition to the renewal of the product range, Pirelli was
awarded excellent results by the most prestigious magazines
in the sector (European, Nordic and Russian). In particular,
Pirelli products achieved 9 podiums and 3 victories in 2021,
including the victory of the flagship product P-Zero PZ4 in
one of the most prestigious magazines: EVO. For the P-Zero
PZ4, this is the third victory since its introduction on the
market and even the 10th podium. Other top 2021 winners
were the ICE ZERO 2 and the CINTURATO P1 VERDE. In
North America, Pirelli products also achieved outstanding
results in tests conducted by TIRE RACK magazine: P7 ALL
SEASON PLUS 3, PZERO ALL SEASON PLUS and PZERO
PZ4 took first place in tests conducted in 2021.
With the renewal of the range, Pirelli has strongly focused its
efforts on products with the best rolling resistance values;
in Europe the Pirelli portfolio in class A/B is represented by
23% of the range, up from the previous year (2020 - 16%).
Specifically, the new labelled codes introduced by Pirelli
worldwide in 2021 have a very strong low rolling resistance
imprinting: 49% have A/B labels.
tyres developed specifically,
Attention to the evolution of mobility and the environment is
also expressed in the ELECT tyre range, which distinguishes
all
together with car
manufacturers, for electric vehicles. The marking represents
the clear identification of a tyre built through technological
solutions and material packages capable of enhancing the
technical features of electric cars, in particular in terms of:
large
investment
in products with excellent
This
environmental performance did not come at the expense
of safety (wet Grip); in Europe Pirelli’s A/B portfolio is
represented by 85% of the range, an improvement over the
previous year (2020- 82%). The new codes introduced by
Pirelli wordwide in 2021 strongly demonstrated the focus on
safety: 87% have A/B labels.
In addition, the strong focus on renewing the product range
also led to the introduction of the third generation of PLUS
lines for the North American market focused on safety and
high mileage: SCORPION ALL SEASON PLUS 3 for the SUV
segment and P7 ALL SEASON PLUS 3 for the CAR segment.
SCORPION ALL SEASON PLUS 3 is the new All Season Touring
product for crossovers, SUVs and Pick-ups. The product is
developed to meet the needs of the North American consumer,
offering high levels of safety in dry, wet and winter conditions.
In addition, the product has also been tested by TIRE RACK
magazine, which confirmed its safety and reliability features,
underlining its precision and excellent road handling. The
product has also been reviewed as best in class by TIRE RACK
users (Tire Rack Consumer reviews at 21 January 2022), with
outstanding performance recognised in all key performance
areas, including Treadwear, wet and dry performance.
Also recently introduced to the North American market from
Q4 2021 is the P7 ALL SEASON PLUS 3, the new touring tyre
for sedans and coupes. The new tread pattern and innovative
compound offer excellent levels of safety in all weather
conditions, best-in-class mileage and driving comfort. The
product was also tested in August 2021 by TIRE RACK
magazine and received first place; the magazine described
the product as balanced with excellent performance.
The renewal of the lines also influenced the LATAM region,
where Pirelli introduced the new SCORPION HT for the
106
→ low rolling resistance, to increase the life of the car battery;
→ low acoustic emissions, for greater driving comfort, in line
with the silence of electric traction;
→ greater resistance of the carcass to better support the
weight increase of the car given by the batteries and, at
the same time, guaranteeing better handling;
→ greater resistance of the tread compound to support the
higher torque generated by the electric motor, ensuring the
necessary road grip.
Pirelli’s growing role in the electric segment and strategic
development partner is also made even clearer by the
achievement of 191 (BEV) homologations from 17 different
carmakers. Pirelli’s strong OE investment was reflected
in a strong increase in OE sales with ELECT technology: in
2021 Elect sales in the OE channel accounted for 5% of the
channel total (vs. 1% in 2020). In the replacement channel,
thanks to Pirelli’s pull through strategy, Elect sales grew eight
times over 2020 sales.
Particularly suitable for electric vehicles, but not only, is
the PNCS™ technology, a crucial innovation for reducing
noise inside the passenger compartment generated by
tyre rolling as a result of stress between the road surface
and the tread pattern. The benefits have been recognised
by car manufacturers such as Volkswagen, Jeep, Alpina,
Karma, Great Wall, Enovate, Jaguar-Land Rover, Bmw,
Audi, Volvo, Polestar, Mercedes, Ford, Tesla, Lucid, Porsche,
Bentley, McLaren, Aston Martin e Rolls Royce, with over 320
homologations. PNCS™ technology not only increased its
impact on overall sales but also demonstrated its potential
and interest on the part of OEMs and end users during
2021, even during a year strongly characterised by the
global macroeconomic context, marking a growth in sales of
(quantity) both in the replacement channel (+81% vs 2020)
and in the original equipment channel and marking a growth
in the replacement channel (+13% vs 2020).
Pirelli Annual Report 2021 HIGH VALUE APPROACH TO FUTURE MOBILITY
Pirelli carefully monitors the evolution of mobility and its
main trends such as digitalisation, electrification, shared
mobility and driving automation, elements that were
already present before the health emergency and that are
expected to evolve strongly in the coming years. The health
emergency has
importance of
indeed highlighted the
personal health and safety, and a recovery is expected to be
oriented towards greater sustainability for people and the
planet, in which technologies can play a fundamental role
in making the mobility of the future safer, more accessible,
more efficient and with less environmental impact.
The mobility of the future cannot ignore digitalisation, and
in this area Pirelli is present with the Cyber™ project. The
tyre sensor-fitting, an integral part of the Group’s strategy
innovation a distinctive and
that makes technological
key element in responding to the major issues that will
transform the concept of mobility: self-driving cars, electric
cars, shared cars and cars with 5G connectivity.
In fact, experimentation activities related to 5G connectivity
and the enabling of V2V and V2X communication continue,
where the tyre plays a fundamental role in recognising and
communicating potentially dangerous situations related to
road surface conditions. This trial, promoted by the Italian
Ministry of Economic Development and led by Vodafone,
sees Pirelli as the project’s industrial partner with its Cyber
Tyre technology, a key player in important use cases of
future 5G connected mobility, with significant spin-offs in
terms of transport safety, efficiency and sustainability.
In 2021, the development of Cyber Tyre technology saw the
market launch of the first car with tyres natively integrated
with the vehicle’s electronic systems. This integration
project, which has taken several years and involved the
R&D teams of Pirelli and McLaren, opens the way to new
developments and innovations. The new McLaren Artura
with Cyber Tyre technology as standard, is equipped with
an advanced tyre monitoring system that can check tyre
conditions in real time and provide timely indications to
increase safety and performance, both on the road and on
the track.
The mobility of the future, in fact, will be characterised by an
increasingly marked polarisation: on the one hand its service
dimension, on the other the passion of those who, on the
road or on the track, will continue to drive a car for the sheer
pleasure of being behind the wheel. With these people in mind,
Pirelli Track Adrenaline™ was created, an advanced telemetry
and sensor-fitted tyre monitoring system for amateur drivers.
Introduced in Italy in the summer of 2019, in 2020 Pirelli
Track Adrenaline™ was introduced in Belgium, Germany,
the UK, Austria and the United Arab Emirates. In Belgium,
a partnership has also been launched with an international
organiser of track events, with the aim of shifting the focus
from pure speed, to the acquisition of increasingly refined
driving skills.
In terms of fleets and reducing their management costs,
Pirelli is pursuing the Cyber Fleet project, a system based
on tyre sensors and constant monitoring of pressure and
temperature parameters. Through a tyre management
portal, Cyber Fleet makes it possible to predict and schedule
maintenance operations, reducing the risk of breakdowns,
as well as providing important KPIs on fuel consumption
and CO2 emissions. In 2021, Cyber Fleet technology was
fully integrated into the Geotab platform, which is among
the global leaders in the supply of telematic services for
fleets, who wanted to enrich their offerings with the tyre
management system developed by Pirelli.
The mobility of the future also partly consists of a return to the
past, where bicycles, now electrified, play an important role,
especially in urban mobility. This is why, since 2017, Pirelli has
returned to the world of bicycle tyres (consider that the first
Pirelli tyre at the end of the 1800s was a bicycle tyre) where
it is present with several product lines: P ZERO™ for high-
performance racing bikes and a user devoted to maximum
performance, CINTURATO™ for Endurance and Gravel bikes,
where the more playful component of exploration and sporting
lifestyle becomes
activity understood as wellness and
preponderant over pure performance, the line dedicated to
the off-road world of Mountain Bike SCORPION™ with all its
variants, from Cross Country to E-MTB, and finally the Urban
CYCL-e™ tyre line, ideal for all city and non-pedal commuting
situations.
Pirelli has also dedicated itself to micro-mobility projects
such as CYCL-e around™ which, through pedal-assisted
bicycles, promotes a comfortable and sustainable mobility
style on holiday and in daily life. It is a turnkey e-bike
rental service for private communities, mainly hotels and
companies. In 2020, activities in hotels were consolidated
and experimentation in the corporate sector began with two
tests involving the Fatebenefratelli Sacco hospital (pro bono)
and Pirelli’s headquarters. In the field of micro-mobility, Pirelli,
with the CYCL-e around™ project, aims to bring innovation to
urban mobility to provide a concrete response to the needs
of increasingly smart citizens and workers. A turnkey service
that includes a fleet of top-of-the-range e-bikes, an app to
manage bookings, routine maintenance of the bicycles and
marketing and communication support to promote their
use in partner companies and hotels. The year 2021 saw
the consolidation of activities on the hotel channel and the
introduction of the first partner companies in Italy, such as
Open Fiber, Accenture and NTT Data. Last but not least was
the renewal of the collaboration with a school with a strong
technological vocation, I.I.S. Volta in Pescara, as part of the
Future Class project.
TYRE AS A SERVICE – PIRELLI CARE™ PROJECT
Consumer-oriented services play and will continue to play a
central role in Future Mobility.
The year 2021 saw the birth of the first initiative within
the Tyre as a Service platform: Pirelli Care™, a new type of
offering that combines the purchase of tyres with a wide
range of mobility services in a single digital solution: simple to
manage, independently or through dedicated customer care,
and customised according to the needs of the end customer
(type of user, driving style, kilomenters).
107
Report on Responsible Management Through the pirellicare.com portal or by downloading the
dedicated Pirelli Care™ app free of charge, it is possible to
purchase packages of tyres and services related to tyre
replacement and maintenance, car care and sustainable
individual mobility, all through quick online registration,
monthly payment based on the package selected and by
conveniently booking a first service appointment with the
dealer selected from the countrywide Driver network. The
range of services being offered is set to grow and vary, with
the intention of responding nimbly to market demands,
particularly those related to sustainable mobility and
servitisation.
Pirelli Care™ launched a first pilot phase in September 2021
on a geographical area limited to the city of Milan and some
surrounding areas, engaging more than 50 selected Driver
Centres.
initiative was also designed
The
to support Pirelli’s
commitment to a sustainable business strategy. For example,
by supporting the transition to e-mobility through strategic
industry partnerships and alliances and dedicated offers;
by guaranteeing the end customer a ‘Perfect Fit’ in tyre and
vehicle combinations, or by actively supporting performance
and safety throughout the product lifecycle, from fitting
to replacement; by monitoring driving styles and sending
messages and push notifications to encourage the adoption
of more eco-sustainable behaviour. By monitoring the driving
style of its customers, Pirelli Care™ supports technological
and product innovation that can draw on unique usage and
performance data.
The pilot phase will be followed by gradual expansion
throughout Italy, with the official presentation of the project
to the market scheduled for April 2022.
MOTORSPORT AND SUSTAINABILITY
Pirelli’s sustainable approach to motorsport reflects the
Sustainability Model adopted by the Company and
is
developed along the entire product life cycle, from production
to logistics to the supply chain to the end of product life.
As far as the supply chain is concerned, a common vision
and responsible management of the business form the basis
on which commercial relations are based and can develop.
Material suppliers must adhere to strict rules of quality, social
and environmental sustainability. As early as the supplier
qualification and homologation phase, Pirelli initiates a third-
party sustainability audit at the supplier’s site to track any
nonconformities and initiate recovery plans (a mandatory
condition for proceeding with homologation). There are also
dedicated policies, as in the case of natural rubber, in respect
of which the company has been committed for years both
with its suppliers and with non-governmental organisations,
and at the international level (Global Platform for Sustainable
Natural Rubber) so that the rubber business can grow without
deforestation and in a way that is prosperous for communities
and the ecosystem.
Technological innovation and research and development are
at the heart of Pirelli Motorsport, as evidenced by the new GT
tyre, the P Zero DHF, which has benefited from the extensive
use of virtual models that have allowed the production of
physical prototypes to be reduced. The latest range of DHF
tyres also includes new types of renewable materials.
Pirelli’s commitment to reducing CO2 emissions is a priority,
both through energy efficiency measures and through the
purchase of electricity from renewable sources: by 2021, all
Pirelli’s European plants, including the Motorsport factories
in Slatina, Romania, and Izmit, Turkey, will purchase 100%
of their electricity from renewable sources alone. In the
future, Pirelli’s environmental strategy will enable the Group,
including the Motorsport department, to achieve Carbon
Neutrality by 2030 through aggressive plans to replace fossil
energy with 100% renewable energy.
In addition, since 2019, Pirelli has eliminated single-use
plastic from its activities and consumption on the track, in
compliance with the Group Policy Guidelines.
In terms of logistics, Pirelli uses the latest EURO 6 standard
truck fleet, while for extra-European shipments it chooses as
much as possible solutions by sea, which are proportionally
less polluting than by air.
The cycle closes with the end of product life, an area in which
Pirelli is involved in research projects for the recovery of high-
quality material from end-of-life motorsport tyres and in the
evaluation of innovative ideas for obtaining secondary raw
materials from disposal processes. In order to increase the
share of tyres involved in this virtuous process, the company
has launched a programme to raise awareness among the
Motorsport world and teams and to recover tyres used in all
Motorsport competitions on an international scale.
Pirelli is also the first and only tyre manufacturer in the
world to have obtained the three stars of the Environmental
Accreditation Programme promoted by the FIA, a prestigious
recognition for its commitment to sustainability in motorsport.
SUPPORTING YOUNG TALENTS
Supporting the growth of young talent is another important
aspect that has always characterised Pirelli’s presence in
motorsport and which boasts various programmes, both in
the championships reserved for single-seaters and in World
Rally and many other national series, both on the track and in
the off-road world.
In 2022, Pirelli’s commitment to young drivers will be
renewed and intensified with its involvement not only in the
ERC Junior and WRC Junior, which this year will experience
its own revolution by switching to 4-wheel drive, but also in
the FIA RALLY STAR programme, the new format devised and
managed by the FIA to find new talent in rally driving, aimed
at youngsters aged between 17 and 26, an evolution of what
was previously Pirelli Star Driver at the start of 2009, later to
become the WRC Academy, which launched talents such as
Ott Tänak, Elfyn Evans and Craig Breen.
108
Pirelli Annual Report 2021 Young drivers are identified through a multi-phase selection
process based on digital motorsport and real driving sessions
in production vehicles. There is also no shortage of similar
initiatives in the world of Formula 1 support racing. For
example, for years now, Pirelli has been awarding a substantial
cash prize to the winning driver in Formula 3 to support him
on his way to the top series.
Another important project that Pirelli supports is the FIA Girls
on Track, in this case aimed at young female drivers with
the aim of promoting the growth and inclusion of women in
motorsport with a view to inclusion and equality, themes that
have always been close to Pirelli.
Finally, Pirelli collaborates extensively with national
motorsport federations and clubs to provide support for
young drivers, offering them the chance to grow and reach
the peaks of international competition.
OUR SUPPLIERS
SUPPLY CHAIN SUSTAINABLE MANAGEMENT SYSTEM
The supply chain management model adopted by Pirelli fully
complies with the provisions of the international guidelines
for sustainable procurement ISO 20400 - “Sustainable
Procurement Guidance”, as certified at the beginning of 2018
and reconfirmed at the end of 2021 by a third party (SGS Italia
S.p.A.) following an in-depth evaluation. The analysis confirmed
that the requirements of the ISO 20400 standard are fully
met by Pirelli’s procurement model, both in terms of corporate
policies and strategies and in terms of managing the internal
processes needed to implement sustainability requirements
in purchasing dynamics, and at a more operational level in
the direct management of supplier ethical performance. The
certification of full compliance with ISO 20400 is in addition
to the certification of compliance obtained by the Company
with the guidelines on social responsibility dictated by ISO
26000, issued by the auditor of this Report.
The Group’s relations with suppliers are based on loyalty,
impartiality and respect for equal opportunities for all the
subjects involved in the purchasing processes, as required
by the Group Values and Code of Ethics and in line with the
OECD Guidelines on due diligence.
The sustainable management of the supply chain is handled
in the “Green Sourcing Policy”, the “Social Responsibility
Policy on Occupational Health, Safety and Labour Rights,
Environment”, the “Global Health, Safety and Environment
Policy”, the “Global Human Rights Policy”, the “Global Quality
Policy”, the “Product Stewardship Policy”, and in the Group’s
“Sustainable Natural Rubber Policy” published in several
languages on the Company’s website, so that they can be fully
understood by the public at large. In all the documents cited,
with reference to the specific social and environmental issues
discussed from the individual Policies, Pirelli undertakes to
establish and maintain the procedures necessary to evaluate
and select its suppliers on the basis of their level of social
and environmental responsibility, as well as to request their
suppliers implement a similar management model, in order
to extend its responsible management in the supply chain as
far as possible back to the origin of the chain. The Policies
mentioned are available to suppliers in their local languages.
The social, environmental and business ethics responsibilities
of a Pirelli supplier are assessed together with the economic
and product or service quality to be supplied, right from the
selection as potential supplier stage.
Analysis of ESG performance
(Environment, Social,
Governance) continues through the qualification stage of the
potential supplier pre-analysed (and audited on-site by a third
party for all cases of potential raw material suppliers) at the
assessment phase, and then is “contract bound” though the
Sustainability and business ethics clauses included in every
contract/purchasing order.
ESG compliance of those who join the Pirelli panel of suppliers
is therefore verified through periodic on-site third-party audits.
The aforementioned Management Model and the related
documentation are available on the institutional Pirelli website,
in the “Suppliers Area” (Pirelli.com/suppliers), section devoted
to the world of supply and accessible to current and potential
Pirelli suppliers, as well as anyone with an interest in knowing
the approach and procedures adopted by the Company in the
areas of purchases of good and service around the world.
The detailed process follows.
ESG ELEMENTS IN THE PURCHASING PROCESS
Pirelli uses the same approach to assessing ESG performance
throughout the entire process of interactions with a supplier,
although in different ways among them, consistently with
the intensity of the interactions characterising the specific
procedural stages.
During a first phase of scouting, and thus assessment of
potential suppliers of goods or services, a buyer who has
been adequately trained is able to gain a first impression of
the abidance by the ESG and product or service requirements
by the potential supplier. This makes it possible to eliminate
potential future suppliers that are clearly in possible violation
of Pirelli expectations.
Pirelli asks suppliers who gain access to the on-boarding
(pre-qualification and qualification) phase to fill
in the
questionnaire through which the supplier can view and
simultaneously accept Pirelli’s requests in terms of economic,
social, environment and business ethics responsibilities.
Among the questions asked to the potential supplier, for
example, the request to certify that its company checks
workers’ ages before hiring them, and it ascertains that all of
its employees satisfy the minimum legal working age; uses
workers provided with a written labour contract and who
work on a voluntary basis exclusively; abides by workers’
rights of freedom of association and participation in trade-
union activities; pays wages that meet the minimum legal
standards; manages disciplinary practices, if any, abiding by
the law; abides by and applies legislative/contract provisions
in the matter of work schedules, overtime and rest periods.
109
Report on Responsible Management The process then continues with further questions aimed at
identifying potential integrity and corruption risks in advance.
relations with third parties, contractual and otherwise;
→ require that Suppliers confirm their commitment to:
For all potential new suppliers and/or facilities of raw material
and high value added parts, which by their nature can become
development/long-term partners for the Company, and
which are also granted much of the spending of purchases,
Pirelli conducts a third-party preliminary on-site audit during
the qualification phase to verify the level of compliance of the
potential supplier with respect to the principal national and
international regulations on Work, Environment and Business
Ethics. Loss prevention information is also analysed, a key
element not only to prevent future business interruptions. The
non-acceptance of the audit and/or not signing the corrective
action plan shall block the qualification of the supplier.
The preventive assessment of new raw materials and process
aids is particularly important, with a view to safeguarding the
health of workers and the environment. These assessments
of potential materials and auxiliaries are obviously conducted
before the materials in question can be used extensively
by the Group’s operating units, and are carried out taking
into account not only the requirements of the more
restrictive European regulations on the management of
hazardous substances (see, for example, the ‘REACH’ and
‘CLP’ Regulations), but also by virtue of the standards and
knowledge acquired at international level (specific United
Nations databases, etc.).
In recent months, the activities described above have
also been supplemented by a specific request sent to all
Suppliers of raw materials and process aids used by the
Group in relation to an increasing commitment to quantifying
the residual impurities contained in the above-mentioned
commercial products, regardless of the legal requirements.
Finally, the consolidated activities of monitoring the producers
and suppliers of the raw materials with regard to compliance
with the requirements of Regulation (EU) 2017/821 (as
modified by Regulation (EU) 2020/1588) on so-called
“conflict minerals” (to which a paragraph is dedicated below).
With regard to the contractual stage, for more than a decade,
Pirelli systematically includes the Sustainability and Business
Ethics Clauses (including anti-corruption)
in contracts
and orders for the purchase of goods and/or services and/
or works, both with private suppliers and with the Public
Administration (or institutes/enterprises under public control)
and also in agreements with NGOs, worldwide.
In particular, the clauses:
→ require suppliers to be aware of the principles,
commitments and values contained in Pirelli’s sustainability
documents, namely “The Values and Code of Ethics”, the
“Code of Conduct”, the “Global Human Rights Policy”,
the “Health, Safety and Environment Policy”, the “Anti-
Corruption Programme” and the “Product Stewardship
Policy”, published and accessible on the web, which set
out Pirelli’s principles for managing its activities and its
→ not using or supporting the use of child labour and
forced labour or any other form of exploitation;
→ ensuring equal opportunity, freedom of association and
promotion of the development of each individual;
→ opposing the use of corporal punishment, mental or
physical coercion, or verbal abuse;
→ complying with the laws and industry standards
concerning working hours and ensuring that waves are
sufficient to cover the basic needs of personnel;
→ not tolerating any type or bribery in any form or manner
and in any legal jurisdiction, even where such practices
are effectively permitted, tolerated, or not subject to
prosecution;
→ assess and reduce the environmental impact of its own
products and services throughout their entire life cycle;
→ using resources responsibly with the aim of achieving
sustainable development in compliance with the
principles of respect for the environment and the rights
of future generations;
→ establishing and maintaining the necessary procedures
to evaluate and select suppliers and sub-suppliers on the
basis of their commitments to social and environmental
responsibility, regular overseeing compliance with this
obligation on the part of the same;
→ specify that Pirelli reserves the right to verify at any time
through activities of audit, either directly or through third
parties, that fulfilment of the duties taken on by a supplier
has been achieved (see further details in the next paragraph).
→ include an invitation to use Pirelli’s Whistleblowing
Procedure (e-mail address ethics@pirelli.com) to report
in complete confidentiality any violation or suspected
violation that suppliers identify in their relations with
Pirelli, both with respect to the law and to the principles,
commitments, and values contained in: “The Values and
Ethical Code”, the “Code of Conduct”, the Group policies
“Global Human Rights”, “Health, Safety and Environment”,
“Anti-Corruption Programme”, and “Product Stewardship”.
During 2021, among the reports signed, one was sent by a
Supplier. It is objectively not possible to confirm that the
total number of reports from suppliers corresponds only to
three as some reports were anonymous, as specified in the
paragraph “Focus: Group Whistleblowing Procedure”, to
which reference should be made for further details.
For some categories of suppliers, the clauses are also
supplemented by additional
requirements aimed at
regulating specific areas such as the existence of an
adequate management model for conflict minerals and
cobalt, and compliance with Pirelli’s Policy on the sustainable
management of natural rubber.
The Sustainability Clauses have been translated into 21
languages so as to ensure maximum clarity and transparency
vis-à-vis a supplier in the matter of the contract duties that
they assume, not only in respect of the Firm itself, but also at
their own site in relations with their own suppliers.
110
Pirelli Annual Report 2021 FOCUS: ESG ON-SITE AUDIT
Pirelli management model has been characterised by third-
party on-site audits since 2009. Compared to self-assessment
or remote assessments, this approach allows for a very high
level of reliability of the audit results, as they are carried out
on-site and in person by a specialised third party. In addition,
the on-site audit is also a valuable opportunity for the supplier
to train and analyse the compliance of its activities with local
and international regulations on the environment, human and
labour rights, and business ethics. The on-site audit is carried
out during the pre-qualification phase for all potential new
suppliers and/or plants of raw materials and high value-added
goods, which by their very nature may become development/
long-term partners for the Company, and to which a large
part of procurement spending is destined.
In addition, every year Pirelli conducts an on-site third-party
ESG audit campaign at active suppliers’ sites to cover all
product and geographic areas of purchase.
The annual Audit Campaign covers suppliers considered
critical based on the results of economic materiality and
ESG risk criteria. In particular, the Group’s Purchasing and
Sustainability Departments define and annually renew the
parameters for the Risk Assessment which, carried out by
the Purchasing Managers and Sustainability Managers of the
Group’s subsidiaries, will lead to the selection of suppliers to
be audited on site. In the risk assessment and definition of
the shortlist of Suppliers to be Audited, the following basic
parameters must be considered:
→ the supplier is bound to Pirelli by multi-year contracts;
→ the replacement of the supplier and/or related product
may be complex (the supplier holds more than 50% of the
purchase for the specific product category);
→ the economic burden of the purchase is significant;
→ the supplier operates in a Country considered to be at risk
under environmental, human rights and/or employment
terms;
→ the supplier has not yet undergone an ESG audit by Pirelli
or special criticalities have been detected in previous audits;
→ there is information, a perception or doubt concerning
possible violations by the supplier in the matter of social,
environmental and/or business ethics responsibilities.
Each audit lasts an average of two days in the field and includes
factory visits, interviews with workers, management and trade
union representatives. The external auditors carry out the audits
following a checklist of sustainability parameters deriving from
the SA8000® standard (a benchmark tool officially adopted by
the Group for managing social responsibility since 2004), the
Pirelli Ethical Code, the Pirelli Group’s “Social Responsibility
Policy for Health, Safety and Rights at Work, Environment” (in
its turn consistently with the areas of social, environmental and
governance sustainability dictated by the Global Compact of
the United Nations and underlying OECD and ILO regulations),
the Global Health, Safety and Environment Policy, the Equal
Opportunities Policy and the Global Human Rights Policy.
From 2019, KPIs relating to loss prevention issues have been
added. For natural rubber suppliers, the on-site Audit checklist
is enriched with additional and specific parameters, deriving
from Pirelli’s Policy for the Sustainable Management of Natural
Rubber and in line with the expectations of the Global Platform
for Sustainable Natural Rubber (a specific paragraph is
dedicated to the topic of Natural Rubber Sustainability below).
On the basis of audit findings, and where non-conformities
are found, the supplier signs off a corrective action plan
suggested by the independent auditor, to be implemented
within specific deadlines. The implementation of the recovery
plan is verified by a follow-up activity directly followed by the
Auditor, who report to Pirelli.
The results of the on-site ESG Audit, together with additional
assessments made during the supplier on-boarding phase,
are integrated into the annual Vendor Rating process, on
the basis of which a rating is assigned to the supplier that
sums up ESG performance, the qualitative level of supplies,
the quality of the commercial relationship and technical-
scientific collaboration.
From 2020, following the evolution of the Covid-19 scenario,
the third-party auditors used by Pirelli have developed and
introduced a new methodology, in accordance with ISO/IEC
17021-1: 2015 (and related guidance), IAF MD4: 2018, IAF
MD 5: 2019 and IAF ID 12: 2015 standards, which has made
it possible to guarantee the continuity of auditing activities
also through a hybrid approach (combination of remote and
on-site audits).
111
Report on Responsible Management Below is the number of third-party ESG audits carried out in the last three years:
Year
2019
2020
2021
Audit Number
9016
7117
9318
In the year 2021, the audits involved Pirelli suppliers of all product categories operating in Argentina, Brazil, China,
Germany, Indonesia, Italy, Mexico, United Kingdom, Romania, Russia, United States, Turkey. Malaysia, Thailand,
the Czech Republic, India, Japan and Portugal.
The results of the audits carried out during the 2021 annual campaign:
→ 32% of suppliers without any non-compliance;
→ an incidence of non-conformities found at supplier sites down by 2% compared to 2020.
The non-conformities recorded in 2021 are essentially linked to the health and safety management processes,
the use of overtime and the correct implementation of environmental management systems. The Suppliers with
which non-conformities were found have signed a remedy plan to be implemented within precise time frames,
which, as per the Procedure, will see follow-up by the third-party Auditor to evidence and confirm the return.
The results of the on-site ESG Audit together with the further assessments carried out during the supplier’s
on-boarding phase, are integrated into the annual Vendor Rating process based on which a rating is assigned
to the supplier that adds up the ESG performances, the quality level of supplies, the quality of the commercial
relationship and the technical-scientific collaboration.
The Group Internal Audit Department verifies the adequacy of the management and oversight of the ESG Audit
on suppliers by the local responsible Functions (Sustainability and Purchasing).
MATERIALITY OF ESG IMPACTS ON THE SUPPLY CHAIN
Health and safety at work, human rights and labour rights are material issues and therefore subject to monitoring
(see previous section on operating procedures) in all categories of purchases, with a greater risk of negative
impact in the case of suppliers operating in countries considered to be more at risk than others from the point of
view of compliance with national and international labour legislation.
Considering the life cycle of the Pirelli product (which is specified in the “Environmental Dimension” chapter of
this report), the environmental impacts of the supply chain are found prevalently in the category of raw materials,
in terms of direct emissions by the supplier but also of indirect emissions by Pirelli. With reference to the water
footprint along the life cycle of Pirelli products, impacts are prevalent again in the area of raw materials and
specifically in the processing of natural rubber, a material on which particular attention is also paid in terms of
preventing the risk of deforestation and protecting biodiversity.
Pirelli mitigates the risks mentioned through the Management Model adopted above described, which is
completed with the engagement activities of the suppliers referred to below.
SUSTAINABILITY OF THE NATURAL RUBBER SUPPLY CHAIN With global demand for natural rubber expected to
increase, sustainable management of the related supply chain is essential to preserve forests, biodiversity and to
enable sustainable development for local communities and economies. The economic, social and environmental
sustainability of the natural rubber supply chain is among the priorities of Pirelli, with the full awareness that the
origins of its rubber supply chain impact in forestry terms.
The natural rubber supply chain - from upstream to downstream - includes producers/farmers, traders, processors,
distribution companies and manufacturing facilities. Pirelli is at the end of the chain, as a tyre manufacturer that
16 Of which 26 on potential new suppliers of raw materials.
17 Of which 6 on potential new suppliers of raw materials.
18 Of which 18 on potential new suppliers of raw materials.
112
Pirelli Annual Report 2021 does not own its own plantations or natural rubber processing
plants. Pirelli intends to play an active role in the aforementioned
context, contributing to the efforts that are globally dedicated
to the sustainable management of natural rubber.
In October 2017, Pirelli issued its “Sustainable Natural
Rubber Policy”, after a long process based on consultation
with key Stakeholders and companies that have longstanding
experience in terms of sustainable procurement of materials.
During 2021 the policy was revised to align it with the Policy
Framework of the Global Platform for Sustainable Natural
Rubber, of which Pirelli is also a founding member.
As stated in the Policy, Pirelli continues to undertake to
promote, develop and
implement the sustainable and
responsible procurement and use of natural rubber
throughout its entire value chain. In particular, the Policy
breaks down the positioning of the Company in terms of:
→ defence of Human Rights and promotion of decent working
conditions;
→ promotion of the development of local communities and
prevention of conflicts related to land ownership;
→ protection of ecosystems, flora and fauna;
→ no to deforestation, no to the exploitation of the peat
land, no to the use of the fire, and adoption of the “High
Conservation Value (HCV)” and “High Carbon Stock (HCS)”
methodologies;
→ efficient use of resources;
→ ethics and anti-corruption;
→ traceability and mapping of socio-environmental risks along
the supply chain (so-called risk-based approach);
→ clear indication of the governance model envisaged by
the policy, and consideration of the risks identified in the
definition of the purchasing strategies;
→ encouragement of its suppliers and sub-suppliers to the
adoption of solid certification systems, internationally
recognised and verified by third parties, at all levels of the
supply chain;
→ promotion, support for the Company’s active participation
in cooperation initiatives at sector level and among
Stakeholders that play a significant role in the value chain,
in the belief that, in addition to the individual commitment of
companies, a shared effort can accelerate and strengthen
the path towards a sustainable development of the global
natural rubber supply chain;
→ activities aimed at the implementation of the policy;
→ commitment to reporting on the results achieved;
→ providing a dedicated grievance mechanism for natural
rubber that allows stakeholders to address grievances and
initiate remedial action.
the Company published
In December 2018
the
Implementation Manual for Pirelli Policy on Sustainable
Natural Rubber. The aim of the manual is to facilitate the
understanding of the principles, commitments and values
expressed in the Policy, as well as provide guidance for its
implementation to the supply chain. As already happened
for the preparation of the Policy in 2017, also the process of
preparation of the Manual has foreseen the involvement and
the consultation of the main Stakeholders concerned, both
locally, with the main actors of the supply chain (processors,
retailers, small plantation owners), and globally.
At the same time, Pirelli defined its Action Plan, updating it
periodically.
The Policy, the Implementation Manual and the 2019-2021
Action Plan and are published on the Group website, in the
Policy area within the Sustainability section. The Plan up to
2025 will be published on the company website in early 2022.
In particular, since 2019 Pirelli has started through the support
of central and local specialists of Earthworm Foundation,
activities concerning the organisation of meetings with the
management of supplier companies; the identification of
the geographical areas from which rubber is purchased; the
analysis of potential socio-environmental risks for the mapped
geographical areas; training of suppliers on the contents of
the Policy and its Implementation Manual; distribution of
infographics on various sensitive issues in the natural rubber
chain; definition of a roadmap by suppliers detailing activities
to be implemented to fill identified gaps; on-site ESG audits
covering around 100 % of our purchased volumes.
In 2020 and 2021 the evolution of the pandemic led to
the temporary suspension of those activities planned for
the period that, in order to achieve the expected level of
effectiveness, would have had to be held on site with the
actors in the supply chain (processors, traders, farmers).
Also during 2021:
→ The Group and its supplier Kirana Megatara confirmed
the continued awarding of scholarships to the children of
local producers, in the belief that the future sustainability
of the natural rubber business absolutely cannot ignore the
adequate training and development of the new generations,
and their right to study. A total of 65 scholarships were
awarded;
→ Pirelli is the first company to launch and produce the
first Forest Stewardship Council (FSC) certified tyre line
for natural rubber and rayon; FSC forest management
certification confirms that plantations are managed in a
way that preserves biological diversity and benefits the
lives of local communities and workers, while ensuring
economic sustainability. The complex FSC chain of custody
certification process verifies that, along the processing
chain from plantation to tyre manufacturer, FSC-certified
material has been identified and separated from non-
certified material;
→ Pirelli, in partnership with BMW, is supporting Birdlife
International in a three-year project that aims to encourage
the long-term production of sustainable, deforestation-
free natural rubber in Indonesia. The initiative involves part
of the rainforest area of Hutan Harapan (Sumatra Island)
and will be developed through a series of initiatives aimed
at protecting the indigenous community, preserving a
deforestation-free area of 2,700 hectares and protecting
endangered animal species. The various activities will be
carried out in line with the objectives of the Global Platform
of Sustainable Natural Rubber (GPSNR);
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Report on Responsible Management → Pirelli continued to work with its suppliers to identify their
supply chains. More than 95 per cent of natural rubber
volumes purchased in 2021 will come from suppliers
who have a roadmap in place and have monitored
implementation progress in line with restrictions due to
the health situation.
In 2022 Pirelli will continue on the path of engagement and
partnership activities with its suppliers, supporting them in the
implementation of their roadmap with ad hoc interventions
and will continue to map the socio-environmental risks
of the entire chain, strengthened by an increasingly close
relationship with the various players involved.
TOGETHER FOR THE SUSTAINABILITY OF NATURAL RUBBER
- THE GPSNR PLATFORM Pirelli Policy on the sustainable
management of natural rubber, in point VIII, states: “Pirelli
believes that the global challenge of natural rubber
sustainability requires engagement, cooperation, dialogue
and partnership among all involved actors. In addition to
engaging with its suppliers, Pirelli fosters and supports
active cooperation at industry level and among stakeholders
playing a material role in the natural rubber value chain, with
the conviction that in addition to corporations’ individual
engagement, a shared effort can result in stronger and faster
progress towards sustainable development of the global
natural rubber supply chain. Pirelli cooperates with national
and international governmental, non-governmental, industry-
wide and academic initiatives to develop global sustainable
natural rubber policies and principles.”
In line with the stated approach, in 2017 Pirelli played a
proactive role in the creation of the Global Platform for
Sustainable Natural Rubber - GPSNR, together with tyre
manufacturers which are also part of the Tyre Industry Project
Group, within the World Business Council for Sustainable
Development. The development of the Platform benefited
from the contribution, ideas and suggestions of the main
categories of Stakeholders involved in the value chain, such
as rubber producers, processors, automobile manufacturers,
and of the fundamental contribution deriving from the
experience of important international NGOs.
The Platform, launched in Singapore in October 2018 with the
participation of the first “founding members”, including Pirelli,
is independent, based on multi-stakeholder dialogue and
aims to support the sustainable development of the natural
rubber business globally, for the benefit of the entire value
chain through shared tools and initiatives based on respect
for human and labour rights, prevention of land grabbing,
respect for biodiversity and increased plant productivity,
especially those of small owners. The first General Assembly
of GPSNR was held in March 2019.
During 2021 Pirelli actively participated in four working
groups launched by the platform, specifically:
→ The “Smallholder Representation Working Group”, which
Pirelli co-chairs, has identified a geographically diverse
group of farmers capable of effectively representing the
interests of smallholders within the platform and identified
three representatives to sit on the Executive Committee.
Work continues to support the smallholder community on
the platform, with the aim of extending the geographical
presence covered and achieving the new targets set;
→ The “Capacity Building Working Group”, which Pirelli
co-chairs, in 2021 has continued its activities aimed
at developing a capacity building strategy in favour of
smallholders and industrial plantations, identifying potential
sources of financing;
→ The “Traceability and Transparency Working Group”
which aims to identify an appropriate tool to improve the
large-scale traceability, and therefore transparency, of the
complex natural rubber supply chain. During 2021, the
group focused on mapping the traceability systems offered
by the market, with a specific focus on those already used in
the world of natural rubber. The work will continue in 2022,
with the aim of defining the general characteristics that
the traceability tool must have in order to meet the level of
transparency required by the GPSNR platform;
→ Pirelli also participates in the Shared Responsibility Working
Group, which aims to define the principles and framework
for implementing shared responsibility within the platform.
The Pirelli representative was appointed as the platform’s
most participating Co-Chair, demonstrating the company’s
strong commitment to the project.
THE “GREEN SOURCING” POLICY
Since 2012 Pirelli has had a “Green Sourcing Policy”, with the
aim of stimulating and encouraging environmental awareness
throughout the supply chain, as well as encouraging choices
that could reduce the impact on the environment of Pirelli’s
procurement of goods and services. The system for
implementing the Green Sourcing Policy, both within Pirelli
and in relations with suppliers, is organised as follows:
→ Pirelli Green Sourcing Manual, an internal document
containing operating guidelines, intended to guide the
activities of the Pirelli functions involved in the Green
Sourcing process;
→ Pirelli Green Purchasing Guidelines, a document intended
for Pirelli suppliers as part of the Contract for supply and
based on the Green Sourcing Manual containing the KPIs
(Key Performance Indicators) for assessing the Green
Performance of these suppliers.
Pirelli Green Sourcing Manual defines four areas of
Green Sourcing: Materials, Capex, Opex and Logistics.
Interdepartmental working groups, comprised of Purchasing,
R&D, HSE and Sustainability analysed the Green Sourcing
process associated with the purchasing categories falling
within the four areas mentioned above. Green Engineering
Guidelines were also defined for the Materials and Capex
areas, where the design component (what is conceived in-
house) is material to Pirelli core business.
For the Opex and Logistic areas characterised by goods
categories in respect of which the design component is not
equally significant, Green Operating Guidelines have in any
vent been defined by referring to internationally recognised
best practices.
114
Pirelli Annual Report 2021 The Green Sourcing Manual is a unique document that contains:
→ a general part on Green Sourcing topics;
→ the Green Engineering Guidelines (Materials, Capex);
→ the Green Operating Guidelines (Opex, Logistics).
On the basis of the Guidelines of the Green Sourcing Manual,
Pirelli Green Purchasing Guidelines were published on the
website www.pirelli.com, so making them available both to
Pirelli suppliers and to other Stakeholders. In China, Mexico,
the United States, Russia and Italy, by-invitation seminars have
been held at Pirelli offices on the Green Sourcing Guidelines
for local suppliers so as to inform and receive direct feedback
on the way they work.
In addition to the “Green Sourcing Policy”, in 2019 the Group
adopted a Single Use Plastic Free Policy, aiming at the
elimination at Group level by 2021 of all single-use plastic
used for offices and factory services. The company expects to
reach the target by the first half of 2022, with a delay of about
six months by virtue of the precautions that were adopted
during the pandemic period, including in certain cases and for
health and safety reasons it was not It is possible to replace
single-use plastic in light of its insulating properties.
POLICY ON CONFLICT MINERALS
The concept of Conflict Minerals was introduced by Section
1502 of the Dodd-Frank Act, a United States federal law, in
2010. By “conflict minerals” is meant gold, columbite-tantalite
like
(coltan) cassiterite, wolframite and their derivatives
tantalum, tin and tungsten that come from (or are extracted in)
the Democratic Republic of Congo and/or bordering Countries.
The objective of the rules in respect of Conflict Minerals
(Conflict Mineral Rules) is to discourage the use of minerals
whose sale might finance violent conflicts in Central Africa
where grave violations of human rights have been recorded for
many years. Under Conflict Mineral Rules, listed companies
in the United States are required to perform reasonable due
diligence in tracing the provenance of these materials and
reporting the findings to the SEC and publishing them on
their website, with the first report to be published by 31 May
2014 (relating to 2013) and subsequently updated each year.
In turn, the European Institutions in May 2017 approved the
2017/821 Regulation (subsequently amended by Regulation
(EU) 2020/1588) which “establishes duties in terms of due
diligence in the supply chain for EU importers of tin, tantalum
and tungsten, their minerals, and gold, originating in conflict
zones or at high risk”. The new provisions came into force
from January 2021.
Pirelli expresses its position on the management of the issue in
a paragraph dedicated to it in its Global Human Rights Policy,
where it is stated that the Company “requires that its suppliers
conduct proper due diligence within their supply chain in order
to certify that the products and materials supplied to Pirelli
are “conflict free” throughout the whole supply chain. Pirelli
reserves the right to terminate relations with suppliers in cases
where there is clear evidence of supplying conflict minerals
and however in case of any violation of Human Rights.”
The Policy is published in multiple foreign languages in the
Sustainability section of pirelli.com website.
In 2017 Pirelli also strengthened its management model,
introducing the request for the following documentation
among the qualification requirements of suppliers that can
be associated with the possible use of conflict minerals:
→ Conflict Minerals Reporting Template (CMRT);
→ Conflict Minerals policy if present;
→ description of the “Due Diligence” system to identify and
trace the presence of 3TG minerals (Tantalum, Tungsten,
Tin, Gold).
The management model then extends to the contractual phase,
through the inclusion of a Conflict Minerals clause that recalls
the supplier’s commitment to providing the Conflict Minerals
Reporting Template on an annual basis and to maintain the
results achieved in terms of chain transparency, in addition to
reporting the further progress pursued and expected.
To give an idea of the scale of the phenomenon for Pirelli,
it is worthwhile stating that the impact is very limited: the
volume of minerals (3TG) used by Pirelli Tyre in one year in
fact weighs less than a tonne, a quantity which is less than
one millionth of the volume of raw materials used annually by
the Company and which is equally distributed among most
of the tyres produced. To give an example, a tyre weighing 10
kg contains about 10 mg (milligrams) equivalent of tin, in the
extremely low concentration of 1ppm (one part per million).
With a view to procurement covering only minerals that
are “conflict free”, Pirelli has conducted a comprehensive
investigation on its supply chain, in order to have full visibility up
to the mines or foundries in order to identify the existence of any
“conflict minerals”. The company asked its suppliers to fill in the
CMRT (Conflict Minerals Reporting Template) form developed
by the Responsible Minerals Initiative (RMI) as developed in the
past by the Electronic Industry Citizenship Coalition (EICC) and
the GeSI (Global e-Sustainability Initiative).
The suppliers polled cover 100% of the “conflict minerals”
risk tied to Group products. 100% of suppliers polled have
already given precise indications concerning the source of
the materials in question and listing foundries as required by
the procedure and there was no evidence of the presence of
conflict minerals.
DUE DILIGENCE ON NEW METALS: COBALT
As is known, the Democratic Republic of the Congo (DRC) is
the world’s largest producer of cobalt and holds more than 50%
of the world’s reserves of this metal. Among the various uses of
Cobalt is its use in Lithium batteries that are an integral part of
electric vehicles, mobile phones and laptops. The demand for
Cobalt is growing very rapidly and its extraction occurs both in
a highly mechanised way and in a traditional way. Concerning
this latter type of extraction, concerns have recently been
raised about unsafe working conditions and child labour. In
2017, RMI (Responsible Minerals Initiative) launched a working
group on the sustainable supply of cobalt, with particular
regard to the risk of child labour in the DRC, with a supply chain
115
Report on Responsible Management monitoring approach similar to the one already in place for 3TG
metals. The update of the Cobalt Reporting Template (CRT)
was recently published (28 October 2020) by RMI. Pirelli uses
some Cobalt salts, a type of raw material commonly used in
the production of tyres. In 2019, Pirelli therefore decided to join
the “Cobalt Initiative” launched by RMI and to ask its suppliers
to fill in the CRT. The suppliers surveyed cover 100% of the
“conflict minerals” risk associated with the use of raw materials
using cobalt in tyres. 100% of suppliers surveyed responded:
72% of these suppliers excluded that foundries identified in
their supply chain source their cobalt from conflict areas or,
if in a conflict area, ensure due diligence in accordance with
OECD guidelines.; the remaining 28% gave insufficiently
precise indications of the source of cobalt, as required by the
procedure defined in the “Cobalt Initiative”, Since adherence to
the Cobalt Initiative is voluntary, Pirelli has undertaken a plan to
raise awareness and provide support to improve monitoring by
these Suppliers.
ENGAGEMENT OF SUPPLIERS
Pirelli believes that activities involving suppliers are essential
from the viewpoint of creating environmental and social
value and that are inseparably tied to the creation of shared
economic value. There are many activities operated by the
Company to that effect.
has
established
R&D PARTNERSHIPS Pirelli
several
partnerships with strategic suppliers and universities for the
development of innovative materials with low environmental
impact (materials described in the paragraphs dedicated
to environmental management of products of this Report).
As part of the development of new nanofillers, for example,
pursued since the early 2000s through research contracts
with universities and collaborations with suppliers, Pirelli has
begun to industrially introduce materials of mineral origin in
partial replacement of precipitated silica and carbon black.
Compared to the production processes of the replaced raw
materials, the innovations mentioned have guaranteed a
water saving, as well as a reduction of CO2 emissions by more
than 75%, saving respectively about 35,000 m3 of water and
about 580 tonnes of CO2.
These innovations provide economic benefits related directly
to the material for about €199,000 a year, although the real
sustainable business driver is the performance that the
product acquires, thus becoming more competitive.
CDP SUPPLY CHAIN For years, Pirelli has participated in
Climate Change and Water programmes promoted by CDP
(ex Carbon Disclosure Project). Implementing its Green
Sourcing Policy since 2014 Pirelli has in its turn decided
to extend the request for CDP assessment to its own key
suppliers at a Group level, identified in accordance with
criteria of environmental and economic materiality. In 2021,
the selection concerned the suppliers with the most impact
on the Carbon Footprint of the Group in the Raw Materials,
Logistics and Energy categories.
The CDP Supply Chain supports Pirelli in monitoring Scope
3 emissions from its supply chain and ensures adequate
awareness of suppliers in matters relating to climate change
116
so as to identify and activate all possible opportunities for
reducing emissions of climate-altering gases. In 2021, the
set of emission reduction actions implemented by Pirelli
suppliers made it possible to avoid overall the emission
of more than 59 million tonnes of CO2 equivalent into the
atmosphere, combined with estimated economic savings of
US$ 1.77 billion.
The first company among tyre manufacturers to have globally
introduced the CDP Supply Chain in its own supply chain,
Pirelli aims to achieve a response rate for suppliers of Raw
Materials of 90% in 2022. The response rate recorded in
2021 was 88%, an upward trend compared to previous years
(84% in 2020, 81% in 2019, 74% in 2018).
In addition, it should be noted that the Company is included in
the Supplier Engagement Rating Leaderboard 2021 published
by CDP, having obtained a score of A on an assessment of the
management of climate issues along its supply chain.
TRAINING OF SUPPLIERS ON SUSTAINABILITY MATTERS Since
2012, Pirelli has been providing training on environmental,
social and business ethics issues to its suppliers, identifying
each year the applicable pool of participants based on
strategic issues, spending value and operations by suppliers
in Countries considered at risk.
In 2021, given the continuation of the Covid-19 scenario, the
Group had to put on standby the activities planned in the
2019-2021 Roadmap on the implementation of the Policy
on Sustainable Natural Rubber Management. However,
to support training actions, a programme of distribution
of infographics was initiated to facilitate the continuous
cascading throughout the supply chain of our sustainable
natural rubber management policy. In 2021, the programme
covered about 80% of our suppliers, with the remainder to be
covered in early 2022.
SUPPLIER AWARD Pirelli Supplier Award, which is assigned
each year to suppliers of excellence, aims to constantly
improve relations with parties from the standpoint of shared
development.
The 2021 edition of the Supplier Award, after a pause in
2020 due to the evolution of the Covid-19 scenario, was held
virtually at the Pirelli Bicocca headquarters, in the presence
of Pirelli’s Vice Chairman and CEO and the Company’s Chief
Procurement Officer, who awarded prizes to nine suppliers
operating internationally, particularly in China, Italy, Japan,
Poland and Mexico, who distinguished themselves for quality,
innovation, service level, performance and sustainability.
The presence of the prestigious
‘Sustainability’ award
confirmed the importance of ‘responsibility’ strategies and
the resulting tangible benefits along the entire value chain.
In 2021, the award was given to a natural rubber supplier
that in recent years has demonstrated a strong and growing
commitment to and contribution to social and environmental
sustainability along the entire supply chain, collaborating
in the production of the first tyre with Forest Stewardship
Council (FSC) certified natural rubber and rayon.
Pirelli Annual Report 2021 TREND OF PURCHASES
The following tables show the value of purchases made by Pirelli Tyre and the percentage of the relative suppliers
divided by geographical area. These figures show that the value of purchases, as well as the number of suppliers,
is slightly higher in OECD area19 with respect to non-OECD areas.
63% of suppliers (down from 79% in 2020) operate locally with respect to the Pirelli Tyre subsidiaries supplied,
according to a local for local supply logic and excluding raw material suppliers as they generally operate where
Pirelli does not have its own facilities.
VALUE OF PURCHASES BY GEOGRAPHIC AREA
OECD COUNTRIES
NON-OECD COUNTRIES
NUMBER OF SUPPLIERS BY GEOGRAPHIC AREA
OECD COUNTRIES
NON-OECD COUNTRIES
Europe
North America
Others
Latin America
Asia
Africa
Others
Europe
North America
Others
2021
2020
2019
49.8%
49.1%
54.9%
6.8%
5.6%
11.4%
17.5%
0.5%
8.4%
8.0%
4.6%
12.1%
17.3%
0.5%
8.4%
6.7%
5.0%
12.1%
11.9%
0.4%
9.0%
2021
2020
2019
53.9%
55.2%
47.2%
4.5%
4.8%
4.8%
4.5%
5.5%
5.4%
Latin America
18.9%
19.7%
22.8%
Asia
Africa
Others
9.1%
0.2%
8.6%
6.9%
0.2%
8.7%
8.4%
0.4%
10.3%
The following table shows the breakdown in percentage of the value of Pirelli Tyre’s purchases by type. With a
weight equal to 45% of the total, the purchasing category which is decidedly more relevant and significant, as in
previous years, is that of raw materials.
VALUE OF PURCHASES BY CATEGORY
Raw Materials
Consumable Materials20
Services21
Capital goods22
2021
2020
2019
45%
11%
39%
5%
49%
8%
40%
3%
47%
7%
37%
9%
19 For the complete list of OECD Countries please refer to the official website http://www.oecd.org/about/
membersandpartners/
20 Indirect materials, auxiliary materials.
21 Energy, logistics services, shared services, ICT, R&D, marketing, trademarks and patents.
22 Machinery, civil works, moulds.
117
Report on Responsible Management With reference to the percentage of Pirelli Tyre’s suppliers by type presented in the table below, it is noted that
suppliers of consumables and services weigh about 95% of total number of suppliers, despite the weight on the
total value of purchases is lower compared, for example, to that of raw material purchases which, on the other
hand, show a substantial concentration on a few operators.
NUMBER OF SUPPLIERS BY CATEGORY
Raw Materials
Consumable Materials
Services
Capital goods
2021
2020
2019
2%
37%
58%
3%
2%
36%
59%
3%
The following table represents the percentage composition in the value of the mix of raw materials purchased by
Pirelli Tyre in the three-year period 2019-2021. The volume of raw materials utilised for the production of tyres in
2021 amounted to approximately 898,000 tonnes, of which approximately 4% derives from recycled materials
(in line with the previous year) and 22% of renewable materials23.
MIX OF RAW MATERIALS PURCHASED (VALUE)
2021
2020
2019
Natural Rubber
Synthetic Rubber
Carbon black
Chemicals
Textile
Steel
14%
25%
11%
23%
16%
11%
13%
26%
10%
23%
18%
10%
2%
35%
58%
5%
13%
26%
12%
22%
17%
10%
TARGETS
→ CDP Supply Chain: increase in raw material suppliers’ response rate from 88% in 2021 to 90% in 2022;
→ Natural Rubber supply chain sustainability: implementation of the 2022-2025 roadmap published in the
Sustainability section of the website www.pirelli.com. In 2022 Pirelli will continue on the path of engagement
and partnership with its suppliers, focusing training on specific issues that meet the needs of the supply
chain and dedicating it to players increasingly close to the origin of the chain. Pirelli will support suppliers
in the implementation of their roadmap of activities to implement Pirelli Policy and will continue to map the
socio-environmental risks of the supply chain, with increasingly precise traceability and an increasingly close
relationship with the various players involved;
→ reduction of CO2 emissions from raw material suppliers by 8.6% by 2025 compared to 2018 (Science Based
Target approved by SBTi);
→ as per the Single Used Plastic Policy, the Company plans to eliminate all single-use plastic used for offices
and factory services by the first half of 2022.
23 Pirelli aligns itself with the OECD, which defines “Renewable Natural Resources” as natural resources,
which, after their exploitation, can return to their original stock levels through natural growth or regeneration
processes.
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Pirelli Annual Report 2021 Environmental dimension
multiple languages in the Sustainability section of pirelli.com
website, available to the external community.
Pirelli Group considers environmental protection as a
fundamental value in the exercise and development of its
activities.
JOINING THE TASK FORCE ON CLIMATE-RELATED
FINANCIAL DISCLOSURES (TCFD)
Pirelli approach to environmental management is set forth
in accordance with the United Nations Global Compact,
of which Pirelli has been an active member since 2004,
and pursuant to the “Rio Declaration on Environment and
Development”.
investment and business decisions
Pirelli Values and Ethical Code states that “key consideration
in
is environmental
sustainability, with the Group supporting eco-compatible
growth, not least through the adoption of special technologies
and production methods (where this is operationally feasible
and economically viable) that allow for the reduction of the
environmental impact of Group operations, in some cases
even below statutory limits”.
The environmental management model adopted is detailed
in the Group Policies “Health, Safety and Environment”,
“Product Stewardship”, “Quality”, “Social Responsibility for
Occupational Health, Safety and Rights, and Environment”,
“Green Sourcing”, based on which Pirelli undertakes to:
→ assess and reduce the environmental impact of its own
products and services throughout their entire life cycle, as
of products and services purchased;
→ develop products and production processes that are
safe and designed to minimize polluting emissions, waste
generation, consumption of natural resources available and
the causes of Climate Change, in order to preserve the
environment, biodiversity and ecosystems;
→ manage its environmental activities in full compliance
with applicable laws and in compliance with the highest
international standards;
→ monitor and communicate to its Stakeholders the
environmental performance associated with processes,
products and services throughout the entire life cycle,
promoting its culture of environmental protection;
→ monitor the environmental impacts of its suppliers by
requesting them to adopt the same business model along
the supply chain;
→ support customers and end consumers in understanding
the environmental impacts of its products, informing
them of the safest use and disposal methods, facilitating
recycling or re-use where possible;
→ empower and train its workers in order to extend adequate
In September 2018, Pirelli formally joined the Task Force on
Climate-Related Financial Disclosures (TCFD) set up by the
Financial Stability Board24.
In supporting the initiative, Pirelli is committed to the voluntary
disclosure of transparent reporting and the disclosure of all
relevant information on risks and opportunities related to
Climate Change as indicated in the TCFD recommendations.
To this end, Pirelli publishes this information publicly both in
this report and through the CDP Climate Change programme,
where, once again in 2021, it has been confirmed as one of
the leaders included in the A-List.
Since Pirelli publishes an integrated annual report, the four
topics and the eleven recommendations identified by the
TCFD are reported as follows.
GOVERNANCE: (concerning climate-related risks and
opportunities).
responsible of sustainability
The matters relating to Climate Change fall within the
activities whose Governance is described in the paragraph
“Management Model” of this report, and in the paragraph
“Director
topics” and
“Audit, Risks, Sustainability and Corporate Governance
Committee” of the “Report on the Corporate Governance
and Share Ownership of Pirelli & C. S.p.A.”, included in this
report and to which reference should be made for further
information.
a) Board of Directors’ oversight
Pirelli Board of Directors, supported in its activities by the
Control, Risk, Sustainability and Corporate Governance
Committee, approves both the sustainable management
objectives and targets integrated into the Industrial Plan
and Pirelli Annual Report, including the Consolidated Non-
Financial Statement. The Executive Vice Chairman and Chief
Executive Officer is also appointed as Director in charge of
Sustainability with the task of overseeing sustainability topics
related to the Company’s operations and its interaction with
all Stakeholders, and implementing the guidelines defined by
the Board of Directors.
culture of environmental capital conservation.
b) Management’s role
All the documents mentioned above are communicated to
the Group’s employees in the local language and published in
24 The Task Force on Climate-related Financial Disclosures (TCFD) was established in 2015 by the Financial
Stability Board (FSB) - a body that monitors the global financial system - with the goal of developing a set of
recommendations on the reporting of Climate Change risks. The aim is to guide and encourage companies
to align the information disclosed with investors’ expectations and needs. In June 2017, the Task Force
published 11 recommendations in the areas of governance, strategy, risk management, metrics and targets.
The strategic development of Group Sustainability
is
entrusted to the Sustainability Strategic Committee, a body
chaired by the CEO and composed of the Company’s Top
Management representing all organisational and functional
responsibilities, which meets on an ordinary basis at least
twice a year. In addition, an Operational Sustainability
Committee was established in 2021, chaired by the Deputy
CEO and consisting of the company’s top management, with
119
Report on Responsible Management responsibility for the strategic and operational management
of the Group’s sustainability matters, including, among other
things, climate change issues.
The organisational structure thus consists of a Sustainability
and Future Mobility Department, reporting directly to the
company’s Deputy CEO, which oversees management at
Group level and proposes sustainable development plans
to the Sustainability Strategic Committee. The Group
Sustainability & Diversity Officer works in the Sustainability
and Future Mobility Department.
The Sustainability Department is supported by:
→ a Sustainability Working Group made up of sustainability
representatives within the various company departments
to guarantee constant monitoring and coordination of
strategic programmes with an impact on the competence
of the specific departments;
→ Country Sustainability & Diversity Managers in the oversight
of activities covering all Group subsidiaries. The role of
Country Sustainability Manager is covered by the Country
CEOs, who report directly to them for the operational
management of sustainability country plans.
STRATEGY (actual and potential impacts of climate-related
risks and opportunities on business, strategy and financial
planning).
With a view towards long-term management, Pirelli monitors the
Carbon Footprint and Water Footprint of its entire organisation
and is committed to the progressive reduction of the related
impacts on resources, climate and ecosystems. As broadly
described in the paragraph “Pirelli Group Environmental
Strategy and Footprint” of this report, the Group has adopted
a control and monitoring system that allows the qualitative and
quantitative identification of the materiality of environmental
impacts along the life cycle of the product on the basis of
which the company defines the response strategy.
In addition, Pirelli periodically performs sensitivity analyses
and risk assessments with respect to transition scenarios
towards a low-carbon economy and climate scenarios25, in
order to have a constantly updated picture of potential risks
and opportunities linked to Climate Change which are of
interest to the business and the related quantification of any
potential financial impacts. For further details, see the section
“Risks linked to Climate Change” in the “Directors’ Report on
Operations” of this report, and Pirelli’s public responses to the
CDP Climate Change questionnaire26.
a) Climate-related risks and opportunities (over the short,
medium and long term)
25 The latest Group Climate Change Risk Assessment considered the analysis of IPCC climate scenarios
(RCP 4.5 and RCP 8.5) and IEA energy transition scenario (IEA 450).
26 https://www.cdp.net/en/responses
27 Eco & Safety Performance products identify car tyres that Pirelli produces not only in Europe but
throughout the world and whose rolling resistance and wet grip performance fall within the A, B and C
values of the European labelling.
120
In line with the results of the last Group Climate Change Risk
Assessment, in the short-medium term (up to 5 years) there
are no significant risks relating to production processes or
to the markets in which Pirelli operates. On the other hand,
regarding a medium-long term scenario (up to 30 years), the
tyre sector could be subject to a series of risks, both physical
(extreme weather events with potential impacts on plant
production continuity) and regulatory (possible effects on
operational costs). On the other hand, there are opportunities
for growth in sales of Pirelli Eco & Safety Performance27
products, which identify car tyres characterised by rolling
resistance and wet grip belonging to the A, B, C values of
the European labelling, which is used as an internal metric to
classify all the products Pirelli produces not only in Europe
but throughout the world.
b) Impacts of climate-related risks and opportunities
As discussed in the section “Risks linked to Climate Change”
in the “Directors’ Report on Operations” of this report, to which
reference should be made, in relation to internal metrics of
potential financial impact, no risks with a significant impact
in the short to medium term were identified in relation to
production processes or the markets in which Pirelli operates.
c) Resilience of the strategy
The results of the scenario analyses carried out as part of
the Climate Change Risk Assessment, were assessed for
the definition of ambitious climate-related targets within the
sustainable development strategy to 2022, 2025 and 2030,
published in the current Industrial Plan. At process level, the
targets for reducing energy consumption and absolute CO2
emissions, the sourcing of 100% electricity from renewable
sources by 2025 and Group carbon neutrality by 2030 are
highlighted. In particular, the targets for reducing absolute
CO2 emissions were developed in accordance with the
guidelines of the Science Based Targets initiative (SBTi),
which validated them in June 2020, judging them to be
consistent with the actions needed to keep global warming
“well below 2°C”, as recommended by the Paris Agreement,
and cover both the production process (Scope 1 and 2
emissions) and the reduction of emissions in the supply chain
(Scope 3). At product level, among the several Eco & Safety
performance targets, in terms of impact on the climate, it has
to be mentioned the objective of having, by 2025, over 70%
of new car products, i.e. new labelled IP codes considered at
group level, classified as A or B for rolling resistance, according
to the highest European labelling standards, and over 90%
classified as A or B for “wet grip”. The business strategy based
on development of the Eco & Safety Performance product
line is designed to give Pirelli a competitive advantage over its
competitors in the face of growing market demand for low-
emission goods and services. Following the positive trend
that has seen revenues from Eco & Safety Performance tyres
over total Group revenues grow from 5% in 2009 to 63% in
2021, Pirelli has set the target to achieve 66% by 2025.
Pirelli Annual Report 2021 RISK MANAGEMENT: (identification, assessment and
management of the climate-related risks).
b) GHG emissions
a) Identification and assessment processes
The process adopted by Pirelli to identify and assess the
possible financial impacts, in terms of risks and opportunities,
related to Climate Change is based on the Group Climate
Change Risk Assessment, which is updated at least once a
year by the Sustainability and Future Mobility Department in
collaboration with Enterprise Risk Management and other
relevant corporate functions (Operations, Procurement,
Environmental Governance, Compliance among others). The
analysis assesses the evolution of any physical, regulatory,
technological, reputational and market risks that may affect
the company, with respect to transition scenarios towards
a low-carbon economy and climate scenarios with short,
medium and long-term time horizons. For the conclusions of
the analysis, see the section “Risks linked to Climate Change”
in the “Directors’ Report on Operations” of this report,
and Pirelli’s public responses to the CDP Climate Change
questionnaire28.
b) Management processes
The most relevant risks identified through the Climate
Change Risk Assessment are assessed and classified against
internal metrics of potential financial impact: for each risk
or opportunity that has been recognised as material, a risk
mitigation plan is prepared or an internal discussion is opened
to capture the maximum benefit from the opportunity.
c) Integration into overall risk management
The process for identifying, assessing and managing risks
related to Climate Change is fully integrated into Pirelli’s risk
management model, as described in detail in the “Risk factors
and Uncertainty” section included in the “Directors’ Report on
Operations” of this report.
METRICS AND TARGETS: (metrics and targets used to
assess and manage risks and opportunities related to Climate
Change, where the information is material).
a) Metrics used
Pirelli reports the impacts and performance linked to
Climate Change according to the metrics defined by the GRI
Sustainability Reporting Standards and by the Sustainability
Accounting Standard Board (SASB). In particular, see
the “GRI Content Index” (GRI Standard 305 Disclosures:
Emissions) and the “SASB Content Index” at the end of this
Annual Report.
28 https://www.cdp.net/en/responses
121
Pirelli monitors and reports its direct (Scope 1) and indirect
(Scope 2 and Scope 3) greenhouse gas emissions as
described in the paragraph “GHG emissions management
and carbon action plan” in this report, and the related values
are subject to specific limited audit activity, by an independent
company, according to ISAE 3000.
c) Targets
Pirelli reports its environmental and product targets that
are most closely linked to Climate Change, in the present
chapter “Environmental Dimension” and in the “Sustainability
Planning and the United Nations Sustainable Development
Goals (SDGs)” and “Our Suppliers” (“Target” section)
paragraphs of this report.
PIRELLI GROUP ENVIRONMENTAL STRATEGY AND FOOTPRINT
Monitoring and management of environmental issues have
always played a key role in the business strategy at Pirelli. With
a view to long-term management, Pirelli each year monitors
the Carbon Footprint and Water Footprint of its entire
organisation and is committed to the progressive reduction
of the related impacts on resources, climate and ecosystems.
The Group has adopted a control and monitoring system that
allows the identification of the materiality of environmental
impacts throughout the product life cycle. The infographic on
the following pages shows Pirelli approach to environmental
management and the specific
long-term sustainability
targets defined by the Industrial Plan, whose performance is
reported in the present report.
The Pirelli Group’s Carbon and Water Footprint are updated
to 2021. With regard to the carbon footprint, in 2021 there
was an increase in absolute terms of about 15% over 2020 (a
year that saw a significant reduction in production volumes,
and consequently in all emissions associated with the various
phases of the tyre life cycle, due to the effects of the health
emergency linked to the Covid-19 pandemic), but a significant
decrease of 7% compared to 2019 (a year not affected by
the Covid-19 emergency). Similarly, with regard to the water
footprint, growth in absolute terms is around 17% compared
to 2020, but down 6% compared to 2019.
As
immediately clear, the materiality of environmental
impacts is concentrated in the use phase of the tyre. In terms
of the Carbon Footprint, the use phase has a weight of about
91.3% of total impacts throughout the entire life cycle of the
product, compared to a production phase that has a weight of
only 2.4% of total impacts. As regards the impact of the Water
Footprint, the use phase of the product is the most significant
(53.1% of the total impacts), followed by the production phase
of raw materials (34.2% of impacts).
The graph can be read either horizontally, following the
stages of life of a tyre one by one, or vertically, thus being able
to appreciate the targets of reducing the impacts that the
Report on Responsible Management Company has defined for each of the different stages of life,
which will be explored later in this chapter.
At the methodological level, the phases of the life cycle
have been analysed following the Life Cycle Assessment
methodology as defined by the ISO 14040 family of
standards. This approach is capable of validating the results
and the strategic decisions related to it, as objectively as
possible, integrated with the indications of the “Product
Category Rule29“ for tyres developed by the Tyre Industry
Project Group of the World Business Council for Sustainable
Development. This approach is based on the identification
and quantification of all input and output flows of the various
life cycle phases (resources, raw materials, emissions, waste),
which are subsequently translated into environmental impact
potentials by means of dedicated models. This approach
makes it possible to consolidate the effects of a very
large number of factors into a few synthetic quantitative
parameters (for example, of all the types of emissions or
waste that are generated in the production processes of the
raw materials used). The reporting of the emission impacts
also complies with the provisions of the GHG Protocol
(Corporate Accounting and Reporting Standard) and the
GRI Sustainability Reporting Standards. To determine the
Carbon Footprint and the Water Footprint, Pirelli’s calculation
model is respectively inspired by the ISO 14067 and ISO
14046 standards. The values are shown as a percentage, as
the objective of this infographic is to show the difference in
materiality between the various life stages.
The main environmental impacts are generated by various
activities related to the different stages of the Life Cycle. In the
case of raw materials procurement, the main impact derives
from the related production and distribution. In the case of
tyre production, the main impact is related to the consumption
of electricity and natural gas: in particular the main pressure
in terms of emissions
into the atmosphere and water
consumption is attributed to the production of the latter. In the
case of the distribution of new tyres and their use by customers,
the impact is indirect and derives from the fuel consumption
of vehicles (only the fuel consumption related to the power
absorbed by the rolling resistance of the tyres is allocated to
the customers). Finally, in the last phase of life considered, the
impact derives from the processing of end-of-life products
for recovery thereof as energy or recycled raw material. With
reference to the Carbon Footprint, the infographic (see the
“Driver” part) also includes a breakdown of emissions in the
three Scope categories provided by the GHG Protocol.
If the product life phases are considered according to what
is indicated in the GHG Protocol standard (Corporate Value
Chain - Scope 3) and as taken up by the Science Based
targets initiative, emissions from the use phase of the tyre are
evaluated as “indirect” since already included in the use phase
of the vehicle, of which the tyre is a component (with indirect
responsibility for the energy consumption of the vehicle
during use). Therefore, these emissions do not fall within the
boundary to be considered by tyre makers for value chain
emissions reduction targets, which instead consider: Scope
1 and 2 emissions, generated by the group’s production
activities, and Scope 3 emissions mainly related to the supply
chain, logistics and end of life of the product. The Tyre Use
Phase, as mentioned above, is part of the vehicle use phase
and therefore of Scope 3 emissions in charge of Vehicle
Manufacturer Customers.
As reported below, Pirelli has both emission reduction targets
approved by the Science Based Targets initiative, covering
its own Scope 1, 2 and 3 emissions, and indirect Scope 3
emissions reduction targets in the use phase, the benefit of
which goes towards reducing Scope 3 emissions in the use
phase of vehicle manufacturers.
infographic shows the actual
The central part of the
quantification, in percentage terms, of the Carbon Footprint
and Water Footprint. These two aspects are summarised by
four principal indicators: Primary Energy Demand (PED),
Global Warming Potential (GWP), Water Depletion (WD) and
Eutrophication Potential (EP). The values are calculated in GJ
of energy, tonnes of CO2 equivalent, cubic metres of water
and kilograms of phosphate equivalents.
Primary Energy Demand refers to the quantity of renewable
or non-renewable energy that is taken directly from the
hydrosphere, the atmosphere or the geosphere.
The Global Warming Potential concerns the effect on the
climate of anthropic activities and is calculated, as mentioned,
in tons of CO2 equivalent (the greenhouse effect potential of
the gas considered is assessed in relation to CO2, considering
a residence time in the atmosphere of 100 years).
The Water Depletion, based on the Swiss model for ecological
scarcity, represents the volume of water used, compared
to the availability of water resources locally, with the aim of
giving greater weight to the volumes of water taken from
areas characterised by a greater scarcity of this resource.
Eutrophication Potential is the enrichment of nutrients in a
given ecosystem, whether aquatic or terrestrial: air pollution,
emissions into water and agricultural fertilisers all contribute
to eutrophication. The result in aquatic systems is accelerated
growth of algae, which does not allow sunlight to penetrate the
surface of the water basins. This reduces photosynthesis and
thus reduces the production of oxygen. Low concentrations
of oxygen may cause the alteration of the aquatic ecosystem
with potential effects in terms of biodiversity.
In terms of environmental materiality, the use phase of the tyre
is overall the most prevalent. In terms of economic materiality,
instead, the amount of company spending in the process
phase is the most relevant, which results in the opportunity
to reduce impacts through investments in energy efficiency.
In the lower part of the infographic, the actions and targets
adopted by Pirelli are indicated in order to reduce the
environmental impacts in the various phases of the life cycle
according to the current Industrial Plan.
29 Product Category Rule: Set of rules, requirements and specific guidelines for the development of
environmental declarations, for one or more product categories, defined according to ISO 14025.
122
Pirelli Annual Report 2021 123
Report on Responsible Management STAGES
OF LIFE CYCLE
DRIVERS
IMPACT:
CARBON & WATER
FOOTPRINT*
MATERIALITY
RESPONSE
STRATEGY
RAW MATERIALS
MANUFACTURING
Suppliers
Raw Materials production and transport:
the impact is due to the resources use
by suppliers’ plants
Pirelli
Tyre manufacturing: at Pirelli’s factories the
impact mainly derives from the consumption
of electricity and natural gas.
DISTRIBUTION
Suppliers
USE
Customers
Consumption and related production of fuel
used by trucks and ships of logistics
providers. which deliver Pirelli tyres
worldwide.
Production and consumption of the fuel of
customers’ vehicles due to rolling resistance.
END-OF-LIFE
Waste Recovery Players
End-of-life tyre management: old tyres
are prepared by specialised companies
to be reused either as energy or
as regenerated raw material.
Scopo 3
Scope 1+2+3
Scope 3
Scope 3
Scope 3
34.2%
24.4%
10.6%
6.1%
12.6%
3.7%
2.4%
0.9%
0.2%
0.2%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
PED
GWP
WD
EP
PED
GWP
WD
EP
PED
GWP
WD
EP
PED
GWP
WD
EP
PED
GWP
WD
EP
Economic
High
Environmental
Medium
Economic
High
Environmental
Medium
Economic
Medium
Environmental
Low
Economic
Environmental
High
High
Economic
Environmental
Low
Low
RAW MATERIAL INNOVATION
PROCESS EFFICIENCY
GREEN SOURCING POLICY
PRODUCT INNOVATION
91.3%
85.5%
74.7%
53.1%
Target 2025
100%
renewable electricity sourcing
-25%
Absolute CO2 emissions
vs. 2015
(target validated by SBTi**)
-43%
Specific water withdrawal
vs. 2015
-10%
Specific energy consumption
vs. 2019
98%
Waste sent for recovery
Target 2030
Group Carbon Neutrality
(emissions from electric and thermal energy);
ISO 14001 IN ALL FACTORIES
SCRAP REDUCTION PROGRAMME
Research and development of raw materials
with low environmental impact
Gradual introduction of new materials from
renewable and/or recycled sources
Biomaterials such as high-performance
silica from renewable sources, biofillers such
as lignin and plant-based plasticisers/resins
Natural rubber: search for sustainable
alternative sources
Functionalised polymers: research into
innovative polymers that guarantee reduced
environmental impact, better driving safety
and improved production efficiency
Target
Reduction of CO2 emissions from raw
material suppliers by 8.6% by 2025
compared to 2018 (target validated by
SBTi**)
for new product lines:
by 2025: > 40% renewable materials, > 3%
recycled materials and < 40% fossil-derived
materials
by 2030: > 60% renewable materials, > 7%
recycled materials and < 30% fossil-derived
materials
GREEN PURCHASING GUIDELINES/GREEN
SOURCING POLICY
CDP SUPPLY CHAIN
THIRD-PARTY AUDITS OF CRITICAL
SUPPLIERS
124
Green Logistics Procedure
Engagement to reduce Supply chain
Carbon & Water Footprint
Target 2025
Rolling Resistance A/B ≥ 70% of new car
products (new labelled IP Codes)
Wet Grip A/B ≥ 90% of new car products
(new labelled IP Codes)
ECO & SAFETY PERFORMANCE REVENUES
Target 2025
≥ 66% of Group car tyre sales and ≥ 71% of
High Value products***
CYBER™ TECHNOLOGIES
PRESENCE ON MAIN INTERNATIONAL
WORKING GROUPS
(WBCSD, ETRMA) to spread the culture
of recovery
REGENERATED RAW MATERIALS
Research projects in order to improve the
quality of regenerated materials, with the
aim of increasing their percentage portion of
the new compounds
PED:
Primary Energy Demand
GWP:
Global Warming Potential
WD:
Water Depletion
EP:
Eutrophication Potential
(Freshwater - Peq)
* Value expressed as % of impact at different
stages of the life cycle
** Science Based Targets initiative
*** High Value products are determined
by rims equal to or greater than 18 inches and,
in addition, include all “Specialties” products
(RUN FLATTM, SEAL INSIDETM, PNCSTM).
Pirelli Annual Report 2021 STAGES
OF LIFE CYCLE
DRIVERS
IMPACT:
CARBON & WATER
FOOTPRINT*
MATERIALITY
RESPONSE
STRATEGY
RAW MATERIALS
MANUFACTURING
Suppliers
Raw Materials production and transport:
the impact is due to the resources use
by suppliers’ plants
Pirelli
Tyre manufacturing: at Pirelli’s factories the
impact mainly derives from the consumption
of electricity and natural gas.
DISTRIBUTION
Suppliers
USE
Customers
Consumption and related production of fuel
used by trucks and ships of logistics
providers. which deliver Pirelli tyres
worldwide.
Production and consumption of the fuel of
customers’ vehicles due to rolling resistance.
END-OF-LIFE
Waste Recovery Players
End-of-life tyre management: old tyres
are prepared by specialised companies
to be reused either as energy or
as regenerated raw material.
Scopo 3
Scope 1+2+3
Scope 3
Scope 3
Scope 3
34.2%
24.4%
10.6%
6.1%
12.6%
3.7%
2.4%
0.9%
PED
GWP
WD
EP
PED
GWP
WD
EP
PED
GWP
WD
EP
PED
GWP
WD
EP
PED
GWP
WD
EP
0.2%
0.2%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Economic
Environmental
High
Medium
Economic
Environmental
High
Medium
Economic
Medium
Environmental
Low
Economic
High
Environmental
High
Economic
Low
Environmental
Low
91.3%
85.5%
74.7%
53.1%
RAW MATERIAL INNOVATION
PROCESS EFFICIENCY
GREEN SOURCING POLICY
PRODUCT INNOVATION
Target 2025
100%
renewable electricity sourcing
-25%
Absolute CO2 emissions
vs. 2015
(target validated by SBTi**)
-43%
Specific water withdrawal
vs. 2015
vs. 2019
-10%
Specific energy consumption
98%
Waste sent for recovery
Target 2030
Group Carbon Neutrality
(emissions from electric and thermal energy);
ISO 14001 IN ALL FACTORIES
SCRAP REDUCTION PROGRAMME
Research and development of raw materials
with low environmental impact
Gradual introduction of new materials from
renewable and/or recycled sources
Biomaterials such as high-performance
silica from renewable sources, biofillers such
as lignin and plant-based plasticisers/resins
Natural rubber: search for sustainable
alternative sources
Functionalised polymers: research into
innovative polymers that guarantee reduced
environmental impact, better driving safety
and improved production efficiency
Target
Reduction of CO2 emissions from raw
material suppliers by 8.6% by 2025
compared to 2018 (target validated by
SBTi**)
for new product lines:
by 2025: > 40% renewable materials, > 3%
recycled materials and < 40% fossil-derived
materials
materials
by 2030: > 60% renewable materials, > 7%
recycled materials and < 30% fossil-derived
GREEN PURCHASING GUIDELINES/GREEN
SOURCING POLICY
CDP SUPPLY CHAIN
THIRD-PARTY AUDITS OF CRITICAL
SUPPLIERS
Green Logistics Procedure
Engagement to reduce Supply chain
Carbon & Water Footprint
Target 2025
Rolling Resistance A/B ≥ 70% of new car
products (new labelled IP Codes)
Wet Grip A/B ≥ 90% of new car products
(new labelled IP Codes)
ECO & SAFETY PERFORMANCE REVENUES
Target 2025
≥ 66% of Group car tyre sales and ≥ 71% of
High Value products***
CYBER™ TECHNOLOGIES
125
PRESENCE ON MAIN INTERNATIONAL
WORKING GROUPS
(WBCSD, ETRMA) to spread the culture
of recovery
REGENERATED RAW MATERIALS
Research projects in order to improve the
quality of regenerated materials, with the
aim of increasing their percentage portion of
the new compounds
PED:
GWP:
WD:
EP:
Primary Energy Demand
Global Warming Potential
Water Depletion
Eutrophication Potential
(Freshwater - Peq)
* Value expressed as % of impact at different
stages of the life cycle
** Science Based Targets initiative
*** High Value products are determined
by rims equal to or greater than 18 inches and,
in addition, include all “Specialties” products
(RUN FLATTM, SEAL INSIDETM, PNCSTM).
Report on Responsible Management PIRELLI’S APPROACH TO THE CIRCULAR ECONOMY: THE 5RS
As part of Pirelli’s “Eco & Safety Design” Strategy, a decisive
role is played by the continuous focus on the definition and
implementation of increasingly circular solutions.
It is in this context that Pirelli has developed its own approach
to the Circular Economy, which is based on rethinking (Rethink)
the way products, processes and services are developed, with
the goal of achieving ever-higher performance, continuously
reducing environmental impacts, and protecting the health
and safety of people.
Rethink is supported by the other four commitments in
Pirelli’s 5R approach:
→ Refuse: avoiding processes, products, services and
materials that are redundant, while promoting an increase
in the safety of the products used, through the replacement
of those not considered suitable, in a preventive manner
and even going beyond legislative requirements. The
progressive elimination of single-use plastics is also part
of this commitment.
→ Reduce: reducing the use of resources, especially non-
renewable resources, both in terms of energy carriers and
natural resources, and of raw materials, with the aim of
reducing the Group’s Environmental Footprint, also with a
view to Carbon Neutrality. Reducing also means developing
tyres with increasingly less rolling resistance that can
help reduce vehicle consumption, as well as production
processes that use fewer resources and generate less and
more easily recyclable waste. Pirelli has expressed numerous
public objectives in support of its reduction commitment,
which include all 2025 targets for process efficiency in
factories (-43% on specific water withdrawal compared to
2015; -10% on specific energy consumption compared to
2019 and -25% of absolute CO2 emissions compared to
2015, as approved by the SBTi), the performance of new car
products in terms of Rolling Resistance (≥ 70% A/B labelling
classification by 2025) and the SBTi validated target to
reduce CO2 emissions (-8.6% by 2025 compared to 2018)
of its raw material suppliers.
→ Reuse: maximising the reuse of resources and products,
consistent with the quality and safety levels required for
tyres, with the aim of preventing waste generation and
unnecessary consumption of resources, especially non-
renewable resources. This commitment is reflected, for
example, in the design of tyres with an increasing content
of renewable or recycled raw materials, with public targets
that envisage on some product lines to use over 40%
renewable materials by 2025 (over 60% by 2030), over
3% recycled materials (over 7% by 2030) and to reduce
the use of fossil-derived raw materials to less than 40%
(less than 30% by 2030).
→ Recycle: recycling the waste derived from production
processes, promoting, as far as possible and compatibly with
the contexts in which it operates, the recovery of materials
and favouring the recovery of end-of-life tyres, also through
research and development actions aimed at maximising the
quality of materials deriving from the recovery of end-of-life
tyres (ELTs) both for “closed loop” applications and for use
in other phases of the value chain through the promotion
of industrial ecosystems. This commitment is reflected, for
example, in the group’s 2025 target to send at least 98%
of the waste produced for recovery.
The main examples of the application of these commitments
along all stages of the tyre life cycle and the relative
performance in 2021 are reported in the following paragraphs.
PRODUCT: RESEARCH AND DEVELOPMENT OF RAW MATERIALS
The Research and Development of innovative materials is
essential in order to design and manufacture “Eco & Safety”
tyres which are increasingly sustainable and which guarantee
lower environmental impacts throughout their life cycle while
ensuring greater driving safety.
In terms of raw materials, for the selected product lines,
the current Industrial Plan envisages an increasing use of
materials from renewable and recycled sources, with the aim
of using more than 40% renewable materials by 2025 (more
than 60% by 2030), more than 3% recycled materials (more
than 7% by 2030) and reducing the use of fossil-derived raw
materials to less than 40% (less than 30% by 2030).
In 2021, a significant R&D effort was made on innovative
renewable and recycled materials, which led Pirelli to equip
the Volvo Recharging Concept with a tyre containing 94%
materials of non-fossil origin, such as silica from rice husks,
carbon black from recycling and bio-resins. This concept
paves the way for the introduction of such materials in normal
production, as in the case of rice husk silica, which has been
introduced in several production plants, making it possible to
reach up to 28% of renewable materials in some IP codes by
2021 (up from 23% in 2020), together with 5% (about 1%,
excluding metals) of recycled materials (a value in line with
the 2020 figure).
In this context, Pirelli’s Research & Development focuses, for
example, on:
→ high-dispersion silica for wet grip, rolling resistance and
mileage;
→ new technologies applied to the development of polymers,
fillers and plasticisers to improve the wear rate of tyres;
→ biomaterials, such as silica from renewable sources,
biofillers such as lignin and sepiolite, and plasticisers/resins
of plant origin;
→ textile reinforcements with fibres from renewable and/or
recycled sources;
→ nanofillers for more stable compounds, lighter structures
and highly impermeable liners;
→ new silica surfactants to guarantee performance stability
and processability.
Pirelli has activated several Joint Development Agreements
with leading suppliers for the study of new polymers, silicas,
plasticisers and resins that are able to further improve the
characteristics of tyres for rolling resistance, low temperature
performance, mileage and road grip.
126
Pirelli Annual Report 2021 The Joint Labs agreement (2021-2024) between Pirelli and
the Politecnico of Milan, aimed at research and training in
the tyre industry, covers nanotechnology, the development
of new synthetic polymers, new biopolymers and new
bifunctional chemicals (e.g. serinol-pyrrole for improving
polymer-charge interaction with reduced emission of volatile
organic compounds - VOCs).
In the field of biomaterials, in addition to the introduction of
resins and plasticisers from natural origin, Pirelli has focused
on silica deriving from the rice husk, namely the outer shell
of rice grain. The husk is by weight 20% of the raw rice grain
and it is the main waste of this crop, because, in many areas of
the world, it is not used but burned in the open air. Thanks to
a partnership with various producers, Pirelli is evaluating the
diversified supply of high-performance silica from processes
that start from rice husks used as feedstocks, contributing
to the industrial application of a circular economy model
concerning waste materials. The combustion of the carbon
part of the husk also allows a reduction of more than 90% of
the amount of CO2 emitted per kilogram of silica, compared
to the conventional process that instead exploits fossil energy
sources. During 2021, the use in normal production of silica
from rice husks was increased achieving a volume scale-up
to 1% of total silica consumption involving plants in China and
Europe, with the aim of reaching 7% during 2022.
(Consortium
Specific projects for the development of new materials
from renewable sources, mainly focused on the use of waste
feedstocks, are the subject of the framework agreement
between Pirelli, CORIMAV
for Materials
Research Advanced) and Bicocca University. In the context
of the new nano-fillers, in production Pirelli has started to
introduce process materials of mineral origin in a partial
substitution of precipitated silica and carbon black, such
as sepiolite. These innovations save water and reduce CO2
emissions by more than 75% compared to the production
processes of the raw materials being replaced.
With a view to the circular economy, in 2021 Pirelli filed
patent applications for the use of recycled PET in the
manufacture of tyres, resins from renewable sources,
lignin and, in collaboration with the Milan Polytechnic, the
synthesis of pyrroles from materials derived from renewable
lignocellulosic biomass. Lignin, a low environmental impact
additive of natural origin derived from waste from the cellulose
production process, is already being used in a compound for
Velo products.
Pirelli Research and Development constantly monitors the
growing opportunities for the use (in increasing proportions)
of materials from recycling. The development of innovative
technologies for the production of materials from recycled
end-of-life tyres (ELTs), such as powder obtained by fine
grinding the tyre or carbon black obtained from tyre pyrolysis,
allows them to be used in increasing quantities without
compromising performance or safety, unlike the technologies
of the past.
Some materials used in compound formulations (such as
synthetic polymers, carbon-black and synthetic oils) can in
turn be produced by feeding the synthesis process with certain
quotas of feedstock from recycling (recycled polystyrene, oil
from pyrolysis of ELTs): during 2021, Pirelli expanded the
collaboration with partners aimed at developing, validating
and applying these technologies in new materials.
There is constant research into the efficiency of materials,
which makes it possible to reduce the volumes purchased, as
well as the weight of the finished product, with a significant
positive environmental impact throughout the entire life cycle
of the material and product.
is also continuing aimed at diversifying the
Research
potential supply sources of natural rubber, to reduce
pressure on biodiversity in producer Countries and allow the
Company to manage the potential scarcity of raw materials
with greater flexibility. At the same time, partnerships are
being strengthened with suppliers of FSC-certified (Forest
Stewardship Council) natural rubber. The sustainable
management of the natural rubber supply chain, the so-
called conflict minerals and the cobalt chain are specifically
discussed in the “Our Suppliers” section of this report.
Further information on Pirelli’s Research & Development
activities can be found in the paragraph “Our Suppliers” (R&D
Partnership section) of this report and in the Directors’ Report
on Operations (“Research and Development Activities”
section).
PRODUCT: THE OBJECTIVES OF ECO & SAFETY PERFORMANCE
In line with its position in the Premium and Prestige segments,
Pirelli develops and introduces increasingly sophisticated
products on the market, responding to a macroeconomic
scenario in constant and rapid evolution. The significant
corporate
in research and development on
materials, compounds, structures and tread patterns allows
Pirelli products to achieve extremely high performance in
terms of braking in dry and wet conditions and, at the same
time, improved environmental performance such as:
investment
→ less rolling resistance – lower CO2 emissions;
→ less noise – reduced noise pollution;
→ increased mileage – lengthening of tyre life and reduced
exploitation of resources.
The targets to improve the environmental performances
adopted by Pirelli for its products are objective, measurable
and they consider the level of materiality of the impacts
along the life cycle of the product with a perspective of the
maximum effectiveness of the action. In this regard, Pirelli is
constantly committed to reducing the rolling resistance of its
car products, which, at the end of 2021, is 10.3% lower than
the 2015 value (and down more than one percentage point
from the 2020 figure), calculated as the weighted average
of all car tyres. In addition, Pirelli has set the goal for 2025
of having over 70% of new car products, i.e. new labelled IP
codes considered at group level, classified A or B for rolling
resistance (according to the highest European labelling
standards) and over 90% classified A or B for wet grip. In
127
Report on Responsible Management 2021, the new labelled IP code tyres placed on the market
by Pirelli worldwide have 49% (up from 39% in 2020) A or
B Rolling Resistance labels and 87% (in line with the 2020
figure) A or B Wet Grip labels, according to the European
classification.
For an overview of product performance targets, please
refer to the “Sustainability planning and the UN Sustainable
Development Goals (SDGs)” section of this report.
include
Eco & Safety Performance30 products
the
CINTURATO™ P7™ Blue, with which solution Pirelli was the
first manufacturer in the world present on the market with a
tyre that, in some measurements, boasts the double A in the
Eurolabel scale. This product is available, depending on the
measurements, both in double A class and in B class of rolling
resistance while always maintaining A class for wet grip. On
average, the CINTURATO™ P7™ Blue guarantees 23% less
rolling resistance than the Pirelli reference (rolling resistance
class C), combined with lower fuel consumption and a
reduction in the atmospheric emissions associated with it. A
vehicle with CINTURATO™ P7™ Blue tyres that runs 15,000
km a year consumes 5.1% less fuel (equivalent to 52 litres),
and reduces greenhouse gas emissions by 123.5 kilograms
of CO2 and has a braking distance on wet 9% lower than the
Pirelli benchmark (class B of wet grip) in the same segment.
Comparative TÜV SÜD tests showed that, at a speed of 80
km/h on a wet surface, the CINTURATO™ P7™ Blue reduces
braking by 2.6 metres compared to a tyre classified B.
In 2021, Pirelli launched the new Pirelli Powergy, a summer
tyre for crossovers, SUVs, sedans and MPVs, which is
characterised by class A labelling for wet grip, class B for
rolling resistance and low noise emission (minimum value on
the label). To achieve the performance offered by the Pirelli
Powergy, the latest virtual simulation technologies have
been used to develop the tread pattern and the profile of the
tyre with a view to optimising the footprint, with the benefit
of limiting braking distances and maximising controllability
and driving precision. These elements, combined with the
use of compounds with balanced polymers, serve to improve
performance on wet surfaces and mileage. The results
were also achieved thanks to the analysis of the parameters
obtained from the use of the static simulator at Pirelli’s R&D
centre in Milan and the final validation tests on the track,
which made it possible to optimise the development times
and processes of this tyre, designed in 18 months despite
the difficulties of the global health context, with reduced
production of physical tyre prototypes and consequent
benefits in environmental terms.
In May 2021, Pirelli became the first company in the world to
produce a range of FSC-certified tyres designed for the new
BMW X5 xDrive45e Plug-In Hybrid. These tyres contain
FSC-certified natural rubber and rayon and represent a new
horizon for increasingly sustainable tyre production. FSC
30 Eco & Safety Performance products identify the car tyres that Pirelli produces throughout the world that
fall exclusively into classes A, B, C of rolling resistance and wet grip according to the labelling parameters set
by European regulations.
forest management certification confirms that plantations
are managed in a way that preserves biological diversity and
benefits the lives of local communities and workers, while
ensuring economic sustainability. Also contributing to the
environmental sustainability of this tyre, which is produced
exclusively at the Pirelli factory in Rome (Georgia, USA), is
its low rolling resistance (A value on the European label),
which limits the vehicle’s fuel consumption and related
atmospheric emissions.
In 2021, Pirelli presented its first tyre with an HL (High Load)
index dedicated to electric or hybrid cars and SUVs. Designed
to support the increased weight of vehicles equipped with
batteries, the new product is capable of supporting a ground
weight more than 20% greater than a standard tyre. The
new US luxury electric sedan Lucid Air is the first car to use
Pirelli’s new HL tyres, which also feature Pirelli Elect and
PNCS technologies. The Elect marking identifies Pirelli tyres
dedicated to electric and hybrid vehicles, whose performance
is closely influenced by the tyres. Thanks to specific technical
characteristics of the compound and structure, Pirelli tyres
marked Elect offer several advantages: low rolling resistance to
increase autonomy, low rolling noise to ensure excellent driving
comfort, immediate grip for transmission stress during start-
up and a structure suitable for supporting the weight of the
battery-powered vehicle. To further increase interior comfort,
PNCS technology, consisting of a special sound-absorbing
material placed in the tyre cavity, dampens air vibrations
that would otherwise be transmitted inside the vehicle with a
consequent reduction in the noise generated by tyre rolling,
with an additional benefit for the driver and passengers.
Attention to environmental sustainability is also fully integrated
into the company’s motorsport business model. In fact, Pirelli
is the first and only tyre manufacturer in the world to have
obtained three stars of the Environmental Accreditation
Programme promoted by the FIA (International Automobile
Federation), in recognition of its commitment to sustainability
in motorsport and achieved them as a result of a supply
chain that is fully managed according to environmental and
social sustainability criteria. Among the measures Pirelli has
taken to achieve this result in Formula 1™ are an increase in
the use of renewable materials, the elimination of single-use
plastic from track activities and a supply chain fully managed
according to environmental and social sustainability criteria.
In addition, Pirelli’s motorsport activities have passed a series
of rigorous audits that take into account various elements to
reduce environmental impact, starting with carbon dioxide
emissions. An issue that was also central to the development
of the new GT tyre, the P Zero DHF, thanks to the extensive
use of virtual models that made it possible to reduce the
production of physical prototypes. Examples of Pirelli’s
sustainability objectives, in both business and manufacturing,
include reducing absolute CO2 emissions by 25% by 2025
(compared to 2015 levels) and sourcing 100% of electricity
from renewable sources, a goal already achieved by all Pirelli
European plants including the motorsport factories in Slatina,
Romania, and Izmit, Turkey. As far as logistics are concerned,
Pirelli uses the latest EURO 6D truck fleet and for extra-
European shipments chooses sea solutions as far as possible,
which are less polluting than air transport.
128
Pirelli Annual Report 2021 For further information on Motorsport, please refer to the
paragraph “Motorsport and sustainability” of this report and
the paragraph “Engagement in motorsport” in the Directors’
Report on Operations.
With reference to the cycling, also in 2021 Pirelli launched
new product lines (P ZERO Race, P ZERO Road, P7 Sport,
SmarTUBE) renewing and expanding the range of products
dedicated to sportspeople and cycling enthusiasts.
In 2021, Pirelli launched CYCL-e around™ for companies; a
fleet of e-bikes that companies will be able to make available
to their employees to ride to work and in their free time, fitting
in as a complement to the ecosystem of urban transport
and private vehicles to make mobility in the city more fluid,
sustainable and accessible.
Pirelli’s high-tech products include the development of
technologies based on the introduction of sensors inside
the tyre. In February 2021, for the first time in the world, a
production car fitted as original equipment a sensor-fitted
tyre that talks to the car: the Pirelli Cyber Tyre system,
consisting of a sensor in each of the tyres that collects
fundamental information for driving safety and software
integrated into the car’s electronics. This is the McLaren
Artura, a hybrid supercar equipped with the latest technology
aimed at making the driving experience as engaging and
safe as possible. The Pirelli Cyber Tyre system will represent
the future of tyres, providing cars with a “sense of touch”,
able to detect or anticipate potentially dangerous situations
such as loss of grip and aquaplaning, thus enabling the
car’s electronics to intervene promptly. The next step will
see tyres networked, both with other vehicles and with the
road infrastructure. Already by late 2019, Pirelli was the first
company in the world in the tyre sector to share information
on the 5G network about the road surface detected by
smart tyres equipped with sensors, presenting in Turin the
use-case “World-first 5G enhanced ADAS (Advanced Driver
Assistance Systems) services”. This is a continuously evolving
system that will become essential as the level of autonomy of
cars increases. In fact, the driver’s current ability to perceive
the grip conditions provided by the type of road surface and
weather conditions will have to be fulfilled by the tyres, and
the car will be able to slow down if the asphalt is found to be
slippery, adapt the electronic controls to increase safety and,
with inter-vehicle connectivity, warn other self-driving cars
of a potential imminent danger. This is a true tactile sense
offered by the only point of contact between the car and the
road, the tyres.
an
transport,
announced
In 2021, Pirelli and Geotab, a global leader in IoT and
connected
international
collaboration to support the commercial transport sector
in
improving operational efficiency and sustainability,
while also promoting greater safety for people and goods.
Reducing tyre management costs, fuel consumption and
emissions are the objectives to be achieved through the
forthcoming use of Pirelli CYBER Fleet within Geotab’s
Marketplace application offering: a sensor placed inside
the tyres detects their pressure and temperature, data that
are collected by an app on tablets or smartphones and sent
to Geotab’s digital platform (MyGeotab), simplifying daily
vehicle inspection and tyre control. This integrated solution
allows the efficiency of the vehicle to be monitored remotely
and any anomalies to be seen so that maintenance work can
be scheduled efficiently.
For further information on Cyber™ technologies, please
refer to the paragraph “High Value Approach to Future
Mobility” in the “Our Customers” chapter of this report and
to the paragraph “Product, material and production process
innovation” in the Directors’ Report on Operations.
initiatives, the Joint Labs
Among the Open Innovation
agreement between Pirelli and the Milan Polytechnic and the
Milan Polytechnic Foundation should be highlighted. In 2021,
ten years after the first signing, the continuation of the initiative
focused on research projects for the continuous technological
innovation of tyres was signed. The collaboration has been
extended for a further 3 years, with new challenging objectives
and innovative tools, including the static simulator, installed
at Pirelli’s R&D centre in Milan, and the dynamic simulator at
the Milan Polytechnic. In addition to exploring the potential
of virtual environments, this new phase of the agreement
(2021-2023), which envisages a total investment of more
than €2 million, focuses on two research macro-strands:
the area of materials, with the development of innovative
solutions and the modelling of mixing processes, and the
area of Product Development and Cyber, with integrated
static-dynamic simulation and innovative modelling. During
the ten years of the collaboration agreement between the
Milan Polytechnic, Milan Polytechnic Foundation and Pirelli,
14 patent families have been deposited and about thirty
articles published in international scientific journals, as well
as dozens of presentations at international congresses. Many
topics have been addressed and results achieved in the area
of tyre performance, safety and sustainability, thanks to the
use of advanced materials identified within the framework
of this collaboration. In particular, 15 research grants have
been awarded to young graduates in the field of materials
chemistry. In the last three years, for example, research has
focused mainly on the production and functionalisation of
carbon allotropes; the preparation of modified silicate fibres;
the study of alternative sources of natural rubber; and the
synthesis of innovative polymers and self-repairing materials.
Attention was also paid to the tyre mechanics sector where,
since 2011, 12 research contracts have been activated in the
Cyber Tyre™ and F1® fields, with the study of tyre-asphalt
interaction. One area of particular interest was the study
of low-noise tyres, especially for new hybrid and electric
vehicles, where this component is important for driver
comfort. In fact, innovative test methodologies have been
applied for the indoor measurement of the acoustic field
generated by the rolling tyre. The Tread Modeling Automation
project, on the other hand, has studied tyre modelling and the
characteristics of different summer, winter and all-season
treads. In support of professional training, the second level
university Master’s degree “R&D Excellence Next” was
also recently inaugurated, created in collaboration with the
Milan Polytechnic, which involves 34 young engineers who
have just been hired by the company, with the aim of training
specialised technicians.
129
Report on Responsible Management TYRE AND ROAD WEAR PARTICLES
For many years, Pirelli has paid great attention to the theme
of “Tyre and Road Wear Particles” (TRWP), the micrometric
particles produced by the combined wear and tear of the
road and tyre during vehicle circulation. The phenomenon
of TRWP is complex, since the generation of these particles
is not only linked to the combined wear of the road and tyre,
but also substantially to the characteristics and conditions
of use of the vehicle (weight, mass distribution, correct tyre
pressure, etc.), the characteristics of the roads (material
and roughness of the roads, being straight or winding, uphill
or downhill, etc.), environmental conditions (dry or humid
climate, hot or cold) and driving style (aggressive or relaxed,
at high or moderate speeds, with sharp or progressive
braking, etc.). Scientific studies (see “WBCSD” in this
report) conducted so far have not shown significant risks to
human health and the environment: however, the definition
and implementation of effective actions for the mitigation
of TRWP generation is strongly linked to the variety and
number of causal factors mentioned above: it should be
noted that some of them, such as driving style, road and
vehicle characteristics, have more influence than the tyre
considered individually.
The various causal factors extrinsic to the tyre and belonging
to the sphere of influence of multiple stakeholders require
combined action by all actors in order to define and
implement the most effective mitigation actions. The need
for multi-stakeholder engagement led to the creation of the
“European TRWP Platform” launched by ETRMA (see more
in the “ETRMA” section of this report), which saw, in addition
to the Tyre Industry, the participation of Road Authorities,
Automobile Manufacturers Association, Automobile Clubs,
industry, Universities and
the waste water treatment
Research Centres, NGOs, European Institutions and national
authorities. The platform will continue its work in 2022 and,
as in the previous editions 2018-21 will be supported by
CSR Europe.
In terms of tyre-specific actions, Pirelli’s commitment to
TRWPs is expressed both through active participation in
the Tyre Industry’s most important collaborative projects
on TRWPs (see the “ETRMA” and “WBCSD” sections of
this report) and through its R&D activities on materials and
tyre design, aimed at continually improving tyre wear and,
consequently, minimising its contribution to the issue of
TRWPs. Demonstrating this commitment, the new product
lines launched in 2021 boast a wear rate improvement of
up to 30% less than the previous generation of tyres. This is
accompanied by collaboration with Public Authorities and
the Tyre Industry to support the development of standardised
methodologies for measuring tyre wear, for example within
the European Union where a dedicated activity has begun.
MANAGEMENT OF END-OF-LIFE TYRES
In terms of materiality, the end-of-life phase of the product
has a low proportion of the total impact of the tyre on the
environment, as already highlighted in the infographic related
to the Group’s Carbon and Water Footprint.
End-of-life tyres, however, represent a valuable source of
resources (secondary raw materials), which are already
successfully used in several sectors of the value chain (e.g. in
construction, infrastructure, asphalt, manufacturing of rubber
products) and with a considerable potential for developing
further applications in different industrial ecosystems, aimed
at increasingly exploiting their properties.
In the world, it is estimated that one billion tyres reach the
end-of-life each year. On a global scale, 60% of end-of-life
tyres (ELTs) are recovered (Source: WBCSD 2019 - Global
ELT Management – A global state of knowledge on regulation,
management systems, impacts of recovery and technologies),
while in Europe and the United States the recovery stands at
95% (Source: ETRMA 2021, data from 2019) and 76% (source:
USTMA - 2019 US Scrap Tyre Management Summary).
For years, Pirelli has been engaged in the management of ELTs.
The Company actively collaborates with the main reference
entities at national and international level, promoting the
identification and development of solutions to enhance and
promote the sustainable recovery of ELTs, shared with the
various Stakeholders and based on the Circular Economy
model. In particular, Pirelli is active in the Tyre Industry
Project (TIPG) of the World Business Council for Sustainable
Development (WBCSD), in the ELT working groups of ETRMA
(European Tyres and Rubber Manufacturers’ Association)
and, at national and local level, it interacts directly with leading
organisations active in the recovery and recycling of ELTs,
such as the consortia established to comply with regulations
on Extended Producer Responsibility.
As a member of TIPG, Pirelli has collaborated on the
publication of guidelines on the management of ELTs (WBCSD
“A framework for effective management systems” in 2008
and “Managing End-of-Life Tires” in 2010), taking a proactive
approach to raising the awareness both within Emerging
Countries and those that do not yet have a system for ELTs
recovery, in order to promote their recovery according to
“best practices”, i.e. defined management models which have
already been launched successfully.
Potentially all tyres produced and sold by Pirelli can be
destined for recovery activities, both in terms of material
(recycling) and energy. The actual recovery/recycling rate
varies depending on the markets and ELT management
models in the various countries.
With regard to “closed-loop” Circular Economy applications,
as already mentioned, tyres are a mixture of many valuable
materials that at end-of-life allow two paths of recovery: recovery
of material (such as “secondary raw materials”) or energy. In the
recovery of material, the reclaimed rubber is already reused
by Pirelli in the compounds for new tyres, thus contributing to
the reduction of the related environmental impact. In order to
increase this recovery rate, research activities following our
Open Innovation model are continuing, aimed at improving the
quality of recovered secondary raw materials in terms of affinity
with the other raw materials and the other ingredients present in
our ultra-high performance compounds, as well as in the search
for innovative recovery solutions.
130
Pirelli Annual Report 2021 ENVIRONMENTAL IMPACT OF PIRELLI’S PRODUCTION SYSTEM
ENVIRONMENTAL PERFORMANCE INDICES TREND
ENVIRONMENTAL MANAGEMENT SYSTEM
AND FACTORY PERFORMANCE MONITORING
All the production facilities of Pirelli and the tyre testing field
in Vizzola Ticino have Environmental Management Systems
certified under
ISO 14001. The
International Standard
International Standard ISO 14001 was adopted by Pirelli as
a reference in 1997 and, since 2014, all the certificates have
been issued with international accreditation ANAB (ANSI-
ASQ National Accreditation Board: accrediting entity of the
United States).
The certification of the environmental management system
according to the ISO 14001 Standard is part of Pirelli’s
Environmental Policy and, as such, is extended to new
settlements that become part of the Group. The certification
activity, together with control and maintenance of previously
implemented and certified systems, is coordinated on a
centralised basis by the Health, Safety and Environment
Department.
Also thanks to the environmental certification of
its
motorsport tyre factory management systems, Pirelli is the
first and only tyre manufacturer in the world to have been
awarded three stars by the Environmental Accreditation
Programme promoted by the FIA (International Automobile
Federation). The three stars represent the maximum score
level awarded by the programme, whose aim is to propose
a series of measures that participants must implement to
achieve the highest environmental standards.
The environmental, health and safety performance of every
tyre manufacturing site is monitored with the web-based
Health, Safety and Environment Data Management (HSE-
DM) system, which is processed and managed centrally by
the Health, Safety and Environment Department. Pirelli has
also developed the CSR-DM (Corporate Social Responsibility
Data Management), an IT system for managing Group
Sustainability information, which is used to consolidate
the environmental and social performance of all Group
subsidiaries worldwide. Both systems support consolidation
of the environmental performance accounted for in this
report.
SCOPE OF REPORTING
The performances reported in the following paragraphs
concern the three-year period 2019-2020-2021 and cover
the same scope of the Group’s consolidation, including
the impacts of all the units under operational control: from
industrial realities to commercial and administrative sites.
In terms of materiality of environmental impacts (Carbon
and Water Footprint) of the tyre along the entire life cycle,
the production phase accounts for 2.4% of total greenhouse
gas emissions impacts and for 12.6% of total water-related
impacts.
Despite the continuing health emergency linked to the
Covid-19 pandemic, the Group’s production activity in 2021
was marked by an increase in tonnes of finished product of
around 25% compared to the previous year (value calculated
on a like-for-like basis).
As a result of the significant growth in volumes, together with
the geographical redistribution of production, the indices
calculated in absolute terms of energy consumption, water
withdrawal and waste production increased compared to
the 2020 figure (a year that saw a significant reduction in
all absolute consumption due to the effects of the health
emergency linked to the Covid-19 pandemic). On the other
hand, the increase in the share of electricity from renewable
sources used by Pirelli grew significantly in 2021, supporting
the improvement in the index relating to absolute greenhouse
gas emissions. The percentage of waste sent for recovery is
stable with respect to 2020 at 97%. The return to a more stable
production continuity favoured the reduction compared to
2020 of all specific indices (calculated on tonnes of finished
product) relating to energy consumption, greenhouse gas
emissions, water withdrawal and waste production. All the
equivalent specific indicators weighted on the operating
result (related to the EBIT Adjusted) also improved.
The trend reported rewards the intense effort dedicated
to reducing environmental impacts, also considering the
special features of Pirelli production, focused on Premium
and Prestige
tyres whose production processes are
characterised by greater energy complexity, more restrictive
quality specifications, more complex processing and smaller
production batches than standard tyre production processes.
ENERGY MANAGEMENT
Pirelli monitors, manages and reports its energy consumption
through three main indicators:
→ absolute consumption, measured in GJ, which includes
the total consumption of electrical energy, thermal energy,
natural gas and petroleum derivatives (fuel oil, gasoline,
diesel, and LPG);
→ specific consumption, as measured in GJ per tonne of
finished product;
→ specific consumption, as measured in GJ per euro of
Operating Income.
The amount of finished product used in the calculation
of the specific indices indicated below, in 2021 was over
772,000 tonnes.
The current Industrial Plan provides for a 10% reduction in
specific energy consumption by 2025 compared to 2019
values.
131
Report on Responsible Management In the course of 2021, the energy efficiency plan continued
at all Group plants, already initiated in recent years and
characterised by actions aimed at:
→ improving energy management systems,
through
measurement consumption, a daily focus on technical
indicators and continuous improvement of processes;
→ optimising the procurement of energy resources, direct
or indirect;
→ improving the quality of energy transformation;
→ improving the efficiency of distribution plants;
→ improving the efficiency of production plants;
→ recovering energy for secondary uses;
→ applying targeted maintenance plans in order to reduce
energy waste.
With regard to Life Cycle Assessment, the specific
consumption of each plants is mapped, whether dedicated to
production or dedicated to the generation of energy carriers
in order to: increase the standard reference indicators,
compare similar families of machinery, evaluate in detail the
energy content of the plants’ different families of products
and sub-products and implement actions to improve their
energy performance.
In terms of compliance, every industrial facility completely
fulfils the indications of law regarding energy consumption
and management. The legislative situation affecting the
Company
introduction of periodic audit
mechanisms on energy management and use, as well as
possible tariff incentives. In this regard, there were no critical
elements or non-conformities.
includes the
The Energy Management System, certified according to
the ISO 50001 standard is under development and has
already been adopted at the Breuberg (Germany) and Izmit
(Turkey) plants.
Actions and investments for energy efficiency are alongside
the assessment of environmental impacts to economic
sustainability criteria normally applied to all Pirelli projects.
The areas for technical action both concern the traditional
themes applied to each industrial area, such as modernisation
of thermal insulation, maintenance of distribution plants,
use of technologies using inverters, the implementation of
optimised control systems and special projects assessed
according to the needs of each manufacturing site.
During the course of 2021, the installation of LED lighting
systems continued at production sites to replace less
efficient traditional systems, achieving coverage of the
majority of the Group’s plants. To speed up this replacement
plan, Pirelli also uses “Light Service” contracts, which define
guaranteed levels of both energy savings and the quality of
light achieved. Great attention was paid to the efficiency
in the transformation of thermal energy and the recovery
of thermal waste for heating of premises and improved
steam generation performance through flue gas recovery
and combustion air pre-heating systems. There were also
activities to improve the efficiency of both compressed
air generation, using high-performance compressors, and
energy flows, with a particular focus on cold management,
starting with pilot initiatives in individual plants that will then
be extended to all production units.
The activities to reduce compressed air and steam losses
continued with excellent results, whether on machinery
(generators and users) or on distribution lines, through
monitoring and regular maintenance of the elements at
greatest risk of malfunctioning (leak management. Moreover,
the electrical absorption measurements performed on
individual plants are on-going, in order to correlate specific
consumption to production in greater detail, so as to optimise
their operating conditions.
As regards the digitalisation of energy management, the
production plants have been equipped with smart systems
(Green Button), which modulating the energy consumption
based on the state of operation of the machinery, provide
to disable the auxiliaries up to a stand-by regime with
the energy consumption at the minimum, but able to
guarantee an immediate restart where necessary (Shut-
down Management). In addition, the expansion of the
real-time energy carrier measurement network and its
interconnection with Building Energy Management Systems
(BEMS) continues.
Despite the continuing health emergency linked to the
Covid-19 pandemic, energy efficiency in 2021 benefited
from a return to more stable production continuity compared
to 2020, although, in response to an increasingly dynamic
automotive market, the internal complexity of factories has
increased in order to cope with a greater demand for flexibility
and a production mix increasingly oriented towards High-
Value products, characterised by higher energy intensity
during production compared to standard tyres.
Compared to the previous year, 2021 recorded a reduction
in the Group’s specific energy index of 8.3%, returning in line
with the 2019 figure (the year on which the 2025 reduction
target is based).
In absolute terms, energy consumption increased by 15%
compared to 2020 (a year that saw a significant reduction in
production volumes, and consequently in energy consumption
associated with tyre manufacturing processes, due to the
effects of the health emergency linked to the Covid-19
pandemic) and by around 3% when compared to 2019. This
had no impact on total CO2 emissions, which fell significantly
due to the strong increase in the use of renewable electricity.
The application of energy management with a view to
maximising industrial efficiency, implementing continuous
improvement logics, has resulted in savings of approximately
871,434 GJ in absolute terms. This value was estimated
for each factory on the basis of production volumes in the
reporting year and the change in efficiencies achieved in
2021 compared to the previous year.
132
Pirelli Annual Report 2021 The absolute and specific energy consumption data reported in the following table were calculated by using direct
measurements and were subsequently converted into GJ by using heating values from official IPCC sources.
Absolute consumption
Specific consumption
11,000,000
10,000,000
9,000,000
8,000,000
7,000,000
GJ
GJ/tonFP
GJ/k€
2019
2020
2021
10,467,443
9,373,179
10,789,138
13.90
11.41
15.22
18.70
13.97
13.23
15.30
14.80
14.30
13.80
13.30
22.00
19.00
16.00
13.00
10.00
2019
2020
2021
2019
2020
2021
2019
2020
2021
Absolute consumption GJ
Specific consumption GJ/tonFP
Specific consumption GJ/k€
The graph below highlights the “Distribution of energy sources” used in Pirelli production process: among the
direct sources, all from non-renewable sources, which account for 31% of the total, are natural gas and, to a
lesser extent, other liquid fuels such as oil, LPG and diesel (classified as “other”); indirect sources cover the
remaining 69%, with 42% electricity (37.5% electricity taken from national distribution networks) and 27% steam
purchased by the Group.
DISTRIBUTION OF ENERGY SOURCES
100%
80%
60%
40%
20%
0%
1%
31%
25%
43%
2019
1%
31%
25%
43%
2020
1%
30%
27%
42%
2021
Other
Natural gas
Steam purchased
Electricity
Of the total electricity used by the Group, more than 62%31 derives from renewable sources (up from 52% in
2020 and 41% in 2019), while for purchased steam, the share generated from renewable sources is around 17%32
of the total. Overall, compared to the total energy consumed, the renewable share calculated as above is around
31% (19% excluding the portion of the electricity mix from grids outside the Group’s control - i.e. purchased from
national distribution networks).
The current Industrial Plan envisages sourcing 100% of electricity from renewable sources used on a group-wide
basis by 2025.
With regard to all production sites in Europe and Turkey, 100% of the electricity supply from the grid in 2021
came from certified renewable sources.
31 Figure including both share from direct procurement (such as the purchase of energy from the grid
certified with Energy Attribute Certificates withdrawn and cancelled in favour of Pirelli or production
in on-site wind or photovoltaic plants) and national electric grid mix based on IEA data (International
Energy Agency).
32 It includes the supply of steam generated by biomass plants.
133
Report on Responsible Management → Emission factors used in the context of location-based
if other sources of data are not available;
and are reported according to the models proposed by:
→ GHG Protocol: Corporate Accounting and Reporting
Standard;
→ GHG Protocol Scope 2 Guidance.
the national average
Regarding Scope 2 emissions,
coefficients are defined with respect to the
last year
available on the above reports. It should be noted that the
tyre production industry is not a carbon-intensive industry;
in fact, it falls within the European Emission Trading Scheme
only with reference to thermal power plants above 20 MW
of installed capacity. The Company is not subject to other
specific regulations at the global level.
As in the case of energy, Pirelli monitors and accounts for its
direct CO2e (Scope 1) and indirect (Scope 2) by using three
principal indicators:
→ absolute emissions, as measured in tonnes;
→ specific emissions, as measured in tonnes per tonne of
finished product;
→ specific emissions, as measured in tons per euro of
Operating Income.
The management, calculation and reporting model of Pirelli’s
greenhouse gas emissions has been defined according to
the ISO 14064 standard and the related data have been
subjected to specific limited audit activity by an independent
third party company according to ISAE 3000.
According to the Guidelines of the GHG Protocol Guide, the
level of inventory uncertainty was evaluated as “Good”.
The current Industrial Plan, in line with the decarbonisation
strategy adopted by the company, envisages a 25%
reduction in the group’s absolute CO2 emissions (scope 1
and scope 2 market based) by 2025 compared to 2015
values and an 8.6% reduction in absolute CO2 emissions
related to the purchase of raw materials (scope 3) by 2025
compared to 2018 values. Both targets were validated in
June 2020 by the Science Based Targets initiative (SBTi),
which judged them to be consistent with the actions needed
to keep global warming “well below 2°C”, as recommended
by the Paris Agreement.
In addition, Pirelli expects to source 100% of electricity from
renewable sources by 2025 and achieve Group carbon
neutrality by 2030.
MANAGEMENT OF GREENHOUSE GAS EMISSIONS
AND CARBON ACTION PLAN
Pirelli monitors and reports its33 emissions of greenhouse
gases through the calculation of CO2-equivalent (CO2e) –
unit of measurement used for the emissions reported here
below –, which takes into account the contribution of carbon
dioxide, methane (CH4) and nitrous oxide (N2O). To quantify
emissions, the energy consumption of all local units under
operational control included in the scope of reporting are
collected annually through the CSR-DM IT system.
Greenhouse gases are generated by the combustion of
hydrocarbons at production sites, mainly used to operate heat
generators that power Group plants, and particularly those
that produce steam for vulcanisers, or by the consumption
of electrical or thermal energy. The former are defined as
“direct emissions”, or Scope 1 emissions, as produced within
the Company’s production sites, while the latter compose
the so-called “indirect emissions”, or Scope 2 emissions, as
they are generated in the plants that produce the energy
and steam purchased and consumed by Pirelli. The Scope 2
emissions are reported in two separate ways: location-based
and market-based (methodology introduced in 2015 with
the guideline “GHG Protocol Scope 2 Guidance” and current
reference for Pirelli’s targets).
With regard to “other indirect emissions” attributable to Pirelli
Value Chain activities, or Scope 3 emissions, in addition to
the information reported in this section, please refer to the
paragraph “Our Suppliers” (“CDP Supply Chain” section)
for further information about the specific activities of Pirelli
Suppliers. Instead, reference is made to the Group Footprint
infographics in the paragraph “Pirelli Group Environmental
Strategy and Footprint” for the representation of the impacts
of Scope 3 of the various phases of the life cycle.
Performance as measured by energy and greenhouse gas
emissions is calculated on the basis of emission factors
obtained from the following sources:
→ IPCC: Guidelines for National Greenhouse Gas Inventories
(2006)34.
→ Within Scope 2 location-based:
→ National emission factors35 taken from IEA Emission
factors 202136;
→ Within Scope 2 market-based:
→ Specific emission factors37 of suppliers where available;
→ Residual-mix emission factors taken from AIB European
Residual Mixes (EU)38 and Green-e Residual Mix
Emissions Rates (US)39;
33 GHG inventory perimeter as indicated in paragraph “Scope of Reporting”.
34 Emission factors expressed in CO2 equivalent, obtained by considering the GWP (Global Warming
Potential) coefficients based on 100 years of the IPCC Fifth Assessment Report, 2014 (AR5).
35 Emission factors expressed in CO2/kWh.
36 2021 Publication with update to the 2020 figure.
37 Emission factors expressed in CO2/kWh.
38 2021 Publication with update to the 2020 figure.
39 2021 Publication with update to the 2019 figure.
134
Pirelli Annual Report 2021 The following charts show the performance of the last three-year period:
900,000
800,000
700,000
600,000
500,000
1.20
1.10
1.00
0.90
0.80
1.40
1.20
1.00
0.80
0.60
2019
2020
2021
2019
2020
2021
2019
2020
2021
Absolute emissions tonCO2
Specific emissions tonCO2/tonFP
Specific emissions tonCO2/k€
In 2021, the Group’s absolute emissions were in line (-0.4%) with the figure for 2020, (a year that saw a significant
reduction in production volumes, and consequently in emissions associated with tyre manufacturing processes
due to the effects of the health emergency linked to the Covid-19 pandemic), and 23% lower than in 2019 and
31% lower than in 2015, the year in which the target (approved by SBTi) to reduce absolute emissions to 2025
is based. Having achieved in advance the target, validated by the Science Based Targets initiative in line with the
“well below 2°C” scenario, Pirelli asked SBTi to upgrade it in line with the 1.5°C scenario.
Specific CO2 emissions (weighted on tonnes of finished product) decreased by more than 20% in 2021
compared to the 2020 figure (25% compared to 2019), thanks to the implementation of new initiatives in the
field of renewables, which allowed the share of electricity from renewable sources used by the group to increase
to more than 62%40 of the total (compared to 52% the previous year and 41% in 2019).
With regard to all production sites in Europe and Turkey, 100% of the electricity supply from the grid in 2021
came from certified renewable sources.
The portion of indirect emissions generated by the low-carbon projects (described below), was reported as
prescribed by the Guidelines of the GHG Protocol, respectively for the procurement of electrical energy from
renewable sources and steam from biomass.
The following table reports absolute and specific emissions distinguishing between market-based (target
reference) and location-based methodology for Scope 2.
2019
2020
2021
828,388
638,730
636,190
192,149
168,158
187,510
636,239
470,572
448,680
574,349
508,390
528,332
1.100
0.90
1.037
0.824
1.27
0.78
GHG EMISSIONS ACCORDING TO SCOPE
Absolute emissions (Scope 1 and Scope 2 market-based)
Scope 1
Scope 2 (market-based)
Scope 2 (location-based)
Specific emissions (Scope 1 and Scope 2 market-based)
40 This figure includes both the share from direct procurement initiatives (such as the purchase of energy
from the grid certified with Energy Attribute Certificates or the production in on-site wind or photovoltaic
plants) and the contribution from national electricity distribution networks assessed on the basis of IEA
(International Energy Agency) data.
tonCO2e
tonCO2e
tonCO2e
tonCO2e
tonCO2e/tonPF
tonCO2e/k€
135
Report on Responsible Management The following infographic highlights the weight of direct emissions (Scope 1) and indirect emissions (Scope 2
market-based) of the total absolute emissions of Pirelli.
DISTRIBUTION OF GHG EMISSIONS ACCORDING TO SCOPE
29%
Scope 1
71%
Scope 2
To support the aim of reducing climate-altering gas emissions, Pirelli has defined a “Carbon Action Plan” with the
aim of making increasing use of renewable energy sources through specific projects, facilitating the company’s
transition to low-carbon energy sources. These include:
→ the cogeneration plant for the production of electricity, steam and hot water, present at the plant in Settimo
Torinese (Italy). One of the two existing modules is a 1 MW internal combustion engine powered by vegetable
oil, which ensures supply of thermal energy from renewable sources;
→ the supply of steam generated by biomass plant, fuelled with waste wood from local supply chains, activated in
Brazil for the plants in Campinas and in Feria de Santana. Thanks to this initiative, in the year 2021, the savings
in terms of avoided CO2e emissions exceeded 26,000 tonnes (Scope 2);
→ the procurement of electrical energy from renewable sources at the plant in Silao (Mexico). In 2021 the
agreement continued for the dedicated supply of electricity generated from wind sources, which in the year
allowed the replacement of 17 GWh of energy from fossil fuels, for a saving in terms of avoided CO2e emissions
of around 6,000 tonnes (Scope 2);
→ the supply of electricity from renewable sources at the plant in Slatina (Romania). In 2021, the share of electricity
certified from renewable sources was 240 GWh, for a saving in terms of avoided CO2e emissions of more than
63,000 tonnes (Scope 2);
→ the procurement of electrical energy from renewable sources at the plants in Burton and Carlisle (UK). In 2021
the share of electricity certified from renewable sources exceeded 56 GWh, for a saving in terms of avoided
CO2e emissions of nearly 18,000 tonnes (Scope 2);
→ the supply of electricity from renewable sources at the plant in Breuberg (Germany). In 2021, the share of
electricity certified from renewable sources was 39 GWh, for a saving in terms of avoided CO2e emissions of
almost 23,000 tonnes (Scope 2);
→ the supply of electricity from renewable sources at the plant in Izmit (Turkey). In 2021, the share of electricity
certified from renewable sources was 12 GWh, for a saving in terms of avoided CO2e emissions of around
5,000 tonnes (Scope 2);
→ the supply of electricity from renewable sources at the headquarters in Milan and plants in Bollate and in
Settimo Torinese (Italy). In 2021, the share of electricity certified from renewable sources exceeded 70 GWh,
for a saving in terms of avoided CO2e emissions of around 33,000 tonnes (Scope 2).
136
Pirelli Annual Report 2021 The table below shows the emissions relating to Pirelli’s Carbon Footprint (Scope 1, 2 and 3) distributed along the
different phases of the value chain.
GHG EMISSIONS GROUP FOOTPRINT
Raw Materials (Scope 3)
Manufacturing (Scope 1 + 2 + 3)
Distribution (Scope 3)
Customers (Scope 3)
End-of-Life (Scope 3)
Total
103 tonCO2e
103 tonCO2e
103 tonCO2e
103 tonCO2e
103 tonCO2e
103 tonCO2e
201941
2020
2021
2,563.9
2,077.1
2,500.7
1,198.8
940.0
996.2
84.4
71.5
90.1
40,220.9
32,576.8
37,527.8
2.2
1.9
2.2
44,070.2
35,667.3
41,117.0
With regard to absolute CO2 emissions related to the purchase of raw materials, for which the Scope 3 target
approved by the Science Based Targets initiative is set, which envisages a reduction of 8.6% by 2025 compared
to 2018, in 2021 there was an increase of 20% compared to 2020 (a year that saw a significant reduction in
production volumes and therefore in raw materials purchased due to the effects of the health emergency linked
to the Covid-19 pandemic), but also a decrease of 2.5% compared to 2019 and 6% compared to the 2018 (base
year of the SBTi target).
In 2021, and as for several years now, Pirelli continued in the compensation project of CO2 emissions produced
the previous year by its fleet of company cars, through the purchase and retiring of carbon credits certified
according to the VCS standard (Verified Carbon Standard). Direct issuance of Pirelli auto policy, which
introduces an Internal Carbon Price model for the economic quantification of the impacts associated with car
emissions, this initiative aims to promote the choice of vehicles with less impact on the environment and support
environmental protection projects. The cars in the Italian corporate fleet emitted 785 tonnes of CO2 in 2020.
In order to offset this impact on the climate, Pirelli supported two sustainable forest management projects: an
international one, carried out in Brazil, for the financing of activities under the REDD programme (Reducing
emissions from deforestation and forest degradation) in an area very rich in biodiversity and recognised as an
important ecological corridor and an Italian one, carried out in the forest areas of Ziano di Fiemme (TN), as part
of the initiative “Restoring Forests Destroyed by Storm VAIA”. The activities financed with Pirelli’s contribution
were carried out in 2021.
WATER MANAGEMENT
Pirelli monitors the Water Footprint along the life cycle of the product (as extensively explained earlier in this
chapter), and in terms of materiality, the production phase of the tyres is the third most influential, after the
phases of use of the product and production of raw materials.
In the aforementioned environmental strategy of Pirelli, the efficient and responsible use of water in production
processes and at workplaces is addressed comprehensively, with actions to improve water efficiency in
production processes, from design of the machinery to Facility Management activities. Particular attention is
paid to the local context of the use of this precious resource, with the use of specific analysis tools (such as the
Global Water Tool of the World Business Council for Sustainable Development and the Aqueduct Water Risks
Atlas of the World Resources Institute) and dedicated action plans.
In addition, the management of water resources, of relations with relevant stakeholders (local communities,
authorities, etc.) and the related potential impacts of the local context in which the production plants are
located, is ensured by the environmental management systems implemented and certified in each production
unit. Environmental management and its continuous improvement are also driven by the mapping of the main
stakeholders, their interests and expectations. These management systems also aim to ensure that the qualitative
and quantitative characteristics of emissions are in line with the context and the regulations in force.
41 As from 2019, the value includes emissions generated by the Group’s business air travel and commuting
by employees at the Milan headquarters. The value also includes some primary data collected directly from
suppliers.
137
Report on Responsible Management The current Industrial Plan envisages a target to reduce specific water withdrawal by 43% by 2025 compared
to the 2015 value.
Compared to the previous year, 2021 showed a reduction in the Group’s specific withdrawal index of more than
11%, equal to approximately 8.5 cubic metres per tonne of finished product, returning in line with the 2019 figure.
Compared to 2015, the base year for the 2025 reduction target, the specific water withdrawal index shows a
reduction of 34%.
In absolute terms, water withdrawal was 6.6 million cubic metres, up 12% compared to 2020 (a year that saw a
significant reduction in production volumes, and consequently in the water used by factories, due to the effects
of the health emergency linked to the Covid-19 pandemic) but down 4% compared to 2019. Thanks to the actions
implemented, since 2015 Pirelli has saved a total of more than 14 million cubic metres of water: an amount
equivalent to the absolute withdrawal of about two and a half years by the entire Group.
To give an overall view of performance in terms of water withdrawal over the last three years, the following tables
report the indicators:
→ absolute withdrawal, measured in cubic metres, which indicates the total withdrawal of water by the Group;
→ specific withdrawal, measured in cubic metres per tonne of finished product, which indicates the withdrawal
of water used to make one tonne of finished product;
→ specific withdrawal, as measured in cubic metres per euro of Operating Income.
Absolute Withdrawal
Specific Withdrawal
8,000,000
7,000,000
6,000,000
5,000,000
4,000,000
m3
m3/tonPF
m3/k€
11.0
10.0
9.0
8.0
7.0
2019
2020
2021
6,299,468
5,871,790
6,552,628
8.4
6.9
9.5
11.7
8.5
8.0
12.0
10.5
9.0
7.5
6.0
2019
2020
2021
2019
2020
2021
2019
2020
2021
Absolute withdrawal m3
Specific withdrawal m3 /tonFP
Specific withdrawal m3/k€
All the figures reported in this paragraph have been collected by taking direct or indirect measurements and are
communicated by the local units. The following two graphs show the distribution of absolute withdrawals by type
of use and the weight of water supply by type of source.
DISTRIBUTION OF WITHDRAWALS BYY USEU
TYPE OF WATER SOURCES (m3)
Other sites (warehouses, logistics, etc.)
Public water supply system and other sources
25%
Surface water
13%
Inside wells
62%
10%
Offices
4%
Tyre production sites
86%
138
Pirelli Annual Report 2021
62% of the water withdrawn is pumped from wells inside the plants and authorised by the competent authorities.
In addition, Pirelli obtains 13% of its needs from surface water and storm-water. As for water from aqueducts or
third-party sources, around 60% is drawn from groundwater, while the remainder comes from surface water. The
volume of water withdrawn from water stress areas42 is equal to 46% of the total. In addition, about 176,000 cubic
metres of water used, equivalent to about 2.5% of the total withdrawal, are obtained from the treatment of waste
water from its production processes.
A total of about 4.6 million cubic metres of domestic and industrial waste water were discharged, with 57% of this
into surface water bodies. The remaining amount was discharged into sewer networks.
Before being discharged into the final recipient, industrial waste water – adequately treated as necessary – is
periodically subjected to analytical tests that certify substantial compliance with locally applicable statutory
limits.
In particular, as regards the quality of industrial effluents of the production facilities, indicative average values are:
13.5 mg/l of BOD5 (Biochemical Oxygen Demand), 45 mg/l of COD (Chemical Oxygen Demand) and 30 mg/l of
Total Suspended Solids. It should also be noted that Pirelli does not use substances classified as “Substances of
Very High Concern” as defined by EU Regulation no. 1907/2006, the so-called “REACh Regulation”.
SUMMARY
Water Type
Total
Water stress areas
Overall volume (m3)
Freshwater volume (m3)
Overall volume (m3)
Freshwater volume (m3)
Surface water
828,100
828,100
775,300
775,300
WITHDRAWAL
Wells
4,063,600
4,063,600
1,368,800
1,368,800
from
Third parties
1,660,900
1,660,900
873,300
873,300
Total
6,552,600
6,552,600
3,017,400
3,017,400
DISCHARGE
to
Surface water
Third parties
2,603,000
1,427,000
0
0
1,978,600
1,570,900
1,363,400
1,306,700
Total
4,581,600
2,997,900
1,363,400
1,306,700
CONSUMPTION
Total
1,971,000
3,554,700
1,654,000
1,710,700
WASTE MANAGEMENT
Circularity of resource management is one of the tyre industry’s most pressing challenges, both in the design of
its products and in the management of waste to minimise its generation, maximise its recovery and thus limit its
impact on the environment.
The improvement of environmental performance connected with the management of waste is achieved through:
→ innovation of production processes, with the aim of preventing the production of waste at the source,
progressively reducing the processing of rejects and replacing current raw materials with new materials that
have a lower environmental impact;
→ operating management of generated waste, an integral part of the management systems of environmental
certificates according to ISO 14001, aimed at identifying and ensuring the selection of waste treatment
channels, in line with current local regulations, that can maximise recovery and recycling, gradually eliminating
the amount sent to the landfill with the Zero Waste to Landfill vision;
→ streamlining packaging management, both for the packaging of purchased products and the packaging for
products made by the Group. Within this context, also fall the initiatives guided by the Pirelli’s Single Use
Plastic Free Policy.
Compared to the previous year, the 2021 recorded a 5% of reduction of the waste specific production index
weighted on tonnes of finished product.
42 ater stress areas: this includes all areas with a water stress level equal to or greater than high according to
the WRI Aqueduct classification (Aqueduct Water Risk Atlas wri.org), as of 24 January 2022.
139
Report on Responsible Management In absolute terms, the production of waste in 2021 grew by about 19% compared to 2020 (a year that saw a
significant reduction in production volumes, and consequently in the waste produced, due to the effects of the
health emergency linked to the Covid-19 pandemic) and about 7% when compared to 2019.
Of the total waste produced in 2021, 97% is sent for recovery at third party plants (for material recovery for
about 2/3 of the quantity), in line with the current Sustainability Plan, which envisages sending 98% of the waste
produced for recovery by 2025, with a “Zero Waste to Landfill” vision.
Hazardous waste43 accounts for 9% (compared to 8% of 2020 and 10% of 2019) of total waste produced and is
totally sent for treatment in third party facilities authorized in accordance with local regulations.
As regards the waste generated by the production sites, equal to 107,900 tons, approximately 9% is represented
by hazardous waste, and 69% is sent for material recovery (recycling).
WASTE BY TYPE OF TREATMENT
TYPE OF WASTE - 2021
3%
3%
3%
97%
97%
97%
2019
2020
2021
Disposal or incineration without energy recovery
Recovery (including: material recovery, energy recovery, recycling and reuse)
Hazardous waste sent for disposal
1%
Hazardous waste sent for recovery
8%
Non-hazardous waste sent for disposal
2%
Non-hazardous waste sent for recovery
89%
The graphs below detail waste production through three main indicators:
→ absolute production, as measured in tonnes;
→ specific production, as measured in kilograms per tonne of finished product;
→ specific production, as measured in kilograms per euro of Operating Income.
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Absolute production
Specific production
ton
kg/tonFP
kg/k€
2019
2020
2021
105,977
95,470
113,769
141
116
155
190
147
139
43 The hazardousness of waste is generally defined according to the applicable local regulations (for
example in Europe it is made in accordance with the Waste Framework Directive 2008 / 9EC).
140
Pirelli Annual Report 2021 125,000
115,000
105,000
95,000
85,000
160
155
150
145
140
200
175
150
125
100
2019
2020
2021
2019
2020
2021
2019
2020
2021
Absolute production ton
Specific production kg/tonFP
Specific production kg/k€
The following table summarizes the main data on the management of waste produced in 2021 which are entirely
managed by external treatment plants.
TYPE OF TREATMENT AT EXTERNAL SITES
Non-hazardous waste
Hazardous waste
Total
Preparation for reuse
Recycle
Other recovery operations
Waste not for disposal
325,978
84,609
410,587
57,416,391
1,148,727
58,565,118
14,652,221
1,894,643
16,546,864
72,394,590
3,127,979
75,522,569
Incineration (without energy recovery)
557,566
871,567
1,429,133
Incineration (with energy recovery)
29,228,920
5,610,056
34,838,976
Landfill Disposal
Other disposal operations
Waste destined for disposal
1,565,980
6,348
55,419
350,116
1,621,399
356,464
31,358,814
6,887,157
38,245,971
Waste sent to recovery (of material & energy)
101,623,510
8,738,035
110,361,544
TOTAL
103,753,404
10,015,136
113,768,540
OTHER ENVIRONMENTAL ASPECTS
SOLVENTS Solvents are used as ingredients in processing, mainly to reactivate vulcanised rubber, during the
fabrication and finishing of tyres. Pirelli is committed to the progressive reduction of these substances, both by
optimising their use, and by spreading solvent-free technologies for operations that may be performed even without
their use. In 2021, the value of specific solvent consumption stabilised at 1.1 kg per tonne of tyres produced, a
reduction of 7% compared to 2020, with emission of related VOCs slightly lower than total consumption.
Absolute consumption
Specific consumption
1,000
900
800
700
600
tonSOLV
kgSOLV/tonFP
1,3
1,2
1,1
1,0
0,9
2019
2020
2021
883
1.2
686
1.1
804
1.0
2019
2020
2021
2019
2020
2021
Absolute consumption tonSOLV
Specific consumption kgSOLV/tonFP
BIODIVERSITY Pirelli pays the utmost attention to ensuring that corporate activities do not interfere with the
biodiversity characteristic of the contexts in which the Company operates. Currently, there are two Pirelli sites
located within protected areas of high biological diversity: the site of Vizzola Ticino (Italy) and that of Elias Fausto
(Brazil). Both are not production sites but test fields for testing tyres.
141
Report on Responsible Management The Vizzola site hosting the tyre test track has an area of 0.37 square kilometres and is part of the Lombard area
of the Parco del Ticino, MAB area44 of UNESCO, characterised by the presence of 23 species included in the IUCN
Red List (International Union for the Conservation of Nature) of which: 17 are classified as “of least concern (LC)”,
1 as “near threatened (NT)”, 3 as “vulnerable (V)”, 1 as “endangered (EN)” and one as “Critically Endangered (CR)”.
To ensure the utmost protection of the natural environment in which the Vizzola test track is located, Pirelli has
implemented an ISO 14001 certified Environmental Management System in accordance with the “Parco del
Ticino”. Environmental impact on biodiversity in the area are not significant; however, several interventions were
carried out, both directly by the Company and by the Park Authority, to mitigate and improve the interactions
of Pirelli’s activities with the natural environment, as stipulated in the agreement signed in 2001. In 2016, a
campaign to monitor air quality was also carried out, which highlighted the substantial negligence of the impacts
of the activity compared to the context in which the test field is inserted.
The site of Elias Fausto (Brazil) is the new Brazilian test track, with an area of 1,59 square kilometres, and is
located in an area with a prevalent cultivation of sugar cane where there are two streams (Itapocu and Tietê rivers)
that provide permanent protection areas. There are 162 species on the IUCN Red List, of which 1 is classified as
‘vulnerable’ (V), 2 as ‘near-threatened’ (NT), 158 as ‘of minor concern’ (LC) and 1 as ‘missing data’ (DD). In order to
maximise environmental protection in the area, Pirelli manages environmental issues, monitors and implements
measures to conserve fauna and water resources, including the planting of native species and the control of
noise levels in accordance with the environmental impact study carried out prior to the project, according to
which the environmental impact of the activities on the region’s biodiversity is not significant.
Pirelli’s focus on biodiversity is also very high with regard to the supply chain, as in the case of sustainable
management of the natural rubber supply chain based on a no deforestation policy. As evidence of this commitment,
Pirelli presented in 2021 the first tire in the world with natural rubber and rayon certified by the Forest Stewardship
Council (FSC). FSC forest management certification confirms that plantations are managed in a way that preserves
biological diversity and benefits the lives of local communities and workers, while ensuring economic sustainability.
For an extensive description of the sustainable management of the natural rubber supply chain, please refer to the
paragraph “Sustainability of the natural rubber supply chain” in the “Our suppliers” chapter within this report.
In 2021, Pirelli also announced the launch of a three-year project in the Indonesian forest of Hutan Harapan, in
collaboration with BMW Group and BirdLife International, which includes activities to support local communities,
forest conservation and the protection of animal species at risk.
NOX EMISSIONS NOx emissions derive directly from the energy-generating processes used. In 2021, the index
based on the tons of finished product fell by 14% compared to the 2020 figure, mainly due to a change of the
mix of the energy consumed, which in particular saw an increase in the share of renewables, as described above.
The emissions were calculated by applying the emission factors indicated by the EEA (European Environment
Agency) to the energy consumption data.
In absolute terms, NOX emissions in 2021 grew by nearly 8% compared to 2020 (year that saw a significant
reduction in production volumes, and consequently in energy consumption, due to the effects of the health
emergency linked to the Covid-19 pandemic) but decreased by more than 12% when compared to 2019.
Absolute emissions
Specific emissions
1,000
900
800
700
600
tonNOX
kgNOX/tonFP
1.40
1.30
1.20
1.10
1.00
2019
2020
2021
917
1.22
743
1.21
800
1.04
2019
2020
2021
2019
2020
2021
Absolute emissions tonNOx
Specific emissions kgNOx/tonFP
44 Man and Biosphere is a group of biosphere reserves in many countries in the world protected by UNESCO
with the aim of promoting socio-economic development and conservation of ecosystems and biological diversity.
142
Pirelli Annual Report 2021 The following graph shows the 2021 weight of direct and indirect NOX emissions out of total NOX emissions.
DISTRIBUTION OF NOX EMISSIONS
31%
Direct
69%
Indirect
OTHER EMISSIONS AND ENVIRONMENTAL ASPECTS The production process does not directly use substances
that are harmful to the ozone layer. These are instead contained in certain closed circuits of the cooling and air
conditioning plants. Therefore, except for accidental and unforeseeable losses, there are no free emissions into
the atmosphere that can be correlated with Pirelli manufacturing activities.
In 2021, direct emissions of SOX, caused by the combustion of diesel and fuel oil, came to 10.1 tonnes (respectively
10.7 tonnes in 2020 and 13.7 tonnes in 2019); the value is estimated based on EEA - European Environment
Agency - emissions standards.
In terms of packaging management, the car tyre is a product generally sold without packaging.
The environmental management systems implemented at the production units and the implementation of
procedures dedicated to the prevention and response to emergencies, assured constant and prompt monitoring
and intervention regarding potential emergency situations that may arise, as well as the reports received from
Stakeholders. During 2021, no incidents, complaints or significant sanctions related to environmental issues
were recorded.
EXPENSES AND INVESTMENTS
In the three-year period 2019-2021, environmental expenditure related to the production process was around €
60 million, of which about 33% was allocated in 2021. About 84% of this amount concerned normal management
and administration of factories, while the remaining 16% was dedicated to preventive measures and improvement
in environmental management.
Lastly, it should be noted that, consistent with the materiality analysis at the beginning of this section of the
report, the most significant expenses that Pirelli dedicates to the environment are those relating to Product
Research & Development: in 2021, the Company invested € 240.4 million in research and innovation of
its products, with a constant focus on safety performance and reduction of environmental impacts and,
simultaneously, production efficiency.
In the Operations area, for the assessment of some new investments, the potential impacts associated with
GHG emissions are highlighted, evaluating internally a Carbon Price. However, the environmental efficiency
associated with projects is one of the guiding criteria to be considered in the context of investment management,
as regulated by the relevant internal Group operating rule.
143
Report on Responsible Management THE EUROPEAN REGULATION ON THE TAXONOMY
OF SUSTAINABLE ECONOMIC ACTIVITIES
EU REGULATION 2020/852:
PURPOSE AND REGULATORY CONTEXT
The European Union some time ago defined a strategic
framework for the implementation of actions and policy
initiatives consistent with the objectives of the UN 2030
Agenda and, in this context, in March 2018 the European
Commission formalised for the first time an Action Plan
for Financing Sustainable Growth, with the stated aim of
redirecting capital flows towards sustainable investments,
integrating sustainability into risk management and promoting
transparency and long-term vision, in awareness of the
important role that the financial sector can play in channelling
private investment in support of sustainable development.
Subsequently, in December 2019, the European Union issued
the European Green Deal, a roadmap with the aim of meeting
the challenges posed by climate change to drive the EU’s
green transition with the ultimate goal of achieving climate
neutrality by 2050. In addition, during 2020, the European
Union further increased its climate commitments by setting
itself an interim target of reducing emissions by 55% by
2030 compared to 1990 levels.
In 2021, in the light of the climate change targets set, the
negative impacts generated by the Covid-19 pandemic
and the growing international focus on sustainability, the
European Commission published a new “Strategy for
financing the transition to a sustainable economy” which,
in line with the previous Action Plan, identifies four areas of
action needed for the financial system to fully support the
economy’s transition to sustainability:
→ financing the transition to sustainability;
→ ensuring an inclusive financial system for all;
→ improving the resilience of the financial sector and its
contribution to sustainability;
→ promoting international cooperation on sustainable finance.
The European Union’s commitment to sustainable finance also
includes EU Regulation 2020/852 (the so-called “Taxonomy”),
which aims to provide investors and the market with a common
language of sustainability metrics that can ensure comparability
between operators, reduce the risk of greenwashing and
increase the quantity and quality of information on the
environmental and social
impacts of business, thereby
encouraging more responsible investment decisions.
Currently, the Taxonomy is focused on the identification of
economic activities considered to be eco-sustainable, defined
as those economic activities that contribute substantially to
the achievement of at least one of the following environmental
objectives, provided that they do not cause significant harm
to any of the other environmental objectives and are carried
out with minimum safeguards:
→ climate change mitigation;
→ climate change adaptation;
→ the sustainable use and protection of water and marine
resources;
→ the transition to a circular economy;
→ pollution prevention and control;
→ the protection and restoration of biodiversity and
ecosystems.
In June 2021, the European Commission formally adopted
the Technical Delegated Acts (hereinafter referred to as the
“Climate Delegated Acts”) that define the list of economic
sectors and activities currently included in the Taxonomy
and the related technical screening criteria to verify whether
they contribute substantially to the achievement of the
environmental objectives of climate change mitigation
and adaptation; further delegated acts are expected to be
published during 2022 with reference to the remaining four
environmental objectives.
In drawing up the content of the Taxonomy, the European
Commission has envisaged that economic activities that
contribute substantially to the objective of climate change
mitigation can also be considered those activities for which
there are no technologically and economically feasible low-
carbon alternatives, provided that they support the transition
to a climate-neutral economy in line with a pathway aimed
at limiting the temperature increase to 1.5°C compared to
pre-industrial levels, including by phasing out greenhouse
gas emissions, in particular emissions from solid fossil fuels
(so-called transition activities). Furthermore, it has been
envisaged that an economic activity contributes substantially
to one or more of the environmental objectives in the
Taxonomy if it directly enables other activities to make a
substantial contribution to one or more of these objectives
(so-called enabling activities).
The process of verifying the eco-sustainability of an economic
activity (so-called “alignment” to the Taxonomy) involves the
following steps of analysis:
→ verification of the Technical Screening Criteria to assess
the actual contribution of the economic activity to a
given environmental objective, respecting the principle of
technology neutrality and taking into account the long- and
short-term impact of the economic activity; and
→ verification of the “DNSH” (Do No Significant Harm)
criteria to ensure that the economic activity does not cause
significant harm to any of the other environmental objectives.
In addition, there is also the verification of compliance
with Social Minimum Safeguards, aimed at ensuring that
economic activities are conducted in accordance with the
main international human rights guidelines and treaties.
As mentioned above, the regulation on taxonomy is not
yet complete as we are waiting for the publication of the
delegated acts on the environmental objectives of sustainable
use and protection of water and marine resources, transition
to a circular economy, prevention and control of pollution and
protection of biodiversity and ecosystems.
In addition, the European Commission is working on the
inclusion in the Taxonomy of additional sectors to those
currently foreseen (which are mainly energy, transport,
144
Pirelli Annual Report 2021 forestry, water and waste management, some types of
manufacturing and construction) as well as on the drawing
up of a Social Taxonomy, which would allow us to broaden
the assessment of sustainability of economic activities by
considering additional aspects such as health and safety of
workers, human rights, inclusion policies and attention to
opportunities for growth and training of staff.
REPORTING OBLIGATIONS AND
GENERAL PRINCIPLES FOR DEFINING KPIS
Article 8 of EU Regulation 2020/852 defines the reporting
obligations under the taxonomy and, in particular, clarifies
that these obligations fall on any company subject to the
obligation to publish non-financial
information pursuant
to Article 19-bis or Article 29-bis of Directive 2013/34/EU.
From 1 January 2022, therefore, these companies will have to
include information in their non-financial reporting (or in their
consolidated non-financial reporting) on how and to what
extent their activities are associated with economic activities
considered environmentally sustainable within the meaning
of the Regulation.
With regard to non-financial corporations, the disclosure
focuses on the following metrics (so-called Key Performance
Indicators or KPIs):
a) the share of turnover coming from products or services
associated with economic activities considered to be
environmentally sustainable;
b) the share of capital expenditure and the share of
operational expenditure related to assets or processes
associated with economic activities considered to be
environmentally sustainable.
In July 2021, EU Regulation 2021/2178 was published,
supplementing Article 8 of EU Regulation 2020/852 in order
to further specify the content and presentation of these
“KPIs” as well as the methodology to be followed for their
measurement and the qualitative information that needs to
accompany their reporting45.
Non-financial undertakings46 are required to determine KPIs
by ensuring general consistency with financial reporting and
by using the same currency as for the annual or consolidated
financial statements, with the additional requirement to
include references to the relevant balance s heet items for
turnover and capital expenditure indicators in their non-
financial statements.
Finally, EU Regulation 2178/2021 establishes reduced
disclosure for the first year of full application of the regulation,
which is focused exclusively on the indication of the share
of turnover, capital expenditure and operating expenditure
45See in particular Annex 1 “Key Performance Indicators (KPIs) of non-financial corporations” and Annex 2
“Templates for Key Performance Indicators (KPIs) of non-financial corporations” to EU Regulation 2021/2178.
46 Pursuant to the legislation, a “non-financial undertaking” means an undertaking subject to the disclosure
requirements set out in Articles 19-bis and 29-bis of Directive 2013/34/EU which is not a financial asset
manager, credit institution, investment firm, insurance undertaking or reinsurance undertaking (see EU
Regulation 2021/2178 Article 1(9)).
which are “eligible” for the taxonomy, i.e. those falling within
one of the descriptions of economic activities contained in
Annexes I and II of the Climate Delegated Act, with respect to
the total value of turnover, capital expenditure and operating
expenditure.
The additional considerations outlined above regarding
compliance with the screening criteria for determining
(a) the substantial contribution of an economic activity to
the achievement of one or more environmental objectives
(b) without causing significant harm to any of the other
environmental objectives and the minimum safeguards will
have to be made for the purpose of reporting on the share
of turnover, capital expenditure and operating expenditure
which is “aligned” with the taxonomy as at 1 January 2023.
TAXONOMY FOR THE PIRELLI GROUP
METHODOLOGICAL NOTE
The Pirelli Group, understanding the relevance and innovative
scope of the Taxonomy, immediately began a dedicated
worksite to understand the new regulatory obligations and
plan the preparatory activities for the reporting process as
part of its consolidated non-financial statement in a timely
and effective manner.
These activities were mainly concentrated in the second half
of 2021 and involved the organisation as a whole, requiring
the active participation of the company’s business structures
for the identification of activities which are “eligible” for the
taxonomy and for the management of the data collection
process at all the companies included in the scope of
consolidation.
focused
first on
The methodological approach
the
regulatory analysis and contextualisation of the tyre sector
for the purpose of its application. This preliminary activity
immediately brought to light some unclear application and
interpretation aspects both with reference to the general
discipline47 and above all with regard to the tyre sector,
whose framework in the Climate Delegated Act on Taxonomy
appears difficult to read.
In particular, within the scope of the transport-related
manufacturing activities included in these delegated acts,
there is only economic activity 3.3 Manufacture of low carbon
technologies for transport, the description and technical
screening criteria of which, however, specifically refer to the
production of transport equipment in its entirety, including
vehicles and personal mobility devices, but not to the production
of parts and/or components of the same48. Recent interpretations
published by the European Commission have confirmed that
47 In the Assonime Circular no. 1/2022 “The European Regulation on the taxonomy of eco-sustainable
activities: advertising obligations for companies” a series of aspects are explained for which clarification is
requested from the European Commission.
48 The NACE codes associated with this economic activity include C29.1 “Manufacture of motor vehicles” but
not C29.3 “Manufacture of parts and accessories for motor vehicles” which, by its nature, could also include the
manufacture of tyres.
49 the FAQ published by the European Commission on 2 February 2022 clarified that “manufacturing
specific car and vehicle components is not automatically eligible under the section ‘manufacture of low carbon
technologies for transport’” (ref. FAQ 8).
50 The above-mentioned FAQ clarified that “the activity or product needs to have the objective of enabling a
substantial reduction of GHG emissions in another sector of the economy” (ref. FAQ 9).
145
Report on Responsible Management the manufacture of automotive components is an economic
activity automatically “eligible” and that therefore these
companies, including tyre manufacturers, “can qualify” under
the economic activity49 3.6 - Manufacture of other low carbon
technologies if their products meet the characteristics set out
in the Climate Delegated Act. The same document published
by the European Commission in February 2022 clarifies that
the “eligibility” for the taxonomy under the aforementioned
economic activity 3.6 is to be assessed exclusively in relation to
the fact that the activity or product has the objective of enabling
a substantial reduction of GHG emissions in another sector of
the economy50, a circumstance that makes the interpretation
questionable with reference to the tyre product, being the tyre
a product conceived with the essential objective of serving
mobility while taking multiple dimensions into account, starting
with safety (e.g. wet grip, braking distances). Moreover, this
economic activity includes a methodology for determining the
substantial contribution to climate change mitigation that does
not reflect processes, products and technologies commonly
found and applicable in the tyre sector.
Given the complexity of the legislation and the fact that
this is the first year of implementation, there is currently no
official position from the industry associations, nor are there
any emerging market practices that would allow a shared
interpretation of how the Taxonomy should be applied to the
tyre sector.
The Pirelli Group, albeit with the difficulties and limitations
the regulatory context described, has
deriving from
evaluated its positioning with respect to the economic
activity 3.6 Manufacture of other low carbon technologies,
by determining the Key Performance Indicators relating
to turnover, capital expenditure and operating expenditure
required by the regulations. However, the Pirelli Group reserves
the right to reconsider its evaluations and interpretations in
future reports in order to take into account any changes in
the regulatory framework or further clarifications that may be
made in the meantime by national and European authorities
or trade associations.
Finally, it is highlited that the assessments currently carried
out on economic activities “not eligible” for the taxonomy
could change as a result of the publication of the technical
delegated acts relating to the remaining four environmental
objectives envisaged by the Regulation (sustainable use
and protection of water and marine resources, the transition
towards a circular economy, pollution prevention and control,
the protection of biodiversity and ecosystems) as well as
the effect of the inclusion in the Climate Delegated Act of
additional sectors and economic activities.
ELIGIBLE ECONOMIC ACTIVITIES OF THE PIRELLI GROUP
TURNOVER INDICATOR Pirelli is one of the world’s leading tyre
manufacturers, the only one to be entirely focused on the
consumer market, which includes car, motorbike and bicycle
51 Regulation (EU) 2020/740.
tyres, from which it derives its total turnover.
The lack of a shared interpretative model with respect to the
concrete method of applying the Taxonomy to the tyre sector,
in the terms widely described in the previous paragraph, Pirelli
has identified the share of “eligible” economic activities with
the turnover from tyres for vehicles with low environmental
impact and from tyres with high energy efficiency in terms of
rolling resistance, considering the European labelling values
as a reference.
The European tyre labeling51 provides a clear and common
classification of their performance for i) rolling resistance, ii)
wet grip and iii) external noise. Since the taxonomy is focusing
on the environmental impact, the labeling parameter deemed
consistent is therefore only that relating to rolling resistance.
Rolling resistance has an impact on vehicle fuel consumption
and therefore indirectly on the fuel consumption and related
greenhouse gas emissions, which is why high performance
in terms of rolling resistance has a positive impact on the
environmental objective of mitigating climate change.
In particular, the rolling resistance classes indicate the energy
efficiency level of the tyre and they range from A (maximum
energy efficiency) to E (minimum energy efficiency).
In this respect, the following turnover was considered, with the
aim of giving a view as complete and transparent as possible:
→ the view of the turnover from the sale of car and van tyres
produced by the Group with European labelling in A, B and
C classes of rolling resistance, thus focusing on very high,
high and medium efficiency levels (excluding the lower
efficiency levels D and E).
of which
→ the view of the turnover from the sale of car and van tires
produced by the Group with European labeling considering
only the rolling resistance classes A and B, therefore very
high and high energy efficiency.
The turnover from the sale of bicycle tyres was added and
consolidated in both values (A + B + C and only A + B).
The denominator of the KPI is made up of the consolidated
revenues for the year 2021 as indicated in the explanatory
note no. 29 “Revenues from sales and services” within the
consolidated financial statements.
CAPITAL EXPENDITURE INDICATOR The share of “eligible”
economic activities with reference to capital expenditure
refers mainly to productive investments directly related
to the above-mentioned “eligible” revenues, which have
been determined using an allocation driver in the case of
investments in manufacturing that are common to several
types of products.
In addition, investments in energy efficiency at the Group’s
factories related to the environmental objective of mitigating
climate change have also been taken into account; these are
146
Pirelli Annual Report 2021 therefore economic activities included in sector 7. Construction and real estate activities of the Climate Delegated
Act that refer to the construction and rehabilitation of buildings or the installation of energy efficiency devices,
instruments and devices for measuring, regulating and controlling the energy performance of buildings and
renewable energy technologies.
The denominator of the KPI is the sum of the gross additions recognised in 2021 in respect of property, plant and
equipment owned, rights of use and intangible assets, as disclosed in Explanatory Note no. 9 “Property, plant and
equipment” and Explanatory Note no. 10 “Intangible assets” within the consolidated financial statements.
OPERATIONAL EXPENDITURE INDICATOR The share of “eligible” economic activities with regard to operating
expenses refers mainly to production costs directly related to “eligible” revenues, which have been determined
using an allocation driver in the case of manufacturing expenses common to several product types.
The costs incurred for research and development projects with the environmental objective of mitigating climate
change by reducing CO2 emissions and the operating costs related to investments in energy efficiency described
above, which also relate to the environmental objective of mitigating climate change, were also considered.
The denominator of the KPI, as required by regulation, is non-capitalised direct costs related to research and
development, building renovation, rent, maintenance, repairs and other direct expenses related to the day-to-day
operation of assets incurred in 2021.
CAR AND VAN TYRES SALES (WITH LABEL IN CLASSES A-B-C OF ROLLING RESISTANCE)
(very high, high and medium efficiency levels of rolling resistance)
INDICATORS FOR EU LABEL PRODUCTS WITH ROLLING RESISTANCE A-B-C
Taxonomy eligible
Taxonomy not eligible
Share of turnover
Share of capital expenditure
Share of operational expenditure
49%
22%
22%
51%
78%
78%
CAR AND VAN TYRES SALES (WITH LABEL IN CLASSES A-B OF ROLLING RESISTANCE)
(very high and high efficiency levels of rolling resistance)
INDICATORS FOR EU LABEL PRODUCTS WITH ROLLING RESISTANCE A-B
Taxonomony eligible
Taxonomy not eligible
Share of turnover
Share of capital expenditure
Share of operational expenditure
16%
12%
10%
84%
88%
90%
It should also be noted that, also considering the turnover deriving from the sale of car and van tires produced by
the Group with rolling resistance values consistent with the European labeling parameters by re-parameterizing
the non-European labeling to the values of the European labeling, the share of turnover “eligible” would be
respectively 59% (A-B-C classes) and 18% (A-B classes).
147
Report on Responsible Management SOCIAL MINIMUN SAFEGUARDS
The Company promotes respect for Human Rights and
adherence to international standards applicable to its Partners
and Stakeholders. Pirelli aligns its governance with the
United Nations Global Compact, the ISO 26000 Guidelines,
the dictates of the SA8000® Standard and underlying ILO
international regulations, the OECD Guidelines on the duty
of supervision and the recommendations contained in the
Business and Human Rights Guiding Principles of the United
Nations, implementing the Protect, Respect and Remedy
Framework.
in-depth
information on the Policies adopted, the
For
Management model, risks, projects and performance in the
field of Human and Labor Rights, please refer to the sections
dedicated to this in this Report, in particular: “Respecting
human rights”, “ESG elements in the purchasing process”,
“Compliance with statutory and contractual obligations
governing overtime,
leave, association and negotiation,
equal opportunities and non-discrimination, bans on child
and forced labour”, “Focus: Training on Sustainability and
Corporate Governance” and “ Focus: Reporting Procedure -
Whistleblowing Policy”.
FUTURE DEVELOPMENTS
As of 1 January 2023, it will be necessary to report on
the shares of turnover, capital expenditure and operating
expenditure “aligned” with the taxonomy. This requires
verification, for each economic activity identified as “eligible”,
of compliance with the criteria for technical screening which
make it possible to determine a) the substantial contribution
of an economic activity to the achievement of one or more
environmental objectives b) without causing significant
damage to any of the other environmental objectives and
compliance with the minimum safeguards.
This is a particularly challenging process in light of both
the difficulties and limitations deriving from the regulatory
context described above and the complexities of applying
the aforementioned criteria; pending further regulatory
in particular the publication of the
developments and
delegated acts referring to the remaining four environmental
objectives, the Pirelli Group has begun the preparatory
activities necessary to ensure complete and accurate
reporting for the 2022 financial year in accordance with the
requirements of the regulations.
148
Pirelli Annual Report 2021 Social dimension
RESPECTING HUMAN RIGHTS
Pirelli bases its activities on compliance with the universally
established Human Rights, as fundamental and indispensable
values of its culture and business strategy, working to manage
and reduce potential risks of violations and in order to avoid
causing – or contributing to causing – adverse impacts to
these rights in the international, multicultural, socially and
economically diverse context in which it operates.
international standards applicable at
The Company promotes respect for Human Rights and
adherence to
its
Partners and Stakeholders and aligns its governance to the
Global Compact of the United Nations, to the ISO 26000
Guidelines, to the dictates of the SA8000® Standard and
underlying ILO
international standards, the OECD Due
Diligence Guidelines, and the recommendations contained
in the Guiding Principles Business and Human Rights of
the United Nations, implementing the Protect, Respect and
Remedy Framework.
The human rights management processes are handled by
Pirelli Sustainability Department, which acts in concert with
the affected and responsible functions, at central level and in
the various Countries, with reference to both the Internal and
External Community.
Pirelli’s commitment on human rights is dealt with extensively
in the Group “Global Human Rights” Policy, which describes
the management model adopted by the Company in respect
of core Rights and Values such as occupational health and
safety, non-discrimination, freedom of association, refusal of
child and forced labour (firmly condemning the trafficking in
and exploitation of human beings in any form), guarantee of
decent work conditions in economic and sustainable terms
and in terms of working hours, protection of rights and values
of local communities, refusal of any form of corruption and
protection of privacy. Further references to respect for human
rights are also found in other company documents: “Values
and the Code of Ethics”, the “Social Responsibility Policy on
Occupational Health, Safety and Rights and Environment”,
the “Global Health, Safety and Environment” Policy, the
“Privacy” Policy, the “Equal Opportunities Statement” and the
“Policy on the Sustainable Management of Natural Rubber”.
All the documents were communicated to employees
in the local language and published on Pirelli website in
multiple languages, as well as to Group Suppliers for whom
sustainability and business ethics clauses are included in
every contract and purchase order.
To identify, assess, prevent and mitigate the risks of violation
of Human Rights, the Company:
→ ensures awareness among
its employees through
information and training starting from the course for new
hires (in this regard, reference is made to the paragraph
“Focus: Training on Sustainability and Corporate
Governance”);
→ verifies the application of regulations on respect for human
and labour rights at its affiliates through periodic audits
carried out by the Internal Audit Department, in accordance
with a three-year audit plan covering all Company sites. For
further details, please refer to the section of this report
entitled “Compliance with statutory and contractual
obligations governing overtime, leave, association and
negotiation, equal opportunities and non-discrimination,
bans on child and forced labour”;
→ manages its supply chain responsibly and specifically
includes respect for human rights in the selection
parameters of its suppliers, the contractual clauses and
carries out due diligence by third-party audits. Pirelli
also contractually requires its suppliers to implement a
similar business model that is active on their supply chain,
including adequate due diligence aimed at certifying that
the products and materials provided to Pirelli are “conflict-
free” throughout the supply chain. From 2019, Pirelli has
also subscribed to the “Cobalt Initiative” launched by RMI.
With specific reference to the natural rubber context,
Pirelli promotes decent working conditions, development
of local communities and prevention of conflicts related
to land ownership, in line with its Policy for Sustainable
Natural Rubber Management, and at the same time with
the dictates of the Global Platform for Sustainable Natural
Rubber (GPSNR) of which Pirelli is a founding member.
Please refer to the section “Our Suppliers” in this Report
for an in-depth look at the supply chain management
model, audits performed and initiatives, including details
on Natural Rubber;
→ cooperates and sustains the importance of cooperation
with government and non-government, sectoral and
academic entities in relation to the development of global
policies and principles aimed at protecting human rights;
This is the context which sees the inserting, as an example,
of the Group CEO signing the “CEO Guide on Human
Rights” promoted by the WBCSD in 2019, the activity under
the UN Global Compact Working Group “Decent Work in
Global Supply Chains” and Pirelli’s active contribution to
the creation of the Global Platform for Sustainable Natural
Rubber (GPSNR);
→ before investing in a specific market, conducts ad hoc
assessments of any political, financial, environmental
and social risks, including those related to the respect of
human and labour rights. The internal and external context
is monitored in those Countries where the Company does
operate, in view of preventing negative impacts on human
rights, and if so, remedying them;
→ makes available to its Stakeholders a channel dedicated
to the reporting, even anonymous, of any situations that
constitute or may constitute a risk of violation of Human
Rights as well as any Group Policy, law or regulation in
dealing with the Group (in this regard and with reference
to the reports received in the last three years, please refer to
the paragraph “Focus: reporting procedure - Whistleblowing
Policy” in this report).
149
Report on Responsible Management In terms of materiality in the Company value chain, the
respect for human rights and
labour rights assumes
particular importance in human resources and supply chain
management.
Pirelli updated its analysis of the risk of violation of human
rights on its own premises, in the related value chain (suppliers
and customers) and in the local context external to Pirelli,
asking the main Stakeholders to fill out a dedicated survey.
With regard to the perception of internal risk at Pirelli’s sites
and in the relative value chain, the survey was submitted to
the function managers and to the Sustainability Managers
of the Group’s sites, while regarding the perception of risk
in the external context the survey was submitted to both
the aforementioned Pirelli functions and to local Non-
Governmental Organisations of reference.
The survey asked for an indication of the current and
potential (referring to the next 5-10 years) perceived risk
value on a scale from 1 to 4 (1 = low risk, 2 = medium-low
risk, 3 = medium-high risk and 4 = high risk) for each of
the 20 indicated human rights, deriving from the Universal
Convention of the Human Rights of the United Nations and
the ILO Declaration on the Fundamental Principles and
Rights of Labour. Among the rights covered: equality and non-
discrimination; equal pay for equal work; freedom of thought,
religion, opinion and expression; freedom of association
and collective bargaining; not being subject to slavery,
servitude or forced labour. We also mention the categories of
stakeholders mapped: workers (employees, agency workers,
and contractors); suppliers; and local communities in which
Pirelli operates.
With reference to the internal situation at Pirelli’s sites,
the consolidation of the feedback received revealed not
significant risks; the average values recorded are, in fact, less
than 1.12 for current risks and less than 1.15 for medium-long-
term risks. A similar situation is recorded with reference to the
Group’s value chain, whose average values recorded do not
exceed 1.18 for current risks and 1.29 for potential risks.
The consolidation of the feedback received from Non-
Governmental Organisations, with reference to the risk
perceived in the local context external to Pirelli, showed,
on average, low or medium-low risks; the average values
recorded are, in fact, less than 1.74 for current risks, while
they reach 1.98 for medium-long-term risks. The value of
1.98 corresponds to the risk of violation of the right to fair
justice, which coincides, moreover, with the risk perceived as
increasing the most in the coming years.
150
Pirelli Annual Report 2021 INTERNAL COMMUNITY
PIRELLI EMPLOYEES AROUND THE WORLD
The total Pirelli workforce as at 31 December 2021 - expressed in Full Time Equivalent and including agency
workers - stood at 30,690 employees (vs. 30,510 in 2020 and 31,575 in 2019), recording a net increase of 180
employees compared to the previous year.
The following tables52, with reference to the last three years, detail the composition of the workforce by category,
geographical area, gender, type of contract, and the flow of employees by geographical area53, gender and age
bracket.
To complete the information on the trend of the workforce during the year, please refer to the paragraph “Industrial
Relations” in this Report.
Additional quantitative information with specific reference to the issue of diversity is provided in the “Diversity,
Equity and Inclusion” section of this Report.
BREAKDOWN OF WORKFORCE54 BY CATEGORY
EXECUTIVES
CADRE
WHITE COLLARS
BLUE COLLARS
TOTAL
2021
2020
2019
247
257
271
1,754
1,752
1,893
4,052
4,060
4,617
24,636
24,441
24,794
30,690
30,510
31,575
BREAKDOWN OF WORKFORCE54 BY GEOGRAPHICAL AREA53 AND GENDER
2021
2020
2019
Male
Female
Total
Male
Female
Total
Male
Female
Total
EUROPE
11,022
1,816
12,838
10,951
1,774
12,725
11,295
1,803
13,098
NORTH AMERICA
SOUTH AMERICA
APAC
RUSSIA, NORDICS & MEAI
2,746
7,321
2,999
2,190
451
653
899
593
3,197
2,752
7,975
7,293
3,898
3,093
2,783
2,110
480
647
834
576
3,232
2,758
7,940
7,288
3,927
3,280
2,686
2,431
507
677
854
684
3,265
7,964
4,134
3,115
TOTAL
26,278
4,412
30,690
26,199
4,311
30,510
27,051
4,524
31,575
52 Staff numbers are expressed in Full Time Equivalent; while respecting the totals, partial values entered in the
table may be subject to rounding and the sums thereof may not coincide with the total.
53 Europe: Austria, Belgium, France, Germany, Greece, Italy, Netherlands, Poland, Czech Republic, United
Kingdom, Romania, Slovakia, Spain, Switzerland, Turkey, Hungary. North America: Canada, Mexico, United
States. South America: Argentina, Brazil, Chile, Colombia. Asia Pacific: Australia, China, Korea, Japan, Singapore,
Taiwan. Russia, Nordics & MEAI: Saudi Arabia, Egypt, India, Russia, South Africa, Sweden, UAE.
54 These data include agency workers, corresponding to 0.2% of total workforce in 2019, 0.6% in 2020 and
0.8% in 2021.
151
Report on Responsible Management
BREAKDOWN OF WORKFORCE57 BY GEOGRAPHICAL AREA58 AND CONTRACT
2021
Permanent
Temporary
Agency
Total
EUROPE
NORTH AMERICA
SOUTH AMERICA
APAC
RUSSIA, NORDICS & MEAI
TOTAL
EUROPE
NORTH AMERICA
SOUTH AMERICA
APAC
RUSSIA, NORDICS & MEAI
TOTAL
EUROPE
NORTH AMERICA
SOUTH AMERICA
APAC
RUSSIA, NORDICS & MEAI
TOTAL
11,636
3,166
7,666
3,898
2,658
29,023
1,192
0
112
0
125
1,429
10
31
197
0
0
238
2020
Permanent
Temporary
Agency
Total
11,923
3,024
7,750
3,923
2,562
29,362
795
1
54
4
124
978
7
27
136
0
0
170
2019
Permanent
Temporary
Agency
Total
12,513
3,237
7,779
4,131
3,014
30,674
565
0
185
3
98
851
20
28
0
0
2
50
12,838
3,197
7,975
3,898
2,783
30,690
12,725
3,232
7,940
3,927
2,686
30,510
13,098
3,265
7,964
4,134
3,115
31,575
57 Europe: Austria, Belgium, France, Germany, Greece, Italy, Netherlands, Poland, Czech Republic, United
Kingdom, Romania, Slovakia, Spain, Switzerland, Turkey, Hungary. North America: Canada, Mexico, United
States. South America: Argentina, Brazil, Chile, Colombia. Asia Pacific: Australia, China, Korea, Japan, Singapore,
Taiwan. Russia, Nordics & MEAI: Saudi Arabia, Egypt, India, Russia, South Africa, Sweden, UAE.
58 These data include agency workers, corresponding to 0.2% of total workforce in 2019, 0.6% in 2020 and
0.8% in 2021.
152
Pirelli Annual Report 2021 PERCENTAGE OF EMPLOYEES BY CATEGORY, GENDER AND AGE
2021
<30
30 - 50
>50
<30
30 - 50
>50
<30
30 - 50
>50
Executives
Cadre
White collars
Blue collars
Total
M
F
tot
M
F
tot
M
F
tot
M
F
tot
M
F
tot
0%
0%
0%
3%
4%
3%
20%
27%
23%
24%
16%
23%
22%
18%
22%
55%
61%
56%
67%
76%
69%
65%
60%
63%
64%
76%
65%
64%
71%
65%
45%
39%
44%
30%
20%
28%
15%
13%
14%
12%
8%
12%
14%
11%
13%
2020
Executives
Cadre
White collars
Blue collars
Total
M
F
tot
M
F
tot
M
F
tot
M
F
tot
M
F
tot
0%
0%
0%
2%
2%
2%
20%
29%
23%
23%
19%
23%
21%
20%
21%
50%
59%
51%
63%
73%
66%
63%
56%
61%
63%
73%
64%
63%
68%
63%
50%
41%
49%
35%
25%
32%
17%
15%
16%
14%
8%
13%
16%
12%
15%
2019
Executives
Cadre
White collars
Blue collars
Total
M
F
tot
M
F
tot
M
F
tot
M
F
tot
M
F
tot
0%
0%
0%
3%
4%
3%
22%
30%
25%
26%
24%
26%
24%
24%
24%
55%
69%
57%
66%
75%
68%
64%
56%
61%
62%
70%
63%
63%
66%
63%
45%
31%
43%
31%
21%
29%
14%
14%
14%
12%
6%
11%
13%
11%
13%
EMPLOYEES WITH PART TIME CONTRACT BY GENDER
2021
2020
2019
Male
Female
TOTAL
Male
Female
TOTAL
Male
Female
TOTAL
137
142
279
120
154
274
157
205
362
153
Report on Responsible Management
EMPLOYEE FLOWS BY GEOGRAPHIC AREA59, GENDER AND AGE
The following data refer to incoming/outgoing employees. The entry and exit rates are calculated by comparing
the number of entries and exits of each category to the total number of employees belonging to that category as
of 31 December. The disposals and acquisitions of companies or business units, and changes in work schedules
from full-time to part-time are not considered.
2021 FLOWS: ABSOLUTE VALUES AND RATES
EUROPE
NORTH AMERICA
SOUTH AMERICA
APAC
RUSSIA, NORDICS & MEAI
TOTAL
INCOMING
OUTGOING
<30
30 - 50
>50
M
F
Total
<30
30 - 50
>50
M
F
Total
918
575
50
1,341
202
1,542
562
522
360
1,290
154
1,444
39%
7%
525
245
36%
16%
2%
10
7%
12%
11%
12%
24%
7%
13%
12%
726
54
781
458
330
24
730
8%
82
11%
812
27%
12%
25%
32%
21%
16%
27%
19%
26%
846
578
19
1,321
123
1,443
287
1,042
199
1,413
114
1,527
52%
98
17%
11%
182
6%
272
259
49%
15%
4%
26
6%
3%
19%
19%
19%
18%
19%
27%
20%
18%
20%
3
179
104
283
81
207
2
244
6%
12%
7%
14%
6%
434
123
557
156
256
2%
54
8%
354
46
5%
112
290
7%
466
21%
21%
21%
28%
15%
13%
17%
19%
17%
2,659
1,840
107
4,000
606
4,606
1,544
2,357
639
4,032
508
4,539
40%
9%
3%
15%
14%
15%
24%
12%
16%
16%
12%
15%
2020 FLOWS: ABSOLUTE VALUES AND RATES
EUROPE
NORTH AMERICA
SOUTH AMERICA
APAC
RUSSIA, NORDICS & MEAI
TOTAL
INCOMING
OUTGOING
<30
30 - 50
>50
M
F
Total
<30
30 - 50
>50
M
F
Total
678
437
29%
6%
548
324
42
1%
36
1,018
139
1,157
471
430
289
1,067
123
1,190
9%
838
8%
70
9%
20%
6%
10%
10%
908
542
360
20
824
7%
98
9%
922
36%
22%
21%
31%
15%
28%
35%
24%
12%
30%
21%
29%
392
291
30%
45
6%
79
15%
5%
43
1%
87
5%
7
1%
2
2%
6
1%
603
87
690
348
427
109
759
125
884
8%
59
2%
122
6%
13%
31
4%
50
9%
9%
90
2%
27%
8%
12%
11%
19%
11%
109
142
11
221
15%
5%
13%
7%
41
5%
262
7%
172
141
290
168
446
153
599
7%
26%
18%
38%
22%
27%
23%
1,742
1,182
93
2,640
376
3,017
1,611
1,649
597
3,317
540
3,858
27%
6%
2%
10%
9%
10%
25%
9%
13%
13%
13%
13%
59 Europe: Austria, Belgium, France, Germany, Greece, Italy, Netherlands, Poland, Czech Rep United Kingdom,
Romania, Slovakia, Spain, Switzerland, Turkey, Hungary. North America: Canada, Mexico, United States. South
America: Argentina, Brazil, Chile, Colombia. Asia Pacific: Australia, China, India, Japan, Singapore, South Korea,
Taiwan. Russia, Nordics & MEAI: Saudi Arabia, Egypt, India, Russia, South Africa, Sweden, UAE.
154
Pirelli Annual Report 2021 2019 FLOWS: ABSOLUTE VALUES AND RATES
EUROPE
NORTH AMERICA
SOUTH AMERICA
APAC
RUSSIA, NORDICS & MEAI
TOTAL
INCOMING
OUTGOING
<30
30 - 50
>50
M
F
Total
<30
30 - 50
>50
M
F
Total
904
656
78
1,460
178
1,638
698
553
254
1,328
177
1,505
35%
8%
3%
13%
10%
13%
27%
7%
10%
12%
10%
12%
982
406
26
1,252
162
1,414
750
377
27
1,001
153
1,154
57%
29%
25%
46%
32%
44%
44%
27%
26%
37%
30%
36%
199
212
14%
4%
12
2%
349
74
423
271
425
91
715
72
787
5%
11%
5%
19%
7%
12%
10%
11%
10%
294
303
4
522
26%
10%
5%
16%
159
22%
117
6%
7
1%
221
9%
79
9%
62
9%
601
235
268
12
433
82
515
15%
21%
283
150
9%
21%
9%
161
9%
16%
13%
10%
12%
70
288
93
381
14%
12%
14%
13%
2,538
1,694
127
3,804
555
4,359
2,104
1,784
454
3,765
577
4,342
33%
9%
3%
14%
12%
14%
28%
9%
11%
14%
13%
14%
At Pirelli there are 28 young people older than 15 and under 18 - before birthday - years old (15 in Germany, 9 in
Switzerland and 4 in the UK), each for training and integration plans, in harmony with local laws.
DIVERSITY, EQUITY AND INCLUSION
Pirelli is characterised by a multinational context where individuals manifest a great diversity, whose conscious
management simultaneously creates a competitive advantage for the Company and a shared social value.
Pirelli’s commitment to compliance with equal opportunities and the enhancement of diversity in the workplace is
expressed in the main Group Sustainability documents: the “Ethical Code” approved by the Board of Directors, the
“Social Responsibility Policy for Occupational Health, Safety and Rights, Environment”, the “Equal Opportunities
Statement” and the “Global Human Rights” Policy.
Pirelli has also actively participated in the “B20 - G20 Dialogue on Women Empowerment” Working Group and
signed the related Manifesto; in addition, the Company will participate in the B20 “Women in Business Action
Council” to be held in Indonesia in 2022.
The aforementioned Policies are the subject of training on Pirelli’s Sustainable Management Model through
the “Plunga” international onboarding programme, so that all new hires enter the Company aware of the value
attributed to the issue of Diversity, Inclusion and Equity, as well as the related rules.
In the course of 2022 Pirelli will publish the update of the Equal Opportunities Statement, which flows into the new
“Diversity, Equity and Inclusion” (DE&I) Policy, and will launch a global awareness and training campaign on the
issues of diversity management and good inclusion practices, aimed at all Company employees and managers.
In past years including 2021, various awareness-raising campaigns on DE&I issues have been implemented in the
various countries in which Pirelli operates, both with specific subject matter on Diversity and as part of Human
Rights Training.
Internationality and multiculturalism are the distinguishing features of the Group: Pirelli operates in 160 countries
on five continents and 90% of its employees (as of 31 December 2021) work outside of Italy. Awareness of
the cultural differences that create the identity of the Company entails displaying the utmost confidence in
management of local origin: most of the Senior Managers work in their country of origin, where Senior Managers
are those reporting directly to the Executive Vice Chairman and CEO, and Region CEOs and Executives with
strategic responsibilities as at 31 December 2021. In order to develop the innovative and managerial potential
155
Report on Responsible Management inherent in multiculturalism and in dealings with different professional environments, the Company promotes the
growth of its managers through international mobility: more than half of active Senior Managers in 2020 have in
fact experienced at least one experience as expat during their professional experience within the Pirelli Group.
Compared to the total number of employees, there were 23 new expatriates in 2021, compared to 15 in 2020
and 57 in 2019. Since Pirelli sees expatriation as a means of cultural inclusion and dissemination of different
management cultures, despite the health emergency that all global economies have had to face, Pirelli has not
stopped expatriating, but has simply reduced the number. About a third of new departures went to the main
countries where Pirelli has an industrial presence, such as Germany and China, Russia and Romania. The
total expatriate population at the end of 2021 is 85 people (vs. 114 in 2020 and 170 in 2019), belonging to 13
nationalities and moving to 24 different countries on five continents, of which 15% (vs. 11% in 2020) are women.
42% of the total expatriate population is made up of employees working in different premises compared to the
central one (HQ).
Pirelli monitors the level of acceptance and appreciation of diversity perceived by employees within their own
reality, as well as the priority given to the issue of Diversity and Equal Opportunities by employees. In this regard,
the issue, as part of the materiality analysis conducted at the end of 2021, ranked in the top half of the 20 issues
considered by employees. During 2022 Pirelli will launch the “My Voice for Wellbeing” Survey, which will include
specific questions to monitor the level of inclusion and awareness of diversity elements among Pirelli employees.
The results will be published in the 2022 Annual Report.
A very important tool for the management of equal opportunities and the prevention of risk of breach thereof
is the Group Whistleblowing Reporting Procedure, through which employees and the external stakeholders can
anonymously report any cases of equal opportunity violations within the Company or in relations with it. In 2021,
no reports were received relating to cases of discrimination. For more details on the reports received, see the
paragraph “Focus: Reporting Procedure - Whistleblowing Policy”.
Regarding the composition of the corporate bodies by gender and Diversity Policies, reference is made to the
“Report on the Corporate Governance and Share Ownership of Pirelli & C. S.p.A.”, within the present Annual
Report, paragraphs “Diversity Policies”, “Board of Directors - Composition”, “Board of Statutory Auditors -
Composition”.
With regard to the subdivision of the workforce by gender, with reference to the three-year period 2019-2021,
the data show a substantial stability, with a percentage of women in the total population, which stands at 14.4%.
The percentage of women continued to grow in relation to managerial positions (executives + cadres), standing
at 24.8% in 2021 compared to 24% in 2020 and 22.4% in 2019.
WOMEN’S INCIDENCE ON THE TOTAL WORKFORCE60 BY CATEGORY
YEAR
2021
2020
2019
EXECUTIVES
CADRES
EXEC + CADRES
(= Tot Manager)
WHITE COLLARS
BLUE COLLARS
TOTAL
11.3%
10.5%
10.7%
26.6%
26.0%
24.1%
24.8%
24.0%
22.4%
33.2%
33.0%
33.8%
10.4%
10.2%
10.0%
14.4%
14.1%
14.3%
Analysing the breakdown by gender in terms of employment contract, the table below shows that also in 2021,
and a substantial balance was maintained between men and women.
60 These data include agency workers, corresponding to 0.2% of total workforce in 2019, 0.6% in 2020 and
0.8% in 2021.
156
Pirelli Annual Report 2021 WORKFORCE60 BY GENDER AND BY TYPE OF CONTRACT
2021
2020
2019
Male
Female
Total
Male
Female
Total
Male
Female
Total
PERMANENT
TEMPORARY
AGENCY
94.4%
95.6%
94.5%
96.1%
97.0%
96.2%
97.3%
96.6%
97.1%
4.7%
4.1%
4.7%
0.9%
0.3%
0.8%
3.3%
0.6%
2.8%
0.2%
3.2%
2.6%
3.1%
2.7%
0.6%
0.1%
0.3%
0.2%
In 2021 the number of parental leaves used by Pirelli employees corresponds to 176 for women and 659 for
men. With reference to the post-maternity/paternity return rate, Pirelli figure for the total workforce in all the
countries where the company is present shows that, in 2021, out of the total number of workers who have ended
parental leave, 88% of women and 96% of men have returned to the Company. Also, during 2021, one year after
the maternity and paternity event (begun in 2020), 76% of women and 86% of men are still employed at the
Company. It should be noted that the difference in the data between genders should be considered natural in light
of the different socio-cultural contexts in which female workers are inserted. In 2021, in the Italian perimeter, as a
pilot initiative, an agreement has been signed that provides for a supplement to the provisions of local legislation
on parental leave, which allows for a 100% pay adjustment which covers a period of 3 months.
In the context of gender diversity, Pirelli is particularly attentive to remuneration equality, constantly monitoring
this issue and publishing the figures transparently for 11 years now. The countries considered in the analysis
at the end of 2021 were Brazil, China, Germany, Italy, Romania, Mexico, Argentina, USA, Russia, France, Spain,
UK, Turkey and Sweden, representing in terms of materiality over 3/4 of the total workforce subject to the
remuneration policy (executives, cadres and employees). The pay gaps between men and women are calculated
for each country and for the same roles, taking into account the “grade” assigned to each (i.e. the weight given to
each organisational position on the basis of different factors) and the statistical significance of each cluster. This
method of data collection allows for an objective investigation and evaluation, taking into account the structural
differences of the various local markets and their specific remuneration logic.
The average of pay gaps between men and women white collars recorded in these countries is equivalent to 4%
in favour of women, compared with 3% in 2020 and 2019 also in favour of women; for the cadre category there
is an average pay gap of 3% in favour of men, compared with substantial pay parity in 2020 and 2% in favour of
men in 2019. A few examples:
→ Italy, which has a difference between average remuneration for men and average remuneration for women of
around 3% in favour of women for the category of employees (in line with 2020 and 2019); and 3% in favour
of men for the category of cadres (compared to 1% in 2020 and 4% in 2019 in favour of men);
→ Romania, where for the category of white-collar employees there is 1% in favour of men (compared to 4% in
2020 and 2019, also in favour of men) and for the category of cadre there is 7% in favour of men (compared
to 8% in favour of men in 2020 and 9% in 2019, also in favour of men);
→ Brazil, where there is a pay gap of 1% in favour of women in the category of white-collar employees (compared
to substantial parity in 2020 and 3% in favour of men in 2019) and 2% in favour of men in the cadre category
(compared to 3% in favour of men in 2020 and 4% in favour of men in 2019);
→ Germany, which shows a difference between average male and average female remuneration of 2% in favour
of men for the category of white-collar employees (in line with 2020 and compared to 1% in 2019 in favour of
men) and 2% in favour of men for the category of managers (compared to 2% in 2020 and 9% in 2019, both
in favour of men).
With reference to the population of managers, of which women represent 11.3%, there is an average pay gap of
6% in favour of women (In line with 2020 and compared to 5% in 2019, again in favour of women).
157
Report on Responsible Management With regard to the workers’ population, all countries in which Pirelli is industrially present were analysed. For each
country the pay gap between men and women has been calculated. The average, weighted by the number of
employees, showed a 1% difference in favour of men. Here are a few examples:
→ China presents a difference between average men’s salary and average women’s salary of 12% in favour of
men, compared to 10% in 2020 and 7% in 2019, always in favour of men;
→ Brazil has a pay gap of 4% in favour of women compared to 2% in favour of women in 2020 and 2% in favour
of men in 2019;
→ in Italy there is a gap of 2% in favour of men, in line with 2020 and 2019;
→ in Romania there is substantial pay equity, compared with 2% in favour of women in 2020 and 2019.
With regard to the standard salary of new hires during their first year of work, this is shown to be greater than the
minimum levels prescribed by different local legislation and there are no differences between men and women
or related to other diversity factors.
Pirelli’s inclusive culture towards different skills, as explained in the Pirelli policy on equal opportunities, is
implemented by all the Group’s affiliates. Under applicable local laws, approximately 1.7% of total employees
in 2021 (a reduction of 0.2 pp from the figure for 2020 and unchanged from the figure for 2019) have some
form of disability, net of the following considerations: the percentage measurement of disabled employees in
the multinational context of the company clashes with the objective difficulty of measuring their number, both
because in many countries where the Group is present, there are no specific laws or regulations promoting
their employment and therefore disabilities are not automatically detected, and because in many countries this
information is deemed confidential and protected by privacy laws; it is therefore likely that the actual percentage
of disabled persons working at Pirelli could be higher than the above figure.
With reference to the “age” factor of the company population, subdivided by professional category, it is
homogeneous between genders, as can be seen from the table below.
AVERAGE EMPLOYEE AGE BY CATEGORY AND GENDER
2021
Executives
Cadres
White collars
Blue collars
Group Average
Female
Male
Total
Female
Male
Total
Female
Male
Total
50
50
50
44
45
45
2020
38
39
39
38
38
38
Executives
Cadres
White collars
Blue collars
Group Average
50
51
50
44
46
45
2019
38
39
39
37
38
38
Executives
Cadres
White collars
Blue collars
Group Average
37
38
38
36
37
37
48
50
49
43
45
45
158
39
39
39
38
39
39
37
38
38
Pirelli Annual Report 2021 The following table represents the average seniority of service per professional category and gender: also in
2021, there were no significant differences between men and women.
AVERAGE EMPLOYEE SENIORITY OF SERVICE BY CATEGORY AND GENDER
2021
Executives
Cadres
White collars
Blue collars
Group Average
Female
Male
Total
Female
Male
Total
Female
Male
Total
18
17
17
14
15
14
2020
9
10
10
8
10
10
Executives
Cadres
White collars
Blue collars
Group Average
16
17
17
14
15
15
2019
9
10
10
7
10
10
Executives
Cadres
White collars
Blue collars
Group Average
14
16
16
14
15
15
9
9
9
7
9
9
9
10
10
9
10
10
8
10
9
The following procedures and activities to promote equal opportunities have been well-established for years:
→ the use, as far as possible, of candidate lists with a significant presence of women in recruitment processes;
→ introduction of initiatives aimed at respecting cultural and religious diversity (e.g. different and clearly marked
diets in canteens, typical cuisine from cultures other than that of the host country etc.);
→ “multilingual” bookshops at the factories;
→ welfare and work-life balance initiatives (in regard, refer to the paragraph “Welfare and initiatives in favour of
the Internal Community” in this report).
In 2021, among other initiatives, Pirelli set up a fund with Bocconi University called “Pirelli Women Awards” to support
the university careers of deserving female students. Training initiatives aimed at improving the management of cross-
cultural communication provided during the “Plunga” international onboarding programme for new hires in the Group.
REMUNERATION AND SUSTAINABILITY
The General Remuneration Policy, approved by the Board of Directors of Pirelli, establishes the principles and
guidelines to which the Group adheres in order to determine and monitor the application of the remuneration
guidelines relating to the Directors vested with particular delegations/offices, to the Managing Directors, to
Executives with strategic responsibilities, to Senior Managers and to other Group Executives.
Specifically, the Guidelines of the remuneration for the abovementioned management figures will also cover:
→ fixed and variable remuneration, both short and medium-long term;
→ compensation in case of termination of employment;
→ clawback clauses for Top Management.
159
Report on Responsible Management The remuneration policies adopted by Pirelli aim to ensure
fair remuneration in line with the individual’s contribution to
the success of the Company, recognising the performance
and quality of the individual’s professional input.
The purpose is twofold: on the one hand to attract, retain
and motivate employees, while on the other to reward and
promote conduct that is consistent with the corporate
culture and values. Compensation policies and processes
for Group management (intended as the overall executives)
are managed by the Human Resources department, while for
non-executive personnel they are handled on an individual
Country basis, although supervised from central level.
The Management is covered by the Annual Incentive Plan
(Short Time Incentive – STI), linked to the achievement
of annual economic-financial or functional objectives, to
which a sustainability objective is added, identified “Eco &
Safety Performance Revenues”) with a weight of 10% of the
total. In line with market best practices, the incidence of the
variable component (short- and medium-term) on the total
remuneration of each Group Manager is very high, signifying
a close correlation between remuneration and performance.
The Annual Incentive Plan (STI) provides, with a view to
retention, that for General Managers, Executives with
Strategic Responsibilities
(KM) and selected Senior
Managers, a portion of the incentive accrued equal to a
minimum of 25% and a maximum of 50% is deferred for
three years. The relative payment, together with a company
matching component, is subject to remaining in the company
at the end of this period.
For the rest of the Management, the Plan provides for a
deferred payment to the following year of a part (25%) of the
annual incentive accrued, subject to the achievement of the
following year’s STI targets. The portion to be repaid is equal
to the amount set aside, if the following year’s objectives
are achieved between entry level and target, or double the
amount set aside, if these objectives are achieved at target
level or above.
All Group Executives whose grade, as determined by the Korn
Ferry method, is equal to or greater than 20, in line with the
variable compensation mechanisms adopted at international
level, are also beneficiaries of a Long-Term Incentive (LTI)
Plan, which is totally self-financed as the related charges
are included in the Industrial Plan economic data. In 2021, as
well as in 2020, a Long-Term Incentive (LTI) cash plan was
launched in line with market best practices, based on a rolling
mechanism (a new three-year Incentive Plan will therefore be
proposed each year), which does not provide for an ON/OFF
access condition and with the following targets:
→ Group Net Cash Flow (before dividends) with weighting 40%;
→ Total Shareholder Return (TSR) relative to a panel of
competitors (TIER1) with a weight of 40%;
→ Positioning in the Dow Jones Sustainability Index World
with a weight of 10%;
→ Positioning in the CDP Climate Change Index with a weight
of 10%.
For updates and details on the Remuneration Policy and
related sustainability indicators, refer to the Governance
section of Pirelli website, “Remuneration” sub-section.
EMPLOYER BRANDING
In addition to disseminating the company principles,
Employer Branding is also a valuable tool to give visibility
to job opportunities aimed at recent graduates and profiles
with experience, not only in the Italian market but globally.
Considering the countries where Pirelli has a presence with
one or more production plants, numerous events, projects
and meetings were organised in 2021, where the Company
promoted
initiatives. These
activities are carried out also thanks to the network of
contacts and partnerships with important universities in the
various countries.
its own Employer Branding
In Italy, Pirelli actively collaborates with Polytechnic University
of Milan, Polytechnic University of Turin, Bocconi University,
UCSC Catholic University, University of Turin and the University
of Milan-Bicocca. The latter Universities are located close to
Pirelli offices and the Company has always considered them
to be a benchmark for economic and engineering education of
young people. With these institutions, Pirelli organises Careers
Days, round tables, Job Fairs and company presentations,
whether in-person or virtually.
In 2021, among other initiatives, Pirelli:
→ set up a fund with Bocconi University called “Pirelli Women
Awards” dedicated to supporting the university career of
deserving female students;
→ entered into collaboration with MIP Politecnico di MIlano to
organise the “Master in Sustainable Industrial Management”
and the “Master in Sustainability Management & Corporate
Social Responsibility”.
Among the channels of Employer Branding used by Pirelli,
the internet plays an important role: on pirelli.com website,
the Company provides a channel dedicated to those wishing
to propose their candidacy for specific open positions, as
well as giving ample information on the company history,
management models adopted, objectives and results
achieved; targeted channels - including the best-known social
media channels and the University portals - are also chosen
by Pirelli to publish their job offers.
160
Pirelli Annual Report 2021 DEVELOPMENT
PERFORMANCE MANAGEMENT
With the Performance Management process Pirelli defines and evaluates the contribution of each employee
to the achievement of company objectives in terms of results obtained and behaviours applied. The process
supports the definition and sharing of key indicators for the achievement of the corporate strategy and represents
an important opportunity for the professional development and orientation of each individual.
A key element of the process is the transparent and open dialogue between the manager and the employee, from
the phase of sharing individual objectives to that of evaluating the results achieved and the behaviours expressed
for their attainment.
The main features in the process are:
→ the entire process is managed within a platform accessible from all company devices;
→ the process and the platform are active all year, so as to better support the continuity of dialogue between
boss and employee and alignment of the priorities;
→ the assessment is based on two dimensions: the “what” (results) and the “how” (key behaviours);
→ the key behaviours are the same for the entire company population and are considered essential to the
achievement of the company’s strategic objectives, namely: Accountability, Teamwork and collaboration,
Forward thinking, Agility, Cross-functional approach, and Initiative and drive.
As usual, in 2021, the process was accompanied by digital training resources focused on the evaluation and
feedback process.
The Performance Management process involves all staff worldwide (executives, cadres and white collar
employees) and in 2021 saw a redemption rate (i.e., completed assessments compared to the total eligible
people) of 100% for female and male executives, cadres and white-collars.
The percentages of completion by level are shown below:
Executives
Cadres
White collars
100%
100%
100%
In support of the quality of the Performance assessments, Pirelli process includes the so-called Calibration
Meetings, i.e. meetings with the involvement of the managers of the individual functions, Business Unit and
Country, with their first reporting and with the Human Resources managers of reference. During these meetings
the evaluations of the people belonging to a specific organisational unit are put into common use with the aim
of ensuring a balanced distribution and a process that is as coherent, homogeneous and objective as possible.
TALENT DEVELOPMENT
The Talent Development process aims to ensure business continuity by supporting the identification and
development of people with the potential to cover the positions of greater complexity, those who already hold
strategic positions and so-called critical know-how (that is, people with key skills that are difficult to replace).
The current population of talent and critical know-how is around 580 people. As far as talent is concerned,
the average seniority within the company is 8 years. The strong international character, represented by 22
nationalities, is confirmed.
In 2021, the assessment of the managerial skills of the talent population also continued. This activity enabled the
activation of specific action plans dedicated to supporting the development path of the people involved.
In 2021, a mentoring programme was launched dedicated to the youngest members of the talent pool. Each
of the participants in the initiative was associated with a senior leader in the role of mentor. Mentors and
mentees were supported with several training sessions aimed at sharing methodologies and tools to support the
effectiveness of the programme. The main objectives of the programme were to transfer experience and vision
between current leaders and the next generation of leaders, to support the professional development goals of
young talents and to develop a greater awareness of the corporate culture and context.
161
Report on Responsible Management TRAINING
All Pirelli affiliates have adopted the Learning@Pirelli
training model, organised, structured and equipped system
to respond to “Group” needs as well as any needs that may
emerge locally at any time from the various affiliates.
Pirelli training offering is based on one hand on the strategic
priorities of the organisation and the different functions,
and on the other on the needs that arise each year from the
Performance Management process as well as the training
needs arising from the socio-economic context.
After a slowdown in 2020 due to the Covid health emergency,
training activities resumed in 2021, confirming the prevalence
of virtual participation by the staff population (employees,
middle managers and executives). In addition to Health
and Safety issues, the training focus was on professional
“Upskilling” and improving digital knowledge in line with the
advances in the company’s digitalisation processes.
Continuing the
important digital transformation of the
training offering already begun in previous years, the Pirelli
training model is based on four main pillars: the Professional
Academy, the School of Management, Global Activities and
Local Education. The first three are designed centrally and
delivered centrally and/or locally, while Local Education is
entirely managed and implemented in individual countries
to meet specific local needs. The above is also accompanied
by training programmes organised by the Headquarters in
English to support all colleagues in the foreign offices.
PROFESSIONAL ACADEMIES
Pirelli Professional Academies cater to the entire corporate
population with the aim of providing continuous technical-
professional training, encourage cross-functional collaboration,
ensure the exchange of expertise and know-how among
implementation of tools and
countries and support the
procedures within the organisation.
There are
ten Pirelli Academies: Product Academy,
Manufacturing Academy, Commercial Academy, Quality
Academy, Supply Chain Academy, Purchasing Academy,
Finance and Administration Academy, Planning & Control
Academy, Human Resources Academy and Digital Academy.
Sustainable Management elements are
the
Academies, with focus for example on environmental efficiency
of the process, diversity, health and safety, sustainable
management of the supply chain, risk management and
diversity management. The new digitalisation processes are
also recurring and transversal to the Academy training model.
throughout
The teaching body of the Academy is mainly composed of
internal trainers, experts from the specific functions who,
based on the training needs and logistical needs, provide
training at central, regional and local level. The Academy
model involves a significant figure from the function guiding
each Academy, supported by one or more professionals from
the same function and from the Group Training function,
which ensures consistency in the methods of approach,
delivery and evaluation of learning in addition to ensuring
collaboration with the local training teams. Pirelli Professional
Academy trainers are also certified through a standard
process in all countries and are periodically updated on their
effectiveness in transmitting know-how and skills.
Each year the Professional Academies meet with both Top
Management and local training contacts, with the objectives
of strategic alignment, sharing of results achieved and
determining of training priorities to be focused on in the
following months.
During the 2021 the training digitalization process has
continued (already started the pre-Covid era), leading all the
Professional Academies to expand their training offerings,
supplementing the traditional training delivered with a
portfolio of online courses to be used in “asynchronous”
mode and at the times chosen by the end user.
The expansion of the digital training offering was possible
thanks to what had already been defined and launched in
2019, the year in which the central Learning team defined a
strategy for the gradual digitalisation of training by following
two main paths. The first involves the acquisition of already
available digital content, typically on cross-cutting and
generalist topics, from specialist providers; the second
consists of the in-house creation of e-learning courses on
highly specialised Pirelli content, which is often less well
covered at peripheral level. This two-pronged strategy has
made it possible to create a digital library in a short period
of time, the content of which can be accessed at any time
by all colleagues with access to the Learning Lab platform,
which has been redesigned and updated to accommodate
the new online content: “Customer Specific Requirements”,
“Procurement Process: Standards & Rules”, which add to the
list of online courses designed specifically for Pirelli content.
During 2021 the Professional Academies continued to
organise “live” courses in virtual mode, thus ensuring the
possibility of interacting with participants, guiding their
understanding and learning, and managing to reach a higher
number of colleagues globally more quickly. In this regard,
mention should be made of the significant effort made by
the Quality Academy, which, out of the approximately 70
training sessions organised, held more than half in English
for the benefit of all colleagues in the foreign offices; the
Digital Academy, which trained more than 440 colleagues
in sessions dedicated to exploring the new functions of the
Teams work and collaboration platform; and the HR Academy
which, in continuation of what was started the previous year,
trained more than 160 Internal Trainers on how to conduct
effective and engaging online training sessions.
Among the new training
in 2021
is the Ready to Develop training programme, designed
and implemented to support Research & Development
professionals in acquiring and/or reinforcing skills considered
initiatives conducted
162
Pirelli Annual Report 2021 strategic for the
innovation challenges facing Pirelli’s
researchers and developers. The programme is aimed both
at researchers who have been with the company for years
and at young engineers newly hired into the function. For the
latter, the Ready to Develop programme takes the form of a
specialised second-level master’s degree designed and co-
taught by Pirelli and the Politecnico di Milano. For colleagues
who have already been with the company for a few years, on
the other hand, there is a wealth of Upskilling training available
to reinforce the most critical and sought-after skills to meet
future research trends at Pirelli, such as Industrial Internet of
Things, Statistics, Data Analysis and Machine Learning.
Finally, special mention should be made of the major “reskilling”
project launched in 2021 at the Bollate plant in Italy, due to
the new destination of this production site for the production
of bicycle tyres. The entire population of the plant will be
involved in 2021 and 2022 in a massive training programme
on the new business, new products and processes and the
new work organisation that the new production envisages.
PIRELLI SCHOOL OF MANAGEMENT
The School of Management (SoM) is the training structure
dedicated to the development of the management culture
within Pirelli and its target audience covers the populations
of Executives, Talents, Middle Management/Senior
Professionals and Recent Graduates/Juniors.
The focus of management training is calibrated and outlined
every year based on the business challenges that the
Company is required to face. The training model provides
for a training offering consistent with the six Key Behaviours
identified in the global performance management system, to
which a paragraph is dedicated in this report.
In addition to the classroom training activities, the School
of Management also offers constantly updated online tools
through the section “Insights & Updates”, a collection of
articles and videos published in the bi-monthly newsletter of
the same name aimed at all managers on the LearningLab
international platform and the “Warming Up
learning
platform” dedicated to all recent graduates.
In 2021, Pirelli School of Management courses accounted for
7% of total staff training.
In 2021 the School of Management’s training offering was
further enhanced, offering carefully selected online digital
content for each of the six Key Behaviours, with the aim of
providing Pirelli colleagues with opportunities to increase
their awareness of how they can apply the key behaviours in
the work context. In parallel with the expanded online training
offer, as with the Professional Academies, we continued
to organise virtual classes on managerial and employee
management topics.
All School of Management courses are in English, with the
aim of involving more and more foreign colleagues in training
programmes dedicated to key behaviour and managerial
skills. In 2021 there were 90 course participants from the
12 countries in which Pirelli operates, so as to allow value to
be captured from the heterogeneity of managerial cultures
typical of the Company’s multinational context.
In 2021, the traditional annual “Developing Managerial
Excellence” course for all new Group executives was again
conducted in virtual mode.
As part of the School of Management’s offering, the traditional
‘Plunga’ onboarding programme was held in digital format for
all new recruits to the Pirelli Group, involving 284 colleagues
from 21 different countries.
In 2021 the WarmingUp@Pirelli course was also held in digital
form, dedicated to new graduates from across the Group and
lasting two years, involving 183 people from 11 countries.
GLOBAL ACTIVITIES
Global Activities includes all the training campaigns launched
globally and designed to promote awareness of corporate
guidelines while respecting local diversity. Topics such as
Privacy and Information Security are the primary focus of
these training activities.
In continuity with what was started in the last months of
2020, the international awareness campaign on Information
Security issues continued in 2021. The initiative covered over
1,000 hours of training for employees in Italy and abroad
through online mini-training pills. In continuity and in line with
the corporate strategy of offering more and more training
programmes in English delivered directly by HQ, an English
language skills training programme was launched for the first
time in 2021. The programme involved about 140 colleagues
from 19 Pirelli countries who, distributed in subgroups that
were heterogeneous in terms of starting language level,
country of origin and time zone, participated in language
training sessions, each sharing different points of view,
perspectives and local specificities.
LOCAL EDUCATION
The training provided at the local level responds to the specific
training needs of the Pirelli affiliates operating in the different
Countries and is addressed to the entire company population.
The seminars cover areas of expertise ranging from the
improvement of interpersonal skills to stress management,
from the development of IT, language and regulatory skills at
seminars on issues of welfare and diversity at the Company.
Local training is also an important tool for covering
content related to the implementation of new regulations
or agreements.
During 2021, following the continuation of the health
emergency, particular attention was paid to training on
Covid-19 prevention
issues, with specific courses for
headquarters and travelling personnel, periodically updated
in relation to the evolution of the pandemic and related
government regulations.
163
Report on Responsible Management FOCUS: TRAINING ON SUSTAINABILITY AND CORPORATE GOVERNANCE
Also in 2021, training continued on Pirelli Sustainable Management Model, with update on the state of the
Company’s Sustainability Plan. In addition, there is institutional training in the International programme
“Plunga”, which presents the Group’s Sustainable Management strategy (including in the new virtual version)
to all new employees, starting from the multi-stakeholder approach contextualized in the integrated economic,
environmental and social management. Training on the Pirelli Model also draws the attention of new recruits
to Group Sustainability Policies and related commitments, expressed through the “Code of Ethics”, the “Code
of Conduct”, the “Equal Opportunities Statement”, the “Social Responsibility Policy for Occupational Health,
Safety and Rights and Environment”, the “Health, Safety and Environment” Policy, “Global Human Rights” Policy,
in addition to the requirements of the SA8000® Standard, relating to human and labour rights both within the
company and in the supply chain. As part of the Plunga recruits’ course, a contribution on Compliance & Audit
topics was included in addition to the Sustainability course in 2021.
In addition, during 2021, to complement the previous training campaign with the online course Procurement
Anticorruption: Principles & Behaviours, all colleagues in the Procurement function were invited to attend the course
Procurement Process: Standards & Rules, of which sustainable supply chain management is an integral part.
PIRELLI TRAINING PERFORMANCE
Total training provided in 2021 was 6.9 average training days per capita. This figure reflects the centrality of
training in Pirelli’s culture, as well as its commitment to continuous investment even in emergency and difficult
situations. In fact, at the same time as the gradual resumption of all activities at full capacity, in 2021 the numbers
of training activities also returned to levels comparable with the year before the Covid emergency. Among the
countries with the highest training investment are Mexico, Russia and Romania, which are particularly driven by
production needs or the introduction of new resources.
9.80
8.40
8.00
8.13
7.48
6.90
5.09
2015
2016
2017
2018
2019
2020
2021
Following is the subdivision of average training days by gender and by professional category61:
GROUP
WOMEN
4.7
MEN
7.3
6.9
EXECUTIVES
CADRES & WHITE COLLARS
BLUE COLLARS
1.45
3.47
7.82
The high investment in training involved both men and women, with about 2.6 days more for men due to the clear
prevalence of the male gender in the workforce, which is subject to more technical training.
Moreover, 98% of employees (considering the average workforce for the year) participated in at least one training
activity in the year lasting more than one hour.
The investments made for the various categories of the company population (blue-collar workers, middle
management and white-collar workers, and executives) are in line with those of previous years and balanced
in proportion to the overall training strategies: the strong focus on manufacturing improvement processes
(Manufacturing and Quality) in addition to the usual attention to health and safety issues, which are also
particularly relevant in 2021, determine the largest investments on the blue-collar worker population.
61 Data at Group level and by category calculated with average headcount for 2020; data by gender calculated
with actual headcount as at 31/12/2021.
164
Pirelli Annual Report 2021 On a global level, net of the specific training needs of each
country, the Professional Academies cover the most significant
portion (48.8%) of the training activities on the total non-
worker population; this is because the Professional Academies
are aimed at training and the continuous updating of technical
skills linked to innovation processes, which are strategic for
the company. In particular, with regard to employee training,
again in 2021 reskilling campaigns in the areas of Quality,
Manufacturing and Sales were particularly important.
Health, Safety and Environment topics accounted for 14% of
the total training.
In line with the major digital transformation processes
underway in the company, training processes have also been
progressively involved in digitalising content relating to both
basic skills and innovation, so as to allow it to be used more
widely, quickly and in a more engaging way. In 2021, 62%
(49% in 2020) of staff training hours were carried out in virtual
mode, both synchronously and asynchronously, confirming
the progressive importance assumed by the digital format in
training activities.
LISTENING: GROUP OPINION SURVEY
Pirelli has used the climate survey tool (internally called
“My Voice”) for years as a tool for actively listening to its
employees around the world, on the basis of which to set up
group and local improvement plans.
During the years 2020 and 2021, characterized by the
Covid-19 health emergency at a global level, the main effort of
the company was to keep its employees engaged through the
direct and more massive use of corporate welfare proposals
both of collective type and with new services to support the
person, to respond to the specific needs that emerged in
this difficult period. In fact, new welfare services have been
introduced, also offered in virtual mode, such as online
edutainment programs for employees’ children, counseling
“counters” to support care givers, training sessions, virtual
and face-to-face, both on themes of mental and physical
wellbeing and digital wellbeing, midfulness and physical
activity courses for wellbeing (yoga, stretching, ...).
In some countries, such as Brazil in the latter months of 2020,
specific listening programs were also activated to collect
perceptions of how people were experiencing the particular
moment of the pandemic and what support actions could be
implemented. A new survey was made after a few months,
reporting important improvements on various satisfaction
indicators the factors increased of a value included in
between 4% and 15%).
The trend already started in recent years of offering a broad
and customisable corporate welfare, suitable for finding the
best solutions to cover all people’s new needs, has therefore
been further consolidated in 2021, characterising this area
as a predominant lever of engagement with workers and a
tool to help them adapt constructively and effectively to a
constantly changing scenario.
The engagement activities for 2022 will still be focused
on the wellbeing of people, also through targeted listening
initiatives, on the basis of which specific actions will then
be implemented. Other engagement programs, aimed at
supporting motivation, passion and energy in people, may
be gradually activated in relation to the challenges that the
company will face.
WELFARE AND INITIATIVES FOR THE INTERNAL COMMUNITY
For years, Pirelli has had the organisational figure of the
is entrusted with the
“Group Welfare Manager”, who
supervision of welfare activities, jointly with the many central
and local functions concerned, including Health and Safety at
Work, Industrial Relations, Sustainability, Human Resources
and Organisation.
The welfare initiatives that Pirelli offers to its employees vary
from country to country, in accordance with the specific
regulatory, social and cultural environments in which the
affiliates operate. In any case, they implement the shared
guidelines at Group level since 2016, so that all the offices
of the world are progressively committed to locally adopting
activities, tools and welfare processes aimed at creating
collaborative environments and ensuring adequate support
for the needs of a personal life.
Welfare activities activated at Pirelli affiliates around the
world are attributable to four macro areas of action:
→ health and wellbeing (e.g. health care, information and
initiatives to
awareness-raising campaigns, specific
improve the wellbeing of employees);
→ family support (e.g. scholarships, summer camps for
employees’ children, inter-company crèche and specific
activities to support parenting);
→ free time (e.g. open days, sporting and cultural activities,
online portals of products and services with significant
employee deals and discounts);
→ working life and working environments (e.g. flexible working
hours, individual development training, cultural growth and
group celebrations).
All Group affiliates have the opportunity to share local best
practices through a special section dedicated to welfare on
the corporate Intranet.
Periodic surveys verify employee satisfaction with the
services offered, and particular appreciation is expressed
for health care. Pirelli has always provided infirmaries at all
production units, where health workers and specialist doctors
are available to all employees for visits and examinations
during working hours. In addition to first aid and periodic
health surveillance, these facilities also provide advice on
non-work-related health problems.
A great deal of attention has been paid to preventive measures
against Covid-19 at work sites worldwide. At production sites,
where permitted by law, testing and/or vaccinations against
COVID-19 were carried out at in-house medical facilities.
165
Report on Responsible Management In addition, the pandemic period further confirmed the
centrality of people’s wellbeing, which
is a qualifying
constituent element of the relationship between people and
the company, as well as a generator, like other factors, of
motivation and engagement, in addition to being a strategic
lever for attracting and retaining people. In this regard,
in 2021 the company will once again implement specific
strategies to provide psycho-physical support to people.
These include online yoga, pilates and stretching courses,
periodic conferences to raise awareness of health, wellbeing
and prevention issues, and projects dedicated to parents,
who are under particular pressure during periods of remote
working and distance learning. New projects launched in
2021 in Italy and being proposed to the other countries in the
Group include:
→ “Parents in Action”: a parenting support course dedicated to
parents/workers interested in enhancing, in the professional
and personal spheres, the skills acquired through their
experience and to all those interested in highlighting the
key skills of the parent and how to make the most of them
in their daily work;
→ “Smart Living”: a course available to all employees based
on Positive Psychology to regain confidence, personal
and social energy and train to deal with changes and
uncertainties with a mind-set capable of transforming
critical situations into opportunities for growth.
INDUSTRIAL RELATIONS
The Industrial Relations policy adopted by the Group is
based on respect for constructive dialogue, fairness and
roles. Relations and negotiations with trade unions are
managed locally by each affiliate in accordance with the
laws, national and/or company-level collective bargaining
agreements, and the prevailing customs and practices in
each country.
At this local level, these activities are supported by the central
departments, which coordinate the activities and ensure that
the aforementioned principles are observed throughout the
Group.
Industrial Relations also have an active role in the Group’s
commitment in terms of health and safety, with an equally
active participation on the part of the unions and workers.
In fact, 79% of the Group’s employees are covered by
representative bodies that periodically, with the Company,
monitor and address current topics as well as and awareness
and intervention plans/programmes aimed the improvement
of the activities carried out to safeguard the health and safety
of employees.
In compliance with the principle of constructive and timely
dialogue with employees, with the aim of a reduction of
social impacts, in all cases of corporate reorganisation and
restructuring, workers and their representatives are informed
in advance, with deadlines that vary from Country to Country
in full compliance with local legislation, current collective
agreements and trade union agreements.
During the year, the Company worked at an international level
to rebalance the level of employment, aligning it to the volume
requirements resulting from the drop in the market relating
to the Covid-19 pandemic. This organisational rationalisation
action was managed in agreement with the trade unions,
using natural turnover and the use of tools to minimise social
impact, in full compliance with local legislation, collective
contracts in force and trade union agreements.
During 2021, the Company proceeded to renew the collective
agreements expiring in Romania, Argentina and Mexico,
without any conflict.
EUROPEAN WORKS COUNCIL (EWC)
Pirelli European Works Council (EWC), formed in 1998, holds
its ordinary meeting once a year after presentation of the
Group Annual Financial Report, where it is informed about
the operating performance, operating and financial forecasts,
investments made and planned, research progress and other
matters concerning the Group.
The agreement establishing the EWC provides for the possibility
of holding other extraordinary meetings to fulfil the information
requirements of delegates, in light of transnational events
concerning significant changes to the corporate structure:
opening, restructuring or closing of premises, important and
widespread changes in work organisation. EWC delegates are
provided with the IT tools they need to perform their duties and
a connection to the corporate Intranet system, for the real-time
communication of official Company press releases.
COMPLIANCE WITH STATUTORY AND CONTRACTUAL
OBLIGATIONS GOVERNING OVERTIME, LEAVE, ASSOCIATION
AND NEGOTIATION, EQUAL OPPORTUNITIES AND NON-
DISCRIMINATION, BANS ON CHILD AND FORCED LABOUR
Governance to protect Human Rights and Labour is the
subject of Pirelli’s Code of Ethics and specific Policies adopted
by the Company, in particular the “Social Responsibility
Policy for Health, Safety and Rights at Work, Environment”,
the “Global Human Rights” Policy, the “Equal Opportunities
Statement” and the “Health, Safety and Environment”
Policy. All the aforementioned Policies are public and have
been communicated in the local language to employees.
Moreover, from 2004 Pirelli has adopted the requirements of
Standard SA8000® as a reference tool for managing Social
Responsibility at its Affiliates and along the supply chain.
The Management of Diversity and Equal Opportunities, and
responsible management of the supply chain in the field
of human rights and labour are addressed in the sections
“Diversity, Equity and Inclusion” and “Our Suppliers” in this
Report, to which reference should be made for further details.
Pirelli approach has always promoted compliance with all
legal and/or contractual requirements concerning working
hours, the use of overtime and the right to regular days of
rest. These requirements are often the subject of agreements
with trade unions, in line with the regulatory situation in each
country. The use of all holiday days, as a right of every worker,
does not have any restrictions and the period is generally
agreed between employee and company.
166
Pirelli Annual Report 2021 In addition to the trade union dialogue and coordination between the Headquarters and local functions, Pirelli
verifies the application of the provisions on the respect of human and labour rights to its affiliates through
periodic audits performed by the Internal Audit Department, in compliance with a three-year auditing plan to
cover all the Company’s sites. Normally every audit is carried out by two auditors and takes around three weeks
on-site. The Internal Audit Team received training on the environmental, social, labour and business ethics
elements of an audit from central function directors to enable them to carry out an effective, clear and structured
audit, granting Pirelli effective control over all aspects of sustainability. Based on the results of these audits, an
action plan is agreed between the local managers and central management, with precise implementation dates
and responsibilities and follow-up verification. The auditors carry out verifications on the basis of a checklist of
sustainability parameters deriving from the SA8000® Standard and the Pirelli Policies mentioned above. All
managers from the affiliates involved in the audits are adequately trained and informed on the audit purpose and
procedures by the applicable central functions, in particular Sustainability; Purchasing; Health, Safety and
Environment; Industrial Relations, and Compliance.
FOCUS: INTERNAL AUDIT
Year
2014
2015
2016
2017
2018
2019
2020
2021
Countries
Italy, United Kingdom and China
Mexico, Russia (Voronezh plant) and United Kingdom
Germany, Russia (Kirov plant) and United Kingdom (follow-up)
Argentina, Brazil (Campinas and Feira de Santana plants), Mexico, Romania and USA
France, China (Yanzhou plant)
China (Jiaozuo plant), Russia (Voronezh plant) and Singapore
Remote monitoring of action plans agreed in the preceding audits
Germany and Russia (Voronezh plant)
Non-conformities identified as a result of audits carried out during 2021 are the subject of action plans agreed
between local managers and central management and are followed up by the Internal Audit Function. It should be
noted that in 2021 - as in the audits carried out in previous years - no violations of the ILO Core Labour Standards
were found, with specific reference to forced labour, child labour, freedom of association and bargaining, and
non-discrimination. Consequently, no remedial plan and related corrective actions were required.
LABOUR AND SOCIAL SECURITY LAWSUITS
In 2021, as in previous years, the level of work and social security litigation at Group level remained low. The
level of litigation remains high in Brazil, as in previous years, to the point of representing more than 80% of all
the labour lawsuits currently pending against the entire Group. Labour lawsuits are extremely common in this
country and depend on the peculiarities of the local culture. As such, they affect not only Pirelli but also other
multinational companies operating there. Labour lawsuits are generally initiated when an employment contract
is terminated, and they usually involve the interpretation of regulatory and contractual issues that have long been
controversial. The Company has made a major commitment to prevent and resolve these conflicts – to the extent
possible – including through settlement procedures.
UNIONISATION LEVELS AND INDUSTRIAL ACTION
It is impossible to measure the precise percentage of union membership at Group companies, since this
information is not legitimately available in all countries where Pirelli has a presence.
However, it is estimated that more than 50% of Pirelli employees are members of a trade union. As to the
percentage of workers covered by collective agreement, in 2021, as in 2020 it stood at 79% (vs. 78% in 2019).
This figure is associated with the historical, regulatory and cultural differences between each country. Collective
agreements to be renewed in 2021 were renewed without any conflict and strikes.
167
Report on Responsible Management SUPPLEMENTARY PENSION PLANS, SUPPLEMENTARY
HEALTH PLANS AND OTHER SOCIAL BENEFITS
The Group has defined contribution and defined benefit
funds, with a substantial prevalence of the former kind over
the latter. To date, the only defined benefit plans are:
→ in the United Kingdom, where the fund relating to the tyre
business has been closed to new employees since 2001
for the introduction of a defined contribution scheme (and
closed to future accumulations for all active employees
as at 1 April 2010), while the funds related to the cable
business sold in 2005 were closed to future accumulations
in the same year;
→ in the United States, where the fund was closed in 2001
(since 2003, it has not been tied to salary increases) for
the introduction of a contribution scheme (and only applies
to retired employees);
→ in Germany, where the fund was closed to new hires from
1982.
Other defined benefit plans exist in Holland and Sweden, but
they represent a relatively insignificant liability for the Group.
its affiliates according to
The Group also maintains various supplemental Company
local
medical benefit plans at
requirements. These healthcare schemes vary from country to
country in terms of allocation levels and the types of coverage
provided. The plans are managed by insurance companies or
funds created ad hoc, in which the Company participates by
paying a fixed amount as is done in Italy, or an insurance premium
as is done in Brazil and the United States. For the economic-
equity measurement of the above benefits, reference is made to
the Consolidated Financial Statements, notes “Employee funds”
and “Personnel Costs” within this Annual Report.
life
insurance,
The social benefits recognised by Pirelli in favour of employees
(including
insurance
and additional parental leave) are generally granted to all
employees, regardless of the type of permanent, fixed-time
or part-time contract, in compliance with company policies
and local union agreements.
invalidity/disability
OCCUPATIONAL HEALTH, SAFETY AND HYGIENE
MANAGEMENT MODEL AND SYSTEM
Pirelli’s approach to responsible management of occupational
health, safety and hygiene is based on the principles and
commitments expressed in “The Values and Ethical Code” of
the Group, in the “Health, Safety and Environment Policy” in
the “Global Human Rights Policy” and in the “Quality Policy”,
in accordance with the Sustainability Model envisaged by the
Global Compact of the United Nations, with the “Declaration of
the International Labour Organization on fundamental Principles
and rights at Work” and with the “Universal Declaration of
Human Rights” of the United Nations. The reference tool since
2004 is also the SA8000 ® standard. In particular, the “Health,
Safety and Environment Policy” makes Pirelli’s commitment to:
→ manage its activities regarding health and safety protection
at work in compliance with the laws and all the commitments
168
entered into, as well as according to the most qualified
management international standards;
→ pursue objectives of “no harm to people”, by implementing
actions for early identification, assessment and prevention
of risks for health and safety at work aimed at a continuous
reduction in the number and severity of injuries and
occupational illnesses, activating health surveillance plans
in order to protect workers from specific risks associated
with their business duties;
→ develop and
implement emergency management
programmes to prevent and avoid harm to persons;
→ define, monitor and communicate to its Stakeholders
specific objectives of continuous improvement of health
and safety at work;
→ empower, train and motivate its employees to work safely
involving all levels of the organisation in an ongoing
programme of training and information, aimed at promoting
a culture of safety at work;
→ promote information and awareness-raising on health and
safety issues;
→ provide its employees with ongoing and concrete support
aimed at facilitating the work-life balance;
→ manage its supply chain responsibly by including issues of
health and safety at work in the supplier selection criteria,
the contractual clauses and the audit criteria, also requiring
suppliers to implement a similar management model in their
supply chain (for an outline on responsible management of
the supply chain, reference is made to the paragraph “Our
Suppliers”);
→ make available to all its Stakeholders a channel (the
“Whistleblowing Policy” published on Pirelli’s website)
dedicated to reporting, even anonymously, of any situations
that constitute or may constitute a risk for the protection
of the health, safety and well-being of people (reference
is made to the Paragraph “Focus: Reporting Procedure
- Whistleblowing Policy” of this Report for an outline of
reports received in the last three years, none of which
regarding health and safety).
All the Documents mentioned above are communicated to
Group employees in their local languages and are published
in the Sustainability section of Pirelli website, which should be
consulted for full display of the content.
At all of its production sites, Pirelli voluntarily adopts an
occupational health and safety management system structured
and certified according to Standard ISO 45001:2018. All
certificates are issued with ANAB international accreditation
(ANSI-ASQ National Accreditation Board - US accrediting
body). The occupational safety management system, applied
without exclusion to all processes and activities at each
production site, was developed in compliance with procedures
and guidelines elaborated centrally in order to consolidate
a “common language” that guarantees sharing, alignment
and effective management in the Group. The development
and continuous improvement of the management system is
carried out both centrally and locally by the internal Health &
Safety functions with the involvement of all relevant functions.
Improvement is based on the continuous application of cycles
of action planning, programme implementation, verification of
results and, based on these, implementation of improvement.
Pirelli Annual Report 2021 In 2021, the migration of health and safety management systems from the OHSAS 18001:2007 standard to ISO
45001:2018 was completed, meaning that all production sites are now certified according to ISO 45001:2018.
In 2021, the coverage of the safety management system (certified according to ISO 45001:2018) and subject to
internal and third-party audits is as follows:
COVERAGE OF THE MANAGEMENT SYSTEM
Employees
Agency workers
Contractors
Number of workers covered by the management system
Percentage of workers covered by the management
system our of total number of workers
24,995
82%
200
97%
n.d.62
100%63
SAFETY CULTURE AND GOVERNANCE
The “Zero Accidents Objective” represents a precise and firm corporate position. From an industrial point of
view, this objective is pursued through investments aimed at technical improvement of work conditions, while
constantly insisting on the cultural and behavioural aspect of all Company players. This approach, together with
the involvement and continuous internal dialogue between management and workers, has led over time to a
sharp decline in injury rates.
In pursuit of this goal of zero accidents, through a process of continuous improvement and constant prevention,
all leaders are involved and given responsibility, and are given a trend to improve the accident frequency index to
pursue through action plans within their sites.
Business review meetings are held fortnightly at local, regional and global level, where health and safety issues,
performance trends and improvement programmes are discussed - at the top of the agenda - to ensure
continuous comparison and monitoring. These meetings allow information to be shared across the board and
involve Human Resources, Health and Safety and Top Management at several levels (local, regional and global),
including members of the Executive Board.
At local level, in each individual production unit, with a view to involvement and participation, periodic meetings
are held with workers’ representatives (Health & Safety Committee), with the aim of illustrating, on the basis of
the Health & Safety Management System, the activities carried out and those planned and to provide the results
of risk assessments in the workplace.
To support this model, in 2013 the Company signed an agreement with DuPont Sustainable Solutions for the
global implementation of the “Excellence in Safety” Programme. The Programme began in 2014 and has
gradually been extended to all the Group’s production sites.
The most important areas of intervention of the “Excellence in Safety” Programme, relate to the improvement of
the governance of safety, the clarity of the tasks and roles, empowering of all workers, improving communication
within the organisation, the sharing of objectives, motivation with respect to a common strategy: all substantial
issues for a work environment that is appropriate and stimulating, in which workers feel involved and valued
in safety management. Thanks to information, communication and training actions, everyone is encouraged to
report any anomaly and/or unsafe condition in order to promote participation in continuous improvement and
the removal of any potential cause of an accident. All reports, as well as real or potential accidents, are managed
according to specific procedures aimed at analysing the causes and defining corrective and risk mitigation
actions, involving all functions.
Each site sets up a Central Safety Committee made up of the heads of functions including Human Resources
and Organisation, Health, Safety and Environment, and of which the Plant Manager is the coordinator. This
Committee, which meets at least quarterly, analyses health and safety issues, directs the actions of the local
Excellence in Safety programme and governs its progress. In a co-ordinated manner, various thematic sub-
committees are also set up, which carry out continuous work in relation to the characteristic themes of the site.
62 Figure not available.
63 This value is possible because the hours worked by employees of contractors at Pirelli sites refer exclusively
to sites with a certified safety management system. Contractors working in offices are excluded from the
calculation because their number is negligible compared to contractors working at production sites.
169
Report on Responsible Management The dissemination and sharing of the Safety Culture is also
supported by the regular newsletters like the Safety Bulletin,
and the sharing of significant events through the traditional
channels of internal communication.
due to Covid-19, providing medical support and assistance
(also outside the workplace) in health cases that occurred
and with particular attention to employees with particular
physical frailties.
integrating compliance with
RISK PREVENTION, PROTECTION AND MANAGEMENT
Specific procedures for managing all risk
issues are
developed in accordance with international standards and
reference norms that are applied and translated at each
site,
local regulations. The
procedures, also developed with the collaboration of the
relevant functions, systematically define the requirements
for risk analysis, risk management methods and design
requirements to ensure that hazards are reduced at source.
The risk analysis activity leads to the definition of risk
reduction programmes and actions pursued at each site and
kept under control by specific site committees. In addition,
processes of preventive analysis and release on new projects
are applied in order to ensure risk management in all phases
of development and implementation of new machines and
plants. These approaches make it possible to implement risk
elimination and reduction logics in priority to the mitigation
and containment strategies implemented. The procedures
are reviewed and updated in the event of regulatory changes,
technological or process changes and following the analysis
of incidents.
Risk management related to commercial supplies of raw
materials, services and equipment is governed by safety and
acceptability requirements included in the general conditions
of supply. All chemical substances and products used are
subject to prior HSE assessment (see section “ESG elements
in the purchasing process” of this Report) and all equipment
is subject to conformity analysis and risk assessment before
being put into production. Safety management in supplier
activities on sites is regulated by procedures specifying
coordination requirements, prior risk analysis and work
authorisation.
The year 2021, like 2020, was characterised by the Covid-19
pandemic, which saw a particular focus of Health & Safety
activities on managing prevention measures, protecting the
health of personnel and ensuring safety conditions at all
Pirelli sites. To manage the risk of Covid-19 infection, risk
analysis procedures and action plans were developed and
applied to ensure the health of workers and safe and secure
work environments.
All Pirelli production sites are served by occupational
medicine facilities that employees can access freely
and which are managed by specialised medical and/or
paramedical personnel with
independent management
(guaranteeing privacy) of the doctor-patient relationship.
These services operate in coordination with the safety
management functions and with company management to
provide the necessary support for general risk prevention
actions and guarantee the necessary health surveillance
to protect workers. These services do not only focus on
occupational medicine but also offer health care to all staff in
compliance with local regulations. As for 2021, they focused
on supporting employees in the particular pandemic context
SAFETY TRAINING
Around 14% of the total training provided by Pirelli in 2021
concerned occupational health and safety issues. Each site
designs, plans and delivers safety training on the specific
risks present, the particular need to update and comply
with regulatory obligations, trends in accident indicators
and the evolution of site activities and processes. The
characteristic themes of this training concern general
safety concepts including obligations, responsibilities and
protection concepts, the treatment of all work-related risks
present at the site, safety operating procedures, golden rules,
emergency procedures, the Excellence in Safety programme
mentioned above and the application of its operating tools,
accident notification and management procedures, and
safety procedures and standards for managing emergencies
from Covid-19.
In addition to safety training offered locally at every Pirelli
location (illustrated previously in the paragraph dedicated
to Training), there are Group activities and projects, which
simultaneously target several countries and which allow an
alignment of culture and vision, fully benefiting pursuit of the
Company’s own improvement targets. The Manufacturing
Academy merits a special mention. This is Pirelli Professional
Academy dedicated to the sphere of factories, where health,
safety and environment issues are discussed in detail.
MONITORING OF HEALTH AND SAFETY
PERFORMANCE AND MAIN INDICATORS
Alongside establishing specific guidelines and procedures
for implementing management systems, Pirelli uses the web-
based Health, Safety and Environment Data Management
(HSE-DM) system, prepared and managed centrally by the
Health, Safety and Environment Department. This system
makes it possible to monitor HSE performance and prepare
numerous types of reports as necessary for management or
operating purposes.
The HSE-DM system collects all information on accidents
and special situations that occurred in factories, fitting units,
sales centres, and warehouses managed directly by Pirelli,
including the various categories of workers (agency workers
and contractors operating at Pirelli sites). All sites have
access to information on the most significant accidents or
near misses through the receipt of Safety Alerts by the HSE-
DM system, so that an internal analysis can be conducted to
verify whether similar conditions exist and, if necessary, to
implement appropriate corrective action.
The performances reported below are for the three-year
period 2019-2021 and cover the same scope of the Group’s
consolidation.
In March 2021 Pirelli presented its 2021-2022 Industrial Plan
with Vision 2025 indicating, for 2022, an accident frequency
index IF ≤ 0.15 for 100,000 worked hours (or IF ≤ 1.50 for
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Pirelli Annual Report 2021 1,000,000 worked hours64) and for 2025 an accident frequency index ≤ 0.10 for 100,000 hours worked (or IF ≤
1.00 for 1,000,000 worked hours).
The frequency index is calculated as “Lost Time Index Frequency Rate - LTIFR” or considering the sum of injuries
with at least one day of work lost65.
In 2021, Pirelli registered an LFITR of 0.21, when referring to 100,000 worked hours, or 2.07 if referred to
1,000,000 worked hours, with a decrease of 4.5% compared to 2020. The most representative accidents are
those involving contusions, cuts, fractures and sprains.
The accident frequency index for accidents involving an absence from work of more than 6 months in 2021 is
0.28 for Pirelli employees (based on 1,000,000 worked hours) and zero for temporary workers.
In the mapping of all hazards and on the basis of the accident trend, the main hazard identified as potentially at
risk of accidents with serious consequences relates to the mechanical risk, which was the main contributor to
the accidents that occurred in 2021. Actions are constantly underway to reduce the mechanical risk at source,
through investment in machinery safety, and to manage residual risks by defining safety operating procedures
and continuous staff training.
For 2021, in line with the previous financial years, the LTIFR index for women was decidedly lower than the value
relating to men, also in relation to the fact that the female population is generally engaged in activities with a lower
risk than those of the male population. The graph below shows the trend of LTIFR values by gender over the last
three years:
LTIFR
2.84
2.55
0.92
2019
3.00
2.50
2.00
1.50
1.00
0.50
0.00
2.59
2.24
0.26
2020
2.38
2.07
0.24
2021
Frequency Index (LTFR)
LTFR Men
LTFR Women
LTIFR = number of injuries with at least one person/
number of hours effectively worked x 1,000,000
The following table summarises the distribution of the Frequency Index by geographical area:
LTIFR INDEX
Europe
North America
South America
Russia, Nordics & MEAI
Asia Pacific
2019
2020
2021
3.34
3.18
2.27
1.65
2.04
2.63
3.46
2.69
2.84
1.47
1.31
1.58
0.22
0.11
0.11
LFITR = number of injuries with at least one person /number of hours effectively worked x 1,000,000
64 In accordance with the GRI reporting standards, the frequency index and the resulting target value is
reported with reference to 1,000,000 hours worked.
65 Accidents without lost days are not considered in the calculation of the LTIFR.
171
Report on Responsible Management The injury Severity Index, or The Lost Time Severity Rate (LTSR) is calculated as the number of days of absence,
starting from the first day after the accident / number of hours actually worked x 1,000.
The LTSR in the Group in 2021 was 0.14, decreasing of 6.7% from the previous year.
LTSR
0.14
0.12
0.03
2019
0.16
0.14
0.12
0.1
0.08
0.06
0.04
0.02
0
0.16
0.15
0.04
2020
0.16
0.14
0.01
2021
Severity Index (LTSR)
LTSR Men
LTSR Women
LTSR = number of days of absence, starting from the first day after
the accident/number of hours effectively worked x 1,000
The following table summarises the distribution of the LTSR Severity Index by geographical area:
LTSR INDEX
Europe
North America
South America
Russia, Nordics & MEAI
Asia Pacific
2019
2020
2021
0.13
0.20
0.11
0.07
0.11
0.14
0.19
0.20
0.28
0.11
0.09
0.11
0.01
0.00
0.001
LTSR = number of days of absence, starting from the first day after the accident/number of hours effectively worked x 1,000
With reference to commuting accidents (not included in the calculation of the LTIFR and LTSR indices mentioned
above), the following tables show the total number registered by the Group in the last three years and the
distribution by geographical area of the cases.
COMMUTING ACCIDENTS
2019
2020
2021
117
52
59
COMMUTING ACCIDENTS
Europe
North America
South America
Russia, Nordics & MEAI
Asia Pacific
2019
2020
2021
35
15
21
43
3
28
39
34
10
0
0
0
0
0
0
There are no activities with a high incidence of occupational diseases. The hazards identified as a potential source
of occupational disease determined on the basis of risk assessments conducted concern the manual handling
of loads, exposure to noise and the handling of chemicals. The main types of occupational diseases recorded in
Pirelli employees relate to musculoskeletal disorders and hearing loss. There are no known cases of death due
to occupational diseases in the last three years, nor are there any cases of occupational diseases recorded in
contractors.
172
Pirelli Annual Report 2021 With regard to the Occupational Diseases Frequency Index, it is calculated as the number of occupational
diseases / number of hours actually worked x 1,000,000.
The Frequency Index for occupational diseases in 2021 stands at 0.52.
OCCUPATIONAL DISEASE FREQUENCY INDEX
1
0.8
0.6
0.4
0.2
0
0.56
0.48
0.00
2019
0.81
0.69
0.00
2020
0.61
0.52
0.00
2021
Occupational Disease
Frequency Index
Occupational Disesae
Frequency Index (Men)
Occupational Disesae
Frequency Index (Women)
Occupational Disease Frequency Index = number of occupational
illnesses/number of hours effectively worked x 100,000,000
The following table summarises the distribution by geographical area of the Frequency Index for occupational
diseases:
OCCUPATIONAL
DISEASES FI
2019
2020
2021
Europe
North America
South America
Russia, Nordics & MEAI
Asia Pacific
0.22
0.26
0.04
0
0
0
1.45
2.23
1.85
0
0
0.20
0
0.11
0
Occupational disease frequency index = number of occupational diseases / number of hours actually worked x 1,000,000
Continuous improvement programmes are aimed, with reference to the sources of occupational disease, at
increasing the ability to identify ergonomic risk and consequent technological improvement, favouring where
possible automation and design integrated with the ergonomic requirements of machines. These actions aimed at
reducing the risk at source are in any case complemented by training and organisational measures to encourage
safety and prevention behaviour.
173
Report on Responsible Management With regard to accidents involving agency workers, the Frequency Index (FI) is calculated as the “Lost Time Index
Frequency Rate - LTIFR”, i.e. considering the sum of accidents with at least one lost working day. The tables below
show the number of accidents66 recorded in the last three years and the distribution of the index by gender and
then by geographical area.
ACCIDENTS OF AGENCY WORKERS
2019
2020
2021
Number
LTIFR agency workers - Men
LTIFR agency workers - Women
5
5.46
4.38
3
2.96
0.00
LTIFR = number of accidents with at least one person/number of hours effectively worked x 100,000,000
ACCIDENTS OF AGENCY
Europe
North America
South America
Russia, Nordics & MEAI
Asia Pacific
WORKERS
2019
2020
2021
LTIFR agency workers 2019
LTIFR agency workers 2020
LTIFR agency workers 2021
3
0
0
59.98
0.00
0
0.00
2
2
0
48.00
46.70
0
0.00
0
1
5
0.00
1.11
13.50
13.50
0
0
0
0.00
0.00
0.00
0.00
LTIFR = number of accidents with at least one person/number of hours effectively worked x 100,000,000
5
7.75
0.00
0
0
0
0.00
0.00
0.00
0.00
The LTIFR index of injuries relating to employees of suppliers operating at the Group’s production sites stood at
0.97 in 2021. The data for the last three years and the distribution of cases by geographical area are shown below.
LTIFR CONTRACTORS
2019
2020
2021
1.28
1.30
0.97
LTIFR = number of accidents with at least one person/number of hours effectively worked x 100,000,000
LTIFR CONTRACTORS
Europe
North America
South America
Russia, Nordics & MEAI
Asia Pacific
2019
2020
2021
1.95
1.77
1.40
0.93
1.58
1.03
0.82
1.67
0.33
1.04
0.00
1.11
0.00
0.00
0.00
LTIFR = number of accidents with at least one person/number of hours effectively worked x 100,000,000
66 Calculated on 1,000,000 hours worked; The frequency index “Lost Time Index Frequency Rate - LTIFR” is
calculated using the sum of accidents with at least one day of work lost.
174
Pirelli Annual Report 2021 Below are the figures relating to fatal accidents recorded in the last three years with reference to Pirelli employees,
agency workers and employees of suppliers operating at Group production sites.
FATAL ACCIDENTS (AND FATALITY RATE67)
2019
2020
2021
Pirelli employees
Agency workers
Contractors
1 (0.017)
0 (0)
0 (0)
0 (0)
0 (0)
0 (0)
0 (0.017)
0 (1.420)
0 (0.088)
The whole organisation is committed to ensuring that fatal accidents do not occur and reaction and improvement
plans are constantly implemented and pursued.
FOCUS: TOWARDS THE “ZERO ACCIDENT OBJECTIVE”
Nineteen Pirelli manufacturing plants were named “sites of excellence” in 2021, since no employees were injured there during the year:
Unit
Plants
Fitting unit
Logistics - TLM
Other
Industrial sites
Jiaozuo, Bollate, Bicocca Next Mirs, CMP
Camacari, Sorocaba, Hurligham, Goiana, Ibirite, Sao Jose dos Pinhais
TLM Barueri, TLM Santo Andre, TLM Cabreuva, TLM Feira de Santana, TLM Gravatai, TLM Campinas
St. Andrè HQ, Elias Fausto HQ, AGOM
HEALTH AND SAFETY INVESTMENTS
In the three-year period 2019-2021, investments in health and safety by the Group exceeded €35 million, of
which over €15 million was invested in 2021.
The investments made targeted improvements on machines and plants and, more in general, the workplace
environment as a whole (including improvement of microclimate and lighting conditions, changes in layout for
ergonomic improvement of activities, measures to protect the healthiness of the infrastructure).
67 Fatality rate = number of deaths / total hours worked * 1,000,000.
175
Report on Responsible Management EXTERNAL COMMUNITY
INSTITUTIONAL RELATIONS OF THE PIRELLI GROUP
Pirelli’s institutional relations are underpinned by criteria of
maximum transparency,
legitimisation and responsibility,
both with regard to information disseminated in public
offices, and to relationships managed with
institutional
interlocutors in line with the Code of Ethics, the Institutional
Relations - Corporate Lobbying Policy and the Group Anti-
Corruption Compliance Programme (documents published
on Pirelli website) as well as in line with the principles of the
International Corporate Governance Network (ICGN) and
in compliance with the laws and regulations in force in the
countries where Pirelli operates.
The goal of the Institutional Affairs Department is to create
corporate value through the management of structured
relations with reference stakeholders in all countries where
Pirelli operates.
In the area of institutional relations, Pirelli acts above all via
active monitoring and in-depth analysis of the institutional
and legislative context, as well as identifying the applicable
Stakeholders. The activity of Institutional Affairs also includes
an in-depth analysis of the global political and economic
dynamics, linked to the development of the main topics of
corporate interest, and benefits from collaborations with
selected think tanks of international prestige. Among these
are the collaborations with the Institute for International
Policy Studies, the Institute for International Affairs, the
Trilateral Commission and the Aspen Institute.
At an international level, Pirelli interacts with the main
interlocutors present in the countries in which it operates
with its own production sites. When necessary, the Group
promotes initiatives directed towards mutual understanding
and with the purpose of promoting representation of its own
values and interests through a strategy based on a clear
perception of the industrial targets and the development of
the business. Among the various instruments of “economic
diplomacy”, in addition to the promotion of bilateral initiatives,
Pirelli is active in certain Business Forums, including the
Italo-Russian Business Committee (CIIR), of which it has
held the Co-Chairmanship since 2020, the China Business
Forum (BFIC), the Council for Relations between Italy and the
United States, the Italy Mexico Business Forum and the Italy
Thailand Business Forum.
the Group’s continued commitment
to
As proof of
strengthening relations with the countries in which it operates,
Pirelli took part in official visits in 2021 with institutional
representatives in Italy and abroad. In a context marked by
the Covid-19 health emergency, a series of bilateral meetings
were held, both virtual and in-person where possible, aimed at
deepening the Group’s industrial and commercial issues with
significant institutional impacts. These included meetings
with several representatives of the EU, USMCA, APAC and
CSI blocs.
In China, the Group is committed to enhancing relations with
local institutional interlocutors, particularly in areas where it is
present with industrial sites, such as the Shandong Province
and the Henan Province. During 2021 Pirelli maintained a
dialogue with the main local institutions on multiple areas of
interest, especially with a view to improving the quality and
efficiency of the tyre industry in Shandong, with particular
regard to safety and environmental dynamics. In the wake of
the Covid-19 health emergency, the Group committed itself
immediately and in liaison with local institutions, with the
primary objective of protecting the health of its employees
and the community in which it operates. During 2021, Pirelli
also strengthened its dialogue with key local institutions
on multiple areas of interest and participated in the China
International Import Expo (CIIE) in Shanghai.
In the United States, Pirelli is present with industrial and
commercial activities, and carries out institutional relations
by monitoring legislative and regulatory developments with
impacts on the production, import and distribution of tyres
in the territory. Pirelli is a member of the following trade
associations: United States Tire Manufacturers Association
(USTMA), Original Equipment Suppliers Association
(OESA), American Sustainable Business Network (ASBN),
Public Affairs Council, and Automotive Industry Action
Group (AIAG). Within these associations Pirelli is active in
promoting strategies consistent with Group sustainability
policies, particularly commitments against climate change
and in favour of social responsibility in the supply chain. In
particular, Pirelli sits on the USTMA Sustainability Task Force,
the AIAG Corporate Responsibility Steering Committee, the
CSR Network of the Public Affairs Council and the SASB
Standards Advisory Group. Consistent with Group policies,
it does not participate in any political action committees in
the United States and more generally does not contribute to
election campaigns. Pirelli undertakes to check from time to
time that the sustainability positions of the associations of
which it is a member are consistent with Group positions.
Also in Brazil, Pirelli continued to celebrate the country’s
strong links with Italy, promoting, among others, meetings
with
institutional representatives at federal and central
level. Pirelli also maintains relations with local institutions
and associations to protect its industrial sites, distributed
among the states of Sao Paulo, Bahia and Rio Grande do
Sul. In these states, a series of initiatives are also developed
to raise awareness on issues such as urban mobility, road
safety, the protection of the territory and social and cultural
promotion. In May, the Pan-American Circuit was inaugurated
in the presence of the Governor of the State of São Paulo,
João Doria, and local authorities. In Brazil, Pirelli is associated
with and holds the chairmanship of the Board of ANIP
(National Association of the Tyre Industry) with the objective
of developing its identity and promoting the interests of the
sector in institutional dealings with local governments. The
Group is also associated with Reciclanip, which is active in
the management of end-of-life tyres. Pirelli has recently taken
up the vice-presidency of the Italian-Brazilian Chamber of
Commerce, Industry and Agriculture (ITALCAM).
In the European context, one significant activity concerns
Romania, where Pirelli maintains a constant dialogue with
176
Pirelli Annual Report 2021 the main institutional interlocutors in order to accompany
the phases of industrial development at the Slatina plant. Of
particular relevance in 2021 is the relationship with the UK,
including at the Preparatory Event for the United Nations
World Climate Conference (pre-COP26).
As part of its relations with Turkey, the Group promotes a
constant dialogue with the country’s institutional representatives
to accompany industrial activities and keep the monitoring of
the country’s economic and political environment alive.
In Russia, Pirelli promotes dialogue with
institutional
interlocutors in order to support the Group’s industrial and
commercial activities in the country. In May 2021, Pirelli co-
chaired the first plenary meeting of the renewed Italo-Russian
Business Committee (CIIR). In July, Pirelli participated in
the Innoprom International Trade Fair held in Yekaterinburg
and inaugurated by Prime Minister Mishustin with the
participation of Minister of Economic Development Giorgetti
and Minister of Industry Manturov. Finally, Pirelli co-chaired
the second plenary meeting of the Italo-Russian Business
Committee (CIIR), held in Rome at the Ministry of Foreign
Affairs and International Cooperation on the occasion of the
Italo-Russian Council for Economic, Financial and Industrial
Cooperation (CIRCEIF).
relations with
institutions are focused on
Relations with European
consolidating
institutional counterparts
and stakeholders of reference, monitoring legislation and
in associations. The
constantly representing the Group
ongoing dialogue and discussion with representatives of
the European Commission, the Council and the European
Parliament covers a wide range of topics of interest to the
company. In 2021, the activity focused on regulatory and policy
developments relating to the subjects of industrial policy,
research and innovation, energy, climate and environmental
transition, circular economy, transport and sustainable and
intelligent mobility, technical regulations, internal market
and consumers, digital
international trade and bilateral
agreements. Of particular interest was the implementation of
policies linked to the Green Deal, the strategy for sustainable
growth launched by the European Commission at the end
of 2019, with specific reference to the ‘Fit for 55’ package
proposed by the Commission in July 2021 to achieve the
2030 climate targets. The monitoring activity also concerned
the initiatives undertaken at European level to combat the
pandemic crisis and, in particular, the implementation of
Next Generation EU, the temporary instrument to stimulate
recovery, and the definition by the Member States of national
recovery and resilience plans, functional to accessing funding
under the plan. In the various stages of drafting and defining
European
interests
legislation, Pirelli represents Group
to European stakeholders. Pirelli is listed in the European
Transparency Register, established by an inter-institutional
agreement between the European Parliament and the
European Commission.
In Italy, the Group continues to interact with a system of
relations that involve the main institutional bodies, both
at central and local level. The relations with the Ministry of
Foreign Affairs and International Cooperation are particularly
important in both central and peripheral areas, with which
the information activity is constant with respect to Pirelli’s
global presence to support the enhancement of the interests
of the Country system abroad. The Group’s relations with the
Italian Presidency, the Presidency of the Council, the Ministry
of Economic Development, the Ministry of Economics and
Finance and the Regions of Lombardy and Piedmont.
In December, on the eve of the 150th anniversary of the
company’s foundation, a Pirelli delegation was received
by the President of the Republic, Sergio Mattarella, to
commemorate the company’s anniversary. In Italy, the Group
is also always engaged in customary in-depth analysis of
institutional importance concerning, in particular, issues
relating to the Group’s industrial presence; the promotion
and strengthening of international relations in the countries
where the Group operates with industrial sites; the analysis
and in-depth study of the impacts related to the regulatory
discipline of tyres and their entire life cycle; and other issues
of road safety and environmental sustainability related to
both production processes and the product.
Finally, in line with what is stated in the Code of Ethics,
Pirelli “does not make contributions, advantages or other
benefits to political parties and workers’ trade unions, or to
their representatives or candidates, without prejudice to
compliance with any applicable legislation”. For this reason,
there are no contributions in these areas (zero).
For further details on the Financing received from the Public
Administration and the amounts disbursed in 2021 to Trade
Associations, please refer to the Economic Dimension
Chapter, where this information is provided.
MAIN INTERNATIONAL COMMITMENTS FOR SUSTAINABILITY
The attention of Pirelli to sustainability is also expressed
through participation in numerous projects and programmes
promoted by international organisations and institutions in
the area of social responsibility. A number of the principal
commitments made by Pirelli worldwide are illustrated as
follows.
UN GLOBAL COMPACT
Pirelli has been an active member of the Global Compact since
2004 and since 2011 has been part of the Global Compact
Lead Companies. The Group endorses the “Blueprint for
Corporate Sustainability Leadership”, which offers leadership
guidelines envisaged in the Global Compact to inspire
advanced and innovative sustainability performance in terms
of management capacity for the creation of sustainable value.
Since December 2019 Pirelli has also been on the Board of
the Global Compact Network Italia.
In 2021, the Global Compact proposed a series of initiatives
to provide support
in the definition of strategies and
partnerships for the pursuit of Sustainable Development
Goals (SDGs) launched in September 2015 in New York
with the aim of accompanying the activities of sustainable
companies until 2030.
177
Report on Responsible Management In this context, Pirelli participates to two action platforms:
→ “Decent Work in Global Supply Chain”“: in December 2018
Pirelli and the other participating companies signed the
“Commitment to Action”, publicly committing themselves
to the sustainable management of their supply chains; as
a result of the activities carried out by the working group
in 2019, in February 2020 the digital platform “Decent
Work Toolkit for Sustainable Procurement” was published,
a tool aimed at supporting companies in integrating
sustainability into the procurement process; during 2020
the group worked on several publications including the
“Leadership Brief Navigating Multi-tiered Supply Chains”
and “Family-Friendly Workplaces”; during 2021, the
commitment continued and saw the publication of the
report “Nine Business Practices for Improving Safety and
Health Through Supply Chains and Building a Culture of
Prevention and Protection”.
→ “Sustainable Finance”: in September 2018 the working group
presented its first publication “SDGs Bonds & Corporate
Finance - A Roadmap to Mainstream Investments”; to this,
several other publications on the subject were added during
2019. In December 2019 the platform launched the “CFO
Taskforce for the SDGs”, which Pirelli joined as a Founding
Member. The Taskforce is a collaborative platform that
brings together leaders from different sectors and aims
to develop innovative strategies for mobilizing finance
towards sustainable development. In September 2020,
the taskforce published the “CFO Principles on Integrated
SDG investments and finance”, which aim to support the
alignment of finance and investment practices with the
SDGs through the implementation of best practices. In
2021, the “CFO Taskforce for the SDGs” was officially
presented during the UN General Assembly.
Since 2014, Pirelli has been a Founding Participant of the
SSE Corporate Working Group, the group of companies
indications as
that provide their own evaluations and
part of the Sustainable Stock Exchanges (SSE) initiative
promoted by UNPRI, United Nations Conference on Trade
and Development, United Nations Environment Programme
Finance initiative and the UN Global Compact. The initiative
aims to increase the attention of world stock markets,
investors, regulators and companies to the sustainable
performance of companies.
Once again in 2021 Pirelli was recognised - the only one in the
tyre sector worldwide - as part of the United Nations Global
Compact Lead, which brings together the companies which
have been identified as most committed at the global level to
implementing the Ten Principles of the United Nations Global
Compact as well as advancing global sustainability goals.
During 2021 Pirelli, with UNGCN Italy and other major Italian
companies, worked on the drafting of the position paper
“Italian Business and Decarbonization: a just and inclusive
transition”, published in January 2022. The aim of the paper
is to highlight the commitment of Italian companies adhering
to the UN Global Compact on the issue of decarbonisation.
Moreover, through an analysis of the governance and
legislation on the matter at national and international level,
the document also allows to focus on the challenges and
opportunities for companies related to an action against
climate change, as well as to formulate some guidelines for
companies for the success of their Climate Action.
ETRMA – EUROPEAN TYRE AND RUBBER
MANUFACTURERS ASSOCIATION
ETRMA is the main partner of the EU institutions for the
sustainable development of new European policies for
the sector and for their proper implementation. With the
institutional support of the Pirelli Group, during 2021 ETRMA
carried out intensive advocacy activities, presenting to the
European Commission the contribution of the sector in
pursuing the Green Deal objectives, highlighting the role of
the sector in creating a more environmentally friendly, safe,
and efficient mobility, specifically on the contribution to
CO2 reduction through improved rolling resistance of tyres,
improved road safety through new wet grip performance
limits also for worn tyres, which also leads to a positive
impact on the Circular Economy. The industry is also strongly
committed to the development of a robust tyre abrasion
test methodology to support the European Commission’s
objectives of mitigating the emission of particulate matter
into the environment.
The association continued to raise awareness of the
European Commission and European Union Member
Countries on the implementation of market surveillance for
monitoring compliance with regulations on the general safety
of vehicles and tyres and on energy efficiency, as well as
the labelling of tyres in European Countries, labelling, which
has been totally renewed since May 2021; also continuing
was the strengthening of the partnership with the national
associations of the sector of which Pirelli is an active member.
In 2021, the Connected & Autonomous Driving (CAD)
group continued its intense work to respond to the new
technological challenges affecting the mobility sector
(connectivity, autonomous driving, cyber security, etc.) and
their impact on tyres, with a particular focus on the methods
for managing and exchanging data between the various
players in the system, which led to high-level meetings with
the European Commission in preparation for the enactment
of related legislation.
To monitor and respond to the European Commission’s
sustainable finance legislation, the Taxonomy working group
was activated with Pirelli’s support.
The association ETRMA continues to work alongside the
European Commission in defining policies on the Circular
Economy with an impact on the sector and continues
successfully to promote sustainable practices of producer
responsibility for the management of tyres at the end of
their life, thanks to which Europe maintains a recovery rate
of over 90%, through strong collaboration with the various
management consortia present
in European countries.
ETRMA’s (and European) best practices in fact continue to
be an international benchmark.
178
Pirelli Annual Report 2021 ETRMA maintains a proactive role in the development
of cognitive studies regarding environmental issues, e.g.
Tyre Road Wear Particles (TRWPs), micrometric particles
produced by combined road and tyre wear during vehicle
circulation, and health issues, e.g. granulated filler material
obtained from end-of-life tyres for sports fields. With regard
to TRWPs, ETRMA launched in 2018, with the support of CSR
Europe, the “European TRWP Platform”, a multi-stakeholder
initiative aimed at sharing scientific knowledge and engaging
relevant Sectors and Organisations to define possible actions
to mitigate the impacts of TRWPs. In 2019, the “European
TRWP Platform” published
the State of Knowledge
(“Scientific Report on Tyre and Road Wear Particles, TRWP,
in the aquatic environment”) and possible mitigation actions
that can be taken by the various stakeholders about TRWPs
(“The Way Forward Report”). A micro-site was also created68
to provide information on TRWPs to the general public from
root causes to the definition/implementation of mitigation
actions, highlighting the multi-stakeholder nature of the
phenomenon. The Platform’s activities continued in 2021,
with a series of three stakeholder meetings, which continued
to share topics related to the scientific and policy aspects
associated with TRWPs. In particular, the Platform hosted
the theme of “lessons learned” from other sectors involved
(e.g. textiles) on the issue of microplastics, a theme with
which TRWPs have been associated, and of local authorities’
initiatives on these issues, in order to exchange “best
management practices” and identify possible synergies.
Finally, the Platform’s activities were presented by ETRMA at
the European SDG Summit 202169, through its contribution
to the “European SDG Roundtable” Session with the
presentation “Multistakeholder Actions to Address the Tyre
Sector Sustainability Challenges”.
A section in the Environmental Dimension chapter of this
Report is also dedicated to TRWP, to which reference should
be made for further details.
WBCSD – WORLD BUSINESS COUNCIL
FOR SUSTAINABLE DEVELOPMENT
Pirelli for years has been a member of the WBCSD (World
Business Council for Sustainable Development). This is
a Geneva-based association of about 200 multinational
companies based in 8 regions of the world that have made a
voluntary commitment to link economic growth to sustainable
development. In particular, Pirelli endorses three projects: Tire
Industry Project, Transforming Urban Mobility and Future of
Work.
The Tire Industry Project (TIP), whose members account
for approximately 65% of global production capacity of
tyres, was founded in 2005 with the aim of meeting and
anticipating the challenges related to the potential impacts
on health and the environment of tyres throughout their life
cycle. The project extends its evaluation activities to raw
68 https://www.tyreandroadwear.com/.
69 https://www.csreurope.org/european-sdg-summit-2021.
70 http://www.oecd.org/chemicalsafety/nanosafety/nanotechnology-and-tyres-9789264209152-en.htm.
71 www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=env/jm/mono(2020)36/
REV1&doclanguage=en.
materials, TRWP (with research activities that have seen the
completion of monitoring the impact of TRWP on air quality in
the city of New Delhi, India) and nanomaterials. On the subject
of TRWPs, in 2021 TIP continued its activity on the TRWPs
characterisation methodologies to support their identification
and quantification
in environmental compartments (air,
water, soil), whose results have been shared, as traditionally
happens for TIP studies, with the scientific community
through various publications in scientific journals with peer-
reviewed editorial board. In 2021, TIP also supported the
scientific community by defining a method for the preparation
of rubber particles from tyre treads, in order to produce
standard reference materials, very similar to TRWPs, to be
used for further scientific studies: this initiative, which also
saw the involvement of the United States Tire Manufacturers
Association (USTMA) for the preparation of samples with this
method, was presented at the 42nd International Conference
of the Society of Environmental Toxicology and Chemistry
(SETAC, US, 14-18 November 2021), with excellent reception
from the research community.
On the issue of nanomaterials, in collaboration with the OECD
(Organisation for Economic Cooperation and Development),
TIP has developed a sector-specific guide70 containing
best practices of reference for the research, development
and industrialisation of new nano-materials so as to ensure
that the use of any nano-material is safe for people and
the environment. TIP supported the OECD by actively
supporting the preparation of the guide “Moving Towards
a Safe(r) Innovation Approach (SIA) for More Sustainable
Nanomaterials and Nano-enabled Products”71 (published
on 22 December 2020) which includes extremely topical
elements, also related to the emerging Safe and Sustainable-
by Design (SSbD) theme, of certain importance for the
debate launched in 2021 at the European Commission level.
During 2021, TIP also worked on the updating, to be released
in 2022, of the “product category rules” (PCR) published
in 2018, necessary to carry out the life cycle assessments
(LCAs) of the product, as well as to develop the “environmental
product declarations (EPDs)” for tyres, so that the results
are comparable between the various manufacturers. With
reference to the aggregated sector environmental reports, TIP
has published the “Environmental Key Performance Indicators
for Tire Manufacturing 2009-2019” which presents the
environmental performance related to CO2 emissions, energy
consumption, water withdrawal and ISO 14001 certification
of the environmental management systems of the factories
where the members of TIP produce the tyres.
During 2021, TIP also continued its activities aimed at the
international promotion of best practices on end-of-life
tyre management, in terms of valorisation of recovery and
reuse as a second raw material, in line with the principles of
the Circular Economy. In particular. TIP has organised three
stakeholder dialogues in the United States, Europe and
China, in collaboration with local trade associations, with the
aim of contributing to the promotion of ELT management
at regional and local level by promoting and strengthening
communication between the multiple stakeholders involved.
This ongoing commitment has resulted in the publication of
an “End-of-life tyre (ELT) management Toolkit” in 2021 with
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Report on Responsible Management the specific objective of supporting the development and
improvement of end-of-life tyre management systems. These
activities represent the natural consequence of the analysis
presented in the report “Global ELT Management - A global
state of knowledge on regulation, management systems,
impacts of recovery and technologies” was published, a
document that presents the current state of end-of-life tyre
management in 45 countries, together with an analysis of
regulations, management systems and recovery methods.
An important goal achieved by the TIP was the publication in
May 2021 of the Sustainability Driven - Accelerating Impact
with the Tire Sector SDG Roadmap, which is Sustainable
Roadmap for the sector, developed with the consultation of
international stakeholders, publication that was presented
through a dedicated webinar. The Roadmap identifies how the
value chain interacts with the UN Sustainable Development
Goals (SDGs), the areas where the sector can contribute
most and the key activities that can lead to an acceleration of
this contribution.
Important international stakeholders and TIP launched in
October 2018 the “Global Platform for Sustainable Natural
Rubber” (GPSNR), a voluntary multi-stakeholder platform
aimed at promoting a more sustainable management of
the natural rubber value chain, both in socioeconomic
and environmental aspects. The first general meeting of
the platform was held in March 2019. Pirelli is a founding
member and actively contributes to the platform’s activities
by co-chairing two of the working groups: the first dedicated
to the representation of small landowners within the platform
and the second dedicated to capacity building activities at
plantation level. Platform members include manufacturers,
processors and traders, tyre manufacturers/buyers, car
manufacturers, financial institutions and civil society.
The Transforming Urban Mobility project, which brings
international companies from the automotive,
together
auto parts, transportation, oil & gas, and information and
communication technology sectors, aims to promote and
accelerate the transition to safe, universally accessible
and environmentally friendly urban mobility. The project is
divided into workstreams to analyse in detail the new trends
of future mobility such as electrification and data sharing, to
which a new workstream has been added in 2021 focusing
on commuting as a key element of urban mobility on which
companies can make a strong sustainability contribution.
Project members will also interface with cities to discuss the
most suitable and concrete solutions for each context. Finally,
during 2021, the project was finalised in collaboration with the
ITF (International Transport Forum), with the publication of
the document “The Innovative Mobility Landscape: the case
of mobility as a service” which analyses the main challenges
and indicates the direction for the development of sustainable
mobility with a particular focus on the opportunities opened
up by mobility as a service (Maas).
leading
The Future of Work Project brings together
companies from different sectors to combine their respective
insights, innovations and influences to create strategies,
business models and develop scalable business solutions to
address the challenges that characterise the future of work,
i.e. rapid technological change, socio-economic polarisation,
changing workforce expectations. The aim is to pursue an
equitable, diverse, inclusive and empowering future of work,
with the interests of people at its core. For more information
on the project and to access the documentation developed to
date, please visit the “Future of Work” section of the WBCSD
website.
Among the WBCSD initiatives supported in recent years is
the signing by the Group CEO of the “CEO Guide on Human
Rights”, published in 2019 with the aim of promoting respect
for human rights by companies and their suppliers and
business partners.
that brings
IRSG – INTERNATIONAL RUBBER STUDY GROUP
Pirelli, in representation of the European Commission, is a
member of the Industry Advisory Panel of the International
in Singapore, an
Rubber Study Group (IRSG) based
intergovernmental organisation
together
producers and consumers of rubber (both natural and
synthetic), acting as a valuable platform for discussion on
issues regarding the supply and demand for natural and
synthetic rubber. It is the principal source of information and
analysis on all aspects related to the rubber industry. Within
IRSG, Pirelli participated in the Sustainable Natural Rubber
Project, which resulted in the management guidelines for
the Sustainable Natural Rubber Initiative (SNRi) launched in
2014, during the World Rubber Summit.
During 2019 IRSG signed a Memorandum of Understanding
with the Global Platform for Sustainable Natural Rubber
(GPSNR), whose aim is to develop and consolidate cooperation
between the two organisations. The MoU is fundamental in
ensuring effectiveness in achieving the common objectives
of the two organisations with regard to the sustainable
production and consumption of natural rubber. In 2020, in
cooperation with leading research institutes, IRSG organised
the three-day workshop “Climate Change and Rubber
Economy”, which discussed the impacts of climate change
on the world of natural rubber. The workshop highlighted
a number of climate change mitigation and adaptation
initiatives to protect the communities operating in the sector,
as well as the importance of dialogue between countries to
achieve them.
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Pirelli Annual Report 2021 EU-OSHA – EUROPEAN OCCUPATIONAL
SAFETY AND HEALTH AGENCY
In 2021, for the thirteenth consecutive year, Pirelli continued
its activity as an official partner of the European Agency
for Safety and Health at Work (EU-OSHA), which tackles a
different issue every two years. In particular, in 2020 Pirelli
adhered to the 2020-2022 campaign “Healthy Workplaces
Lighten the Load” dedicated to raising awareness of
ergonomic risks in the workplace and the prevention of
related musculoskeletal disorders.
The campaigns in which the Company has participated in
recent years include the 2018-2019 “Healthy Workplaces
Manage Dangerous Substances” campaign aimed at raising
awareness of the risks posed by hazardous substances in the
workplace, the 2016-2017 “Healthy Workplaces for all Ages”
campaign dedicated to the importance of a sustainable
working environment that ensures the health and safety
of employees throughout their lives, and the 2014-2015
“Healthy Workplaces Manage Stress” campaign, focused on
the issue of stress and psycho-social risks in the workplace,
the main aim of which was to encourage employers, managers
and workers and their representatives to work together to
manage these risks.
CSR EUROPE
Since 2010, Pirelli has been a member of the Board of CSR
Europe, a network of companies in Europe that are leaders
in the area of corporate social responsibility. Its members
include more than 27 multinational companies and 38
national partner organisations from several European
countries.
Since 2016 Pirelli has been supported by CSR Europe in the
organization and moderation of its Stakeholder Dialogue
Stakeholders, which the Company holds at the local Affiliate
level or internationally at Headquarters.
In this regard, reference should be made to the Stakeholder
consultations held in Romania, Mexico, Germany, Turkey,
Russia, Argentina, the United Kingdom and the United
States. CSR Europe moderated the two multi-stakeholder
consultations held by Pirelli for the definition of the Company’s
Sustainable Natural Rubber Management Policy,
the
related Implementation Manual and the 2019-2021 Activity
Roadmap, published on Pirelli website. For more information
on Pirelli’s sustainable management of natural rubber, please
refer to the dedicated section in the “Our Suppliers” chapter
of this Report.
INTERNATIONAL COMMITMENTS AGAINST CLIMATE CHANGE
For years Pirelli has shown its commitment to the fight against
climate change, promoting the adoption of adequate energy
policies aimed at the reduction of CO2 emissions.
In 2021 the Company, together with UNGCN Italy and other
major Italian companies, worked on the drafting and launch
of the position paper “Italian Business and Decarbonization:
a just and inclusive transition” with the aim of enhancing the
commitment of Italian companies adhering to the UN Global
Compact on the issue of decarbonisation.
In 2020, Pirelli expressed its commitment to the Science
Based Targets initiative (SBTi) for the definition of targets on
the reduction of absolute CO2 emissions that are in line with
the level that science is demanding to keep climate warming
well below 2°C, as recommended by the Paris Agreement.
In June 2020, the new targets for reducing absolute CO2
emissions set by Pirelli for its production processes and
supply chain were validated by SBTi, which judged them to be
consistent with the actions needed to keep the increase in the
planet’s temperature well below 2 degrees.
In September 2018, the Company joined the Task Force on
Climate-related Financial Disclosures (TCFD), established by
the Financial Stability Board (FSB), committing to voluntarily
disclose information on risks and opportunities related to
Climate Change as outlined in the TCFD recommendations.
Over the years, Pirelli has also participated in numerous events
and projects such as the Climate Conferences “COP24” in
Katowice (2018), “COP23” in Bonn (2017) and “COP22” in
Marrakech (2016), the “Business for COP 21 Initiative” (2015)
and participated in several side events organised during the
“COP21” Climate Conference in Paris (2015).
Throughout 2014, the Group joined the “Road to Paris
2015” project and signed three initiatives consistent with its
sustainable development strategy: Responsible Corporate
Engagement in Climate Policy, Put a Price on Carbon, Climate
Change Information in Mainstream Filings of Companies
Communication.
Also
in 2014, the Company signed the “Trillion Tonne
Communiqué”, the document that requires global emissions
over the next 30 years to remain below the trillion tonnes of
greenhouse gases in order to avoid a rise in average global
temperature higher than 2°C.
Pirelli has also signed numerous international agreements
such as “The Carbon Pricing Communiqué” (2012), the “2°
Challenge Communiqué” (2011), the “Cancún Communiqué”
(2010), the “Copenhagen Communiqué” as well as the “Bali
Communiqué” (2007), the first document for the development
of concrete strategies for a global climate agreement to be
implemented through a joint government intervention.
COMPANY INITIATIVES FOR THE EXTERNAL COMMUNITY
improving
As specified in the Group “Code of Ethics”, Pirelli provides
support to educational, cultural, and social initiatives for
promoting personal development and
living
standards. The Company does not provide contributions or
other benefits to political parties or trade union organisations,
or to their representatives or candidates, this without
prejudice to its compliance with any relevant legislation.
Since the founding in 1872, Pirelli has been aware that an
important role in the promotion of civil progress in all the
communities where it operates and, capitalising on the
Company’s natural strengths, it has identified three focus
areas: road safety, technical training and solidarity through
sporting activities for young people. Pirelli for some years has
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Report on Responsible Management adopted an internal procedure to regulate the distribution of
gifts and contributions to the External Community by Group
companies, in relation to the roles and responsibilities of
the functions involved, the operational process of planning,
realising and monitoring the initiatives and the disclosures
regarding the same. Essential support in the identifying of the
actions that best satisfy local requirements comes from the
dialogue with locally operating NGOs. Priority is given to those
initiatives whose positive effects on the External Community
are tangible and measurable according to objective criteria.
The internal procedure also specifies that no initiatives may
be taken in favour of beneficiaries for whom there is direct or
indirect evidence of violation of human rights, worker rights,
environmental protection or business ethics.
The contributions to the External Community by Group
companies are part of a broader strategy to support the
achievement of the Sustainable Development Goals of the
United Nations (SDGs), in the paragraphs “Sustainability
Planning and the United Nations Sustainable Development
Goals” and “UN Global Compact”.
The amount of the disbursements in support of the External
Community incurred by Pirelli in 2021 is shown in the section
“Contributions to the External Community”, of this report.
ROAD SAFETY
Pirelli
is synonymous worldwide not only with high
performance, but also safety. Together with environmental
protection, road safety is the key element of the Eco & Safety
Performance strategy that inspires the Group’s industrial
and commercial choices. Pirelli’s commitment to road safety
takes the form of numerous training and awareness-raising
activities, but above all it translates into research and the
ongoing application of innovative technological solutions for
sustainable transport.
Pirelli’s commitment to road safety passes first and foremost
through the product: the tyre is in fact the only part of the
vehicle that interfaces directly with the road and as such is a
fundamental element of road safety. Road safety has always
been a cornerstone of the Pirelli brand. “POWER IS NOTHING
WITHOUT CONTROL™” is Pirelli vision of mobility, which
combines performance and safety. Structural and material
improvements to improve traditional safety performance
such as road grip, wet and dry braking, are combined with the
most advanced technologies such as RUN FLAT™ and SEAL
INSIDE™, which bring road safety to a higher level, allowing
you to maintain control even in the most critical moments,
such as a puncture.
Pirelli’s commitment to road safety does not stop with
product innovations, but also extends to the promotion of the
principles of road safety and safe driving through participation
in dedicated projects and campaigns.
Bearing witness to this commitment, Pirelli in 2018 joined the
United Nations “Road Safety Fund” which aims to support
States to reduce the number of deaths and injuries caused
by road accidents. The Fund supports the implementation
of national plans, as well as concrete actions and projects
aimed at improving the safety of infrastructure and vehicles,
promoting the correct behaviour of road users and managing
the post-accident period efficiently.
Also at Group level, as part of its collaboration with the WBCSD
(World Business Council for Sustainable Development), Pirelli
participated in the “Transforming Urban Mobility” project,
which explores the major trends in mobility (electrification,
data sharing and shared services) to promote solutions
that are more sustainable and thus safer, cleaner and more
efficient. For further details on Pirelli’s involvement in this
project, please refer to the “WBCSD” section of this Report.
There are numerous road safety initiatives implemented in
the countries where the Group operates.
In Italy, in 2021 the partnership with the University of Milan
Bicocca was strengthened and the circle of contacts with
neighbouring companies was widened, with whom an informal
round table was set up on the subject of mobility management
and road safety in the area, issues on which representatives of
the city administration are constantly involved. This is also the
background to the collaboration with the traffic police, which,
together with the Red Cross, the Fire Brigade and a number
of local NGOs, organised an online event on the subject of
road safety on the occasion of the Day of Remembrance for
Road Victims in November.
In the United States and Canada, “Tire Safety Week” was
organised, a series of initiatives on safe driving that also
involved other tyre manufacturers. In the United Kingdom
Pirelli made a donation to TyreSafe, an organisation dedicated
to spreading education about proper tyre maintenance and
the danger posed by defective or illegal tyres.
Also in 2021, despite the limitations on events caused by the
health situation, Pirelli continued with various initiatives to
promote road safety education on two wheels. In particular, the
commitment focused on collaboration with driving schools to
develop practical and safe experience on the road, tracks and
off-road. The various initiatives include partnerships with the
Enduro Republic, Motorace People, Tutti Pazzi per la Pista,
Scuola Motociclismo and Honda True Adventure Off-Road
Academy, as well as the days of free practice on the track
organised directly by Pirelli: the Pirelli Trackdays.
Lastly, as in previous years, a section of the website was
dedicated to driving tips, for summer and winter, highlighting
the important role played by the tyres in the active safety of
vehicles and its occupants.
TRAINING
The promotion of technical education at all levels and training
are very old values that are well-established in the history of
Pirelli. The Group continues to benefit from technical and
research cooperation with various Universities in the world
including the Polytechnic University of Milan, the Polytechnic
University of Turin, Bocconi University and the SDA Bocconi
Business School and the Bicocca University of Milan in Italy,
the University of Craiova, the University of Pitesti and the
Polytechnic University of Bucharest in Romania, the University
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Pirelli Annual Report 2021 of Qingdao in China, and the Technical University of Darmstadt,
the University of Applied Sciences of Würzburg, Aschaffenburg
and Darmstadt, the DHBW of Mannheim and the Vocational
School of Michelstadt, Germany, to name a few.
The company supports educational and didactic initiatives
that can give disadvantaged young people the tools to
improve their condition; it contributes to scholarships and
research projects, firmly believing in education as the key to
individual growth and to the economic growth of a country.
In China, Pirelli sponsored 40 scholarships for science and
technology students at the University of Qingdao. In Turkey,
the Company supported an institute that helps children in
difficulty, the Turkish Education Foundation (TEV), through a
full scholarship and a donation, as well as celebrating Mother’s
Day with dedicated greeting cards. In addition, the company
donated tyres to university engineering students participating
in international competitions. In Russia, in Kirov, Pirelli offered
two internships to students at Vyatka State University.
In Romania, partnerships with the Universities of Craiova,
Pitesti and
the Polytechnic University of Bucharest
concerned the awarding of scholarships and continued
during the pandemic period. 2021 was the fourth year of a
project at Pirelli Slatina (Romania) involving dual studies in
which 27 mechanics and 28 electronics students received a
monthly scholarship and did practice sessions at the factory.
Four scholarships, the “Pirelli Excellence Scholarship,” were
dedicated to four high school graduates from Slatina who
later went on to technical university. Pirelli makes monthly
disbursements and the scholarships are renewed annually
based on results. In the summer the students work in
internships at Pirelli, and after graduation they can be hired
at Pirelli. Also in Romania, Pirelli supported online classes
for 100 children at the Coteana primary school in the Olt
region, providing them with tablets and the necessary tools
to participate in online classes during the health emergency.
In Spain Pirelli offered space to host a student workshop,
where students made a design to build a single-seater racing
car, and a motorcycle, to compete in the international race
“Formula Student” which saw the participation of nearly 500
teams from all over the world. In addition, Pirelli Spain donated
a robot (Staubli RX130) and related accessories to the Escola
Diocesana de Navas school to be dedicated to the degree
course in automation and industrial robotics. The robot was
originally dedicated to the manufacture of photovoltaic cells.
Pirelli also organised a visit for high school students to the
former factory and energy plant.
In the United States, Pirelli contributed to the Rise & Thrive
project of the local Chamber of Commerce in Rome, Georgia,
which aims to develop skills applicable in the local industrial
fabric. In addition, Pirelli became a partner of the College &
Career Academy at Rome Georgia High School, supporting
the programme and offering collaboration on manufacturing
courses.
In Italy, the Percorsi per le Competenze Trasversali e per
in 2017 and
l’Orientamento (PCTO) project,
launched
governed by the 2015 ‘Buona Scuola’ law, came to an end
during 2021. The project, designed on a three-year basis,
involves three classes from chemical and technological high
schools in the area and aims to accompany the children
belonging to the classes involved throughout the three-year
period, in order to guide them to discover what a company
is, to support them in understanding the main dynamics of
company management and to help them in the delicate
phase of professional choice and orientation. Adhering to the
project, Pirelli therefore facilitates schools in the regulatory
compliance of the provisions of the Decree, supports the
territory in the promotion of school excellence and internally
promotes the management of generational diversity thanks to
the involvement, within the project, of senior Pirelli colleagues
in the role of mentors and guides for the young students
involved. In 2021, through the “Fondazione Pirelli Educational”
project, the Pirelli Foundation also allowed secondary schools
that requested it to enter into an agreement for the recognition
of useful training credits under the PCTO.
SPORT AND SOCIAL RESPONSIBILITY
There is a close link between solidarity and sport, in a virtuous
circle where commitment to sports becomes synonymous
with the commitment to promoting solidarity and ethics,
especially amongst young people. Getting young people
involved in sport is a way to teach the notion of integration
to children from different social groups and helps prevent
negative situations
isolation and solitude. Pirelli’s
agreement as a partner in the global social project Inter
Campus, promoted by the football club FC Internazionale
Milano (“Inter”) continued until June 2021.
like
Since 1997, Inter Campus has developed social, flexible
cooperation and long-term actions, in 30 countries around
the world with the support of nearly 300 local operators,
using football as an educational tool to offer needy boys and
girls aged between 6 and 13 the right to play.
Since 2008, Inter and Pirelli, along with a local partner, have been
running the Inter Campus social project in Slatina, Romania. The
sports and recreational activities are organised for the entire
year, involving over 100 children from different social contexts
who have been learning team spirit, social integration and the
values of friendship through football for years.
Since 2012, Pirelli and Inter have replicated the experience of
Inter Campus in Mexico: Inter Campus Silao, near the Pirelli
factory, inaugurated by President Felipe Calderon, normally
involves about 130 children in the area (number reduced to
about 100 in the year 2021). Also in 2021, the coaches carried
out the programme remotely due to the pandemic. In 2014,
Pirelli and Inter launched an Inter Campus project together in
Voronezh, Russia, involving three local orphanages with about
100 children.
In Brazil Pirelli supports football and judo programmes,
and also sponsors an F4 driver. The Seci Social football
programme in Santo Andrè involves about 400 children in
after-school activities. Music and dance activities are also
available, while judo classes were held online due to the
pandemic involving more than 600 children.
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Report on Responsible Management In the United States, Pirelli sponsors a football programme
at the YMCA in Rome, Georgia, while in Germany Pirelli has
supported the “Pump for Peace” initiative to develop mountain
bike trails, thus making the discipline more accessible to all.
The Company in Germany also donated uniforms to a youth
tennis team. In France, a donation was made to ‘Special
Olympics France’ through participation in a running and
walking activity lasting more than a month.
SOLIDARITY
Pirelli’s responsible approach of involvement and inclusion
is reflected in social solidarity activities around the world.
The pandemic has severely affected not only the health of
millions of people around the world, but also the economy.
Pirelli, like many other companies, has tried to help, not only
by providing personal protective equipment and fans, but
also by distributing food and other basic necessities.
In Spain, the Company supports the Santa Clara Convent
Foundation, which manages programmes that provide food
to needy families. Pirelli has made a warehouse available for
the storage of food for the needy.
In Moscow, Pirelli contributed to the “Chance” project, which
provides private lessons to about 600 orphans from various
orphanages. In Kirov, Pirelli donated tyres to the Nadezhda
orphanage, the “Druzhba” organisation for the rehabilitation
of disabled children, and the Gorodec hospital (Nizhny
Novgorod region). In addition, in Kirov Pirelli participated in
the “Christmas Tree Wishes” project, buying bicycles and
hockey equipment for children with disabilities.
In Romania, Pirelli participated in two projects during the
Christmas season: ShoeBox, wrapping gifts for children in
need, and Christmas is in Your Heart, donating presents to
more than 50 families. In the school sector, Pirelli Romania
provided school supplies to fill 60 backpacks; on Mother’s
Day it supported 15 mothers in need by donating personal
care items.
In China, the Company supported 32 orphaned and needy
children in Yanzhou. In Turkey, Pirelli employees raised funds
for a foundation working against cerebral palsy. Meanwhile
in France, the Company made a donation to the UN refugee
agency, UNHCR.
In the UK, Pirelli supported a number of social solidarity
initiatives, including Miles for Meals, a non-profit organisation
that provides food to people in need, hospitals and hospices,
working in Alzheimer’s and cancer research. Pirelli also
sponsored the Covid-19 Community Champion of the Year
Award, honouring people regarded as local heroes in the
Cumbria community.
In Brazil, Pirelli supported several social solidarity activities:
“Aprender Brincando”, an after-school project with activities
for 260 children (run online during the pandemic); “Servico
de Convivencia Meninos e Meninas”, also an after-school
involving 55 children; and “Projeto Guri”, an
activity
important musical activity involving more than 130 children
and young people.
In Mexico and the United States, donations were made to the
non-profit organisation United Way.
Pirelli also contributed to disaster recovery activities by
donating funds for flood victims in Henan Province in
China, to the Jiaozuo Charity Federation and to Fucheng
Sub District Office, Zhongzhan District, Jiaozuo City. In
Germany, the Company also supported “Aktion Deutschland
Hilft”, an organisation that provided emergency assistance
to flood victims, and the “Forderverein der Feuerwehr
Swisttal-Heimerzheim”, an organisation that supported
the reconstruction of impacted areas. In Turkey, Pirelli
responded to fire damage in the southwest of the country
with a donation campaign. Meanwhile in Spain it donated
materials for the victims of the volcanic eruption in the
Canary Islands.
HEALTH
During 2021, the global emergency due to Covid-19 caused
Pirelli to devote a portion of its contributions to the external
community to initiatives supporting health, both aimed at the
families of Group employees and at the local communities
where the Company operates.
Many initiatives have been undertaken in the countries
where the Company
is present. Activities aimed at
improving the health situation include, where permitted
by law, administering vaccines at company sites, making
Covid-test is available, and distributing personal safety
devices. More specifically, we mention the following: in
Milan, Italy, the opportunity to participate in the vaccination
campaign for Pirelli employees and their families at the
Hangar Bicocca Pirelli facility; the provision of shuttles at
the Mexican plant to allow employees to travel more easily
to the vaccination hubs; informative talks with specialised
health personnel at the Russian plants; in Romania, the
Company set up a Covid-19 prevention centre supported
by medical personnel.
It should also be mentioned that in Brazil Pirelli supported
the Pequeno Principe paediatric hospital. In Argentina, it
donated personal protection and hygiene equipment and
other supplies to the hospitals of Merlo, Hospital Heroes
de Malvinas Argentinas and Hospital Eva Peron, as well as
safety equipment to various school institutions to deal with
the second wave of Covid-19.
ENVIRONMENTAL INITIATIVES
In keeping with the company’s vision of sustainability, Pirelli
supports various environmental projects around the world.
In Mexico, even in times of pandemic Pirelli has coordinated
a “llantaton” (or “tyreathon”), i.e. the collection of nearly
13,000 end-of-life tyres in the municipality of Leon, to
promote local hygiene. The collected tyres were valorised as
fuel for cement factories.
In Argentina, the company has also dedicated itself to a
recycling project with the ‘Reciclando Suenos’ cooperative,
including a project to collect recycled material for a fundraiser
for the Garrahan hospital.
184
Pirelli Annual Report 2021 Reforestation is a core value for Pirelli, which led in 2021 to
participation in reforestation projects in Romania, Turkey and
Mexico. In Romania, Pirelli worked with an NGO to plant 200
trees around the factory, and another 500 trees in deforested
areas of Romania. In Mexico, Pirelli renewed the agreement
with the Institute of Ecology of the State of Guanajuato
to care for 40 hectares in the “Cuenca de la Esperanza,” a
protected area. Over the years Pirelli has been responsible for
planting 28,000 trees in the area.
In addition, in 2021, Pirelli in partnership with BMW will join
Birdlife International in a three-year project that aims to
long-term sustainable and deforestation-free
encourage
natural rubber production in Indonesia. The initiative involves
part of the rainforest area of Hutan Harapan (Sumatra
Island) and will be developed through a series of initiatives
aimed at protecting the indigenous community, preserving
a deforestation-free area of 2,700 hectares and protecting
endangered animal species. The various activities will be
carried out in line with the objectives of the Global Platform
of Sustainable Natural Rubber (GPSNR).
CULTURE AND SOCIAL VALUE
The internationality of Pirelli also emerges from the love for
culture, with initiatives in certain countries around the world
also in 2020. The attention to culture, and even more the
commitment to preserve it, spread it and enhance it, are part
of the DNA of the creation of social value.
In Italy, the company’s commitment to activities that generate
value for the territory is demonstrated by its numerous and
consolidated partnerships with prestigious national and
international bodies and institutions: in particular, in the world
of art, culture and history with FAI (Fondo Ambiente Italiano),
Premio Campiello and Fondazione Isec - Istituto per la Storia
dell’Età Contemporanea; in the world of theatre with Piccolo
Teatro di Milano, Teatro Franco Parenti and Teatro No’hma
Teresa Pomodoro; in the world of music, with Fondazione del
Teatro alla Scala, Orchestra da Camera Italiana, Orchestra
Sinfonica G. Verdi Symphony Orchestra, the Portofino
International Opera Competition, the Ravenna Festival and
the MITO SettembreMusica Festival.
In the field of music, Pirelli sponsors the Mozarteum project in
Brazil, in which major international classical music orchestras
participate. In 2021 the concerts were also broadcast online.
Also in São Paulo, Pirelli sponsored in 2021 the Museum
of Modern Art, one of the most important museums in
Latin America, and the Pinacoteca de Sao Paulo, where
Pirelli sponsored the exhibition “A Maquina do Mondo”, a
demonstration of how industry has impacted art in the last
century. Also in São Paulo, Pirelli will be involved in 2022 in
the restoration of the organ of the Catedral da Sè, the largest
musical instrument in the State of São Paulo. The sponsorship
of the Italian Film Festival in São Paulo is also mentioned.
In Germany, Pirelli supported an initiative to preserve the
Obrunnschlucht, a significant natural park.
Moving to Russia, the Company sponsored two exhibitions: in
Yekaterinburg “Concept Cars: Nuccio Bertone One Hundred
Years of Italian Cars Style, The Coupe” at the Museum of
Architecture and Design, in St. Petersburg, the exhibition
“The Two Avant-gardes: The Mattioli Collection in Dialogue
With the Russian Avant-garde”.
FONDAZIONE PIRELLI (PIRELLI FOUNDATION)
The Pirelli Foundation, established in 2008, counts among
its objectives the safeguarding of the Group’s historical and
cultural heritage and the enhancement of its corporate culture,
through projects with a strong social and cultural impact,
also in collaboration with other institutions. During 2021, as
the health emergency situation continued, the alternation of
digital and in-person activities continued, with short periods
of closure of exhibition and archive spaces. The last quarter
of the year was also dedicated to planning the initiatives for
the celebrations of the company’s 150th anniversary, which
will fall in 2022, and in particular: a new publishing project on
the themes of research and innovation, the setting up of an
exhibition in the Foundation’s spaces, a website dedicated to
the anniversary, the creation of commemorative coins minted
by the Istituto Poligrafico e Zecca dello Stato and the issue of
a postage stamp for the anniversary in collaboration with the
Italian Post Office. The main initiatives in 2021 include:
Digital projects to enhance the historical heritage and
corporate culture: in line with 2020, the enhancement of
digital tools and the schedule of communication activities
continued, in order to reach an increasing number of users
in Italy and abroad. In particular, the fondazionepirelli.org
website with the virtual tour fondazionepirelliexperience,
which has been restyled, was visited a total of approximately
97,900 times (+ 1.6% vs. 2020). The new hub www.storie-
di-corse.fondazionepirelli.org was published in Italian and
English, dedicated to Pirelli’s history in the world of racing,
tracing the company’s participation in car, motorbike and
veal competitions, highlighting the function of the track
as a research laboratory for tyre development. An online
editorial project with in-depth features on the great drivers
and the most legendary races, accompanied by a chronology
that, starting with the production of the first bicycle tubular
in 1890, arrives at today’s records. The monthly issues
of the Pirelli Foundation e-news newsletter reached an
average of 3,000 contacts. In addition, new podcasts were
produced on the topics of work and sustainable mobility,
and the “La Fondazione consiglia” section of the website was
implemented with the publication of 89 book reviews. As part
of the digital projects dedicated to promoting reading, the
reviews and video-interviews published on social channels
and Vimeo for the “Premio Campiello 2021”, an initiative
sponsored by Pirelli (post coverage: 36,295) are worthy of
note. The social accounts of the Pirelli Foundation (Facebook,
Instagram, Twitter, Pinterest) reached 14,145 followers
(+8.1% vs 2020) with total coverage of 4,686,125 (+94.8%
vs 2020). About 1,080 pieces of content were produced,
including 77 videos, also distributed through the Vimeo
channel, which had a total of 4,200 views. The Foundation
also joined the project “Nel tempo di una storia”, promoted
by Assolombarda and Museimpresa: a “digital story” of
Italian museums and business archives through the shots
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Report on Responsible Management and videos of photographer Simone Bramante, known as
Brahmino. Also in 2021 the Pirelli Foundation contributed to
the implementation of editorial plans for the Pirelli Corporate
channels dedicated to heritage.
The exhibition “Stories from the Skyscraper. I 60 anni del
Pirellone tra cultura industriale e attività istituzionali di
Regione Lombardia”, promoted by the Pirelli Foundation
and the Lombardy Region and set up in the Pirelli Tower, was
open to the public from 30 June to 30 November 2021 and
visited by about 1,000 people, including students, the general
public and specialists. The inauguration on 29 June was
attended by Marco Tronchetti Provera, Lombardy’s governor
Attilio Fontana and the president of the Regional Council
Alessandro Fermi. The project set up, together with the
dedicated website 60grattacielopirelli.org and its catalogue
published by Marsilio, was included in the ADI Design Index
2021, a publication that brings together the best Italian design
projects selected by the ADI Permanent Design Observatory.
Initiatives for the promotion of reading:
→ Campiello Junior Prize: as part of the sponsorship of the
Campiello Prize, the first edition of the Campiello Junior
Prize was inaugurated, an award for Italian works of fiction
and poetry for children between the ages of 10 and 14. To
promote the prize, which will be awarded in 2022, meetings
dedicated to Pirelli employees and school teachers from
all over Italy were organised, and on 10 December 2021
the Selection Ceremony for the three finalists of the Prize
was held live via streaming from the Pirelli HQ Auditorium.
The 2021 events related to Campiello Junior saw the
participation of 290 people, in presence and online.
→ Pirelli’s corporate libraries: the number of books in the
catalogue reached 8,500; more than 1,150 loans, over
1,600 movements and about 600 users were recorded. The
Biblionews newsletter, with reviews and periodic updates
on books and libraries, reaches around 400 subscribers;
PIRELLI EDUCATIONAL FOUNDATION: EDUCATIONAL
AND TRAINING PROJECTS FOR STUDENTS AND TEACHERS
→ Educational workshops for primary and secondary schools:
the online courses for the second quarter of the 2020/2021
school year and for the period October-December 2021
involved 3,236 students and 198 teachers from secondary
schools. For the latter, where requested, and after the
stipulation of an agreement, the training credits envisaged
by the PCTO, formerly known as Alternanza Scuola-lavoro,
were recognised. On 20 September, 60 teachers from
all over Italy took part in the online presentation of the
2021/2022 teaching programme. In addition, more than
200 teachers attended the 9th edition of the training
course for Cinema & History teachers, entitled “L’Europa
siamo noi”, organised in collaboration with Fondazione Isec
and Fondazione Cinema Beltrade. For the first time this
edition was also open to Pirelli employees.
→ Projects aimed at universities and postgraduate schools:
guided tours in person and online, involving students
from various educational institutions such as the Milan
Polytechnic (Faculty of Architecture) and the International
School of Comics in Milan.
→ Other educational projects: in January, in collaboration
with Pirelli Micromobility Solutions, two online meetings
were held with the students of the Future Class of the
Istituto Volta in Pescara, the first school in Italy to choose
Pirelli’s e-bike rental solution CYCL-e around; in November,
participation in the #ioleggoperché project with initiatives
dedicated to reading aimed at students.
Loans of materials to the external community, historical and
iconographic research and production of editorial content
in support of the brand: there were 134 requests relating
to: set-ups of plants, trade fairs, events, Pirelli offices in
Italy and abroad, loans of materials for exhibitions and
publications curated by other institutions, historical videos
and documentaries, interviews, theses by scholars and
researchers. Among the main ones: the launch of the new
Pirelli Collezione tyres for Mini brand cars, the creation
of the “Meisterstück Great Masters Pirelli Limited Edition
1872” pen as part of the collaboration between Pirelli Design
and Montblanc; Pirelli’s return to the WRC, Casa Pirelli,
F1 Paddock Club in Monaco and Monza, the relationship
between Pirelli and Vespa for the 75th anniversary of the
Piaggio scooter. In addition: exhibition on Pirelli and Bertone
in Ekaterinburg (Russia); documentary on the life of Enzo
Ferrari for Zenit Arte Audiovisive; exhibition dedicated to
Pirelli toys at the recently opened ADI Design Museum in
Milan; exhibition on Italian emigration to Argentina at the
Italian Cultural Institute in Buenos Aires (Argentina). Also in
2021, participation in seminars and conventions dedicated
to Pirelli’s corporate culture.
Initiatives to promote business culture: in total, more than
1,000 people took part in Fondazione Pirelli initiatives to
promote business culture, including: - Museocity, virtual
tours focusing on the relationship between Pirelli and Milan;
- Una Rete in viaggio and Archivi Aperti, digital and in-
person events as part of the programme promoted by Rete
Fotografia; - 20th Corporate Culture Week, with the initiatives
“Pirelli in movimento”, guided tours with readings at the
exhibition “Storie del Grattacielo” and tours of Fondazione
Pirelli, focusing on the theme of travel. The Foundation’s
guests included the visit of the United States Consul and
the Governor of the State of Guanajuato (Mexico). Also in
2021 the Foundation supported the P Lunga training course,
organised by the HR Department.
Processing and relocation of materials from the Historical
Archive, digital heritage management:
→ Historical Archive: about 1,600 documents catalogued
and published online, almost 58,000 digitised, 5,500
restored (photographic, iconographic and audiovisual
fonds, with a focus on rallies, product fairs, factory interiors,
welfare; product data sheets relating to the Research and
Development section). In 2021, a worksite-school was
set up in collaboration with the Brera Academy for the
restoration of part of the company’s photographic fund.
→ Development, within the Historical Archive database, of
a thematic thesaurus with about 800 entries to index
186
Pirelli Annual Report 2021 documents by subject, starting from 6 macro entries
(products, sports, vehicles and brands, headquarters and
plants, exhibitions and fairs, welfare) and with the possibility
of searching by subcategories.
→ Uploading of more than 6,500 digital assets (photographs,
videos, documents), for a total of 36,583 assets uploaded
to the Digital Asset Management platform for long-term
preservation of digital material.
PIRELLI HANGARBICOCCA™
Pirelli HangarBicocca™, which with its 15,000 square metres
is one of the largest exhibition venues in Europe, is a space
dedicated to the production, exhibition and promotion of
contemporary art, created in 2004 from the conversion of a
vast industrial plant into an art centre.
The aim of Pirelli HangarBicocca™ is to be a place open
to the city and the territory, an institution that combines
its exhibition activities with a series of initiatives aimed
at bringing contemporary art closer to an Italian and
international public made up of art experts, representatives
of the most important museum institutions, journalists from
the sector and the general press, as well as an equally vast
audience of enthusiasts, students, families and non-specialist
users.
Pirelli HangarBicocca™’s exhibition and cultural activities
underwent changes in 2021 due to the emergency situation
caused by Covid-19, which required closure in the early
months of the year. In addition, since 26 April the exhibition
space housing Anselm Kiefer’s The Seven Heavenly Palaces
has been granted to the Lombardy Region and transformed
into the Vaccinal Hub under the guidance of Asst Milano
Nord, until the end of October. In the six months it has been
open, the Vaccine Hub has administered around 346,000
vaccinations.
In line with its mission, Pirelli HangarBicocca™ nevertheless
guaranteed the realisation of solo exhibitions by leading
international artists and a programme that stood out for
its research and experimentation character and for the
particular attention paid to site-specific projects capable of
dialoguing with the unique characteristics of the space. The
artistic programme for 2021, curated by Artistic Director
Vicente Todolí, presented artists with a high international
profile, alternating solo exhibitions by established names with
exhibitions by emerging artists.
During 2021, a total of about 75,500 visitors (in attendance)
visited 4 large temporary exhibition projects, in addition to
the permanent installations I Sette Palazzi Celesti 2004-
2015 by Anselm Kiefer, La Sequenza by Fausto Melotti and
the Efêmero mural by OSGEMEOS:
→ Trisha Baga, “the eye, the eye and the ear” (from 20 February
2020, closure extended to 10 January 2021). This is the
artist’s first exhibition in an Italian institution and covers
her entire output. Pirelli HangarBicocca™ also co-produced
the work 1620 (2020), part of the exhibition itinerary. In
addition to five video installations, the exhibition presents
a rich selection of ceramics and the Seed Paintings (2017),
paintings composed using sesame seeds;
→ Chen Zhen, “Short-circuits” (from 15 October 2020, closing
date extended to 6 June 2021): the exhibition is conceived
as an immersive exploration of Chen Zhen’s complex
artistic research and brings together for the first time more
than twenty large-scale installations created between 1991
and 2000, the year of the artist’s untimely death:
→ Neïl Beloufa, “Digital Mourning” (from 17 February 2021,
closure extended to 9 January 2022): this is the first
major solo exhibition dedicated to Beloufa in Italy and
stems from a reflection on the concept of life in the
digital world. Presenting a wide selection of works, the
exhibition is configured as a new complex multimedia
installation that includes the work Screen Talk (2020),
also accessible through an interactive site, and the new
production Hosts (2021);
→ - Maurizio Cattelan, “Breath Ghosts Blind” (from 15 July
2021, closing date 20 February 2022): the artist has
conceived a specific exhibition project for the spaces
of Pirelli HangarBicocca™, offering a vision of collective
and personal history through a symbolic representation
of the cycle of life. Combining a new sculpture with the
reconfiguration of a historical work and the monumental
installation Blind (2021) produced for the occasion, the
exhibition develops in a sequence of distinct acts that
address existential concepts.
Throughout the year, the presentation of exhibitions was
accompanied by the publication of catalogues and specific
texts. On the occasion of Trisha Baga’s exhibition, her
first monograph (Skira Editore), the eye, the eye and the
ear (2020), was published. It was conceived as a science
fiction tale in the artist’s universe, bringing together literary,
scientific and artistic references by Trisha Baga alternating
with critical contributions.
For the exhibition “Short-circuits”, the homonymous catalogue
(Skira Editore) focuses on Chen Zhen’s (1955-2000)
research and installation practice in the period between 1991
and 2000. Together with an extensive documentation of the
exhibition, the book is enriched by critical and in-depth texts,
as well as a selection of preparatory sketches by the artist.
The Neïl Beloufa exhibition is accompanied by the first
monograph on the artist, People Love War Data & Travels
(2021), produced by After8 Books with the support of Pirelli
HangarBicocca™. The book, which opens with a chapter
devoted to the “Digital Mourning” exhibition, is arranged
thematically and illustrates the peculiarities of Beloufa’s
production methods, outlining the artist’s ten-year career in
over 500 pages.
Finally, in conjunction with Maurizio Cattelan’s solo exhibition,
two volumes have been published (Marsilio Editori): the
exhibition catalogue, Breath Ghosts Blind (2021), which
explores the themes of the exhibition, including memory, the
sense of individual and collective loss and the cycle of life, and
INDEX (2021), an anthology of all the conversations Maurizio
Cattelan has held for the last twenty years, Maurizio Cattelan
187
Report on Responsible Management has been conducting conversations for the past twenty years
in the guise of an interviewer, together with other artists and
creatives, including Alighiero Boetti, Massimo Bottura, Paola
Pivi, Tino Sehgal, Chloë Sevigny, Dana Schutz and Frank
Lloyd Wright.
In 2021 Pirelli HangarBicocca™ produced the second edition
of the Annual Journal, which contains a report, through
text and images, of the institution’s activities in relation to
the communities it serves. The new edition underlined the
institution’s digital turnaround: initially due to the pandemic
situation, this turnaround later took on a value of openness to
new communities, audiences and possible forms of content.
The Public Program 2021 was inaugurated with two events
dedicated to the Chen Zhen exhibition: a cycle of five digital
encounters in April on the relationship between Chinese art
and Europe, involving international scholars and curators
from China, Canada, the United States and Germany; a
conversation on the exhibition between MAXXI director Hou
Hanru and critic Marco Scotini on 26 May. For Neïl Beloufa’s
exhibition, an open-air screening of the artist’s films was
organised on the occasion of Miart, Milan’s contemporary
art fair (17 September) and a site-specific performance by
the Ballet de Marseille-(LA)HORDE (21 October) in direct
dialogue with the works on show.
The events produced to accompany the Maurizio Cattelan
exhibition also proved to be highly attractive: a concert with
the Orchestra Sinfonica Giuseppe Verdi of Milan and the
Ensemble Strumentale e Vocale laBarocca, conducted by
Ruben Jais (27 October), which gave rise to a co-production
with Sky channel of an unreleased film; an evening in
collaboration with Bookcity Milano (18 November) with
the presence of philosophers Felice Cimatti and Federico
Campagna and the preview screening of the video SPY by
Yuri Ancarani. The year ended on 2 December with a meeting
between the artist Maurizio Cattelan and the public for the
signing of copies of his latest publication INDEX.
In the early months of 2021, during the lockdown period and
when the schools were closed, the Education Department
proposed a series of new remote digital activities for
children between the ages of 6 and 10, involving movement,
dance, sound and music in collaboration with the duo Luci su
Marte and the musician Davide Tedesco; at the same time
the offer of live digital learning pathways continued with the
involvement of the Arts Tutors of Pirelli HangarBicocca™.
In June the Education Department presented “Edu Summer
2021 - Chronicles of Summer”, a month-long project in
collaboration with dancers Umberto Gesi and Roberta Piazza,
writer Francesco Gungui, the directing duo Kinonauts, artist
Rachele Maistrello, musician Davide Tedesco and illustrator
Marco Zambelli, which consisted of workshops and summer
camps involving more than 270 participants between the
ages of 6 and 12.
In October, the in-person creative courses with Arts Tutors
resumed with more than 25 activities and the involvement of
more than 230 participants aged 5 to 12. In December, the
special programme “Winter is coming!” was presented: three
in-person workshops designed to explore Cattelan’s exhibition
through creative processes linked to storytelling with the writer
Francesco Gungui, sound with the musician Davide Tedesco,
and movement and dance with the Luci su Marte duo, which
involved around 80 children aged between 6 and 10.
A new feature in 2021 was the creation of a new editorial
product: the Kids Guide, a guide with text and images designed
to accompany families in their exploration of the Museum.
In the autumn the School routes were enhanced with new
formats, with workshop activities taking place within the
exhibitions themselves, accompanied by new teaching tools
that teachers can use before, during and after their visit to
the Museum.
For adults there are live digital tours of the exhibition space
enriched by audio-visual contributions with the involvement
of Pirelli HangarBicocca™’s cultural mediators.
itself
In addition to the usual communication activities - through
social planning, WEB content, ADV, SEO, SEA - and press
activities (through the training of international journalists,
the creation of press strategies and press conferences)
in support of the promotion and dissemination of the
exhibitions and cultural events, during the course of 2021
Pirelli HangarBicocca™ intensified its digital storytelling
by strengthening its online activity of user involvement:
the “Bubbles” project, online since 9 March 2021, saw the
into a
pirellihangarbicocca.org website transform
digital environment conceived to explore the universe of
contemporary art and to rediscover, through a fluid navigation
experience, the extensive production of content created
is
by Pirelli HangarBicocca™. The website’s navigation
structured to encounter different types of “Bubbles”, veritable
“bubbles” of textual, video and audio material offering
different categories of experience. The new website aims
to facilitate the use and retrieval of information and to make
it easier to consult archive material, access in-depth topics
and participate in digital initiatives, including live events. Part
of the “Bubbles” project are the short films produced by
Pirelli HangarBicocca™ and dedicated respectively to Chen
Zhen’s artistic work, directed by Kinonauts, and to Maurizio
Cattelan’s exhibition, directed by Yuri Ancarani. Also the
podcast project, realised with Radio Rai Uno, which brought
together personalities, critics, thinkers, collectors on the
radio to describe the figure of Maurizio Cattelan, has become
part of the website, within the “Bubbles”.
On 9 November 2021, Pirelli HangarBicocca™’s 2022-
2023 programme was also presented inside Anselm Kiefer’s
permanent installation by Chairman Marco Tronchetti Provera
and Artistic Director Vicente Todolí: eight monographic
exhibitions dedicated to international artists.
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Pirelli Annual Report 2021 With the aim of automating and integrating communication
and marketing actions aimed at visitors and a wider target of
connoisseurs of Pirelli HangarBicocca™, the CRM (Customer
Relationship Management) project was also launched, which
will see its concrete development and implementation in 2022.
In 2021 the Pirelli HangarBicocca™ Membership programme
continued its online activities during the period when the
spaces were closed and froze the expiry dates of the
cards for the entire first half of the year, thus keeping the
community of Members on board. Since the reopening of the
spaces, activities resumed in presence and from September
2021 the programme took the form of an annual or biennial
subscription, thus unifying the expiry dates of all the cards.
In 2021 the Membership reached over 290 active Members.
There were 5 activities dedicated to Members in 2021: a
digital preview tour of Chen Zhen’s exhibition, a preview visit
to Maurizio Cattelan’s exhibition, two curatorial visits to Chen
Zhen and Neïl Beloufa’s exhibitions and an online activity
dedicated to children aged 6 to 10 focusing on Chen Zhen’s
exhibition. There were 17 dedicated newsletters.
During the year Pirelli HangarBicocca™ also hosted a number
of major events, including the presentation of the new Pirelli
Calendar, the HR Trends and Salary Research Convention by
Randstad Professionals, the Dinner for the 20 years of the
Fondazione Pupi Solidale Onlus and the Charity Dinner of
Progetto Itaca.
In 2021 the Pirelli HangarBicocca™ Bookshop was enlarged,
with the creation of a direct entrance to the point of sale
from the courtyard; the selection of editorial and exhibition
merchandise was expanded. Finally, starting in September,
the Pirelli HangarBicocca™ e-shop went online, with a large
limited artist
section devoted to exhibition catalogues,
editions and merchandising.
189
Report on Responsible Management Report on the
Corporate
Governance
and Share
Ownership of
Pirelli & C. S.p.A.
pursuant to article 123-bis TUF
191
A Beautiful Place
Glossary
Annual General Meeting: the shareholders’ meeting called
to approve the financial statements as of 31 December 2021.
Camfin: Camfin S.p.A., a company established under Italian
law controlled by Marco Tronchetti Provera through MTP&C,
with registered offices in Milan, Via Larga no. 2, Tax Code, VAT
and Milan-Monza Brianza-Lodi Companies Register number
00795290154.
ChemChina: China National Chemical Corporation Limited,
a company established under Chinese law, directly controlled
by Sinochem Holdings with registered offices at 62 West
Beisihuan Road, Haidian district, Beijing (People’s Republic
of China), registered with the State Administration of Industry
and Commerce of the People’s Republic of China, registration
number 100000000038808.
CNRC: China National Tire & Rubber Corporation Ltd., a
company established under Chinese law directly controlled
by ChemChina, with registered offices at 62 West Beisihuan
Road, Haidian district, Beijing (People’s Republic of China),
registered with the State Administration of Industry and
Commerce of the People’s Republic of China, registration
number 100000000008065.
Civil Code: the Italian Civil Code.
Corporate Governance Code: the edition of the Corporate
Governance Code for listed companies approved in January
2020 by the Corporate Governance Committee, in effect as of
1 January 2021, with information to be reported in the Reports
to be published in the course of 2022.
Board of Directors: the Board of Directors of Pirelli & C. S.p.A.
Consob: the National Commission for Companies and the
Stock Exchange.
Report Date: indicates 17 March 2022, the date on which the
Board of Directors approved this Report.
First Trading Day: 4 October 2017, being the date on which
the shares of the Company were admitted to trading on the
MTA - now Euronext Milan (EXM) - market organised and
managed by Borsa Italiana S.p.A.
Year: the financial year to which this Report relates.
Group: collectively Pirelli and its subsidiaries, as defined in art.
2359 of the Civil Code and art. 93 TUF.
IPO: the procedure for the listing of Pirelli shares completed
in October 2017 with the start of trading on the MTA.
Longmarch: Longmarch Holding S.à.r.l., a limited liability
company under Luxembourg law, with its registered office at
14, Rue Edward Steichen, 2540, Luxembourg (Grand Duchy
of Luxembourg).
Marco Polo: Marco Polo International Italy S.p.A., a company
established under Italian law with registered offices at via San
Primo 4, Milan, Tax Code, VAT and Milan-Monza Brianza-Lodi
Companies Register number 09052130961; the company
was terminated following the full demerger from Marco Polo,
to the benefit of MPI Italy, among others, with effect from 8
August 2018.
MPI Italy: Marco Polo International Italy S.r.l., a company
established under Italian law indirectly controlled by Sinochem
Holdings through Chemchina, with registered offices at via
San Primo 4, Milan, Tax Code, VAT and Milan Companies
Register number 10449990968.
MTP&C: Marco Tronchetti Provera & C. S.p.A., a company
established under Italian law with registered offices at via
Bicocca degli Arcimboldi 3, Milan, with Tax Code, VAT and
Milan-Monza Brianza-Lodi Companies Register number
11963760159.
Shareholders’ Agreement: the agreement signed on 1 August
2019 by ChemChina, CNRC, SRF, SPV HK 1, SPV HK 2, SPV
Lux, MPI Italy, MTP&C. with effect from 28 April 2020. The
essential content of the Shareholders’ Agreement, to which
reference is made for further information, is available on the
Website (www.pirelli.com).
PFQY: PFQY S.r.l., a company established under Italian law
controlled by SRF, with registered offices at via San Primo 4,
Milan, with Tax Code, VAT and Milano-Monza Brianza-Lodi
Companies Register number 11324920963.
Pirelli: Pirelli & C. S.p.A., a company established under Italian
law with registered offices at viale Piero e Alberto Pirelli 25,
Milan, with Tax Code, VAT and Milan-Monza Brianza-Lodi
Companies Register number 00860340157.
Pirelli International: Pirelli International plc (now Pirelli
International Limited), a company established under British
law controlled by Pirelli, with registered offices in Derby
Road, Burton on Trent (United Kingdom), registered with the
Companies House of England and Wales, number 04108548.
Pirelli Tyre: Pirelli Tyre S.p.A., a company established under
Italian law controlled by Pirelli, with registered offices at viale
Piero e Alberto Pirelli 25, Milan, Milan-Monza Brianza-Lodi
Companies Register number 07211330159.
Pirelli International Treasury: Pirelli International Treasury
S.p.A., a company established under Italian law controlled by
Pirelli, with registered offices at viale Piero e Alberto Pirelli 25,
Milan, with Milan-Monza Brianza-Lodi Companies Register
number 10523850963.
Board Regulations: the Regulations, adopted by the Board of
Directors of Pirelli & C. S.p.A. on 22 June 2020, which govern
the methods of organisation and internal functioning of the
Board itself, in line with the recommendations of the Corporate
Governance Code.
Issuers’ Regulation: the Regulation approved by Consob
192
Pirelli Annual Report 2021 resolution 11971/1999 (as amended) on the subject of issuers.
Related Parties Regulation: the Regulation issued by Consob
by way of resolution no. 17221 of 12 March 2010 on related-
party transactions, as subsequently amended.
Report: this report on corporate governance and the ownership
structure prepared pursuant to art. 123-bis TUF.
NFD Report: constitutes the Consolidated Non-Financial
Disclosure pursuant to Legislative Decree no. 254 of
30 December 2016, reported in the chapter “Report on
Responsible Management of the Value Chain”.
Remuneration Report: the report prepared pursuant to art.
123-ter TUF.
Sinochem Holdings: Sinochem Holdings Corporation Ltd., a
Chinese state-owned enterprise (SOE), under the supervision
of the State-owned Assets Supervision and Administrative
Commission of the State Council (SASAC) of the People’s
Republic of China, with its registered office at Xiong’an New
District (People’s Republic of China), No. 001, Enterprise
Headquarters Zone, Start-up Area, Hebei District, registered
with the State Administration of Industry and Commerce of the
People’s Republic of China under no. 91133100MA0GBL5F38.
Sinochem Holdings – including through ChemChina and other
subsidiaries of ChemChina, including MPI Italy – indirectly
controls the Company pursuant to art. 93 of the Consolidated
Law on Finance (TUF).
Website: the institutional website of Pirelli containing inter alia
information about the Company, can be found at the Internet
domain www.pirelli.com.
Company: Pirelli & C.
SPV HK1: CNRC International Limited, limited company
under Hong Kong law (People’s Republic of China) indirectly
controlled by Sinochem Holdings through Chemchina, with
registered offices at RMS 05-15, 13A/F South Tower World
Finance CTR Harbour City, 17 Canton Rd TST KLN, Hong Kong
(People’s Republic of China), Hong Kong Companies Register
number 2222516.
SPV HK2: CNRC International Holding (HK) Limited, limited
company formed under the laws of Hong Kong (People’s
Republic of China) indirectly controlled by Sinochem Holdings
through ChemChina, with registered offices at RMS 05-15,
13A/F South Tower World Finance CTR Harbour City, 17
Canton RD TST KLN, Hong Kong (People’s Republic of China),
Hong Kong Companies Register number 2228664.
SPV Lux: Fourteen Sundew S.à.r.l., a limited liability company
(société à responsabilité limitée) under Luxembourg law
indirectly controlled by Sinochem Holdings through ChemChina,
with registered offices at rue Robert Stümper 7A, L-2557,
Luxembourg (Grand Duchy of Luxembourg), with Luxembourg
Companies and Commerce Register number B-195473.
Chinese law with registered offices at F210-F211, Winland
International Finance Center Tower B, 7 Financial Street,
Xicheng, Beijing (People’s Republic of China), registered
with the State Administration of Industry and Commerce
of the People’s Republic of China, registration number
100000000045300(4-1).
Articles: the Articles of Association of Pirelli & C., available
on the Website.
TUF: Legislative decree 58 of 24 February 1998, as
subsequently amended (the Consolidated Law on Finance).
Introduction
The Report presents the corporate governance system
adopted by the Company. This system is consistent with the
principles contained in the Corporate Governance Code
adopted by the Company.
Pirelli is aware that an efficient system of corporate
governance is an essential element for achieving the objective
of sustainable value creation.
1. Company Profile
Pirelli, with its 30,700 employees and revenues of around
Euro 5.3 billion in 2021, ranks among the principal global
manufacturers of tyres and supplier of ancillary services,
being the only operator in the sector exclusively specialised
in the Consumer segment (tyres for cars, motorcycles and
bicycles), with a globally-recognised brand. The Company
has a distinctive positioning with regard to High Value tyres,
which are manufactured to achieve the highest levels of
performance, safety, quietness and road grip, with significant
input from technology and/or customisation (i.e. ≥18”,
Specialities, Super Specialities and Premium Motorcycle
tyres). In addition, the Company currently holds a leadership
position in the Car Prestige tyres segment, and in the radial
segment of the motorcycle tyre replacement market. Pirelli
is also a leader in Europe, China and Brazil in the Car ≥18”
tyre market in the replacement channel. For a profile of the
issuer see also the Company’s website. In its leadership of the
Company, Pirelli’s Board of Directors pursues the objective of
sustainable success by:
→ drawing up a sustainability plan which integrates the
Company’s strategic plans (for more details, see the NFD
Report);
→ including, as part of its Remuneration Policy, ESG indicators
for measuring the Company’s management performance
in its medium/long-term remuneration plans (for more
details see the Remuneration Report);
→ appointing a director responsible of sustainability topics
SRF: Silk Road Fund Co., Ltd., a company established under
(for more details see paragraph 9.7);
193
Report on the Corporate Governance → periodically assessing, on an ongoing basis, the risks associated with business activities so as to create long-
term value for the benefit of shareholders (for more details see paragraph 9);
→ adopting a specific policy for dialogue with shareholders and stakeholders in the financial market in which
the Company operates (for further details see paragraph 14.1);
→ setting up a Board Committee and supporting it in evaluating and making decisions in relation to the internal
control and risk management system, as well as analysing sustainability issues that are important for long-
term value creation (for further details see paragraph 9.2)72.
For the sake of completeness, it should be noted that, pursuant to the Corporate Governance Code, the Company
falls within the definition of “companies with concentrated ownership” and “large company”. The Company did
not use any flexibility options when applying the Corporate Governance Code.
1.1. MODEL OF CORPORATE GOVERNANCE
Pirelli uses the traditional governance and control system. The following diagram summarises the Company’s
current governance structure.
AUDIT RISKS
SUSTAINABILITY
AND CORPORATE
GOVERNANCE
COMMITTEE
RELATED-PARTIES
TRANSACTIONS
COMMITTEE
REMUNERATION
COMMITTEE
APPOINTMENTS
AND
SUCCESSIONS
COMMITTEE
STRATEGIES
COMMITTEE
EXTERNAL
AUDITOR
SHAREHOLDERS
MEETING
BOARD
OF DIRECTORS
CEO
EXECUTIVE
MANAGEMENT
BOARD OF
STATUTORY
AUDITORS
SUPERVISORY
BODY
The statutory auditing of the accounts is entrusted to PricewaterhouseCoopers S.p.A., an auditing firm included
in the register of accounting auditors.
72 The Company’s Board of Directors had already envisaged the support from a specific Board
Committee for the issues referred to in this point prior to the publication of the Corporate Governance
Code and, therefore, did not deem it necessary to set up a new specific Committee.
194
Pirelli Annual Report 2021 2. Information on the
ownership structure
2.1. STRUCTURE OF SHARE CAPITAL
On the Report Date, the issued share capital of Pirelli amounts
to Euro 1,904,374,935.66 fully paid, and is represented by
1,000,000,000 ordinary shares without nominal value.
Each share grants the right to one vote. There are no other
categories of shares.
The extraordinary shareholders’ meeting of 24 March 2021
resolved to increase the share capital for cash for payment,
in a divisible manner, with exclusion of the option rights
pursuant to art. 2441, subsection 5 of the Italian Civil Code,
for a total maximum amount, including any premium, of Euro
500,000,000.00, to service the conversion of the “EUR 500
million Senior Unsecured Guaranteed Equity-linked Bonds
due 2025”, to be paid up in one or more tranches by the issue
of ordinary shares of the Company with regular dividend
entitlement, for a maximum amount of Euro 500,000,000.00,
exclusively to service the bond issued by the Company named
“EUR 500 million Senior Unsecured Guaranteed Equity-linked
Bonds due 2025”, in accordance with the criteria determined
by the related Regulation, without prejudice to the fact that the
final deadline for subscription of the newly issued shares is
established as 31 December 2025 and that if, as of that date,
the share capital increase has not been fully subscribed it will
in any case be intended as increased by an amount equal to the
subscriptions collected and as of that date, with the specific
authorisation for the directors to issue the new shares as they
are subscribed. No parts of shares will be issued or delivered
and no cash payment or adjustment will be made in lieu of
said parts.
The conversion price of the bonds is Euro 6.235.73
Additionally, the Articles do not provide for the possibility of
increased voting rights or the issue of shares with multiple
voting rights.
2.2. SIGNIFICANT SHAREHOLDINGS OF CAPITAL
The Company is indirectly controlled, pursuant to art. 93 of
the TUF, by Sinochem Holdings74 through ChemChina which,
in turn, indirectly holds the shareholding through CNRC and
other subsidiaries of the latter, including MPI Italy, which
directly holds the shareholding.
Based on the communications received by the Company as
at the Report Date pursuant to art. 120 TUF, or from other
information available to the Company, the major direct and
indirect shareholdings of Pirelli capital are indicated in Table 1,
appended to this Report.
2.3. MANAGEMENT AND COORDINATION ACTIVITIES
In its meeting on 31 August 2017, the Board of Directors noted
that, as of the First Trading Day, Pirelli is not subject to any of the
activities typically involved in management and coordination by
direct or indirect controlling shareholders or other companies
or entities. These include but are not limited to:
→ Pirelli conducts relations with customers and suppliers in
full autonomy without any external interference;
→ Pirelli prepares the strategic, industrial, financial and/or
budget plans of the Company or the Group independently;
→ Pirelli is not subject to any group regulations;
→ no organisational-functional link exists between Pirelli on
the one hand and MPI Italy and the companies that control
it on the other;
→ MPI Italy, CNRC, ChemChina and/or Sinochem Holdings
have not carried out any deeds, adopted any resolutions or
made any communications that might cause reasonable
belief that the decisions of Pirelli are in some way imposed
or required by MPI Italy, CNRC, ChemChina and/or
Sinochem Holdings;
→ MPI Italy, CNRC, ChemChina and/or Sinochem Holdings
do not centralise treasury management activities or other
financial support or coordination functions;
→ MPI Italy, CNRC, ChemChina and/or Sinochem Holdings
do not issue directives or instructions – and in any case
would not coordinate initiatives – concerning the financial
and borrowing decisions of Pirelli;
→ MPI
Italy, CNRC, ChemChina and/or Sinochem
Holdings do not issue directives regarding any special
transactions carried out by Pirelli including, for example,
the listing of financial instruments, acquisitions, disposals,
concentrations, contributions, mergers, spin-offs etc.;
→ MPI Italy, CNRC, ChemChina and/or Sinochem Holdings
do not make any crucial decisions regarding the operating
strategies of Pirelli or formulate group strategic guidelines.
The Board of Directors has periodically reiterated these
assessments, most recently at its meeting of 17 March 2022.
Conversely, Pirelli exercises direction and coordination of
numerous subsidiaries, having made the relevant publication
where necessary.
2.4. RESTRICTIONS ON THE TRANSFER OF SECURITIES:
SECURITIES THAT CARRY SPECIAL RIGHTS; EMPLOYEE
SHARE OWNERSHIP: THE MECHANISM FOR EXERCISING
VOTING RIGHTS; RESTRICTIONS ON VOTING RIGHTS
The Articles do not impose any restrictions on the transferability
of the shares issued by the Company.
73 Subject to adjustments and except in cases where the conversion price has to be calculated differently
than what is indicated in the Bond Regulations.
74 On 10 September 2021, as part of the joint restructuring announced by Sinochem Group Co., Ltd.
(“Sincohem Group”) and ChemChina, the companies Sinochem Group and ChemChina came under
the shared control of Sinochem Holdings Corporation Ltd. (“Sinochem Holdings”), which from that date
became the “ultimate parent company” of ChemChina (and therefore also of Pirelli).
No securities have been issued that carry special rights of
control, nor the Company has adopted the option to increase
voting rights.
195
Report on the Corporate Governance With regard to the shares owned by employees, there are no
specific procedures or restrictions governing the exercise of
their voting rights.
There are no mechanisms that restrict the voting rights of
shareholders, except for the terms and conditions governing
the exercise of the right to attend and vote at Shareholders’
Meetings, as discussed in the next paragraph 15 of the Report.
2.5. SHAREHOLDERS’ AGREEMENTS
For more information on the provisions contained in the
shareholders’ agreements referred to herein, please refer
to the relevant extracts available on the Website, published
pursuant to Article 130 of the Issuers’ Regulation.
Below is a brief summary of these agreements.
2.5.1. SHAREHOLDERS’ AGREEMENT
The agreement (expiring on 28 April 2023) was entered into
on 1 August 2019 between ChemChina, CNRC, SPV HK1,
SPV HK2, SPV LUX, MPI Italy, SRF, MTP&C and Camfin
(the “Shareholders’ Agreement”) and came into effect
on 28 April 2020.
By signing the Shareholders’ Agreement, the parties
(i) reaffirmed the stability of the partnership between
ChemChina/CNRC, SRF and Camfin/ MTP&C, in line with
the governance principles previously expressed in the
shareholders’ agreement signed on 28 July 2017, which aims
to preserve Pirelli’s entrepreneurial culture by leveraging the
long-term retention of management, and is inspired by the
best international practice of listed companies; (ii) confirmed
the role of ChemChina and Camfin/MTP&C as stable Pirelli
shareholders with the latter maintaining the shareholding
currently held in Pirelli at a level of more than 10% of the relative
capital for the entire duration of the Shareholders’ Agreement;
(iii) confirmed the central role played by Marco Tronchetti
Provera, in his capacity as the Company’s Executive Vice
Chairman and Chief Executive Officer: (a) in his leadership of
Pirelli’s top management, ensuring the continuity of Pirelli’s
managerial culture; and (b) in the appointment of his successor,
with the implementation of the succession procedure that
must be completed by the end of October 2022 and, therefore,
a few months before the renewal of Pirelli’s Board of Directors
scheduled for spring 2023.
The Shareholders’ Agreement contains certain provisions
regarding the composition of the Board of Directors and
Committees, which are described in paragraphs 4.3 and
6 below.
As of the Report Date, MPI Italy, Camfin (following the
Contribution described in paragraph 2.5.3 below) and PFQY
(the latter following the SPV Lux Assignment described in
the following paragraph) contributed approximately 60% of
Pirelli’s share capital to the agreement.
MPI Italy, as per the previous shareholder agreements signed
by the parties75 – which, inter alia, entailed the exclusion of
SPV HK2 from said chain of control (the “Reorganisation”)
– the partial non-proportional and asymmetrical split of MPI
Italy in favour of PFQY was finalised on 29 September 2020.
As a result, PFQY was assigned, inter alia, 90,212,508 Pirelli
shares, making up 9.02% of the share capital (the “SPV Lux
Allocation”). Following the above-mentioned split:
→ the Equity Investment Agreement for Co-Involvement
and Investment in Acquisition of Pirelli (the “Investment
Agreement”), the Supplemental Agreement to the
Investment Agreement, as amended on 28 April 2020, and
the Second Supplemental Agreement to the Investment
Agreement entered into on 5 June 2015, 28 July 2017 and 7
August 2018 respectively between CNRC, ChemChina and
SRF no longer have any effect, since the co-participation
– of ChemChina and CNRC on one hand, and SRF on the
other – in Marco Polo has ceased to exist and, as such, SRF
became a direct shareholder of Pirelli & C. S.p.A. through
PFQY;
→ the parties updated the essential information pursuant to
art. 130 of the Issuers’ Regulation relating to the Revised
Acting-in-Concert Agreement entered into on 28 April
2020 by CNRC and SRF, which superseded and replaced
the Acting-in-Concert Agreement entered into by the same
parties on 28 July 2017, which contains shareholders’
agreements relating to pursuant to which SRF assumed a
lock-up commitment and a commitment to vote at Pirelli
Shareholders’ Meetings in accordance with CNRC’s
voting instructions, in relation to a number of Pirelli shares
deriving from the SPV Lux Assignment making up 5% of
Pirelli’s share capital.
On 29 March 2021, SRF and CNRC signed the “Amended and
Restated Acting-in-concert agreement”, which supersedes
and replaces the previous “Revised Acting-in-concert
agreement” signed by the parties on 28 April 2020, so that the
shareholders’ agreements can take in account the resolutions
passed by the Shareholders’ Meeting of Pirelli & C. S.p.A. on
24 March 2021 regarding the convertibility of the bond called
“EUR 500 million Senior Unsecured Guaranteed Equity-linked
Bonds due 2025”.
2.5.3. THE LONGMARCH AGREEMENT
On 13 May 2020, Camfin and Longmarch finalised the
signing of an agreement (“2020 Investment Agreement”)
which contains, among other things, some shareholders’
agreements relating to a potential equity investment,
pursuant to art. 119 of the Issuers’ Regulation, consisting
of a “repurchase agreement” entered into by Longmarch
and ICBC Standard Bank Plc (“Repurchase Agreement”)
regarding Longmarch’s right to repurchase a total number of
76,788,672 of Pirelli shares, corresponding to approximately
7.68% of Pirelli’s share capital (“Pirelli Shares Subject to the
Repurchase Right”).
2.5.2. ACTING IN CONCERT
As part of a broader reorganisation of the chain of control of
75 See previous Report on the corporate governance and share ownership for the year 2020 available on
the Website.
196
Pirelli Annual Report 2021 It should be noted that, Camfin and Longmarch entered
into a further agreement on 30 June 2021, amending the
2020 Investment Agreement, which relates to Longmarch’s
entry into Camfin’s share ownership structure (“2021
Investment Agreement”), by virtue of which the share
capital increase resolved by Camfin (reserved for Longmarch
and fully subscribed by the latter through the contribution
of 40,000,000 Pirelli shares – the “Contribution”) was
completed on 7 October 2021. Following the Contribution:
(i) Camfin’s shareholding in Pirelli amounts to approximately
14.1% of Pirelli’s share capital, in addition to a potential
shareholding of approximately 4.6% held through financial
instruments known as “call spreads”; and (ii) Longmarch
holds a shareholding in Pirelli of approximately 3.68%. It
should be noted that, with the signing of the 2021 Investment
Agreement, the commitments previously undertaken by
Longmarch under the 2020 Investment Agreement in relation
to its shareholding in Pirelli of approximately 3.68% remain in
place and, in particular, to exercise its voting rights at the Pirelli
Shareholders’ Meeting in accordance with the outcome of the
discussions concluded between the Parties and, in the event
of disagreement, in accordance with the voting instructions
provided by Camfin.
Furthermore, except with Camfin’s prior written consent,
Longmarch has committed not to transfer or assign the
Repurchase Agreement (including its related rights) or any
Pirelli Shares Subject to the Repurchase Right for a period
of three years from the date of signing the Longmarch
Agreement.
As expressly stipulated in the 2020 Investment Agreement, as
amended by the 2021 Investment Agreement, the provisions
therein (i) do not regulate, nor influence, nor have any impact
whatsoever on Pirelli’s governance, and (ii) shall in no way
be deemed to be connected with or related to, nor have any
effect and/or influence whatsoever on the Renewal of the
Shareholders’ Agreement referred to in paragraph 2.5.1 above.
2.6. CHANGE OF CONTROL CLAUSES
The most significant contracts containing clauses of this type
are summarised below.
2.6.1. SYNDICATED LONG TERM LOAN
On 13 June 2017 Pirelli, on the one hand, and Banca IMI S.p.A.,
J.P. Morgan Limited and The Bank of Tokyo-Mitsubishi UFJ,
Ltd., in their roles as mandated lead arrangers, bookrunners,
underwriters and global coordinators signed a mandate letter
regarding the grant of an unsecured loan to Pirelli and Pirelli
International (the “Beneficiaries”) originally for a maximum
amount of Euro 4,200,000,000 (the “New Loan”).
The New Loan agreement signed on 27 June 2017 (as
subsequently amended) states, inter alia, that the Beneficiaries
shall repay early the part of the New Loan made available by
each lender should certain events occur, including changes in
the control structure of Pirelli.
solely in one of the following circumstances: (i) ChemChina
ceases to hold, directly or indirectly, individually or together
with Camfin or another company controlled by Marco
Tronchetti Provera or his close family members, more than
25% of Pirelli post IPO; or (ii) ChemChina ceases to be, directly
or indirectly, individually or together with Camfin or another
company controlled by Marco Tronchetti Provera or his close
family members, the relative majority holder of the voting
rights in Pirelli (i.e. ceases to hold more voting rights than other
parties that act individually or together); or (iii) any other party
(or parties acting together) appoints or removes the majority
of the Board of Directors.
Any takeover by Camfin (or another company directly or
indirectly controlled by Marco Tronchetti Provera or his
close family members) as the parent company of Pirelli
would not represent a change of control on condition that
certain requirements are met, including the requirement
for Marco Tronchetti Provera or a person designated by
him to be the Chairman and the CEO of that company and
CEO of Pirelli.
2.6.2. PT EVOLUZIONE TYRES JOINT VENTURE
On 24 April 2012, Pirelli Tyre and PT Astra Otoparts tbk,
an Indonesian company, signed a Joint Venture Agreement
in relation to PT Evoluzione Tyres, an Indonesian company
incorporated on 6 June 2012 and operating in the production
of motorcycle tyres in the plant of Subang, West Java.
Pursuant to this contract, in the event of a change in the
ownership structure of one of the shareholders that is deemed
to be a change of control event, a put&call procedure could
be activated that, in the extreme case, might lead to the
acquisition by Pirelli Tyre of the entire equity investment held
by PT Astra Otoparts tbk in PT Evoluzione Tyres, with the
consequent termination of the joint venture agreement.
2.6.3. SUPPLY CONTRACT WITH BEKAERT
The Company has a contract for the supply of steelcord with
Bekaert, to which the Company sold the steelcord business unit
in 2014, also in consideration of the contractual peculiarities
connected with the sale transaction.
The contract with Bekaert includes a change of control clause
whereby Bekaert has the right, inter alia, to withdraw within 90
days after becoming aware of a situation in which a third party
acquires control of Pirelli.
2.6.4. EMTN PROGRAMME AND NOTES ISSUED IN 20186
On 21 December 2017, in order to ensure the constant
optimisation of the financial structure of the Company,
the Board of Directors (i) approved an EMTN programme
(Euro Medium Term Note Programme) for the issue of non-
convertible, senior unsecured bonds for a maximum amount
of Euro 2 billion and (ii) in the context of that programme,
authorised the issue by 31 January 2019 of one or more bonds
In particular, this change of control clause may be invoked
76 For completeness, it is noted that in the context of the company’s refinancing strategy the Board
approved a new EMTN (Euro Medium Term Note) program for the issue of senior non-convertible
unsecured to a maximum value of Euro 2 billion replacing the previous EMTN, currently being finalised.
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Report on the Corporate Governance to be placed with institutional investors for a maximum total
amount of Euro 1 billion. This resolution was subsequently
supplemented on 22 June 2018, increasing the existing
authorisation by a further Euro 800 million - bringing the total
amount to a maximum of Euro 1.8 billion - and extending its
time horizon to 31 December 2019 (inclusive).
Pursuant to the EMTN Programme, bondholders that subscribe
for bonds issued under the programme will be entitled to
request the early reimbursement of their securities (put option)
in the case of a Change of Control event.
In particular, the change of control clause may only be
invoked in one of the following circumstances, except in
specific cases permitted under the EMTN Programme: (i)
ChemChina ceases to hold, directly or indirectly, individually
or together with Camfin or another company controlled by
Marco Tronchetti Provera or his close family members, more
than 25% of Pirelli; or (ii) ChemChina ceases to be, directly
or indirectly, individually or together with Camfin or another
company controlled by Marco Tronchetti Provera or his close
family members, the relative majority holder of the voting
rights in Pirelli (i.e. ceases to hold more voting rights than
other parties that act individually or together); or (iii) any other
party (or parties acting together) appoints or removes the
majority of the Board of Directors.
Any takeover by Camfin (or another company directly or
indirectly controlled by Marco Tronchetti Provera or his close
family members) as the parent company of Pirelli, in place
of ChemChina, would not give rise to a change of control
on condition that certain requirements are met, including
the requirement for Marco Tronchetti Provera or a person
designated by him to be the CEO of both that company and
Pirelli.
Under the EMTN Programme, on 25 January 2018, Pirelli
issued a new, unrated 5-year fixed-rate bond guaranteed
by Pirelli Tyre for an original total nominal amount of Euro
600 million (an amount that has now reduced to EUR 553
million following the Company’s buybacks on the market)
called “Pirelli & C. S.p.A. €600,000,000 1.375% Guaranteed
Notes due 2023”. This security is listed on the Luxembourg
Stock Exchange.
The above-mentioned Change of Control clause applies to
the new note.
For the sake of completeness, on 26 March 2018 Pirelli issued
an unrated variable-rate bond secured by Pirelli Tyre for a total
nominal amount of Euro 200 million due in September 2020
called “Pirelli & C. S.p.A. €200,000,000 Floating Rate Notes
due 2020”. This bond was repaid in full at maturity.
2.6.5. SCHULDSCHEIN: MULTITRANCHE LOAN
FOR A TOTAL OF EURO 525,000,000
On 26 July 2018 Pirelli concluded a “schuldschein” loan
- guaranteed by Pirelli Tyre - for a total of Euro 525 million
(as subsequently amended, the “Schuldschein”), divided as
follows: (i) Euro 82 million maturing in 2021 (fully repaid in
advance in January 2021); (ii) Euro 423 million maturing in
2023; and (iii) Euro 20 million maturing in 2025.
The Schuldschein prescribes, inter alia, that Pirelli must repay
the loan in advance, if certain events occur, including the case
of a change in the control structures of Pirelli, according to
terms and conditions that are the same as those of the EMTN
Programme.
2.6.6. 2019 BILATERAL LOAN WITH INTESA SANPAOLO
On 22 January 2019, the Board of Directors authorised Pirelli
to enter into a medium-long term variable-rate loan guaranteed
by Pirelli Tyre, in the amount of Euro 600 million, with Intesa
Sanpaolo S.p.A. as the lending bank, and Banca IMI S.p.A. as
the agent bank and organising bank (the “Transaction”).
The loan agreement (as subsequently amended) signed on
24 January 2019 in relation to the Transaction prescribes,
inter alia, that Pirelli must repay the Transaction early should
certain events occur, including changes in the control
structure of Pirelli.
Specifically, the change of control clause may only be activated
in the case in which a subject or subjects acting in concert
(and without prejudice to specific cases permitted under the
loan agreement) other than ChemChina, Camfin, MTP&C (or
any other company controlled by Marco Tronchetti Provera
or his close family members) and/or their subsidiaries and/
or any person or persons acting in concert with one of them
should (a) hold a relative majority of votes in Pirelli; and (b)
appoint or remove the majority of the members of the Board
of Directors of Pirelli.
For clarification, the loan contract states that there will be no
change of control if Camfin, MTP&C (or any other company
controlled by Marco Tronchetti Provera or by one or more of
his close family members) participate, directly or indirectly,
in the control of Pirelli, or is entitled, by virtue of contractual
agreement, directly or indirectly, individually or in concert with
one or more subjects, to designate the CEO of Pirelli.
2.6.7. LICENCE AGREEMENT WITH AEOLUS
On 28 June 2016, Pirelli Tyre concluded an agreement
(subsequently amended on 31 January 2019) with Aeolus Tyre
Co. Ltd, to licence patents and know-how for the production and
sale of industrial tyres that expires on 31 December 2030, with
automatic renewal unless cancelled by the parties. Pursuant
to the agreement, either party has the right to terminate the
agreement in advance, by notice to the other party, if CNRC
should cease to be, directly or indirectly, the single largest
shareholder of Pirelli.
2.6.8. BILATERAL LOAN WITH MEDIOBANCA
On 1 August 2019, the Board of Directors approved the
stipulation by Pirelli of a two-year variable rate loan of Euro
125 million with Mediobanca – Banca di Credito Finanziario
S.p.A. (the “Loan”).
The loan agreement signed on 2 August 2019 stipulates,
inter alia, that the Pirelli must repay the Loan early should
certain events occur, including changes in the control
structure of Pirelli.
198
Pirelli Annual Report 2021 Specifically, the change of control clause may only be
triggered (except for the specific cases permitted under
the loan agreement) where an entity, or entities, acting in
concert, other than ChemChina, Camfin, MTP&C (or any
other company controlled by Marco Tronchetti Provera or
his close family members) and/or their subsidiaries and/or
any person or persons acting in concert with one of them
(a) hold a relative majority of votes in Pirelli; and (b) appoint
or remove the majority of the members of Pirelli’s Board of
Directors.
For clarification, the loan contract states that there will be no
change of control if Camfin, MTP&C (or any other company
controlled by Marco Tronchetti Provera or by one or more of
his close family members) participate, directly or indirectly,
in the control of Pirelli, or is entitled, directly or indirectly,
individually or in concert with one or more subjects, to
designate the CEO of Pirelli.
2.6.9. EUR 800 MILLION “SUSTAINABLE” CREDIT LINE
On 31 March 2020, Pirelli signed a new credit line in the
amount of Euro 800 million, guaranteed by Pirelli Tyre, with a
pool of leading Italian and international banks, with a maturity
of five years. The new bank facility is entirely sustainable, i.e.
it is subject to economic and environmental sustainability
targets.
The New Loan agreement states, inter alia, that Pirelli shall be
required to make early repayment of the part made available
by each lender should certain events occur, including changes
in Pirelli’s control structure.
Specifically, the change of control clause may only be
triggered (except for the specific cases permitted under the
loan agreement) where an entity or entities acting in concert,
other than ChemChina, Camfin, MTP&C (or any other company
controlled by Marco Tronchetti Provera or his family members)
and/or their subsidiaries and/or any person or persons acting in
concert with one of them (a) hold a relative majority of votes in
Pirelli; and (b) appoint or remove the majority of the members
of Pirelli’s Board of Directors.
For clarification, the loan contract states that there will be no
change of control if Camfin, MTP&C (or any other company
controlled by Marco Tronchetti Provera or by one or more of
his family members) participate, directly or indirectly, in the
control of Pirelli, or is entitled, directly or indirectly, individually
or in concert with one or more subjects, to designate the
CEO of Pirelli.
2.6.10. EQUITY-LINKED BOND CALLED “EUR 500 MILLION SEN-
IOR UNSECURED GUARANTEED
EQUITY-LINKED BONDS DUE 2025”
On 22 December 2020, Pirelli completed the placement
reserved for institutional investors of an equity-linked bond
with a nominal amount of EUR 500,000,000, maturing on 22
December 2025, called “EUR 500 million Senior Unsecured
Guaranteed Equity-linked Bonds due 2025” guaranteed by
Pirelli Tyre. The bonds were admitted for trading on the Vienna
MTF – a multilateral trading facility managed by the Vienna
Stock Exchange.
As resolved by the Shareholders’ Meeting on 24 March 2021,
the bonds, which are non-interest-bearing, will be able to be
converted into ordinary shares of Pirelli subject to the approval
by the latter’s extraordinary Shareholders’ Meeting of a capital
increase, with the exclusion of option rights pursuant to art.
2441, paragraph 5, of the Italian Civil Code, to be reserved
exclusively to service the conversion of said bonds.
The rules of the loan contained in the Trust Deed, including
the Terms & Conditions (the “Regulations”) provide, inter
alia, that during the period of time set out in the Regulations,
each bondholder shall be granted, at their choice, if a certified
Company change of control should occur or if the free float
of the Company’s ordinary shares (calculated as specified in
the Regulations) should drop below a pre-set threshold and
should remain there for a certain number of open market
days from the first day on which it has dropped below such
level (so called free float event), alternatively: (i) the right to
request early reimbursement at the bonds’ nominal value,
by exercising a put option; or (ii) acknowledgement of a new
conversion price (if applicable even regulated based on
the so-called cash settlement amount mechanism), lower
than the original and based on the time between the event
and the bonds expiring; all based on terms and procedures
established in the Regulations.
In particular, the change of control can only be triggered (except
in specific cases permitted under the Regulation) if any entity,
other than ChemChina, Sinochem Group, SRF, Camfin, MTP&C
(or any other company controlled by Mr Marco Tronchetti
Provera or his family members) and/or their subsidiaries
and/or any person or persons acting in concert with some of
them, acquires the absolute majority of the shares with voting
rights following a public offering to the shareholders, such
that they hold or control the absolute majority of the voting
rights in Pirelli; or if any person or persons acting in concert
with any of them, other than ChemChina, Sinochem Group,
SRF or Camfin, MTP&C, or any other company controlled by
Mr Marco Tronchetti Provera or his family members, and/or
by their subsidiaries and/or by any person or persons acting
in concert with the latter, holds/controls the absolute majority
of the voting rights of Pirelli.
For clarification, the loan contract states that there will be no
change of control if Camfin, MTP&C (or any other company
controlled by Marco Tronchetti Provera or by one or more of
his family members) participate, directly or indirectly, in the
control of Pirelli, or is entitled, directly or indirectly, individually
or in concert with one or more subjects, to designate the
CEO of Pirelli.
2.6.11. 2021 BILATERAL LOAN WITH INTESA SANPAOLO
On 11 November 2021, the Board of Directors authorised
Pirelli to enter into a medium-long term variable-rate loan
of Euro 400 million with Intesa Sanpaolo S.p.A. (as the
lending bank). The new credit line is secured by Pirelli Tyre
and subject to predetermined economic and environmental
sustainability targets.
The loan agreement signed on 23 December 2021 stipulates,
inter alia, that the Pirelli must repay the credit line early should
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Report on the Corporate Governance certain events occur, including changes in Pirelli’s control
structure.
In particular, the change of control can only be triggered
(except in specific cases permitted under the loan
agreement) if any entity, other than ChemChina, Sinochem
Group, SRF, Camfin, MTP&C (or any other company
controlled by Mr. Marco Tronchetti Provera or his family
members) and/or their subsidiaries and/or any person or
persons acting in concert with some of them, becomes the
owner, in aggregate, of more than 50% of the voting rights
granted by the Company shares.
For clarification, the loan contract states that there will be no
change of control if Camfin, MTP&C (or any other company
controlled by Marco Tronchetti Provera or by one or more of
his family members) participate, directly or indirectly, in the
control of Pirelli, or is entitled, directly or indirectly, individually
or in concert with one or more subjects, to designate the CEO
of Pirelli.
2.6.12. MULTICURRENCY TERM AND REVOLVING LOAN 2022
On 11 November 2021, the Board of Directors also
authorised Pirelli and Pirelli International Treasury to enter
into a new medium/long-term unsecured variable-rate
loan, divided into two credit lines guaranteed by Pirelli Tyre:
one ‘Term’ and one ‘Revolving’, based on predetermined
economic and environmental sustainability objectives, for
a total amount no greater than Euro 1.6 billion, with a pool
of lending banks.
On 21 February 2022, the respective loan agreement was
signed with Unicredit S.p.A, as the agent bank, and a further
15 national and international lending banks; the agreement
provides – inter alia – that Pirelli and Pirelli International
Treasury shall be required to repay in advance the portion
of the loan made available by each lender should certain
events occur, including a change in Pirelli’s control structure
under terms and conditions which are the same as those set
out in the bilateral loan signed with Intesa Sanpaolo on 23
December 2021
* * *
For the sake of completeness, it should be specified that, in
addition to the foregoing, as is common in the commercial
context, some companies in the Pirelli Group have entered
into contracts containing a change of control clause relating
only to the shareholding that Pirelli holds in them, directly
or indirectly. It should also be noted that, under the terms
of certain local loans, any change of control of Pirelli
could potentially trigger, in the absence of appropriate
liability management initiatives, the early repayment of the
respective amount disbursed locally and – in certain remote
circumstances – may have a “cascading” effect on the central
loan agreements, entailing the requirement to make early
repayment of the respective amounts disbursed at Group
level by virtue of the usual cross default/acceleration clauses
provided therein.
2.7. CLAUSES IN THE ARTICLES ABOUT PUBLIC OFFERS
The Articles do not provide for exceptions to the provisions
regarding the passivity rule, or application of the neutralisation
rule set out in art. 104-bis TUF.
2.8. MANDATE TO INCREASE SHARE CAPITAL AND
AUTHORISATIONS TO PURCHASE OWN SHARES
With regard to the financial year ending 31 December 2021,
please refer to section 2.1 for details of the capital increase
resolved by the Shareholders’ Meeting of 24 March 2021, to
fund the conversion of a bond loan, when the Board of Directors –
and, on its behalf its legal representatives pro tempore, including
separately – was authorised to carry out the share capital
increase determining, inter alia, in compliance with the provisions
of the Regulations: (i) the exact issue price of the shares, and, in
turn, the determination of the issue price; (ii) the exact number
of shares to be issued, and, therefore, the exact exchange ratio,
as necessary for the precise application of the provisions and
criteria of the Regulations; it being understood that, should the
share capital increase referred to above not be fully subscribed
on 31 December 2025, the share capital shall be deemed to be
increased by an amount equal to the subscriptions received.
The Shareholders’ Meeting of the Company did not authorise
any purchases of own shares.
3. Compliance
Pirelli adheres to the Corporate Governance Code, published
on 31 January 2020, which is available to the public on
the website of the Corporate Governance Committee, at
the following link: https://www.borsaitaliana.it/comitato-
corporate-governance/codice/2020-eng.en.pdf.
The Company also took into account in the Report the
collection of useful Q&As for the application of the Corporate
Governance Code; these were published by the Corporate
Governance Committee on 4 November 2020.
During the Year, the Company examined – with the support
of the Audit, Risks, Sustainability and Corporate Governance
Committee – the content of the Corporate Governance Code,
assessing the potential impact on Pirelli’s corporate governance
system and identifying the areas of specific interest and
possible actions to adapt its corporate practices. The outcome
of this analysis demonstrated compliance with the principles
and recommendations of the Corporate Governance Code.
The Report has essentially been prepared using the Borsa
Italiana format.
On the Report Date, Pirelli is not subject to any non-Italian
laws that might influence the corporate governance structure
of the Company.
200
Pirelli Annual Report 2021 4. Board of Directors
4.1. ROLE OF THE BOARD OF DIRECTORS
The Board of Directors plays a central role in the guidance and management of the Company, and the pursuit of
its sustainability success. Pursuant to art. 11 of the Articles, the Board of Directors manages the business and,
for this purpose, exercises all the widest powers of management, except for those reserved by law or the Articles
to the Shareholders’ Meeting. Specifically, the Board of Directors:
→ guides the Company in examining and approving the strategic, industrial and financial plans of the Company
itself and of the Pirelli Group to achieve sustainable success, and monitor their implementation; for further
details see section 4.4.3 of the Report regarding matters reserved for the exclusive competence of the Board
of Directors (criteria for identifying operations of strategic importance);
→ establishes the nature and level of risk compatible with the Company’s strategic objectives (for further details
see section 9 of the Report);
→ adopts and sets the corporate governance guidelines and rules for the Company and Group companies (for
further details see section 4.4.3 of the Report);
→ ensures the correct management of corporate information through a structured compendium of rules and
procedures for the internal management and external disclosure of documents and information concerning
the Company, particularly regarding inside information (for further details see section 5 of the Report);
→ promotes the most appropriate forms of dialogue with shareholders and other stakeholders relevant to the
Company (for more details see section 14.1 of the Report).
4.2. APPOINTMENT AND REPLACEMENT OF DIRECTORS
Appointment: 22 June 2020
Expiration date: 2022 Financial Statement approval
Board committees: 5
Directors: 15
Executive Director: 2
Independent Directors: 8
Strategies Committee - Appointments and Successions Committee - Re-
lated-Parties Transactions Committee - Remuneration Committee - Audit,
Risks, Sustainability and Corporate Governance Committee
The provisions contained in the Articles, to which reference is made, regarding the appointment and replacement
of directors are summarised below.
4.2.1. APPOINTMENT AND REPLACEMENT
Pursuant to art. 10 of the Articles, the Company is managed by a Board of Directors made up of a maximum of
fifteen members, who remain in office for three years and who may be re-elected.
The Board of Directors is appointed on the basis of slates presented by the shareholders, in which the candidates
must each be listed with a sequence number. The Articles do not allow the outgoing Board of Directors to submit
a slate for the appointment of directors.
The slates presented by shareholders, signed by those submitting them, must be filed at the registered offices
of the Company at least twenty-five days prior to the date fixed for the Shareholders’ Meeting called to resolve
in that regard. These slates are made available to the public at the registered offices, on the Website and in other
ways prescribed by Consob regulation, at least twenty-one days prior to the date of the Meeting.
Each shareholder may present or contribute to the presentation of just one slate and each candidate may be
included in just one slate, subject otherwise to becoming ineligible.
Shareholders are only entitled to present slates if, alone or together with other shareholders, they own shares in
total representing at least 1% of the share capital entitled to vote at an Ordinary Meeting, or any lower amount
specified in the applicable regulations, with the obligation to evidence their ownership of the number of shares
needed for the presentation of slates by the deadline envisaged for the publication of such slates by the Company.
Each slate filed must be accompanied by acceptances of nomination and declarations from each candidate
confirming, under their own responsibility, that there are no reasons making them ineligible for or incompatible with
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Report on the Corporate Governance the role, and that they satisfy any requirements established for
the role concerned. These declarations must be accompanied
by the curriculum vitae of each candidate, describing their
personal and professional characteristics, indicating the
administration and control appointments held by them in
other companies and confirming their satisfaction of the
independence requirements envisaged for the directors of
listed companies by law or by the code of conduct adopted by
the Company. In order to ensure gender balance, slates that
contain three candidates must include candidates of different
genders, whilst slates containing a number of candidates equal
to or higher than four must contain a number of candidates
of different gender at least matching the minimum laid down
in current regulations, in accordance with the content of the
notice of the Shareholders’ Meeting. Any changes arising prior
to the actual date of the Meeting must be promptly notified
to the Company.
Any slates presented that do not comply with the above
instructions will be treated as if not presented.
Each party entitled to vote may only vote for one slate.
The Board of Directors is appointed as follows:
a) four-fifths of the directors to be elected are drawn from
the slate that obtains the majority of the votes expressed
by the shareholders, rounded down to the nearest whole
number in the case of a fractional number;
b) the remaining directors are drawn from the other slates,
using the quotient method described in the Articles.
Should several candidates obtain the same quotient, the
candidate elected will be drawn from the slate that has not
yet elected a director or that has elected the smallest number
of directors.
If none of those slates has elected a director yet or all of them
have elected the same number of directors, the candidate
elected will be drawn from the slate that obtains the largest
number of votes. In the event of a voting tie, again with
more than one candidate obtaining the same quotient, the
Shareholders’ Meeting will vote again and the candidate who
receives the largest number of votes will be elected.
If only one slate is presented, all the directors will be elected
from that slate.
Should application of the slate voting mechanism not ensure
the minimum number of directors belonging to the less
represented gender set out by applicable law, the candidate
belonging to the most represented gender and elected,
indicated in the slate that obtained the largest number of
votes, shall be replaced by the first candidate belonging to
the less represented gender not already elected, drawn from
that slate pursuant to the sequential order of presentation
and so on, for each slate (solely for slates that contain three
or more candidates) until the minimum number of directors
belonging to the less represented gender has been obtained.
If the above procedure does not ensure the result specified
above, the replacement shall be made by resolution of the
Shareholders’ Meeting, adopted by the relative majority of the
votes expressed, following presentation of the candidacies of
persons belonging to the less represented gender.
Should application of the slate voting mechanism not obtain
the minimum number of independent directors envisaged
by applicable law, the non-independent candidate elected
indicated with the highest progressive number in the slate
that obtained the largest number of votes shall be replaced
by the first independent candidate not already elected from
that slate following the sequential order of presentation, and
so on for each slate until the minimum number of independent
directors has been obtained, in all cases in compliance with
the applicable law governing gender balance.
Loss of the independence requirements by a director is not a
cause of removal if the number of directors still in possession
of the legal independence requirements is not lower than the
minimum specified by the laws and/or regulations in force.
For the appointment of directors who, for any reason, were
not appointed in accordance with the slate voting mechanism,
the Shareholders’ Meeting shall adopt resolutions with the
majorities required by law, without prejudice in all cases to
compliance with the independence and gender balance
requirements.
Should one or more directors cease to hold office during the
financial year, they shall be replaced pursuant to art. 2386 of
the Civil Code, without prejudice in any event to respect for
the legislation on gender balance and the independence of
the directors.
4.3. COMPOSITION
The Board of Directors in office at the Report Date was
appointed by the Shareholders’ Meeting on 22 June 2020
and reflects the terms of the Shareholders’ Agreement.
The Board of Directors is composed of 15 members. In particular:
→ Chairman Ning Gaoning, Marco Tronchetti Provera
(Executive Vice Chairman and Chief Executive Officer),
Yang Xingqiang, Bai Xinping, Tao Haisu, Zhang Haitao,
Domenico De Sole, Marisa Pappalardo, Giovanni Tronchetti
Provera, Fan Xiaohua and Wei Yintao were appointed
based on the slate submitted by MPI Italy S.r.l. together with
Camfin, which obtained approximately 87% of the share
capital votes represented at the Shareholders’ Meeting;
→ Directors Giovanni Lo Storto, Roberto Diacetti and Paola
Boromei were appointed based on a slate submitted by a
group of asset management companies and institutional
investors that gained approximately 13% of the share
capital votes represented at the Shareholders’ Meeting;
→ Director Giorgio Luca Bruno (Deputy-CEO) was appointed
– at the proposal of the Board of Directors – by the
Shareholders’ Meeting of 15 June 2021, obtaining around
84% of the share capital votes represented at the Meeting.
At the Report Date, 20% of Board members were female and
the remaining 80% were male. Moreover, 27% are under the
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Pirelli Annual Report 2021 age of 50. The average age of the members of the Board is approximately 57 years of age and the average age
of the female members is approximately 51 years of age. The Directors’ average time in office is about 4 years77.
At the Report Date, the majority of the Board of Directors is made up of independent directors, ensuring that they
have significant weight in the adoption of board resolutions.
Table 2, annexed, provides the significant information on each member of the Board of Directors in office at the
Report Date. In addition, a summary of their professional profiles, periodically updated, is available on the Website.
The following charts illustrate (i) the composition of the Board of Directors of the Company at the Report Date,
as well as (ii) the average duration, (iii) the average shareholding and (iv) the number of meetings of the Board of
Directors and each Committee during the Year.
Wei Yintao
Independent
Director
Ning Gaoning
Chairman
Marco Tronchetti Provera
Executive Vice Chairman
and Chief Executive Officer
Yang Xingqiang
Director
Fan Xiaohua
Independent
Director
Giovanni
Tronchetti Provera
Director
Marisa Pappalardo
Independent
Director
Bai Xinping
Director
Giorgio Luca Bruno
Executive
Director
Tao Haisu
Independent
Director
Giovanni Lo Storto
Indipendent
Director
Zhang Haitao
Director
Roberto Diacetti
Independent
Director
Domenico De Sole
Independent
Director
Paola Boromei
Independent
Director
EXECUTIVE
NOT EXECUTIVE
INDEPENDENT DIRECTOR
Audit, Risks,
Sustainability
and Corporate
Governance Committee
Remuneration
Committee
Appointments and
Successions Committee
Strategies
Committee
Related-Parties
Transactions Committee
77 It should be noted that for the purposes of calculating the tenure of the Board, the date of first
appointment of each Director, indicated in Table 2, was considered.
203
Report on the Corporate Governance AVERAGE PERCENTAGE OF ATTENDANCE TO THE MEETINGS OF THE BOARD OF DIRECTORS AND BOARD COMMITTEES
Strategies Committee
80%
Appointments Committee
75%
RPT Committee
Remuneration Committee
ARSCGC
BoD
90%
100%
96%
84%
75%
80%
85%
90%
95%
100%
AVERAGE LENGTH OF MEETINGS OF THE BOARD OF DIRECTORS AND BOARD COMMITTEES
Strategies Committee
57 min
Appointments Committee
25 min
RPT Committee
54 min
Remuneration Committee
71 min
ARSCGC
BoD
129 min
59 min
HOURS
1
2
3
NUMBER OF MEETINGS OF THE BOARD OF DIRECTORS AND BOARD COMMITTEES
Strategies Committee
Appointments Committee
RPT Committee
Remuneration Committee
ARSCGC
BoD
0
1
2
3
4
5
6
7
8
9
10
11
12
4.3.1. DIVERSITY POLICIES
Pirelli is characterised by a multinational context in which people express a huge heritage of diversity. Conscious
management of this diversity generates competitive advantages, opportunities for the development and enrichment
of the business, and shared corporate values.
The respect of these values has always been guaranteed by the shareholders during the renewal of the Board of
Directors - including the last renewal - in terms of age, gender, nationality, education and professional background
and experience. This enables the Board to perform its duties in the most effective way, making use of the
contributions made from different points of view, and to analyse individual situations from multiple perspectives.
On 14 February 2019, the Board of Directors – having obtained the favourable opinion of the Audit, Risks,
Sustainability and Corporate Governance Committee and the Appointments and Successions Committee
– adopted a Diversity and Independence Statement in relation to the composition of the Board of Directors
and Board of Statutory Auditors. The Company recommends that these values are respected when its own
corporate bodies are being renewed or integrated, in line with the stated diversity and independence criteria. On
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Pirelli Annual Report 2021 22 June 2020, when the administrative body was renewed,
the newly-elected Board of Directors adopted the “Diversity
and Independence Statement”.
The Board of Directors - which avails itself of the opinions
expressed by the Audit, Risks, Sustainability and Corporate
Governance Committee and the Appointments and
Successions Committee - is responsible for the quali-
quantitative assessment of the composition of the Board itself
and the possible updating and amendment of the Diversity and
Independence Statement.
In addition to the administration management and control
bodies, the value of diversity characterises the entire business
organisation, according to the terms and procedures outlined
in the NFS Report published together with the Company’s
annual financial statements (which should be referred to for
more information).
4.3.2. LIMITATIONS ON THE NUMBER OF OFFICES HELD
Pursuant to the guidance adopted by the Board of Directors
on 14 February 2019, subject to the favourable opinion of
the Audit, Risks, Sustainability and Corporate Governance
Committee and the Appointments and Succession Committee,
it is not currently considered compatible with the duties of a
Company director to be a director or statutory auditor of more
than four other companies other than those subject to the
direction and coordination of the Company, or its subsidiaries
or affiliates, in the case of: (i) companies listed on the FTSE/
MIB index (or equivalent foreign index); or (ii) Italian or foreign
companies, subject to the supervision of the competent
authorities, that carry out financial, banking or insurance
activities. Furthermore, it is not considered compatible for
the same director to hold more than three executive positions
in companies of the types indicated in points (i) and (ii) above.
Positions held in several companies belonging to the same
group are considered to be a single position and an executive
position prevails over a non-executive position.
The Board of Directors is entitled to make a different
assessment, properly motivated, to be published in the Report
and explained appropriately therein.
The guidance regarding the maximum number of offices
considered compatible with effective performance as
a Company director was last supplemented with purely
formal amendments to take into account the provisions
of the Corporate Governance Code (replacing the
previous provisions) and – together with the “Diversity and
Independence Statement” referred to in the paragraph above
– the documents were confirmed by the Board of Directors on
17 March 2022, subject to the favourable opinion by the Audit,
Risks, Sustainability and Corporate Governance Committee.
out in the policy adopted by the Company on 14 February 2019.
Annex A indicates the principal appointments held by the
Directors in companies that do not belong to the Group at
the Report Date.
4.3.3. INDUCTION PROGRAMME
The Directors perform their duties autonomously and with
competence, pursuing the priority objective of creating
sustainable value over the medium-long term. They are aware
of the responsibilities pertaining to their role and, like the
Statutory Auditors, they are kept periodically informed by the
competent business functions about the principal regulatory
and self-regulatory changes affecting the Company and the
performance of their duties.
Also during the Year, induction sessions were arranged, also
with the support of the top management and, given the recent
renovation of the Board of Statutory Auditors, an explanation
was provided of the main characteristics of the activities
of Pirelli and its Group and (including through the work of
the committees) the reference legislative and regulatory
framework and specific rules and procedures adopted by
the Company.
The specific initiatives undertaken during the Year include
the induction activities, held on 27 January, 13 July, 18
October and 15 December, which respectively covered
issues relating to internal organisation, and specifically: (i)
a description of the organisational structure and a focus
on the compensation institutes adopted by the Company;
(ii) the integration of sustainability issues in the Company’s
strategy; (iii) communication and cyber security strategies; (iv)
the Company’s digitalisation strategies; (v) issues relating to
Research and Product Development as well as an illustration
of the Company’s strategies for business risk management.
In this context, Directors (independent directors in particular)
and Statutory Auditors had the opportunity to have direct
encounters with the Company’s principal managers (who as
a rule normally attend the meetings of the Board of Directors
and the committees).
4.4. FUNCTIONING OF THE BOARD OF DIRECTORS
Meetings of the Board of Directors are called by the Chairman
or his deputy and held at the registered offices, or in any
another location specified in the notice of call, whenever
deemed appropriate by the Chairman in the interests of the
Company, or when requested in writing by the Chief Executive
Officer or by one-fifth of the appointed Directors. Meetings
of the Board of Directors may also be called by the Board
of Statutory Auditors, or by each standing auditor, following
notification sent to the Chairman of the Board of Directors.
Following review by the Audit, Risks, Sustainability and
Corporate Governance Committee, each year the Board of
Directors examines the positions held by each Director (based
on the information provided by that person and/or on the other
information available to the Company). At the Report Date, no
Director holds a number of position higher than the number set
During the Year the Board of Directors in office at the Report
Date met eight times. The average duration of each meeting
was approximately 59 minutes, with attendance by around 84%
of the Directors and 98% of the Independent Directors. The
Independent Directors were able to have informal meetings in
the terms illustrated in the preceding paragraph. In view of the
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Report on the Corporate Governance health emergency, meetings during the year were held primarily
via audio/video link.
For the 2021 financial year and for the current year, Pirelli
disclosed a calendar of the main corporate events to the
market (also available on the Website). For the 2022 financial
year, the Board is scheduled to meet at least 5 times (at the
Date of the Report two meetings had already been held).
For the resolutions of the Board of Directors to be valid, a
majority of its members must be present, and resolutions must
obtain a majority of the votes expressed.
The Directors’ growing awareness of the business reality and
dynamics of the Company and the Group is enhanced by the
attendance of top management at their meetings, which allows
them to explore the matters on the agenda in appropriate depth.
The means of organisation and the internal functioning of the
Board of Directors are governed by the Regulations on the
Functioning of the Board of Directors adopted on 22 June 2020
in line with the recommendations of the Corporate Governance
Code (“Board Regulations”) available on the Website. The Board
Regulations establish the deadlines for the prior submission of
information and procedures for protecting the confidentiality of
the data and information provided so as not to compromise the
timeliness and completeness of the information flows.
In line with the Board Regulations, the Directors and Statutory
Auditors received the documentation and information needed
to express an informed opinion on the matters submitted
for discussion within a reasonable and appropriate period
in advance. As a rule, the documentation to be examined
by the Board and Committees is sent ten days prior to the
meeting unless specific requirements do not allow such
timeframe: in such case, the documentation shall be sent as
soon as it is available. In the limited and exceptional cases
in which documentation could not be transmitted so far
in advance (or was transmitted closer to the meeting), full
information on the issue to be considered was provided
directly during the meeting, thus ensuring that the Directors
could make informed decisions. Particular attention is paid
to ensuring that information remains confidential, by sending
the documentation relating to the activities of the Board and
its Committes using specific software that guarantees that
access is reserved to the Directors and Statutory Auditors only.
This is in line with best practice and with the recommendations
of the Italian Corporate Governance Committee.
Taking account of the international composition of the Board of
Directors, with the presence of multiple nationalities, it is also
the Company’s practice to proceed to send the documents
to be considered by the Board and its Committees in the
three languages (Italian, English and Chinese) commonly
used by the Directors. Furthermore, for each meeting of the
Board of Directors and Committees, participants are able to
use a simultaneous translation of interventions made in the
languages spoken by the attendees.
In order to facilitate minute taking, the Board meetings
may be recorded; said recordings shall then be destroyed
once the minutes have been transcribed into the applicable
corporate register.
If the Chairman is absent or unavailable, upon request by the
Chairman, the meeting may be chaired by the Vice Chairman
or CEO, where appointed; should the latter also be absent or
unavailable, another director, appointed by the majority of the
attendees, may assume the Chair.
The Articles establish that, until decided differently at a
Shareholders’ Meeting, the Directors are not bound by the
prohibition contained in art. 2390 of the Civil Code.
4.4.1. SECRETARY OF THE BOARD
In line with the recommendations of the Corporate Governance
Code, the Board Regulations allow the Board of Directors to
appoint the Secretary by assessing that he/she satisfies the
necessary professional requirements. The Board Secretary
supports the activities of the Chairman and/or Vice Chairman
and provides impartial assistance and advice to the Board of
Directors on all aspects relevant to the proper functioning of
the corporate governance system. In particular, the Secretary
shall support the Chairman and/or Vice Chairman of the Board
of Directors, in order to ensure that:
a) the pre-meeting information is accurate, complete and
clear and the complementary information provided during
meetings allows directors to act in an informed manner;
b) the activities of the board committees are coordinated with
the activities of the Board of Directors;
c) the top management of the Company and of companies
of the same Group may participate in board meetings, as
well as the heads of the company departments in order to
provide appropriate updates on the items on the agenda;
d) after their appointment and during the mandate of the board,
all Directors may participate in specific induction activities;
e) the board evaluation is adequate and transparent.
4.4.2. BOARD OF DIRECTORS SELF-ASSESSMENT PROCESS
Over the Year the Board of Directors started the process to
evaluate its operation and the operation of its Committees
(board performance evaluation) for the 2021 financial year. In
proceeding with its assessment process, the Board was also
assisted, as usual, by a primary independent consulting firm
specialised in this area (SpencerStuart). The self-assessment
process was carried out through individual interviews with
questions about the size, composition and operation of the
Board of Directors. All members of the Board of Directors
participated in the self-assessment process.
The analysis of the results of the aforementioned board
performance evaluation evidenced a broadly positive situation.
In fact, a very high level of overall appreciation was reported, in
line with the previous financial year. In particular, the Directors
expressed full satisfaction and appreciation of the size,
composition and operation of the Board of Directors and its
Committees. It was also highlighted that the Board operates
in compliance with the Corporate Governance Code and with
both Italian and international best practice. Moreover, the areas
of excellence that had emerged during the previous financial
year’s self-assessment activities have been confirmed overall.
206
Pirelli Annual Report 2021 The areas for which the most appreciation was reported are
outlined below:
→ any transfer and/or deed of disposition, in any form, of
Pirelli know-how (including the granting of licences).
→ the effectiveness of the support provided by the Secretary
of the Board;
→ appropriate preparation of the Agendas to support Board
meetings, which prove to be complete with all the topics
that need to be brought to the attention of the Board;
→ high quality of the documentation supporting the Board
of Directors’ meetings, considered clear and complete;
→ high quality of the minutes of the works of the Board of
Directors and the Committees, which prove to be accurate
and complete with respect to the progress of the meetings;
→ a guarantee of confidentiality regarding the issues dealt
with;
→ effectiveness of the activities put in place to manage the
pandemic situation;
→ effectiveness, continuity and transparency of the exchange
of information on corporate strategy between Directors
and management;
→ appropriate frequency and duration of meetings.
The Directors particularly appreciated: (i) the mix of skills,
(ii) the authority and commitment by the VP and CEO in
guiding the works of the Board and (iii) the relationship with
management based on openness, transparency and positivity
aimed at providing constant support to the needs put forward
by the Directors concerning a progressive deepening of their
knowledge of the business, achieved through the preparation
of presentations focused on the most relevant aspects, and
(iv) the Company’s attention to sustainability topics, ensuring
their systematic integration with Pirelli’s development plans.
The investigation also produced a number of suggestions for
further improving the operation of the Board, including, in
particular, (i) striking an adequate balance in the time devoted
to presentation and debate during Committee and Board
meetings, and developing opportunities for informal meetings
of the directors, so as to encourage reciprocal knowledge
and further strengthen interpersonal relations and team
spirit as well as a constant exchange of ideas and personal
contributions and (ii) greater attention and focus by the Board
on sustainability topics, including, in particular, occupational
health and safety as well as responsible procurement and
end-of-cycle tyre recycling issues.
The Audit, Risks, Sustainability and Corporate Governance
Committee played a leading role in the board performance
evaluation and shared the results in advance at the meeting
of 14 March 2022, which were subsequently submitted to the
Board of Directors.
4.4.3. MATTERS FOR THE BOD
In accordance with the Articles, the Shareholders’ Meeting
requires a qualified majority (i.e. favourable votes by
shareholders representing at least 90% of the share capital
of the Company) for the Board to be authorised to resolve on
the following issues:
On 22 June 2020, the Board of Directors established that all
resolutions regarding the following matters, proposed by Pirelli
and/or by any company subject to direction and coordination
by Pirelli (excluding intergroup transactions) must (also as an
internal restriction of the power granted to the Chief Executive
Office on that date) be approved by the Board of Directors of
the Company:
(i) assumption or concession of loans worth more than Euro
(ii)
200,000,000 and with a term of more than 12 months;
issue of financial instruments for listing on a European
or non-European stock market for a value in excess of
Euro 100,000,000 and revocation from listing of such
instruments;
(iii) concession of guarantees in the favour of third parties
for amounts in excess of Euro 100,000,000. For the
sake of completeness, please note that the concession
of guarantees in the interests of third parties other than
the Company, its subsidiaries and joint ventures, must be
subject, in any case, to the approval of the Pirelli Board
of Directors;
(iv) signing derivative contracts (a) with a notional value higher
than Euro 250,000,000 and (b) except for those having
the sole object and/or effect of hedging corporate risks
(e.g. interest-rate risk, exchange-rate risk, commodity
market risk). For the sake of completeness, please note
that the stipulation of speculative derivative contracts is
in any case subject to the approval of the Pirelli Board of
Directors;
(v) purchase or sale of equity investments in subsidiary and
affiliates for an amount higher than Euro 40,000,000,
which involve entering into (or exiting from) geographical
and/or commodity markets;
(vi) purchase or sale of equity investments other than those
described at point (v) above for an amount higher than
Euro 40,000,000;
(vii) purchase or sale of businesses or business units that have
strategic importance or, in any case, a value of more than
Euro 40,000,000;
(viii) purchase or sale of fixed and other assets that have
strategic importance or, in any case, a value of more than
Euro 40,000,000;
(ix) carrying out transactions of greater significance with
related parties, using the term “related party transactions”
to mean those satisfying the conditions envisaged in
Annex 1 to the “Related Party Transactions Procedure”
approved by the Pirelli Board of Directors on 3 November
2010, as amended over time;
(x) definition of Pirelli’s remuneration policy;
(xi) determination of the remuneration of CEOs and directors
holding special offices, in compliance with Pirelli’s internal
policies and applicable regulations;
(xii) and, where required, the allocation of the total
remuneration set by the Shareholders’ Meeting among
Board members;
(xiii) approval of the strategic, industrial and financial plans of
→ transfer of the operational and administrative headquarters
Pirelli and the group;
outside of the municipality of Milan;
(xiv) adoption of corporate governance rules for Pirelli and
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Report on the Corporate Governance defining guidelines for the corporate governance of the
group;
(xv) definition of guidelines for the internal control system,
including the appointment of a Director responsible for
overseeing the internal control system, determining the
related powers and duties;
(xvi) any other matter deemed to be responsibility of the
board of directors of a listed company by the Corporate
Governance Code promoted by Borsa Italiana78, as
amended from time to time.
It being understood that the approval of the transactions listed
above is reserved solely to the Board of Directors not only if
the threshold indicated for each matter has been reached, but
also if the matters listed from (i) to (vii) – whether considered
a single action or as a series of coordinated actions (carried
out in the context of a common executive programme or a
strategic project) – exceed the amounts indicated in the annual
budget/business plan or (solely for the matters listed from (i)
to (viii) above) if they were not included, listed or envisaged in
the annual budget/business plan.
As required by the Corporate Governance Code79, the Board
of Directors gave a positive assessment of the adequacy of
the Company’s organisational, administrative and accounting
systems and structure, with particular reference to the system
of internal control and risk management, referring to the
analytical work carried out by the Audit, Risks, Sustainability
and Corporate Governance Committee.
The Board has also evaluated the general results of operations,
taking into particular account the information received from
delegated bodies and comparing periodically, at least every
quarter, the results obtained with those planned.
The Board of Directors – also in light of the considerations
set out in the Letter from the Chairman of the Borsa Italiana
Corporate Governance Committee (see section 18 of the
Report) – deemed the Company’s current Bylaw provisions
and practices to be adequate for effective governance of the
Company and for achieving the Company’s interests.
4.5. EXECUTIVE DIRECTORS
With resolution dated 22 June 2020, the Board of Directors
granted the Executive Vice Chairman and Chief Executive
Officer Marco Tronchetti Provera with all the powers
necessary to carry out deeds relating to all aspects of
corporate activity, without any exceptions aside from those
that the law or the Articles reserve to the Board of Directors;
all with the power to grant special and general powers of
attorney that give the representative the right to sign on
behalf of the Company, either separately or together with
others, and all other powers deemed appropriate by him in
the best interests of the Company, including the right to sub-
delegate. In particular, the Executive Vice Chairman and Chief
78 Refer here to the Corporate Governance Code.
79 See Recommendation 33 (a).
Executive Officer Marco Tronchetti Provera was granted:
a) exclusive powers of ordinary management of Pirelli and
the Group both for Pirelli and any other company (including
non-listed foreign companies) under Pirelli’s management
and coordination, with the following internal limitations,
i.e. with the attribution of the relevant competence to the
Board of Directors where:
(ii)
the threshold amounts envisaged for each of the
matters indicated in section 4.4.3 are exceeded; or
(iii) for the matters listed from (i) to (viii) in section 4.4.3
above, the amounts indicated in the business plan and/
or the annual budget are exceeded; or
(iv) for the matters listed from (i) to (viii) in section 4.4.3
above, they were not included, listed or envisaged in
the business plan or the annual budget; and
b) the powers for the supervision and implementation by
the General Manager and Management team of the
business plan and the power to propose to the Board of
Directors adoption of the following resolutions (together,
the “Significant Matters”):
(iii) approval of the business plan and the annual
budget of the Company and the Group, as well as
all significant changes to those documents. The
business plan and annual budget must: (a) address
certain operational and financial aspects of Pirelli
including, but not limited to, identifying all sources
of funding for such business plans and budgets, as
well as the decisions about the industrial initiatives
underlying the business plan and annual budget;
and (b) be accompanied and supported by adequate
and suitable documentation describing the items
contained therein;
(iv) any resolutions regarding industrial partnerships
or strategic joint ventures to which Pirelli and/or
any Group company are party, in all cases following
examination by the Strategies Committee,
it being understood that: (a) the power to pass resolution
on Significant Matters is reserved solely for the Board of
Directors and/or the Shareholders’ Meeting, as applicable;
and (b) should the Board of Directors not approve the
proposal of the Executive Vice Chairman and Chief Executive
Officer, the respective resolution must be justified and, in
any case, take into account the Company’s best interests.
The Executive Vice Chairman and Chief Executive Officer
hold the power to propose to the Board the appointment
and revocation from the office of Key managers of Pirelli, as
identified in accordance with the related internal procedure
and, therefore, the following Pirelli employees: (i) the General
Manager; (ii) the Manager responsible for drawing up
corporate financial documents; (iii) all positions currently
defined as Executive Vice President and (iv) the Secretary of
the Company’s Board of Directors.
The Chief Executive Officer ordinarily reports on the activity
carried out during board meetings.
In light of the above, Executive Vice Chairman and Chief
Executive Officer Marco Tronchetti Provera is identified as
executive director.
208
Pirelli Annual Report 2021 On 15 June 2021, by resolution of the Board of Directors,
Mr Giorgio Luca Bruno was appointed Deputy-CEO of the
Company and, at the same time, was granted powers for
the Company’s operational management, to be exercised
vicariously. As such, Deputy-CEO Giorgio Luca Bruno is
qualified as an executive director.
At the Report Date, it should be noted that in addition to
the Executive Vice Chairman, Chief Executive Officer and
Deputy-CEO, Pirelli classifies as executive directors those
directors who at the same time qualify as Key Managers of
the Company where present, or Directors who also hold office
as Chief Executive Officer or Executive Chairman of Pirelli’s
main subsidiaries80.
It should also be noted that the office of the Chairman of the
Board of Directors does not qualify as ‘executive’ given the
governance structure and powers granted to the Executive
Deputy Chairman and Chief Executive Officer.
4.6. INDEPENDENT DIRECTORS
At the Report Date, eight of the fifteen members (and
therefore over 50%) of the Board of Directors satisfied the
requirements to qualify as independent pursuant to the
Corporate Governance Code and the TUF, namely: Paola
Boromei, Domenico De Sole, Roberto Diacetti, Tao Haisu,
Giovanni Lo Storto, Marisa Pappalardo, Fan Xiaohua and Wei
Yintao. Upon appointment and thereafter on at least an annual
basis, the Board evaluates whether or not members meet and/
or retain the requirements of independence specified in the
Corporate Governance Code and the TUF for non-executive
directors who qualify as independent. This check – which
takes account not only of the information provided by the
directors themselves but also further information that might
be available to the Company, referring to the requirements
set out in the TUF, as well as to those recommended in the
Corporate Governance Code – was most recently carried out
during the board meeting on 17 March 2022.
In making its assessments, the Board did not derogate from any
of the criteria prescribed by the Corporate Governance Code.
At the same time as the assessments made by the Board of
Directors, the Board of Statutory Auditors confirmed that, in
line with the recommendations of the Corporate Governance
Code, it had verified the proper application of the assessment
criteria and ascertainment procedures adopted by the Board
of Directors to assess the independence of its members.
On 25 February 2021, the Board of Directors – upon the
proposal of the Audit, Risks, Sustainability and Corporate
Governance Committee – approved the “Statement
regarding independence” to pre-establish the qualitative and
quantitative criteria to be used in assessing the independence
of Directors and Statutory Auditors.
Said Statement: (i) establishes the qualitative and quantitative
criteria used to assess the independence of directors for
the purposes of the Corporate Governance Code and, in
particular, the parameters of significance of any economic,
professional or financial relationship pertaining to directors
whose independence is being assessed; and (ii) explains in
detail certain interpretative criteria relating to the other cases
of independence referred to in the Corporate Governance
including the notion of “significant additional
Code,
remuneration”.
In particular, the Company’s Board of Directors has set the
following thresholds of significance for the relationships
under examination:
→ with reference to the concept of “significant business,
financial or professional relationship” as per letter c) above,
this includes advisory roles or any other role – with the
exception of non-executive corporate offices held within the
group, relevant for the significant additional remuneration
according to the criteria indicated below – that has led,
for the director or statutory auditor whose independence
is being examined, or their close family members, to
economic compensation in the calendar year greater than
(i) Euro 300 thousand in the case of relationships held
with undertakings or organisations, over which the director,
statutory auditor or close family member has control or is a
relevant member, or of the professional firm or association
or advisory company where such individuals are a partner,
shareholder or associate, in the case of a relationship
held with these undertakings, organisations, advisory
companies or professional firms and associations; (ii) Euro
100 thousand for relationships held directly with natural
persons. In the case of a partnership in a professional
firm or consulting company, the possible impacts on the
position and role of the person under examination should
be assessed;
→ with regard to the concept of “additional significant
remuneration” referred to in Recommendation 7(d)
of the Corporate Governance Code, this includes all
remuneration paid for whatever reason during the calendar
year, by the Company, by a (direct or indirect) subsidiary
or parent company of the Company, that cumulatively
exceeds the total amount of remuneration for the office or
remuneration for participation in board committees paid to
the director, and of remuneration for the office of member
of the Board of Statutory Auditors, whose independence
is being assessed.
None of the Directors qualified as independent at the date
of their appointment had lost this status during their term
of office.
Considering the above, the powers system, the share
ownership structure and the provisions on this subject set
out in the Corporate Governance Code, independent directors
have not yet deemed it necessary to make a proposal to the
Board of Directors to appoint a lead independent director.
80 For the sake of completeness, it should be noted that Giovanni Tronchetti Provera is a senior manager
of the Company.
The independent and non-executive directors contribute to
the Board and committee discussions, bringing their specific
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Report on the Corporate Governance skills, and, given their number, have a decisive weight in the
decision-making process of the Board of Directors and the
committees in which they take part.
Independent directors meet at least once a year in the absence
of the other directors, in order to analyse issues of particular
importance, such as the functioning of the Board of Directors
or company management.
During the Year, the independent directors met for the
induction sessions arranged by the Company (referred to in
section 4.3.3 above).
5. Processing of corporate
information
Pirelli has adopted and consolidated over time a compendium
of rules and procedures for the proper management of
corporate information, in compliance with the regulations
applicable to the various types of data.
With reference to the prevention of market abuses, the Board
of Directors of Pirelli has adopted a procedure for defining
the principles and rules for preventing such abuses by Pirelli,
Group companies and their related parties (the “Market
Abuse Procedure”).
In particular, the Market Abuse Procedure (available on
the Website) governs: (a) the management of “significant
information”, meaning information that may become “inside
information” pursuant to art. 7 of Regulation (EU) 596/2014
(“Inside Information”); (b) the management and communication
to the public of Inside Information; (c) the creation, keeping
and updating of the register of persons who, in view of their
working or professional activities or the functions they perform,
have access to Inside Information; (d) the obligations regarding
transactions in the shares of the Company, credit instruments
issued by the Company and the derivative or other financial
instruments linked to them, by parties deemed to be senior
decision-makers (“internal dealing”); (e) the operational
procedures and scope of application of the prohibition imposed
on the Company and the persons who perform administrative,
control or management functions for the Company regarding
the execution of transactions in Pirelli shares, credit instruments
issued by Pirelli and the derivative or other financial instruments
linked to them during predetermined periods (“black out
periods”); (f) any market soundings carried out or received in
compliance with art. 11 of Regulation (EU) 596/2014 and the
related enabling regulations.
The Market Abuse Procedure also defines rules for
transactions carried out by “Significant Parties” or by “Persons
Closely Related to Significant Parties” in financial instruments
81 Annually - as a rule by the end of the year - the Company publishes the calendar of principal corporate
events for the next financial year and promptly updates this calendar in the event of subsequent amendments.
210
issued by the Company, with an annual amount of at least Euro
20,000, in compliance with the applicable current regulations.
In this regard, a black-out period of 30 calendar days is
imposed prior to the announcement by the Company of the
data contained in the annual, half-yearly and periodic financial
reports required by the legislation in force at the time81, during
which the relevant persons referred to in the procedure are
expressly forbidden from carrying out transactions on such
financial instruments.
6. Board Committees
The role of the board committees is to carry out analyses for,
make recommendations to and/or give advice to the Board
in relation to matters deemed worthy of further investigation,
in order to ensure that there is an effective and informed
exchange of opinions about them.
Given also the recommendations and principles contained
in the Corporate Governance Code, at the meeting on 22
June 2020 the Company’s Board of Directors established
the Strategies Committee, the Appointments and Succession
Committee, the Audit, Risks, Sustainability and Corporate
Governance Committee, the Remuneration Committee and
the Related-Party Transactions Committee.
The composition of the Related-Party Transactions Committee
was amended by way of a subsequent resolution passed on 5
August 2020 following the resignation of Director Secchi as
of the same date. Moreover, the composition of the Strategies
Committee was amended following the resignation of Angelos
Papadimitriou (previously coopted) as of 24 March 2021
and, subsequently supplemented with the appointment of
Director Giorgio Luca Bruno as a member of the Committee
as of 15 June 2021.
When choosing the Committee members, the Board of
Directors considered as a priority the skills and experience
acquired by each director in the subjects under discussion,
distributing the appointments in order to avoid an excessive
concentration of appointments being held by a limited
number of people and to encourage the exchange of multiple
viewpoints and perspectives.
6.1. FUNCTIONING OF COMMITTEES
The Committees are appointed by the Board of Directors
(which also designates its Chairman and approves its rules
of procedure) and remain in office for the entire mandate of
the Board, meeting whenever deemed appropriate by the
Committee Chairman, or when requested by at least one
member, by the Chairman of the Board of Directors or by the
Chief Executive Officer and, in any case, with the frequency
needed to properly carry out their functions.
Pirelli Annual Report 2021 The Strategies Committee meets at least quarterly and in any
case prior to the Board of Directors meeting called to approve
the annual budget and/or the business plan, receiving the
related documentation at least 3 days prior to the meeting.
The Secretary of each Committee is the Secretary to the Board.
The meetings of the Committees shall be convened by notice
sent to the participants by its Chairman or by the Secretary of
the Committee by the Chairman.
The documentation is sent in good time to all members of
the relevant Committee so that they can participate in the
meeting in an informed manner (as a rule 10 days prior to
the meeting).
Committee meetings are quorate when attended by the
majority of appointed members and resolutions are adopted
by the majority of those present. With regard to the meetings
of the Appointments and Succession Committee regarding
the succession of the Chief Executive Officer, the CEO casts
the deciding vote in the event of a voting tie.
Committee meetings may be held by conference call; their
minutes are taken by the Committee Secretary and recorded
in the related minute book.
Committees - which may make use of external advisers in
carrying out their functions - are granted adequate financial
resources to perform their tasks with spending autonomy. The
Related-Party Transactions Committee is entitled to obtain
assistance, at the expense of the Company, from one or more
independent experts selected by the Committee.
Committees are entitled to access relevant business
information and company departments in the performance
of their tasks, with support from the Secretary to the Board of
Directors for this purpose.
The entire Board of Statutory Auditors is entitled to participate
in the activities of the Audit, Risks, Sustainability and Corporate
Governance Committee, Remuneration Committee and RPT
Committee.
One member of the Board of Statutory Auditors is invited to
attend the meetings of the Appointments and Succession
Committee and Strategies Committee (usually the Chairman).
Further information about the number of meetings held by
each Committee during the Year and about the attendance
of each member at those meetings can be found in Table 3
annexed to this Report.
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Report on the Corporate Governance 6.2. STRATEGIES COMMITTEE
STRATEGIES COMMITTEE
NAME AND SURNAME
OFFICE
Ning Gaoning
Chairman of the Board of Director
Marco Tronchetti Provera
Executive Vice Chairman and Chief Executive Officer
Yang Xingqiang
Bai Xinping
Director
Director
Giorgio Luca Bruno
Executive Director
Domenico De Sole
Independent Director
Giovanni Lo Storto
Independent Director
Wei Yintao
Independent Director
At the Report Date, the Strategies Committee is made up of 8 directors (including 3 independent directors):
Marco Tronchetti Provera (Chairman of the Committee), Ning Gaoning, Yang Xingqiang, Giorgio Luca Bruno, Bai
Xinping, Domenico De Sole, Giovanni Lo Storto and Wei Yintao.
The Strategies Committee has consultative and advisory functions in the definition of strategic guidelines and for
the identification and definition of the terms and conditions of the individual operations of strategic importance.
In particular, the Strategies Committee:
→ supports the Board of Directors in examining the business plans of the Company and the Group, also based
on an analysis of the relevant topics for value generation in the long term;
→ helps the Board to assess transactions, initiatives and activities of strategic importance including, in particular:
→ entry into new geographical markets and businesses;
→ industrial alliances (e.g. joint ventures);
→ special transactions (mergers, spin-offs, capital increases and capital reductions, except for those to
cover losses);
→ investment projects;
→ industrial and/or financial restructuring projects and programmes.
→ examines periodically the organisational structure of the Company and the Group, presenting any suggestions
and opinions to the Board;
212
Pirelli Annual Report 2021 → monitors and assesses managements’ achievement of the Group’s economic-financial targets over time on the
basis of the information flows procedure set out below, proposing to the Board of Directors any actions and/
or the adoption of corrections to achieve the economic-financial targets approved by the Board of Directors.
It is required that the Strategies Committee be the recipient of a specific and continuous flow of information from
the Chief Executive Officer, assisted by the Secretary of the Company’s Board of Directors for such purposes.
6.3. RELATED-PARTIES TRANSACTIONS COMMITTEE
RPT COMMITTEE
NAME AND SURNAME
OFFICE
Marisa Pappalardo
Independent Director
Domenico De Sole
Independent Director
Giovanni Lo Storto
Independent Director
At the Report Date, the Related-Parties Transactions Committee is made up of 3 independent directors: Marisa
Pappalardo (Chairman of the Committee), Domenico De Sole and Giovanni Lo Storto.
The Related-Parties Transactions Committee has consultative and advisory functions in relation to related-
parties transactions in the terms laid down in the current regulations and the Procedure for Related-Parties
Transactions (see section 10).
213
Report on the Corporate Governance 7. Succession of Directors - Appointments
and Succession Committee
APPOINTMENTS COMMITTEE
NAME AND SURNAME
OFFICE
Ning Gaoning
Chairman of the Board of Director
Marco Tronchetti Provera
Executive Vice Chairman and Chief Executive Officer
Bai Xinping
Giovanni Tronchetti Provera
Director
Director
At the Report Date, the Appointments and Succession Committee is composed of 4 members: Marco Tronchetti
Provera (Chairman of the Committee), Ning Gaoning, Giovanni Tronchetti Provera and Bai Xinping. As an exception
to the Corporate Governance Code, the majority of members of this committee are non-executive directors
(albeit not independent). This is because the committee addresses not only matters relating to appointments,
but also those regarding top management succession; in addition, committee membership takes account of the
fact that the Shareholders’ Agreement has established a structured procedure for identifying the successor to
Marco Tronchetti Provera as the Chief Executive Officer of Pirelli (see section 7.1 below).
In particular, the Appointments and Succession Committee:
→ prepares opinions for the Board of Directors on the size and composition of the Board and makes
recommendations about the professional roles whose presence on the Board is deemed appropriate;
→ prepares opinions for the Board of Directors on the adoption and/or amendment by the Board of its orientation
towards the number of appointments considered compatible with effective performance as a director of the
Company;
→ makes recommendations to the Board of Directors about any issues regarding application of the prohibition
of competition envisaged in art. 2390 of the Italian Civil Code, should the Shareholders’ Meeting - for
organisational reasons - authorise in advance, on a general basis, exceptions to this prohibition;
→ recommends candidates to the Board of Directors where it is necessary to co-opt new Directors;
→ makes recommendations to the Board of Directors on any “emergency” succession plans for the most senior
decision-makers;
→ prepares opinions for the Board of Directors on the appointment (by co-option or otherwise) of candidates
to the position of Chief Executive Officer;
→ upon proposal of the Chief Executive Officer, identifies criteria for the succession plans covering top and
senior management in general, in order to guarantee the continuity of business strategies.
It is noted that the task of overseeing the self-assessment process of the Board of Directors and Board of Statutory
Auditors has been assigned to the Audit, Risks, Sustainability and Corporate Governance Committee.
7.1. SUCCESSION PLANS
As per the Shareholders’ Agreement, and to ensure the continuity of the Pirelli business culture, Marco Tronchetti
Provera has been granted a leading role in the procedure for identifying his successor as the CEO of Pirelli.
214
Pirelli Annual Report 2021 On 26 July 2019, the Board of Directors of Pirelli detailed the procedure for the succession of Marco Tronchetti
Provera in relation to the position he currently holds (the “Succession Procedure”). In particular, Pirelli’s Executive
Vice Chairman and Chief Executive Officer will continue and complete the procedure for identifying his successor
by 31 October 2022 so as to ensure a smooth transition. Where: (i) Marco Tronchetti Provera does not specify
a candidate to the Appointments and Succession Committee or (ii) Marco Tronchetti Provera is for any reason
unable to complete the aforementioned activities and the member appointed by MTP&C to the Appointments
and Succession Committee, as specified by MTP&C, does not specify a candidate to the Appointments and
Succession Committee, the foregoing provisions will cease to be effective and, as a result, CNRC may freely
choose and propose its own successor candidate and include that candidate on the slate for the appointment of
Pirelli’s new Board of Directors.
Following the completion of the succession procedure referred to above and the identification of the candidate,
CNRC (and MTP&C to the extent possible) must (i) ensure that Pirelli’s shareholders’ meeting for the approval
the financial statements at 31 December 2022 and for the appointment of the new Board takes place before
the end of the third year following publication of the notice of call issued for the Pirelli shareholders’ meeting for
the approval of the Company’s financial statements at 31 December 201982, (ii) include the proposed candidate
on the slate for appointment of Pirelli’s new Board of Directors and (iii) ensure, to the extent possible, that the
non-independent directors vote at the first board meeting – to be held by the aforementioned deadline – for the
proposed candidate as Pirelli’s new Chief Executive Officer. The procedure for the succession of Marco Tronchetti
Provera was most recently confirmed and adopted by the Board of Directors on 22 June 2020.
8. Remuneration Committee and Directors’ remuneration
REMUNERATION COMMITTEE
NAME AND SURNAME
Bai Xinping
OFFICE
Director
Paola Boromei
Independent Director
Fan Xiaohua
Independent Director
Marisa Pappalardo
Independent Director
Tao Haisu
Independent Director
Information about the 2022 remuneration policy and remuneration paid in 2021, and about the duties performed
by the Remuneration Committee, can be found in the Remuneration Report drawn up pursuant to art. 123-ter
TUF, which is made available to the public as envisaged by current laws and regulations, including by publication
on the Website. It should be noted that said document also includes the information required by Article 123-bis,
paragraph 1, letter i) of the TUF.
82 Occurred on 28 April 2020.
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Report on the Corporate Governance 9. System of internal
control and risk management -
Audit, Risks, Sustainability
and Corporate Governance
Committee
The Company’s internal control and risk management system
is designed to contribute to the operation of a healthy and
proper business, consistent with the objectives established
by the Board of Directors, by identifying, managing and
monitoring the principal risks faced by the Company. The
internal control and risk management system allows the
principal risks, and the reliability, accuracy, trustworthiness
and timeliness of financial reporting to be identified,
measured, managed and monitored.
Responsibility for the adoption of an adequate internal control
and risk management system lies with the Board of Directors
which, with the support of the Audit, Risks, Sustainability and
Corporate Governance Committee, carries out the tasks
assigned to it in the Corporate Governance Code. In particular,
after consulting with the Audit, Risks, Sustainability and
Corporate Governance Committee, the Board of Directors:
(i) analyses and approves the compliance and audit plans
scheduled for the following financial year;
(ii) supervises the risk management process to ensure that
the risks assumed in the course of business are in line with
the Company’s strategies; to this end, it establishes a risk
appetite and sets guidelines for managing risks that may
jeopardise the achievement of the Company’s objectives,
assessing their adequacy at least once a year;
(iii) takes note of the risk analysis carried out by the
Company’s offices on a quarterly basis and of the risk
assessment at least on the launch of the annual business
plans and budgets;
(iv) takes note of the progress of the tax risk monitoring
and mitigation activities, as well as (at least annually) the
tax operating plan and (every three years) the strategic
tax plan.
The implementation of the strategies and guidelines adopted
by the Board of Directors is then ensured by a pyramid
structure of the departments involved in drafting the plans
and activities mentioned above, thanks to constant interaction
between the Board itself and the Company’s top management
which directs its work.
A more complete description of Pirelli’s internal control
system can be found in the Directors’ report on operations.
Additionally, in this regard, the Board of Statutory Auditors
has issued a statement on the administration and accounting
systems adopted by the significant subsidiaries of Pirelli to
ensure that the information on the company’s assets, business
and finances required for the preparation of the consolidated
financial statements is regularly received by the Pirelli’s senior
management and external auditor.
9.1. DUTIES OF THE CHIEF EXECUTIVE OFFICER
IN RELATION TO THE ESTABLISHMENT AND
MAINTENANCE OF THE INTERNAL CONTROL SYSTEM
In its meeting of 22 June 2020, the Board of Directors
appointed Mr Marco Tronchetti Provera as the person in
charge of setting up and maintaining the internal control and
risk management system.
The Executive Vice Chairman and Chief Executive Officer
is tasked with supervising the functioning of the system of
internal control and risk management and implementing the
respective guidelines established by the Board of Directors,
with support from the Audit, Risks, Sustainability and
Corporate Governance Committee, ensuring that all actions
necessary for the implementation of the system are taken. In
line with the recommendations of the Corporate Governance
Code, he/she:
→ ensures that the principal business risks are identified,
taking account of the characteristics of the activities
carried out by the Company and its subsidiaries, and
submits them periodically to the Board of Directors for
review;
→ authorises execution of the guidelines formulated
by the Board of Directors, supervising the design,
implementation and management of the internal control
and risk management system and constantly monitoring
its adequacy and effectiveness;
→ ensures that this system is adapted to any changes in
operating conditions and the legislative and regulatory
framework;
→ may ask the internal audit function to carry out checks
on specific operational areas and on compliance with
internal rules and procedures in the execution of corporate
transactions, while simultaneously notifying the Chairman
of the Board of Directors, the Chairman of the Audit, Risks,
Sustainability and Corporate Governance Committee and
the Chairman of the Board of Statutory Auditors; and
→ reports promptly to the Audit, Risks, Sustainability
and Corporate Governance Committee on issues and
critical situations identified during his work or otherwise
brought to his attention, so that the Committee can take
appropriate action.
216
Pirelli Annual Report 2021 9.2. AUDIT, RISKS, SUSTAINABILITY AND CORPORATE GOVERNANCE COMMITTEE
ARSCGC
NAME AND SURNAME
OFFICE
Fan Xiaohua
Independent Director
Zhang Haitao
Director
Roberto Diacetti
Independent Director
Giovanni Lo Storto
Independent Director
Marisa Pappalardo
Independent Director
At the Report Date, the Audit, Risks, Sustainability and Corporate Governance Committee was made up of 5
directors (four of whom are independent): Fan Xiaohua (Chairman of the Commitee), Zhang Haitao, Roberto
Diacetti, Giovanni Lo Storto and Marisa Pappalardo. Directors Fan, Diacetti and Lo Storto have adequate
experience in accounting and finance or in risk management.
The Audit, Risks, Sustainability and Corporate Governance Committee, which incorporates the functions of the
“control and risks committee”, helps the Board of Directors to assess and make decisions relating to the internal
control and risk management system, as well as the approval of periodic financial reports. In particular, the Audit,
Risks, Sustainability and Corporate Governance Committee:
→ assists the Board of Directors with:
a) defining guidelines for the internal control and risk management system, in keeping with the Company’s
strategies;
b) evaluating, at least once a year, the adequacy of the internal control and risk management system with
respect to the characteristics of the business and the risk profile assumed, as well as its effectiveness;
c) appointing and removing the head of the Internal Audit department, defining the remuneration of this figure
in line with the company’s policies, ensuring that the same has adequate resources to perform its duties;
d) approving, at least once a year, the work plan drawn up by the head of the internal audit department and
the head of the compliance department, after consulting with the control body and Chief Executive Officer;
e) assessing the adoption of measures aimed to ensure the effectiveness and impartiality of judgement of the
other company departments involved in the controls, checking that they have adequate professionalism
and resources;
f) assessing, having consulted the Board of Statutory Auditors, the results presented by the external auditor
in any letter of recommendations and in the additional report addressed to the Board of Statutory Auditors;
g) describing, in the report on corporate governance, the main characteristics of the internal control and
risk management system and the methods used to coordinate the various parties involved in said system,
indicating the models and best national and international practices of reference, expressing its opinion
on the overall adequacy of the same;
→ assessing, having consulted the manager responsible for the preparation of the corporate financial documents
as well as the firm appointed to undertake the external audit of the accounts and the Board of Statutory
Auditors, the proper and consistent application of the accounting standards within the Group when preparing
the consolidated financial statements;
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Report on the Corporate Governance → assessing the suitability of the periodic, financial and non-
financial information, correctly representing the business
model, the Company’s strategies, the impact of its activities
and the performances achieved in coordination with the
Strategies Committee;
→ examining the content of the periodic non-financial
information relevant for the internal control and risk
management system;
→ expressing opinions on specific aspects concerning
identification of the main company risks and supporting
the assessments and decisions of the Board of Directors
on the management of risks deriving from adverse facts
that have come to the attention of the Committee;
→ examining the periodic reports prepared by the internal
audit manager and the manager of the compliance function;
→ monitoring the autonomy, adequacy, effectiveness and
efficiency of the internal audit function;
→ requesting that the internal audit department, if deemed
appropriate, perform checks in specific operational areas,
notifying the Chairman of the Board of Statutory Auditors
at the same time;
→ reporting to the Board of Directors on the work performed
and on the adequacy of the internal control and risk
management system, at least at the time of approving the
financial statements and the half-year report;
→ monitoring compliance with and the periodic update of
corporate governance rules, as well as compliance with
any codes of conduct adopted by the Company and its
subsidiaries; in particular, it is responsible for proposing
the procedures and timeframes for the Board of Directors’
annual self-assessment;
→ monitoring the operations of the business in terms of their
sustainability and the dynamics of the interactions of the
business will all stakeholders;
→ defining and recommending “sustainability” guidelines to
the Board of Directors and monitoring compliance with
any codes of conduct adopted by the Company and its
subsidiaries.
9.3. INTERNAL AUDIT DEPARTMENT
The Company has an Internal Audit Department, which has
been assigned functions that are essentially in line with those
provided for by the Corporate Governance Code.
In particular, the department is tasked with assessing the
adequacy and functioning of the audit, risk management and
Corporate Governance processes, by providing independent
and objective assurance and advice.
The Internal Audit Department:
→ audits, both on a continuous basis and in relation to specific
needs and in accordance with international standards, the
effective operation and suitability of the internal control
and risk management system - suggesting any corrective
actions required - by implementing an audit plan approved
each year by the Board of Directors, based on a structured
process of analysis and prioritisation of the principal risks;
→ carries out audits, also at the request of the Audit, Risks,
Sustainability and Corporate Governance Committee,
the Board of Statutory Auditors and the Chief Executive
Officer, of specific operating areas and compliance with
the internal procedures and rules in the execution of
business operations;
→ prepares periodic reports on its assessment of the
suitability of the internal control and risk management
system. These reports are sent, at least once every
quarter, to the Board of Statutory Auditors, the Audit, Risks,
Sustainability and Corporate Governance Committee, and
the Director responsible for the internal control system,
and, at least every six months, to the Board of Directors;
→ receives and analyses reports obtained in accordance
with the whistle-blowing procedures established by the
Group and regarding any cases of corruption/violation of
the principles of internal control and/or the precepts of
the Code of Ethics, equal opportunities, corporate rules
and regulations, or any other actions or omissions that,
directly or indirectly, might result in economic or financial
losses for or damage to the reputation of the Group and/
or its subsidiaries;
→ provides adequate support to the Supervisory Bodies
established pursuant to art. 6 of Decree 231/2001;
→ provides advice and support to the relevant Company
departments – without exercising any decision-making
or authorisation responsibilities – regarding inter alia: (i)
the reliability of their systems for safeguarding corporate
assets; (ii) the adequacy of their procedures for recording,
controlling and reporting administrative activities; (iii) the
assignment of engagements to the external auditor and to
other firms in its network.
As mentioned in paragraph 9.2, it should be noted that
the Audit, Risks, Sustainability and Corporate Governance
Committee expresses an opinion on proposals concerning
the appointment, revocation, assignment of duties and
determination of the remuneration, consistent with Company
policies, of the head of the Internal Audit Department, as well as
on the adequacy of the resources allocated to the department
in order to carry out the assigned functions.
The Head of Internal Audit function reports hierarchically to
the EVP Corporate Affairs, Compliance, Audit and Company
Secretary and functionally to the Audit, Risks, Sustainability
and Corporate Governance Committee and to the Board of
Statutory Auditors.
9.4. COMPLIANCE DEPARTMENT
Operating within the Corporate Affairs, Compliance, Audit and
Company Secretary Department, the Compliance Department
works with the Legal departments and other competent company
departments to ensure that the company’s internal regulations,
processes and activities are constantly aligned with the applicable
regulatory framework, playing an active role in identifying any non-
compliance risks that might give rise to judicial or administrative
penalties, resulting in reputational damage. For more details on
the work carried out by the Compliance Department, see the
paragraph of the NFS Report titled “231 Compliance, Anti-
Corruption, Privacy and Antitrust Projects”.
218
Pirelli Annual Report 2021 9.5. SYSTEM OF RISK MANAGEMENT AND
CONTROL OVER FINANCIAL INFORMATION
Pirelli has implemented a specific and structured risk
management and internal control system supported by a
dedicated IT application, in relation to control over the process
to prepare the separate and consolidated half-yearly and annual
financial reports. In particular, the financial reporting process
is carried out by applying appropriate administrative and
accounting procedures created in accordance with the criteria
established by the Internal Control – Integrated Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission.
The administrative/accounting procedures adopted for the
preparation of financial statements and all other financial
disclosures are created under the responsibility of the
Manager responsible for the preparation of the corporate
financial documents (as defined in section 9.10 below), who –
with support from the Compliance Department – periodically
(and in any case, when the separate/consolidated financial
statements are drawn up) checks their adequacy and proper
application.
In order to permit certification by the Manager responsible
for the preparation of the corporate financial documents,
the companies and the significant processes that generate
information of an economic-nature, or about corporate assets,
have been mapped. The companies that are members of
the Group and the significant processes are identified each
year on the basis of quantitative and qualitative criteria.
Quantitative criteria include the identification of those Group
companies that represent an aggregate value, in relation to the
processes selected, that exceeds a predetermined threshold
of materiality.
Qualitative criteria include the review of those processes and
of those companies that, as determined after much discussion
by the Manager responsible for the preparation of the
corporate financial documents, may present potential areas
of risk despite not falling within the quantitative parameters
described above.
Risks/control objectives have been identified for each
selected process involved in the preparation of the financial
statements and related disclosures, as well as with regard to
the effectiveness/efficiency of the internal control system
in general.
Detailed verification work has been planned, and specific
responsibilities have been defined for each control objective.
A system for supervising the verification work undertaken
has been implemented through a chain-of-certifications
mechanism; any problems that emerge during the assessment
process are the subject of action plans whose implementation
is monitored at subsequent reporting dates.
Finally, the Chief Executive Officers and Chief Financial
Officers of subsidiaries issue half-yearly statements attesting
the reliability and accuracy of the data submitted for the
preparation of the Group’s consolidated financial statements.
Shortly before the Board meetings held to approve the
consolidated data as of 30 June and 31 December, the results
of the verification work are shared with the Group’s Manager
responsible for the preparation of the corporate financial
documents.
The Internal Audit Department periodically verifies the
adequacy of the design and the effective operation of the
controls carried out on samples of companies and processes,
selected applying materiality criteria.
9.6. TAX RISK CONTROL SYSTEM
The Group’s management of and approach to the tax risk
are defined and indicated in the principles and values of its
Global Tax Policy, the document approved by the Board of
Directors and made public on the Company’s website. The
Board of Directors is periodically informed about the progress
of the monitoring, management and mitigation of the tax risks
identified as part of the business activities carried out by the
Group.
Moreover, since 2017, the Company has implemented
and adopted a Tax Control Framework (TCF) in line with
international best practice and in compliance with the
Principles dictated by the OECD, i.e. a system for the detection,
management and control of tax risks based on rules, principles
and processes, which reaffirms the Group’s commitment to
strict compliance with tax regulations.
The soundness of the Company’s TCF has been endorsed by
the Italian Revenue Agency and certified with the Company
being admitted (as of 2017) to the “Cooperative Compliance”
Scheme – the new course in the relationship between tax
authorities and taxpayers, a rewarding scheme to which only
a few large Italian industrial and banking groups have been
admitted.
The results of the risk management, control and mitigation
activities, and the progress of dialogue with the Italian tax
authorities are periodically reported through the Tax Risk
Officer – a new position provided for under the Collaborative
Compliance scheme, who is responsible for implementing
and overseeing the Tax Control Framework for the purpose
of controlling and mitigating tax risks – and the Tax Affairs
Department to the Audit, Risks, Sustainability and Corporate
Governance Committee which, in turn, reports to the Board
of Directors.
9.7. DIRECTOR RESPONSIBLE FOR SUSTAINABILITY TOPICS
On 22 June 2020, the newly appointed Board of Directors
confirmed Executive Vice Chairman and Chief Executive
Officer Marco Tronchetti Provera as the Director Responsible
for sustainability topics.
In that role, he will be responsible for supervising sustainability
topics associated with the conduct of the activities of
the company, and its dynamics of interaction with all the
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Report on the Corporate Governance stakeholders, and for implementing the guidelines defined by
the Board of Directors, with assistance from the Audit, Risks,
Sustainability and Corporate Governance Committee.
9.8. MODEL 231 AND CODE OF ETHICS
The Company has adopted the organisation and management
model envisaged by Decree 231 of 8 June 2001, as
subsequently amended (the “Model 231”), in order to create
a system of rules designed to prevent unlawful conduct
that might be significant for the purposes of applying the
above regulations and, as a consequence, has established a
supervisory body (the “Supervisory Body”).
Model 231 – periodically updated by the Company in light
of legislative developments – is made up of: (a) a general
part covering topics relating, inter alia, to the applicability
and application of Decree 231/2001, the composition
and functioning of the Supervisory Body, and the system
of penalties applicable in the event of breaches of the
standards of conduct specified in Model 231, and (b) special
parts containing the general principles of conduct and the
control protocols for each type of identified offence deemed
significant for the Company.
The Supervisory Board – appointed by the Board of Directors
on 22 June 2020 and reshuffled by the Board of Directors on
11 November 2020 – is made up of: Carlo Secchi (Chairman),
Antonella Carù (Standing Auditor) and Alberto Bastanzio (by
virtue of his position as Executive Vice President Corporate
Affairs, Compliance, Audit and Company Secretary). The
Supervisory Body satisfies the autonomy, independence,
professionalism and continuity of action requirements
specified by law for that body.
Pirelli has adopted a Code of Ethics that sets out principles
for the required conduct of directors, statutory auditors,
executives and employees of the Group and, in general, all
those that work in Italy and abroad on behalf of or for the
benefit of the Group, or that engage in business relations
with the Group, each in the context of their own functions
and responsibilities.
An extract from Model 231 is available on the Website.
9.9. EXTERNAL AUDITOR
The firm engaged to perform the external audit of the Company
accounts is PricewaterhouseCoopers S.p.A. (the “Auditing
Firm”), with registered and administrative offices at Piazza Tre
Torri 2, Milan, recorded on the Register of Auditors established
pursuant to arts. 6 et seq. of Legislative Decree No. 39/2010.
Pirelli’s Ordinary Shareholders’ Meeting held on 1 August 2017
confirmed the firm’s appointment to perform the external audit
of the accounts (originally made for three financial years on 27
April 2017), establishing that, with effect from the admission of
Pirelli shares to trading on the MTA (now Euronext Milan) as of
4 October 2017, such appointment would entail: (i) the external
audit of the accounts (including verification that the accounting
records are properly kept and that the results of operations are
properly reflected in the accounting entries) pursuant to articles
13 and 17 of Decree 39/2010 for the financial years 2017-2025,
in relation to the separate financial statements of the Company,
the consolidated financial statements of the Group and the
additional related activities; and (ii) the limited examination of
the condensed half-year consolidated financial statements of
Pirelli for the six-month periods ending on 30 June 2018-2025.
In addition to carrying out the statutory audit, the Auditing Firm
is also responsible for the limited audit of the sustainability
performance data reported in the NFD Report in accordance
with the criteria set out in ISAE 300083.
For the sake of completeness, it should be noted that the
Company has adopted Operating Rules to assign tasks to
the Auditing Firm84 which concerns – among other things –
the procedures for assigning tasks other than the statutory
audit to PricewaterhouseCoopers S.p.A. and members of its
network (“Other Engagements”; i.e. other audit services, audit-
related services and non-audit services). The Operating Rules
establish a detailed procedure that requires prior approval of
the Board of Statutory Auditors for the assignment of Other
Engagements. In compliance with the provisions of Article
17 of Legislative Decree No. 39/2010 on the independence
of the Auditing Firm, the Company also has a procedure in
place to ensure compliance with the thresholds set out in art.
4, paragraph 2 of Regulation 537/201485. To this end, during
the meetings of the Board of Statutory Auditors regarding
the approval of Other Engagements, specific documentation
is provided to certify compliance with said thresholds. The
details of the fees paid to the Auditing Firm are reported in
the Explanatory Note on the financial statements.
9.10. MANAGER RESPONSIBLE FOR THE PREPARATION
OF THE CORPORATE FINANCIAL DOCUMENTS
Following Mr Francesco Tanzi’s resignation from the
Company tendered on 7 September 2021 and effective as of
31 December 2021, the Board of Directors, in their meeting
of 11 November 2021, assigned Mr Giorgio Luca Bruno –
after a positive evaluation by the Strategies Committee and
a favourable opinion of the Board of Statutory Auditors –
the role of Manager responsible for the preparation of the
corporate financial documents pursuant to art. 154-bis TUF
(the “Manager in Charge”).The Board of Directors also
verified in advance that the Manager in Charge is an expert
in administration, finance and control matters and satisfies the
integrity requirements established for directors.
83 International Standard on Assurance Engagements 3000 - Assurance Engagements other than
Audits or Reviews of Historical Financial Information, issued by the International Auditing and Assurance
Standards Board. For further information, please refer to the Auditors’ Report at the end of the Annual
Report.
84 Operating Rules “Engagement of Auditing Firms” adopted pursuant to Directive 2006/43/EC, as
amended by Directive 2014/56/EU, and Regulation 537/2014. Directive No. 2014/56 was transposed by
Legislative Decree No. 135/2016, which amended Legislative Decree No. 39 of 27 January 2010.
85 “Where the statutory auditor or auditing firm supplies the entity being audited, its parent company or
companies it controls – for a period of three or more consecutive financial years – with non-audit services
other than those referred to in art. 5, paragraph 1 herein, the total fees for said services shall be limited
to 70% of the average fees paid during the preceding three consecutive financial years for the statutory
audit of the entity being audited and, where applicable, its parent company, controlled. companies and the
consolidated financial statements of said group of companies. For the purposes of the limitations set out
in the first paragraph, non-audit services other than those referred to in art. 5, paragraph 1 required by EU
or Italian law shall be precluded”.
220
Pirelli Annual Report 2021 The Manager in Charge puts suitable administrative and
accounting procedures in place for the preparation of the
separate and consolidated financial statements, as well as of
all other financial communications.
The Company deeds and communications made public to the
market that contain accounting information, including interim
data, must be accompanied by a written declaration from the
Manager in Charge confirming that it corresponds to the
supporting documentation, records and accounting entries.
The term of office of the Manager in Charge expires at the
same time as that of the Board of Directors which appointed
him/her.
9.11. COORDINATION BETWEEN THE PARTIES INVOLVED IN
THE INTERNAL CONTROL AND RISK MANAGEMENT SYSTEM
As part of the internal control and risk management system,
the Company provides for and promotes close coordination
between the parties involved in the system, scheduling
meetings at least once every six months for the Audit, Risks,
Sustainability and Corporate Governance Committee,
during which Directors are able to interact directly with the
managers of the departments involved (Compliance, Audit,
Risk Management and Cyber Security). The results of the
Committee meetings are reported directly to the meetings
of the Board of Directors on a regular basis.
In order to ensure coordination between the Company’s control
systems, the meetings of the Audit, Risks, Sustainability and
Corporate Governance Committee are periodically held jointly
with the Supervisory Body, the Board of Statutory Auditors
and the Chairmen of the Boards of Statutory Auditors of the
subsidiaries.
execution of the related-parties transactions arranged directly
by Pirelli or by its subsidiaries.
The full text of the RPT Procedure is available on the Website.
Periodically and at least every three years, the Board of
Directors - having received the opinion of the Related-Parties
Transactions Committee - considers the need to revise the
RPT Procedure.
A special section of the financial statements shows the principal
transactions with related parties undertaken by the Company.
Every six months, a report on the application of the RPT
Procedure, drawn up by the Compliance Department, is
submitted to the Related-Parties Transactions Committee
and subsequently the Board of Directors. The analyses carried
out to date have shown due compliance with and the correct
application of the aforementioned procedure in all cases falling
within its scope of application.
11. Board of Statutory Auditors
11.1. APPOINTMENT, REPLACEMENT AND DURATION IN OFFICE
At the Report Date, the Board of Statutory Auditors is
composed of five standing auditors and three alternate auditors
who satisfy current legislative and regulatory requirements; in
this regard the activities indicated in the corporate purpose,
with particular reference to companies or entities operating
in the financial, industrial, banking, insurance and real estate
fields and services in general, are qualified as subjects and
sectors of activity closely related to those of the company.
For further information, please refer to the dedicated section
in the Report on Operations of the Financial Statements.
The Ordinary Shareholders’ Meeting appoints the Board of
Statutory Auditors and determines its remuneration.
10. Interests of the Directors
and Related-Parties transactions
In compliance with the provisions of art. 2391-bis of the
Italian Civil Code and the Related-Parties Regulations,
on 15 June 2021 the Board of Directors – following the
unanimous favourable opinion expressed by the Related-
Parties Transactions Committee – passed resolution to adopt
the procedure for related-parties transactions (the “RPT
Procedure”)86 with effect from 1 July 2021.
The RPT Procedure establishes rules for the approval and
The statutory auditors act with autonomy and independence,
also with regard to the shareholders that elected them.
In order to enable the minority to elect a standing auditor (who
will be the Chairman of the Board of Statutory Auditors) and an
Alternate Auditor, the Board of Statutory Auditors is appointed
on the basis of slates presented by the shareholders, in which
each candidate is listed with a sequence number. Each slate
contains a number of candidates that does not exceed the
number of members to be elected.
Shareholders are only entitled to present a slate if, alone or
together with other shareholders, they hold at least 1% of the
shares entitled to vote at an Ordinary Shareholders’ Meeting,
or any lower amount required by a regulation issued by Consob
for the presentation of slates of candidates for appointment
to the Board of Directors. Each shareholder may present or
contribute to the presentation of just one slate.
86 For completeness, it should be noted that, on 17 March 2022, the Board of Directors, with the
favourable opinion of the Board of Statutory Auditors, approved the proposed formal amendments to the
RPT Procedure to take account of the changes in the Company’s organisational structure at the end of
2021, which were approved during the Board of Directors’ meeting held on 11 November 2021.
The slates of candidates, signed by those presenting them,
must be filed at the registered offices of the Company at least
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Report on the Corporate Governance twenty-five days prior to the date fixed for the Meeting called
to appoint the members of the Board of Statutory Auditors,
without prejudice to any extension in the cases envisaged by
the applicable legislation. These slates are made available to
the public at the registered offices, on the Website and in other
ways prescribed by Consob regulation, at least twenty-one
days prior to the date of the Meeting.
Each candidate may be included on just one slate, subject
otherwise to becoming ineligible.
Each slate comprises two sections: one for candidates for
the office of standing auditor and the other for candidates to
the position of alternate auditor. The first candidate in each
section shall be selected from among those registered in
the Register of Chartered Accountants who has worked on
external audits for a period of not less than three years. In
order to ensure gender balance, slates that - taking account
of both sections - present a number of candidates equal to
or exceeding three, must include candidates of each gender
at least to the minimum extent required by law and / or pro
tempore regulations in force, as specified in the notice of call
of the Shareholders’ Meeting, both in the section for standing
statutory Auditors and in the section for alternates.
Each party entitled to vote may only vote for one slate. The
members of the Board of Statutory Auditors are elected as
follows:
1) four standing auditors and two alternate auditors are
drawn, in the sequence listed, from the slate that obtained
the largest number of votes (the majority slate);
2) the remaining standing auditor and alternate auditor are
drawn, in the sequence listed, from the slate that obtained
the second largest number of votes (the minority slate);
should several slates obtain the same number of votes,
a new vote limited to just those slates is held by all those
entitled to vote that are present at the Shareholders’
Meeting, and the candidates on the slate which obtains
the simple majority of the votes will be elected.
Should application of the slate voting mechanism not obtain,
considering the standing and alternate auditors separately,
the minimum number of statutory auditors belonging to the
less represented gender envisaged by the regulations in force
at the time, the candidate belonging to the most represented
gender and elected, indicated with the highest sequential
number of each section from the slate that obtained the largest
number of votes, will be replaced by the candidate belonging
to the less represented gender not already elected from the
same section of that slate, according to the sequential order
of presentation.
An auditor is replaced, in the event of death, resignation
or forfeiture, by the first alternate auditor drawn from the
same slate. If this replacement does not allow the Board of
Statutory Auditors to be reconstructed in compliance with
current regulations, including those governing gender balance,
recourse is made to the second alternate auditor drawn from
the same slate. If, subsequently, it becomes necessary to
replace another Auditor drawn from the slate that obtained
the largest number of votes, recourse is made to the other
alternate auditor drawn from the same slate. Should it be
necessary to replace the Chairman of the Board of Statutory
Auditors, the chair is taken by the second auditor on the same
slate as the Chairman to be replaced, following the order of
that slate, always provided that the replacement satisfies the
requirements for the position established by law and/or the
Articles and complies with the gender balance requirements
envisaged by the regulations in force; if it is not possible to
make replacements in accordance with the above criteria, a
Shareholders’ Meeting will be called to supplement the Board
of Statutory Auditors with resolutions adopted by a relative
majority of the votes cast.
When the Shareholders’ Meeting must appoint the standing
and/or alternate auditors necessary for the supplementing of
the Board of Statutory Auditors, the procedure is the following:
if it is necessary to replace auditors elected from the majority
slate, the appointment is made by a relative majority of the votes
cast, without any slate requirements and without prejudice, in
all cases, to compliance with the gender balance requirements
envisaged by the regulations in force; if, on the other hand, it is
necessary to replace auditors elected from the minority slate,
the Shareholders’ Meeting replaces them by a relative majority
of the votes cast, choosing them - where possible - from among
the candidates indicated on the slate from which the auditor
to be replaced was drawn and, in all cases, in compliance with
the principle guaranteeing representation for the minorities
that, pursuant to the Articles, are entitled to participate in
the appointment of the Board of Statutory Auditors, without
prejudice in all cases to compliance with the gender balance
requirements envisaged by the regulations in force. The
principle guaranteeing representation for the minorities is
respected if the auditors elected were previously candidates
on the minority slate or on slates other than that which, at the
time of appointing the Board of Statutory Auditors, obtained
the largest number of votes.
If only one slate is presented, the Shareholders’ Meeting votes
on it; if the slate obtains a relative majority of the votes cast,
the candidates named in the respective sections of the slate
are elected as standing auditors and alternate auditors; the
person named first on the above slate becomes the Chairman
of the Board of Statutory Auditors.
For the appointment of statutory auditors who, for any reason,
were not appointed in accordance with the above procedure,
the Shareholders’ Meeting adopts resolutions with the
majorities required by law, without prejudice in all cases to
compliance with the gender balance requirements envisaged
by the regulations in force. Outgoing Statutory Auditors may
be re-elected.
11.2. COMPOSITION
The Board of Statutory Auditors in office at the Report Date
was appointed by the ordinary Shareholders’ Meeting held
on 15 June 2021 and is made up of the following members:
Riccardo Foglia Taverna (Chairman of the Board of Statutory
Auditors, appointed by the minorities), Francesca Meneghel,
222
Pirelli Annual Report 2021 Teresa Naddeo, Antonella Carù and Alberto Villani, as Standing
Auditors, and Franca Brusco (appointed by the minorities),
Marco Taglioretti and Maria Sardelli, as alternate auditors until
the date of the Shareholders’ Meeting called for the approval
of the financial statements for the year ending 31 December
2023. The Board of Statutory Auditors is composed of a
majority of female auditors.
The professional profiles of the members of the incumbent
Board of Statutory Auditors are summarised on the Website.
The remuneration of the statutory auditors is discussed in the
Remuneration Report.
All Statutory Auditors may be qualified as independent based
on the criteria specified for Directors as set out in the Corporate
Governance Code and as expressly ascertained by the Board
of Statutory Auditors based on the information provided by
the Statutory Auditors and the information available thereto.
This ascertainment is carried out annually.
During the Year, Pirelli’s Board of Statutory Auditors (before
and after its renewal)met 10 times, with each meeting having
an average duration of about 103 minutes.
At the Report Date, of the eight members of the Board of
Statutory Auditors (five standing auditors and three alternate
auditors), approximately 63% were female (the percentage
is 60% of the standing auditors only). Moreover, the average
age of the members of the Board of Statutory Auditors is
approximately 58 years.
During the course of the Year, the Board of Statutory Auditors,
like the Board of Directors, again carried out the process
for assessing its performance, with assistance from the
independent consulting firm Spencer Stuart, in line with what
was done in the previous year and in compliance with the code
of conduct for listed companies published by the Italian national
association of chartered accountants and auditors (“Rules of
Conduct”). That self-assessment process, like the process in
place for the Board of Directors, is carried out through individual
interviews, with questions about the suitability, size, composition
and functioning of the Board of Statutory Auditors itself, in order
to verify suitability, fairness and effectiveness in its functioning.
Positive outcomes of the Board of Statutory Auditors’ self-
assessment process are included in the Statutory Auditors’
report at 31 December 2021.
Table 4, annexed, provides the significant information about
each member of the Board of Statutory Auditors in office at
the Report Date.
As of 1 August 2020, the role of co-CEO General Manager was
established, and entrusted to Angelos Papadimitriou until 28
February 2021, which was the effective date of the consensual
termination of his employment relationship as a manager. The
office of Co-CEO General Manager was superseded at the
Shareholders’ Meeting of 15 June 2021 following Giorgio Luca
Bruno’s appointment as a Director of the Company and as
Deputy-CEO.
13. Information flows
to the Directors
and Statutory Auditors
The Board of Directors of Pirelli adopted a procedure for
information flows to the Directors and Statutory Auditors, in
order to (i) guarantee the transparent management of the
business, (ii) establish conditions for the effective and efficient
management and control of the activities of the Company and
the operations of the business by the Board of Directors, and
(iii) provide the Board of Statutory Auditors with the sources
of information needed for the efficient performance of its
supervisory role.
The flow of information to the directors and statutory auditors
is assured, preferably, by the transmission of documents on
a timely basis and, in any case, with sufficient frequency to
ensure compliance with the disclosure requirements, and in
accordance with deadlines consistent with the timetables
set for each board meeting. These documents may be
supplemented by explanations provided in the context of the
board meetings, or at specific informal meetings organised
to examine topics of interest relating to the management of
the company.
When the information flows relate to Inside Information and/
or Significant Information, they must take place in accordance
and compliance with the procedures indicated in the Market
Abuse Procedure.
It is required that the Strategies Committee be the recipient of
a specific and continuous flow of information from the Chief
Executive Officer, assisted by the Secretary of the Company’s
Board of Directors for such purposes.
12. General Management
Operations
It should be noted that the General Manager Operations
role was established in May 2018 and is entrusted to Andrea
Casaluci.
14. Relations with Shareholders
Pirelli attributes strategic importance to Financial Reporting. In
accordance with the Group’s Values and Code of Ethics, Pirelli
maintains constant dialogue with Shareholders, Bondholders,
Institutional and Individual Investors and Analysts from major
investment banks through the Investor Relations department
and the Group’s Top Management in order to promote fair,
transparent, timely and accurate reporting.
223
Report on the Corporate Governance In line with international best practice, the “Investors” section
of the website is constantly updated with content of interest
to the financial market, including: strategy (“Equity Story”),
economic-financial data on previous years, analysts’ opinions
of Pirelli, and their estimates for the principal economic-
financial indicators (“Consensus”), monthly developments in
the principal automotive tyre market (“Tyre Market Watch”).
The Investor Relations Department also promotes periodic
meetings with Shareholders and Investors in Italy and abroad.
14.1. POLICY FOR MANAGING DIALOGUE WITH SHAREHOLDERS
AND THE MAIN FINANCIAL MARKET STAKEHOLDERS
On 23 February 2022, the Board of Directors – after obtaining
the favourable opinion of the Audit, Risks, Sustainability and
Corporate Governance Committee and in accordance with
the recommendations of the Corporate Governance Code87
– adopted a specific policy which, changing the existing
practices, governs the rules for managing the dialogue held by
the Board of Directors, through the VP and CEO and with the
assistance of the departments concerned (primarily Investor
Relations and Corporate Affairs), with shareholders and with
the main stakeholders of the financial market in which the
Company operates (the “Engagement Policy”).
This policy covers – inter alia – the following issues:
→ business and financial strategies and performance;
→ corporate governance (e.g. appointment and composition
of the administrative body, including in terms of size,
professional aspects, respectability, independence and
diversity, board committees, etc.);
→ social and environmental sustainability;
→ policies on the remuneration of directors and key managers
and on their implementation; and
→ system of internal control and risk management.
For further information on the Engagement Policy, please refer
to the Website.
15. Shareholders’ meetings
Pursuant to art. 7 of the Articles, ordinary and extraordinary
Shareholders’ Meetings of the Company are held in single call.
Their resolutions are adopted with the majority required by law,
with the sole exception of the authorisation of the Board of
Directors to carry out the deeds listed below, which requires a
qualified majority (votes in favour of shareholders representing
at least 90% of the share capital of the Company):
→ transfer of the operational and administrative headquarters
outside of the municipality of Milan;
→ any transfer and/or deed of disposition, in any form, of
Pirelli know-how (including the granting of licences).
87 Recommendation 3 of the Corporate Governance Code.
Parties entitled to vote may be represented by proxy, given
in accordance with the procedures envisaged by law and the
regulations in force.
The notice of call may also limit to one of the above methods
the specific procedure usable in relation to the Meeting called
by that notice.
For each Meeting, the Company designates one or more
persons to which those entitled to vote may grant proxy, with
voting instructions for all or just some of the motions on the
agenda. The proxy does not apply to motions for which no
voting instructions were given. The persons designated to
receive proxies for the Meeting are specified in the related
notice of call, together with relevant procedures and deadlines.
The Ordinary Shareholders’ Meeting for the approval of the
financial statements must be called, in accordance with the
law, no later than 180 days from the end of the financial year.
In the situations envisaged by law and in accordance with the
related procedures, the directors must call a Shareholders’
Meeting without delay when requested by shareholders
representing at least one-twentieth of share capital.
The shareholders requesting the Meeting must prepare
a report on their proposals regarding the matters to be
discussed. At the time of publishing the notice of call for the
Meeting and in accordance with the procedures envisaged
by law, the Board of Directors must make the report prepared
by the shareholders available to the public, together with its
considerations, if any.
In the cases, in the manner and with the timing envisaged by
law, shareholders that, individually or together, represent at
least one-fortieth of share capital may request the integration
of the items of the agenda, indicating in their request the
additional topics proposed by them, or proposing resolutions
on matters already on the agenda.
A notice is published about the addition of items to the agenda
or the presentation of additional proposed resolutions on
matters already on the agenda, by the legal deadlines, in the
manner established for publication of the notice of call.
Shareholders requesting additions to the agenda must prepare
and send to the Board of Directors, by the final deadline for
the presentation of requests for additions, a report explaining
their reasons for the proposed resolutions on the matters they
wish to discuss, or their reasons for the additional proposed
resolutions presented in relation to matters already on
the agenda. At the time of publishing the notice about the
additions to the agenda and in accordance with the procedures
envisaged by law, the Board of Directors must make the report
prepared by the shareholders available to the public, together
with its considerations, if any.
The right to attend Meetings and vote is governed by
the relevant current legislation and is certified by a
communication sent to the Company, by an authorised
intermediary with reference to its accounting records, on
behalf of the party entitled to vote. This certification is based
224
Pirelli Annual Report 2021 on the evidence existing at the end of the accounting day
on the seventh trading day prior to the date fixed for the
Meeting. The additions and deductions recorded on those
counts subsequent to that deadline are not relevant when
determining the legitimacy of the right to vote at the Meeting.
The communication must be received by the Company by
the end of the third trading day prior to the date fixed for
the Meeting, or by any different deadline established by
the applicable regulations. Shareholders are still entitled
to attend and vote if the communication is received by the
Company after the above deadlines, on condition that it is
received before business commences at the Meeting.
Ordinary and Extraordinary Shareholders’ Meetings are
chaired by the Chairman of the Board of Directors or, if absent
or unavailable, by the Chief Executive Officer. If the above
persons are absent, the chair is taken by another person
appointed by a majority of the share capital represented at
the Meeting.
The Chairman of the Meeting is assisted by a Secretary,
appointed by a majority of the share capital represented at the
Meeting, who does not need to be a shareholder; assistance
from the Secretary is not necessary when the minutes of the
Meeting are taken by a Notary.
The Chairman of the Meeting chairs the Meeting and, in
accordance with the law and the Articles, moderates its
course. For this purpose, the Chairman - inter alia - verifies
that the Meeting has been properly convened, verifies the
identity of those attending and their right to attend, directly
or by proxy; verifies the legal quorum for voting; directs the
proceedings, with the right to change the order of discussion
of the items indicated in the notice of call. The Chairman also
adopts suitable measures to ensure orderly discussions and
voting, determining the related procedures and checking
the results.
Meeting resolutions are evidenced by the minutes signed
by the Chairman of the Meeting and by the Secretary of the
Meeting or the Notary. The minutes of Extraordinary Meetings
must be taken by a Notary designated by the Chairman of the
Meeting. All copies of and extracts from minutes not prepared
by a Notary are certified true by the Chairman of the Board
of Directors.
The conduct of such meetings is governed by the general
meeting regulations approved by the Shareholders’ Meeting
held on 1 August 2017 (available on the Website), as well as by
the law and the Articles.
For the sake of completeness, it should be noted that, in order
to minimise the risks related to the health emergency tied
to the Sars-CoV 2 (Covid-19) virus, in 2021 the Company
used the option – in compliance with the statutory provisions
and governmental indications88, inter alia – to: (i) extend the
time limits for convening the Shareholders’ Meeting; (ii) only
88 Decree-Law No. 18 of 17 March 2020, as converted with amendments into Law No. 27 of 24 April
2020, the application of which was last extended by Decree-Law No. 183 of 31 December 2020, as
converted with amendments into Law No. 21 of 26 February 2021.
conduct the Shareholders’ Meeting remotely without the
physical attendance of those entitled to vote; and (iii) allow
those entitled to vote in the Shareholders’ Meeting to attend
solely through a representative appointed pursuant to art.
135-undecies TUF.
16. Changes since
the end of the year
There have not been any changes to the structure of corporate
governance since the end of the Year, except as already
indicated in the previous paragraphs, if applicable.
17. The Pirelli website
For Pirelli, the Website - in English and in Italian - represents a
fundamental tool to ensure the prompt and total dissemination
of information about the Company and the Group to all
Stakeholders.
Pirelli ensures that it is promptly and thoroughly updated, so as
to guarantee the transparency of information and compliance
with the current laws and regulations applicable to companies
listed on the Italian Stock Exchange.
The Company’s objective is to provide simple and clear
information for investors and, in general, all its Stakeholders,
through the Site, in line with common practice. For this reason,
also taking account of the periodic results of assessments
by independent agencies and in line with the Stakeholders’
expectations, the Company uses its best endeavours to
constantly implement the Website.
18. Considerations
on the letter by the Chairman
of the Corporate Governance
Committee
With a letter of 3 December 2021 (the “Chairman’s Letter”),
in the context of the usual monitoring of the application of the
provisions of the Corporate Governance Code, the Chairman
of the Corporate Governance Committee of Borsa Italiana has
provided listed companies with a further six recommendations
(the “Committee Recommendations for 2022”) listed below:
1.
in pursuit of the “sustainable success” objective of the
Corporate Governance Code: (i) to provide, in the Corporate
Governance Report, adequate and concise information on
the methods adopted to pursue said goal and the approach
225
Report on the Corporate Governance taken to promote dialogue with relevant stakeholders; and
(ii) to provide concise information on the content of the
policy for dialogue with all shareholders;
2. in the light of the new approach to proportionality
laid down in the Corporate Governance Code and the
structural changes introduced, to assess the company’s
classification with respect to the new categories envisaged
and the simplification options available to “non-large” and/
or “concentrated” companies, and to adequately indicate
the choices made;
3. with regard to the application of independence criteria:
(i) the corporate governance report should include the
criteria used to assess the significance of professional,
commercial or financial relationships and additional
remuneration, including with reference to the Chairman
of the Board of Directors, if he/she has been classified as
independent pursuant to the Code;
4. with regard to pre-meeting information: (i) to explicitly
determine the deadlines deemed appropriate for sending
documentation, (ii) to provide a clear indication of the terms
identified and their actual compliance in the corporate
governance report, (iii) not to allow these deadlines to be
waived for mere confidentiality reasons;
5. with respect to the appointment and succession of
directors and with reference to non-concentrated
ownership companies, to examine the recommendations
made to them concerning the renewal of the board of
directors. In particular, this recommendation requires
those submitting slates containing candidates for more
than half of the directors to be elected, to provide adequate
information demonstrating that the slate matches the
guidance expressed by the outgoing board, and to indicate
their own candidate for the office of Chairman;
6. with regard to gender equality, ensure adequate information
in the corporate governance report on the concrete
measures established and implemented to promote
gender equality and equal opportunities within the entire
corporate organisation;
7. with regard to remuneration policies: (i) to improve
the definition of clear and measurable rules for the
disbursement of the variable component and any end-
of-office indemnities, (ii) to adequately consider whether
the parameters set for variable remuneration are
consistent with the strategic objectives of the business
and pursuit of sustainable success, assessing non-financial
parameters where appropriate, (ii) with particular regard
to remuneration parameters tied to the achievement of
environmental and social objectives, to ensure that such
parameters are predetermined and measurable.
The Committee’s Recommendations for 2022 were brought
to the attention of (i) the Audit, Risks, Sustainability and
Corporate Governance Committee and Board of Statutory
Auditors on 18 February 2022 and (ii) the Board of Directors
on 23 February 2022.
The Board of Directors of the Company – having also obtained
the favourable opinion of the members of the competent
Committees and Board of Statutory Auditors on this matter –
believes that, as promptly highlighted in this Report, no specific
interventions to its own corporate governance system are
needed in relation to the issues highlighted in the Committee’s
Recommendations for 2022 given that they have already been
adequately implemented by the Company for some time,
also given the fact that the Board of Directors approved the
Engagement Policy in its meeting of 23 February 2022.
The Company considers it appropriate to provide the
following summary of the considerations formulated by the
Board of Directors on the aforementioned Committee’s
Recommendations for 2022.
It is deemed that the systems of corporate governance
rules adopted by Pirelli is already in line with the foregoing
recommendations, for the reasons outlined below:
→ the sustainability of the business activities has long
represented a pillar of Pirelli’s strategy which aims to create
long-term value for the benefit of shareholders, taking into
account all relevant stakeholders for the Company. In order
to contribute to the sustainable success of the Company,
the internal control and risk management system, whose
guidelines are defined by the Board of Directors in line
with the Company’s strategies, allows for the main risks
to be identified, measured, managed and monitored. In
addition, the Company’s remuneration policy includes
long-term variable components of remuneration aimed
at encouraging the achievement of corporate strategic
objectives and the sustainable growth of the company;
the Report on the Corporate Governance and Share
Ownership included in the annual financial Report as at
31 December 2021 will provide succinct information on
the content of the “Policy for managing the dialogue with
shareholders and the main financial market stakeholders
with the Board of Directors of the company” adopted by
the Company, which will also be published on the website
www.pirelli.com, in the Governance section;
→ though, pursuant to the Corporate Governance Code, the
Company fits the definition of a “concentrated ownership
company”, considering the presence of the Shareholders’
Agreement, it did not avail itself of any flexibility options
when applying the Corporate Governance Code, though
foreseen therein;
→ the Pirelli Board of Directors has a number of independent
directors who normally make up the absolute majority of its
members. For the periodical review of the independence
requirements of its members and statutory auditors,
in 2021 the Company adopted a “Statement” on
independence which defines the qualitative/quantitative
criteria to be used to assess the independence of directors
for the purposes of the Corporate Governance Code and,
in particular, the relevant parameters of any economic,
professional or financial relationship pertaining to the
directors whose independence is being examined. The
“Statement” (also applied to members of the Board of
Statutory Auditors) details some interpretation criteria
related to the other types of independence mentioned in
the Corporate Governance Code, including the notion of
“significant additional remuneration”;
→ pre-board reporting (of a continuous nature or relating
to specific topics) also took place in 2021 in compliance
with an advance that was deemed adequate to allow the
226
Pirelli Annual Report 2021 Directors to express informed opinions on the matters
submitted for examination by the Board and consistent
with quality standards that are in line with international best
practices and broad guarantees as to the confidentiality
and traceability of the information and documents sent;
as established in the Regulations on the functioning of the
Board of Directors (approved most recently at the meeting
held on 22 June 2020), the documentation examined by
the Board and the Committees is sent out in the ten days
prior to the meeting, unless specific requirements do not
allow this: in such cases the documentation is sent as
soon as it is available and during the board meeting full
information on the issue to be considered is provided.
Said Regulation does not establish that those terms may
be waived for mere confidentiality requirements;
→ Pirelli is characterised by a multinational context in which
people express a huge heritage of diversity. Conscious
management of this diversity generates competitive
advantages, opportunities for the development and
enrichment of the business, and shared corporate
values. The respect of these values has always been
guaranteed by the shareholders during the renewal of
the Board of Directors in terms of age, gender, nationality,
education and professional background and experience.
This enables the Board to perform its duties in the most
effective way, making use of the contributions made
from different points of view, and to analyse individual
situations from multiple perspectives. During 2019,
the Company adopted a Diversity and Independence
Statement in relation to the make-up of the Board itself
and the Board of Statutory Auditors, recommending
that these values be respected when its own corporate
bodies are being renewed or integrated, in line with the
diversity and independence criteria. On 22 June 2020,
when the administrative body was renewed, the newly-
elected Board of Directors adopted the “Diversity and
Independence Statement”;
→ the Company’s remuneration policy establishes the short
and medium/long term variable remuneration parameters,
maintaining strong alignment with company strategies, the
medium/long term interests and sustainability; in order
to promote the creation of long term sustainable success
and achieve the goals of the Company’s strategic plans.
The variable components of Management remuneration
include non-financial parameters (easily measurable)
consistent with Group strategy.
227
Report on the Corporate Governance TABLE 1: SIGNIFICANT SHAREHOLDINGS OF CAPITAL
The subjects which, according to the information published by Consob at the date of publication of this Report
and/or according to further information available to the Company, possess shares with voting rights in Ordinary
Shareholders’ Meetings that represent more than 3% of the ordinary share capital are listed below.
SIGNIFICANT SHAREHOLDINGS OF CAPITAL
DECLARING PARTY
DIRECT SHAREHOLDER
% OF ORDINARY CAPITAL
% OF VOTING CAPITAL
SINOCHEM HOLDINGS CORPORATION LTD[1]
MARCO POLO INTERNATIONAL
ITALY S.R.L.
TRONCHETTI PROVERA MARCO
SILK ROAD FUND CO LTD
BOMBASSEI ALBERTO
CAMFIN S.P.A.
PFQY SRL[3]
NEXT INVESTMENT SRL
BREMBO SPA
NIU TENG
LONGMARCH HOLDING S.à.r.l
TACTICUM INVESTMENTS S.A.
TACTICUM INVESTMENTS S.A.
37.015
14.10[2]
9.021
0.210
4.777
4.987
3.68
4.271
37.015
14.10
9.021
0.210
4.777
4.987
3.68
4.271
Note: The data relating to shareholders who, directly or indirectly, hold ordinary shares representing more than 3% of the share capital with voting rights in ordinary meetings of the Company,
are taken from Consob’s website. In this regard, it is useful to note that the information published by Consob on its website by virtue of the communications made by the parties bound by
the obligations of Article 120 of the TUF and the Issuers Regulation, could differ appreciably from the real situation, because the obligations to communicate changes in the percentages of
holdings arise not when there is a simple change in this percentage but only when the holdings exceed or fall below predetermined thresholds (3%, 5%, and subsequent multiples of 5% up to
a 30% threshold and, beyond this threshold, 50%, 66.6% and 90%). It follows, for example, that a shareholder (i.e. a declaring subject) that has declared ownership of 5.1% of the share capital
with voting rights may increase their stake up to 9.9% without thereby having any obligation to notify Consob under Article 120 of the TUF.
Finally, the Company Articles do not provide for the possibility of increased voting rights or the issue of shares with multiple voting rights.
1 Following the completion of the transfer of the entire share capital of ChemChina to Sinochem Holdings as part of the joint restructuring of Sinochem Group Co. and China National Chemical
Corporation Ltd. (see section 2.2).
2 Following completion of the increase in the share capital of Camfin S.p.A., fully subscribed by Longmarch Holding S.à.r.l., through the contribution of 40,000,000 Pirelli shares to Camfin
S.p.A.. For the sake of completeness, it should be noted that in September 2019 Camfin S.p.A. informed the market that it had taken out instruments called “Call Spreads” with major financial
institutions, the original maturity of which was extended (on 29 June 2021) from September 2022 to September 2023, with an underlying equivalent to approximately 4.6% of Pirelli’s share
capital (see section 2.5).
3 Allocation of Lux SPVs following the Reorganisation referred to in paragraph 2.5.2.
228
Pirelli Annual Report 2021 TABLE 2: STRUCTURE OF THE BOARD OF DIRECTORS AT THE END OF THE YEAR
BOARD OF DIRECTORS
OFFICE
MEMBERS
YEAR
OF
BIRTH
DATE FIRST
APPOINTED (*)
IN OFFICE
SINCE
IN OFFICE UNTIL
SLATE
(**)
EXEC.
NON-
EXEC.
INDEP.
CODE
INDEP.
TUF
Chairman
Executive
Vice Chairman
and Chief
Executive
Officer •
Director
Ning
Gaoning
Marco
Tronchetti
Provera
1958 7 August 2018
18 June
2020
Shareholders’ meeting to approve
financial statements at 31 Dec. 2022
M
1948
7 May 200389
18 June
2020
Shareholders’ meeting to approve
financial statements at 31 Dec. 2022
M
x
Yang
Xingqiang
1967
20 October
2015
18 June
2020
Shareholders’ meeting to approve
financial statements at 31 Dec. 2022
Director
Bai Xinping
1968
2 September
2015
18 June
2020
Shareholders’ meeting to approve
financial statements at 31 Dec. 2022
Director
Giorgio Luca
Bruno
1960 15 March 2016
15 June
2021
Shareholders’ meeting to approve
financial statements at 31 Dec. 2022
Director
Zhang Haitao
1971
18 June 202090
Director
Tao Haisu
1949 1 August 201791
18 June
2020
Shareholders’ meeting to approve
financial statements at 31 Dec. 2022
18 June
2020
Shareholders’ meeting to approve
financial statements at 31 Dec. 2022
Director
Director
Director
Director
Director
Director
Paola
Boromei
Domenico
De Sole
Roberto
Diacetti
Giovanni Lo
Storto
Marisa
Pappalardo
Giovanni
Tronchetti
Provera
1976
18 June 2020
18 June
2020
Shareholders’ meeting to approve
financial statements at 31 Dec. 2022
1944 1 August 2017
18 June
2020
Shareholders’ meeting to approve
financial statements at 31 Dec. 2022
1973
18 June 2020
18 June
2020
Shareholders’ meeting to approve
financial statements at 31 Dec. 2022
1970
15 May 2018
18 June
2020
Shareholders’ meeting to approve
financial statements at 31 Dec. 2022
1960 1 August 2017
18 June
2020
Shareholders’ meeting to approve
financial statements at 31 Dec. 2022
1983
1 August 2017
18 June
2020
Shareholders’ meeting to approve
financial statements at 31 Dec. 2022
Director
Fan Xiaohua
1974
1 August 2017
Director
Wei Yintao
1971
1 August 2017
18 June
2020
Shareholders’ meeting to approve
financial statements at 31 Dec. 2022
18 June
2020
Shareholders’ meeting to approve
financial statements at 31 Dec. 2022
DIRECTORS WHO CEASED TO HOLD OFFICE DURING THE YEAR
Angelos Papadimitriou ceased to be a Director of the Company on 24 March 2021.
x
M
M
M
M
M
m
M
m
m
M
M
M
M
NO.
OTHER
OFFICES
(***)
(****)
Cf. Annex A 0/8
Cf. Annex A 8/8
Cf. Annex A 1/8
Cf. Annex A 8/8
Cf. Annex A 2/2
Cf. Annex A 8/8
Cf. Annex A 8/8
Cf. Annex A 8/8
Cf. Annex A 7/8
Cf. Annex A 8/8
Cf. Annex A 8/8
Cf. Annex A 8/8
Cf. Annex A 8/8
Cf. Annex A 8/8
Cf. Annex A 8/8
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
Director
Angelos
Papadimitriou
1966 5 August 2020
5 August
2020
Shareholders’ meeting to approve
financial statements at 31 Dec. 2020
-
X
-
3/3
Number of meetings of the Board of Directors held during the year: 8
Indicate the quorum required for minority shareholders to submit a slate for the election of one or more directors (pursuant to art. 147-ter TUF): 1% of the share capital
with the right to vote in ordinary shareholders’ meetings.
NOTES
The following symbols must be inserted in the “Office” column:
• This symbol indicates the director responsible for the internal control and risk management system.
○ This symbol indicates the Lead Independent Director (LID).
* The date of first appointment of each director means the date on which the director was appointed for the first time (in absolute terms) to the BoD of the Issuer.
(**) This column indicates whether the slate from which each director was drawn is a majority slate (“M”), or minority slate (“m”).
(***) This column shows the number of offices as director or statutory auditor held by the person in question in other listed companies or companies of significant size. The offices are shown in
full in the Report on Corporate Governance.
(****) This column shows the directors’ attendance at Board of Director meetings (specify the number of meetings the person attended out of the total number of meetings he or she could
have attended, e.g. 6/8, 8/8, etc.).
89 Marco Tronchetti Provera assumed the office of General Partner of Pirelli & C. Accomandita per
Azioni on 29 April 1986. On 7 May 2003 it was resolved to transform the Company from a “joint stock
partnership” to a “limited liability company”, and in consequence, there no longer being the role of general
partner, directors were appointed.
90 Zhang Haitao was a Director of Pirelli from 15 March 2016 to 31 August 2017. He was appointed by the
Board of Directors on 18 June 2020.
91 Tao Haisu was a Director of Pirelli from 20 October 2015 to 15 March 2016. He was appointed as
Director again on 1 August 2017.
229
Report on the Corporate Governance TABLE 3: STRUCTURE OF THE BOARD COMMITTEES AT THE END OF THE YEAR
BOD
STRATEGIES
COMMITTEE
RPT
COMMITTEE
AUDIT, RISKS,
SUSTAINABILITY
AND CORPORATE
GOVERNANCE
COMMITTEE
REMUNERATION
COMMITTEE
APPOINTMENTS
COMMITTEE
OFFICE/QUALIFICATION
MEMBERS
(*)
(**)
(*)
(**)
(*)
(**)
(*)
(**)
(*)
(**)
Chairman of the BoD
non-executive - non-independent
Ning Gaoning
0/2
M
Executive Vice Chairman and Chief
Executive Officer
Marco Tronchetti
Provera
2/2
C
Non-executive Director -
non-independent
Non-executive Director -
non-independent
Non-executive Director -
non-independent
Non-executive Director -
non-independent
Non-executive Director –
independent as per the TUF and Code
Yang Xingqiang
1/2
Bai Xinping
2/2
Giorgio Luca Bruno
-
M
M
M
Zhang Haitao
Tao Haisu
Non-executive Director –
independent as per the TUF and Code
Paola Boromei
0/1
M
1/1
C
5/5
M
1/1
M
5/5
M
5/5
5/5
C
M
Non-executive Director –
independent as per the TUF and Code
Domenico De Sole
2/2
M
5/7
M
Non-executive Director –
independent as per the TUF and Code
Roberto Diacetti
Non-executive Director –
independent as per the TUF and Code
Non-executive Director –
independent as per the TUF and Code
Giovanni Lo Storto
2/2
M
7/7
Marisa Pappalardo
7/7
4/5
5/5
5/5
M
C
M
M
M
Non-executive Director -
non-independent
Giovanni Tronchetti
Provera
Non-executive Director –
independent as per the TUF and Code
Fan Xiaohua
Non-executive Director –
independent as per the TUF and Code
Wei Yintao
2/2
M
DIRECTORS LEAVING OFFICE DURING THE YEAR
Executive Director
Angelos
Papadimitriou
1/1
M
5/5
M
1/1
M
5/5
C
5/5
M
No. of meetings held during the Year
2
7
5
5
1
NOTES
(*) This column shows the directors’ attendance at committee meetings (specify the number of meetings the person attended out of the total number of meetings he or she could have
attended, e.g. 6/8, 8/8, etc.).
(**) The office held by the person on the Committee is indicated in this column: “C”: chairman; “M”: member.
230
Pirelli Annual Report 2021 231
Report on the Corporate Governance TABLE 4: STRUCTURE OF THE BOARD OF STATUTORY AUDITORS
BOARD OF STATUTORY AUDITORS
BOARD OF STATUTORY AUDITORS
OFFICE
MEMBERS
YEAR OF
BIRTH
DATE FIRST
APPOINTED (*)
IN OFFICE SINCE
IN OFFICE UNTIL
SLATE
(**)
INDEP.
CODE
Chairman
Riccardo
Foglia Taverna
1966
15 June 2021
15 June 2021
Standing auditor
Antonella Carù
1961
10 May 2012
15 June 2021
Standing auditor
Francesca Meneghel
1961
15 June 2021
15 June 2021
Standing auditor
Teresa Naddeo
1958
15 June 2021
15 June 2021
Standing auditor
Alberto Villani
1962
5 September
2017
15 June 2021
Alternate auditor
Franca Brusco
1971
15 May 2018
15 June 2021
Alternate auditor
Marco Taglioretti
1960
15 June 2021
15 June 2021
Alternate auditor
Maria Sardelli
1965
15 June 2021
15 June 2021
AUDITORS WHO CEASED TO HOLD OFFICE DURING THE YEAR
Chairman
Francesco Fallacara
1964
10 May 2012
15 May 2018
Standing auditor
Fabio Artoni
1960
14 May 2015
15 May 2018
Standing auditor
Luca Nicodemi
1973
5 September
2017
15 May 2018
Alternate auditor
Elenio Bidoggia
1963
15 May 2018
15 May 2018
Alternate auditor
Giovanna Oddo
1967
14 May 2015
15 May 2018
Shareholders’ meeting
to approve financial
statements
at 31 Dec. 2023
Shareholders’ meeting
to approve financial
statements
at 31 Dec. 2023
Shareholders’ meeting
to approve financial
statements
at 31 Dec. 2023
Shareholders’ meeting
to approve financial
statements
at 31 Dec. 2023
Shareholders’ meeting
to approve financial
statements
at 31 Dec. 2023
Shareholders’ meeting
to approve financial
statements
at 31 Dec. 2023
Shareholders’ meeting
to approve financial
statements
at 31 Dec. 2023
Shareholders’ meeting
to approve financial
statements
at 31 Dec. 2023
Shareholders’ meeting
to approve financial
statements
at 31 Dec. 2020
Shareholders’ meeting
to approve financial
statements
at 31 Dec. 2020
Shareholders’ meeting
to approve financial
statements
at 31 Dec. 2020
Shareholders’ meeting
to approve financial
statements
at 31 Dec. 2020
Shareholders’ meeting to
approve financial state-
ments at 31 Dec. 2020
m
M
M
M
M
m
M
M
m
M
M
M
M
x
x
x
x
x
x
x
x
x
x
x
x
x
Number of meetings of the Board of Statutory Auditors held during the Year: 10
Indicate the quorum required for minority shareholders to submit a slate for the election of one or more directors (pursuant to art. 148 TUF):
1% of the shares with the right to vote in ordinary shareholders’ meetings.
* The date of first appointment of each auditor means the date on which the auditor was appointed for the first time (in absolute terms) to the Board of Statutory Auditors of the issuer.
** Slate from which each auditor was elected (“M”: majority slate; “m”: minority slate).
*** This column shows the attendance of the auditors at meetings of the Board of Statutory Auditors (number of meetings the person attended out of the total number of meetings he or she
could have attended, e.g. 6/8, 8/8, etc.).
**** The number of offices as director or statutory auditor held by the person in question pursuant to art. 148-bis TUF and its implementing provisions in the Consob Issuers’ Regulation. The
complete list of offices is published by Consob on its website, pursuant to art. 144-quinquiesdecies of the Consob Issuers’ Regulation.
232
ATTENDANCE
AT MEETINGS
OF THE BOARD
OF STATUTORY
AUDITORS
(***)
ATTENDANCE AT
ATTENDANCE AT
MEETINGS OF
THE BOD
MEETINGS OF
THE ARSCGC
ATTENDANCE AT
ATTENDANCE AT
ATTENDANCE AT
MEETINGS OF THE
MEETINGS OF THE
MEETINGS OF
REMUNERATION
APPOINTMENTS
THE STRATEGIES
COMMITTEE
COMMITTEE
COMMITTEE
ATTENDANCE
AT MEETINGS
OF THE RPT
COMMITTEE
NO. OTHER
OFFICES
(****)
3/3
10/10
3/3
3/3
10/10
-
-
-
-
-
7/7
7/7
6/7
3/3
8/8
3/3
3/3
8/8
-
-
-
-
-
5/5
5/5
5/5
2/2
5/5
2/2
2/2
4/5
-
-
-
-
-
3/3
3/3
3/3
2/2
5/5
2/2
2/2
5/5
-
-
-
-
-
3/3
3/3
2/3
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3/3
Cf. Annex A
7/7
Cf. Annex A
3/3
Cf. Annex A
2/3
Cf. Annex A
7/7
Cf. Annex A
Cf. Annex A
Cf. Annex A
Cf. Annex A
4/4
Cf. Annex A
3/4
Cf. Annex A
Cf. Annex A
Cf. Annex A
-
-
-
-
-
1/1
2/2
3/4
Cf. Annex A
Pirelli Annual Report 2021 BOARD OF STATUTORY AUDITORS
BOARD OF STATUTORY AUDITORS
OFFICE
MEMBERS
IN OFFICE SINCE
IN OFFICE UNTIL
YEAR OF
BIRTH
DATE FIRST
APPOINTED (*)
SLATE
(**)
INDEP.
CODE
ATTENDANCE
AT MEETINGS
OF THE BOARD
OF STATUTORY
AUDITORS
(***)
ATTENDANCE AT
MEETINGS OF
THE BOD
ATTENDANCE AT
MEETINGS OF
THE ARSCGC
ATTENDANCE AT
MEETINGS OF THE
REMUNERATION
COMMITTEE
ATTENDANCE AT
MEETINGS OF THE
APPOINTMENTS
COMMITTEE
ATTENDANCE AT
MEETINGS OF
THE STRATEGIES
COMMITTEE
ATTENDANCE
AT MEETINGS
OF THE RPT
COMMITTEE
NO. OTHER
OFFICES
(****)
Chairman
1966
15 June 2021
15 June 2021
Riccardo
Foglia Taverna
Standing auditor
Antonella Carù
1961
10 May 2012
15 June 2021
Standing auditor
Francesca Meneghel
1961
15 June 2021
15 June 2021
Standing auditor
Teresa Naddeo
1958
15 June 2021
15 June 2021
Standing auditor
Alberto Villani
1962
15 June 2021
5 September
2017
Alternate auditor
Franca Brusco
1971
15 May 2018
15 June 2021
Alternate auditor
Marco Taglioretti
1960
15 June 2021
15 June 2021
Alternate auditor
Maria Sardelli
1965
15 June 2021
15 June 2021
AUDITORS WHO CEASED TO HOLD OFFICE DURING THE YEAR
Chairman
Francesco Fallacara
1964
10 May 2012
15 May 2018
Standing auditor
Fabio Artoni
1960
14 May 2015
15 May 2018
Standing auditor
Luca Nicodemi
1973
15 May 2018
5 September
2017
Alternate auditor
Elenio Bidoggia
1963
15 May 2018
15 May 2018
Shareholders’ meeting
to approve financial
statements
at 31 Dec. 2023
Shareholders’ meeting
to approve financial
statements
at 31 Dec. 2023
Shareholders’ meeting
to approve financial
statements
at 31 Dec. 2023
Shareholders’ meeting
to approve financial
statements
at 31 Dec. 2023
Shareholders’ meeting
to approve financial
statements
at 31 Dec. 2023
Shareholders’ meeting
to approve financial
statements
at 31 Dec. 2023
Shareholders’ meeting
to approve financial
statements
at 31 Dec. 2023
Shareholders’ meeting
to approve financial
statements
at 31 Dec. 2023
Shareholders’ meeting
to approve financial
statements
at 31 Dec. 2020
Shareholders’ meeting
to approve financial
statements
at 31 Dec. 2020
Shareholders’ meeting
to approve financial
statements
at 31 Dec. 2020
Shareholders’ meeting
to approve financial
statements
at 31 Dec. 2020
Shareholders’ meeting to
approve financial state-
ments at 31 Dec. 2020
m
M
M
M
M
m
M
M
m
M
M
M
M
x
x
x
x
x
x
x
x
x
x
x
x
x
Alternate auditor
Giovanna Oddo
1967
14 May 2015
15 May 2018
Number of meetings of the Board of Statutory Auditors held during the Year: 10
Indicate the quorum required for minority shareholders to submit a slate for the election of one or more directors (pursuant to art. 148 TUF):
1% of the shares with the right to vote in ordinary shareholders’ meetings.
3/3
10/10
3/3
3/3
10/10
-
-
-
7/7
7/7
6/7
-
-
3/3
8/8
3/3
3/3
8/8
-
-
-
5/5
5/5
5/5
-
-
2/2
5/5
2/2
2/2
4/5
-
-
-
3/3
3/3
3/3
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3/3
Cf. Annex A
7/7
Cf. Annex A
3/3
Cf. Annex A
2/3
Cf. Annex A
7/7
Cf. Annex A
-
-
-
Cf. Annex A
Cf. Annex A
Cf. Annex A
1/1
2/2
3/4
Cf. Annex A
-
-
-
-
-
-
-
-
4/4
Cf. Annex A
3/4
Cf. Annex A
-
-
Cf. Annex A
Cf. Annex A
2/2
5/5
2/2
2/2
5/5
-
-
-
3/3
3/3
2/3
-
-
233
Report on the Corporate Governance Annex A
SECTION I: LIST OF OFFICES HELD BY DIRECTORS, AT THE REPORT DATE, IN OTH-
ER COMPANIES THAT ARE NOT PART OF THE PIRELLI GROUP
FIRST AND LAST NAME
COMPANY
OFFICE HELD IN THE COMPANY
Ning Gaoning
Sinochem Corporation Ltd:
• Sinochem Group Co. Ltd.
• China National Chemical Corporation Ltd.
• China Jinmao Holdings Group Ltd.
• Far East Horizon Ltd.
• Syngenta AG
• Syngenta Group Co. Ltd.
• Adama Agricultural Solutions Ltd.
• Sinochem Hong Kong (Group) Co., Ltd.
• Luxi Chemical Group Co., Ltd
Marco Tronchetti Provera & C. S.p.A.:
• Camfin S.p.A.
Chairman of the Board of Directors
Chairman of the Board of Directors
Chairman of the Board of Directors
Chairman of the Board of Directors
Chairman of the Board of Directors
Chairman of the Board of Directors
Chairman of the Board of Directors
Director
Chairman of the Board of Directors
Chairman of the Board of Directors
Chairman of the Board of Directors
Chairman of the Board of Directors
Marco Tronchetti Provera
RCS MediaGroup S.p.A.
Director
Yang Xingqiang
China National Salt Industry Corporation Ltd.
Chairman of the Board of Directors
Bai Xinping
Giorgio Luca Bruno
Paola Boromei
Domenico De Sole
Roberto Diacetti
Sinochem Holdings:
• China National Tire & Rubber Company Ltd.
• CNRC International Holding (HK) Ltd.
• CNRC Capital Ltd.
• CNRC Capitale Limited
• CNRC International Ltd.
• Fourteen Sundew S.à.r.l.
• Marco Polo International Italy S.r.l.
• TP Industrial Holding S.p.A.
• Prometeon Tyre Group S.r.l.
Camfin S.p.A.:
• Camfin Alternative Assets S.p.A.
CAAM 1 S.r.l.
Istituto Europeo di Oncologia S.r.l.
Chairman of the Board of Directors
Director
Director
Director
Director
Director
Chairman of the Board of Directors
Director
Chairman of the Board of Directors
Director
Chairman
Chairman
Director
GB & Co. S.r.l.
Sole Director
Snam Rete Gas S.p.A.
Grifal S.p.A.
Director
Director
Tom Ford International Inc.
Chairman of the Board of Directors
Ermenegildo Zegna S.p.A.
Banca IFIS
Saipem S.p.A.
Director
Director
Director
234
Pirelli Annual Report 2021 NOME E COGNOME
SOCIETÀ
CARICA NELLA SOCIETÀ
Giovanni Lo Storto
Banca Mediolanum S.p.A.
Luiss Guido Carli
• LUISS ALUMNI 4 Growth S.r.l.
• Luiss X S.r.l.
Tao Haisu
-
Zhang Haitao
Sinochem Holdings:
• CNRC International Holding (HK) Ltd.
• Marco Polo International Italy S.r.l.
• TP Industrial Holding S.p.A.
• Prometeon Tyre Group S.r.l.
• Fourteen Sundew S.à.r.l.
Marisa Pappalardo
BPER Banca S.p.A.
Giovanni Tronchetti Provera
Marco Tronchetti Provera & C. S.p.A.:
• Camfin S.p.A.
• Camfin Alternative Assets S.p.A.
Fan Xiaohua
Wei Yintao
-
-
Director
Director
Director
-
Director
Director
Director
Director
Director
Director
Director
Director
Director
-
-
235
Report on the Corporate Governance SECTION II: LIST OF OFFICES HELD BY STATUTORY AUDITORS IN OTHER COMPANIES
AT THE DATE OF THE REPORT
FIRST AND LAST NAME
COMPANY
OFFICE HELD IN THE COMPANY
Achille Pinto S.p.A.
Ankorgaz S.r.l.
Sole Auditor
Sole Auditor
Banca Sella Holding S.p.A.
Alternate Auditor
B&C Speakers S.p.A. (Listed)
Chairman of the Board of Statutory Auditors
Boutique Italia S.p.A.
Cabeco S.r.l.
Cedis S.r.l.
Director
Sole Auditor
Director
Consorzio Vigilanza Sella S.C.P.A.
Alternate Auditor
Double R S.r.l. (Former Ruffini Partecipazioni Srl)
Standing Auditor
Gamma Topco S.p.A.
Chairman of the Board of Statutory Auditors
Gamma Bidco S.p.A.
Chairman of the Board of Statutory Auditors
Gestimm S.p.A.
Chairman of the Board of Statutory Auditors with Legal Audit
Riccardo Foglia Taverna
Guglielmi S.p.A.Rubinetterie
Alternate Auditor
Jakil S.p.A.
Illimity Bank S.p.A.
Industries S.p.A.
In-Pao S.r.l.
Standing Auditor
Alternate Auditor
Alternate Auditor
Sole Auditor
Lampugnani Farmaceutici S.p.A.
Standing Auditor
Officine Rigamonti S.p.A.
Alternate Auditor
Neprix S.r.l.
Prosino S.r.l.
Standing Auditor
Sole Auditor
Ruffini Partecipazioni Holding S.r.l.
Standing Auditor
Rubimetterie Ritmonio S.r.l.
Standing Auditor
Sella Fiduciaria (Former Selfid S.p.A.)
Standing Auditor
Sigla S.r.l.
Autogrill S.p.A.
Chairman of the Board of Statutory Auditors
Standing Auditor
Antonella Carù
Autogrill Advanced Business Service S.r.l.
Standing Auditor
Fondazione Accademia Teatro alla Scala
Director
Geox S.p.A.
Indipendent Director
Francesca Meneghel
Avon Cosmetics S.r.l.
Chairman of the Board of Statutory Auditors
Digitalia’08 S.r.l.
Chairman of the Board of Statutory Auditors
Direct Channel S.p.A.
Standing Auditor
236
Pirelli Annual Report 2021 NOME E COGNOME
SOCIETÀ
CARICA NELLA SOCIETÀ
Elettronica Industriale S.p.A.
Standing Auditor
Francesca Meneghel
Flowe S.p.A.
Immobiliare Idra S.p.A.
Mediamond S.p.A.
Mediaset S.p.A.
Standing Auditor
Standing Auditor
Chairman of the Board of Statutory Auditors
Standing Auditor
Mediolanum Comunicazione S.p.A.
Standing Auditor
Mediolanum Fiduciaria S.p.A.
Chairman of the Board of Statutory Auditors
Mediolanum Gestione Fondi Sgr S.p.A.
Chairman of the Board of Statutory Auditors
Teresa Naddeo
Webuild S.p.A.
Vera Vita S.p.A.
Dufrital S.p.A.
Director
Standing Auditor
Standing Auditor
AGB Nielsen Media Research Holding S.p.A.
Chairman of the Board of Statutory Auditors
AREEF 2 PALIO SICAF
Standing Auditor
EDRA S.p.A.
Nuova GS S.p.A.
BBC Italia S.r.l.
Chairman of the Board of Statutory Auditors
Standing Auditor
Director
BTSR International S.p.A.
Chairman of the Board of Statutory Auditors
Fratelli Consolandi S.r.l.
Chairman of the Board of Statutory Auditors
HDP S.p.A.
Chairman of the Board of Statutory Auditors
Selecta Industrial Operations S.p.A.
Chairman of the Board of Statutory Auditors
Selecta Digital Services S.p.A.
Chairman of the Board of Statutory Auditors
Alberto Villani
Quattroduedue S.p.A.
Chairman of the Board of Statutory Auditors
Tenuta Montemagno Soc. Agricola S.p.A.
Chairman of the Board of Statutory Auditors
Bennet S.p.A.
Bennet Holding S.p.A.
Carcano Antonio S.p.A.
DE’ Longhi S.p.A.
Standing Auditor
Standing Auditor
Standing Auditor
Standing Auditor
DE’ Longhi Capital Services S.r.l.
Chairman of the Board of Statutory Auditors
DE’ Longhi Appliances S.r.l.
Chairman of the Board of Statutory Auditors
EFFE 2005 Gruppo Feltrinelli S.p.A.
Standing Auditor
FINMEG S.r.l.
Standing Auditor
Gallerie Commerciali Bennet S.p.A.
Standing Auditor
S.r.l. Immobiliare Rimini
CEO
237
Report on the Corporate Governance NOME E COGNOME
SOCIETÀ
CARICA NELLA SOCIETÀ
Meg Property S.p.A.
Over Light S.p.A.
Standing Auditor
Standing Auditor
Vetus Mediolanum S.p.A.
Chairman of the Board of Statutory Auditors
San Remo Games S.r.l.
Sole Auditor
Impresa Costruzioni Grassi&Crespi S.r.l.
Alternate Auditor
Alberto Villani
Impresa Luigi Notari S.p.A.
Alternate Auditor
Marco Taglioretti
Compagnia Padana per Investimenti S.p.A.
Alternate Auditor
Royal Immobiliare S.r.l.
SO.SE.A. S.r.l.
Sole Director
Director
Vianord Engineering Société par action simplifiée
Director
Zenato azienda vitivinicola S.r.l.
Chairman of the Board of Statutory Auditors
Euricom S.p.A.
Standing Auditor
Garzanti Specialties S.p.A.
Standing Auditor
Saint Andrews S.p.A.
Standing Auditor
Commercio Prodotti Industriali S.r.l.
Standing Auditor
Relife Recycling
Alternate Auditor
Focus Investments S.p.A.
Alternate Auditor
De Wave Srl
Standing Auditor
Marco Tronchetti Provera& C. S.p.A.
Standing Auditor
Associazione Insieme Per I Bambini
Alternate Auditor
Tecnopool S.p.A.
Isoltema S.p.A.
Relife Spa
Ems Group S.p.A.
Mimac Italia S.r.l.
Logiudice Forni S.r.l.
Xpn S.p.A.
Panapesca S.p.A.
Mega Surgelati S.r.l.
Xpp Seven Two S.p.A.
Xpp Seven S.p.A.
Quake S.r.l.
Cbg Acciai S.p.A.
238
Standing Auditor
Standing Auditor
Standing Auditor
Standing Auditor
Standing Auditor
Standing Auditor
Standing Auditor
Standing Auditor
Standing Auditor
Standing Auditor
Standing Auditor
Standing Auditor
Standing Auditor
Pirelli Annual Report 2021 NOME E COGNOME
SOCIETÀ
Zuma S.r.l.
Koverlux S.r.l.
Rav Italy Sicaf S.p.A.
Lame Italia S.r.l.
Telco S.r.l.
Sp Plast S.r.l.
Marco Taglioretti
Milano Lame S.r.l.
F2i Re S.p.A.
CARICA NELLA SOCIETÀ
Standing Auditor
Standing Auditor
Standing Auditor
Standing Auditor
Alternate Auditor
Standing Auditor
Standing Auditor
Standing Auditor
Trabaldo Togna S.p.A.
Director
Condorpelli S.p.A.
Camfin S.p.A.
Alternate Auditor
Alternate Auditor
Camfin Industrial Spa In Liq.Ne
Alternate Auditor
Cartiera Di Bosco Marengo
Alternate Auditor
Banca Profilo S.p.A.
Standing Auditor and member of the Supervisory Body
International Sport Capital
Standing Auditor
Milano Serravalle – Milano Tangenziali S.p.A.
Director
Boato Holding S.p.A.
Chairman of the Board of Statutory Auditors
Telepass S.p.A.
Alternate Auditor
Intersistemi Italia S.p.A.
Member of the Supervisory Body
Maria Sardelli
Pro Recco Waterpolo 1913 S.r.l.
Member of the Supervisory Body
Spezia Calcio S.r.l.
Member of the Supervisory Body
GSE S.p.A.
Member of the Supervisory Body
Green Arrow SGR S.p.A.
Member of the Supervisory Body
Fintecna S.p.A.
Chairman of the Supervisory Body and Chairman
of the Board of Statutory Auditors
Demag Cranes e Components S.p.A.
Chairman of the Supervisory Body
Donati S.r.l.
ENAV S.p.A.
Chairman of the Supervisory Body
Chairman of the Board of Statutory Auditors
Biancamano S.p.A.
Standing Auditor
D-Flight S.p.A.
Chairman of the Board of Statutory Auditors
Franca Brusco
CDP Industria S.p.A.
Standing Auditor
Cassa Depositi e Prestiti S.p.A.
Standing Auditor
Autorità di Sistema portuale del Mare Mediterraneo
meridionale
Member of the Association of Auditors
Galleria Borghese National Museum
Member of the Association of Auditors
Gruppo Garofalo Health Care S.p.A.
Independent Director
239
Report on the Corporate Governance Report on the
Remuneration
Policy and
compensation
paid
241
A Beautiful Place
Preamble
This Report on remuneration policy and compensation paid
(the “Report” or the “Remuneration Report”), approved by
the Board of Directors on 17 March 2022, on the proposal of
the Remuneration Committee, subject to the opinion of the
Board of Statutory Auditors, is structured into two sections:
→ Section I: “Remuneration Policy” for FY 2022 (the “2022
Policy” or the “Policy”) and;
→ Section II: “Report on Compensation Paid” in FY 2021 (the
“2021 Compensation Report” or the “Compensation
Report”).
The Report is prepared in accordance with Art. 123-ter of
the Consolidated Law on Finance (“TUF”), as amended and
supplemented by Art. 3 of Italian Legislative Decree no. 49
of 10 May 2019 (the “Decree”), as well as art. 84-quater
and Scheme 7-bis of Annex 3A to the Consob regulation
(no. 11971 of 14 May 1999 on issuers), as also amended by
Consob Resolution no. 21623 of 10 December 2020 (the
“Issuers’ Regulation”).
For the purposes of the Report, due consideration was
given to the European Commission recommendations on
the remuneration of directors of listed companies, as well
as to the recommendations on remuneration adopted by the
Corporate Governance Code for listed companies, approved
by the Corporate Governance Committee and promoted by
Borsa Italiana S.p.A., ABI, Ania, Assogestioni, Assonime and
Confindustria, to which Pirelli has adhered, as well as the
more recent recommendations of the Corporate Governance
Committee.
The Policy has also been drafted in accordance with and for
the effects of Pirelli’s Related-Parties Transactions Procedure.
The Report is made available to the public at the company’s
registered office, at the authorised storage mechanism (www.
emarketstorage.com) and on the Pirelli & C. S.p.A. (“Pirelli &
C.” or the “Company”) website at www.pirelli.com.
The 2022 Policy submitted for the binding vote to the
Shareholders’ Meeting called to approve the financial
statements for the year ended 31 December 2021 pursuant
to art. 123-ter, paragraph 3-bis and 3-ter, TUF defines the
principles and guidelines for the 2022 financial year:
→ for determining the remuneration of the Company Directors,
in particular Directors holding specific offices, General
Managers and KM, as well as, without prejudice to the
provisions of art. 2402 of the Italian Civil Code, for determining
the remuneration of members of the control body;
→ to which Pirelli & C. refers in defining the remuneration of
Senior Managers and, more generally, Group Executives.
The 2022 Policy: (i) sets out its contribution to the company
strategy, the pursuit of long-term interests and the sustainable
success of Pirelli & C., understood as the creation of long-term
value to the benefit of shareholders, taking into account the
other relevant stakeholders of the Company; (ii) also takes
account of the need to have, retain and motivate people with
the expertise and professional standing required by the role
held in the Company; and (iii) indicates the purposes, methods
of operation and the beneficiaries of the remuneration, as well
as the bodies involved and the procedures used for its adoption
and implementation.
The 2021 Compensation Report, submitted for the advisory
and non-binding vote of the Shareholders’ Meeting in
accordance with art. 123-ter, paragraph 6, TUF, provides,
by name, for the Directors, Statutory Auditors and General
Managers and, in aggregate form, for the KM:
→ adequate information about each component of their
remuneration, including payments prescribed in the event
of resignation from office or termination of employment,
pointing out their compliance with the remuneration policy
adopted by the Company for the 2021 financial year;
→ an analytical indication of the sums paid in the 2021
financial year for any reason and in any form by the
Company and its subsidiaries or affiliates, indicating any
components of payments that are referable to activities
undertaken in years preceding 2021 (and also highlighting
the payments to be made in one or more subsequent years
for activity undertaken in the 2021 financial year, providing,
if applicable, estimates for the components that cannot be
objectively quantified in the 2021 financial year);
→ an illustration of how the Company took account of the
votes cast by the Shareholders’ Meeting in 2021.
242
Pirelli Annual Report 2021 Executive Summary
Purposes and principles
of the Policy
The Policy aims to achieve long-term interests, thereby contributing to the achievement of strategic objectives and sustainable growth
of the company as well as bringing the interests of the Management into line with those of the shareholders.
BENEFICIARIES IN OFFICE
ON THE DATE OF THE REPORT
Chairman: € 400,000
Executive Vice Chairman and CEO: € 2,400,000
Deputy-CEO: € 1,100,000
General Manager: € 750,000
KM: no more than 50% of Annual Total Direct Compen-
sation on-Target
Senior Managers and Executives: no more than 60%
(Senior Manager) and 75% (Executive) of the Annual
Total Direct Compensation on-Target
Chairman: not one of the beneficiaries of the plan.
Executive Vice Chairman and CEO:
• Minimum: 80% of fixed remuneration
• Target: 125% of fixed remuneration
• Cap: 250% of fixed remuneration
Deputy-CEO:
• Minimum: 65% of fixed remuneration
• Target: 100% of fixed remuneration
• Cap: 200% of fixed remuneration
General Manager:
• Minimum: 50% of the GABS
• Target: 75% of the GABS
• Cap: 150% of the GABS
KM:
• Minimum: 35% of the GABS
• Target: 50% of the GABS
• Cap: 100% of the GABS
Senior Manager ed Executive:
• Minimum: from 10% to 25% of the GABS
• Target: from 15% to 40% of the GABS
• Cap: from 30% to 80% of the GABS
Fixed Remuneration
PURPOSE
HOW IT OPERATES
To reward managerial and
professional competence
and experience, and the
contribution made to the role.
It is defined in relation to the
characteristics, responsibilities and
powers, if any, assigned to the role, taking
account of the market references, in order
to assure that it is competitive.
Annual variable
remuneration (STI)
Intended to motivate
managers to achieve the
Company’s annual objectives,
maintaining strong alignment
with the business strategy
and the Company’s interests
and medium-long term
sustainability, including
through a sustainability
target and a partial deferral
mechanism together
with a business matching
component.
Directly linked to the achievement of
performance objectives, assigned to each
beneficiary in coherence with the role they
cover:
• EBIT (Group/Region/BU)
• Net Cash Flow (Group/Region)
• Group Net Income
• Two sustainability objectives
• Unit/department objectives (for Senior
Managers and Executives)
In addition to an on-off condition
(which determines access to the Plan),
represented by a cash indicator (typically
Net Cash Flow).
There will be a minimum level for each
objective, below which the related pro-
quota of the incentive is not accrued.
There is also a maximum cap to the
incentive that can be achieved (if all
maximum performance objectives are
achieved), equal to twice the incentive that
can be achieved at target performance.
Finally, for General Managers, KM and
selected Senior Managers, with a view
to retention, a portion of the incentive
accrued ranging from a minimum of 25% to
a maximum of 50% is subject to three-year
deferral. The relative payment, together
with a corporate matching component, is
subject to the continuation of employment
at the company at the end of this period.
For the rest of the Management, on the
other hand, 25% of the incentive accrued
is deferred and its payment, together with
any increase, is subject to the achievement
of the following year’s STI objectives.
243
Report on the Remuneration Policy PURPOSE
HOW IT OPERATES
BENEFICIARIES IN OFFICE ON THE DATE
OF THE REPORT
“Access threshold”: 52.5% of fixed remuneration
“Access threshold”: 45% of fixed remuneration
Chairman: not one of the beneficiaries of the Plan.
Executive Vice Chairman and CEO (annual
opportunities)
•
• Target: 70% of fixed remuneration
• Cap: 200% of fixed remuneration
Deputy-CEO (annual opportunities):
•
• Target: 60% of fixed remuneration
• Cap: 160% of fixed remuneration
General Manager (annual opportunities):
•
• Target: 60% of the GABS
• Cap: 160% of the GABS
KM (annual opportunities):
•
• Target: 50% of the GABS
• Cap: 130% of the GABS
Senior Managers and Executives (annual
opportunities):
•
“Access threshold”: 37.5% of the GABS
“Access threshold”: 45% of the GABS
“Access threshold”: from 11.25% to 37.5% of the
GABS
• Target: from 15% to 50% of the GABS
• Cap: from 40% to 130% of the GABS
Medium-long
term variable
remuneration (LTI)
The intention is to promote
the creation of success that
is sustainable in the long-
term and achievement of the
objectives in the Company’s
strategic plans, while also
promoting management
engagement and retention.
Other tools
To assure organisational
stability and the contribution
made to the implementation
of the Company’s strategic
plans, also for the purpose
of promoting sustainable
success over the long-term.
Safeguard company know-
how and protect it from
competitors.
Promote attractiveness of
the Company and loyalty of
managerial staff.
2020-2022 LTI Plan, 2021-2023 LTI Plan
and 2022-2024 LTI Plan: a monetary
incentive dependent on achievement
of the following, independent long term
objectives:
• Cumulative Group Net Cash Flow
(before dividends)
• Relative TSR versus a panel of peers
(TIER1: Continental, Michelin, Nokian,
Goodyear and Bridgestone)
• a third objective linked to two
Sustainability indicators for the 2020-
2022 and 2021-2023 LTI Plans; Dow
Jones Sustainability World Index ATX
Auto Component sector and CDP
Ranking, for the 2022-2024 LTI Plan:
Dow Jones Sustainability World Index
ATX Auto Component sector and CO2
Emissions Reduction.
There will be an “access threshold” level for
each objective, equal to 75% of the target
premium, below which the related pro-
quota of the incentive is not accrued.
There is also a maximum cap to the
incentive that can be achieved, if all
maximum performance objectives are
achieved.
The plans are rolling ones and have a
vesting period of 3 years.
A potential move from cash-based to
equity-based LTI Plans is being considered
for future rolling cycles.
• Non-competition agreements: con-
straint regarding the market sector
in which the Group operates and the
territorial coverage. The extent varies
according to the role covered. The
Chairman and Executive Vice Chairman
and CEO are not included among the
beneficiaries of the non-competition
agreements.
• Welcome bonus: one-off bonuses
that can be assigned with a view to
attracting managerial resources exclu-
sively during the hiring phase.
• Benefit: non-monetary benefits cur-
rently assigned on the basis of market
practices.
244
Pirelli Annual Report 2021 Remuneration Policy
for the 2022 Financial year
1. STAKEHOLDERS IN THE PROCESS OF POLICY
PREPARATION, ADOPTION AND IMPLEMENTATION
STAKEHOLDERS IN THE PROCESS
The definition of the remuneration policy and any amendments
made thereto are the result of a clear and transparent process
in which the Remuneration Committee and the Board of
Directors play a central role. It is, in fact, adopted and approved
by the Board of Directors annually – based on a proposal by
the Remuneration Committee – and the Board then submits
it to the Shareholders’ Meeting for a vote.
The Board of Statutory Auditors issued its opinion on the policy,
including the part regarding the remuneration of Directors
holding specific offices.
The Remuneration Committee, the Board of Statutory Auditors
and the Board of Directors supervise the application thereof.
To such purpose, at least once per year, when the report on
compensation paid is submitted, the Head of the Human
Resources & Organisation Department reports on the application
of the remuneration policy to the Remuneration Committee, the
chairman of which in turn reports to the Board of Directors.
For the sake of completeness, it should be noted that, in
accordance with current legislation, it is the role of the Board
of Directors to propose to the Shareholders’ Meeting the
adoption of incentive mechanisms for members of the board
of directors, employees or collaborators via the attribution
of financial instruments or options on financial instruments,
which, if approved, are later made public by the legal deadline
(without prejudice to any further transparency requirements
laid down in the applicable regulations). As at the date of
this Report, the Company has no incentive plans based on
financial instruments in place92.
A potential move from cash-based to equity-based LTI Plans
is being considered for future rolling cycles.
In preparing the 2022 Policy, the Company was assisted
by Willis Towers Watson and Korn Ferry for the preparation
of national and international benchmarks used to define
the structure of the remuneration of the Directors holding
specific offices, General Managers and KM, in addition to
Senior Managers and Executives.
Amongst the measures aimed at avoiding or managing
conflicts of interest, it is noted that, in compliance with the
recommendations of the Corporate Governance Code, no
member of the Board of Directors shall attend meetings of
the Remuneration Committee during which proposals are
made to the Board of Directors regarding their remuneration.
92 It should be noted that the Board of Directors’ meeting of 17 March 2022, in application of the “rolling”
mechanism introduced with the 2020-2022 LTI Plan, established the objectives of the 2022-2024 LTI
Plan, related to the objectives contained in the 2021-2022/2025 Strategic Plan. Such LTI plan will be
submitted for approval of the Shareholders’ Meeting as regards the part establishing determination of
the incentive on the basis of a target total shareholder return, calculated as the performance of the Pirelli
share, compared to a panel of selected peers from the Tyre sector. For a more extensive description,
reference is made to paragraphs 2, 4, 5 and 6 below.
245
Report on the Remuneration Policy Below is a summary of the activities carried out by the parties involved in the process of policy preparation,
adoption and implementation:
BODY
ROLE AND COMPETENCE ACTIVITIES
Shareholders’ Meeting
Board of Director
Related-Parties Transactions Committee
-
-
-
-
-
determines at the time of appointment the gross annual remuneration to
be paid to members of the Board of Directors, except for the remuneration
to be attributed, by the Board, to Directors holding specific offices;
determines at the time of appointment the gross annual remuneration to
be paid to the members of the Board of Statutory Auditors;
approves the first section of the remuneration report;
issues an advisory vote on section 2 of the remuneration report;
decides, upon the proposal of the Board of Directors, on any incentive
mechanisms based on the attribution of financial instruments or options
on financial instruments.
defines:
-
the breakdown of the total remuneration defined for Directors by the
Shareholders’ Meeting;
-
-
-
-
the policy on remuneration of members of the Board of Directors, General
Managers, KM and, without prejudice to the provisions of art. 2402 of the
Italian Civil Code, members of the Board of Statutory Auditors;
the remuneration of Directors holding specific offices in accordance with
art. 2389, paragraph 3 of the Italian Civil Code, and that of General
Managers;
the performance objectives related to the variable part of the remuneration
of executive directors, General Managers and KM;
the remuneration of the Head of the Internal Audit department upon a
proposal by the Audit, Risk, Sustainability and Corporate Governance
Committee.
In the cases envisaged by law and the procedures for related-parties
transactions adopted by the Company in implementation of the Consob
regulation in force pro-tempore, the Related-Parties Transactions
Committee expresses the relevant opinions.
REMUNERATION COMMITTEE
The Remuneration Committee is appointed by the Board of Directors (which also appoints the chairman thereof)
and remains in office for the entire duration of the mandate granted by the Board of Directors.
As at the date of this Report, the Committee, consistently with the recommendations of the Corporate Governance
Code, is composed of five members, all of whom are non-executive and the majority of whom are independent.
The Chairman of the Committee is an independent director.
246
Pirelli Annual Report 2021 As at the date of this Report, the Committee members are as follows:
REMUNERATION COMMITTEE
NAME AND SURNAME
Bai Xinping
OFFICE
Director
Paola Boromei
Independent Director
Fan Xiaohua
Independent Director
Marisa Pappalardo
Independent Director
Tao Haisu
Independent Director
Director Paola Boromei was considered by the Board of Directors as having sufficient experience in matters of
accounting, finance and remuneration policies.
The entire Board of Statutory Auditors is entitled to participate in the work of the Remuneration Committee.
The Secretary to the Board of Directors acts as the Secretary to the Remuneration Committee.
The Committee has investigatory, advisory, propositional and supervisory functions and ensures the definition
and application, within the Group, of remuneration policies that, on the one hand, aim at pursuing the sustainable
success of the Company/Group and aligning the interests of management with those of the shareholders and, on
the other, at attracting, retaining and motivating human resources with the expertise and professional standing
required of the role held in the Company.
In particular, the Remuneration Committee:
→ assists the Board of Directors with defining the remuneration policy;
→ assesses periodically the adequacy and overall consistency of the remuneration policy for directors of the
Company and in particular Directors holding specific offices, General Managers and KM;
→ with regard to the executive directors, other Directors holding specific offices and General Managers, it makes
recommendations or expresses opinions to the Board:
→ about their remuneration, in compliance with the remuneration policy;
→ about setting performance objectives linked to the variable part of that remuneration;
→ about the definition of any no-competition agreements;
→ about the definition of any agreements for the termination of working relationships, on the basis of the
principles established in the remuneration policy;
→ monitors the correct application of the remuneration policy and checks the actual achievement of performance
objectives;
→ verifies compliance of the remuneration of executive directors, other Directors holding specific offices, General
Managers and KM with the remuneration policy and expresses an opinion on this, also in accordance with
247
Report on the Remuneration Policy the related-parties transaction procedure adopted by the Company in application of the Consob regulation
in force at the time93;
→ assists the Board of Directors in the examination of proposals to the Shareholders’ Meeting for the adoption
of remuneration plans based on financial instruments;
→ examines and submits to the Board of Directors the report on compensation paid, on behalf of the governing
and supervisory bodies, of the General Managers and in aggregate form the KM:
→ provides adequate information about each component of their remuneration;
→ explains in detail the remuneration paid during the financial year in question, for whatever reason and in
whatever form, by the Company and its subsidiaries or affiliates;
→ in any case, provides the Related-Parties Transactions Committee with opinions if the responsibilities of said
Committee regarding related-parties transactions do not cover issues pertaining to the remuneration of
executive directors, including Directors holding specific offices, General Managers and KM;
→ assesses whether there are exceptional circumstances that allow for a derogation from the remuneration
policy. Where derogations to the Policy on the matters indicated in paragraph 10 below exist, they are approved
by the Remuneration Committee, as the Related-Parties Transactions Committee, or by the Related-Parties
Transactions Committee, on the basis of the procedures adopted by the Company for related-parties
transactions, in implementation of the applicable Consob regulation pro-tempore.
A timetable of the Remuneration Committee’s main activities in 2022 is shown below.
2022
SUBJECT
ACTIVITIES
1Q
2Q
3Q
4Q
2022 Remuneration Policy and Variable Incentive Plans
Shareholders’ Meeting and publication of the 2022
Remuneration Policy
Analysis of votes received from Shareholders and review
of Governance
Market analysis and review of Remuneration Policy
• Presentation of the timetable
• Draft 2022 Remuneration Policy
• Approval of the incentive plan by the Remuneration Committee:
• Review of the 2021 STI closure targets and definition of 2022
targets
• 2022-2024 LTI
• Analysis of market remuneration benchmarks
• Analysis for adoption of the LTI equity based plan
• Remuneration Report Approval
• Shareholders’ vote on 2022-2024 LTI incentive plans
• Analysis for adoption of the LTI equity based plan
• Analysis of votes received from Shareholders
• Analysis of 2022 Remuneration Policy and quality benchmark
• Analysis of Remuneration Policy and assessment of potential changes
• Analysis for adoption of the LTI equity based plan
• Guidelines for the new Remuneration Policy
• Analysis of variable incentive plans and assessment of potential changes
(e.g. Equity Based LTI)
In relation to the operating methods of the Remuneration Committee, see the Report on Corporate Governance
and the Ownership Structure.
2. PURPOSES AND PRINCIPLES OF THE 2022 REMUNERATION POLICY
PURPOSES OF THE 2022 POLICY AND GUIDING PRINCIPLES
The aims of the Policy are to attract, motivate and retain resources in possession of the professional qualities
required to pursue business objectives.
In addition, through the multi-year variable components assigned, in particular, to the Executive Vice Chairman
and Chief Executive Officer, Deputy-CEO, General Managers, KM, Senior Managers and Executives, it aims to
achieve long-term interests, contributing to the achievement of strategic objectives and the sustainable success
of the company, as well as aligning the interests of Management with those of shareholders.
93 In accordance with the Procedure for Related-Parties Transactions adopted by the Company on 15
June 2021 and effective from 1 July 2021, the Board of Directors resolved to assign to the Remuneration
Committee the functions of the Committee for Transactions with Related Parties in relation to
transactions with related parties that refer to the remuneration and treatment of directors and other KM
and, more generally, to the matters covered by the report on the remuneration policy and remuneration
paid (including any exceptions), within the limits and according to the criteria allowed by Consob
Regulation no. 17221 of 12 March 2010 and by the applicable legal or regulatory provisions. The Procedure
for Related-Parties Transactions was most recently updated on 17 March 2022 only to take into account
the changes made to the Company’s organisational structure at the end of 2021.
248
Pirelli Annual Report 2021 The Policy is intended to strengthen the pay for performance link and, as better explained below, provides for
the objectives underlying the incentive plans in place to be set consistently with those disclosed to the market.
The Policy is valid for one year and in any case until the Shareholders’ Meeting approves a new remuneration policy.
It is defined taking into account various factors such as remuneration, which in turn is defined on the basis of
market benchmarks aiming at a level of attractiveness differentiated according to the company role and skills,
the compensation mix and the working conditions of Company employees.
With reference to this last aspect, the 2022 Policy also in fact refers to the remuneration of the Senior Managers
and Executives of the Group. Moreover, Pirelli:
→ applies and complies with, where existing, the national collective bargaining agreements applicable from time
to time to which it adheres;
→ adopts for all the Group’s managers and the remaining employees meritocratic policies, variable incentive
systems, welfare initiatives and services to benefit employees or their families, as well as, in order to protect
the company assets, non-competition agreements for specific individuals.
RESULTS OF THE VOTING AND FEEDBACK FROM INVESTORS
The Policy is established taking into account the analysis and investigations made of the results of the Shareholders’
Meeting vote and the feedback received from shareholders and key proxy advisors on the 2021 Remuneration
Policy and the Report on Compensation paid in FY 2020.
The diagram below presents the result of the binding vote expressed by the Shareholders’ Meeting on 15 June
2021 compared to the result of the voting in 2020.
87.5%
In favour
12.3%
Agains
2020
87.7%
In favour
11.4%
Agains
2021
0.2%
Abstaining / not voting
0.8%
Abstaining / not voting
Pirelli attaches great importance to analysing this voting result and the feedback received and, following the
analysis of the results of the 2021 voting and the main rationale for the votes against, in the course of 2021
and in the first months of 2022, took the action required to ensure the consistency of the 2022 Policy with the
shareholders’ expectations for the future.
DESCRIPTION OF THE CHANGES WITH RESPECT TO THE 2021 POLICY
With respect to the 2021 Remuneration Policy, the following aspects of the 2022 Policy were reviewed:
→ the reference panel used to compare the Annual Total Direct Compensation on-Target of the Executive Vice
Chairman and Chief Executive Officer was redefined by excluding Cooper Tyre, given its delisting following
the acquisition by Goodyear, and FCA, following the merger with Stellantis. Brembo was also added, thus
maintaining the focus on the size and sector in which Pirelli operates;
→ increased weight of sustainability objectives in the STI, taking it from 10% to 15% with the introduction of the
“Diversity and Inclusion (D&I)” Women Hiring objective;
→ replacement, starting from the LTI 2022-2024 cycle, of the CDP Ranking objective with the CO2 Emissions
Reduction objective;
→ benchmarking of the Chairman conducted by Willis Towers Watson in line with what was done for the Executive
Vice Chairman and Chief Executive Officer;
→ in the event of the hiring of a new General Manager, in addition to Willis Towers Watson and Korn Ferry, other
leading firms specializing in executive compensation may be engaged;
→ the possibility of revising the targets or closing the STI and LTI plans early is limited to circumstances in which
extraordinary transactions affecting the Group perimeter and/or profound changes in the macroeconomic
249
Report on the Remuneration Policy and geopolitical scenario take place;
selected Senior Managers/Executives.
→ increase in the value of the consideration under the
non-competition agreement up to a maximum of 80%
of the GABS (compared to the previous 60%) to include
roles with a high technical content and specialist know-
how, consequently an increase in the regular payment
percentages to a maximum of 15% of the GABS (compared
to the previous 10%);
→ the quantification of the objectives of the STI and LTI plans
(at minimum level/access threshold, target and maximum)
have been set on the assumption that the prices of energy
and oil will remain at the levels they were in February 2022
until the end of the year 2022, this quantification does not
take into account the potential impacts on local operations
of imports and exports from and to Russia of raw materials
and finished products, not even the possibility of a total
interruption of import and export flows from and to Russia
and a recession in Europe due to worsening geopolitical
tensions. Referring to the STI and LTI plans in force94 in
implementation for the latter of the option to modify the
objectives in the event of deep changes in the macro-
economic scenario to ensure alignment between the
corporate objectives and the objectives underlying the
Management incentive systems, the Board of Directors,
upon proposal of the Remuneration Committee,
with favourable opinion from the Board of Statutory
Auditors has established adjustment criteria of the sole
quantification of the objectives of these plans (which
for the rest are unchanged) to make allowance for any
negative effects resulting from a worsening geopolitical
and macroeconomic referring scenario. In particular, the
approved criteria allow to reduce the quantification of the
objectives in a less than proportional way the negative
effects generated (in order to push Management towards
compensatory actions) by factors resulting from the
deepening of the crisis and affecting, for example, the
trend of sales of products produced in Russian plants, the
increase of the landed cost in Europe due to productions
in alternative plants and the substitution of suppliers of
raw materials or the use of alternative raw materials.
The 2022 Policy takes into account the definition of the
objectives of the LTI Plan for the three-year period 2022-
2024, applying the rolling mechanism already provided for
in the 2020 Policy, in support of the objectives of the 2021-
2022/2025 Strategic Plan.
The 2022 Policy no longer includes the medium-long term
Retention Plan approved on 26 February 2018 and terminated
in 2021 for the General Manager Operations, the KM and
The 2022 Policy also provides for the launch of an analysis
process for the possible adoption of equity-based long-term
plans (LTI).
MARKET REFERENCES AND PEER GROUP
Pirelli defines and applies a policy:
→ for the Chairman, aiming for the reference market median;
→ for the remaining of Top Management and Senior
Managers, with reference to the third quartile;
→ for Executives, aiming for the median.
The Annual Total Direct Compensation on-Target constitutes
the benchmark for market comparison.
The analysis of the positioning, the make-up and more
generally the competitiveness of the remuneration of Directors
holding specific offices is conducted by the Remuneration
Committee and the Board of Directors with the assistance
of companies specialised in executive compensation, on
the basis of methodological approaches that allow the full
assessment, if within the typical limits of benchmark analyses,
of the complexity of their positions from an organisational
point of view, the specific duties assigned thereto and any
individual’s impact on the final business results.
In regard to the comparative market, in the definition of
the panel of reference companies updated annually by
the Remuneration Committee, it takes account of various
components such as business sector, geography, specific
features and size of the company.
The reference sample of companies used to analyse the
competitiveness and for the possible review of the remuneration
of the Chairman of Pirelli & C. has been established with the
assistance of Willis Towers Watson and consists of twelve
FSEMIB companies, excluding financial companies.
The sample of reference companies used for the
competitiveness analysis and possible review of the
remuneration of the Executive Vice Chairman and Chief
Executive Officer of Pirelli & C. has been defined with the
assistance of Willis Towers Watson, also taking into account
the main recommendations on pay for performance, and
consists of the 14 companies shown in the table below, all
belonging to the Vehicles, Auto Component & Tyre industry,
thus restricting the comparison to companies operating in the
same sector as Pirelli.
94 Including the LTI plan for the 2022-2024 cycle.
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Pirelli Annual Report 2021
Aston Martin
Ferrari
Michelin
Bmw
Goodyear
Navistar
Brembo
Continental
Harley-Davidson
Magna International
Renault
Stellantis
Volkswagen
Volvo Car
The sample of reference companies used for the competitiveness analysis and for the possible review of the
Deputy-CEO’s remuneration was established with the help of Korn Ferry; in this regard, it should be noted that
the source used for the market comparison is the European Top Executive Compensation Survey covering 250
listed European companies included in the FTSE500 list, which includes the 500 biggest European companies
by capitalisation.
Finally, the remuneration structure for General Managers, KM, Senior Managers and Executives is defined on
the basis of national and international benchmarks which, in view of the complexity and specific nature of the
role, were prepared by Willis Towers Watson and/or Korn Ferry and agreed with the Remuneration Committee.
ELEMENTS OF THE 2022 POLICY
In keeping with previous remuneration policies, the 2022 Policy provides for the Management remuneration to
consist of various elements:
→ gross annual base salary;
→ an annual variable component (STI);
→ medium-long term variable component (LTI);
→ non-monetary benefits.
FIXED COMPONENT
The base salary is established on the basis of the complexity of the position, professional seniority, the skills
required to perform in the role, performance over time, and the trend in the comparison remuneration market
related to the position held by the individual.
VARIABLE COMPONENTS
The STI and LTI variable components are established - taking account of the benchmarks for each - as a percentage
of base salary which increases according to the position held by the beneficiary.
ANNUAL VARIABLE COMPONENT (STI)
The STI component, except for specific cases, is extended to all the Management - except for the Chairman -
and is intended to reward the beneficiaries’ short term performance; moreover, it can be extended to managers
who joined the Group during the year. The STI objectives for Directors holding specific offices to whom further
specific duties have also been attributed, for General Managers and for KM are established by the Board of
Directors upon a proposal by the Remuneration Committee (see §4 and §5).
The objectives underlying the STI plan represent performance consistent with the corresponding objectives
disclosed to the market, in particular the objectives for obtaining the incentive at minimum level are set as equal
to the value disclosed to the market. For 2022, the targets assigned to the Directors holding specific offices to
whom further specific duties have also been attributed, to General Managers and KM in the context of the STI
plan are the following:
EBIT Adj. Group level
Group Net Cash Flow (before dividends)
Net income
Eco & Safety Rev.
D&I: Women Hiring
251
WEIGHT OF OBJECTIVES
35%
30%
20%
10%
5%
Report on the Remuneration Policy The STI objectives of the Senior Managers and Executives are, instead, defined by the hierarchical manager
in accordance with the Human Resources & Organisation and Planning and Controlling departments and
envisage, amongst others, also objectives connected with the economic performance of the relevant business
unit/geography/department (cf. §6).
At the end of the year and based on the finalised performance figures (and included in the draft financial statements
approved by the Board of Directors), the Department of Human Resources & Organization, with the assistance
of the Planning, Controlling and Administration Department, checks the level to which the objectives have been
achieved, on which basis the Board of Directors then resolves, after examination by the Remuneration Committee,
having obtained the opinion of the Board of Statutory Auditors, on the amount of the variable compensation to
be disbursed.
In the event of extraordinary transactions affecting the scope of the Group and/or major changes in the
macroeconomic and geopolitical scenario, the Remuneration Committee may adjust the targets in the STI plan,
in order to protect the plan’s value and aims and ensure that the objectives of the company and the objectives
that underpin the Management incentive systems are constantly aligned, or close the plan early.
The quantification of STI 2022 objectives (at minimum, target and maximum) have been set on the assumption
that the prices of energy and oil will remain at the levels they were in February 2022 until the end of the year
2022, this quantification does not take into account the potential impacts on local operations of imports and
exports from and to Russia of raw materials and finished products, not even the possibility of a total interruption
of import and export flows from and to Russia and a recession in Europe due to worsening geopolitical tensions.
Referring to the STI 2022 plan and to ensure alignment between the corporate objectives and the objectives
underlying the Management incentive systems, the Board of Directors, upon proposal of the Remuneration
Committee, with favourable opinion from the Board of Statutory Auditors, has established adjustment criteria of
the sole quantification of the objectives of this plan (which for the rest is unchanged) to make allowance for any
negative effects resulting from a worsening geopolitical and macroeconomic referring scenario. In particular, the
approved criteria allow to reduce the quantification of the objectives in a less than proportional way the negative
effects generated (in order to push Management towards compensatory actions) by factors resulting from the
deepening of the crisis and affecting, for example, the trend of sales of product produced in Russian plants, the
increase of the landed cost in Europe due to productions in alternative plants and the substitution of suppliers of
raw materials or the use of alternative raw materials.
Achievement of the individual objectives will be assessed by the Remuneration Committee, neutralising the
effects of any extraordinary decisions that could have impacted the results (either positively or negatively). The
Board of Directors resolves on any review proposal submitted for its examination.
For 2022, for General Managers, KM and selected Senior Managers, part of the remuneration accrued as STI,
from a minimum of 25% to a maximum of 50%, is deferred, with a view to retention, and disbursed at the end of a
three-year period subject to the continuation of employment and together with a corporate matching component
which can vary from a minimum of 1 time to a maximum of 1.5 times the amount of the deferred STI (see the
diagram below).
YearT
YearT+1
YearT+2
YearT+3
YearT+4
YearT+5
YearT+6
YearT+7
...
Disbursement of
75%/50% of the
STI accrued
Disbursement of
75%/50% of the
STI accrued
Disbursement of
75%/50% of the
STI accrued
Disbursement of
75%/50% of the
STI accrued
Verification of the maintenance of the
employment relationship and any return
of the deferred share + any increase
Verification of the maintenance of the
employment relationship and any return of
the deferred share + any increase
Verification of the maintenance of the
employment relationship and any return
of the deferred share + any increase
For the rest of the Management, on the other hand, part of the variable remuneration accrued as STI is deferred
to the benefit of continued results over time and thereby the creation of sustainable value for shareholders in the
medium-long term. Indeed, 75% of any STI accrued is paid, since the remaining 25% is deferred by 12 months
and subject to achievement of the STI objectives for the following year. More specifically (see graph below):
252
Pirelli Annual Report 2021 → in the event that no STI is accrued in the following year, the deferred STI share of the previous year is definitively
“lost”;
→ in the event that the payout percentage of the STI accrued in the following year is below target level, the STI
share deferred from the previous year is paid;
→ in the event that the payout percentage of the STI accrued in the following year is equal to or higher than
target value, the STI share deferred from the previous year is paid, together with an additional amount equal
to the portion deferred (increase).
Year T
Year T+1
Year T+2
Year T+3
Year T+4
...
Disbursement
of 75% of the
STI accrued
Verification of the access condition and
disbursement of deferred share + any increase
Disbursement
of 75% of the
STI accrued
Verification of the access condition and
disbursement of deferred share + any increase
Disbursement
of 75% of the
STI accrued
Verification of the access condition and
disbursement of deferred share + any increase
Disbursement
of 75% of the
STI accrued
MEDIUM-LONG TERM VARIABLE COMPONENT (LTI)
As for the medium to long term variable remuneration (LTI), it is assigned to Top Management – except for the
Chairman – and extended, except in specific cases, to all Executives whose grade, determined with the Korn
Ferry method, is equal to or above 20.
The medium-long term incentive plans (LTI) are intended to:
→ link Management remuneration with the medium-long term performance of the Group;
→ promote the creation of shareholder value and sustainable success for the Company;
→ align the interests of shareholders with those of the Management;
→ retain Managers.
The “rolling” mechanism introduced starting from the LTI Plan for the 2020-2022 period allows flexibility to be
guaranteed by ensuring that, for each new three-year period, the performance indicators are aligned with the
evolution of the market and the company and, therefore, the Company’s Strategic Plan.
Below is an example diagram showing how the rolling mechanism works:
Assumption
GAR: € 100,000
Three-year incentive percentages: 90% target -t maximum 240%
Performance objective: Cumulative Net Cash Flow
2020
2021
2022
2023
2024
2025
2026
”
D
E
S
O
L
C
“
H
C
A
O
R
P
P
A
I
”
G
N
L
L
O
R
“
H
C
A
O
R
P
P
A
2020-2022
NCF: 100 mln €
2021-2023
NCF: 103 mln €
2022-2024
NCF: 105 mln €
2023-2025
NCF: 110 mln €
Performance
at target level
Payout 90k €
Performance
at target level
Payout 30k €
2026
Total
Payment
180k €
Performance
at target level
Payout 30k €
Performance
at target level
Payout 30k €
The LTI plans assign each beneficiary an incentive opportunity (the “LTI Bonus”), equal to a percentage of the
gross annual fixed component in place in the first year of the plan. This incentive percentage increases in relation
to the position held and takes into account the benchmarks for each role.
The full cost of the LTI plans is included in the economics of the Strategic Plan, so that their cost is “self-funded”
by achievement of the expected results.
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Report on the Remuneration Policy
The risk governance process is fully integrated into the strategic planning process in order to ensure that the
objectives envisaged for achieving the variable incentive do not expose Pirelli to managerial behaviour inconsistent
with an acceptable level of risk (“risk appetite”) as defined by the Board of Directors when approving the Plans.
The targets set in the LTI plans represent a performance consistent with the corresponding targets disclosed to
the market. In particular, the objectives for obtaining the incentive at “access threshold” level are set as equal to
the value disclosed to the market (net of the sustainability objectives).
The targets assigned to the Directors holding specific offices to whom further specific duties have also been
attributed, to General Managers and KM in the context of the 2022-2024 LTI Plan are the following:
LTI 2022 - 2024
Group Net Cash Flow
Related TSR vs TIER 1 Panel
DJS Index
CO2 Emissions Reduction
WEIGHT OF OBJECTIVES
KPI
40%
40%
10%
10%
Value disclosed to the market
Performance equal to panel average*
From -1% to -5% vs Top Industry cluster
Value disclosed to the market
* The period of comparison is the second half of 2024 vs the second half of 2021.
In the event of extraordinary transactions affecting the Group’s perimeter and/or profound changes in the
macroeconomic and geopolitical scenario, the Board of Directors, on a proposal from the Remuneration
Committee, subject to the opinion of the Board of Statutory Auditors, may decide:
→ any adjustment of the targets (both upward or downward) of the 2022-2024 LTI Plans, so as to protect their
value and relative targets, thus ensuring constant alignment between the company’s objectives and the
objectives underlying the Management incentive schemes;
→ possible early closure thereof.
The quantification of the LTI plans objectives for 2022 (access threshold, target and maximum) have been set
on the assumption that the prices of energy and oil will remain at the levels they were in February 2022 until the
end of the year 2022, this quantification does not take into account the potential impacts on local operations
of imports and exports from and to Russia of raw materials and finished products, not even the possibility of
a total interruption of import and export flows from and to Russia and a recession in Europe due to worsening
geopolitical tensions. Referring to the LTI plans in force95 in implementation for the latter of the option to modify
the objectives in the event of deep changes in the macroeconomic scenario, to ensure alignment between the
corporate objectives and the objectives underlying the Management incentive systems, the Board of Directors,
upon proposal of the Remuneration Committee, with favourable opinion from the Board of Statutory Auditors,
has established adjustment criteria of the sole quantification of the objectives of these plans (which for the
rest are unchanged) to make allowance for any negative effects resulting from a worsening geopolitical and
macroeconomic referring scenario. In particular, the approved criteria allow to reduce the objectives in a less
than proportional way (in order to push Management towards compensatory actions) by factors resulting from
the deepening of the crisis and affecting, for example, the trend of sales of product produced in Russian plants,
the increase of the landed cost in Europe due to productions in alternative plants and the substitution of suppliers
of raw materials or the use of alternative raw materials.
The diagram below shows the link between the corporate strategy and the KPIs of the incentive systems.
STRATEGIC PLAN PILLARS
SHORT TERM INCENTIVE (STI)
LONG TERM INCENTIVE (LTI)
High-end focus
Competitiveness Plan
Cash flow generation
Sustainability
95 Including the LTI plan for the 2022-2024 cycle.
Net Result
EBIT
Net Cash Flow
Relative TSR
Cumulative Group Net Cash Flow
Eco & Safety Performance Revenues
D&I: Women Hiring
Dow Jones Sustainability Index
CO2 Emissions Reduction
254
Pirelli Annual Report 2021 NON-MONETARY BENEFITS
When a new General Manager or an KM is hired, the Company may define, in line with market practice, the
experience gained and the conventional seniority that may be due to such person.
Lastly, non-monetary elements of remuneration are benefits provided to beneficiaries, depending on the position
held, as a result of contractual provisions/company policies or aimed at reinforcing attraction during the recruitment
phase (e.g. accommodation and student grants for limited periods of time).
3. REMUNERATION OF THE BOARD OF DIRECTORS AND THE BOARD OF STATUTORY AUDITORS
THE BOARD OF DIRECTORS
Within the Board of Directors, a distinction can be made between:
(i) Directors holding specific offices to whom further specific duties have also been attributed;
(ii) Directors holding no specific offices.
The attribution to Directors of powers for specific matters, which are not covered by the duties delegated under
Art. 2381 of the Italian Civil Code, does not per se make them directors to whom specific duties are attributed.
The total gross annual salary established by the Shareholders’ Meeting96 was allocated by the Board of Directors
as follows for the years 2020, 2021 and 2022:
DIRECTORS’ REMUNERATION
OFFICE
REMUNERATION
BODY
Board of Directors
Audit, Risks, Sustainability and Corporate Governance Committee
Remuneration Committee
Strategies Committee
Appointments and Successions Committee
Related-Parties Transactions Committee
Director
Chairman
Member
Chairman
Member
Chairman
Member
Chairman
Member
Chairman
Member
65,000 Euro
35,000 Euro
30,000 Euro
35,000 Euro
30,000 Euro
50,000 Euro
30,000 Euro
50,000 Euro
30,000 Euro
75,000 Euro
50,000 Euro
In line with best practice, Directors with no specific offices do not receive a variable part of their salary. Expenses
incurred for official reasons are also reimbursed to the directors.
In any case, the compensation granted to non-executive directors is determined in such an amount as to guarantee
adequacy in terms of the skill, professionalism and effort required by their appointment. In deciding said allocation,
the Board of Directors takes into account the effort required for the directors’ attendance of the individual board
committees, on the basis of the previous mandate.
In the event that during the current term of office the Board of Directors is called on to resolve again on the
allocation of the remuneration established by the Shareholders’ Meeting, and unless the Shareholders’ Meeting
provides otherwise, an allocation of said remuneration that envisages the attribution (i) of a remuneration that is
at most +25% of the Directors’ remuneration attributed during the previous term of office and (ii) +25% of the
96 On 18 June 2020, the Pirelli & C. Shareholders’ Meeting resolved to establish, for the years 2020,
2021, 2022 and until cessation of office with the approval of the financial statements as at 31 December
2022, a maximum of euro 2 million as the total annual salary of the Board of Directors in accordance with
Art. 2389, paragraph 1 of the Italian Civil Code, excluding the remuneration to be assigned by the Board to
Directors holding specific offices, as envisaged by Art. 2389 of the Italian Civil Code.
255
Report on the Remuneration Policy remuneration for the office held in the committees in the previous term of office for committee members, should
be considered compliant with the policy. If new committees should be established, the maximum limit is that of
the highest remuneration envisaged for the corresponding office in other committees.
Again in line with best practices, a Directors & Officers Liability (“D&O”) insurance policy is envisaged to cover the
third party liability of the corporate bodies, the General Managers, the KM, the Senior Managers and Executives,
in going about their duties. Consequent to the provisions established on the matter by the applicable national
collective bargaining agreement and rules governing mandates, this policy aims to indemnify Pirelli from any
expenses deriving from the related compensation, excluding cases of wilful misconduct or gross negligence.
No insurance coverage, whether for social security or pensions, other than the obligatory coverage is provided
for Directors holding specific offices.
SUPERVISORY BODY
On 22 June 2020, the Board of Directors confirmed the remuneration paid to members of the Supervisory Body
during the previous term of office.
Supervisory Body
Chairman
Member
60,000 Euro
40,000 Euro
For completeness, it is reported that the remuneration assigned to members of the Supervisory Body is not
included in the total gross annual salary established by the Shareholders’ Meeting.
THE BOARD OF STATUTORY AUDITORS
The remuneration of members of the controlling body is determined by the Shareholders’ Meeting as a fixed
annual amount, appropriate to the competence, professionalism and commitment required by the importance
of the position held and the size and sector characteristics of the company.
The Shareholders’ Meeting of 15 June 2021, called to resolve on the renewal of the Board of Statutory Auditors,
whose mandate expired with the approval of the financial statements as of 31 December 2020, determined a
gross annual fixed remuneration, pursuant to Art. 2402 of the Italian Civil Code - for its Chairman, for the years
2021, 2022, 2023 and until cessation of office with the approval of the financial statements as of 31 December
2023, of €90,000 and for the other regular members of €75,000.
For the Statutory Auditor called to be part of the Supervisory Body, following the Shareholders’ Meeting of 15
June 2021, in line with the resolutions passed by the Board of Directors’ meeting of 22 June 2020, the Board of
Directors confirmed for the years 2020, 2021, 2022 and until the end of the term of office of the current Board of
Directors and in any case until renewal by the next Board of Directors, a gross annual remuneration of €40,000.
Expenses incurred for official reasons are also reimbursed to the Statutory Auditors.
In line with best practices, a D&O insurance policy is envisaged to cover the third party liability of the corporate
bodies, including the members of said controlling bodies.
4. REMUNERATION OF DIRECTORS HOLDING SPECIFIC OFFICES
The remuneration of Directors holding specific offices is proposed by the Remuneration Committee to the Board
of Directors when they are appointed, or at the first useful meeting thereafter.
CHAIRMAN OF THE BOARD OF DIRECTORS
If a Director has been appointed to hold specific offices, but no further specific duties have been assigned (at
the date of the Report, this applies to Chairman Ning Gaoning) the remuneration consists solely of a fixed gross
annual component, as well as the compensation for the office of director and any participation in committees.
At the time of appointment, the Board of Directors determines the remuneration for the Chairman of the Board
of Directors, considering the remuneration assigned during the previous mandate (if the same holder) and the
market benchmark (if a different person).
Chairman Ning Gaoning will receive an annual gross remuneration of €400,000 for the years 2020, 2021 and
2022 and until cessation of office with the approval of the financial statements as of 31 December 2022.
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Pirelli Annual Report 2021 In the event that the Board of Directors is called on to resolve again on the compensation of the Chairman during
the current term of office, a Chairman’s compensation that is at most equal to +10% of the remuneration assigned
during the previous term of office (in the case of the same holder) or with respect to the market benchmark -
median - (in the case of a different person), is considered compliant with the Policy.
For those Directors holding specific offices to whom no further specific duties have been assigned, no non-
monetary benefits, social security or pension cover is provided other than the obligatory schemes.
DIRECTORS HOLDING SPECIFIC OFFICES TO WHOM
FURTHER SPECIFIC DUTIES HAVE ALSO BEEN ATTRIBUTED
The remuneration of Directors holding specific offices to whom further specific duties have also been attributed
(as of the date of this Report this applies to the Executive Vice Chairman and Chief Executive Officer Marco
Tronchetti Provera) consists of the following elements:
Fixed remuneration for principal offices
Not more than 1/3 of the Annual Total Direct Compensation on-Target for the Executive Vice Chairman and Chief
Executive Officer
FIXED REMUNERATION
Not more than 40% of Annual Total Direct Compensation on-Target for the Deputy-CEO
Annual incentive plan (STI)
Deferred annual incentive quota/STI increase
Medium-long term incentive plan (LTI)
Severance Indemnity
Office Termination Payment
Benefits typical of the office and recognised according to company practice
Insurance covers
PNC (for Deputy-CEO only)
SHORT TERM VARIABLE
REMUNERATION
LONG TERM VARIABLE
REMUNERATION
OTHER COMPONENTS
Directors holding specific offices to whom further specific duties have also been attributed, shall also be due the
compensation for the office of director and any participation in committees97.
With regard to the incidence of the various components, the structure of the compensation package of the
current Executive Vice Chairman and Chief Executive Officer and Deputy-CEO in the event of achievement of
the minimum target and maximum STI 2022 and 2022-2024 LTI targets is shown below.
PAY MIX - EXECUTIVE VICE CHAIRMAN AND CEO
Minimum
Target
Maximum
FIXED REMUNERATION
REMUNERATION FOR
OTHER OFFICES
SHORT-TERM VARIABLE
REMUNERATION
LONG-TERM VARIABLE
REMUNERATION
44.6%
Fixed
55.4%
Variable
PAY MIX - DEPUTY-CEO
FIXED REMUNERATION
REMUNERATION
FOR OTHER OFFICES
SHORT-TERM VARIABLE
REMUNERATION
LONG-TERM VARIABLE
REMUNERATION
49.7%
Fixed
50.3%
Variable
30.3%
41.7%
2.9%
25.1%
32.1%
Fixed
67.9%
Variable
39.8%
30.0%
2.1%
28.1%
17.3%
Fixed
82.7%
Variable
Minimum
Target
Maximum
28.0%
45.7%
4.0%
22.3%
37.0%
Fixed
63.0%
Variable
37.5%
34.1%
2.9%
25.5%
20.9%
Fixed
79.1%
Variable
52.5%
16.2%
1.1%
30.2%
50.1%
19.3%
1.6%
29.0%
97 The Executive Vice Chairman and Chief Executive Officer is also entitled to the compensation
for serving as a Director (€65,000), and as Chairman of the Strategies Committee (€50,000) and
Appointments and Successions Committee (€50,000). The Deputy-CEO is entitled to the compensation
for serving as a Director (€65,000) and member of the Strategies Committee (€30,000).
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Report on the Remuneration Policy FIXED REMUNERATION
The gross annual base salary for the office of Executive Vice
Chairman and Chief Executive Officer and the Deputy-CEO
is determined at the time of appointment, taking into account
the compensation attributed during the previous mandate
(in the case of the same holder) and the market benchmark
(in the case of a different person), in an amount that would
ensure a balance between the fixed component and the
variable component that is adequate and consistent with the
strategic objectives and the risk management policy, taking
into account the characteristics of the business and the sector
in which the Company operates, in any case establishing that
the variable component represents a significant part of the
total remuneration.
The gross annual fixed component for financial years
2020, 2021 and 2022 and up until approval of the financial
statements for the year ended 31 December 2022 attributed
to the Executive Vice Chairman and Chief Executive Officer
is €2,400,000.
The gross annual fixed component for financial years 2021
and 2022 and up until approval of the financial statements for
the year ended 31 December 2022 attributed to the Deputy-
CEO is €1,100,000.
In the event that during the current term of office the Board
of Directors is called on to resolve again on the gross annual
fixed component of the Executive Vice Chairman and Chief
Executive Officer and the Deputy-CEO, the allocation of a
gross annual base salary or a review of such, which, considering
the annual and medium-long term incentive percentages,
determines an Annual Total Direct Compensation on-Target
equal to (i) at most +5% of the value assigned during the
previous mandate (in the case of the same holder) or with
respect to the market benchmark third quartile (if the office
is assumed by a different person) for the Executive Vice
Chairman and Chief Executive Officer and (ii) 10% of the value
assigned during the previous mandate (in the case of the same
holder) or with respect to the market benchmark third quartile
(if the office is assumed by a different person) for the Deputy-
CEO, is compliant with the Policy.
ANNUAL VARIABLE COMPONENT (STI)
The Executive Vice Chairman and Chief Executive Officer
and the Deputy-CEO are entitled to an annual variable
remuneration (STI) equal to a percentage of the fixed
remuneration determined at the time of appointment and
thereafter when launching the individual annual plans.
In the event that during the current term of office the Board
of Directors is called on to resolve again on the STI incentive
percentages for the Executive Vice Chairman and Chief
Executive Officer and the Deputy-CEO, the allocation of an
STI incentive percentage no higher than the previous financial
year is considered compliant with the Policy.
For each objective there is a minimum and a maximum (cap)
to the amount of the incentive that can be achieved; for
performance below the minimum level, no payment is envisaged.
The on/off condition is represented by the Group Net Cash
Flow (before dividends) and is established as an amount equal
to the value announced to the market. Failure to achieve the on/
off condition shall result in the cancellation of the STI incentive
regardless of the level of achievement of the other objectives.
The finalisation of the bonus between the minimum value and
target and between the target and maximum is carried out by
linear interpolation.
Depending on the level of performance achieved, the Executive
Vice Chairman and Chief Executive Officer will be paid an
incentive of 80% of fixed remuneration for minimum level
performance, amounting to 125% of the fixed remuneration
in the case of on-target performance and 250% for maximum
level performance.
Depending on the level of performance achieved, the Deputy-
CEO will be paid an incentive of 65% of fixed remuneration for
minimum level performance, amounting to 100% of the fixed
remuneration in the case of on-target performance and 200%
for maximum level performance.
Once the on/off condition has been achieved, all the objectives
envisaged on the STI scorecard shall apply independently,
according to the incentive curve shown below. Therefore,
according to the performance achieved, each objective will
go towards calculating the total payout, on the basis of the
weighting shown on the scorecard.
258
Pirelli Annual Report 2021 Example curve if all objectives are achieved at minimum, target and maximum level by the Executive Vice
Chairman and CEO and the Deputy-CEO.
PERFORMANCE/PAYOUT CURVE
VC & CEO
PERFORMANCE/PAYOUT CURVE
DEPUTY-CEO
250%
125%
80%
)
n
o
i
t
a
r
e
n
u
m
e
r
d
e
x
i
f
%
(
t
u
o
y
a
P
200%
100%
60%
)
n
o
i
t
a
r
e
n
u
m
e
r
d
e
x
i
f
%
(
t
u
o
y
a
P
Minimum Target
Maximum
Performance
Minimum Target
Maximum
Performance
Part of the remuneration accrued by to the Executive Vice Chairman and CEO and by the Deputy-CEO
as STI is deferred to support the continuity of results over time as stated in paragraph 2. In the event that
the payout percentage of the STI accrued in the following year is equal to or higher than target value, the
STI share deferred from the previous year is paid, together with an additional amount equal to the portion
deferred (increase).
MEDIUM-LONG TERM VARIABLE COMPONENT (LTI)
The Executive Vice Chairman and Chief Executive Officer and the Deputy-CEO will be assigned a medium-long
term incentive plan so as to contribute to the Company’s strategy and sustainability, and the pursuit of its long-
term interests. For 2022, the Executive Vice Chairman and Chief Executive Officer is a beneficiary of the 2022-
2024 LTI Plan related to the goals of the 2021-2022/2025 Strategic Plan and the 2021-2023 and 2020-2022
LTI Plan. For 2022, the Deputy-CEO is a beneficiary of the 2022-2024 LTI Plan and the 2021-2023 LTI Plan. He
is also a beneficiary of the 2020-2022 LTI Plan on a pro-quota basis.
An “access threshold” level – associated with payment of 75% of the bonus achievable on-target – and a maximum
(cap) are envisaged for each objective of the LTI plans.
The performance range for the economic-financial objectives is defined as the more challenging out of the
target and maximum level with respect to that envisaged between the “access threshold” level and target. In
order to offer an incentive for achieving results above target, the incentive curve is fixed in such a way that
the incentive opportunity grows faster between the target and the maximum than in the range between the
“access threshold” and the target (see graph below). All the objectives envisaged on the LTI scorecard shall
apply independently, according to the incentive curve shown below. Therefore, according to the performance
achieved, each objective will go towards calculating the total payout, on the basis of the weighting shown on
the scorecard.
259
Report on the Remuneration Policy
Example curve if all objectives are achieved at minimum, target and maximum level by the Executive Vice
Chairman and CEO and the Deputy-CEO.
PERFORMANCE/PAYOUT
CEO
PERFORMANCE/PAYOUT
DEPUTY-CEO
200%
70%
52.5%
)
n
o
i
t
a
r
e
n
u
m
e
r
d
e
x
i
f
%
(
t
u
o
y
a
P
160%
60%
45%
)
n
o
i
t
a
r
e
n
u
m
e
r
d
e
x
i
f
%
(
t
u
o
y
a
P
«Access threshold»
Maximum
Target
Performance
«Access threshold»
Maximum
Target
Performance
For the TSR and cumulative Group Net Cash Flow (before dividends) objectives, for results falling between the
“access threshold” and the target, or between the target and the maximum, performance will be calculated by
linear interpolation.
For the sustainability objectives, except for the CO2 emissions indicator, which will be assessed as described
above, performance will be calculated in three steps: “access threshold”, target and maximum, without considering
intermediate performances.
Within the scope of the 2022-2024 LTI Plan, depending on the level of performance achieved, the Executive Vice
Chairman and Chief Executive Officer will be recognised an annually based bonus opportunity of 70% of fixed
remuneration for on-target performance, 52.5% of fixed remuneration if the “access threshold” performance
is achieved (75% of the on-target bonus), and 200% of the fixed remuneration (cap) in the case of maximum
performance.
Within the scope of the 2022-2024 LTI Plan, depending on the level of performance achieved, the Deputy-CEO
will be granted an annual bonus opportunity of 60% of fixed remuneration for on-target performance, 45% of
fixed remuneration if the “access threshold” performance is achieved (75% of the on-target bonus), and 160%
of the fixed remuneration (cap) in the event of maximum performance.
In the case of lapsing from office at the end of mandate or cessation of the entire Board of Directors, and
subsequent non-appointment even as director, the LTI Bonus is to be paid pro-quota.
OFFICE TERMINATION PAYMENT AND NON-MONETARY BENEFITS
In addition, the Board of Directors has made the following provision for Directors holding specific offices to whom
further specific duties have also been attributed, in the event that said duties are not related to their executive
employment relationship (on the date of this Report, the Executive Vice Chairman and Chief Executive Officer
Marco Tronchetti Provera and the Deputy-CEO Giorgio Luca Bruno), as guaranteed by the law and/or national
collective employment agreement for the Group’s Italian executives:
→ an Office Termination Payment (TFM) pursuant to Art. 17, subsection 1, letter c) of the TUIR (Italian consolidated
law on income tax) no. 917/1986, with similar characteristics to those typical of Severance Indemnity Payment
(TFR) pursuant to Art. 2120 of the Italian Civil Code, comprising:
a) an amount equal to the amount that would be due as manager by way of TFR; the basis for calculation
consists of the gross annual fixed compensation received for the specific role held in the Company;
b) an amount equal to the contributions paid by the employer that would be due to social security and
welfare institutes or funds in the event of a contract of employment as manager ex lege and/or National
Collective Bargaining Agreement for the Italian Managers of the Group with the same degree of seniority
of employment; the basis for calculation consists of the gross annual fixed compensation received for
the specific role held in the Company, in addition to any other payments due by way of medium-long term
annual variable component.
260
Pirelli Annual Report 2021
TFM, including the relevant value adjustment of such amounts, will be due as a lump sum to the beneficiary at the
end of the current mandate or, in the event of premature death, their assignees:
→ a compensation allowance for death from any cause and permanent invalidity following illness as well as a
compensation allowance for death from any cause and permanent invalidity following accidents, the terms,
limits and conditions of which are in line with what was guaranteed for the previous mandate for the Executive
Vice Chairman and CEO and with Pirelli policies for executives for the Deputy-CEO;
→ further benefits typical of the role and currently paid within the Group to General Managers, KM and Executives
(e.g. company car).
5. GENERAL MANAGERS AND KM
The remuneration of the General Managers (at the date of the Report the General Manager Operations is Andrea
Casaluci) and the KM has the following elements:
Gross Annual Salary (GAS)
No more than 50% of Annual Total Direct Compensation on-Target
Annual incentive plan (STI)
STI deferral/increase
Medium-long term incentive plan (LTI)
Non-competition agreement
Benefits typically provided in the contract/company practice
FIXED REMUNERATION
SHORT TERM VARIABLE
REMUNERATION
LONG TERM VARIABLE
REMUNERATION
OTHER COMPONENTS
With regard to the incidence of the various components, the structure of the compensation package of the
General Manager Operations and KM in the event of achievement of the minimum, target and maximum 2022
STI and 2022-2024 LTI targets is shown below.
PAY MIX - GENERAL MANAGER OPERATIONS
(IN THE EVENT OF DEFERRAL OF 25% OF THE STI ACCRUED)
Minimum
Target
Maximum
FIXED REMUNERATION
SHORT-TERM VARIABLE
REMUNERATION
LONG-TERM VARIABLE
REMUNERATION
48.2%
Fixed
51.8%
Variable
33.7%
48.2%
18.1%
39.4%
Fixed
60.6%
Variable
38.4%
39.4%
22.2%
22.3%
Fixed
77.7%
Variable
PAY MIX - KM
(IN THE EVENT OF DEFERRAL OF 25% OF THE STI ACCRUED)
Minimum
Target
Maximum
FIXED REMUNERATION
SHORT-TERM VARIABLE
REMUNERATION
LONG-TERM VARIABLE
REMUNERATION
55.2%
Fixed
44.8%
Variable
30.3%
55.2%
14.5%
47.1%
Fixed
52.9%
Variable
35.3%
47.1%
17.6%
28.2%
Fixed
71.8%
Variable
52.6%
22.3%
25.1%
50.7%
28.2%
21.1%
The comparative analysis of the remuneration of the General Manager Operations and the KM, yearly carried out,
is carried out with the help of an independent company specialised in executive compensation (Korn Ferry). The
method used is “Job Grading”, which compares the roles on the basis of three different components (know-how,
problem solving and accountability), whereby the weighting of each role is determined within the organisation.
The market benchmark used to verify the competitiveness of the related remuneration includes approximately
400 listed European companies selected by Korn Ferry, included on the FTSE500 list - which includes the 500
highest cap European companies.
261
Report on the Remuneration Policy In the case of hiring a new General Manager, in addition
to the company mentioned above, Pirelli may also use the
services of other leading companies specialised in executive
compensation with the relative methodology and comparison
market in view of the complexity and specific nature of the
role, after obtaining the agreement of the Remuneration
Committee, in compliance with the Procedure for Related-
Parties Transactions.
FIXED REMUNERATION OF THE GENERAL MANAGERS AND KM
The fixed remuneration of the General Managers is determined
at the time of appointment by the Board of Directors, based
on an opinion provided by the Remuneration Committee, in
line with the Policy.
The fixed remuneration of KM is determined by the Executive
Vice Chairman and Chief Executive Officer in accordance
with the Policy, assessed by the Remuneration Committee.
If a new General Manager or a new KM is appointed, the
Remuneration Committee determines the grade and
benchmark of reference based on their role and responsibilities,
with the support of selected external partners.
In case of hiring of a new General Manager, a fixed
remuneration not exceeding 85% of that of the Executive Vice
Chairman and Chief Executive Officer and an Annual Total
Direct Compensation on-Target which, taking into account the
annual and medium-long term percentages, does not exceed
80% of the Annual Total Direct Compensation on-Target of the
Executive Vice Chairman and Chief Executive Officer.
In case of hiring a new KM, a fixed remuneration not exceeding
that of the General Manager Operations and an Annual Total
Direct Compensation on-Target not exceeding +20% of the
market benchmark (third quartile) are deemed to comply
with the Policy.
The proposed revisions of the fixed remuneration are carried
out with reference to the purpose of the Policy to attract,
retain and motivate key resources to achieve the company’s
objectives. Subject to the above, a review that, considering
the annual and medium-long term incentive percentages,
determines an Annual Total Direct Compensation on-Target
equal to at most + 10% of the market benchmark (third
quartile), is compliant with the Policy. Otherwise the Procedure
for Related-Parties Transactions is applicable.
ANNUAL VARIABLE COMPONENT (STI)
The General Managers and KM are beneficiaries of the STI
plan, defined according to the same structure and objectives
as for the Executive Vice Chairman and Chief Executive
Officer and the Deputy-CEO.
On the basis of the performance level achieved, the following
shall be paid:
→ an incentive of 50% of the GABS for the General Manager
Operations and an incentive of 35% of the GABS for KM if
the minimum performance level is achieved;
→ an incentive of 75% of the GABS for the General Manager
Operations and an incentive of 50% of the GABS for KM if
the on-target performance is achieved;
→ an incentive of 150% of the GABS for the General Manager
Operations and an incentive of 100% of the GABS for KM
if the maximum performance is achieved (double the on-
target incentive).
In the event of hiring a new General Manager, the Remuneration
Committee, having as reference the purpose of the Policy
to attract key resources for the achievement of corporate
objectives, may set incentive percentages higher than those
indicated above, provided that they are not higher than those
of the Executive Vice Chairman and Chief Executive Officer.
In such case the Procedure for Related-Parties Transactions
applies.
For General Managers and KM a percentage of the STI
accrued, from a minimum of 25% to a maximum of 50%,
is deferred at the end of the three-year period, as stated in
paragraph 2.
MEDIUM-LONG TERM VARIABLE COMPONENT (LTI)
In order to contribute to the Company’s strategy, the pursuit
of long-term interests and the sustainability of the Company,
General Managers and KM are beneficiaries of medium-long
term incentive plans and, in particular, of the 2020-2022, 2021-
2023 and 2022-2024 LTI Plans. The LTI plans have the same
structure, mechanisms and objectives as those envisaged
for the Executive Vice Chairman and Chief Executive Officer
and the Deputy-CEO. Within the scope of the LTI Plan for the
period 2022-2024, on the basis of the performance level
achieved, the following is paid:
→ an annually based bonus opportunity of 45% of the GABS
for the General Manager Operations and 37.5% of the
GABS for KM if the “access threshold” performance level
is achieved (75% of the on-target incentive);
→ an annually based bonus opportunity of 60% of the GABS
for the General Manager Operations and 50% of the GABS
for KM if the on-target performance is achieved;
→ an annually based bonus opportunity of 160% of the GABS
for the General Manager Operations and 130% of the
GABS for KM if the maximum performance is achieved.
In the event of appointment of a new General Manager, the
Remuneration Committee, having as reference the purpose
of the Policy to attract key resources for the achievement
of corporate objectives, may set incentive percentages
higher than those indicated above, provided that they are not
higher than those of the Executive Vice Chairman and Chief
Executive Officer. In such case the Procedure for Related-
Parties Transactions applies.
In the event of termination of the employment relationship
for any reason before the end of the three-year period, the
General Managers and KM will no longer form part of the LTI
plans and no award nor pro-rated award will be paid.
NON-MONETARY BENEFITS, CONVENTIONAL
SENIORITY AND WELCOME BONUS
Non-monetary elements of remuneration are benefits provided
to General Managers and KM as a result of contractual
262
Pirelli Annual Report 2021 provisions/company policies or aimed at reinforcing attraction during the recruitment phase (e.g. accommodation
and student grants for limited periods of time).
Moreover, if a new General Manager or KM is hired, the Remuneration Committee in compliance with the
Procedure for Related-Parties Transactions, may establish (i) an agreed seniority recognised on the basis of
previous experience in similar roles, (ii) the allocation of a one-off bonus not exceeding 100% of the beneficiary’s
fixed gross annual remuneration, taking into account the Policy’s objective of attracting key resources to achieve
the company’s objectives.
6. SENIOR MANAGERS AND EXECUTIVES
The remuneration of Senior Managers and Executives consists of the following elements:
Gross Annual Salary (GAS)
No more than 60% for Senior Manager and 75% for Executives of the on-Target Annual Total Direct Compensation
Annual incentive plan (STI)
STI deferral/increase
Medium-long term incentive plan (LTI)
Non-compete clause (for some Senior Managers)
Benefits typically provided in the contract/company practice
FIXED REMUNERATION
SHORT TERM VARIABLE
REMUNERATION
LONG TERM VARIABLE
REMUNERATION
OTHER COMPONENTS
The remuneration structure for Senior Managers and Executives (as a whole) with evidence of the incidence of the
various parts of their compensation packages, in the event that they achieve the minimum, target and maximum
levels of the 2022 STI and 2022-2024 LTI objectives is shown below.
PAY MIX - SENIOR MANAGERS
(IN THE EVENT OF DEFERRAL OF 25% OF THE STI ACCRUED)
FIXED REMUNERATION
SHORT-TERM VARIABLE
REMUNERATION
LONG-TERM VARIABLE
REMUNERATION
59.3%
Fixed
40.7%
Variable
PAY MIX – EXECUTIVES
FIXED REMUNERATION
SHORT-TERM VARIABLE
REMUNERATION
LONG-TERM VARIABLE
REMUNERATION
79.2%
Fixed
20.8%
Variable
Minimum
Target
Maximum
29.6%
59.3%
11.1%
50.0%
Fixed
50.0%
Variable
35.0%
50.0%
15.0%
30.3%
Fixed
69.7%
Variable
Minimum
Target
Maximum
79.2%
8.9%
11.9%
71.4%
Fixed
28.6%
Variable
71.4%
10.7%
17.9%
52.6%
Fixed
47.4%
Variable
51.5%
30.3%
18.2%
52.6%
15.8%
31.6%
Also, the analysis of the remuneration of Senior Managers and Executives is carried out with the help of an
independent company specialised in executive compensation (Korn Ferry) with the same methodology as
described previously with regard to General Manager Operations and KM.
For managers of the Internal Audit department, it should be noted that, in line with best practices, the fixed
component has a higher incidence than the variable.
ANNUAL VARIABLE COMPONENT (STI)
Senior Managers and Executives are beneficiaries of the STI plan, defined according to the same structure
as for the Executive Vice Chairman and Chief Executive Officer, the Deputy-CEO, the General Managers
and the KM.
263
Report on the Remuneration Policy For the year 2022, the objectives assigned to Senior Managers and Executives are as shown in the table below:
STI DATA SHEET
SENIOR/EXECUTIVE HEADQUARTERS
WEIGHT OF
OBJECTIVES
STI DATA SHEET
SENIOR/EXECUTIVE OF REGIONS/BUs
WEIGHT OF
OBJECTIVES
Group Net Cash Flow (before dividends)
ON/OFF condition
Group Net Cash Flow (before dividends) - BU
Region Net Cash Flow (before dividends) - Region
DSO - Sales Managers*
ON/OFF condition
Group adjusted EBIT
From 25% to 30%
Adjusted EBIT of Region/BU/Country
From 25% to 35%
Group Net Cash Flow (before dividends)
20%
Group/Region Net Cash Flow (before dividends)
From 10% to 20%
Functional objective/s with Group scope
40%
Functional objective/s with Region/BU/Group scope
Sustainability objective - value of the «Eco & Safety
Performance Revenues» on the whole range
10%
Sustainability objective - value of the «Eco & Safety
Performance Revenues» on the whole range
D&I: Women Hiring**
5%
D&I: Women Hiring**
40%
10%
5%
* If the on/off NFC Region or DSO condition is not met, the on/off NCF Group condition will apply with a 25% reduction of the total payout accrued.
** Objective assigned to Senior Managers.
According to the performance level achieved, the Senior Managers and Executives are assigned:
→ a bonus ranging between 10% and 25% of the GABS, depending on the position held, if minimum performance
is achieved;
→ a bonus ranging between 15% and 40% of the GABS, depending on the role held if on-target performance
is achieved;
→ a bonus ranging between 30% and 80% of the GABS, depending on the position held, if maximum performance
is achieved (200% of the on-target bonus).
For selected Senior Managers, as for General Managers and KM, a percentage of the STI accrued is deferred
as stated in paragraph 2.
For the remaining Senior Managers and Executives, 75% of the accrued bonus is paid, and the remaining 25% is
deferred by 12 months and payable upon the achievement of the STI objectives of the following year, according to
the same parameters specified for the Executive Vice Chairman and Chief Executive Officer and the Deputy-CEO.
MEDIUM-LONG TERM VARIABLE COMPONENT (LTI)
Senior Managers and Executives (with a Korn Ferry grade of 20 or more) are beneficiaries of the medium-long
term incentive plan so as to contribute to the Company’s strategy and sustainability, and the pursuit of its long-term
interests. The 2020-2022, 2021-2023 and 2022-2024 LTI Plans are defined according to the same structure,
mechanisms and objectives as envisaged for the Executive Vice Chairman and Chief Executive Officer, the
Deputy-CEO, the General Managers and the KM.
Within the scope of the LTI plan for the period 2022-2024, on the basis of the performance level achieved, Senior
Managers and Executives are paid:
→ an annually based bonus opportunity ranging between 11.25% and 37.5% of the GABS, depending on the
position held if “access threshold” performance is achieved (75% of the on-target bonus);
→ an annually based bonus opportunity ranging between 15% and 50% of the GABS, depending on the position
held if on-target performance is achieved;
→ an annually based bonus opportunity ranging between 40% and 130% of the GABS, depending on the position
held if maximum performance is achieved.
In the event of termination of the employee-employer relationship for any reason before the end of the three-
year period, the beneficiary will no longer form part of the LTI plan and no award nor pro-rated award will be paid.
NON-MONETARY BENEFITS
Non-monetary elements of remuneration are benefits provided to Senior Managers and Executives as a result
of contractual provisions/company policies or aimed at reinforcing attraction during the recruitment phase (e.g.
accommodation and student grants for limited periods of time).
264
Pirelli Annual Report 2021 7. CLAWBACK CLAUSES
The annual STI and multi-year (LTI) incentive plans for Directors
holding specific offices to whom further specific duties have
also been attributed, General Managers and KM provide inter
alia for clawback mechanisms.
In particular, without prejudice to the possibility of any other
action permitted by the order to protect the interests of the
Company, contractual agreements will be signed with the
aforementioned persons, enabling Pirelli to claim back (in
whole or in part), within three years of the payment thereof,
incentives paid to persons who, due to wilful misconduct or
gross negligence, are held responsible for (or are accomplices
to) the facts, as indicated below, related to economic and
financial indicators included in the Annual Financial Report
that involve subsequent comparative information adopted as
parameters for the determination of the variable awards in the
aforementioned incentive plans:
(i) proven significant errors resulting in non-compliance with
the accounting standards applied by Pirelli, or
(ii) proven fraudulent conduct aimed at obtaining a specific
representation of Pirelli’s financial and equity situation,
economic result, or cash flow.
8. COMPENSATION IN THE EVENT OF RESIGNATION,
DISMISSAL OR TERMINATION OF RELATIONS
It is Pirelli Group policy not to enter into with Directors, General
Managers, KM, Senior Managers or Executives agreements
regulating economic aspects related to any early termination
of relations in retrospect at the initiative of the Company or
the individual.
Pirelli aims at agreements to “terminate” relations in a
consensual manner. Without prejudice to any legal and/or
contractual obligations, agreements to end relations with the
Pirelli Group are inspired by the benchmarks in the matter and
are within the limits laid down in case law and by the practices
in the country in which the agreement was signed.
The Company sets its owns internal criteria, with which the
other Group companies also comply, for managing early
termination agreements of relations with executives and/or
those of Directors holding specific offices. If an executive
director or General Manager should cease to hold office
and/or their employment be terminated, the Company will,
upon completion of the internal processes that lead to the
attribution or award of indemnities and/or other benefits,
provide detailed information on the issue, by means of a press
release disseminated to the market.
With regard to Directors holding specific offices to whom
further specific duties have been attributed and who are not
bound by executive employment relationships, Pirelli does not
pay compensation or extra bonuses in relation to the end of
their mandate. Specific compensation may be paid subject
to assessment by the competent corporate bodies, in the
following cases:
→ termination by the Company for other than just cause;
→ termination by the director for just cause, including but
not limited to substantial changes to the role or duties
attributed and/or cases of a “hostile” takeover bid.
In such cases, the indemnity amounts to 2 years of gross
annual salary, i.e. the sum of (i) the gross annual base salary
for the duties performed in the Group, (ii) the average annual
variable remuneration (STI) accrued in the previous three
years and (iii) severance pay on the aforementioned amounts.
As regards General Managers and KM, agreements for
consensual termination of employment are submitted to the
Remuneration Committee, which assesses their compliance
with the Policy and authorises their negotiation by setting
the maximum amounts that can be disbursed, including the
maintenance of non-monetary benefits for a predetermined
period.
265
Report on the Remuneration Policy The closure amounts are determined with reference to the applicable category national collective bargaining
agreements. In particular, as regards General Managers and KM, reference is made to the contract for Industry
managers in Italy and the incentive to take voluntary redundancy is determined with reference to the number of
months of notice reimbursable by entities and supplementary indemnity in the event of arbitration, depending
on the employee’s length of service in the Group. Below is an explanatory table:
NO. MONTHS
YEARS OF SENIORITY
NOTICE
MIN
MAX
ARBITRATION PANEL
more than 15 years
up to 15 years
up to 10 years
up to 6 years
up to 2 years
12
10
8
6
6
18
12
8
4
4
24
18
12
8
4
After review, evaluation and approval by the competent Committee, it may also be granted to General Managers and KM:
→ an additional amount by way of general and novative transaction, within the limits of the low thresholds
established for related parties transactions;
→ a period of paid leave or equivalent substitute indemnity between the stipulation of the exit agreement and
the effective date of termination of employment.
Finally, a consultancy (or collaboration) agreement may be stipulated between General Managers and KM and
a Group company, which is predefined in the term subsequent to termination of the employment contract and
subject, in this case too, to the assessment and approval of the competent Committee.
Remuneration due to General Managers and KM by virtue of positions occupied on the Board of Directors is not
included in the calculation of severance pay and is due in the amount determined solely for the period during
which the position was held on the Board of Directors.
Finally, as regards the medium-long term incentive system (LTI):
→ for the Executive Vice Chairman and CEO and the Deputy-CEO, in the event of termination of office due to
completion of term or termination of office of the entire Board of Directors, and subsequent non-appointment
even as director, the bonus is paid pro-quota;
→ for General Managers, KM, Senior Managers and Executives, in the event of termination of the employment
relationship for any reason before the end of the three-year period, no award nor pro-rated award will be paid.
9. NON-COMPETITION AGREEMENT
The Group enters into non-competition agreements with the Deputy-CEO, General Managers and KM and,
for particularly crucial duties, with Senior Managers and Executives, which provide for the payment of a
consideration in proportion to the GABS in relation to the duration and extent of the constraints arising from
the agreement itself.
The constraints refer to the market sector in which the Group was operating when the agreement was made and
to territorial size. The extent varies according to the position held when the agreement was completed and can
in some highly critical cases, as in the case of the Deputy-CEO, General Managers and KM, extend to a wider
geographical area covering the main countries where the Group operates.
The Executive Vice Chairman and Chief Executive Officer are not subject to a non-competition agreement.
In the case of the Deputy-CEO, General Managers and KM, the non-competition agreement has the following
characteristics:
266
Pirelli Annual Report 2021 → the list of competitors: companies operating in the tyre
sector and, according to the role held, identification of
more specific clusters;
→ geography: all the main countries in which the Pirelli Group
operates;
→ the duration of the non-competition agreement: 24 months
from when the employment contract ends;
→ the fee: from a minimum of 30% to a maximum of 80%
of the GABS on the basis of the role held, the technical
skills, the specialised know-how and the reason for leaving
for each year of the duration of the clause following a
potential redundancy, less any portion disbursed during
the contract of employment, amounting to between 10%
and 15% of the GABS per year of validity of the agreement
(usually 5 years). When hiring a new General Manager, the
consideration for the non-competition agreement may be
determined as a percentage also above 80% of the GABS
and in any case not above 100% and, in this case, the annual
payment during employment may be a maximum of 20%
of the GABS.
10. EXCEPTIONS TO THE REMUNERATION POLICY
In compliance with Art. 123-ter of the TUF and Art. 84-quater
of the Issuers’ Regulation, the Company may adopt any
decisions that temporarily make an exception to the Policy.
With reference to parties for whom the Board of Directors defines
remuneration in accordance with the Policy, in the presence of
exceptional circumstances, it is possible to make a temporary
exception to the fixed or variable remuneration criteria indicated
in the Policy or the structure of non-competition agreements
and the attribution of non-monetary benefits.
Exceptional circumstances are situations in which an exception
to the Policy is necessary for the purposes of pursuing the
long-term interests and sustainability of the Company as a
whole or to ensure its ability to stay on the market, such as, for
example (i) the need to replace, due to unforeseen events, the
chief executive officer, general managers or key managers and
to negotiate a remuneration package quickly, without limits to
the possibility of attracting managers with the most suitable
professional skills to manage the business and to ensure that
the same levels of sustainable success and market positioning
are at least maintained; (ii) significant changes in the scope
of the company’s business during the term of the policy, such
as the sale of a company/business unit or acquisition of a
significant business.
The Remuneration Committee assesses the existence of
exceptional circumstances that allow for a derogation from the
Policy. In exceptional circumstances, derogations to the Policy
are approved in compliance with the procedures adopted by the
Company for related parties transactions, in implementation of
the applicable current Consob regulation pro-tempore.
The Company provides information about any derogations to
the Policy applied in exceptional circumstances, in accordance
with the terms and conditions of current provisions of law and
regulations pro-tempore.
11. OTHER INFORMATION
Pursuant to Scheme 7-bis of Annex 3A of the Issuers’
Regulations, introduced by Consob Resolution no. 18049 of
23 December 2011 and amended thereafter by resolution no.
21623 of 10 December 2020, it should be noted that:
→ Pirelli has no shareholder incentive plans in place;
→ in defining the 2022 Policy, Pirelli has not used the specific
remuneration policies of other companies as a benchmark.
The Policy has been prepared on the basis of scheme no.
7-bis adopted by Consob and in force as at the date on
which the Policy was approved. This scheme establishes
that the section of the Report provided for by Art. 123-
ter with reference to members of the governing bodies,
General Managers and KM, shall contain at least the
information set out in the scheme referred to above.
Annex 1 – Glossary
Directors: members of the Board of Directors of Pirelli & C..
Directors holding specific offices: the Directors of Pirelli &
C. holding the office of Chairman, Executive Vice Chairman
and Chief Executive Officer and Deputy-CEO. The Directors
holding specific offices in other Group companies, who are
also managers, are, for the purpose of the Policy, Executives
or Senior Managers, depending on the role held and, unless
otherwise resolved by the Board of Directors of Pirelli & C.
which classifies them as KM.
Directors with no specific offices: are the Directors of Pirelli
& C. other than those holding specific offices. Directors not
holding specific offices in other Group companies, who are
also managers, are, for the purpose of the Policy, Executives
or Senior Managers, depending on the role held and unless
otherwise resolved by the Board of Directors of Pirelli & C.,
which classifies them as KM.
Annual Total Direct Compensation on-Target: means the sum
total of the following components, regardless of whether they
were disbursed by Pirelli & C. or by another Group company:
(i) gross annual base salary of the remuneration;
(ii) annual variable short-term incentive (STI), if target
objectives are achieved;
(iii) medium-long term variable component consisting of:
a. annual value of the long-term incentive (LTI) plan if
multi-year target objectives are achieved;
b. pro-quota value of the STI accrued and deferred, to
be paid if the underlying conditions are met;
c. an additional value of an equal or higher amount in
respect of the pro-quota of the STI accrued and
deferred, to be paid if the underlying conditions are
met.
Shareholders’ Meeting: means the meeting of the
shareholders of Pirelli & C..
267
Report on the Remuneration Policy Remuneration Committee: the Remuneration Committee
of Pirelli & C..
Board of Directors: indicates the Board of Directors of
Pirelli & C..
General Manager(s): the persons chosen by the Pirelli & C.
Board of Directors to be assigned extensive powers of business
segment management. The subjects holding the office of
General Manager in other Group companies are, for the purpose
of the Policy, Executives or Senior Managers, depending on
the role held and unless otherwise resolved by the Board of
Directors of Pirelli & C., which classifies them as KM.
KM: executives, chosen by the Pirelli & C. Board of Directors
in accordance with the procedure confirmed and adopted
by Board resolution passed on 22 June 2020, having the
power or responsibility for planning, directing and controlling
the Company’s activities or the power to make decisions
that can impact its evolution or future prospects and, more
generally, those of Pirelli. In accordance with the procedure,
in any case all employees holding the following positions must
be classified as KM: (i) General Manager; (ii) Executive Vice
President; (iii) Manager responsible for the preparation of
financial and corporate documents; (iv) Company Secretary.
Executives: managers of the Italian companies or employees
of the Group’s foreign companies with a position or role that
is comparable to that of an Italian manager.
Meeting held on 18 June 2020, as subsequently amended by
the Board of Directors’ meeting of 31 March 2021 (amendment
submitted to the Shareholders’ Meeting of 15 June 2021).
2021-2023 LTI Plan: means the Long-Term Incentive plan
for the three-year period 2021-2023 approved by the Board
of Directors’ meeting of 31 March 2021 and subject to the
approval of the Shareholders’ Meeting scheduled for 15 June
2021, in support of the achievement of the new objectives set
by the 2021-2022/2025 Strategic Plan.
2022-2024 LTI Plan: means the Long-Term Incentive plan
relating to the three-year period 2022-2024, approved by the
Board of Directors’ meeting of 17 March 2022, to support the
achievement of the objectives set by the 2021-2022/2025
Strategic Plan.
2021-2022/2025 Strategic Plan: means the business plan
approved by the Pirelli & C. Board of Directors on 31 March
2021.
GABS: means the gross annual base remuneration for those
employed by a Pirelli Group company.
Senior Managers: means the persons to whom the following
shall first report, except where they are KM (i) Directors
holding specific offices to whom further specific duties have
also been attributed; (ii) General Managers, where the work
of the Senior Manager significantly impacts business results.
The Pirelli Group or Pirelli or the Group: means all the
companies included in the Pirelli & C. consolidation scope.
Statutory Auditors: members of the Board of Statutory
Auditors of Pirelli & C..
Management: means all Directors holding specific offices,
General Managers, KM, Senior Managers and Executives.
The Company or Pirelli & C.: means Pirelli & C. S.p.A..
2020-2022 LTI Plan: means the Long-Term Incentive plan
relating to the three-year period 2020-2022 supporting
achievement of the objectives set by the 2020-2022
Strategic Plan approved by the Board of Directors’ meeting
of 19 February 2020 and, subsequently, by the Shareholders’
STI: means the annual variable component of remuneration
that can be achieved if the predefined corporate objectives are
achieved, as more fully described in paragraphs 2, 4, 5 and 6.
Top Management: means all Directors holding specific
offices, General Managers and KM.
268
Pirelli Annual Report 2021 Report on compensation paid in 2021
1. ILLUSTRATION OF REMUNERATION COMPONENTS
The Remuneration Report illustrates the Policy implemented by the Pirelli Group during the 2021 financial
year in relation to remuneration and provides a summary of the same in relation to the different types of
persons involved, without prejudice to the transparency obligations provided for by other applicable legal
or regulatory provisions, highlighting compliance with the Remuneration Policy approved the previous year
(“2021 Policy”).
The subject appointed to carry out the external audit of the financial statements verifies that the Directors have
prepared the Report on Compensation Paid. The Shareholders’ Meeting deliberates on the second section of
the Report with an advisory vote.
In implementing the 2021 Policy, the Company took into account the vote in Shareholders’ Meeting held on
15 June 2021, which voted in favour of the Report on Compensation Paid in 2020. The chart below illustrates
the outcome of advisory votes in 2021 on the compensation paid in 2020 and in 2020 on the compensation
paid in 2019.
89.2%
For
10.6%
Against
2020
89.7%
For
9.5%
Against
2021
0.2%
Abstained / Not voting
0.8%
Abstained / Not voting
1.1. TOTAL REMUNERATION
FIXED REMUNERATION The remuneration of the Directors not holding specific offices for 2021 includes the
remuneration for the office and the additional remuneration for participation in the board committees, as resolved
by the Board of Directors on 22 June 2020.
The remuneration paid to Chairman Ning Gaoning includes the remuneration for his main office, equal to an annual
gross remuneration equal to euro 400,000, and the remuneration for the office of Director and for participation
in the Strategies Committee, determined by the Board of Directors on 22 June 2020.
The Executive Vice Chairman and Chief Executive Officer was paid the gross annual fixed component for the main
office of euro 2,400,000 and the remuneration for the office of Director, Chairman of the Strategies Committee
and Chairman of the Appointments and Succession Committee as resolved by the Board of Directors on 22
June 2020.
The remuneration paid to the Deputy-CEO for the year 2021 includes - pro-rata, as of the date of his appointment
- the gross annual fixed component for the main office, of euro 1,100,000, determined by the Board of Directors
on 15 June 2021, and the remuneration for the office of Director and member of the Strategies Committee as
resolved by the Board on 22 June 2020.
The General Manager co-CEO, who ceased to hold office as of 28 February 2021, was paid pro-rata the gross
annual remuneration determined by the Board of Directors on 23 July 2020. He also received pro-rata, until 24
March 2021, the remuneration for the office of Director and member of the Strategies Committee as resolved
by the Board of Directors on 22 June 2020.
The General Manager Operations received a gross annual remuneration of euro 750,000, in line with the resolution
of the Board of Directors, after consulting the Remuneration Committee.
269
Report on the Remuneration Policy KM received gross annual remuneration, in line with that determined by the Executive Vice Chairman and Chief
Executive Officer, amounting, at an aggregate level, to euro 3,139,61598.
The Statutory Auditors appointed by the Shareholders’ Meeting of 15 May 2018, whose term of office expires
with the approval of the financial statements for the year ended 31 December 2020, were paid pro-rata the
fixed remuneration approved by the Shareholders’ Meeting that appointed them (euro 75,000 for the Chairman
and euro 50,000 for the Standing Auditors). The remuneration paid to the Statutory Auditors appointed by
the Shareholders’ Meeting of 15 June 2021 includes, pro-rata, the fixed annual gross remuneration set for the
Chairman at euro 90,000 and that of the other regular members at euro 75,000. The Statutory Auditor appointed
to the Supervisory Board also received a gross annual remuneration of euro 40,000, established by the Board
of Directors on 22 June 2020.
The amounts relating to fixed remuneration are shown in the respective columns of Table 1.
For more details, please refer to paragraphs 3, 4 and 5 of 2021 Policy.
ANNUAL VARIABLE REMUNERATION STI Management remuneration achieved in FY 2021 contributed to the
sustainability of the Company’s long-term results thanks to the variable components (both short and medium-
long term) represented by the STI plan and the deferral mechanism of a portion of it.
With reference to the 2021 STI plan, the table below summarises the achievement of the performance targets
for the year in relation to the targets set out in the 2021 STI plan, which represent a performance consistent with
the corresponding targets disclosed to the market.
Group Net Cash Flow (before dividends)
Group EBIT Adj.
Group Net Cash Flow (before dividends)
Group Net Result
Eco & Safety Rev.
300
Access condition
431.2
euro/mln
ON
815.8
euro/mln
ON/OFF condition
WEIGHT OF
OBJECTIVES
675
Minimo
700
Target
730
Maximum
431.2
euro/mln
300
Minimum
320
Target
350
Maximum
321.6
euro/mln
190
Minimum
220
Target
270
Maximum
63%
58
Minimum
59
Target
61
Maximum
40%
30%
20%
10%
98 As of 31 December 2021, in addition to the General Manager Operations, 6 KM have been identified.
The aggregate remuneration also includes, pro-rata temporis, the remuneration received by 2 KM who
ceased to hold office in June 2021 and 1 KM identified on the same date.
270
Pirelli Annual Report 2021 In light of the results achieved, the payout percentage accrued by each beneficiary in respect of the STI 2021
plan is at the maximum value (cap) as shown in the table below.
% ACHIEVED ON FIXED COMPONENT
Exec. Vice Chairman and CEO
Deputy-CEO
General Manager Operations
KM*
Minimum
Target
Maximum
Minimum
Target
Maximum
Minimum
Target
Maximum
Minimum
Target
Maximum
80%
125%
250%
65%
100%
200%
50%
75%
150%
35%
50%
100%
250%
200%
150%
98%
* It should be noted that one KM, as a result of being appointed with effect from 15 June 2021, held different percentages for the first part of the year.
Note that the amounts accrued under the 2021 STI shall be paid with the following procedures and mechanisms,
in accordance with Policy:
→ the Executive Vice Chairman and Chief Executive Officer and the Deputy-CEO are paid 75% of the accrued
incentive upfront while payment of the remaining 25% is deferred for 12 months and put at risk/opportunity
as it is subject to the achievement of the 2022 STI targets as defined in the 2022 Policy. For this reason, both
the deferral quota and any bonus are not represented in the column “Bonuses and other incentives” in Table 1;
→ the General Manager Operations and the KM are instead subject to the co-investment mechanism as defined
in the 2021 Policy, which provides for the deferral of a portion of the accrued incentive that can vary from a
minimum of 25% to a maximum of 50%, depending on the individual choice. This deferred portion will be paid
in 2025 subject to the permanence of the employment relationship until 31 December 2024 and together with
a company matching component that may vary from a minimum of 1 to a maximum of 1.5 times the deferred
amount. Since the deferred amount and the company matching are already determined in their amount as
they are not subject to further performance conditions, both components are represented in the column
“Bonuses and other incentives” of Table 1.
It should also be noted that pursuant to the resolution adopted by the Board of Directors of 3 April 2020, the
instalments of 2019 STI that had been deferred were disbursed in 2021.
For further details please refer to paragraph n. 2, 3, 4 and 5 of 2021 Policy.
The above amounts for the STI plans are shown in the respective headings of Tables 1 and 2.
Finally, the following graph shows the proportion of fixed and variable remuneration99 achieved in relation to the
results of the year 2021 for top management figures.
Executive Vice Chairman
and Chief Executive Officer
Deputy-CEO
General Manager Operations
KM
66%
34%
72%
28%
73%
27%
56%
44%
Fixed
Variable
99 Corresponding for the fixed part to the items represented in the columns “Fixed remuneration” and
“Remuneration for participation in committees” and for the variable part in the column “Bonuses and other
incentives” of Table 1.
271
Report on the Remuneration Policy OTHER REMUNERATION It should be noted that Pirelli has non-
competition agreements in place for the Deputy-CEO, the
General Manager Operations, the KM and, more generally,
for selected Senior Managers and Executives, to protect the
Group’s strategic and operational know-how.
On the other hand, it should be noted that the Executive Vice
Chairman and Chief Executive Officer does not have a non-
competition agreement.
Finally, it should be noted that during 2021, the last instalment
of the four-year Retention Plan launched in 2017 was paid to
all participants in this plan (General Manager Operations, KM
and selected Senior Managers/Executives). A stability bonus
was also paid to the General Manager Operations, as provided
for in the 2021 Policy.
Please refer to paragraph 9 of 2021 Policy for more details.
1.2. INDEMNITIES IN THE EVENT OF TERMINATION
OF OFFICE AND/OR TERMINATION OF EMPLOYMENT
DURING THE 2021 FINANCIAL YEAR
It should be noted that on 28 February 2021, the agreement
for the consensual termination of the employment relationship
with the General Manager co-CEO Angelos Papadimitriou
became effective; he also ceased to be a Director at the
Shareholders’ Meeting of 24 March 2021.
As announced to the market, pursuant to the agreement
for consensual termination of the executive employment
relationship, in accordance with 2021 Policy, Angelos
Papadimitriou was paid during the year, in addition to the
amounts due as compensation (pro-rata for his position as
Director and as a member of the Strategies Committee) and
other legal benefits accrued up to the date of termination: (i)
10 months’ gross annual salary as a redundancy incentive,
equal to the value of what would have been the indemnity in lieu
of notice on the basis of the agreed seniority granted to him
upon his recruitment as an executive; (ii) euro 100,000 gross
as a general novation settlement; (iii) non-monetary benefits
granted upon his recruitment as an executive, quantifiable in
an amount not exceeding euro 95,000.
In accordance with 2021 Policy, Angelos Papadimitriou did
not have any rights in relation to the incentive plans in place
at the time of his leaving the position of co-CEO.
Angelos Papadimitriou will be bound, for the two years
following his termination of office as Director (24 March 2021),
by a non-competition agreement, valid for the main countries
in which Pirelli operates, in exchange for payment, for each
year in office, equal to 100% of his gross annual salary, to
be paid in 8 quarterly instalments in arrears starting from 1
July 2021; the non-competition agreement includes a non-
solicit clause as well as penalties in the event of breach of the
obligations arising from the agreement.
During 2021, there were no further cases of termination of office
of directors or members of the Board of Statutory Auditors and/
or termination of employment with General Managers and KM
leading to the allocation of indemnities and/or other benefits.
For the sake of completeness, it should be noted that on 31
December 2021, the resignation of the KM Francesco Tanzi
took effect, with no allocation of indemnities and/or other
benefits. On the other hand, the non-competition agreement
he held will be automatically apply. For further details see
paragraph 9 of the 2021 Policy.
1.3. EXCEPTIONS TO THE 2021 POLICY
It should be noted that there were no cases of exemption from
the 2021 Policy for Directors (including Directors holding
specific offices), General Managers, KM and members of the
Board of Statutory Auditors.
1.4. CLAWBACK CLAUSES
It should also be noted that during the year the conditions for
the application of the mechanisms for ex post repayment of
the variable component (clawback clause) envisaged by the
STI annual and LTI multi-year incentive plans did not occur.
1.5. COMPARISON INFORMATION
Below is a summary of comparative information for the last
three years: (i) the remuneration of each of the persons
for whom the information in this section of the Report is
provided by name, (ii) the Company’s results, (iii) the average
remuneration of employees of Pirelli & C..
272
Pirelli Annual Report 2021 ANNUAL VARIATION IN REMUNERATION AND PERFORMANCE
Values in €
2021
2021 VS 2020
2020 VS 2019
2019 VS 2018
Executive Vice Chairman and Chief Executive Officer
Actual Total Cash[1]
Marco Tronchetti Provera
7,474,184
234%
Deputy-CEO
Giorgio Luca Bruno[2]
General Manager Operations
Andrea Casaluci
Board of Directors
Name
Ning Gaoning[3]
Yang Xingqiang
Bai Xinping
Tao Haisu
Haitao Zhang
Paola Boromei
Domenico De Sole
Roberto Diacetti
Giovanni Lo Storto
Marisa Pappalardo
Angelos Papadimitriou[4]
Giovanni Tronchetti Provera
Fan Xiaohua
Wei Yin Tao
Board of Statutory Auditors
Name
Francesco Fallacara
Riccardo Foglia Taverna
Antonella Carù
Fabio Artoni
Luca Nicodemi
Alberto Villani
Francesca Meneghel
Teresa Naddeo
Results
Relative TSR[5]
Group Adjusted EBIT (mln euros)
Actual Total Cash[1]
2,300,347
-
Actual Total Cash[1]
2,795,472
292%
Office
Chairman
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Actual Total Cash[1]
Change
525,000
95,000
155,000
100,000
95,000
95,000
145,000
95,000
175,000
200,000
273,750
526,036
130,000
95,000
20%
20%
20%
22%
100%
100%
19%
100%
38%
58%
-59%
92%
34%
20%
-11%
-12%
-11%
-9%
-
-
-19%
-
15%
27%
-
3%
8%
-12%
Office
Actual Total Cash[1]
Change
Chairman (outgoing)
Chairman
Standing auditor
Standing Auditor (outgoing)
Standing Auditor (outgoing)
Standing auditor
Standing auditor
Standing auditor
34,375
48,750
108,097
32,325
27,500
63,542
40,625
40,625
Actual result
-
815.8
-54%
-
8%
-54%
-54%
27%
-
-
12.1%
62.8%
Change
-47%
Change
-
Change
-33%
0%
-
0%
0%
0%
0%
-
-
Change
-7.6%
-45.4%
Change
-11%
-11%
-
23%
148%
0%
0%
0%
-
-
0%
-
58%
0%
-
23%
0%
0%
0%
-
3%
7%
6%
0%
-
-
-2.2%
-4.0%
-3%
Average remuneration of employees
Actual Total Cash[1]
Employees of Pirelli & C. S.p.A. active at 31/12
108,719
39%
[1] Corresponds to the sum of “Fixed remuneration”, “Fees for participation in committees” and “Bonuses and other incentives” of Table 1
[2] Appointed as of 15 June 2021
[3] Appointed Chairman in 2018
[4] Ceased to hold office as General Manager Co-CEO on 28 February 2021 and as Director from 24 March 2021
[5] Calculated as [(average market cap. current year - average market cap. previous year + dividends paid current year) / average market cap. previous year].
The percentages indicated represent, for each year, the difference in percentage points between Pirelli’s TSR and the peers’ average: Nokian, Michelin, Continental, Goodyear and Bridgestone.
Goodyear’s TSR was normalised following the acquisition of Cooper.
273
Report on the Remuneration Policy
The graph below compares the above changes in the Executive Vice Chairman and Chief Executive Officer,
employees of Pirelli & C. S.p.A. and the Group’s Relative TSR and Adjusted EBIT performance.
CEO
Group EBIT Adj.
Average employees
Relative TSR
2019
2020
2021
2. THE “TABLE”: REMUNERATION PAID TO MEMBERS OF THE BOARD OF DIRECTORS, GENERAL MANAGERS AND KM.
The following tables set out:
→ by name, the remuneration paid to Directors, Statutory Auditors and General Managers;
→ in aggregate form, that of KM100. As at 31 December 2021, in addition to the General Manager Operations
(Andrea Casaluci), 6 KM had been identified.
Remuneration is reported on an accruals basis and the notes to the tables indicate the office for which the
remuneration is received (for example, where a director is a member of more than one Board Committee) and
the company Pirelli & C. or subsidiary and/or investee company thereof paying it (not for remuneration waived
or transferred to the Company).
The tables include all persons who held the above-mentioned offices during the financial year 2021, even if only
for a fraction of the year101. Non-monetary benefits, where received, are also reported on an accrual basis and
reported in accordance with the ‘tax basis’ of the benefit granted.
100 Subparagraph (b) of Section II of Schedule 7-bis of Annex 3A of the Issuers’ Regulation provides that
the so-called Report on Remuneration paid is in two parts:
a) the remuneration of the members of the administrative and supervisory bodies and of the general
managers;
b) the remuneration of any other key management personnel who received during the financial year total
remuneration (obtained by adding the monetary remuneration and the remuneration based on financial
instruments) higher than the highest total remuneration attributed to the persons indicated in letter a).
For executives with strategic responsibilities other than those indicated in letter b), the information is
provided at an aggregate level, indicating instead of the name of the persons to whom it relates “aggregate
level in special tables, indicating instead of the name the number of persons to whom it refers”.
101 In this case the fees are represented pro-rata temporis.
274
Pirelli Annual Report 2021 275
Report on the Remuneration Policy FIRST AND LAST NAME
OFFICE
PERIOD OFFICE
HELD
EXPIRY OF TERM
OF OFFICE
FIXED
REMUNERATION
REMUNERATION
FOR MEMBERSHIP
OF COMMITTEES
VARIABLE NON-EQUITY REMUNERATION
BONUS AND OTHER
INCENTIVES
PROFIT SHARING
NON-MONETARY
OTHER
BENEFITS
REMUNERATION
TOTAL
FAIR VALUE
OF EQUITY
REMUNERATION
END OF EMPLOYMENT
OR OFFICE INDEMNITY
Marco Tronchetti Provera
Executive Vice
Chairman and CEO
01/01/2021 -
31/12/2021
AGM to approve the financial
statements for the year to 31
December 2022
2,465,000.00
100,000.00
4,909,184.00
0.00
670,863.00
0.00
8,145,047.00
0.00
0.00
Of which remuneration in Pirelli & C. S.p.A.
2,465,000.00(1)
100,000.00(2)
4,909,184.00(3)
670,863.00(4)
8,145,047.00
Of which remuneration by subsidiary and affiliated Companies
Ning Gaoning
Chairman
01/01/2021 -
31/12/2021
AGM to approve the financial
statements for the year to 31
December 2022
465,000.00
60,000.00
0.00
0.00
0.00
0.00
525,000.00
0.00
0.00
Of which remuneration in Pirelli & C. S.p.A.
465,000.00(5)
60,000.00(6)
Of which remuneration by subsidiary and affiliated Companies
Yang Xingqiang
Director
01/01/2021 -
31/12/2021
AGM to approve the financial
statements for the year to 31
December 2022
65,000.00
30,000.00
0.00
0.00
0.00
0.00
95,000.00
0.00
0.00
Of which remuneration in Pirelli & C. S.p.A.
65,000.00(8)
30,000.00(9)
Of which remuneration by subsidiary and affiliated Companies
Bai Xinping
Director
01/01/2021 -
31/12/2021
AGM to approve the financial
statements for the year to 31
December 2022
65,000.00
90,000.00
0.00
0.00
0.00
0.00
155,000.00
0.00
0.00
Of which remuneration in Pirelli & C. S.p.A.
65,000.00(8)
90,000.00(10)
Of which remuneration by subsidiary and affiliated Companies
Paola Boromei
Director
01/01/2021 -
31/12/2021
AGM to approve the financial
statements for the year to 31
December 2022
65,000.00
30,000.00
0.00
0.00
0.00
0.00
95,000.00
0.00
0.00
Of which remuneration in Pirelli & C. S.p.A.
65,000.00(8)
30,000.00(11)
Of which remuneration by subsidiary and affiliated Companies
Giorgio Luca Bruno
Deputy-CEO
15/06/2021 -
31/12/2021
AGM to approve the financial
statements for the year to 31
December 2022
634,097.00
16,250.00
1,650,000.00
0.00
6,973.00
150,000.00
2,457,320.00
0.00
0.00
Of which remuneration in Pirelli & C. S.p.A.
634,097.00(12)
16,250.00(9)
1,650,000.00(13)
6,973.00(14)
150,000.00(15)
2,457,320.00
Of which remuneration by subsidiary and affiliated Companies
Domenico De Sole
Director
01/01/2021 -
31/12/2021
AGM to approve the financial
statements for the year to 31
December 2022
65,000.00
80,000.00
0.00
0.00
0.00
0.00
145,000.00
0.00
0.00
Of which remuneration in Pirelli & C. S.p.A.
65,000.00(8)
80,000.00(16)
Of which remuneration by subsidiary and affiliated Companies
Roberto Diacetti
Director
01/01/2021 -
31/12/2021
AGM to approve the financial
statements for the year to 31
December 2022
65,000.00
30,000.00
0.00
0.00
0.00
0.00
95,000.00
0.00
0.00
Of which remuneration in Pirelli & C. S.p.A.
65,000.00(8)
30,000.00(17)
Of which remuneration by subsidiary and affiliated Companies
Fan Xiaohua
Director
01/01/2021 -
31/12/2021
AGM to approve the financial
statements for the year to 31
December 2022
65,000.00
65,000.00
0.00
0.00
0.00
0.00
130,000.00
0.00
0.00
Of which remuneration in Pirelli & C. S.p.A.
65,000.00(8)
65,000.00(18)
Of which remuneration by subsidiary and affiliated Companies
Giovanni Lo Storto
Director
01/01/2021 -
31/12/2021
AGM to approve the financial
statements for the year to 31
December 2022
65,000.00
110,000.00
0.00
0.00
0.00
0.00
175,000.00
0.00
0.00
Of which remuneration in Pirelli & C. S.p.A.
65,000.00(8)
110,000.00(19)
Of which remuneration by subsidiary and affiliated Companies
525,000.00(7)
95,000.00(7)
155,000.00(7)
95,000.00
145,000.00
95,000.00
130,000.00
175,000.00
276
Pirelli Annual Report 2021
FIRST AND LAST NAME
OFFICE
PERIOD OFFICE
EXPIRY OF TERM
FIXED
HELD
OF OFFICE
REMUNERATION
REMUNERATION
FOR MEMBERSHIP
OF COMMITTEES
VARIABLE NON-EQUITY REMUNERATION
BONUS AND OTHER
INCENTIVES
PROFIT SHARING
NON-MONETARY
BENEFITS
OTHER
REMUNERATION
TOTAL
FAIR VALUE
OF EQUITY
REMUNERATION
END OF EMPLOYMENT
OR OFFICE INDEMNITY
2,465,000.00
100,000.00
4,909,184.00
0.00
670,863.00
0.00
8,145,047.00
0.00
0.00
Of which remuneration in Pirelli & C. S.p.A.
2,465,000.00(1)
100,000.00(2)
4,909,184.00(3)
670,863.00(4)
8,145,047.00
Marco Tronchetti Provera
Executive Vice
Chairman and CEO
01/01/2021 -
31/12/2021
AGM to approve the financial
statements for the year to 31
December 2022
Of which remuneration by subsidiary and affiliated Companies
Ning Gaoning
Chairman
465,000.00
60,000.00
0.00
0.00
0.00
0.00
525,000.00
0.00
0.00
Of which remuneration in Pirelli & C. S.p.A.
465,000.00(5)
60,000.00(6)
525,000.00(7)
Yang Xingqiang
Director
65,000.00
30,000.00
0.00
0.00
0.00
0.00
95,000.00
0.00
0.00
Of which remuneration in Pirelli & C. S.p.A.
65,000.00(8)
30,000.00(9)
95,000.00(7)
Bai Xinping
Director
65,000.00
90,000.00
0.00
0.00
0.00
0.00
155,000.00
0.00
0.00
Of which remuneration in Pirelli & C. S.p.A.
65,000.00(8)
90,000.00(10)
155,000.00(7)
Paola Boromei
Director
65,000.00
30,000.00
0.00
0.00
0.00
0.00
95,000.00
0.00
0.00
Of which remuneration in Pirelli & C. S.p.A.
65,000.00(8)
30,000.00(11)
95,000.00
Giorgio Luca Bruno
Deputy-CEO
634,097.00
16,250.00
1,650,000.00
0.00
6,973.00
150,000.00
2,457,320.00
0.00
0.00
Of which remuneration in Pirelli & C. S.p.A.
634,097.00(12)
16,250.00(9)
1,650,000.00(13)
6,973.00(14)
150,000.00(15)
2,457,320.00
Domenico De Sole
Director
65,000.00
80,000.00
0.00
0.00
0.00
0.00
145,000.00
0.00
0.00
Of which remuneration in Pirelli & C. S.p.A.
65,000.00(8)
80,000.00(16)
145,000.00
Roberto Diacetti
Director
65,000.00
30,000.00
0.00
0.00
0.00
0.00
95,000.00
0.00
0.00
Of which remuneration in Pirelli & C. S.p.A.
65,000.00(8)
30,000.00(17)
95,000.00
Fan Xiaohua
Director
65,000.00
65,000.00
0.00
0.00
0.00
0.00
130,000.00
0.00
0.00
Of which remuneration in Pirelli & C. S.p.A.
65,000.00(8)
65,000.00(18)
130,000.00
Giovanni Lo Storto
Director
65,000.00
110,000.00
0.00
0.00
0.00
0.00
175,000.00
0.00
0.00
Of which remuneration in Pirelli & C. S.p.A.
65,000.00(8)
110,000.00(19)
175,000.00
01/01/2021 -
31/12/2021
AGM to approve the financial
statements for the year to 31
December 2022
01/01/2021 -
31/12/2021
AGM to approve the financial
statements for the year to 31
December 2022
01/01/2021 -
31/12/2021
AGM to approve the financial
statements for the year to 31
December 2022
01/01/2021 -
31/12/2021
AGM to approve the financial
statements for the year to 31
December 2022
15/06/2021 -
31/12/2021
AGM to approve the financial
statements for the year to 31
December 2022
01/01/2021 -
31/12/2021
AGM to approve the financial
statements for the year to 31
December 2022
01/01/2021 -
31/12/2021
AGM to approve the financial
statements for the year to 31
December 2022
01/01/2021 -
31/12/2021
AGM to approve the financial
statements for the year to 31
December 2022
01/01/2021 -
31/12/2021
AGM to approve the financial
statements for the year to 31
December 2022
Of which remuneration by subsidiary and affiliated Companies
Of which remuneration by subsidiary and affiliated Companies
Of which remuneration by subsidiary and affiliated Companies
Of which remuneration by subsidiary and affiliated Companies
Of which remuneration by subsidiary and affiliated Companies
Of which remuneration by subsidiary and affiliated Companies
Of which remuneration by subsidiary and affiliated Companies
Of which remuneration by subsidiary and affiliated Companies
Of which remuneration by subsidiary and affiliated Companies
277
Report on the Remuneration Policy
FIRST AND LAST NAME
OFFICE
PERIOD OFFICE
HELD
EXPIRY OF TERM
OF OFFICE
FIXED
REMUNERATION
REMUNERATION
FOR MEMBERSHIP
OF COMMITTEES
VARIABLE NON-EQUITY REMUNERATION
BONUS AND OTHER
INCENTIVES
PROFIT SHARING
NON-MONETARY
OTHER
BENEFITS
REMUNERATION
TOTAL
FAIR VALUE
OF EQUITY
REMUNERATION
END OF EMPLOYMENT
OR OFFICE INDEMNITY
Marisa Pappalardo
Director
01/01/2021 -
31/12/2021
AGM to approve the financial
statements for the year to 31
December 2022
65,000.00
135,000.00
0.00
0.00
0.00
0.00
200,000.00
0.00
0.00
Of which remuneration in Pirelli & C. S.p.A.
65,000.00(8)
135,000.00(20)
Of which remuneration by subsidiary and affiliated Companies
Tao Haisu
Director
01/01/2021 -
31/12/2021
AGM to approve the financial
statements for the year to 31
December 2022
65,000.00
35,000.00
0.00
0.00
0.00
0.00
100,000.00
0.00
0.00
Of which remuneration in Pirelli & C. S.p.A.
65,000.00(8)
35,000.00(21)
Of which remuneration by subsidiary and affiliated Companies
Giovanni Tronchetti Provera
Director
01/01/2021 -
31/12/2021
AGM to approve the financial
statements for the year to 31
December 2022
291,923.08
30,000.00
204,113.00
0.00
14,070.00
0.00
540,106.08
0.00
0.00
Of which remuneration in Pirelli & C. S.p.A.
65,000.00(8)
30,000.00(22)
Of which remuneration by subsidiary and affiliated Companies
226,923.08(23)
204,113.00(24)
14,070.00(25)
Wei Yin Tao
Director
01/01/2021 -
31/12/2021
AGM to approve the financial
statements for the year to 31
December 2022
65,000.00
30,000.00
0.00
0.00
0.00
0.00
95,000.00
0.00
0.00
Of which remuneration in Pirelli & C. S.p.A.
65,000.00(8)
30,000.00(9)
Of which remuneration by subsidiary and affiliated Companies
Haitao Zhang
Director
01/01/2021 -
31/12/2021
AGM to approve the financial
statements for the year to 31
December 2022
65,000.00
30,000.00
0.00
0.00
0.00
0.00
95,000.00
0.00
0.00
Of which remuneration in Pirelli & C. S.p.A.
65,000.00(8)
30,000.00(17)
Of which remuneration by subsidiary and affiliated Companies
Angelos Papadimitriou
Director and General
Manager co-CEO
01/01/2021 -
24/03/2021 (26)
Shareholders’ meeting of 24
March 2021
266,250.00
7,500.00
0.00
0.00
5,885.00
0.00
279,635.00
0.00
4,442,534.00
Of which remuneration in Pirelli & C. S.p.A.
266,250.00(27)
7,500.00(9)
5,885.00(28)
279,635.00
4,442,534.00(29)
Of which remuneration by subsidiary and affiliated Companies
Andrea Casaluci
General Manager
Operations
Of which remuneration in Pirelli & C. S.p.A.
750,000.00
0.00
2,045,472.00
0.00
16,641.00
1,155,000.00
3,967,113.00
0.00
0.00
Of which remuneration by subsidiary and affiliated Companies
750,000.00
2,045,472.00(24)
16,641.00(30)
1,155,000.00(31)
3,967,113.00
No. 6 Key Managers
(32)
Of which remuneration in Pirelli & C. S.p.A.
3,139,615.38
40,000.00
4,120,468.00
0.00
103,361.00
4,400,303.00
11,803,747.38
0.00
89,000.00
2,385,769.23
40,000.00(33)
78,820.00(35)
2,683,053.00(36)
8,340,361.23
89,000.00(37)
Of which remuneration by subsidiary and affiliated Companies
753,846.15
24,541.00(35)
1,717,250.00(36)
3,463,386.15
Riccardo Foglia Taverna
Chairman of the Board
of Statutory Auditors
15/06/2021 -
31/12/2021
AGM to approve the financial
statements for the year to 31
December 2023
48,750.00
0.00
0.00
0.00
0.00
0.00
48,750.00
0.00
0.00
3,152,719.00(34)
967,749.00(38)
Of which remuneration in Pirelli & C. S.p.A.
48,750.00
Of which remuneration by subsidiary and affiliated Companies
Francesco Fallacara
Chairman of the Board
of Statutory Auditors
01/01/2021 -
15/06/2021
AGM to approve the financial
statements for the year to 31
December 2020
34,375.00
0.00
0.00
0.00
0.00
0.00
34,375.00
0.00
0.00
Of which remuneration in Pirelli & C. S.p.A.
34,375.00
Of which remuneration by subsidiary and affiliated Companies
200,000.00
100,000.00
95,000.00
445,106.08
95,000.00
95,000.00(7)
48,750.00
34,375.00
278
Pirelli Annual Report 2021
FIRST AND LAST NAME
OFFICE
PERIOD OFFICE
EXPIRY OF TERM
FIXED
HELD
OF OFFICE
REMUNERATION
REMUNERATION
FOR MEMBERSHIP
OF COMMITTEES
VARIABLE NON-EQUITY REMUNERATION
BONUS AND OTHER
INCENTIVES
PROFIT SHARING
NON-MONETARY
BENEFITS
OTHER
REMUNERATION
TOTAL
FAIR VALUE
OF EQUITY
REMUNERATION
END OF EMPLOYMENT
OR OFFICE INDEMNITY
Marisa Pappalardo
Director
65,000.00
135,000.00
0.00
0.00
0.00
0.00
200,000.00
0.00
0.00
Of which remuneration in Pirelli & C. S.p.A.
65,000.00(8)
135,000.00(20)
200,000.00
Of which remuneration by subsidiary and affiliated Companies
Of which remuneration by subsidiary and affiliated Companies
Tao Haisu
Director
65,000.00
35,000.00
0.00
0.00
0.00
0.00
100,000.00
0.00
0.00
Of which remuneration in Pirelli & C. S.p.A.
65,000.00(8)
35,000.00(21)
100,000.00
Giovanni Tronchetti Provera
Director
291,923.08
30,000.00
204,113.00
0.00
14,070.00
0.00
540,106.08
0.00
0.00
Of which remuneration in Pirelli & C. S.p.A.
65,000.00(8)
30,000.00(22)
Of which remuneration by subsidiary and affiliated Companies
226,923.08(23)
204,113.00(24)
14,070.00(25)
95,000.00
445,106.08
Wei Yin Tao
Director
65,000.00
30,000.00
0.00
0.00
0.00
0.00
95,000.00
0.00
0.00
Of which remuneration in Pirelli & C. S.p.A.
65,000.00(8)
30,000.00(9)
95,000.00
Of which remuneration by subsidiary and affiliated Companies
Haitao Zhang
Director
65,000.00
30,000.00
0.00
0.00
0.00
0.00
95,000.00
0.00
0.00
Of which remuneration in Pirelli & C. S.p.A.
65,000.00(8)
30,000.00(17)
95,000.00(7)
Of which remuneration by subsidiary and affiliated Companies
Angelos Papadimitriou
Director and General
Manager co-CEO
01/01/2021 -
24/03/2021 (26)
Shareholders’ meeting of 24
March 2021
Of which remuneration in Pirelli & C. S.p.A.
266,250.00(27)
7,500.00(9)
5,885.00(28)
279,635.00
4,442,534.00(29)
266,250.00
7,500.00
0.00
0.00
5,885.00
0.00
279,635.00
0.00
4,442,534.00
01/01/2021 -
31/12/2021
AGM to approve the financial
statements for the year to 31
December 2022
01/01/2021 -
31/12/2021
AGM to approve the financial
statements for the year to 31
December 2022
01/01/2021 -
31/12/2021
AGM to approve the financial
statements for the year to 31
December 2022
01/01/2021 -
31/12/2021
AGM to approve the financial
statements for the year to 31
December 2022
01/01/2021 -
31/12/2021
AGM to approve the financial
statements for the year to 31
December 2022
750,000.00
0.00
2,045,472.00
0.00
16,641.00
1,155,000.00
3,967,113.00
0.00
0.00
Of which remuneration by subsidiary and affiliated Companies
750,000.00
2,045,472.00(24)
16,641.00(30)
1,155,000.00(31)
3,967,113.00
3,139,615.38
40,000.00
4,120,468.00
0.00
103,361.00
4,400,303.00
11,803,747.38
0.00
89,000.00
2,385,769.23
40,000.00(33)
3,152,719.00(34)
967,749.00(38)
78,820.00(35)
2,683,053.00(36)
8,340,361.23
89,000.00(37)
24,541.00(35)
1,717,250.00(36)
3,463,386.15
48,750.00
0.00
0.00
0.00
0.00
0.00
48,750.00
0.00
0.00
Of which remuneration in Pirelli & C. S.p.A.
48,750.00
48,750.00
Of which remuneration in Pirelli & C. S.p.A.
34,375.00
34,375.00
34,375.00
0.00
0.00
0.00
0.00
0.00
34,375.00
0.00
0.00
Of which remuneration by subsidiary and affiliated Companies
Andrea Casaluci
General Manager
Operations
Of which remuneration in Pirelli & C. S.p.A.
No. 6 Key Managers
(32)
Of which remuneration in Pirelli & C. S.p.A.
Of which remuneration by subsidiary and affiliated Companies
753,846.15
Riccardo Foglia Taverna
Chairman of the Board
of Statutory Auditors
15/06/2021 -
31/12/2021
AGM to approve the financial
statements for the year to 31
December 2023
Of which remuneration by subsidiary and affiliated Companies
Francesco Fallacara
Chairman of the Board
of Statutory Auditors
01/01/2021 -
15/06/2021
AGM to approve the financial
statements for the year to 31
December 2020
Of which remuneration by subsidiary and affiliated Companies
279
Report on the Remuneration Policy
FIRST AND LAST NAME
OFFICE
PERIOD OFFICE
HELD
EXPIRY OF TERM
OF OFFICE
FIXED
REMUNERATION
REMUNERATION
FOR MEMBERSHIP
OF COMMITTEES
VARIABLE NON-EQUITY REMUNERATION
BONUS AND OTHER
INCENTIVES
PROFIT SHARING
NON-MONETARY
OTHER
BENEFITS
REMUNERATION
TOTAL
FAIR VALUE
OF EQUITY
REMUNERATION
END OF EMPLOYMENT
OR OFFICE INDEMNITY
Francesca Meneghel
Standing auditor
15/06/2021 -
31/12/2021
AGM to approve the financial
statements for the year to 31
December 2023
40,625.00
0.00
0.00
0.00
0.00
0.00
40,625.00
0.00
0.00
Of which remuneration in Pirelli & C. S.p.A.
40,625.00
Of which remuneration by subsidiary and affiliated Companies
Fabio Artoni
Standing auditor
Of which remuneration in Pirelli & C. S.p.A.
Of which remuneration by subsidiary and affiliated Companies
Teresa Naddeo
Standing auditor
01/01/2021 -
15/06/2021
AGM to approve the financial
statements for the year to 31
December 2020
15/06/2021 -
31/12/2021
AGM to approve the financial
statements for the year to 31
December 2023
32,325.00
0.00
0.00
0.00
0.00
0.00
32,325.00
0.00
0.00
22,917.00
9,408.00(39)
40,625.00
0.00
0.00
0.00
0.00
0.00
40,625.00
0.00
0.00
Of which remuneration in Pirelli & C. S.p.A.
40,625.00
Of which remuneration by subsidiary and affiliated Companies
Luca Nicodemi
Standing auditor
Of which remuneration in Pirelli & C. S.p.A.
Of which remuneration by subsidiary and affiliated Companies
Antonella Carù
Standing auditor
01/01/2021 -
15/06/2021
AGM to approve the financial
statements for the year to 31
December 2020
01/01/2021 -
31/12/2021
AGM to approve the financial
statements for the year to 31
December 2023
27,500.00
0.00
0.00
0.00
0.00
0.00
27,500.00
0.00
0.00
22,917.00
4,583.00(40)
68,097.00
40,000.00
0.00
0.00
0.00
0.00
108,097.00
0.00
0.00
Of which remuneration in Pirelli & C. S.p.A.
63,542.00
40,000.00(34)
Of which remuneration by subsidiary and affiliated Companies
4,555.00(40)
Alberto Villani
Standing auditor
01/01/2021 -
31/12/2021
AGM to approve the financial
statements for the year to 31
December 2023
63,542.00
0.00
0.00
0.00
0.00
0.00
63,542.00
0.00
0.00
Of which remuneration in Pirelli & C. S.p.A.
63,542.00
40,625.00
22,917.00
9,408.00
40,625.00
22,917.00
4,583.00
103,542.00
4,555.00
63,542.00
Of which remuneration by subsidiary and affiliated Companies
* * * * *
Total remuneration in Pirelli & C. S.p.A.
Total remuneration by subsidiary and affiliated Companies
Total
7,333,409.23
958,750.00
1,749,315.23
0.00
9,082,724.46
958,750.00
9,711,903.00
3,217,334.00
12,929,237.00
0.00
0.00
0.00
762,541.00
2,833,053.00
21,599,656.23
55,252.00
2,872,250.00
7,894,151.23
817,793.00
5,705,303.00
29,493,807.46
0.00
0.00
0.00
4,531,534.00
0.00
4,531,534.00
(1) Of which: euro 65,000 as a Director of Pirelli & C. S.p.A. and euro 2.4 as Executive Vice Chairman and Chief Executive Officer of Pirelli & C. S.p.A.
(2) Of which euro 50,000 as Chairman of the Appointments and Successions Committee of Pirelli & C. S.p.A. and euro 50,000 as Chairman of the Strategies Committee of Pirelli & C. S.p.A.
(3) The amount includes 75% of the 2021 STI incentive accrued and paid out (upfront amount) and 25% of the 2019 STI incentive paid out in 2021. 25% of the 2021 STI incentive deferred and
assigned for risks/opportunities according to the results of the 2022 STI is not indicated (see the following table for details on the amounts).
(4) Of which: euro 666,302 for insurance policies in line with the provisions of the 2021 Policy, and euro 4,561 for a company car.
(5) Of which euro 400,000 as a Chairman of Pirelli & C. S.p.A. and euro 65,000 as a Director of Pirelli & C. S.p.A.
(6) Of which euro 30,000 as member of the Appointments and Successions Committee of Pirelli & C. S.p.A. and euro 30,000 as member of the Strategies Committee of Pirelli & C. S.p.A.
(7) Remuneration transferred to employer company.
(8) As a Director of Pirelli & C. S.p.A.
(9) As a member of the Strategies Committee of Pirelli & C. S.p.A.
(10) Of which: euro 30,000 as a member of the Remuneration Committee of Pirelli & C. S.p.A., euro 30,000 as a member of the Appointments and Successions Committee of Pirelli & C. S.p.A.,
and euro 30,000 as a member of the Strategies Committee of Pirelli & C. S.p.A.
(11) As member of the Remuneration Committee of Pirelli & C. S.p.A.
(12) Of which: euro 35,208 as a Director of Pirelli & C. S.p.A. and euro 598,889 as Deputy-CEO of Pirelli & C. S.p.A. from 15 June 2021.
(13) The amount includes 75% of the 2021 STI incentive accrued and paid out (upfront amount). 25% of the same incentive deferred and assigned for risks/opportunities according to the results
of the 2022 STI is not indicated (see the following table for details on the amounts).
(14) Of which: euro 1,402 for insurance policies, euro 3,625 for a company car and euro 1,946 for health insurance.
(15) Deriving from the consulting agreement entered into with Pirelli & C. S.p.A. effective as of 1 January 2019 and terminated on 15 June 2021. Note that the non-competition agreement paid
upon termination of the previous office of Director of Pirelli & C. S.p.A. (18 June 2020) and terminated by mutual agreement on 15 June 2021, is not shown as its total value is already indicated
in the Report on Remuneration paid in 2018.
(16) Of which: euro 30,000 as member of the Strategies Committee of Pirelli & C. S.p.A. and euro 50,000 as member of the Related-Parties Transactions Committee of Pirelli & C. S.p.A. (“RPT
Committee”).
(17) As member of the Audit, Risks, Sustainability and Corporate Governance Committee of Pirelli & C. S.p.A. (“ARSCGC”).
(18) Of which: euro 35,000 as Chairman of the ARSCGC and euro 30,000 as member of the Remuneration Committee of Pirelli & C. S.p.A.
(19) Of which: euro 30,000 as a member of the ARSCGC, euro 30,000 as a member of the Strategies Committee of Pirelli & C. S.p.A., and euro 50,000 as a member of the RPT Committee.
(20) Of which: euro 30,000 as member of the ARSCGC, euro 30,000 as member of the Remuneration Committee of Pirelli & C. S.p.A. and euro 75,000 as Chairman of the RPT Committee.
(21) As Chairman of the Remuneration Committee of Pirelli & C. S.p.A.
(22) As a member of the Appointments and Successions Committee of Pirelli & C. S.p.A.
(23) As Senior Manager of Pirelli Tyre S.p.A. for the whole of 2021.
280
Pirelli Annual Report 2021 FIRST AND LAST NAME
OFFICE
PERIOD OFFICE
EXPIRY OF TERM
FIXED
HELD
OF OFFICE
REMUNERATION
REMUNERATION
FOR MEMBERSHIP
OF COMMITTEES
VARIABLE NON-EQUITY REMUNERATION
BONUS AND OTHER
INCENTIVES
PROFIT SHARING
NON-MONETARY
BENEFITS
OTHER
REMUNERATION
TOTAL
FAIR VALUE
OF EQUITY
REMUNERATION
END OF EMPLOYMENT
OR OFFICE INDEMNITY
Francesca Meneghel
Standing auditor
40,625.00
0.00
0.00
0.00
0.00
0.00
40,625.00
0.00
0.00
Of which remuneration in Pirelli & C. S.p.A.
40,625.00
40,625.00
Fabio Artoni
Standing auditor
32,325.00
0.00
0.00
0.00
0.00
0.00
32,325.00
0.00
0.00
22,917.00
9,408.00
Teresa Naddeo
Standing auditor
40,625.00
0.00
0.00
0.00
0.00
0.00
40,625.00
0.00
0.00
40,625.00
Luca Nicodemi
Standing auditor
27,500.00
0.00
0.00
0.00
0.00
0.00
27,500.00
0.00
0.00
22,917.00
4,583.00
Antonella Carù
Standing auditor
68,097.00
40,000.00
0.00
0.00
0.00
0.00
108,097.00
0.00
0.00
Of which remuneration in Pirelli & C. S.p.A.
63,542.00
40,000.00(34)
Of which remuneration by subsidiary and affiliated Companies
4,555.00(40)
103,542.00
4,555.00
Alberto Villani
Standing auditor
63,542.00
0.00
0.00
0.00
0.00
0.00
63,542.00
0.00
0.00
Of which remuneration in Pirelli & C. S.p.A.
63,542.00
63,542.00
7,333,409.23
958,750.00
1,749,315.23
0.00
9,082,724.46
958,750.00
9,711,903.00
3,217,334.00
12,929,237.00
0.00
0.00
0.00
762,541.00
2,833,053.00
21,599,656.23
55,252.00
2,872,250.00
7,894,151.23
817,793.00
5,705,303.00
29,493,807.46
0.00
0.00
0.00
4,531,534.00
0.00
4,531,534.00
15/06/2021 -
31/12/2021
AGM to approve the financial
statements for the year to 31
December 2023
01/01/2021 -
15/06/2021
AGM to approve the financial
statements for the year to 31
December 2020
15/06/2021 -
31/12/2021
AGM to approve the financial
statements for the year to 31
December 2023
01/01/2021 -
15/06/2021
AGM to approve the financial
statements for the year to 31
December 2020
01/01/2021 -
31/12/2021
AGM to approve the financial
statements for the year to 31
December 2023
01/01/2021 -
31/12/2021
AGM to approve the financial
statements for the year to 31
December 2023
22,917.00
9,408.00(39)
40,625.00
22,917.00
4,583.00(40)
Of which remuneration by subsidiary and affiliated Companies
Of which remuneration in Pirelli & C. S.p.A.
Of which remuneration by subsidiary and affiliated Companies
Of which remuneration in Pirelli & C. S.p.A.
Of which remuneration by subsidiary and affiliated Companies
Of which remuneration in Pirelli & C. S.p.A.
Of which remuneration by subsidiary and affiliated Companies
Of which remuneration by subsidiary and affiliated Companies
* * * * *
Total remuneration in Pirelli & C. S.p.A.
Total remuneration by subsidiary and affiliated Companies
Total
(24) The amount includes the full amount of the accrued 2021 STI incentive (including the deferred portion), the company matching component that will be paid at the end of the deferral period
(3 years) and 25% of the 2019 STI incentive paid in 2021.
(25) Of which: euro 462 for insurance policies, euro 3,072 for a company car, euro 7,200 for supplementary pension contributions and euro 3,336 for health insurance.
(26) Ceased to hold office as General Manager co-CEO of the Company on 28 February 2021 and as Director from 24 March 2021.
(27) Of which: euro 16,250 as a Director of Pirelli & C. S.p.A. and euro 250,000 as General Manager co-CEO of Pirelli & C. S.p.A.
(28) Of which: euro 1,553 for a company car, euro 1,200 for supplementary pension contributions, euro 556 for health insurance and euro 1,846 for accommodation assigned on loan for use and
euro 730 for insurance policies.
(29) Of which: euro 1.25 million as a redundancy incentive, euro 100,000 as general novation settlement, euro 3 million as total consideration for a non-competition agreement (of which euro
750,000 was paid in 2021), euro 92,534 related to non-monetary benefits after termination of employment.
(30) Of which: euro 3,630 for a company car, euro 7,200 for supplementary pension contributions, euro 3,336 for health insurance and euro 2,475 for insurance policies.
(31) Of which: euro 330,000 for the last tranche of the Retention Plan, euro 75,000 as payment during the employment contract of a portion of the fee for the non-competition agreement and
euro 750,000 as a stability bonus.
(32) As of 31 December 2021, 6 KM had been identified, of which 1 is represented pro-rata temporis as of 15 June 2021. The table also shows pro-rata temporis the remuneration of 2 KM who
held this office until 15 June 2021. Note, lastly, that the remuneration paid to the General Manager co-CEO who ceased to hold office on 28 February 2021 and the General Manager Operations
are not included in this item, as these figures are indicated separately in the table.
(33) As a member of the 231 Supervisory Body.
(34) The amount includes, for the respective holders, the full amount of the accrued 2021 STI incentive (including the deferred portion), the company matching component that will be paid at the
end of the deferral period (3 years) and 25% of the 2019 STI incentive paid in 2021. For Mr Francesco Tanzi, the deferred portion of the 2021 STI and the company matching opportunity are not
shown as they have been definitively lost due to the termination of employment.
(35) The amounts, for the respective holders, are for a company car, supplementary pension contributions, health insurance, insurance policies and housing benefit.
(36) The amounts, for the respective holders, are for payment during the employment contract of a portion of the fee for the non-competition agreement, the last instalment of the Retention
Plan, a one-off bonus and reimbursement for school fees.
(37) As a fee for the non-competition agreement after termination of the employment relationship.
(38) The amount includes, for the respective holders, the full amount of the accrued 2021 STI incentive (including the deferred portion), the company matching component that will be paid at the
end of the deferral period (3 years) and 25% of the 2019 STI incentive paid in 2021.
(39) As standing auditor of Pirelli Industrie Pneumatici S.r.l., Chairman of the Board of Statutory Auditors of Pirelli Tyre S.p.A. until 14 June 2021, Chairman of the Supervisory Board of Pirelli
International Treasury S.p.A. as of 4 June 2021.
(40) As a standing auditor of Pirelli Tyre S.p.A.
281
Report on the Remuneration Policy 3. MONETARY INCENTIVE PLANS FOR MEMBERS OF THE BOARD OF DIRECTORS, GENERAL MANAGERS AND KM
For a description of the monetary incentive plans, please refer to the 2021 Policy.
FIRST AND
LAST NAME
OFFICE
PLAN
BONUS FOR THE YEAR
BONUS FOR THE PREVIOUS YEARS
PAYABLE/
PAID OUT
DEFERRED
DEFERMENT
PERIOD
NO LONGER
PAYABLE
PAYABLE
/PAID OUT
STILL
DEFERRED
OTHER
BONUSES
2019 STI
-
-
-
-
409,184.00(1)
Marco
Tronchetti
Provera
Executive Vice
Chairman and
CEO
Giorgio Luca
Bruno
Deputy-CEO(7)
Giovanni
Tronchetti
Provera
Director (8)
Andrea
Casaluci
General
Manager
Operations
No. 6
Key Managers
(9)
(I) Remuneration in the Company
that has prepared the financial
statements
2021 STI
4,500,000.00
1,500,000.00(2)
1 year
LTI Plan
2020-2022
LTI Plan
2021-2023
-
-
-
-
-
-
2021 STI
1,650,000.00
550,000.00(2)
1 year
LTI Plan
2020-2022
LTI Plan
2021-2023
2019 STI
-
-
-
-
-
-
-
-
-
2021 STI
105,000.00
94,500.00(3)
3 years
LTI Plan
2020-2022
LTI Plan
2021-2023
2019 STI
-
-
-
-
-
-
-
-
-
2021 STI
562,500.00
1,406,250.00(3)
3 years
LTI Plan
2020-2022
LTI Plan
2021-2023
2019 STI
-
-
-
-
-
-
-
-
-
2021 STI
1,725,700.00
2,135,060.00(5)
3 years
LTI Plan
2020-2022
LTI Plan
2021-2023
2019 STI
-
-
-
-
-
-
2021 STI
7,625,700.00
3,560,060.00
LTI Plan
2020-2022
LTI Plan
2021-2023
2019 STI
-
-
-
-
-
-
-
-
-
1 year
3 years
-
-
-
2021 STI
917,500.00
2,125,750.00
3 years
(II) Remuneration from Subsidiary
and Affiliated Companies
LTI Plan
2020-2022
LTI Plan
2021-2023
-
-
-
-
(III) Total
8,543,200.00
5,685,810.00
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,613.00(1)
-
-
-
76,722.00(1)
-
-
-
259,708.00(1)
-
-
-
576,143.00
-
-
-
174,084.00
-
-
-
750,227.00
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,080,000.00(4)
4,127,250.00(6)
2,460,000.00
2,747,250.00
5,207,250.00
(1) The amount relates to 25% of the 2019 STI which had been deferred and which, in execution of the specific resolution of the Board of Directors of 3 April 2020, was paid in 2021 subject to
continued employment on the payment date. This amount is shown in the “Bonuses and other incentives” column of Table 1.
(2) The amount in the “Deferred bonus for the year” column refers to 25% of the 2021 STI deferred and assigned to risk/opportunity subject to the results of the 2022 STI. This amount is not
shown in the “Bonuses and other incentives” column of Table 1.
(3) The amount in the “Deferred bonus for the year” column refers to the sum of the deferred 2021 STI portion and the company matching component, which will be paid at the end of the deferral
period (3 years). This amount is shown in the “Bonuses and other incentives” column of Table 1.
(4) The amount refers to the sum of the last tranche of the Retention Plan and of the stability bonus. This amount is shown in the “Other remuneration” column in Table 1.
(5) The amount in the “Deferred bonus for the year” column refers to the sum of the deferred portion of the 2021 STI and the company matching component which will be paid at the end of the
deferral period (3 years) for the KM in office at 31/12/2021, net of Mr Francesco Tanzi, who definitively loses the deferred portion of the 2021 STI and the company matching opportunity due to
the termination of his employment. This amount is shown in the “Bonuses and other incentives” column of Table 1.
(6) The amount refers, for the respective holders, to the last tranche of the Retention Plan and a one-time bonus. This amount is shown in the “Other remuneration” column in Table 1.
(7) The Deputy-CEO, appointed on 15 June 2021, participates in the 2021 Annual Incentive (STI), the 2021-2023 Long Term Incentive (LTI) plan and, pro-rata, the 2020-2022 Long Term
Incentive (LTI) plan.
(8) Giovanni Tronchetti Provera is included in the LTI and STI variable incentive plans as Senior Manager of Pirelli Tyre S.p.A.
(9) As of 31 December 2021 there were 6 KM. It should be noted that the remuneration paid to the General Manager Operations is not included in this item, as it is indicated separately in the table.
282
Pirelli Annual Report 2021 4. TABLE OF EQUITY INVESTMENTS OF THE MEMBERS OF THE BOARD
OF DIRECTORS, GENERAL MANAGERS AND KM
The table below provides disclosures on any equity investments held in Pirelli & C. and in its subsidiary companies,
by those who, even for a fraction of the year, have held the position of:
→ member of the Board of Directors;
→ member of the Board of Statutory Auditors;
→ General Manager;
→ KM.
In particular, it indicates, for each member of the Board of Directors and Board of Statutory Auditors and General
Managers, by name, and cumulatively for KM, with regard to each company in which shares are held, the number
of shares, by category:
→ held at the end of the prior year;
→ purchased during the reporting year;
→ sold during the reporting year;
→ held at the end of the reporting period.
In this regard, the title of possession and the manner in which it is held are also specified.
This includes all persons who, during the year in question, held the position of member of the administrative and
control bodies, General Manager or KM, even if only for a fraction of a year.
1) EQUITY INVESTMENTS OF MEMBERS OF BOARD OF DIRECTORS AND CON-
TROLLING BODIES AND GENERAL MANAGERS
FIRST AND LAST NAME
OFFICE
Marco Tronchetti Provera(i)
Executive Vice
Chairman and
Chief Executive
Officer
INVESTEE
COMPANY
NO. OF SHARES
OWNED AT
31.12.2020
NO. OF SHARES
PURCHASED/
SUBSCRIBED
NO. OF SHARES
SOLD
NO. OF SHARES OWNED
AT 31.12.2021
Pirelli & C.
100,959,399
40,000,000(ii)
Angelos Papadimitriou
Director
Pirelli & C.
170,000(iv)
Giorgio Luca Bruno
Director
Pirelli & C.
500(v)
-
-
-
-
-
140,959,399(iii)
170,000(iv)
500(v)
(i) Shares held by the indirect subsidiary Camfin S.p.A.
(ii) Shares acquired by Camfin S.p.A. on 7 October 2021 following completion of the share capital increase of Camfin S.p.A. fully subscribed by Longmarch Holding S.à.r.l. through the
contribution of 40,000,000 Pirelli shares.
(iii) For the sake of completeness, it should be noted that Camfin S.p.A. informed the market that it had taken out instruments called “Call Spreads” with major financial institutions, the original
maturity of which was extended from September 2022 to September 2023, on 29 June 2021, with an underlying equivalent to approximately 4.6% of Pirelli’s share capital.
(iv) Shares purchased on 6 August 2020 and held at the date of termination of office (24 March 2021).
(v) Shares purchased when the Company was listed on 4 October 2017.
2) EQUITY INVESTMENTS OF OTHER KM
NUMBER OF MANAGERS WITH
STRATEGIC RESPONSIBILITY
INVOLVED
COMPANY
NO. OF SHARES
HELD AT 31.12.2020
NO. OF SHARES
PURCHASED/ SUBSCRIBED
NO. OF SHARES
SOLD
NO. OF SHARES HELD
AT 31.12.2021
-
-
-
-
-
-
283
Report on the Remuneration Policy Consolidated
Financial
Statements at
December 31, 2021
285
A Beautiful Place
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(in thousands of euro)
Property, plant and equipment
Intangible assets
Investments in associates and joint ventures
Other financial assets at fair value through other Comprehensive
Income
Deferred tax assets
Other receivables
Tax receivables
Other assets
Derivative financial instruments
Non-current assets
Inventories
Trade receivables
Other receivables
Other financial assets at fair value through Income Statement
Cash and cash equivalents
Tax receivables
Derivative financial instruments
Current assets
Total Assets
Note
9
10
11
12
13
15
16
22
27
17
14
15
18
19
16
27
Equity attributable to the owners of the Parent Company:
20,1
Share capital
Reserves
Net income / (loss)
Equity attributable to non-controlling interests:
20,2
Reserves
Net income / (loss)
Total Equity
Borrowings from banks and other financial institutions
Other payables
Provisions for liabilities and charges
Deferred tax liabilities
Provisions for employee benefit obligations
Tax payables
Derivative financial instruments
Non-current liabilities
Borrowings from banks and other financial institutions
Trade payables (*)
Other payables (*)
Provisions for liabilities and charges
Provisions for employee benefit obligations
Tax payables
Derivative financial instruments
Current liabilities
Total Liabilities and Equity
20
23
25
21
13
22
26
27
23
24
25
21
22
26
27
12/31/2021
12/31/2020
of which related
parties (note 43)
of which related
parties (note 43)
3,288,914
5,485,665
80,886
56,907
137,643
362,944
27,564
153,205
4,612
9,598,340
1,092,162
659,209
470,577
113,901
1,884,649
17,773
46,562
4,284,833
13,883,173
4,908,112
1,904,375
2,700,941
302,796
134,527
115,730
18,797
5,042,639
3,789,369
76,485
81,170
1,033,892
220,598
11,512
3,519
5,216,545
1,489,249
1,626,367
314,203
43,594
-
134,388
16,188
3,623,989
13,883,173
6,664
19,474
105,942
13,210
213
22,028
7,157
2,751
144,122
13,376
3,159,767
5,582,033
72,588
42,720
109,378
402,148
4,761
80,422
-
9,453,817
836,437
597,669
469,194
58,944
2,275,476
29,153
17,900
4,284,773
13,738,590
4,447,418
1,904,375
2,513,262
29,781
104,432
91,540
12,892
4,551,850
4,970,986
77,280
73,257
1,006,799
243,931
10,795
87,601
6,470,649
883,567
1,316,971
325,266
48,083
5,013
99,505
37,686
2,716,091
13,738,590
5,826
12,790
111,325
14,693
213
5,926
2,408
2,192
134,597
6,719
3,017
(*) At December 31, 2021, payables for investments inproperty, plant and equipment and intangible assets are classified under Trade payables. In order to ensure compatibility with the previous
financial year, payables for investments in property, plant and equipment and intangible assets at December 31, 2020, to the amount of euro 49,000 thousand, were reclassified from Other
payables to Trade payables.
286
Pirelli Annual Report 2021
CONSOLIDATED INCOME STATEMENT
(in thousands of euro)
Revenues from sales and services
Other income
Note
2021
2020
of which related
parties (note 43)
of which related
parties (note 43)
5,331,450
23,659
4,302,131
15,074
303,868
56,294
306,313
49,392
29
30
Changes in inventories of unfinished, semi-finished and finished
products
157,813
(160,223)
Raw materials and consumables used (net of change in inventories)
(1,820,615)
(3,577)
(1,280,361)
(4,917)
Personnel expenses
31
(1,101,913)
(23,085)
(949,678)
(14,959)
- of which non-recurring events
Amortisation, depreciation and impairment
Other costs
Net impairment loss on financial assets
Increases in fixed assets due to internal works
Operating income/(loss)
Net income/(loss) from equity investments
- share of net income/(loss) of associates and joint ventures
- gains on equity investments
- losses on equity investments
- dividends
Financial income
Financial expenses
(2,537)
(517,192)
(11,205)
(517,152)
(1,770,518)
(312,465)
(1,466,294)
(241,764)
(7,950)
2,111
577,054
3,978
1,697
27
(20)
2,274
(17,385)
1,788
219,139
(5,271)
1,697
(5,629)
(5,629)
1,140
(847)
65
35,000
3,651
149,134
(179,281)
(1,505)
(305,636)
2,338
(921)
32
33
34
35
36
37
Net income / (loss) before taxes
436,751
Taxes
38
(115,158)
- of which non-recurring events
Net income / (loss)
Attributable to:
Owners of the Parent Company
Non-controlling interests
Total earnings / (losses) per share (in euro per basic share)
39
23,223
321,593
302,796
18,797
0.303
57,366
(14,693)
-
42,673
29,781
12,892
0.030
287
Consolidated Financial Statements
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(in thousands of euro)
A
Net income / (loss)
- Remeasurement of employee benefits
- Tax effect
Note
2021
2020
321,593
42,673
22
91,168
(30,173)
18,946
(5,271)
- Fair value adjustment of other financial assets at fair value through Other Comprehensive Income
12
13,764
(16,129)
B
Total items that may not be reclassified to Income Statement
74,759
(2,454)
Exchange differences from translation of foreign Financial Statements
- Gains / (losses)
- (Gains) / losses reclassified to Income Statement
- Tax effect
Fair value adjustment of derivatives designated as cash flow hedges:
- Gains / (losses)
- (Gains) / losses reclassified to Income Statement
- Tax effect
Cost of hedging
- Gains / (losses)
- (Gains) / losses reclassified to Income Statement
- Tax effect
Share of other comprehensive income related to associates and joint ventures, net of taxes
20
35
27
27
27
27
11
119,201
(373,552)
-
-
(932)
-
95,523
(119,247)
(72,380)
124,345
(4,638)
(482)
1,175
(6,870)
878
6,694
4,496
(7,104)
81
(2,093)
Total items reclassified / that may be reclassified to Income Statement
139,583
(374,488)
214,342
(376,942)
535,935
(334,269)
505,837
(336,516)
30,098
2,247
C
D
Total other comprehensive income (B+C)
A+D
Total comprehensive income / (loss)
Attributable to:
- Owners of the Parent Company
- Non-controlling interests
288
Pirelli Annual Report 2021
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY AT 12/31/2021
(in thousands of euro)
Attributable to the Parent Company (note 20.1)
Share
Capital
Translation
reserve
Other O.C.I.
reserves *
Other
reserves/
retained
earnings
Total
attributable
to the Parent
Company
Non-
controlling
interests
(note 20.2)
Total
(note 20)
Total at 12/31/2020
1,904,375
(679,737)
(89,893)
3,312,673
4,447,418
104,432
4,551,850
Other components of comprehensive Income
-
114,594
88,447
-
203,041
11,301
214,342
Net income / (loss)
Total comprehensive income / (loss)
Dividends approved
Effects of hyperinflation accounting in
Argentina
Other
-
-
-
-
-
-
-
302,796
302,796
18,797
321,593
114,594
88,447
302,796
505,837
30,098
535,935
-
-
-
-
-
(80,000)
(80,000)
33,647
33,647
-
-
(80,000)
33,647
38
1,172
1,210
(3)
1,207
Total at 12/31/2021
1,904,375
(565,143)
(1,408)
3,570,288
4,908,112
134,527
5,042,639
(in thousands of euro)
OTHER O.C.I. RESERVES *
Reserve for
cost of hedging
Reserve for
cash flow
hedge
Remeasurement
of employee
benefits
Tax effect
Other O.C.I.
reserves
Reserve for
fair value
adjustment of
financial assets
at fair value
through other
comprehensive
income
Total at 12/31/2020
(16,357)
7,290
(26,228)
(25,104)
(29,494)
(89,893)
Other components of comprehensive Income
13,764
(5,695)
23,143
91,168
(33,933)
88,447
Other changes
Total at 12/31/2021
(4)
-
-
43
(1)
38
(2,597)
1,595
(3,085)
66,107
(63,428)
(1,408)
289
Consolidated Financial Statements
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY AT 12/31/2020
(in thousands of euro)
Attributable to the Parent Company (note 20.1)
Share
Capital
Translation
reserve
Other O.C.I.
reserves *
Other
reserves/
retained
earnings
Total
attributable
to the Parent
Company
Non-
controlling
interests
(note 20.2)
Total
(note 20)
Total at 12/31/2019
1,904,375
(313,805)
(89,424)
3,223,303
4,724,449
102,182
4,826,631
Other components of comprehensive income
Net income / (loss)
Total comprehensive income / (loss)
Convertible bond reserve
Effects of Hyperinflation accounting in
Argentina
Other
-
-
-
-
-
-
(365,932)
(365)
-
(366,297)
(10,645)
(376,942)
-
-
29,781
29,781
12,892
42,673
(365,932)
(365)
29,781
(336,516)
2,247
(334,269)
-
-
-
-
-
41,200
41,200
20,041
20,041
(104)
(1,652)
(1,756)
-
-
3
41,200
20,041
(1,753)
Total at 12/31/2020
1,904,375
(679,737)
(89,893)
3,312,673
4,447,418
104,432
4,551,850
(in thousands of euro)
OTHER O.C.I. RESERVES *
Reserve
for cost of
hedging
Reserve for
cash flow
hedge
Remeasurement
of employee
benefits
Tax effect
Other O.C.I.
reserves
Reserve for
fair value
adjustment of
financial assets
at fair value
through other
comprehensive
income
Total at 12/31/2019
(228)
9,898
(31,326)
(43,946)
(23,822)
(89,424)
Other components of comprehensive income
(16,129)
(2,608)
5,098
18,946
(5,672)
Other changes
-
-
-
(104)
-
(365)
(104)
Total at 12/31/2020
(16,357)
7,290
(26,228)
(25,104)
(29,494)
(89,893)
290
Pirelli Annual Report 2021
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands of euro)
Note
2021
2020
of which related
parties (note 43)
of which related
parties (note 43)
Net income / (loss) before taxes
436,751
Reversals of amortisation, depreciation, impairment losses and
restatement of property, plant and equipment and intangible
assets
32
517,192
5,629
(4,029)
390
(6,868)
2,524
(2,257)
57,366
517,152
156,502
(65)
(293)
5,629
64,781
(90,692)
140,645
(35,324)
(184,604)
21,926
60,555
(37,173)
(58,053)
618,352
(177,879)
5,405
(15,527)
279
-
69
144,281
(2,274)
(7)
(1,697)
(1,697)
(6,359)
19,478
(1,197)
(5,158)
(3,017)
Reversal of Financial (income) / expenses
36/37
Reversal of Dividends
Reversal of gains / (losses) on equity investments
Reversal of share of net income from associates and joint
ventures
Reversal of accruals and other
Net Taxes paid
Change in Inventories
Change in Trade receivables
Change in Trade payables
Change in Other receivables
Change in Other payables
Uses of Provisions for employee benefit obligations
Uses of Other provisions
A
Net cash flow provided by / (used in) operating activities
Investments in owned tangible assets
Disposal of owned tangible assets
Investments in intangible assets
Disposal of intangible assets
(Investments) in other financial assets at fair value through
Other Comprehensive Income
Loss of control in subsidiaries
Change in Financial receivables from associates and joint
ventures
Dividends received
B
Net cash flow provided by / (used in) investing activities
Change in Borrowings from banks and other financial
institutions due to draw down
Change in Borrowings from banks and other financial
institutions due to repayments and other
Change in Financial receivables / Other current financial
assets at fair value through income statement
35
35
35
38
35
23
23
Financial income / (expenses)
Dividends paid
Repayment of principal and payment of interest for lease
liabilities
Net cash flow provided by / (used in) financing activities
Total cash flow provided / (used) during the period (A+B+C)
Cash and cash equivalents at the beginning of the financial year
Exchange rate differences from translation of cash and cash
equivalents
C
D
E
F
G
133,963
(125,634)
(222,495)
(51,352)
214,512
23,745
(59,096)
(48,751)
(40,064)
919,074
(256,092)
8,534
(30,579)
243
(450)
4,407
15,272
2,274
(256,391)
886,242
(1,649,448)
(21,079)
(115,071)
(79,935)
(1,084,646)
(421,963)
2,269,683
35,824
Cash and cash equivalents at the end of the period (D+E+F) (°)
19
1,883,544
(°)
of which:
cash and cash equivalents
bank overdrafts
1,884,649
(1,105)
291
15,272
(64,093)
(64,093)
65
(251,681)
2,577,182
(1,806,690)
(192,666)
(38,504)
-
(105,355)
(3,830)
(99,924)
(2,856)
439,398
806,069
1,600,627
(137,013)
2,269,683
2,275,476
(5,793)
Consolidated Financial Statements Explanatory notes
1. GENERAL INFORMATION
Pirelli & C. S.p.A. is a company whose legal status is governed
by the laws of the Italian Republic.
Founded in 1872, Pirelli & C. S.p.A. is - also by way of its
subsidiaries in Italy and abroad - a Pure Consumer Tyre
Company (which includes tyres for cars, motorcycles and
bicycles) whose particular focus is on the High Value tyre
market, that is, products created to reach the highest levels
of performance, safety, quietness and adherence to the road
surface.
The Company’s registered office is in Milan, at Viale Piero e
Alberto Pirelli n. 25.
These Financial Statements have been prepared using the
euro as the reporting currency, with all values rounded to the
nearest thousand euro, unless otherwise indicated.
The audit of the Financial Statements has been entrusted
to PricewaterhouseCoopers S.p.A. pursuant to Legislative
Decree No. 39 of January 27, 2010, and execution of the
resolution passed by the Shareholders’ Meeting of August 1,
2017, which conferred the mandate to the aforesaid company
for each of the nine financial years with closings from
December 31, 2017 to December 31, 2025.
Pirelli & C. S.p.A. is directly controlled by Marco Polo
International Italy S.r.l., which in turn, through China National
Chemical Corporation (“ChemChina”) and other subsidiaries
of the latter, is indirectly controlled by Sinochem Holdings
Corporation Ltd, a Chinese state-owned enterprise (SOE)
controlled by the State-owned Assets Supervision and
Administrative Commission of the State Council (SASAC) of
the People’s Republic of China.
As of the starting date of trading on the Stock Exchange
(October 4, 2017), there are no entities that exercise
management and coordination activities on the Company.
On March 17, 2022 the Board of Directors authorised the
publication of these Consolidated Financial Statements.
2. BASIS OF PRESENTATION
COVID-19
During 2021, the car tyre market recorded growth globally,
despite volumes still remaining below the pre-pandemic
levels of 2019. There was growth for the Original Equipment
channel, even if far from pre-pandemic levels, impacted by
the shortage in semi-conductors, particularly during the third
and fourth quarters of 2021. There was sustained growth
for the Replacement channel, supported by the recovery in
mobility following the easing of restrictions put in place to
combat contagions.
Pirelli’s results for 2021 reflect the recovery in demand, and
the implementation of the key programmes of the 2021-
2022|2025 Industrial Plan with revenues amounting to euro
5,331.5 million (+23.9% compared to 2020), and an operating
result amounting to euro 577.1 million.
As regards the medium-term Outlook and the elements of
risk and uncertainty, reference should be made to the relevant
sections in this document.
Considering the results for 2021 and those estimated for
2022, as reported in the “Outlook for 2022” section of the
Directors’ Report on Operations, the conditions required for
the going concern assumption underlying the preparation of
the Consolidated Financial Statements have been met, using
a future period of at least 12 months from the closing date of
the financial year as reference.
FINANCIAL STATEMENTS
The Consolidated Financial Statements at December 31,
2021 consist of the Statement of Financial Position, the
Income Statement, the Statement of Comprehensive Income,
the Statement of Changes in Equity, the Cash Flow Statement
and the Explanatory Notes, which are accompanied by the
Directors’ Report on Operations.
This document has not been prepared pursuant to EU
Delegated Regulation 2019/815 (ESEF Regulation), which
was adopted in implementation of the Transparency Directive.
The document prepared pursuant to the ESEF Regulation
is available (only in Italian) on the website of the authorised
storage mechanism eMarket Storage (emarketstorage.com)
and on the Company’s website www.pirelli.com.
The format adopted for the Statement of Financial Position
provides for the distinction of assets and liabilities according
to whether they are current or non-current.
The Group has opted to present the components of gains/
losses for the financial year in a separate Income Statement,
rather than
in the
Statement of Comprehensive Income. The Income Statement
format adopted provides for the classification of costs by
nature.
include these components directly
The Statement of Comprehensive Income includes the results
for the financial year and, the for homogeneous categories,
income and expenses are recognised directly in equity, in
accordance with the IFRS.
The Group has opted to present the tax effects and
reclassifications to the Income Statement of the gains/losses
which had been recognised in equity in previous financial
years, directly in the Statement of Comprehensive Income
and not in the Explanatory Notes.
The Statement of Changes in Equity sets forth, in addition
to the total gains/losses of the period, the amounts from
transactions with equity holders and the movements which
occurred during the financial year in the reserves.
292
Pirelli Annual Report 2021 In the Statement of Cash Flow, the cash flows from operating
activities are reported using the indirect method, whereby the
gains or losses for the financial year are adjusted by the effects
of non-monetary transactions, by any deferrals or accruals of
past or future collections or payments for operating activities,
and by revenue or expense item, connected with the cash
flows derived from any investment or financing activity.
SCOPE OF CONSOLIDATION
The scope of consolidation
associates and agreements for joint arrangements.
includes the subsidiaries,
Subsidiaries are defined as all the companies over which the
Group contemporarily holds:
→ the power of decision-making, or the ability to direct the
relevant activities of the subsidiary, that is activities that
have a significant influence on the results of the subsidiary
itself;
→ the right to the variable (positive or negative) results from
the investment in the entity;
→ the capacity to utilise its decision-making power to
determine the amounts for results arising from the
investment in the entity.
The Financial Statements of subsidiaries are included in
the Consolidated Financial Statements as of the date when
control is assumed until such time when control ceases
to exist. The share of equity and of the results attributable
to non-controlling interests, are separately reported in the
Statement of Financial Position, the Income Statement and
the Statement of Comprehensive Income, respectively.
All companies for which the Group is able to exercise
significant influence as defined by IAS 28 – Investments in
Associates and Joint Ventures, are considered associates.
This influence is legally presumed to exist when the Group
holds a percentage of voting rights of between 20% and 50%,
or when - even in the case of a lower share of voting rights –
it has the power to participate in determining financial and
operating policies by virtue of specific legal relationships,
such as, for example, the participation in Shareholders’
agreements together with other forms of significant exercise
of governance rights.
Joint arrangements are agreements whereby two or more
parties have joint control under a contract. Joint control
is the shared control of a business activity, established by
agreement which exists only when decisions relative to
the activity require the unanimous consent of all parties
who share control. These agreements may give rise to joint
ventures or joint operations.
joint operations which
A joint venture is an agreement for the joint control of an entity
whereby the parties that have joint control, have rights to the
net assets of the said entity. Joint ventures are distinguished
from
instead are configured as
agreements which give the parties of the agreement, which
have joint control of the initiative, the rights to the individual
assets and the obligations of the individual liabilities relative to
the agreement. In the case of joint operations, it is mandatory
that the assets, liabilities, costs and revenues subject to the
agreement be recognised in accordance with the applicable
accounting standards. The Group does not currently have any
agreements in place for joint operations.
The main changes
summarised as follows:
in the scope of consolidation are
→ incorporation on May 19, 2021 of the company Pirelli
Logistics (Yanzhou) Co., Ltd. which is wholly owned by
Pirelli Tyre Co., Ltd.
→ incorporation on December 20, 2021 of the company
Pirelli Digital Solutions S.r.l., which is wholly owned by
Pirelli Tyre S.p.A.
It should also be noted that the Mexican companies Pirelli
Servicios S.A. de C.V. and Pirelli Neumaticos de Mexico S.A.
de C.V. were merged by incorporation into Pirelli Neumaticos
S.A. de C.V. effective December 31, 2021. The merger had no
impact on the Group’s Consolidated Financial Statements.
293
Consolidated Financial Statements INFORMATION ON SUBSIDIARIES
The Consolidated Financial Statements include the assets and liabilities of 88 legal entities. The following is a list
of the significant subsidiaries:
Headquarter
12/31/2021
12/31/2020
% group
% non-
controlling
interests
% group
% non-
controlling
interests
Pirelli Tyre Co. Ltd
Yanzhou (China)
90.00%
10.00%
90.00%
10.00%
Pirelli Deutschland GmbH
Breuberg/Odenwald (Germany)
Pirelli Tyre S.p.A.
Milan (Italy)
Pirelli Industrie Pneumatici S.r.l.
Settimo Torinese (Italy)
Pirelli International Treasury S.p.A.
Milan (Italy)
Pirelli Neumaticos S.A. de C.V.
Silao (Mexico)
Pirelli Pneus Ltda
Campinas (Brazil)
Pirelli Comercial de Pneus Brasil Ltda
Sao Paulo (Brazil)
Pirelli UK Tyres Ltd
Burton-on-Trent (United Kingdom)
Pirelli Tire LLC
Rome (USA)
S.C. Pirelli Tyres Romania S.r.l
Slatina (Romania)
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
Limited Liability Company Pirelli Tyre Russia Moscow (Russia)
65.00%
35.00%
65.00%
35.00%
The complete list of subsidiaries is contained in the attachment “Scope of Consolidation – Companies
Consolidated on a Line-by-line Basis”.
Non-controlling interests in the subsidiaries of the Group are not relevant either individually or in aggregate form.
CONSOLIDATION PRINCIPLES
For consolidation purposes, the financial statements of the companies included in the Scope of Consolidation
were used, which were prepared at the reporting date of the Financial Statements of the Parent Company and
appropriately adjusted in order to render them compliant with the IAS/IFRS accounting standards applied by
the Group.
The financial statements expressed in foreign currencies have been translated into euro at period-end exchange
rates for the items in the Statement of Financial Position, and at average exchange rates for the items of the
Income Statement, with the exception of the financial statements of companies operating in hyperinflationary
countries, whose Income Statements have been translated at period-end exchange rates.
The differences arising from the conversion of the initial equity at period-end exchange rates are recognised
in the translation reserve, together with the difference arising from the translation of the results for the period
at period-end exchange rates, instead of the average exchange rate. The translation reserve is reversed to the
Income Statement at the time of the disposal of the company which generated the reserve.
The criteria for consolidation can be summarised as follows:
→ subsidiaries are consolidated on a line-by-line basis, according to which:
→ the assets and liabilities, costs and revenues of the Financial Statements of subsidiaries are assumed in
their entirety, regardless of the percentage of investment held;
→ the carrying amount of investments is de-recognised against the related portion of equity;
→ equity and income related transactions between fully consolidated companies, including dividends
distributed within the Group, are eliminated;
→ non-controlling interests are reported under the appropriate equity item, and similarly, the share of gains
or losses attributable to non-controlling interests is reported separately in the Income Statement;
294
Pirelli Annual Report 2021 → at the time of disposal of the subsidiary and the
consequent loss of control, any goodwill allocable
to the subsidiary in determining the capital gains or
losses arising from the disposal, is taken into account;
→ in the case of an equity investments acquired after
the assumption of control, any difference between the
purchase cost and the corresponding portion of equity
acquired, is reported in equity. Similarly, the effects
deriving from the disposal of non-controlling interests
without loss of control are also recognised in equity.
→ investments in associates and joint ventures are evaluated
using the equity method, whereby the carrying amount of
the investments is adjusted to take into account:
→ other financial assets at fair value through the Income
Statement
BUSINESS COMBINATIONS
Corporate acquisitions are accounted
acquisition method.
for using
the
When a controlling interest in a company is acquired, goodwill
is calculated as the difference between:
→ the fair value of the consideration plus any non-controlling
interests in the acquired company, measured at fair value
(if this option is chosen for the acquisition in question)
or in proportion to the non-controlling interest’s share of
the net assets of the acquired company;
→ the investor’s share of the post-acquisition results of
→ the fair value of the assets acquired and the liabilities
the associate or joint venture;
assumed.
→ the pertinent share of gains and losses are which
reported directly in the equity of the subsidiary, in
accordance with the applicable accounting standards;
→ the dividends paid by the subsidiary;
→ when the Group’s pertinent share in the losses of the
associate/joint venture exceeds the carrying amount
of the investment in the Financial Statements, so then
the carrying amount of the investment is reset to zero
and the share of any further losses is recognised under
“Provisions for liabilities and charges”, to the extent to
which the Group is contractually or implicitly obligated
to cover the losses;
→ the margins resulting from sales carried out by
subsidiaries to joint ventures or associates which are
eliminated only to the extent of the ownership stake in
the acquiring company.
3. ADOPTED ACCOUNTING STANDARDS
Pursuant to Regulation No. 1606 issued by the European
Parliament and the European Council in July 2002, the
Consolidated Financial Statements of the Pirelli & C. Group
have been prepared in accordance with the International
Financial Reporting Standards (IFRS) in force, as issued by
the International Accounting Standards Board (IASB) and
approved by the European Union at December 31, 2021, as well
as the provisions issued with the implementation of Article 9 of
Legislative Decree no. 38/2005. The term IFRS and IAS signifies
the IFRS and IAS international accounting standards in force
as issued by the International Accounting Standards Board
(IASB) and approved by the European Union at December 31,
2021 and all the interpretations of the International Financial
Reporting Interpretations Committee (IFRIC), formerly the
Standing Interpretations Committee (SIC).
The Consolidated Financial Statements have been prepared
using the historical costs method with the exception of the
following items which have been measured at their fair value:
→ derivative financial instruments;
→ other financial assets at fair value through other
Comprehensive Income;
In cases where the aforesaid difference is negative, the
difference is immediately recognised in the Income Statement
under income.
In the case of the acquisition of the control of a company
in which a non-controlling interest is already held (step
acquisition), the previously held investment is measured at
fair value, and the effects of this adjustment is recognised the
Income Statement.
The costs of business combination operations are recognised
in the Income Statement.
Contingent considerations, that is, the obligations of the
acquiring company to transfer additional assets or shares
to the seller in cases if certain future events occur, or
specific conditions are fulfilled, are recognised at fair value
at the acquisition date as part of the amount transferred in
exchange for the acquisition itself. Any subsequent changes
in the fair value of these agreements are recognised in the
Income Statement.
INTANGIBLE ASSETS
Intangible assets with finite useful lives are valuated at cost,
net of any accumulated amortisation and impairment.
Amortisation is calculated on a straight-line basis and begins
when the asset becomes available for use or capable of
operating in the manner intended by management and
ceases on the date when the asset is classified as held for
sale or is de-recognised.
Capital gains and capital losses deriving from the divestment
or disposal of an intangible asset are determined as the
difference between the net proceeds from disposal and the
carrying amount of the asset.
GOODWILL
Goodwill is an intangible asset with an indefinite useful life and
is therefore not subject to amortisation. Goodwill is subject to
evaluation, aimed at identifying any impairment losses, at least
annually or whenever there are indicators of impairment.
295
Consolidated Financial Statements TRADEMARKS AND LICENSES
Trademarks and licenses for which the conditions for classification as intangible assets with an indefinite useful
life have not been met, are evaluated at cost, net of the accumulated amortisation and impairment. This cost is
amortised for whichever period is shorter between, the duration of the contract and the useful life of the asset.
The trademarks for which the conditions for classification as intangible assets with an indefinite useful life have
been met, are not systematically amortised, and are subjected to an impairment test at least once a year.
SOFTWARE
Software license costs, including incidental expenses, are capitalised and recognised in the Financial Statements
net of any amortisation and net of any accumulated impairment. Software is amortised on the basis of its useful life.
CUSTOMER RELATIONSHIPS
Customer relationships mainly refer to intangible assets acquired in a business combination, and are recognised
in the Financial Statements at their fair value at the purchase date, and amortised on the basis of their useful life.
TECHNOLOGY
The value of Technology refers mainly to product, process and product development technology acquired in a
business combination. It is recognised in the Financial Statements at fair value at the date of acquisition, and is
amortised on the basis of its useful life.
RESEARCH AND DEVELOPMENT COSTS
Research costs refer to product innovation, innovation in production processes and research into new materials.
These are expensed as they are incurred. There were no development costs that satisfied the requisites for
capitalisation as provided for by IAS 38.
OWNED TANGIBLE ASSETS
Property, plant and equipment are recognised at their purchase cost or production cost, including any directly
attributable incidental expenses.
Any costs incurred subsequent to the acquisition the assets, plus the cost of replacing any parts or portions of
the assets of this category, are capitalised only if they increase the future financial benefits inherent to the asset
to which they relate. All other costs are recognised in the Income Statement as they are incurred. When the cost
of replacing any parts or portions of the asset is capitalised, the residual value of the replaced parts is recognised
in the Income Statement.
Property, plant and equipment are recognised at cost, net of any accumulated depreciation, except for land
which is not depreciated but which is recognised at cost net of any accumulated impairment.
Depreciation is accounted for starting from the month in which the asset is available for use, or is potentially
capable of providing the financial benefits associated with it.
Depreciation is recognised on a monthly basis and on a straight-line basis at rates that allow for the depreciation
of assets until the end of their useful life or, in the case of disposals, until the last month of use.
Depreciation rates were as follows:
Buildings
Plants
Machinery
Equipment
Furniture
Motor vehicles
3% - 10%
7% - 20%
5% - 20%
10% - 33%
10% - 33%
10% - 25%
The Group annually revises the expected useful life of property, plant and equipment.
Government capital grants relative to property, plant and equipment are recorded as deferred revenue, and
accredited to the Income Statement for the duration of the depreciation period of the relevant assets.
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Pirelli Annual Report 2021 Improvements to third-party assets (leasehold improvements)
are classified under tangible assets, consistent with the
nature of the cost
incurred. The depreciation period
corresponds to whichever is shorter between the remaining
useful life of the tangible asset, and the remaining duration of
the lease contract.
Replacement parts of significant value are capitalised and
depreciated for the duration of the estimated useful life of
their respective assets.
Any decommissioning costs are estimated and added to the
cost of property, plant and equipment, as a counter entry to
the provisions for liabilities and charges, if the requirements
for setting up a provision for liabilities and charges are met.
They are then depreciated for the duration of the remaining
useful life of the respective asset.
Property, plant and equipment are derecognised from the
Statement of Financial Position at the time of their disposal or
their permanent retirement from use and, as a consequence,
no future financial benefits can be expected to be derived
from their disposal or use.
losses resulting from the
Any capital gains or capital
divestment or disposal of property, plant and equipment are
determined as the difference between the net proceeds from
disposal, and the carrying amount of the asset.
RIGHT OF USE
Starting on the date on which the assets which are the subject
of a lease contract become available for use by the Group, lease
contracts are accounted for as a right of use under non-current
assets with a counter entry under financial liabilities.
The cost of lease payments is separated into two components;
as a financial expense which is recognised in the Income
Statement for period of the duration of the contract, and as
the reimbursement of capital which is recorded as a reduction
of the financial liability. The right of use is depreciated on
a monthly basis at constant rates, for whichever period is
shorter, between the useful life of the asset and the duration
of the contract.
Right of use and financial liabilities is initially valuated at the
present value of future payments.
Future payments are discounted using the incremental
borrowing rate. This rate consists of the risk free rate of the
country in which the contract is negotiated and is based on
the duration of the contract. It is then adjusted according to
the Group’s credit spread and the local credit spread.
The right of use is valuated at cost, and composed of the
following elements:
→ initial amount of the financial liability;
→ payments made before the start of the contract net of the
leasing incentives received;
→ directly attributable incidental expenses;
→ estimated costs for decommissioning or restatement.
Lease payments associated with the following types of lease
contracts are recorded in the Income Statement on a linear
basis for the duration of the respective contracts:
→ contracts with a duration of less than twelve months for
all asset classes;
→ lease contracts for which the underlying asset
is
configured as a low-value asset, that is, the unit value of
the underlying assets is not greater than euro 8 thousand
when new;
→ contracts for which the payment for the right of use of the
underlying asset varies in accordance with any changes
in the facts or circumstances (not related to sales
performances), which are not foreseeable at the starting
date.
Low-value contracts are mainly relative to the following
categories of goods:
→ computers, telephones and tablets;
→ office and multi-function printers;
→ other electronic devices.
IMPAIRMENT OF ASSETS
PROPERTY, PLANT AND EQUIPMENT EXCLUDING RIGHT OF
USE Whenever there are specific indicators of impairment, at
least on an annual basis, intangible assets with an indefinite
useful life including goodwill, property, plant and equipment,
intangible assets and right of use, are subjected to an
impairment test.
The present value of financial liabilities for lease contracts
includes the following payments:
The test consists of an estimate of the recoverable amount
for the asset compared to its carrying amount.
→ fixed payments;
→ variable payments based on an index or rate;
→ the exercise price of a redemption option, in the event
that the exercise of the option is considered reasonably
certain;
→ the payment of penalties for the termination of the
contract, if the exercise of the option to terminate the
contract is considered reasonably certain;
→ optional payments subsequent to the non-cancellable
period, if the extension of the contract beyond the non-
cancellable period is considered reasonably certain.
The recoverable amount of an asset corresponds to the
higher amount between the fair value less the costs of sale,
and the value in use.
It is not necessary to estimate both amounts in order to verify
the absence of any impairment, as it is sufficient that one
of the two configured amounts is higher than the carrying
amount.
The value in use for property plant and equipment and
intangible assets, is the present value of the estimated future
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Consolidated Financial Statements cash flows originating from the use of the asset, plus those
deriving from its disposal at the end of its useful life, net of
taxes and the application of a discount rate, which reflects
the current market assessment of the time-value of money
and the risks specific to the asset.
For the right of use, the value in use is the present value of
the estimated future cash flows originating from the right of
use for period of the duration of the lease contract, and of the
outgoing right of use which is to be replaced in accordance
with the terms of the lease contract (for example, the cost of
purchasing an asset to replace the one that is leased).
If the recoverable amount of an asset is lower than the
carrying amount, the latter is reduced and adjusted to the
recoverable amount. This reduction in value constitutes an
impairment which is then recorded in the Income Statement.
In order to evaluate an impairment, assets are aggregated
at the lowest level at which their independent cash flows are
separately identifiable (cash generating units).
Specifically, for the purpose of the impairment test, the
allocation is made at Group level of CGU (Cash Generating
latter represents the
Unit), “Consumer Activities”. The
minimum level at which goodwill is monitored for internal
management control purposes.
indications that any
In the presence of
impairment
recognised in previous financial years for property, plant and
equipment or intangible assets other than goodwill or right
of use, may no longer exist or may have been reduced, the
recoverable amount for the activity is estimated again, and
if it results as higher than the net carrying amount, then the
net carrying amount is increased up to, but not exceeding,
the recoverable amount.
The restatement of a value must not exceed the carrying
amount that would have been determined (net of impairment,
depreciation or amortisation) had no
impairment been
detected in previous financial years.
The restatement of the value of an asset other than goodwill
is recognised in the Income Statement.
Any impairment which has been detected for goodwill cannot
be restated in subsequent financial years.
Any loss due to the impairment of any goodwill recorded in the
interim (half-yearly) Financial Statements cannot be restated
in the Income Statement in subsequent financial years.
INVESTMENTS IN ASSOCIATES AND JOINT VENTURES
Following the application of the equity method, in the
presence of the indication of an impairment, the value
of investments in associates and joint ventures must be
compared with the recoverable amount (the so-called
impairment test). The recoverable amount corresponds to
the higher amount between the fair value less the costs of
sale, and the value in use.
For the purposes of impairment testing, the fair value of
an investment in an associate or joint venture with shares
listed on an active market, is always equal to its market
value, irrespective of the percentage of ownership. In the
case of investments in unlisted companies, the fair value
is determined using estimates based on the best available
information.
The value in use of an associate or joint venture is determined
by estimating the future net operating cash flows discounted
from the associate’s or joint venture’s net financial position at
the measurement date (the so-called Discounted Cash Flow
– Asset side criteria).
When there is evidence that an impairment recognised in
previous financial years may no longer exist or may have
been reduced, the recoverable amount of the investment is
estimated again, and if it results as higher than the amount of
the investment, then the latter amount is increased up to and
not exceeding the recoverable amount.
The restatement of a value may not exceed the value of
the investment that would have been determined (net of
impairment) had no impairment been recognised in previous
financial years.
The restatement of the value of investments in associates
and joint ventures is recognised in the Income Statement.
OTHER FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER
COMPREHENSIVE INCOME (FVOCI)
The equity instruments for which the Group - at the time of
their initial detection - exercised the irrevocable option to
present the gains and losses deriving from the changes in
their fair value in equity (FVOCI), fall under this evaluation
category, as these are financial assets that do not belong to
the Group’s usual activity. They have been classified as non-
current assets under the item “Other financial assets at fair
value through other Comprehensive Income”.
They were initially recognised at fair value, including the
transaction costs directly attributable to the acquisition.
They were subsequently measured at their fair value, and any
gains and losses deriving from any changes in their fair value
were recognised in a specific equity reserve. These reserves
were not reversed to the Income Statement. In the event of
the disposal of the financial asset, the amount suspended in
equity is reclassified to retained earnings.
Dividends deriving
financial assets are
recognised in the Income Statement when the right to
collect is established.
these
from
OTHER FINANCIAL ASSETS AT FAIR VALUE THROUGH THE
INCOME STATEMENT (FVPL)
The items which fall under this evaluation category are:
→ equity instruments for which the Group - at the time of
their initial detection - did not exercise the irrevocable
option to present the gains and losses deriving from the
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Pirelli Annual Report 2021 changes in their fair value in equity. They are classified as
non-current assets under the item “Other financial assets
at Fair Value through the Income Statement”;
→ debt instruments for which the Group’s business model
for asset management provides that the sale of the debt
instruments and the cash flows associated with the
financial asset, represent the payment of the outstanding
capital. They are classified as current assets under item
“Other financial assets at Fair Value through the Income
Statement”;
→ derivative
instruments, with the exception of those
designated as hedging instruments.
These are initially recognised at fair value. Transaction costs
directly attributable to their acquisition are recognised in the
Income Statement.
They are subsequently measured at fair value, and any gains
or losses deriving from any changes in their fair value are
recognised in the Income Statement.
INVENTORIES
Inventories are valued either at cost or their estimated
realisable value, whichever is lower.
Costs are determined as follows:
→ Raw materials: the purchase cost is calculated using the
FIFO method;
→ Finished and semi-finished goods: the direct costs of
materials and labour and indirect costs.
The cost of inventories includes the transfer, from other
Comprehensive Income, of income and losses derived from
qualified cash flow hedging transactions related to the
purchase of raw materials, typically natural rubber.
The cost is increased by incremental expenses similarly to
that described with respect to property, plant and equipment.
Their realisable value is the estimated selling price, net of all
costs estimated for the completion of the asset including any
sales and distribution costs that will be incurred.
The impairment provisions for obsolete and low rotation
inventories are calculated by taking their estimated future
use and their realisable value into account.
RECEIVABLES
Receivables are initially recorded at their fair value, which
normally corresponds to the agreed consideration or to the
present value of the amount that will be collected. They are
subsequently measured at amortised cost, which is reduced
in the case of impairment. Amortised cost is calculated by
using the effective interest rate method, which is equivalent
to the discount rate which, when applied to future cash flows,
renders the present value of such cash flows equal to the
initial fair value. Receivables in currencies other than the
functional currency of the individual companies are adjusted
to the year-end exchange rates with a counter entry in the
Income Statement. Receivables are de-recognised when
the right to receive cash flows is extinguished, when all the
risks and rewards connected with holding the receivable have
essentially been transferred, or in cases when the receivable
is considered definitively irrecoverable after all the necessary
recovery procedures have been completed. At the same time
that the receivable is de-recognised, the relative provision is
also reversed, if the receivable had previously been impaired.
IMPAIRMENT OF RECEIVABLES
For trade receivables, the Group applies a simplified approach,
by calculating the expected losses over the life of receivables
from the moment of initial recognition. The Group uses a matrix
based on historical experience, linked to the ageing of the
receivables themselves and the credit rating of the customers,
adjusted to take into account forecast factors specific to
certain creditors. Trade receivables are grouped on the basis
of similar risk characteristics. This grouping is based on the
original credit maturity date and on the customer’s credit
rating, as attributed by independent market assessors. For
financial receivables, the calculation of the impairment is made
with reference to expected losses for the next twelve months.
These calculations are based on a matrix which includes
the credit ratings of customers provided by independent
assessors. In the event of any significant increase in credit risk
subsequent to the original date of the receivable, the expected
loss is calculated for the entire life of the receivable. The
Group assumes that the credit risk of a financial instrument
has not increased significantly after its initial recognition, if it is
determined that the financial instrument has a low credit risk
at the reporting date of the financial statements. The Group
assesses whether there has been a significant increase in
credit risk when the customer’s credit rating, as attributed by
independent assessors, undergoes a change that shows an
increase in the probability of default. The Group considers
that a financial asset is in default when internal or external
information indicates that it is improbable that the Group will
receive the full expired contractual amount (for example, when
receivables have been referred to the legal department).
PAYABLES
Payables are initially recorded at their fair value, which
normally corresponds to the agreed consideration or to
the present value of the amount that will be paid. They are
subsequently valued at the amortised cost. Amortised cost
is calculated by using the effective interest rate method,
which is equivalent to the discount rate which, when applied
to future cash flows, renders the present value of such cash
flows equal to the initial fair value. Payables in currencies other
than the functional currency of the individual companies are
adjusted to the year-end exchange rates with a counter entry
in the Income Statement. Payables are de-recognised from
Financial Statements when the specific contractual obligation
is extinguished. In the event of a change in a financial liability
that does not entail its derecognition, the gain or loss resulting
from the change is calculated by discounting the change in
the contractual cash flows using the original effective interest
rate, and is immediately recognised in the Income Statement.
The fair value of the debt component of a convertible bond
is equal to the fair value of a liability issued on substantially
equivalent market terms, without the right of conversion.
This component is subsequently measured at the amortised
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Consolidated Financial Statements cost until extinguished, at the time of conversion or until the
maturity of the bonds. The residual portion is recognised, up
to the amount collected, as a component of equity. Issuance
costs are allocated proportionally to the debt component and
equity component.
The provision for employees’ leaving indemnities (TFR) for
Italian companies with at least 50 employees, is considered
a defined benefit plan only for the portions matured prior to
January 1, 2007 (and not yet paid at the reporting date), while
after that date it qualifies as a defined contribution plan.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include bank deposits, postal
deposits, cash and cash equivalents on hand, and other
forms of short-term investment whose original maturity is
three months or less and which are readily convertible into a
given amount of money and subject to an insignificant risk of
change in value.
Bank overdrafts are classified under financial payables as
current liabilities.
The amounts included in cash and cash equivalents are
measured at their fair value and any relative changes are
recognised in the Income Statement.
For the purposes of the presentation in the Consolidated
Cash Flow Statement and cash equivalents are represented
by cash and cash equivalents as defined above, net of bank
overdrafts.
POTENTIAL ASSETS
Any potential assets, which arise as a result of past events and
whose generation is linked to the occurrence or otherwise
of unpredictable future events, are not recognised in the
Financial Statements, unless the realisation of revenue is
virtually certain.
PROVISIONS FOR LIABILITIES AND CHARGES
Provisions for liabilities and charges include accruals for
current obligations (legal or implicit) deriving from a past
event, the fulfilment of which will likely require the necessary
use of resources, and whose amounts can be estimated in
a reliable manner. Changes in estimates are recognised in
the Income Statement for the financial year in which the
change occurs. If the effect of discounting is significant,
provisions are stated at their present value. A provision for
restructuring is recognised only if, in addition to meeting the
requisite conditions for provisions for liabilities and charges,
there exists a detailed formal restructuring plan so that any
concerned third parties can maintain a valid expectation that
the restructuring will take place.
EMPLOYEE BENEFITS
Employee benefits paid after the termination of the
employment relationship under defined benefit plans and
other long-term benefits are subject to actuarial evaluations.
The liability recognised in the Financial Statements is the
present value of the Group’s obligation, net of the fair value
of any plan assets. For defined benefit plans, the actuarial
gains and
losses deriving from adjustments based on
past experience and from any changes in the actuarial
assumptions are fully recognised in equity for the financial
year in which they occur. For other long-term benefits, the
actuarial gains and losses are immediately recognised in the
Income Statement.
The net interest calculated on net liabilities is classified under
financial expenses.
Costs relative to defined contribution plans are recognised in
the Income Statement as they are incurred.
In the event that the plan assets of defined benefits outweigh
the liabilities, the asset is recognised to the extent that
the financial benefit in the form of a reimbursement or a
reduction in future contributions, and is available to the
Group in accordance with the regulations of the plan itself,
and pursuant to the provisions in force in the jurisdiction in
which the plan operates.
In the case of the purchase of qualifying insurance policies
through the use of plan assets, any additional contributions
requested by the insurance company are recognised in equity.
Insurance policies are recognised in the financial statements
as plan assets and are evaluated on the same basis as the
liabilities to which they refer.
INSTRUMENTS DESIGNATED AS
DERIVATIVE FINANCIAL
HEDGING INSTRUMENTS
In accordance with the provisions of IFRS 9, derivative
financial instruments are accounted for in accordance with
the methods established for hedge accounting only when:
→ the hedged items and the hedging instruments meet the
eligibility requirements;
→ at the beginning of the hedging relationship, there is the
formal designation and documentation of the hedging
relationship of the Group’s objectives for the management
of risk, and of the strategy for implementing the hedge cover;
→ the hedging relationship meets all the following efficiency
requirements:
→ there is a financial relationship between the hedged
item and the hedging instrument;
→ the effect of credit risk is not dominant compared to
any changes associated with the hedged risk;
→ the hedge ratio defined in the hedging relationship is
respected, also by way of rebalancing measures, and is
coherent with the risk management strategy adopted
by the Group.
These derivative instruments are measured at fair value.
The following accounting treatments are applied on the basis
of the type of coverage:
→ Fair value hedge – if a derivative financial instrument is
designated as a hedge against exposure to any changes
in the fair value of an asset or liability attributable to a
specific risk, the gain or loss deriving from any subsequent
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Pirelli Annual Report 2021 changes in the fair value of the hedging instrument is
recognised in the Income Statement. For the portion
attributable to the hedged risk, the gain or loss on the
hedged item modifies the carrying amount of that asset
or liability (basis adjustment), and it too is recognised in
the Income Statement;
→ Cash flow hedge – if a derivative instrument is designated
as a hedge against exposure to the variability in the
cash flows of an asset or liability recognised in the
Financial Statements, or against a highly probable future
transaction, the effective portion of the change in the fair
value of the hedging instrument is recognised directly
in equity, while the ineffective portion is immediately
recognised
Income Statement. The amounts
recognised directly in equity are reclassified to the Income
Statement for the financial year in which the hedged item
produced an effect on the Income Statement. If the hedge
of a highly probable future transaction subsequently
entails the recognition of a non-financial asset or liability,
the amounts that are suspended in equity are included in
the initial value of the non-financial asset or liability.
in the
When future transactions are hedged through forward
contracts, the Group may designate to hedge accounting;
→ the full fair value (including forward points): the effective
portion of the changes in fair value of the entire derivative
instrument is recognised in equity (cash flow hedge reserve);
→ the single spot component (excluding forward points): the
effective portion of the changes in fair value relative to
the single spot component, is recognised in equity under
the cash flow hedge reserve, while the change in forward
points for the hedged item is recorded under the cost of
hedging reserve, always in equity.
When a hedging instrument matures or is sold, terminated
early, exercised, or no longer meets the conditions to
is
be designated as a hedge, then hedge accounting
discontinued. The fair value adjustments accumulated in
equity (either in the cash flow hedge reserve or in the cost
of hedging reserve) remain suspended in equity until the
hedged item manifests its effects in the Income Statement.
Subsequently they are reclassified to the Income Statement
for the financial years during which the acquired financial
asset or the assumed financial liability manifests an impact
on the Income Statement. When the hedged item is no longer
expected to have any impact on the Income Statement, the
fair value adjustments accumulated in equity (both in the
cash flow hedge reserve and in the cost of hedging reserve)
are immediately recognised in the Income Statement. For the
derivative instruments that do not satisfy the prerequisites
provided for by IFRS 9 for the adoption of hedge accounting,
reference should be made to the section “Financial assets at
fair value through the Income Statement”. The acquisitions
and sales of derivative financial instruments are recorded at
the settlement date.
DETERMINATION OF THE FAIR VALUE OF
FINANCIAL INSTRUMENTS
The fair value of financial instruments listed on an active
share market is based on market prices at the reporting date.
The market price used for financial assets is the bid price,
while for financial liabilities it is the ask price. The fair value
of instruments not listed on an active market is determined
by using evaluation techniques based on a series of methods
and assumptions which are tied to market conditions at
the reporting date. The fair value of interest rate swaps is
calculated by discounting estimated future cash flows based
on observable yield curves. The fair value of forward foreign
exchange contracts is determined by using the forward
exchange rate at the reporting date. The fair value of the cross
currency interest rate swaps is calculated by discounting the
estimated future cash flows based on observable yield curves
and converting them into euro using the exchange rate at the
reporting date of the Financial Statements. The fair value
of natural rubber futures is determined by using the closing
price of the contract at the reporting date of the Financial
Statements.
TAXES
Current taxes are determined on the basis of a realistic
forecast of the tax expenses payable in accordance with the
applicable tax regulations of the country.
The Group periodically evaluates the choices it has made
when determining taxes with reference to situations where
the tax legislation in force lends itself to interpretation,
and if deemed appropriate, adjusts its exposure to the tax
authorities on the basis of the taxes it expects to pay. Any
interest and penalties accrued on these taxes are recognised
under Income tax in the Income Statement.
Deferred taxes are calculated according to the temporary
differences which exist between the asset and liability
amounts in the Financial Statements and their tax value
(global allocation method), and are classified under non-
current assets and liabilities.
Deferred tax assets on tax losses carried forward, as well as
on temporary differences, are only recognised when there is
a likelihood of future recovery.
Current and deferred tax assets and liabilities are offset
when income taxes are applied by the same tax authority and
when there is a legal right to offset. Deferred tax assets and
liabilities are determined at the tax rates that are expected to
be applicable to taxable income in the respective jurisdictions
of the countries in which the Group operates, for the financial
years during which the temporary differences will arise or be
extinguished.
With regard to temporary taxable differences associated with
investments in subsidiaries, associates and joint ventures, the
relative deferred tax liabilities are not recognised in cases
where the investing entity is able to control the reversal of the
temporary differences and it is likely that it will not occur in
the foreseeable future.
Deferred taxes are not discounted.
Deferred tax assets and liabilities are credited or debited to
equity if they refer to items that have been credited or debited
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Consolidated Financial Statements directly in equity during the financial year or during previous
financial years.
EQUITY
TREASURY SHARES Treasury shares are classified as a
reduction in equity.
If they are sold, reissued or cancelled, the resulting earnings
or losses are recognised in equity.
COSTS OF CAPITAL TRANSACTIONS Costs that are directly
attributable to the capital transactions of the Parent Company
are accounted for as a reduction in equity.
SHARE BASED PAYMENTS (CASH SETTLED)
The additional cash settled benefits granted to some Group
executives are recognised under Provisions for employee
benefit obligations with a counter entry under “Personnel
expenses”. This cost is estimated to be equal to the fair value
and is recognised for the duration of the plan in accordance
with the vesting conditions at the reporting date. The estimate
is revised at each reporting date up until the settlement date.
RECOGNITION OF REVENUES
Revenues are recognised for an amount that reflects the
consideration to which the Group believes it is entitled to
in exchange for the transfer of goods and/or services to
its customers. The variable considerations that the Group
deems necessary as payable to direct or indirect customers
are recognised as a reduction to revenues.
The Group generally acts as the principal for most of the
agreements that generate revenues. However, there are
contracts with customers in which the Group acts as an agent
and these revenues are recognised net of costs incurred
under the commercial agreements.
PRODUCT SALES Revenues from product sales are recognised
when the performance obligations towards customers have
been satisfied. A performance obligation is deemed to have
been met when the control of goods has been transferred to
the customer, that is, generally when the goods are delivered
to the customer.
If the products are ready to be delivered, but delivery is
postponed to a future date, sales revenues are recognised
only if control of the products has been transferred to the
customer. Control is considered to have been transferred to
the customer when the following conditions have been met:
→ the reasons for delivering at a future date are real (for
example: the customer has requested delivery at a future
date in writing);
→ the products in the warehouse are separately identified as
being owned by the customer;
→ the products are ready to be physically delivered to the
customer;
→ the Group does not have the possibility to use the product
or to deliver it to other customers.
Retrospective discounts are applied to product sales based
on the achievement of the objectives defined within the
framework of commercial agreements. Revenues from
sales are recognised net of these discounts, and estimated
on the basis of historical experience with the expected
valuation method and for amounts which are not expected
to be reversed.
Sales do not include a financial component, in that the
average terms of payment applied to customers fall within
the standard commercial terms for the country in which the
sales occur.
PROVISION OF SERVICES Revenues
from services are
recognised when the rendered service has been completed,
or based on the stage of completion of the service, at the
reporting date.
FINANCIAL INCOME AND EXPENSES
Financial income and expenses are recognised on an
accrual basis.
ROYALTIES
Royalties are recognised over time on an accrual basis,
according to the provisions of the relevant agreement, which
provides for the transfer to the customer of the rights of access
to intellectual property. The amounts for royalties are estimated
using the output method. Royalties invoiced for each period
directly correlate with the value transferred to the customer.
DIVIDENDS
Dividends are recognised when the right to collect
is
established, which normally corresponds to a resolution
approved by the Shareholders for the distribution of dividends.
EARNINGS/(LOSSES) PER SHARE
Earnings/(losses) per ordinary share - basic: basic
earnings/(losses) per share are calculated by dividing the
earnings/(losses) attributable to the Group by the weighted
average number of ordinary shares outstanding during the
financial year excluding treasury shares.
Earnings/(losses) per share - diluted: diluted earnings
per share are calculated by dividing the earnings/(losses)
attributable to the Group by the weighted average number
of ordinary shares outstanding during the financial year,
excluding treasury shares. For the purposes of calculating
the diluted earnings/(losses) per share, the weighted average
number of outstanding shares is adjusted by assuming the
exercise of all the rights of the assignees for the financial
year, which could potentially have a dilutive effect, while the
Group’s net income/(loss) is adjusted to take into account
any effects, net of taxes, of the exercise of these rights.
OPERATING SEGMENTS
An operating segment is one part of the Group that engages
in business activities from which it may earn revenues and
incur costs, and whose operating results are periodically
reviewed by the Chief Executive Officer, in his role as Chief
Operating Decision Maker (CODM), for the purposes of
taking decisions on the resources to be allocated to the sector,
302
Pirelli Annual Report 2021 and the evaluation of results, for which financial information
is made available.
The business carried out by the Group is identifiable as a
single operating “Consumer Activities” sector.
FOREIGN CURRENCY TRANSACTIONS
Foreign currency transactions are recorded at the prevailing
exchange rates on the date of the transaction. Monetary
assets and liabilities in foreign currencies are translated at
the prevailing exchange rates at the reporting date. Exchange
rate differences arising from the extinguishment or extinction
of monetary items or their translation at rates other than those
of their initial recognition at the beginning of the financial
year, or different to those at the end of the previous financial,
are recognised in the Income Statement.
Whenever the conditions for the designation of
inter-
company monetary items such as “Net Investment in Foreign
Operations” are met, the differences in exchange rate as of
the date of the designation are recognised directly in the
Consolidated Statement of Comprehensive Income.
ACCOUNTING STANDARDS FOR
HYPERINFLATIONARY COUNTRIES
Companies, operating in countries where the cumulative
inflation rate over a three-year period approximates or
exceeds 100%, adopt inflation accounting and discontinue it
in the event that the cumulative inflation rate over a three-
year period falls below 100%.
Group companies operating
in hyperinflation countries
recalculate the values for the non-monetary assets and
individual Financial
liabilities present
Statements in order to eliminate the distorting effects caused
by the loss of purchasing power of the currency.
in their original
The inflation rate used to implement inflation accounting
corresponds to the consumer price index, with a balancing
entry in Financial income and expenses.
Gains or losses on the net monetary position are recognised
in the Income Statement.
The financial statements of companies prepared in currencies
other than the euro which operate in hyperinflation countries,
are translated into euro by applying the period-end exchange
rates to the items of both the Statement of Financial Position
and the Income Statement.
During the course of the third quarter of 2018, the inflation rate
accumulated over the previous three year period in Argentina
exceeded 100%. This, together with other characteristics of
the country’s economy, led the Group to adopt, as of July 1,
2018, the accounting standard IAS 29 - Financial Reporting in
Hyperinflationary Economies, for the Argentinian subsidiary
Pirelli Neumaticos S.A.I.C.
ENVIRONMENTAL CERTIFICATES
In some European countries, the Group receives greenhouse
gas emission allowances free of charge, as provided for by
the European Emission Trading Schemes. These rights are
received on an annual basis and must be surrendered to the
relevant national authority based on actual emissions.
If the rights received for free are not sufficient to cover actual
emissions, the Group purchases the missing rights.
The rights received either for free or purchased are
recognised at cost.
Costs related to greenhouse gas emissions are recognised
on an accrual basis, in proportion to the emissions produced
during the financial year and are recognised under other
costs.
is recognised for the obligation to deliver
A provision
allowances in an amount equal to the actual emissions. These
rights reduce the provision when they are used to meet the
Group’s obligations to deliver these rights to the competent
authority.
The Group also purchases renewable energy certificates
(for example, Guarantees of Origin - GO, Renewable
Energy Certificates - REC, International Renewable Energy
Certificates - IREC, Renewable Energy Guarantee of Origin
- REGO), which are instruments that certify the renewable
origin of the energy sources used. The cost of purchasing
these certificates is recognised in other expenses.
3.1. APPROVED ACCOUNTING STANDARDS
AND INTERPRETATIONS IN FORCE AS OF JANUARY 1, 2021
IAS 8 - Accounting Policies, Changes
Pursuant to
in
Accounting Estimates and Errors, the IFRS standards that
came into force as of January 1, 2021 were as follows:
→ Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
(Benchmark interest rate reform - IBOR reform - phase 2).
These amendments introduce a temporary relaxation of
the manner in which the impact of replacing an interest
rate offered on the interbank market (IBOR) with an
alternative risk-free rate must be managed. Specifically,
the amendments provide for the following practical
approaches:
→ treating contractual changes or changes in cash flows
which are directly required by the reform as changes in
a variable market interest rate;
→ the introduction of certain exemptions relative to the
termination of hedging relationships;
→ the temporary exemption from the requirement to
separately identify a risk component (where that
separate hedged component is an alternative interest
rate);
→ the
introduction of some additional disclosures
regarding the impacts of the reform.
These changes do not impact on the Group’s Financial
Statements in that the maturity of the potentially impacted
instruments is scheduled to occur prior to the transition to
the new IBOR.
303
Consolidated Financial Statements → Amendment to IFRS 16 Leases - COVID-19 Related Rent
Concessions
These amendments extend by one year the possibility of
applying an optional accounting treatment for lessees in the
presence of reductions in permanent lease payments (rent
holidays) or temporary lease payments linked to COVID-19.
The amendments were intended to be applicable until June
30, 2021, but because the impact of the pandemic continues,
this option has been extended until June 30, 2022.
in the
Lessees can choose to account for reductions as variable
lease payments, recognised directly
Income
Statement for the period in which the reduction applies,
or treat them as an amendment to the lease, with the
consequent obligation to re-measure the lease liability
based on the revised consideration using a revised
discount rate. The Group expects to apply this optional
accounting treatment if it occurs within the permitted
period of application. There were no impacts on the
Group’s Financial Statements.
3.2. INTERNATIONAL ACCOUNTING STANDARDS AND/OR
INTERPRETATIONS ISSUED BUT NOT YET IN FORCE IN 2021
Pursuant to IAS 8 – Accounting Policies, Changes
in
Accounting Estimates and Errors - the new standards and
interpretations that were issued but had not yet come into
force, or had not yet been approved by the European Union at
December 31, 2021, and which were therefore not applicable,
along with any expected
impacts on the Consolidated
Financial Statements, were as follows:
None of these standards and interpretations were adopted in
advance by the Group.
→ Amendments to IAS 1 - Presentation of Financial Statements
- Classification of Liabilities as Current or Non-current
The amendments clarify the criteria to be applied in
liabilities as current or non-current and
classifying
specify that the classification of a liability is not affected
by the probability that settlement of the liability will be
delayed for 12 months following the financial year in
which it is incurred. The Group’s intention to liquidate
in the short-term had no impact on their classification.
These amendments, whose entry into force has been
scheduled on January 1, 2023, have not yet been
approved by the European Union. No impacts on the
classification of financial liabilities are expected as a
result of these amendments.
→ Amendments to IAS 37 - Provisions, Contingent Liabilities
and Contingent Assets - Onerous Contracts - Cost of
Fulfilling a Contract
These amendments specify that the costs to be taken
into account when measuring onerous contracts are
both the incremental costs of fulfilling the contract (for
example, direct labour and materials) and a proportion
of other costs that relate directly to fulfilling the contract
(for example, an allocation of the depreciation rate of the
assets used in fulfilling the contract).
These amendments, approved by the European Union,
came into force on January 1, 2022. No impacts on the
Group’s financial statements are expected as a result of
these amendments.
→ Annual Improvements (2018 - 2020 cycle) issued in
May 2020
These amendments are limited to some standards (IFRS
1 - First time adoption of the International Financial
Reporting Standards, IFRS 9 - Financial instruments, IAS
41 – Agriculture, and explanatory examples of IFRS 16 -
Leases) which clarify the wording or correct omissions or
conflicts between the requirements of the IFRS standards.
These amendments, approved by the European Union,
came into force on January 1, 2022. No impacts on the
Group’s financial statements are expected as a result of
these amendments.
→ Amendments to
IAS 1 - Presentation of Financial
Statements, and IFRS Practice Statement 2: Disclosure
on Accounting Standards
These amendments provide guidance on the application
of materiality
to accounting standard
disclosures in a way that is more useful; particularly:
judgements
→ the requirement to disclose “significant” accounting
standards has been replaced with a requirement to
disclose “relevant” accounting standards;
→ guidance has been added on how to apply the concept
of materiality to accounting standard disclosures.
In assessing the relevance of accounting standard
disclosures, entities must consider both the size of
transactions, other events or conditions and their nature.
These amendments, which will come into force on
January 1, 2023, have not yet been approved by the
European Union. No impacts on the disclosures in the
Group’s Financial Statements are expected as a result of
these amendments.
→ Amendments to IAS 16 – Property, Plant and Equipment -
→ Amendments to IAS 8 – Accounting Policies, Changes in
Proceeds before Intended Use
These amendments prohibit the deduction of amounts
received from the sale of products from the cost of
property, plant and equipment, while the asset is being
prepared for its intended use. Revenues from sales
of products and the relative production cost must be
recognised in the Income Statement.
These amendments, approved by the European Union,
came into force on January 1, 2022. No impacts on the
Group’s financial statements are expected as a result of
these amendments.
Accounting Estimates and Errors
These amendments
introduce a new definition of
“accounting estimates”, by distinguishing them more
clearly from accounting policies, and provide guidance
on whether changes should be treated as changes in
estimates, changes in accounting standards or errors.
These amendments, which will come into force on January
1, 2023, have not yet been approved by the European
Union. No impacts on the Group’s Financial Statements
are expected as a result of these amendments.
304
Pirelli Annual Report 2021 → Amendments to IAS 12 - Income Taxes Deferred Tax related
to Assets and Liabilities arising from a Single Transaction
These amendments eliminate the possibility of not
recognising deferred taxes at the time of the initial
recognition of transactions that give rise to taxable and
deductible temporary differences (e.g. lease contracts).
With respect to lease contracts, these amendments also
clarify that, when lease payments are deductible for tax
purposes, it is a matter of judgement (after considering the
applicable tax law) whether such deductions are attributable
for tax purposes to the lease liability recognised in the
Financial Statements, or to the related right of use. If the tax
deductions are allocated to the right of use, the tax values of
the right of use and the lease liability are the same as their
carrying amounts, and no temporary differences arise at
initial recognition. However, if tax deductions are allocated
to the lease liability, the tax values of the right of use and the
lease liability are zero, giving rise to taxable and deductible
temporary differences, respectively. Even
if the gross
temporary differences are equal, a deferred tax liability and
a deferred tax asset must nevertheless be recognised.
These amendments, which will come into force on January
1, 2023, have not yet been approved by the European
Union. The impact on the Group’s Financial Statements as
a result of these amendments is currently being analysed.
4. FINANCIAL RISK MANAGEMENT POLICIES
The Group is exposed to financial risks which are principally
associated with foreign exchange rates trends, with fluctuations
in interest rates, with the price of financial assets held in
portfolio, with the ability of Pirelli’s customers to meet their
obligations to the Group (credit risk), and with the procurement
of financial resources on the market (liquidity risk).
is an
Financial risk management
integral part of the
Group’s business management, and is performed centrally
in accordance with the guidelines issued by the Finance
Department as part of the risk management strategies
which are more defined on a more general level by the
Managerial Risk Committee.
4.1. TYPES OF FINANCIAL RISKS
EXCHANGE RATE RISK
The geographical distribution of Group production and
commercial activities entails exposure to exchange rate risks
such as transaction risk and translation risk.
A) TRANSACTIONAL EXCHANGE RATE RISK This risk
is
generated by the commercial and financial transactions of the
individual companies which are executed in currencies other
than the functional currency of the Company. Fluctuations in
the exchange rate between the time when the commercial
or financial relationship is established and the time when
the transaction is completed (collection or payment) may
generate exchange rate gains or losses.
The Group aims to minimise the impact of transaction
risks tied to exchange rate volatility. In order to achieve this
objective, the Group’s procedures provide that the Operating
Units are responsible for the collection of all information
inherent to positions subject to transaction risk, whose
hedging is then provided in the form of forward contracts
which are entered into with the Group Treasury.
The positions subject to managed exchange rate risk are
mainly represented by receivables and payables in foreign
currencies.
The Group Treasury is responsible for hedging the resulting
net position for each currency and, in accordance with the
established guidelines and predetermined restrictions, it in
turn closes all risk positions by trading derivative hedging
contracts on the market, which typically take the form of
forward contracts.
For such contracts, the Group did not consider it necessary
to avail itself of the option for hedge accounting as provided
for by IFRS 9, in that the representation of the impacts on the
Income Statement and the Statement of Financial Position
of a hedging strategy for transaction risk is nevertheless
substantially guaranteed even without the Group availing
itself of the aforementioned option.
loans denominated
With reference to some
in foreign
currencies, the Group has entered into derivative contracts
(cross currency interest rate swaps) in order to hedge not
only interest rate risk, but also transactional exchange rate
risk for which hedge accounting has been activated pursuant
to the requirements of IFRS 9.
Of note is that, as part of the annual and three-year planning
process, the Group formulates exchange rate forecasts for
these time horizons based on the best information available
on the market. Fluctuations in the exchange rate between
the time when the forecast is made and the time when the
commercial or financial transaction occurs represents the
transaction risk for future transactions.
From time to time the Group evaluates the opportunity to carry
out hedging transactions on future transactions for which it
typically makes use of either forward buy or sell operations,
or optional operations such as risk reversal (for example; zero
cost collars). Hedge accounting, as provided for by IFRS 9, is
activated if and when the requirements are met.
The impacts on the Group’s equity and Income Statement,
deriving from changes in the exchange rates calculated on
outstanding hedging instruments at December 31, 2021, are
described in Note 27 - “Derivative Financial Instruments”.
B) TRANSLATION RISK The Group owns controlling interests
in companies that prepare their Financial Statements in
currencies other than the euro, which is the currency used to
prepare the Consolidated Financial Statements. This exposes
the Group to currency translation risk, which is generated
by the conversion into euro of the assets and liabilities of
these subsidiaries. The main exposures to translation risk
are constantly monitored, however it is not currently deemed
necessary to adopt specific policies to hedge this exposure.
305
Consolidated Financial Statements At December 31, 2021 approximately 36.3% of the total consolidated equity was expressed in euro (36.3% at
December 31, 2020). The most significant currencies for the Group other than the euro were the Brazilian real
(8.5%; 9.8% at December 31, 2020), the Turkish lira (0.4%; 0.4%; at December 31, 2020), the Chinese renminbi
(17.7%, 15.2% at December 31, 2020), the Romanian leu (12.5%; 14.7% at December 31, 2020), the British pound
sterling (4.0%, 3.8% at December 31, 2020), the US dollar (4.4%; 4.2% at December 31, 2020) the Mexican peso
(10.1%, 10.4% at December 31, 2020), and the Russian rouble (2.2%; 1.8% at December 31, 2020).
The effects on consolidated equity which derive from a hypothetical appreciation / depreciation of the above
listed credit notes the euro - all other conditions being equal were as follows:
Brazilian Real
Turkish Lira
Chinese Renmimbi
Romanian Leu
Russian Rouble
(in thousands of euro)
Appreciation of 10%
Depreciation of 10%
12/31/2021
12/31/2020
12/31/2021
12/31/2020
47,609
49,534
(38,953)
(40,528)
2,013
98,871
70,086
12,061
2,073
(1,647)
(1,696)
76,782
(80,894)
(62,822)
74,158
(57,343)
(60,675)
9,337
(9,868)
(7,640)
British Pound Sterling
22,528
19,402
(18,432)
(15,875)
Argentinian Peso
US Dollar
Mexican Peso
13,767
24,675
56,501
8,874
(11,264)
(7,260)
21,081
(20,189)
(17,248)
52,697
(46,228)
(43,116)
Total on consolidated equity
348,111
313,938
(284,818)
(256,860)
It should be noted that, during the course of 2021, the Turkish lira and the Argentinian peso suffered a depreciation
of more than -10%. For information on the effect on equity, reference should be made to Note 20 – “Equity”.
INTEREST RATE RISK
Interest rate risk is represented by the exposure to variability in the fair value or the future cash flows of financial
assets or liabilities, due to changes in market interest rates. The Group evaluates, based on market conditions,
whether to enter into derivative contracts, in order to hedge interest rate risk, for which hedge accounting is
activated when the conditions as provided for by IFRS 9 are met.
The table below shows the effects on the net income/(loss) resulting from an increase or decrease of 0.50% in
the level of interest rates of all currencies to which the Group is exposed – all other conditions being equal:
(in thousands of euro)
+0.50%
-0.50%
12/31/2021
12/31/2020
12/31/2021
12/31/2020
Impact on Net income/(loss)
(5,986)
(7,332)
5,986
7,332
The effects on the Group’s equity resulting from changes in the LIBOR and EURIBOR rates, calculated on the
hedging instruments for interest rates which are outstanding at December 31, 2021, are described in Note 27 -
“Derivative Financial Instruments”.
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Pirelli Annual Report 2021
PRICE RISK ASSOCIATED WITH FINANCIAL ASSETS
The Group’s exposure to price risk is limited to the volatility
of financial assets such as listed and unlisted equities
and bonds, which constituted approximately 1.23% of the
total consolidated assets at December 31, 2021 (0.74% at
December 31, 2020. These assets were classified as other
financial assets at fair value through other Comprehensive
Income, and other financial assets at fair value through the
Income Statement.
No derivatives were put in place to limit the volatility risk for
these assets.
These financial assets are subdivided as follows:
→ assets whose fair value is recognised through other
Comprehensive Income is represented by listed equity
securities which amounted to euro 21,855 thousand
(euro 14,076 thousand at December 31, 2020) and those
represented by securities indirectly associated with listed
equity securities (Fin. Priv. S.r.l.) amounted to euro 21,171
thousand (euro 15,902 thousand at December 31, 2020);
→ assets whose fair value is recognised through the Income
Statement amounted to euro 85,912 thousand and are
represented by Argentinian dollar-linked bonds (euro
34,571 thousand at December 31, 2020).
Financial assets at fair value through other Comprehensive
Income constituted 25.2% of the total financial assets subject
to price risk (29.5% at December 31, 2020). A positive change
of +5% in the prices of the aforesaid listed securities, all other
conditions being equal, would result in a positive change to
the Group’s equity of euro 1,093 thousand (a positive change
of euro 704 thousand at December 31, 2020) while a negative
change of -5% in the prices of the aforesaid listed equities,
all other conditions being equal, would result in a negative
change to the Group’s equity of euro 1,093 thousand (a
negative change of euro 704 thousand to the Group’s equity
at December 31, 2020).
Financial assets at fair value through the Income Statement
constituted 50.3% of the total financial assets subject to
price risk (34% at December 31, 2020). A change positive of
+5% in the prices of the aforesaid listed securities, all other
conditions being equal, would result in a positive change to
the Group’s net income of euro 4,041 thousand (euro 1,706
thousand at December 31, 2020), while a negative change
of -5% in the prices of the aforesaid listed equities, all other
conditions being equal, would result in a negative change to
the Group’s net income of euro 3,882 thousand (euro 1,668
thousand at December 31, 2020).
CREDIT RISK
Credit risk represents the Group’s exposure to potential
losses resulting from the non-fulfilment of the commercial
and financial obligations undertaken by counterparties. As
regards these commercial counterparties, in order to limit
this risk, Pirelli has put in place procedures to assess the
potential and financial creditworthiness of customers, to
monitor expected cash flows, and to take any recovery action.
The aim of these procedures is to define customer credit
limits, whereby in the event that those limits are exceeded,
the rule to withhold further supplies is activated. In some
cases customers are asked to provide guarantees, mainly
bank guarantees issued by parties of the highest credit or
personal standing. Less frequently, mortgage guarantees
may be requested.
instruments used
for commercial credit
risk
Other
management is the taking out of insurance policies. A master
agreement has been in place for more than 10 years with a
leading insurance company with an AA credit rating according
to Standard & Poor’s ratings, which was recently renewed
for the 2021-2022 two-year period, for worldwide coverage
for credit risk mainly relative to sales on the Replacement
channel (the coverage ratio at December 31, 2021 exceeded
70%).
However, as regards the financial counterparties for the
management of its temporary cash surpluses, or for trading
in derivative instruments, the Group deals only with entities
of the highest credit standing. Pirelli does not hold public
debt instruments from any European country, and constantly
monitors its net credit exposure to the banking system, and
does not have any significant concentrations of credit risk.
Expected
losses on trade receivables are calculated
throughout the life of the receivables, starting from the
moment of initial recognition, using a matrix linked to the
customer’s credit rating and credit ageing which is adjusted
to take into account forecasting factors specific to certain
creditors as well as the presence of any collateral and other
credit enhancement instruments, such as the insurance
policies mentioned above. The calculation of expected losses
is based on (i) a matrix which includes the credit ratings of
customers provided by independent market assessors, and
on (ii) the value of receivables, which takes the collateral and
related insurance coverage into account. This calculation also
includes an updated assessment of expected losses due to
exogenous events, such as COVID-19 and climate change,
in the specific markets in which the counterparties operate,
impacting their probability of default and the ceiling levels
granted by the insurance company. The provision for bad
debts at December 31, 2021 was calculated according to the
method described above, and is composed as follows:
307
Consolidated Financial Statements Current
Past due > 30
days
Past due > 90
days
Past due > 180
days
Total
(in thousands of euro)
Expected loss rate
3.0%
6.2%
10.6%
64.2%
10.9%
Exposure net of credit enhancements
518,807
53,413
13,964
81,945
668,129
Bad debt provision
(15,621)
(3,302)
(1,477)
(52,580)
(72,979)
The situation at December 31, 2020 was as follows:
Current
Past due > 30
days
Past due > 90
days
Past due > 180
days
Total
(in thousands of euro)
Expected loss rate
2.9%
6.8%
Exposure net of credit enhancements
426,267
39,000
Bad debt provision
(12,191)
(2,658)
10.2%
15,751
(1,614)
68.9%
12.0%
72,346
553,364
(49,882)
(66,345)
At December 31, 2021, the exposure gross of credit enhancements amounted to euro 900,303 thousand, and
the provision for bad debts, which was calculated without considering the presence of any collateral securities
and other credit enhancement instruments, amounted to euro 75,632 thousand.
The difference between the exposure gross of credit enhancements amounting to euro 900,303 thousand, and
the value of the trade receivables amounting to euro 732,188 thousand reported in Note 14 - “Trade receivables”,
was mainly due to credit notes to be issued, that were not taken into account in the calculation of the provision
for bad debts.
LIQUIDITY RISK
Liquidity risk represents the risk that the Company’s available financial resources may be insufficient to meet its
financial and commercial obligations pursuant to contractual terms and conditions.
The main instruments used by the Group to manage liquidity risk are constituted by one-year and three-year
financial plans as well as treasury plans, in order to allow for the complete and correct detection and measurement
of cash inflows and outflows. The differences between the plans and the final data are subjected to constant
analysis.
The Group has implemented a centralised system for the management of collection and payment flows in
compliance with the various local currency and tax regulations. The negotiation and management of banking
relationships is carried out centrally, in order to ensure hedging for short and medium-term financial needs at the
lowest possible cost. Even the procurement of medium to long-term resources on the capital market is optimised
through centralised management.
The prudent management of the aforementioned risk requires the maintenance of an adequate level of cash
or cash equivalents and/or highly liquid short-term securities, and the availability of funds obtainable through
an adequate amount of committed credit facilities and/or the possibility of resorting to the capital market, and
diversifying products and maturities to seize the best opportunities available.
Furthermore, the Group has adopted an extremely prudent approach to the maturities of its financial debt,
refinancing them well in advance in order to minimise the risks associated with liquidity crises or market shut-
downs.
At December 31, 2021 the Group had, a liquidity margin of euro 2,698,550 thousand, calculated as the sum
of cash and cash equivalents and other financial assets at fair value through the Income Statement – current
to the amount of euro 1,998,550 thousand (euro 2,334,420 thousand at December 31, 2020), and unused
credit facilities to the amount of euro 700,000 thousand (euro 700,000 thousand at December 31, 2020). The
308
Pirelli Annual Report 2021
aforementioned liquidity margin is sufficient to cover financial debt maturities until February 2024. In addition,
considering the Company’s optional right to extend the maturity of the unsecured “Facilities” loan by a further
two years (therefore until June 2024), this coverage would be guaranteed until June 2024.
Maturities for Financial Liabilities at December 31, 2021 were composed as follows:
Trade payables
Other payables
Derivative financial instruments
(in thousands of euro)
within 1 year
1 to 2 years
2 to 5 years
over 5 years
Total
1,626,367
314,203
18,936
-
11,509
1,769
-
-
1,626,367
26,310
38,666
390,688
148
-
20,853
Borrowings from banks and other financial institutions
1,543,592
1,220,559
2,535,452
226,980
5,526,583
of which lease liabilities
98,638
86,353
193,246
226,980
605,218
3,503,098
1,233,837
2,561,910
265,646
7,564,491
Maturities for Financial Liabilities at December 31, 2020 were composed as follows:
Trade payables
Other payables
Derivative financial instruments
(in thousands of euro)
within 1 year
1 to 2 years
2 to 5 years
over 5 years
Total
1,316,971
325,266
38,641
-
13,734
67,289
-
-
1,316,971
24,326
39,220
402,546
2,835
-
108,765
Borrowings from banks and other financial institutions
1,143,948
1,758,008
3,225,910
239,521
6,367,387
of which lease liabilities
94,982
79,673
172,514
239,521
586,690
2,824,826
1,839,031
3,253,071
278,741
8,195,669
5. INFORMATION ON FAIR VALUE
5.1. FAIR VALUE MEASUREMENT
In relation to financial instruments measured at fair value, the following table shows the classification of these
instruments on the basis of the hierarchy of levels as provided for by IFRS 13, which reflects the significance of
the inputs used in determining their fair value. The levels are defined as follows:
→ level 1 – unadjusted prices quoted on an active market for assets or liabilities subject to evaluation;
→ level 2 – inputs other than the quoted prices referred to in the previous point, which are observable on the
market either directly (as in the case of prices) or indirectly (because they are derived from prices);
→ level 3 – inputs that are not based on observable market data.
309
Consolidated Financial Statements
The following table shows assets and liabilities measured at fair value at December 31, 2021, subdivided into
the three levels defined above:
Note
Carrying amount
at 12/31/2021
Level 1
Level 2
Level 3
(in thousands of euro)
FINANCIAL ASSETS:
Financial assets at fair value through Income Statement:
Other current financial assets at fair value through Income Statement
Current derivative financial instruments
Derivative hedging instruments:
Current derivative financial instruments
Non-current derivative financial instruments
Other financial assets at fair value through Other Comprehensive
Income:
Securities and shares
Investment funds
18
27
27
27
113,901
85,912
17,345
29,217
4,612
-
-
-
54,082
21,855
2,825
-
27,989
17,345
29,217
4,612
21,171
2,825
12
56,907
21,855
23,996
TOTAL ASSETS
221,982
107,767
103,159
FINANCIAL LIABILITIES:
Financial assets at fair value through Income Statement:
Current derivative financial instruments
Derivative hedging instruments:
Current derivative financial instruments
Non-current derivative financial instruments
TOTAL LIABILITIES
27
27
27
(15,209)
-
(15,209)
(979)
(3,519)
(19,707)
(77)
-
(77)
(902)
(3,519)
(19,630)
-
-
-
-
11,056
-
11,056
11,056
-
-
-
-
310
Pirelli Annual Report 2021
The following table shows assets and liabilities measured at fair value at December 31, 2020, subdivided into
the three levels defined above:
FINANCIAL ASSETS:
Financial assets at fair value through Income Statement:
Other current financial assets at fair value through Income Statement
Current derivative financial instruments
Other financial assets at fair value through Other Comprehensive
Income:
Securities and shares
Investment funds
Note
Carrying amount
at 12/31/2020
Level 1
Level 2
Level 3
(in thousands of euro)
18
27
58,944
34,571
24,373
17,900
-
17,900
-
-
39,934
14,076
15,902
9,956
2,786
-
2,786
12
42,720
14,076
18,688
TOTAL ASSETS
119,564
48,647
60,961
FINANCIAL LIABILITIES:
Financial assets at fair value through Income Statement:
Current derivative financial instruments
Derivative hedging instruments:
Current derivative financial instruments
Non-current derivative financial instruments
27
27
27
(37,314)
-
(37,314)
(372)
(372)
-
(87,601)
-
(87,601)
TOTAL LIABILITIES
(125,287)
(372)
(124,915)
The following table shows changes in the financial assets that occurred at level 3 during the course of 2021:
(in thousands of euro)
Opening balance 01/01/2021
Translation differences
Increases
Decreases
Fair value adjustments through Other Comprehensive Income
Other changes
Closing balance 12/31/2021
These financial assets are mainly represented by equity investments in the European Institute of Oncology
(euro 8,006 thousand), Telco S.r.l (euro 450 thousand), Genextra (euro 635 thousand and Tlcom I LP (euro
193 thousand).
311
-
9,956
9,956
-
-
-
-
9,956
8
450
(39)
677
4
11,056
Consolidated Financial Statements
The fair value adjustments through other Comprehensive Income equalled a positive net amount of euro 677
thousand, and mainly refers to the fair value adjustment of the investment in the Genextra.
During the course of 2021 there were no transfers from level 1 to level 2 or vice versa, nor from level 3 to other
levels and vice versa.
The fair value of financial instruments traded on active markets is based on the price quotations published at the
reporting date of the Financial Statements. These instruments, included in level 1, primarily comprise of equity
investments classified as financial assets at fair value through other Comprehensive Income.
The fair value of financial instruments not traded on active markets (for example, derivatives) is determined by
the use of evaluation techniques widely used in the financial sector, which maximise the utilisation of observable
and available market data:
→ market prices for similar instruments;
→ the fair value of interest rate swaps is calculated by discounting estimated future cash flows based on
observable yield curves;
→ the fair value of foreign exchange derivatives (forward contracts) is determined by using the forward exchange
rate at the reporting date of the Financial Statements;
→ the fair value of cross currency interest rate swaps is calculated by discounting the estimated future cash
flows based on observable yield curves and converting them into euro using the exchange rate at the reporting
date of the Financial Statements;
→ the fair value of natural rubber futures is determined by using the closing price of the contract at the reporting
date of the Financial Statements.
5.2. CATEGORIES OF FINANCIAL ASSETS AND LIABILITIES
The table below shows the carrying amounts for each class of financial assets and liabilities as identified by
IFRS 9:
FINANCIAL ASSETS
Financial assets at fair value through Income Statement
Other financial assets at fair value through Income Statement
Current derivative financial instruments
Financial assets at amortised cost
Other non-current receivables
Current trade receivables
Other current receivables
Cash and cash equivalents
Financial assets at fair value through other comprehensive income (FVOCI)
Other financial assets at fair value through Other Comprehensive Income
Financial hedging derivative instruments
Current derivative financial instruments
Non-current financial derivative instruments
TOTAL FINANCIAL ASSETS
312
(in thousands of euro)
Note
Carrying amount
at 12/31/2021
Carrying amount
at 12/31/2020
18
27
15
14
15
19
12
27
27
113,901
58,944
17,345
17,900
131,246
76,844
362,944
402,148
659,209
597,669
470,577
469,194
1,884,649
2,275,476
3,377,379
3,744,487
56,907
42,720
29,217
4,612
-
-
3,599,361
3,864,051
Pirelli Annual Report 2021
FINANCIAL LIABILITIES
Financial liabilities at fair value through Income Statement
Current derivative financial instruments
Financial liabilities valuated at amortised cost
Non-current borrowings from banks and other financial institutions (excl. lease liabilities)
Other non-current payables
Current borrowings from banks and other financial institutions (excl. lease liabilities)
Current trade payables
Other current payables
Lease liabilities
Non-current lease liabilities
Current lease liabilities
Derivative financial hedging instruments
Non-current derivative financial instruments
Current derivative financial instruments
TOTAL FINANCIAL LIABILITIES
(in thousands of euro)
Note
Carrying amount
at 12/31/2021
Carrying amount
at 12/31/2020
27
23
25
23
24
25
23
23
27
27
15,209
37,314
3,376,573
4,580,537
76,485
77,280
1,397,638
808,163
1,626,367
1,316,971
314,203
325,266
6,791,266
7,108,217
412,796
390,449
91,611
75,404
504,407
465,853
3,519
979
4,498
87,601
372
87,973
7,315,380
7,699,357
6. CAPITAL MANAGEMENT POLICY
The Group’s objective is to maximise the return on net invested capital while maintaining the ability to operate
over time, guaranteeing adequate returns for shareholders and benefits for other stakeholders, foreseeing a
gradual deleverage of the Group’s financial structure to be achieved over the short to medium-term period, as
reported in the “Outlook for 2022” section of the Directors’ Report on Operations.
The main indicator that the Group uses for capital management is the R.O.I.C which is calculated as the ratio
between the EBIT adjusted net of tax effects, and the average net invested capital which does not include
“Investments in associated companies and joint ventures”, “Other financial assets at fair value through other
Comprehensive Income”, “Other financial assets at fair value through the Income Statement”, “Other non-
current assets”, the intangible assets relative to assets recognised as a consequence of Business Combinations,
the deferred tax liabilities relative to the latter, and “Provisions for employee benefit obligations current and
non-current”.
The R.O.I.C. for the 2021 financial year stood equal to 17.6% compared to 10.4% for 2020. This increase
compared to the previous financial year, was mainly due to the increase in the EBIT adjusted thanks to the
recovery in demand, following the fall in 2020 due to the effects of the COVID-19 pandemic on the sector in
which the Group operates.
313
Consolidated Financial Statements
7. ESTIMATES AND ASSUMPTIONS
The preparation of the consolidated Financial Statements
entails the necessity of Management in making estimates and
assumptions which, under certain circumstances are based
on difficult and subjective evaluations and estimates based
on historical experience, as well as assumptions that are from
time to time considered reasonable and realistic in light of the
circumstances. It is possible that the actual results could therefore
differ from these estimates. The estimates and assumptions
are reviewed periodically and the effects of any changes made
to them are reflected in the Income Statement for the period in
which the estimate is revised. If such estimates and assumptions,
based on the best valuation available at the time, should differ
from actual circumstances, they are consequentially modified
for the period in which the change of circumstances occurred.
The estimates and assumptions refer mainly to assessments of
the recoverability of goodwill and other intangible assets with an
indefinite useful life, to the definition of the useful lives of property,
plant and equipment and intangible assets, to the recoverability of
receivables, to the determination of taxes (current and deferred),
to the evaluation of pension plans and other post-employment
benefits, and to the recognition/valuation of the provisions for
liabilities and charges.
GOODWILL
In accordance with the accounting standards adopted for
the preparation of the Financial Statements, goodwill is
tested annually in order to ascertain the existence of any
impairment to be recognised in the Income Statement.
Specifically, testing involves the allocation of goodwill to
the groups of cash generating units (which for the Group
coincide with the business sector or the Consumer Activities),
and the subsequent determination of the relative recoverable
amount, being the higher amount between the fair value and
the value in use.
If the recoverable amount proves to be lower than the
carrying amount of the group of cash generating units to
which goodwill has been allocated, the goodwill allocated to
them is impaired.
With reference to the impacts derived from the adoption of the
accounting standard IFRS 16 - Leases, the carrying amount
of the cash generating units includes the value of the right of
use of the CGUs themselves. In determining the present value
of future flows, any flows relative to the repayment of lease
liabilities are excluded, in that they represent flows deriving
from financing activities. Consequently, the value of lease
liabilities is excluded from the carrying amount of the CGU at
the date of the impairment test.
The configuration of the value used to determine the recoverable
amount for Consumer Activities at December 31, 2021 was the
fair value determined using the stock market capitalisation of the
Parent Company at the date of the impairment test (December
31, 2021), where the stock market capitalisation was calculated
on the number of outstanding shares, and adjusted upwardly or
downwardly according to the fair value of the financial statement
items not included in the carrying amount of the Consumer
Activities, mainly the net financial position.
PIRELLI BRAND (INTANGIBLE ASSET WITH AN INDEFINITE
USEFUL LIFE)
The Pirelli Brand is an intangible asset with an indefinite
useful life not subject to amortisation, but pursuant to IAS
36, is tested for impairment on an annual basis or more
frequently, if specific events or circumstances arise that
may indicate an impairment.
The impairment test at December 31, 2021 was performed
using
third-party
professional.
the assistance of an
independent
The configuration of the recoverable amount for impairment
testing purposes at December 31, 2021 was the fair value,
calculated on the basis of the income approach (the so-called
Level 3 of the IFRS 13 hierarchy – Fair Value measurement).
The key assumptions used by Management were the
estimates for future increases in sales, their growth rate
beyond the explicit forecast period for the purposes of
estimating the terminal value, in the royalty rate, and in the
discount rate which is based on the weighted average cost of
capital increased by a premium determined on the basis of
the riskiness of the specific asset.
OWNED TANGIBLE ASSETS
In accordance with the relevant accounting fixed assets are
tested, in order to ascertain whether there has been any
impairment when there are indicators that signal that difficulties
are to be expected for the recovery of their relative net carrying
amount, through their use. The verification of the existence of
the aforesaid impairment indicators requires that the Directors
make subjective judgements based on the information available
from both internal and external sources as well as on historical
experience. Also if it is determined that a potential impairment
may have been generated, the impairment is calculated using
the suitable evaluation techniques. The correct identification of
the indicators of a potential impairment, as well as the estimates
used to determine the impairment, depend on a subjective
evaluation as well as on factors that may change over time which
influence the valuations and estimates made by Management.
RIGHT OF USE AND LEASE LIABILITIES
As regards the estimates and assumptions used for the
determination of lease liabilities and the right of use, the
application of IFRS 16 has introduced some elements of
professional judgement as well as the use of assumptions
and estimates in relation to the lease term and the definition
of the incremental borrowing rate.
The main are summarised as follows:
→ contract renewal clauses are considered for the purposes
of determining the duration of the contract, that is, when
the Group has the option to exercise these clauses
without the need to obtain the consent of the other party,
and when their exercise is considered reasonably certain.
In the case of clauses which provide for multiple renewals
that can be exercised unilaterally by the Group, only the
first extension period was considered;
→ automatic renewal clauses in contracts, in which both
314
Pirelli Annual Report 2021 parties have the right to terminate the contract, were not
considered for the purposes of determining the duration
of the contract, as the ability to extend its duration, is not
under the unilateral control of the Group, and the penalty
to which the lessor could be exposed to is not significant.
However, in the event that the lessor is exposed to a
significant penalty, the Group evaluates the inclusion of
the renewal option in the determination of the duration
of the contract. This assessment is also carried out
considering the degree of personalisation of the leased
asset. If personalisation is high, the lessor could incur a
significant penalty if they oppose the renewal;
→ early termination clauses in contracts: not taken into
account when determining the duration of the contract
if they are exercisable only by the lessor and not by both
parties. In cases where they can be unilaterally exercised
by the Group, specific assessments are made contract by
contract (for example, the Group is already negotiating a
new contract or has already given notice to the lessor);
→ The incremental borrowing rate is the risk-free rate of the
country in which the contract is traded, and is based on the
duration of the contract itself. It is then adjusted according
to the Group’s credit spread and the local credit spread.
INCOME TAXES (CURRENT AND DEFERRED)
Income taxes (current and deferred) are determined in
each country in which the Group operates according to
a prudent interpretation of the tax regulations in force.
This process sometimes involves complex estimates in
determining taxable income and temporary deductible
and taxable differences between carrying amounts and tax
amounts. Specifically, deferred tax assets are recognised
to the extent that it is probable that future taxable income
will be available against which they can be recovered. The
assessment of the recoverability of deferred tax assets,
recorded in relation both to tax losses that may be used in
subsequent financial years, and to temporary deductible
differences, takes into account the estimate of future
taxable income and is based on prudent tax planning. As
regards the situations in which the tax legislation in force
lends itself to interpretation, if the Group considers it
probable (more than 50%), that the tax authority will accept
the tax treatment adopted, the net income/(loss) before tax
is determined in accordance with the tax treatment applied
in the tax return, otherwise the effect of any uncertainty
is reflected in the determination of the net income/(loss)
before tax. The probability refers to the probable fact that
the tax authority will not accept the tax treatment adopted,
and not to the probability of the assessment.
PENSION FUNDS
The companies of the Group have in place, pension plans,
health insurance plans and other defined benefit plans
for their employees, primarily in the United Kingdom and
the United States. These funds have been closed to new
participants, and therefore the actuarial risk refers only to the
previous deficit. Management, through the use of a leading
consulting firm, uses actuarial assumptions to calculate
the liabilities and assets servicing these pension plans. The
actuarial assumptions of a financial nature concern the
discount rate, the rate of inflation and the trend in medical
costs. The actuarial assumptions of a demographic nature
are essentially concerned with mortality rates. The Group has
identified discount rates which it has deemed are balanced,
given their context.
PROVISIONS FOR LIABILITIES AND CHARGES
In view of the legal and tax risks relative to indirect taxes,
provisions for the risk of unfavourable outcomes have
been recognised. The value of provisions recognised in the
Financial Statements relative to these risks represent the
best estimate to date made by Management for legal and
tax issues regarding a vast range of problematic issues that
are subject to the jurisdiction of different countries. This
estimate entails the adoption of assumptions which depend
on factors that may change over time and which could
therefore have a significant impact on the current estimates
made by Management
in preparing the Consolidated
Financial Statements.
8. OPERATING SEGMENTS
IFRS 8 - Operating segments, defines an operating segment
as a component:
→ which involves entrepreneurial activities which generate
revenues and costs;
→ whose operating income is periodically reviewed by the
Chief Executive Officer, in his role as Chief Operating
Decision Maker (CODM);
→ for which separate income, financial position, and equity
data is available.
For the purposes of IFRS 8, the activities performed by the
Consumer Activities are identifiable in a single operating sector.
For 2021, the Group has adopted the same organisational
model used in 2020 composed of five Regions.
315
Consolidated Financial Statements Revenues from sales and services according to geographical region were as follows:
Europe and Turkey
North America
APAC
South America
Russia, Nordics and MEAI
Total
(in thousands of euro)
2021
2020
2,058,539
1,756,112
1,145,656
870,511
1,018,817
865,988
667,567
458,617
440,871
350,903
5,331,450
4,302,131
Non-current assets by geographic region which are allocated on the basis of the country where the assets are
located, were as follows.
Europe and Turkey
North America
APAC
South America
Russia, Nordics and MEAI
(in thousands of euro)
12/31/2021
12/31/2020
5,352,217
61.00%
5,440,542
62.24%
416,304
539,778
384,362
198,153
4.74%
6.15%
4.38%
2.26%
389,634
486,468
358,383
182,828
4.46%
5.56%
4.10%
2.09%
Non-current unallocated assets
1,883,765
21.47%
1,883,945
21.55%
Total
8,774,579
100.00%
8,741,800
100.00%
The non-current allocated assets reported in the preceding table consist of property, plant and equipment and
intangible assets, excluding goodwill. The non-current unallocated assets are relative to goodwill.
9. PROPERTY, PLANT AND EQUIPMENT
Their composition was as follows:
Total Net Value:
- Owned Tangible Assets
- Right of use
(in thousands of euro)
12/31/2021
12/31/2020
3,288,914
3,159,767
2,823,765
2,725,755
465,149
434,012
316
Pirelli Annual Report 2021
9.1. OWNED TANGIBLE ASSETS
The composition and changes were as follows:
Gross Value
12/31/2021
Accumulated
Depreciation
Net Value
Gross Value
(in thousands of euro)
12/31/2020
Accumulated
Depreciation
Net Value
Land
Buildings
144,121
-
144,121
147,406
-
147,406
848,138
(196,180)
651,958
787,489
(150,793)
636,696
Plants and machinery
2,704,531
(949,926)
1,754,605
2,458,722
(763,568)
1,695,154
Industrial and trade equipment
574,926
(361,250)
213,676
500,443
(303,197)
197,246
Other assets
Total
124,286
(64,881)
59,405
111,179
(61,926)
49,253
4,396,002
(1,572,237)
2,823,765
4,005,239
(1,279,484)
2,725,755
NET VALUE
(in thousands of euro)
12/31/2020
Hyperinflation
Argentina
Currency
translation
differences
Increases
Decreases
Depreciation
Devaluation
Recl./Other
12/31/2021
Land
147,406
(831)
(2,412)
-
(39)
-
-
Buildings
636,696
3,777
20,956
26,456
(287)
(33,798)
(1,882)
(3)
40
144,121
651,958
Plants and machinery
1,695,154
7,023
45,514
188,405
(1,924)
(176,971)
(2,505)
(91)
1,754,605
Industrial and trade
equipment
197,246
4,835
4,176
79,239
(1,789)
(70,229)
(1,278)
1,476
213,676
Other assets
49,253
2,410
131
20,875
(330)
(9,879)
(46)
(3,009)
59,405
Total
2,725,755
17,214
68,365
314,975
(4,369)
(290,877)
(5,711)
(1,587)
2,823,765
NET VALUE
(in thousands of euro)
12/31/2019
Change in
consolidation
scope
Hyperinflation
Argentina
Currency
translation
differences
Increases
Decreases
Depreciation
Devaluation Recl./Other
12/31/2020
Land
189,417
(666)
740
(20,540)
-
(1,560)
-
-
(19,985)
147,406
Buildings
725,908
(3,624)
3,253
(68,647)
12,428
(1,125)
(33,069)
(33)
1,605
636,696
Plants and
machinery
Industrial
and trade
equipment
1,965,870
(503)
6,268
(155,297)
58,419
(2,247)
(176,389)
(7,074)
6,107
1,695,154
246,476
-
1,083
(27,099)
48,874
(1,395)
(69,237)
(1,974)
518
197,246
Other assets
59,519
(35)
546
(4,895)
4,787
(100)
(10,683)
(57)
171
49,253
Total
3,187,190
(4,828)
11,890
(276,478)
124,508
(6,427)
(289,378)
(9,138)
(11,584)
2,725,755
Hyperinflation Argentina refers to the revaluation of the assets held by the Argentinian company as a
consequence of the application of the accounting standard IAS 29 - Financial Reporting in Hyperinflationary
Economies. This was partially offset by a negative translation difference of euro 4,573 thousand.
Increases, totalling euro 314,975 thousand, were primarily aimed at the High Value segment, to the continuous
improvement in the mix and quality in all manufacturing plants, and increased production capacity in Mexico,
China, Russia and Romania.
317
Consolidated Financial Statements
The ratio of investments to depreciation for 2021 was equal to 1.08, (0.43 for the financial year 2020).
Devaluation refers mainly to property, plant and machinery that are obsolete and no longer used.
Property, plant and equipment in progress at December 31, 2021, included in the individual fixed asset
categories, amounted to euro 183,468 thousand (euro 138,012 thousand at December 31, 2020). The main
projects included under property, plant and equipment in progress were the initiation of new projects to increase
production capacity, the constant technological upgrading of manufacturing plants and of machinery, also aimed
at increasing their safety from an Environmental, Health and Safety (EHS) perspective and at investments in
machinery for the development of new product lines and the improvement of existing products.
It should be noted that the companies of the Group did not pledge any property, plant and equipment as collateral.
9.2. RIGHT OF USE
The net value of the assets for which the Group has entered into lease contracts, is detailed as follows:
Right of use land
Right of use buildings
Right of use plants and machinery
Right of use other assets
Total net right of use
(in thousands of euro)
12/31/2021
12/31/2020
17,312
13,730
366,512
336,740
27,382
26,012
53,943
57,530
465,149
434,012
The item right of use buildings mainly refers to contracts relative to offices, warehouses and points of sale.
The item right of use other assets mainly refers to contracts relative to motor vehicles and transport equipment.
These contracts also include the service component (non-lease component).
Lease contracts are negotiated on an individual basis and include a wide variety of terms and conditions.
Increases in the right of use for the 2021 financial year, also including remeasurements, amounted to euro
122,416 thousand (euro 87,698 thousand for 2020), mainly for new lease contracts for logistics warehouses
signed mainly in Europe and North America.
During the course of 2021, the following contracts were subject to reassessment and amendments:
→ the lease agreement for a warehouse in the UK was extended for 5 years, with a corresponding increase in the
right of use to the amount of euro 10,847 thousand;
→ the lease agreement for a warehouse in Romania was extended for 4 years, with a corresponding increase in
the right of use to the amount of euro 3,115 thousand.
318
Pirelli Annual Report 2021
Depreciation of the right of use recognised in the Income Statement, and included under the item “Depreciation,
Amortisation and Impairments” (Note 32), was composed as follows:
Land
Buildings
Plants and machinery
Other assets
Total depreciation of right of use
(in thousands of euro)
2021
2020
1,154
61,014
7,374
1,121
60,505
7,644
18,866
19,356
88,408
88,626
For interest on lease liabilities, reference should be made to Note 37 - “Financial Expenses”.
Information on the costs for lease contracts with a duration of less than twelve months, lease contracts for assets
with a low unit value, and lease contracts with variable lease payments, is included in Note 33 - “Other Costs”.
10. INTANGIBLE ASSETS
The composition and changes were as follows:
NET VALUE
(in thousands of euro)
12/31/2020
Currency
translation
differences
Increase
Decrease
Amortisation
Recl./Other
12/31/2021
"Concessions, licenses and trademarks -
finite useful life"
73,694
2,375
303
Pirelli Brand - indefinite useful life
2,270,000
Goodwill
Customer relationships
Technology
Software applications
Patents and design patent rights
Other intangible assets
1,883,945
273,870
1,045,467
26,181
7,689
1,187
-
57
189
-
(9)
-
(11)
-
-
180
-
26,548
3,548
-
-
(237)
-
-
-
-
(3,872)
88
72,588
-
-
(34,607)
(76,850)
-
-
7
-
2,270,000
1,883,765
239,639
968,617
(12,669)
(483)
39,568
-
(5)
(352)
(1,043)
-
475
10,194
1,294
Total
5,582,033
2,601
30,579
(242)
(129,393)
87
5,485,665
319
Consolidated Financial Statements
NET VALUE
(in thousands of euro)
12/31/2019
Currency
translation
differences
Increase
Decrease
Amortisation
Riclass./
Other
12/31/2020
"Concessions, licenses and trademarks -
finite useful life"
59,834
(1,608)
430
Pirelli Brand - indefinite useful life
2,270,000
-
Goodwill
1,886,988
(2,765)
Customer relationships
308,585
(168)
Technology
1,122,317
-
-
-
-
-
(6)
-
(278)
-
-
(5,061)
20,105
73,694
-
-
(34,547)
(76,850)
-
-
-
-
2,270,000
1,883,945
273,870
1,045,467
Software applications
18,971
(394)
11,172
(3)
(10,219)
6,654
26,181
Patents and design patent rights
Other intangible assets
4,490
8,990
-
3,925
(448)
-
-
-
(726)
-
7,689
(646)
(6,709)
1,187
Total
5,680,175
(5,383)
15,527
(287)
(128,049)
20,050
5,582,033
Intangible assets were composed as follows:
→ the Pirelli Brand (indefinite useful life) amounted to euro 2,270,000 thousand. It should be noted that the
evaluation of the useful life of brands is based on a series of factors including the competitive environment,
market share, history of the Brand, life cycles of the underlying product, operating plans and the macroeconomic
environment of the countries in which the related products are sold. Specifically, the useful life of the Pirelli
Brand was assessed as indefinite on the basis of its history of over one hundred and fifty years of success
(established in 1872), and on the intention and ability of the Group to continue investing in order to support
and maintain the Brand;
→ the Metzeler Brand (useful life of 20 years) amounted to euro 46,677 thousand included under the item
“Concessions, licenses and trademarks – finite useful life”;
→ Customer relationships (useful life of 10-20 years) which mainly includes the value of commercial relationships
both for the Original Equipment channel and the Replacement channel;
→ Technology which includes the value of both product and process technologies as well the value of the In-
Process R&D (being formed at the time of the acquisition of the Group in 2015 by Marco Polo Industrial
Holding S.p.A.) amounted to euro 913,617 thousand and euro 55,000 thousand respectively. The useful life
of product and process Technology was determined to be 20 years, while the useful life for In-Process R&D
was 10 years.
→ Goodwill to the amount of euro 1,883,765 thousand, of which euro 1,877,363 thousand was recorded at the
time of acquisition of the Group in September 2015. The residual portion refers to the goodwill provisionally
determined as part of the acquisition of the company JMC Pneus Comercio Importação e Exportação Ltda
which occurred in 2018.
During the course of 2021, investments were also made in software applications (26,548 additions in total) as
part of the Digitisation Programme to transform the Group’s key processes by 2023. This aim of this programme
is to enable the real-time integration of the exchange of information between thethe exchange of information
between different business functions and their external partners/customers through digital platforms, using
artificial intelligence models.
IMPAIRMENT TESTING OF GOODWILL Goodwill, amounting to euro 1,883,765 thousand, was allocated to the group of
“Consumer Activities” CGUs, which represent the only sector of activity in which the Group operates, and considers
to be the minimum level at which goodwill should be monitored for internal management control purposes.
The impairment testing of goodwill consists of comparing the recoverable value of the Consumer Activities to
which goodwill is allocated and their carrying amount, including its operating assets and goodwill.
The configuration of the value used to determine the recoverable amount for Consumer Activities (including
goodwill) at December 31, 2021 is the fair value determined by using the market capitalisation of the Parent
Company at the date of the impairment test (December 31, 2021), where the market capitalisation is calculated
on the number of outstanding shares without consideration of any control premium, adjusted upwards or
320
Pirelli Annual Report 2021 The revenue growth rate for the period 2022 - 2025,
calculated with respect to 2021 revenues, is 4.5%;
→ a sum-of-parts valuation criterion which also takes into
account the contribution of royalties from the Prometeon
Tyre Group for the use of the Pirelli trademark in relation
to the Industrial segment;
→ the royalty rate applied to the revenues of the Consumer
High Value and Consumer Standard segment was
deduced from the royalty rates implicit in the valuations
made by an independent entity relative to the main brands
of the listed companies of the Tyre sector, and was equal
to an average royalty rate of 3.94%. With reference to the
contribution in terms of royalties from the Prometeon Tyre
Group, the royalty rates used were those already forecast;
→ a discount rate of 7.90% which included a premium
compared to the WACC which is determined on the basis
of the risk level of the specific asset;
→ a growth rate of “g in the terminal value assumed to be
equal to zero;
→ the TAB (Tax Amortisation Benefit) that is, the tax benefit
that could potentially benefit the market participant which
acquired the asset separately as a result of the possibility
of amortising the asset for tax purposes.
For the purposes of impairment testing, the recoverable
amount of the Pirelli Brand cum TAB was compared with the
carrying amount (cum TAB) and no impairment emerged.
The recoverable amount is greater than the carrying amount
of the Brand (12.5%), while, in order for the Fair Value to be
equal to the carrying amount, a downward change in the key
parameters is necessary, particularly:
→ a decrease in the royalty rates for the Consumer valuation
units of 45 basis points, and the simultaneous resetting
to zero of the balance for royalties from the license
agreement with Prometeon Tyre Group;
→ an increase in the discount rate by 89 basis points;
→ a negative “g” growth rate of -141 basis points.
downwards by the fair value of Financial Statement items
not included in the carrying amount of Consumer Activities,
mainly the Net Financial Position.
The impairment test at December 31, 2021 did not reveal
any impairment, as the fair value of Consumer Activities was
significantly higher than the carrying amount.
The difference between the recoverable amount and the
carrying amount of the group of CGUs related to Consumer
Activities was reset to zero, against a potential contraction
of -20% in the stock market price of Pirelli & C. S.p.A.
ordinary shares.
IMPAIRMENT TESTING OF THE PIRELLI BRAND (INTANGIBLE
ASSET WITH AN INDEFINITE USEFUL LIFE) The Pirelli Brand,
valued at euro 2,270,000 thousand is an intangible asset
with an indefinite useful life and as such is not subject
to amortisation, but pursuant to IAS 36, is tested for
impairment annually or more frequently, if specific events or
circumstances arise that may suggest an impairment.
The impairment test at December 31, 2021 was performed
using
third-party
professional.
the assistance of an
independent
The configuration of the recoverable amount for the purposes
of impairment testing purposes at December 31, 2021 is the
fair value, calculated on the basis of the income approach
(the so-called Level 3 of the IFRS 13 hierarchy – Fair Value
measurement) and is based on:
→ management’s forecasts which are based, with reference
to 2022, on the Guidance presented to the financial
community on 23 February 2022 and, with reference
to the years 2023 - 2025, on the Industrial Plan at 31
March 2021. It should be noted that analysts’ consensus
forecasts for the period 2022 - 2024 are higher than
management’s projections and therefore have not been
considered for the purposes of the financial statements.
321
Consolidated Financial Statements 11. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES
The changes in investments in associates and joint ventures were as follows:
(in thousands of euro)
12/31/2021
12/31/2020
Associates
JV
Total
Associates
JV
Total
8,395
64,193
72,588
8,703
72,143
80,846
(186)
716
-
93
-
981
(186)
1,697
(192)
-
(192)
228
(5,857)
(5,629)
6,694
6,694
-
(2,093)
(2,093)
-
93
(344)
-
(344)
9,018
71,868
80,886
8,395
64,193
72,588
Opening balance
Distribution of dividends
Share of net income / (loss)
Share of other components recognised in Equity
Other
Closing balance
11.1. INVESTMENTS IN ASSOCIATES
The details were as follows:
Eurostazioni S.p.A.
Joint Stock Company Kirov Tyre Plant
Investments in other associates
Total
(in thousands of euro)
12/31/2020
Distribution of
dividends
Share of net
income / (loss)
Other
12/31/2021
6,395
1,121
879
8,395
-
-
(186)
(186)
180
127
409
716
-
91
2
93
6,575
1,339
1,104
9,018
The investments in associated companies evaluated using the equity method, were not relevant in terms of the
impact on total consolidated assets, either individually or in aggregate form.
11.2. INVESTMENTS IN JOINT VENTURES
The details were as follows:
12/31/2020
Share of net
income / (loss)
(in thousands of euro)
Share of other
components
recognised in
Equity
12/31/2021
12,103
52,090
64,193
1,049
(68)
981
1,040
5,654
6,694
14,192
57,676
71,868
PT Evoluzione Tyres
Xushen Tyre (Shanghai) Co., Ltd
Total
The Group holds:
→ an investment of 63.04% in PT Evoluzione Tyres, an entity which operates in Indonesia and is active in the
production of tyres for motorcycles. Even though the company is 63.04% owned, as a result of contractual
agreements between Shareholders, it falls under the definition of a joint venture, in that the governance
regulations explicitly require unanimous consensus for significant business decisions. The investment is
evaluated using the equity method;
322
Pirelli Annual Report 2021
→ a 49% stake in the company Xushen Tyre (Shangai) Co., Ltd, a joint venture which, through the company
Jining Shenzhou Tyre Co., Ltd owns a Consumer tyre manufacturing plant in China. The plant provides the
necessary production flexibility for the High Value segment, given the evolution of the Chinese market, the
expected developments in the electric car segment and the increasing share of homologations obtained
for the Original Equipment channel in China, Japan and Korea. The investment is evaluated using the equity
method. As announced on August 1, 2018, the joint venture agreement relative to Xushen Tyre (Shanghai) Co.,
Ltd. provides for a for a call option in favour of Pirelli Tyre S.p.A., exercisable as of January 1, 2021 until March
31, 2026, which - if exercised - would allow Pirelli Tyre S.p.A. to increase its interest in the company to up to
70%. During the course of 2020, Pirelli Tyre S.p.A. notified the shareholders of Xushen Tyre (Shanghai) Co.,
Ltd. of its intention to not exercise the option until December 31, 2022.
The share of net income/(loss), positive to the amount of euro 981 thousand, refers to the euro -68 thousand
pro-rata share of the loss attributable to the joint venture Xushen Tyre (Shanghai) Co., Ltd. and to the euro 1,049
thousand pro-rata share of net income attributable to the joint venture PT Evoluzione Tyres.
The investments in joint ventures were not relevant in terms of their impact on the total consolidated assets.
12. OTHER FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
The movements in other financial assets at fair value through other Comprehensive Income amounted to euro
56,907 thousand at December 31, 2021 (euro 42,720 thousand at December 31, 2020), and were as follows:
Opening balance at 01/01/2021
Translation differences
Increases
Decreases
Fair Value adjustment through Other Comprehensive income
Closing balance 12/31/2021
(in thousands of euro)
42,720
12
450
(39)
13,764
56,907
323
Consolidated Financial Statements
The composition of the item according to the individual securities is as follows:
Listed securities
RCS MediaGroup S.p.A.
Total
Unlisted securities
Fin. Priv. S.r.l.
Fondo Anastasia
Istituto Europeo di Oncologia S.r.l.
Euroqube
Tlcom I LP
Telco S.r.l.
Other companies
Total
Total other financial assets at Fair Value through Other Comprehensive Income
(in thousands of euro)
12/31/2021
12/31/2020
21,855
21,855
21,171
2,825
8,006
-
193
450
14,076
14,076
15,902
2,786
7,962
10
185
-
2,407
1,799
35,052
28,644
56,907
42,720
The fair value adjustments through other Comprehensive Income equalled a positive net value of euro 13,764
thousand, and mainly refers to the fair value adjustment of the investment in the RCS MediaGroup S.p.A. (positive
to the amount of euro 7,779 thousand), and in Fin. Priv S.r.l (positive to the amount of euro 5,269 thousand).
For listed securities, the fair value corresponds to the stock market price at December 31, 2021. For unlisted
securities, the fair value was determined by using estimates based on the best available information.
13. DEFERRED TAX ASSETS AND LIABILITIES
Their composition is as follows:
Deferred tax assets
Deferred tax liabilities
Total
(in thousands of euro)
12/31/2021
12/31/2020
137,643
109,378
(1,033,892)
(1,006,799)
(896,249)
(897,421)
Deferred tax assets and deferred tax liabilities are offset when the deferred taxes refer to the same legal entity
and the same taxation authority.
The item deferred tax liabilities mainly refers to the difference between the tax value and the carrying amount
of assets identified at the date of acquisition of the Pirelli Group by Marco Polo Industrial Holding S.p.A., recorded
in the Consolidated Financial Statements following the merger by incorporation of the Parent company, Marco
Polo Industrial Holding S.p.A. into Pirelli, which took place during the course of 2016.
324
Pirelli Annual Report 2021
Their composition, gross of the offsets carried out was as follows:
Deferred tax assets
- of which within 12 months
- of which beyond 12 months
Deferred tax liabilities
- of which within 12 months
- of which beyond 12 months
Total
(in thousands of euro)
12/31/2021
12/31/2020
330,936
348,534
210,568
171,435
120,368
177,099
(1,227,185)
(1,245,955)
(111,378)
(114,624)
(1,115,807)
(1,131,331)
(896,249)
(897,421)
The composition of deferred taxes, related to temporary differences and tax losses carried forward, is shown in
the following table:
Deferred tax assets
Provisions for liabilities and charges
Property, plant and equipment
Leases
Provisions for employee benefit obligations
Inventories
Tax losses carried forward
Trade receivables and other receivables
Trade payables and other payables
Other
Total
Deferred tax liabilities
Intangible assets
Property, plant and equipment
Leases
Provisions for employee benefit obligations
Other
Total
(in thousands of euro)
12/31/2021
12/31/2020
54,262
50,369
9,825
2,129
5,189
-
43,869
55,672
37,902
48,670
53,647
50,094
38,866
30,894
5,071
5,047
85,365
102,599
330,936
348,534
(975,326)
(1,006,521)
(157,851)
(155,339)
-
(720)
(37,605)
(22,439)
(56,403)
(60,936)
(1,227,185)
(1,245,955)
The item “Other” relative to deferred tax assets, mainly includes deferred tax assets recognised on surplus non-
deducted interest expense (euro 10,879 thousand), and on the ACE benefit (Allowance for Corporate Equity)
(euro 71,669 thousand).
325
Consolidated Financial Statements
The item “Other”, relative to deferred tax liabilities, mainly includes deferred tax liabilities recognised
on the undistributed gains of subsidiaries for which distribution in future financial years is probable (euro
54,748 thousand).
At December 31, 2021 the value of deferred tax assets not recognised on tax losses amounted to euro 76,913
thousand, while those related to temporary differences amounted to euro 33,224 thousand. This latter item
mainly includes deferred tax assets not recognised on interest payables. Deferred tax assets were not recognised,
in that no taxable income is expected to justify their recovery.
The value of tax losses according to their maturity, against which deferred tax assets were not recognised, are
as follows:
Year of maturity
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
No expiry date date
Total
(in thousands of euro)
12/31/2021
12/31/2020
-
2,775
2,295
5,121
1,280
2,563
5,073
3,731
779
26
5
2,663
2,771
2,291
5,121
1,280
2,557
5,073
3,696
770
25
4
277,452
291,885
301,100
318,136
Of the total tax losses without an expiry date, euro 270,512 thousand refer to losses attributable to subsidiaries
in the UK, Spain and Brazil.
The tax effect of gains and losses recognised directly in equity was negative to the amount of euro 33,933
thousand (negative to the amount of euro 5,672 thousand for 2020), and is reported in the Statement of
Comprehensive Income. These changes were mainly due to tax effects connected to actuarial gains/losses on
employee benefits, and to the fair value adjustment of cash flow hedge derivatives.
326
Pirelli Annual Report 2021
14. TRADE RECEIVABLES
Trade receivables were analysed as follows:
Trade receivables
Provision for bad debts
Total
(in thousands of euro)
12/31/2021
12/31/2020
Total
Non-current
Current
Total
Non-current
Current
732,188
(72,979)
659,209
-
-
-
732,188
664,014
(72,979)
(66,345)
659,209
597,669
-
-
-
664,014
(66,345)
597,669
The gross value of trade receivables amounted to euro 732,188 thousand (euro 664,014 thousand at December
31, 2020). At the reporting date, receivables which were past due by more than 30 days gross of credit notes
to be issued, and net of credit enhancement instruments, amounted to 22% of the total exposure (23% at
December 31, 2020).
Receivables which were past due and not yet due were evaluated in accordance to the Group’s policy described
in the section on the adopted accounting standards.
The item impaired receivables includes both significant individual positions subject to individual impairment, and
positions with similar credit risk characteristics which were grouped together and impaired on a collective basis.
The calculation of the impairment is based on (i) a matrix which includes the credit ratings of customers provided
by independent market assessors, and on (ii) the value of receivables, which takes the collateral and related
insurance coverage into account. This calculation also includes an updated assessment of expected losses due
to exogenous events, such as COVID-19 and climate change, in the specific markets in which the counterparties
operate, impacting their probability of default and the ceiling levels granted by the insurance company.
The changes in the provision for bad debts were as follows:
Opening balance
Translation differences
Accruals
Decreases
Releases
Other
Closing balance
(in thousands of euro)
12/31/2021
12/31/2020
66,345
65,967
917
(9,636)
14,089
22,358
(1,212)
(7,160)
-
(6,788)
(5,515)
(41)
72,979
66,345
Accruals to the provision for bad debts are recognised net of releases, in the Income Statement under “Net
Impairment of Financial Assets” (Note 34).
The carrying amount for trade receivables is considered to approximate their fair value.
For the fully impaired trade receivables which were subject to legal action, it is estimated that an amount not
exceeding 10% of their gross value might be recovered.
327
Consolidated Financial Statements
15. OTHER RECEIVABLES
Other receivables were analysed as follows:
12/31/2021
12/31/2020
Total
Non-current
Current
Total
Non-current
Current
(in thousands of euro)
Financial receivables
352,658
269,658
83,000
377,024
273,198
103,826
Trade accruals and deferrals
39,633
6,709
32,924
36,485
11,174
25,311
Receivables from employees
3,977
708
3,269
5,038
1,094
3,944
Receivables from social security and welfare institutions
781
-
781
1,402
-
1,402
Receivables from tax authorities not related to income taxes
356,936
64,851
292,085
328,654
93,917
234,737
Other receivables
89,366
29,152
60,214
131,986
30,018
101,968
Bad debt provision for other receivables and financial
receivables
(9,830)
(8,134)
(1,696)
(9,247)
(7,253)
(1,994)
Total
833,521
362,944
470,577
871,342
402,148
469,194
843,351
371,078
472,273
880,589
409,401
471,188
Financial receivables - non-current (euro 269,658 thousand) refer mainly to, euro 54,353 thousand, the sum
deposited as guarantees for tax and legal disputes in relation to the subsidiary Pirelli Pneus Ltda (Brazil) and
remunerated at market rates, to the sum of euro 179,277 thousand deposited into escrow accounts in favour of
the pension funds of Pirelli UK Ltd. and Pirelli UK Tyres Ltd., to euro 14,464 thousand in contributions paid in cash
at the time of signing an association in participation contract, and to euro 6,664 thousand in loans disbursed in
favour of the Indonesian joint venture PT Evoluzione Tyres.
Financial receivables - current (euro 83,000 thousand) refer mainly to euro 81,402 thousand for the short-term
portion of loans granted to the joint venture Jining Shenzhou Tyre Co., Ltd. for which there was no significant
credit risk increase compared to the date of disbursement. These loans will be extended, at maturity, for a further
12 months.
The item bad debt provision for other receivables and financial receivables (euro 9,830 thousand) mainly
includes euro 9,315 thousand relative to the impairment of financial receivables.
The item receivables from tax authorities not related to income taxes (euro 356.936 thousand compared
to euro 328,654 thousand for 2020) is mainly comprised of receivables for VAT (Value Added Tax) and other
indirect taxes whose recovery is expected in future financial years.
Other receivables - non-current (euro 29,152 thousand) refer mainly to amounts deposited as guarantees for
legal and tax disputes for the Brazilian companies (euro 26,726 thousand).
Other receivables - current (euro 60.214 thousand) include:
→ advances to suppliers amounting to euro 19,813 thousand mainly for logistics costs;
→ receivables from associates and joint ventures to the amount of euro 11,026 thousand, mainly for royalties,
and the sale of materials and moulds;
→ receivables from the Prometeon Group to the amount of euro 11,513 thousand mainly in relation to royalties;
→ receivables to the amount of euro 4,895 thousand in yet to be collected government grants.
For other receivables - current and non-current the carrying amount is considered to approximate their fair value.
328
Pirelli Annual Report 2021
16. TAX RECEIVABLES
Tax receivables refers to income taxes which amounted to euro 45.337 thousand (of which euro 27.564
thousand was non-current) compared to euro 33.914 thousand at December 31, 2020 (of which euro 4,761
thousand was non-current). In more detail, it mainly refers to receivables for advances paid on taxes for the
financial year, and to income tax receivables from previous financial years recorded by the Brazilian companies.
The change in non-current tax receivables compared to the previous financial year was mainly due to the
recognition, by Pirelli Pneus Ltda of tax credits amounting to euro 23,223 thousand for income taxes unduly
sustained in previous financial years by the Brazilian subsidiary and recorded following the 2021 decision of
the Federal Supreme Court (“STF”). Specifically, this decision established the unconstitutionality of including
the monetary adjustments - calculated on the basis of the SELIC system (Special System for Settlement and
Custody)– applied to tax credits for taxes paid but not owed, when calculating income tax (“IRPJ”) and social
security contributions, on net income (“CSSL”).
17. INVENTORIES
The following is an inventories analysis:
Raw and auxiliary materials and consumables
Sundry materials
Unfinished and semi-finished products
Finished products
Advances to suppliers
Total
(in thousands of euro)
12/31/2021
12/31/2020
176,795
108,306
6,354
69,413
6,638
51,534
838,186
669,433
1,414
526
1,092,162
836,437
The restatement of the value of inventories, which was recognised net of impairments, amounted to euro 1,549
thousand (an impairment of euro 14,044 thousand for 2020).
The increase in the value of inventories compared to December 31, 2020 was attributable to an increase in raw
materials, offset by stable levels in terms of their share of sales.
Inventories were not subject to any guarantee pledges.
18. OTHER FINANCIAL ASSETS AT FAIR VALUE THROUGH THE INCOME STATEMENT - CURRENT
Other financial assets at fair value through the Income Statement - current amounted to euro 113,901 thousand
at December 31, 2021 compared to euro 58,944 thousand at December 31, 2020. For unlisted securities, the
fair value was determined by using estimates based on the best available information. This increase compared
to December 31, 2020 was mainly due to investments made by the Argentinian subsidiary in dollar-linked bonds,
with the aim of mitigating the effects of the depreciation of the local currency. Changes in fair value for the period
were recognised in the Income Statement as “Financial Income” (Note 36).
19. CASH AND CASH EQUIVALENTS
Cash and cash equivalents went from euro 2,275,476 thousand at December 31, 2020 to euro 1,884,649
thousand at December 31, 2021.
329
Consolidated Financial Statements
Details of the change in the balance are provided in the
Consolidated Cash Flow Statement.
These were concentrated in the treasury centres of the
Group, and in companies that generate liquidity and use it
locally. They are mainly invested, in accordance with risk
diversification principles and minimum rating levels, in the
market for short-term deposits with banking counterparties,
at interest rates that are consistent with the prevailing market
conditions. The credit risk associated with cash and cash
equivalents is considered to be limited as the counterparties
are leading national and international banks.
For the Statement of Cash Flow, the balance of cash and
cash equivalents was recorded net of bank overdrafts, to the
amount of euro 1,105 thousand at December 31, 2021 (euro
5,793 thousand at December 31, 2020).
20. EQUITY
20.1. ATTRIBUTABLE TO THE OWNERS OF THE PARENT
COMPANY
Equity attributable to the Owners of the Parent Company
went from euro 4,447,418 thousand at December 31, 2020
to euro 4,908,112 thousand at December 31, 2021.
The subscribed and paid up share capital at December
31, 2021 amounted to euro 1,904,375 thousand and was
represented by 1,000,000,000 registered ordinary shares
without indication of their nominal value.
The translation reserve, which is generated by the conversion
into euro of the Financial Statements of subsidiaries that have
a functional currency other than the euro, amounted to a loss
of euro 565,143 thousand at December 31, 2021. Movements
during the financial year included a positive change of euro
114,594 thousand related mainly to the subsidiaries in China
and Mexico, which was partially offset by a negative change
in Turkey and Argentina.
Changes in other reserves through other Comprehensive
Income went from a negative value of euro 89,893 thousand
at December 31, 2020 to a negative value euro 1,408
thousand at December 31, 2021, due to the positive effect
of actuarial gains on pension funds (euro 91,168 thousand),
financial assets at fair value through other Comprehensive
Income (euro 13,764 thousand) and the cash flow hedge
reserve (euro 23,143 thousand), which was partially offset
by the tax effect (negative to the amount of euro 33,933
thousand).
Other reserves/retained earnings went
from euro
3,312,673 thousand at December 31, 2020, to euro
3,570,288 thousand at December 31, 2021, essentially due
to the net income/(loss) for the financial year (positive to the
amount of euro 302,796 thousand), due to hyperinflation in
Argentina (positive to the amount of euro 33,647 thousand,
which was partially offset by a negative translation reserve
of euro 8,631 thousand) and due to approved dividends to
the amount of euro 80,000 thousand).
20.2. ATTRIBUTABLE TO NON-CONTROLLING INTERESTS
Equity attributable to Non-Controlling Interests went
from euro 104,432 thousand at December 31, 2020 to
euro 134,527 thousand at December 31, 2021. This positive
change was mainly due to the results for the financial year
which amounted to euro 18,797 thousand, and exchange rate
gains to the amount of euro 11,301 thousand.
330
Pirelli Annual Report 2021 21. PROVISIONS FOR LIABILITIES AND CHARGES
Movements in the non-current portion of provisions that occurred during the period are shown below:
PROVISION FOR LIABILITIES AND CHARGES - NON-CURRENT PORTION
(in thousands of euro)
12/31/2020
Currency
translation
differences
Increases
Uses
Releases
Reclass.
12/31/2021
Provision for labour disputes
Provision for tax risks not related to income
taxes
Provision for environmental risks
Provision for restructuring and
reorganisation
Provision for other risks
Total
14,697
4,987
3,641
8,385
41,547
73,257
6
(32)
13
-
195
182
3,510
(5,356)
(299)
300
12,858
118
(936)
7,145
(1,127)
400
(5,265)
-
-
-
-
-
4,137
9,672
(2,161)
1,359
17,056
(2,031)
(45)
(3,578)
53,144
28,229
(14,715)
(344)
(5,439)
81,170
Increases mainly refer to accruals to the provisions for labour disputes mainly for the Brazilian subsidiaries to
the amount of euro 3,467 thousand, and to accruals to the provisions for environmental risks. With regard to
other risks, the increase for the financial year mainly refers to the STI (Short Term Incentive) and LTI (2020-
2022 and 2021-2023 Long Term Incentive) for Directors, reflects the improved performances on the underlying
parameters of the plans.
Uses were mainly attributable to rationalisation measures in Italy to the amount of euro 5,265 thousand, and to
litigation regarding occupational diseases.
Reclassifications refer mainly to the reclassification of from non-current provisions to payables to social security
institutions relative to accruals to the provisions for rationalisation measures in Italy. Under other risks, mainly of
note was the reclassification of a provision for the commercial risks of the subsidiary Pirelli Tyre S.p.A. from non-
current to current.
Movements in the current portion of provisions that occurred during the period, are shown below:
PROVISION FOR LIABILITIES AND CHARGES - CURRENT PORTION
(in thousands of euro)
12/31/2020
Currency
translation
differences
Increases
Uses
Releases
Reclass.
12/31/2021
Provision for labour disputes
Provision for tax risks not related to income
taxes
Provision for environmental risks
Provision for restructuring and
reorganisation
Provision for claims and warranties
Provision for other risks
78
7,303
3,165
15,918
7,827
13,792
(55)
207
-
32
559
394
(13)
(61)
(3,500)
(1,139)
274
619
101
(156)
2,865
(14,907)
3,936
(499)
-
(377)
(229)
-
-
-
-
-
223
3,490
3,110
3,531
11,594
10,728
(4,114)
(2,433)
3,279
21,646
Total
48,083
1,137
18,523
(23,189)
(4,239)
3,279
43,594
Increases were mainly attributable to the purchase of greenhouse gas emission allowances in compliance with
the requirements of the European Emission Trading Schemes, to the amount of euro 6,076 thousand, to accruals
to the provisions for insurance risks, work accidents and to accruals to the provision for commercial risks that
emerged following the reorganisation of the UK manufacturing plant.
Uses refer to rationalisation measures in Brazil and the United Kingdom, and to the insurance and commercial
risks of the subsidiary Pirelli Tyre S.p.A.
331
Consolidated Financial Statements Releases relative to other risks mainly refer to adjustments for insurance risks.
22. PROVISIONS FOR EMPLOYEE BENEFIT OBLIGATIONS AND OTHER ASSETS
PROVISIONS FOR EMPLOYEE BENEFIT OBLIGATIONS AND OTHER ASSETS – NON-CURRENT PORTION
The item is composed as follows
Pension funds in surplus
Total other assets
Pension funds in deficit
Employee leaving indemnities (TFR - Italian companies)
Healthcare plans
Other benefits
(in thousands of euro)
12/31/2021
12/31/2020
153,205
80,422
153,205
80,422
85,493
148,658
26,123
15,597
93,385
31,486
16,026
47,761
Total provisions for employee benefit obligations
220,598
243,931
PENSION FUNDS
The following table shows the composition of pension funds at December 31, 2021.
(in thousands of euro)
12/31/2021
Germany
Sweden
Total
unfunded
pension
funds
USA
UK
Switzerland
Total funded
pension
funds
Total
Present value of liabilities
75,005
2,957
77,962
105,578
1,203,187
34,203
1,342,968
1,420,930
Fair value of plan assets
Total Assets in surplus
(100,942)
(1,356,392)
(31,308)
(1,488,642)
(1,488,642)
(153,205)
(153,205)
(153,205)
Total Liabilities in deficit
75,005
2,957
77,962
4,636
2,895
7,531
85,493
Total pension funds
(67,712)
332
Pirelli Annual Report 2021
The following table shows the composition of pension funds at December 31, 2020.
12/31/2020
(in thousands of euro)
Germany
Sweden
Total
unfunded
pension
funds
USA
UK surplus
UK deficit
Switzerland
Total funded
pension
funds
Total
Present value of liabilities
80,454
3,176
83,630
107,059
749,527
465,946
34,384
1,356,916
1,440,546
Fair value of plan assets
Total Assets in surplus
(92,526)
(829,949)
(421,933)
(27,902)
(1,372,310)
(1,372,310)
(80,422)
(80,422)
(80,422)
Total Liabilities in deficit
80,454
3,176
83,630
14,533
44,013
6,482
65,028
148,658
Total pension funds
68,236
The characteristics of the main pension funds in place at December 31, 2021 were as follows:
→ Germany: this is an unfunded defined benefits plan based on final salary. This fund guaranteed a pension in
addition to the state pension. The plan was closed in October 1982. Consequently the participants to this plan
are employees whose employment had begun prior to that date;
→ USA: this is a funded defined benefits plan based on final salary, and is administered through a Trust. This
fund guaranteed a pension in addition to the state pension. The plan was closed in 2001 and frozen in 2003
for employees who then transferred to a defined contribution scheme. All participants to this plan have
since retired;
→ UK: these are funded defined benefits plans based on salary trends. It guarantees a pension in addition to the
state pension and is administered through a Trust. These plans, managed by the subsidiary Pirelli Tyres Ltd.
were closed in 2001 to new participants and frozen during the course of 2010 for employees hired prior to
2001, who were then offered a transfer to a defined contribution plan. The plan was operated by the subsidiary
Pirelli UK Ltd., and included the employees in the Cables and Systems sector which was sold in 2005, and was
already frozen in 2005 at the date of the disposal. At the end of October 2017, three of the smaller UK pension
funds - Pirelli General Executive Pension and Life Assurance Fund, Pirelli Tyres Limited Executive Retirement
Benefits Scheme and Pirelli General Overseas Retirement Benefits Scheme, entered into buy-in contracts
which consist of the purchase of bulk annuity insurance policies. For the first two aforementioned funds, the
buy-out (insurance out-sourcing) process was subsequently finalised in January 2021, followed by the wind-
up (closure) of the funds in June the same year. This wind-up led to a reduction in the liabilities and in the
plan assets of pension funds to the amount of euro 86,048 thousand. The surplus recognised at December
31, 2021 in respect of provisions still outstanding is equal to the recoverable amount, assuming the gradual
extinguishment of the plan liabilities over time;
→ Sweden: this a defined benefits plan (ITP2), which is closed to new participants. The only participants are
retired employees and the recipients of deferred pensions. It is based on percentages applied to different
wage and salary ranges;
→ Switzerland: these are funded defined benefit plans that guarantee a pension in addition to the state pension
and are open to new employees. They are based on final salary reduced by a fixed amount.
333
Consolidated Financial Statements
Movements for 2021 in defined benefits pension funds (refers to funded and unfunded pension funds) were
as follows:
Opening balance at January 1, 2021
Currency translation differences
Movements through Income Statement:
- current service cost
- cost of services rendered for previous years
- interest expense / (income)
Remeasurements recognised in equity:
- actuarial (gains) / losses from change in demographic assumptions
- actuarial (gains) / losses from change in financial assumptions
- experience adjustment (gains) / losses
(in thousands of euro)
Present value of
gross liabilities
Fair value of plan
assets
Total
1,440,546
(1,372,310)
68,236
92,720
(97,026)
(4,306)
1,421
1,417
-
-
19,674
(19,543)
1,421
1,417
131
22,512
(19,543)
2,969
41,117
(4,894)
(10,760)
-
-
-
41,117
(4,894)
(10,760)
- return on plan assets, net of interest income
-
(114,269)
(114,269)
Employer contributions
Employee contributions
Benefits paid
Employer settlement payment
Other
25,463
(114,269)
(88,806)
-
525
(43,533)
(43,533)
(525)
-
(74,912)
69,424
(5,488)
(86,048)
86,048
124
3,092
-
3,216
Closing balance at December 31, 2021
1,420,930
(1,488,642)
(67,712)
334
Pirelli Annual Report 2021
Movements for 2020 in defined benefits pension funds (refers to funded and unfunded pension funds) were
as follows:
Opening balance at January 1, 2020
Currency translation differences
Movements through Income Statement:
- current service cost
- cost of services rendered for previous years
- interest expense / (income)
Remeasurements recognised in equity:
- actuarial (gains) / losses from change in demographic assumptions
- actuarial (gains) / losses from change in financial assumptions
- experience adjustment (gains) / losses
(in thousands of euro)
Present value of
gross liabilities
Fair value of plan
assets
Total
1,429,002
(1,313,077)
115,925
(74,152)
73,292
(860)
1,783
11,403
-
-
27,508
(26,533)
40,694
(26,533)
(3,297)
130,989
(8,051)
-
-
-
1,783
11,403
975
14,161
(3,297)
130,989
(8,051)
- return on plan assets, net of interest income
-
(138,788)
(138,788)
Employer contributions
Employee contributions
Benefits paid
Other
119,641
(138,788)
(19,147)
-
534
(37,702)
(37,702)
(534)
-
(74,118)
68,496
(5,622)
(1,055)
2,536
1,481
Closing balance at December 31, 2020
1,440,546
(1,372,310)
68,236
Current service costs for services rendered by employees and for services rendered in previous years, are
included under “Personnel Expenses” (Note 31), and interest payables are included under “Financial Expenses”
(Note 37).
335
Consolidated Financial Statements
The following table shows the composition of funded pension fund assets /plan assets:
12/31/2021
12/31/2020
listed
unlisted
total
%
listed
unlisted
total
%
50,045
320,610
370,655
24.9%
57,638
315,104
372,742
27.1%
(in thousands of euro)
Insurance policies
3,101
4,914
8,015
0.5%
2,835
91,330
94,165
66,546
101,428
167,974
11.3%
40,240
94,284
134,524
9.8%
6.9%
7.5%
30,257
34,433
64,690
4.3%
94,300
8,950
103,250
489
192,147
192,636
12.9%
(349)
233,147
232,798
17.0%
-
53,199
53,199
3.6%
5,112
47,843
52,955
3.9%
594,839
32,246
627,085
42.2%
385,012
(16,490)
368,522
26.8%
4,388
-
4,388
0.3%
13,354
-
13,354
1.0%
749,665
738,977
1,488,642
100.0%
598,142
774,168
1,372,310
100.0%
Shares
Bonds
Deposits
Balanced funds
Real Estate
Derivatives
Other
Total
The main risks to which the Group is exposed in relation to the pension funds are detailed as follows:
→ the volatility of plan assets: in order to be able to balance liabilities, the investment strategy cannot limit its
horizons exclusively to risk free assets. This implies that some investments, such as listed securities represent
high volatility in the short-term, and this exposes the plans to the risk of short-term declines in asset values,
and consequently increased imbalances. However, this risk is mitigated by diversifying investments into
numerous asset classes, through different investment managers, through different investment styles and with
exposures to multiple factors which are not perfectly correlated to each other. in addition, the investments
are continually revised in response to market conditions, and adjusted in order to maintain the overall risk at
acceptable levels;
→ changes in bond yields and forecast inflation: expectations of declining bond yields and/or rising inflation
brings about an increase in the value of liabilities. The plans reduce this risk through investments in liability
hedging assets. In the United Kingdom, the protection guaranteed by a portfolio of this type has been built up
over the years, and as of the second quarter of 2014 it had reached a coverage of between 100% and 115% of
the value of the liabilities covered by the assets;
→ life expectancy: the increase in life expectancy brings about an increase in the value of a plan’s liabilities. The
UK plans completed a process during 2016 that allowed them, through longevity swaps entered into with a
pool of insurers, to cover approximately 50% of this risk. However, prudent assumptions are used to assess
residual risks and the adequacy of these assumptions is reviewed periodically.
In the UK the management of the plan assets has been delegated, under the supervision and within a precise
mandate attributed by the Trustees, to a Fiduciary Manager who operates in accordance with a Liability Driven
Investment (LDI) model, that is, using the liability benchmark so as to minimise the volatility (and therefore the
risk) of the deficit, which has in fact been reduced to more than one third of the levels which existed prior to its
introduction (at the beginning of 2011).
The key parameters of this mandate were as follows:
→ an asset mix managed dynamically over time, rather than the the allocation of a fixed strategy;
→ hedged coverage of approximately 100% -115% of the interest rate and inflation risk - expressed as the
percentage of the value of the assets - through the use of debt instruments (government bonds) and
derivatives;
→ the management of exchange rate risk with the objective of hedging at least 70% of the exposure to the
foreign currencies in the portfolio through the use of forward contracts.
In the UK, the funding arrangements and funding policies are revised every three years. The next funding
evaluation is expected in 2023. In the United States funding evaluations are carried out on an annual basis.
336
Pirelli Annual Report 2021
The contributions which are expected to be paid into unfunded pension funds during the 2022 financial year
amount to euro 5,228 thousand, while for funded pension funds the amount expected is euro 19,860 thousand.
EMPLOYEES’ LEAVING INDEMNITIES (TFR)
Movements for the year in the provision for employees’ leaving indemnities were as follows:
Opening balance
Movements through Income Statement:
- current service cost
- interest expense
Remeasurements recognised in equity:
- actuarial (gains) / losses arising from changes in financial assumptions
- effect of experience adjustments
Liquidation/advances
Other
Closing balance
(in thousands of euro)
12/31/2021
12/31/2020
31,486
32,680
52
204
336
(1,365)
(4,248)
(342)
41
240
292
-
(1,273)
(494)
26,123
31,486
The current service cost for services rendered by employees is included in the item “Personnel Expenses” (Note
31), and interest payables are included in the item “Financial Expenses” (Note 37).
HEALTHCARE PLANS
This item refers exclusively to the healthcare plan in place in the United States.
Liabilities recognised in the Financial Statements at 12/31/2021
Liabilities recognised in the Financial Statements at 12/31/2020
(in thousands of euro)
USA
15,597
16,026
337
Consolidated Financial Statements
Movements for the period were as follows:
Opening balance
Translation differences
Movements through Income Statement:
- current service cost
- interest expense
Remeasurements recognised in equity:
- actuarial / (gains) losses arising from changes in financial assumptions
- actuarial / (gains) losses arising from changes in demographic assumptions
- effect of experience adjustments
Benefits paid
Closing balance
(in thousands of euro)
12/31/2021
12/31/2020
16,026
1,262
1
340
(415)
57
(735)
(939)
17,825
(1,485)
2
505
1,061
(467)
(307)
(1,108)
15,597
16,026
The cost for services rendered by employees is included under “Personnel Expenses” (Note 31), while interest
payables are included under “Financial Expenses” (Note 37).
The contributions which are expected to be paid into the healthcare plan during the 2022 financial year amount
to euro 1,381 thousand.
ADDITIONAL INFORMATION REGARDING POST-EMPLOYMENT BENEFITS
Net actuarial gains accrued during 2021 and recorded directly in equity amounted to euro 91,168 thousand, (net
actuarial gains at December 31, 2020 had amounted to euro 18,946 thousand).
The main actuarial assumptions used at December 31, 2021 were the following:
Discount rate
Inflation rate
Italy
Germany
Sweden
UK
USA
Switzerland
0.90%
1.00%
1.55%
1.80%
2.55%
0.40%
1.70%
1.50%
2.25%
3.56%
N/A
0.50%
The main actuarial assumptions used at December 31, 2020 were the following:
Discount rate
Inflation rate
Italy
Germany
Sweden
UK
USA
Switzerland
0.60%
0.80%
0.75%
1.40%
2.20%
0.15%
1.00%
1.50%
1.50%
2.85%
N/A
0.50%
338
Pirelli Annual Report 2021
The following table provides an analysis of payment schedules for subsequent post-employment benefits:
within 1 year
1 to 2 years
3 to 5 years
over 5 years
Total
(in thousands of euro)
Pension funds
67,243
67,673
204,753
351,646
691,315
Employees' leaving indemnities (TFR)
Healthcare plans
Total
2,218
1,381
2,067
1,348
5,892
3,810
8,815
5,278
18,992
11,817
70,842
71,088
214,455
365,739
722,124
The weighted average duration of post-employment benefit obligations equalled 15.23 years (14.97 years at
December 31, 2020), 8.44 years for employees’ leaving indemnities (8.65 years at December 31, 2020) and
8.22 years for medical assistance plans (8.65 years at December 31, 2020).
The sensitivity analysis for the relevant actuarial assumptions at the end of the financial year was as follows:
Impact on post employment benefits
Change in
assumptions
Increase in assumptions
Decrease in assumptions
(in %)
Discount rate
0.25%
decrease of
3.72%
increase of
3.87%
Inflation rate (only UK plans)
0.25%
increase of
2.97%
decrease of
2.91%
At the end of 2020 the situation was as follows:
Impact on post employment benefits
Change in
assumptions
Increase in assumptions
Decrease in assumptions
(in %)
Discount rate
0.25%
decrease of
3.59%
increase of
3.80%
Inflation rate (only UK plans)
0.25%
increase of
2.43%
decrease of
2.29%
The sole purpose of the above analysis is to estimate the change in liability, with changes in the discount rates
and the UK inflation rates with reference to the central rate assumption, rather than to an alternative set of
assumptions.
This sensitivity analysis on the liabilities related to post-employment benefits is based on the same methodology
used to calculate the liability recognised in the Financial Statements.
339
Consolidated Financial Statements
OTHER LONG TERM BENEFITS
The composition of other benefits was as follows:
Long Term Incentive plans
Jubilee awards
Leaving indemnities
Other long-term benefits
Total
(in thousands of euro)
12/31/2021
12/31/2020
52,571
18,650
9,513
12,651
93,385
11,238
19,210
10,366
6,947
47,761
The item Long Term Incentive plans refers to the amount earmarked for the three-year monetary 2020-2022 and
the 2021–2023 Long Term Incentive plans aimed at the management sector of the Group, and correlates with the
Guidance for 2020 and with the objectives contained in the 2021 – 2022|2025 Industrial Plan. The increase compared
to the previous financial year reflects the improved performances on the underlying parameters of the plans.
PROVISIONS FOR EMPLOYEE BENEFIT OBLIGATIONS - CURRENT PORTION
This decrease compared to December 31, 2020 of euro 5,013 thousand is due to the payment of the fourth and
final instalment of the retention plan approved, by the Board of Directors on February 26, 2018, which is aimed
at Key Managers and a selected number of Senior Managers and Executives.
23. BORROWINGS FROM BANKS AND OTHER FINANCIAL INSTITUTIONS
Borrowings from banks and other financial institutions were as follows:
12/31/2021
12/31/2020
Total
Non-current
Current
Total
Non-current
Current
(in thousands of euro)
Bonds
1,453,762
1,453,762
-
1,524,559
1,442,650
81,909
Borrowings from banks
3,269,732
1,922,771
1,346,961
3,793,780
3,137,857
655,923
Borrowings from other financial institutions
34,390
-
34,390
43,930
-
43,930
Lease liabilities
504,407
412,796
91,611
465,853
390,449
75,404
Accrued financial expenses and deferred financial income
Other financial payables
13,787
2,540
-
40
13,787
13,512
2,500
12,919
-
30
13,512
12,889
Total
5,278,618
3,789,369
1,489,249
5,854,553
4,970,986
883,567
The item bonds refers to:
→ the senior unsecured guaranteed equity-linked non-interest-bearing bond with a nominal value of euro 500
million maturing on December 22, 2025. This bond loan, reserved for institutional investors, was issued
by Pirelli & C. S.p.A. on December 22, 2020, guaranteed by Pirelli Tyre S.p.A., and admitted for trading on
the Vienna MTF, a multilateral trading facility operated by the Vienna Stock Exchange. The bond loan is
convertible, at the discretion of the bondholders, into new ordinary shares of the Company at a price of euro
6.235 per share, subject to the adjustments provided for by the loan regulations. At December 31, 2021, the
component recorded under financial payables amounted to euro 461 million. The difference in the nominal
value refers to the fair value of the call option sold to the subscribers of the loan, which is represented by the
optional right to convert the bond loan into new ordinary shares of the Company at a pre-determined price,
and is accounted for under equity reserves to the amount of euro 41.2 million;
340
Pirelli Annual Report 2021
→ the unrated bond loan for the nominal amount of euro 553 million (originally for euro 600 million which
was partially repurchased for the total amount of euro 47 million during the last quarter of 2018), placed on
January 22, 2018 with a fixed coupon of 1.375% and an original maturity period of 5 years. This bond loan,
guaranteed by Pirelli Tyre S.p.A and placed with international institutional investors, was issued as part of the
EMTN (Euro Medium-Term Note) programme approved by the Board of Directors at the end of 2017, signed
on January 10, 2018 and updated on December 19, 2018;
→ the floating rate (EURIBOR + spread) “Schuldschein” loan for the total nominal value of euro 443 million
placed on July 26, 2018. This bond loan, guaranteed by Pirelli Tyre S.p.A., and signed by leading market
operators, consists of one tranche for the amount of euro 423 million with a 5 year maturity, and another for
euro 20 million with a 7 year maturity. The loan, placed on July 26, 2018, also includes a tranche of euro 82
million with an original maturity date of July 31, 2021, that was repaid in advance in January 2021.
The carrying amount for bond loans was determined to be as follows:
Nominal value
Equity component of the convertible bond loan
Transaction costs
Bond loan discount
Amortisation of the effective interest rate
Non-monetary interest on convertible bond loan
Total
(in thousands of euro)
12/31/2021
12/31/2020
1,496,000
1,578,000
(41,791)
(41,791)
(14,957)
(15,133)
(2,988)
(2,988)
9,282
8,216
6,275
196
1,453,762
1,524,559
The item borrowings from banks, which amounted to euro 3,269,732 thousand, mainly refers to:
→ the use of unsecured (“Facilities”) loan granted to Pirelli & C. S.p.A. for the amount of euro 949,182 thousand,
classified under current payables. The nominal amount of the refinancing operation, signed on June 27, 2017
(with a closing date of June 29, 2017), equalled euro 1.65 billion (net amount of repayments made since the
date of signing - the original amount of euro 4.2 billion granted for the credit facility). This loan is guaranteed by
Pirelli Tyre S.p.A., Pirelli Deutschland GmbH, Pirelli Tyres Romania S.r.l., Pirelli Pneus Ltda, Pirelli International
Treasury S.p.A. and Pirelli Neumaticos S.A. de C.V. On November 29, 2018 the loan was amended to insert
the right for the Pirelli Group to extend, at its own discretion, the expiry of the individual credit facilities of the
loan for up to 2 years, with respect to their original contractual maturity of 3 and 5 years. The credit facilities
are denominated in euros and US dollars and carry a floating interest rate of EURIBOR + spread and LIBOR
+ spread, respectively. In February 2021, a portion of the loan was repaid to the amount of euro 756 million. It
should also be noted that all credit facilities with an original maturity period of 3 years were fully repaid. The
value of the outstanding loan at December 31, 2021 therefore refers only to the credit facilities with an original
maturity period of 5 years;
→ the “Sustainable Credit Facility” for euro 795,993 thousand relative to the euro 800 million credit facility with
a floating interest rate (EURIBOR + spread) guaranteed by Pirelli Tyre S.p.A. and signed on March 31, 2020
with a pool of leading Italian and international banks, with a 5 year maturity. This bank credit facility consists
of a sustainable tranche of euro 600 million, which is geared towards the Group’s financial and environmental
sustainability objectives (sustainable KPIs), as well as a circular economy tranche, which is indexed to the
Group’s circular economy objectives. It should be noted that following the first reporting of the sustainable
KPIs, and having achieved the objectives for the year, the Group is benefiting from the relative incentives to
reduce the cost of the sustainable tranche of the credit facility. Reporting for the circular economy tranche is
expected to occur only in 2023;
→ euro 722,622 thousand relative to two bilateral loans granted to Pirelli & C. S.p.A. by leading banks, of which a
nominal euro 600 million (the “Bilateral 600”) with a floating rate (EURIBOR + spread), guaranteed by Pirelli
Tyre S.p.A., matures in February 2024, and euro 125 million (the “Bilateral 125”) with a floating rate (EURIBOR
+ spread), matures in August 2023;
→ euro 498,728 thousand relative to two new bilateral loans granted in December 2021 to Pirelli & C. S.p.A.
by leading banks, of which, a nominal euro 400 million (the “Bilateral 400”), guaranteed by Pirelli Tyre S.p.A.
341
Consolidated Financial Statements
is geared towards some of the sustainability targets of the Group, with a floating rate (EURIBOR + spread),
matures in December 2024, and euro 100 million at a fixed rate matures in December 2022;
→ euro 180,362 thousand mainly relative to floating rate loans disbursed in Brazil by local and international
banking institutions of which euro 1,002 thousand has been classified under non-current borrowings from
banks;
→ borrowings from banks and the use of credit facilities in local currency by subsidiaries in Russia, (equivalent
to euro 65,591 thousand of which euro 3,127 thousand is classified non-current borrowings from banks) and
in China (equivalent to euro 51,655 thousand), classified entirely as current borrowings from banks.
At December 31, 2021 the Group had a liquidity margin equal to euro 2,698,550 thousand, composed of euro
700,000 thousand in the form of non-utilised committed credit facilities and of euro 1,884,649 thousand in cash
and cash equivalents, in addition to financial assets at fair value through the Income Statement to the amount of
euro 113.901 thousand.
The item lease liabilities represents the financial liabilities relative to leasing contracts. The change compared
to the previous financial year refers to increases in the right of use during the financial year, deriving from the
signing of new contracts and the remeasurement of existing contracts, partially offset by lease instalments.
Non-discounted future payments for lease contracts for which the exercise of extension options is not considered
to be reasonably certain, amounted to euro 115,473 thousand at December 31, 2021 and were not included in
the item “Borrowing from banks and other financial institutions” (euro 90,373 thousand at December 31, 2020).
Accrued financial expenses and deferred financial income, to the amount of euro 13,787 thousand mainly
refers to the accrual of interest matured on bond loans to the amount of euro 8,510 thousand (euro 8,990
thousand at December 31, 2020), and to the accrued interest matured on borrowings from banks to the amount
of euro 3,618 thousand (euro 2,062 thousand at December 31, 2020).
The change in total borrowings from banks and other financial institutions for 2021 is composed as follows:
(in thousands of euro)
Borrowings from banks and other financial institutions at December 31, 2020
Bond repayment (EMTN program)
Drawdowns of unsecured financing (Facilities)
Repayments of unsecured financing (Facilities)
New bilateral borrowings
Financial inflows for the local credit facilties of Group companies
Financial outflows for the local credit facilties of Group companies
Repayment of lease liabilities
Cash changes
Amortised cost for the period
Translation differences and other changes for the period
Increases in lease liabilities
Remeasurement and early termination
Non-cash changes
Borrowings from banks and other financial institutions at December 31, 2021
342
5,854,553
(82,000)
368,549
(1,337,656)
500,000
30,501
(229,790)
(105,355)
(855,751)
26,289
112,727
108,702
32,098
279,816
5,278,618
Pirelli Annual Report 2021
The change in total borrowings from banks and other financial institutions for 2020 is shown below:
(in thousands of euro)
Borrowings from banks and other financial institutions at December 31, 2019
Bond issuance (Convertible bond)
Bond repayment (EMTN program)
Drawdowns of unsecured financing (Facilities)
Repayments of unsecured financing (Facilities)
New bilateral borrowings
Financial inflows for the local credit facilties of Group companies
Financial outflows for the local credit facilties of Group companies
Transaction costs
Repayment of lease liabilities
Cash changes
Reclassification to equity of convertible option at issuance date
Amortised cost for the period
Translation differences and other changes for the period
Increases in lease liabilities
Remeasurement and early termination
Non-cash changes
Borrowings from banks and other financial institutions at December 31, 2020
5,369,239
500,000
(200,000)
1,127,978
(1,342,297)
800,000
149,204
(250,732)
(13,661)
(99,924)
670,568
(41,200)
9,813
(254,287)
89,557
10,863
(185,254)
5,854,553
At December 31, 2021 there were no financial payables secured by collateral guarantees (pledges and mortgages).
For current financial payables, it is considered that their carrying amount approximates their relative fair value.
For non-current financial payables, their fair value is shown below, compared with their carrying amount:
Bonds
Borrowings from banks
Other financial payables
(in thousands of euro)
12/31/2021
12/31/2020
Carrying amount
Fair value
Carrying amount
Fair value
1,453,762
1,469,529
1,442,650
1,465,120
1,922,771
1,926,002
3,137,857
3,164,333
412,836
412,836
390,479
390,479
Total non-current financial payables
3,789,369
3,808,367
4,970,986
5,019,932
The public bond loan issued by Pirelli & C. S.p.A. under the EMTN programme is listed and its relative fair value was
measured with reference to year-end prices. It has therefore been classified in level 1 of the hierarchy provided
for by IFRS 13 – Fair Value Measurement. The fair value of the debt component of the convertible bond of the
“Schuldschein” loan and of current borrowings from banks, was calculated by discounting each expected debt
cash flow at the market swap-rate for the currency and the maturity date, increased by the Group’s credit rating
343
Consolidated Financial Statements
for other debt instruments similar by nature and technical characteristics, which therefore placed it at level 2 of
the hierarchy as provided for by IFRS 13 - Fair Value Measurement.
The apportionment of borrowings from banks and other financial institutions according to the currency of
origin for the debt, was as follows:
EUR
USD (US Dollar)
CNY (Chinese Renmimbi)
RUR (Russian Rouble)
RON (Romanian Leu)
BRL (Brasilian Real)
SEK (Swedish Krona)
GBP (British Pound Sterling)
TRY (Turkish Lira)
JPY (Japanese Yen)
MXN (Mexican Peso)
Other Currencies
Total
(in thousands of euro)
12/31/2021
12/31/2020
3,884,307
3,857,077
1,159,808
1,770,024
75,408
68,354
929
62,784
66,798
196
31,690
35,992
23,823
25,091
950
1,168
465
6,625
29,841
16,024
8,708
1,449
581
5,079
5,278,618
5,854,553
At December 31, 2021 there were hedging derivatives in place for interest rates and exchange rates on floating
rate debt in foreign currencies.
Considering the effects of the aforementioned hedging derivatives, the Group’s exposure to changes in interest
rates on financial payables, both in terms of the type of interest rate and in terms of the date of the renegotiation
of the same (resetting) was subdivided as follows:
→ floating rate payables to the amount of euro 2,143,307 thousand, whose interest rate is subject to renegotiation
during the course of 2022;
→ fixed rate payables to the amount of euro 3,082,028 thousand, whose interest rate is not subject to
renegotiation until the natural maturity of the debt to which it refers (euro 1,142,216 thousand with maturity in
the next twelve months, and euro 1,939,812 thousand euro with maturity beyond twelve months).
The cost of debt year-on-year stood at 2.38% compared to 1.94% at December 31, 2020.
The change mainly reflects the slight increase in financial expenses related to financial debt (euro +4.3 million)
combined with the significant reduction in gross debt realised during the year thanks to the generation of cash
and financial debt repayments made in the first months of 2021 for euro 838 million.
With regard to the existence of financial covenants, it is to be noted that (i) the Group’s main bank credit facility
(“Facilities”), granted to Pirelli & C. S.p.A. and Pirelli International Ltd. (formerly Pirelli International Plc) (to date
to be utilised solely by Pirelli & C. S.p.A.), (ii) the “Schuldschein” loan, (iii) the bilateral euro 600 million credit
facility granted to Pirelli & C. S.p.A. during the course of the first quarter of 2019 (the “Bilateral 600”), (iv) the
bilateral euro 125 million credit facility granted to Pirelli & C. S.p.A. during the course of the third quarter of 2019
(the “Bilateral 125”), (v) the “Sustainable Credit Facility” signed on March 31, 2020, and (vi) the euro 400 million
“ESG linked” bilateral credit facility granted to Pirelli & C. S.p.A. in December 2021 (the “Bilateral 400”), require
the observance of a maximum ratio (“Total Net Leverage”) between net debt and the gross operating margin, as
reported in the Consolidated Financial Statements of Pirelli & C. S.p.A.
344
Pirelli Annual Report 2021
For all of the loans indicated above, any failure to comply with the financial covenant is identified as a default event.
Specifically, any such default or non-fulfilment event will have the following consequences, if the lending
banks exercise their remedies: (i) for the “Facilities” loan, only if requested by a number of the lending banks
which represents at least 66 2/3% of the total commitment, the early repayment (partial or total) of the loan
with the simultaneous cancellation of the relative commitment; (ii) for the “Schuldschein” loan, individually and
independently if requested by each lending bank for their own share, the early repayment of the loan only for that
share; (iii) for the “Bilateral 600”, the “Bilateral 125” and the “Bilateral 400”, if requested by the sole bank which
had granted each of the loans, the termination of the contract and early repayment of the full amount disbursed
and (iv) for the “Sustainable Credit Facility”, only if requested by a number of the lending banks representing at
least 50% of the total commitment (or at least 60% if an additional lending bank is added to the current four), the
termination of the contract and early repayment of the loan.
In relation to the above, it should be noted that, at December 31, 2021, no default or non-fulfilment event had
occurred.
Other financial payables outstanding at December 31, 2021 were not subject to financial covenants.
The ““Facilities”, “Schuldschein”, “Bilateral 600” and “Bilateral 125” loans, the “Sustainable Credit Facility”, the
“Bilateral 400” loan, as well as the euro 100 million bilateral credit facility granted to Pirelli & C. S.p.A. in December
2021, also include Negative Pledge clauses and other customary provisions whose terms and conditions are
consistent with market standards, for each of the aforementioned types of credit facility.
24. TRADE PAYABLES
Trade payables were composed as follows:
Trade payables
Bill and notes payable
Total
(in thousands of euro)
12/31/2021
12/31/2020
Total
Non-current
Current
Total
Non-current
Current
1,516,488
109,879
1,626,367
-
-
-
1,516,488
1,273,863
109,879
43,108
1,626,367
1,316,971
-
-
-
1,273,863
43,108
1,316,971
For trade payables, it is considered that their carrying amount approximates their relative fair value.
The increase in trade payables, compared to the previous financial year, was mainly due to the recovery of
business and the low level of investments made in the last quarter of 2020
Trade payables for 2021 included, the portion relative to payables for the purchase of intangible assets and
property, plant and equipment, which amounted to euro 109,060 thousand. For comparative purposes, the 2020
balances were adjusted by including the portion of payables for the purchase of intangible assets and property,
plant and equipment that had been reported under “Other payables” to the amount of euro 49,000 thousand.
Refer to Note 25 for further details.
345
Consolidated Financial Statements
25. OTHER PAYABLES
Other payables were as follows:
12/31/2021
12/31/2020
Total
Non-current
Current
Total
Non-current
Current
(in thousands of euro)
Accrued expenses and deferred income
75,142
45,877
29,265
82,119
52,292
29,827
Tax payables not related to income taxes
82,449
5,410
77,039
120,470
5,178
115,292
Payables to employees
128,810
3,927
124,883
83,074
2,038
81,036
Payables to social security and welfare intitutions
61,345
20,368
40,977
55,010
17,008
38,002
Dividends payable
Contract liabilities
Other payables
152
4,434
-
12
152
254
4,422
4,198
-
-
254
4,198
38,356
891
37,465
57,421
764
56,657
Total Other payables
390,688
76,485
314,203
402,546
77,280
325,266
Accrued expenses and deferred income - non-current refers to euro 44,724 thousand in capital contributions
received for investments made mainly in Romania, whose benefits are recognised in the Income Statement in
proportion to the costs for which the contribution was disbursed.
Accrued expenses and deferred income - current includes euro 8,264 thousand for various trade initiatives
realised in Germany and Brazil, euro 9,387 thousand in government grants and tax incentives received mainly in
Italy and Romania, and euro 1,059 thousand for insurance costs coverage in some European countries.
The item tax payables not related to income taxes is mainly comprised of VAT payables (Value Added Tax),
other indirect taxes, withholding tax for employees, and other taxes not related to income taxes. This change
compared to the previous financial year, refers mainly to the postponement of the settlement of indirect tax
payables for 2020 by some Group companies, due to the possibility granted by various countries to postpone the
payment of settlements as a measure to contain the financial impact of the pandemic.
The item payables to employees mainly includes amounts accrued during the period but not yet paid. The
increase compared to the previous financial year mainly refers to the STI (Short Term Incentive) plan that was
cancelled in 2020 following the COVID-19 pandemic.
The item contract liabilities refers to advance payments from customers for which the performance obligation
has not yet been completed, pursuant to the provisions of IFRS 15.
The item other payables (euro 38,356 thousand) mainly includes:
→ euro 11,044 thousand in payables to representatives, agents, professionals and consultants;
→ euro 4,348 thousand in advance payments from customers on tyre sales;
→ euro 915 thousand in payables to Directors, Auditors and supervisory bodies.
The item other payables for 2020 included the portion related to payables for the purchase of intangible assets
and property, plant and equipment amounting to euro 49,000 thousand, reclassified among trade payables as
shown in Note 24 - “Trade Payables”.
346
Pirelli Annual Report 2021
26. TAX PAYABLES
Tax payables were for the most part for national and regional income taxes in different countries, and amounted
to euro 145,900 thousand (of which euro 11,512 thousand was for non-current payables), compared to euro
110,300 thousand at December 31, 2020 (of which euro 10,795 thousand was for non-current payables), which
is substantially consistent with the current taxes recorded for the financial year. Income tax payables include the
assessments made by Management with respect to the possible effects of uncertainty regarding the treatment
of income taxes.
27. DERIVATIVE FINANCIAL INSTRUMENTS
The item includes the fair value measurement of derivative instruments. The details are as follows:
12/31/2021
12/31/2020
Non-current
assets
Current
assets
Non-current
liabilities
Current
liabilities
Current
assets
Non-current
liabilities
Current
liabilities
(in thousands of euro)
Without adoption of hedge accounting
Foreign exchange derivatives - commercial positions
Foreign exchange derivatives - included in net financial
position
Interest rate derivatives - included in net financial
position
Hedge accounting adopted
- cash flow hedge:
Interest rate derivatives - included in net financial
position
Other derivatives - included in net financial position
Other derivatives - commercial positions
-
-
-
4,612
-
-
7,713
9,633
-
-
-
-
-
(5,856)
4,561
(9,353)
12,995
-
344
-
-
-
(4,815)
(32,499)
-
-
-
(3,519)
(979)
29,216
-
-
-
-
-
(10,623)
(76,978)
-
-
-
-
(372)
Total derivatives included in net financial position
4,612
38,849
(3,519)
(10,332)
13,339
(87,601)
(32,499)
4,612
46,562
(3,519)
(16,188)
17,900
(87,601)
(37,686)
At 31 December 2021, the derivatives of Brazil were presented by netting the assets and liabilities on the
same instrument. To ensure comparability with the previous year, derivative financial instruments present in
current assets, amounting to euro 21,427 thousand, were reclassified to derivative financial instruments in
current liabilities.
347
Consolidated Financial Statements
The composition of the items according to the type of derivative instrument is as follows:
Current assets
Forward foreign exchange contracts - fair value recognised in the Income Statement
17,346
17,556
(in thousands of euro)
12/31/2021
12/31/2020
Interest rate swaps - fair value recognised in the Income Statement
Cross currency interest rate swaps - cash flow hedge
Total current assets
Non-current assets
Interest rate swaps - cash flow hedge
Total non-current assets
Current liabilities
-
29,216
344
-
46,562
17,900
4,612
4,612
-
-
Forward foreign exchange contracts - fair value recognised in the Income Statement
(15,209)
(37,314)
Interest rate swaps - cash flow hedge
Commodity Futures in natural rubber - cash flow hedge
Total current liabilities
Non-current liabilities
Interest rate swaps - cash flow hedge
Cross currency interest rate swaps - cash flow hedge
Total non-current liabilities
(979)
-
-
(372)
(16,188)
(37,686)
(3,519)
(10,623)
-
(76,978)
(3,519)
(87,601)
DERIVATIVE FINANCIAL INSTRUMENTS NOT IN HEDGE ACCOUNTING The value of exchange rate derivatives
included in current assets and liabilities corresponds to the fair value measurement of forward currency buy/sell
contracts outstanding at closing date for the period. These are transactions which mirror the commercial and
financial transactions of the Group, and for which the hedge accounting option has not been adopted. Their fair
value was determined by using the forward exchange rate at the reporting date.
DERIVATIVE FINANCIAL INSTRUMENTS IN HEDGE ACCOUNTING The value of interest rate derivatives recognised
under non-current assets to the amount of euro 4,612 thousand, under non-current liabilities to the amount of
euro 3,519 thousand, and under current liabilities to the amount of euro 979 thousand, refers to the fair value
measurement of 14 interest rate swaps.
(milioni di euro)
Derivative
Hedged element
Notional amount
Start date
Maturity
IRS
IRS
IRS
IRS
Term loan in EUR
Term loan in EUR
Schuldschein
Schuldschein
IRS forward start
Pre-hedge
Totale
June 2019
June 2022 receive floating / pay fixed
August 2019
August 2023
receive floating / pay fixed
July 2020
July 2023
receive floating / pay fixed
July 2020
July 2025 receive floating / pay fixed
March 2022
March 2026
receive floating / pay fixed
250.0
62.5
180.0
20.0
500.0
1,012.5
348
Pirelli Annual Report 2021
During the first half-year of 2021, an IRS receive floating EURIBOR / pay fixed EURIBOR was closed early
following the partial repayment of the unsecured (“Facilities”) loan to the amount of euro 756 million amount
(refer to Note 23).
For these derivatives, hedge accounting of the cash flow hedge type was adopted. Items subjected to hedge
accounting are:
→ future interest flows on floating rate liabilities in EUR;
→ future interest flows on the “Schuldschein” loan (refer to Note 23);
→ future financing transactions (pre-hedge).
The change in the fair value for the period which was positive to the amount of euro 4,964 thousand, was entirely
suspended in equity, while euro 4,624 thousand in net interest payables was reversed to the Income Statement
under the item “Financial Expenses” (Note 37), correcting the financial expenses recognised on the hedged
liability, and euro 1,089 thousand for the ineffectiveness related to the early liquidation of the IRS.
A change of +0.5% in the EURIBOR curve, all other conditions being equal, would result in a positive change
of euro 11,973 thousand in the equity of the Group, while a change of -0.5% in the EURIBOR curve, all other
conditions being equal, would result in a negative change of euro 12,274 thousand in the equity of the Group.
The value of other derivatives, recognised under current assets to the amount of euro 29,216 thousand, refers
to the fair value measurement of 4 cross currency interest rate swaps with the following characteristics:
Derivative
CCIRS
Total
"Notional amount
(USD million)"
"Notional amount
(USD million)"
Start date
Maturity
1,079
1,079
920
920
July 2019
June 2022
pay fix EUR / receive
floating LIBOR USD
During the first half-year of 2021, two CCIRS pay floating EURIBOR/receive floating LIBOR contracts were
closed early following the partial repayment of the unsecured loan (“Facilities”) to the amount of euro 756 million,
(refer to Note 23). The exchange of notional amounts generated exchange rate losses of euro 15,598 thousand.
The objective of these derivatives, for which hedge accounting of the cash flow hedge type was adopted, was
to hedge the Group against the risk of cash flow fluctuations associated with changes in the LIBOR rate and
changes in the US$/euro exchange rate generated by a liability in USD at a floating rate.
The positive change in fair value for the period was suspended in equity to the amount of euro 91,570 thousand,
(the cash flow hedge reserve was positive to the amount of euro 90,395 thousand, and the cost of hedging
reserve was positive to the amount of euro 1,175 thousand), while to the Income Statement were reversed:
→ income of euro 83,860 thousand to offset unrealised net exchange rate losses recorded on the hedged liability;
→ net interest payables of euro 52 thousand to correct the financial expenses recognised on the hedged liability;
→ effectiveness which amounted to euro 1,363 thousand following the early liquidation of two CCIRS in
February 2021.
A parallel change of +0.5% in the EURIBOR and LIBOR curves, all other conditions being equal, would result in a
positive change of euro 1,853 thousand in the equity of the Group, while a change of -0.5% in the same curves, all
other conditions being equal, would result in a negative change of euro 1,867 thousand in the equity of the Group.
A +10% change in the USD/EUR exchange rate, all other conditions being equal, would result in a negative change
of euro 205 thousand in the Group’s equity, while a negative change of -10%, would instead result in a positive
change of euro 427 thousand in the Group’s equity.
Hedging relationships relative to any IRS and CCIRS are considered prospectively effective when the following
conditions are met:
→ there exists a financial relationship between the hedging instrument and the hedged item, in that the
characteristics of the hedging instrument (the nominal interest rate, the reset of the interest rate and
349
Consolidated Financial Statements the frequency of interest liquidation), are substantially
aligned with those of the hedged item. As a consequence,
any changes in the fair value of the hedging instrument
regularly offsets that of the hedged item;
→ the effect of credit risk is not predominant within the
hedging relationship. Based on the Group’s operating
policy, derivatives are traded only with financial counter-
parties with an elevated credit standing, while the
credit quality of the outstanding derivatives portfolio is
constantly monitored;
→ the designated hedge ratio is aligned with that used for
financial risk management purposes and is equal to
100% (1:1).
The ineffectiveness of the hedging relationship is calculated
at each reporting date using the Dollar Offset method, which
involves comparing any changes in the risk-adjusted fair
value of the hedging instrument (with the exception of those
attributable to the currency basis spread) with changes in
the risk-free fair value of the hedged item, by identifying a
hypothetical derivative with the same characteristics as the
underlying financial liability.
The possible causes of ineffectiveness are as follows:
→ the application of credit risk adjustments only to the
hedging instrument but not to the hedged item;
→ the hedged item incorporates a floor that is not reflected
in the hedging instrument;
→ the misalignment between the effective contractual
conditions of the future transaction and those of the
hedging instrument.
For further details reference should be made to Note 37 -
“Financial Expenses”.
28. COMMITMENTS AND RISKS
COMMITMENTS FOR THE PURCHASE OF TANGIBLE AND
INTANGIBLE ASSETS
The commitments to purchase property, plant and equipment
and intangible assets amounted respectively to euro 104,143
thousand and euro 3,489 thousand, and refer mainly to
subsidiary companies in Italy, Romania, Germany, Brazil,
China, Russia and Mexico.
LEASING CONTRACT COMMITMENTS
At December 31, 2021, the total amount for non-discounted
future payments for lease contracts not yet in force and
against which no financial debt was recognised, equalled
euro 2,171 thousand and mainly referred mainly referred to a
rental contract for a test track for summer tyres in Sweden.
COMMITMENTS FOR THE PURCHASE OF EQUITY INVESTMENTS/
FUND SHARES
These refer to commitments to purchase shares in Equinox
Two S.C.A., a private equity company, for a maximum amount
of euro 2,158 thousand.
OTHER RISKS
investigation
LITIGATION AGAINST THE COMPANIES OF THE PRYSMIAN
GROUP BEFORE THE COURT OF MILAN A case is currently
pending before the Court of Milan (arising from the joinder of
two separate proceedings - see below) following the decision
issued on April 2, 2014 by the European Commission (as
confirmed in the final instance by the Court of Justice of
the European Union on October 28, 2020) at the conclusion
of the antitrust
into conduct restricting
competition in the European high voltage electric cables
market. The decision had imposed a sanction on Prysmian
Cavi e Sistemi S.r.l. (“Prysmian CS”) as it was directly involved
in the cartel, a portion of which (euro 67 million) Pirelli, despite
not having been found directly involved in the activities of the
cartel, had been held to be jointly and severally liable with
Prysmian CS, based solely on the application of the so-called
parental liability principle, since during part of the period of
the infringement, the share capital of Prysmian CS was held,
either directly or indirectly by Pirelli.
On December 31, 2020, Pirelli proceeded to pay its share of
the aforementioned sanction to the European Commission
(corresponding to 50% of the sanction, plus interest), for
which it had previously made appropriate provisions.
Pending the settlement of the aforementioned EU Court
proceedings, in November 2014, Pirelli brought an action
before the Court of Milan in order to obtain an assessment
and declaratory judgement of the obligation of Prysmian
CS to hold Pirelli harmless and indemnified against any
claim relating to the alleged anti-competitive cartel in the
energy cables sector, including the sanction imposed by the
European Commission.
Prysmian CS filed an appearance in the aforementioned
proceedings requesting the dismissal of Pirelli’s claims,
as well as, by way of a counterclaim, as well as to be held
indemnified by Pirelli in relation to the consequences arising
from or in any way connected to the Decision of the European
Commission. The proceedings had been suspended pending
the final ruling of the EU Courts and were resumed by Pirelli
on November 30, 2020 following the ruling of the Court of
Justice.
In October 2019, Pirelli brought a further action before the
Court of Milan against Prysmian CS. and Prysmian S.p.A.
requesting the assessment and declaratory judgement of
Prysmian CS’s obligation to also indemnify and hold Pirelli
harmless from any charges, expenses, costs and/or damages
resulting from claims by private and/or public third parties
(including authorities other than the European Commission)
relating to, connected with and/or consequential to the
facts that were subject to the decision of the European
Commission, as well as the consequent order that Prysmian
CS reimburse any charges, expenses, costs or damages
incurred or suffered by Pirelli.
In these proceedings, Pirelli also requested that Prysmian CS
and Prysmian S.p.A. be held liable for certain unlawful conduct
connected with the abovementioned anti-competitive cartel
350
Pirelli Annual Report 2021 and accordingly, that they be ordered to pay compensation
for all damages suffered and to be suffered by Pirelli.
Pirelli lastly, requested the assessment and declaratory
judgement on the joint and several liability of Prysmian S.p.A.
with Prysmian CS in relation to the amounts that will be paid
in this new action and in the action commenced in November
2014, if they should not be satisfied by the latter.
Prysmian CS and Prysmian S.p.A. entered an appearance
in the above proceedings in November 2020, seeking the
dismissal of Pirelli’s claims and, by way of a counterclaim, to
be held harmless and indemnified by Pirelli in relation to any
consequences arising from claims by private and/or public
third parties relating to, connected with and/or consequential
to the facts which are the subject of the decision of the
European Commission.
In April 2021, the two judgments were joined.
Based on careful analyses supported by authoritative
external legal opinions, the assessment of the risk related
to the disputes described above is such as to not require
the allocation of any specific provision in the Consolidated
Financial Statements at December 31, 2021.
OTHER DISPUTES RELATED TO THE EUROPEAN COMMISSION
DECISION In November, 2015, a number of companies of
Prysmian Group served Pirelli with a summons for the action
damages brought before the London High Court of Justice
against them and other defendants of the Decision of the
European Commission of April 2, 2014, by National Grid
and Scottish Power, the companies who claim to have been
harmed by the cartel. Specifically, the companies of the
Prysmian Group have requested that Goldman Sachs and
Pirelli, the latter due to its role as Parent Company for part
of the period of the cartel, hold them harmless with respect
to any obligations to pay damages (as yet unquantifiable) to
the National Grid and Scottish Power. As the aforementioned
action, brought before the Court of Milan in November 2014,
is still pending, Pirelli has challenged the lack of jurisdiction
of the London High Court of Justice claiming that, that any
decision on the merits must be referred to the Court that
had previously heard the case. In April 2016, the High Court
of Justice, at the request of Pirelli and the companies in the
Prysmian Group, suspended the proceedings until a final
judgment was passed that would settle the Italian proceedings
already pending.
In April 2019, before the Court of Milan, Terna S.p.A. - Rete
Elettrica Nazionale (“Terna”) jointly and severally sued Pirelli,
three Prysmian Group companies and another company
of the aforementioned European Commission decision,
in order to obtain compensation for the damage allegedly
suffered as a consequence of the anti-competitive conduct,
currently quantified by the plaintiff as euro 199.9 million.
Pirelli appeared in court contesting Terna’s claims, and like
the other defendants and against them filed a counterclaim
for damages in the unlikely event that it is held jointly and
severally liable for the anti-competitive cartel. In October
2021, the Judge excised from the proceedings the portion
of the dispute consisting of the “overlapping” indemnity
claims brought by Pirelli, on the one hand and Prysmian CS
and Prysmian S.p.A. on the other, ordering their joinder with
the proceedings pending between them before the Court of
Milan (see above).
Lastly, also in April 2019, the Electricity & Water Authority
of Bahrain, GCC Interconnection Authority, Kuwait Ministry
of Electricity and Water and Oman Electricity Transmission
Company, served a writ of summons against Pirelli, some
of the Prysmian Group companies and other defendants of
the aforementioned decision of the European Commission,
suing them jointly and severally to obtain compensation for
the damages allegedly suffered as a result of the alleged anti-
competitive conduct. These proceedings were brought before
the Court of Amsterdam, who with its ruling dated November
25, 2020, upheld the objection raised by Pirelli and excluded
its own jurisdiction over Pirelli. In February 2021, the plaintiffs
appealed against this ruling before the Amsterdam Court of
Appeal and the related proceedings are ongoing.
Based on careful analyses supported by authoritative
external legal opinions, the assessment of the risk related
to the disputes described above is such as to not require
the allocation of any specific provision in the Consolidated
Financial Statements at December 31, 2021
TAX DISPUTES
BRAZIL
The subsidiary Pirelli Pneus Ltda is involved in tax litigations
and proceedings. The most significant are described below:
LITIGATION CONCERNING THE ICMS TAX CREDITS ASSIGNED
BY THE STATE OF SANTA CATARINA With reference to the
dispute concerning the ICMS tax credits (Imposto Sobre
Operações Relativas à Circulação or state value added tax
on transactions related to the movement of goods and the
rendering of interstate, intermunicipal and communication
transport services) assigned by the State of Santa Catarina,
Pirelli Pneus Ltda, had received tax assessments which
disavowed the ICMS tax credits. The claim was made by
the State of São Paulo, according to which Pirelli Pneus
Ltda had benefited from ICMS tax credits allocated by the
State of Santa Catarina and which were deemed illegitimate
by the former because they were allocated by the latter
in violation of the Brazilian Constitution, in the absence
of a previous agreement between the various States. This
dispute was brought before the competent administrative-
tax commissions and though the initial decisions were
not favourable to Pirelli Pneus Ltda, on August 8, 2017 a
legislative provision (Complementary Law No. 160) came into
force, aimed at ending this dispute between the various states
in Brazil. This regulation validates the incentives, which had
previously been considered illegitimate, and therefore also
extinguished the relative sanctions imposed by the Brazilian
tax authorities.
The implementative aspects of this new provision have been
defined by the Brazilian States, and therefore even Pirelli
Pneus Ltda has also filed a petition for amnesty regarding
351
Consolidated Financial Statements the dispute in question. Specifically, between May and June
2021, the claims of the tax authorities were withdrawn in three
different cases and, therefore, the risk previously estimated
at euro 122 million has now been reduced to approximately
euro 5.7 million, including taxes, interest and sanctions.
The risk of losing the case has not been assessed as probable
and, therefore, as a result no liability has been accrued in the
Financial Statements for this dispute.
LITIGATION CONCERNING THE IPI TAX RATE APPLICABLE TO
CERTAIN TYPES OF TYRES The subsidiary Pirelli Pneus Ltda
is party to a tax dispute with the Brazilian tax authorities
concerning the
IPI tax rate (Imposto sobre Produtos
Industrializados or tax on industrialised products) particularly
with reference to the tax rate applicable to the production
and importation of tyres for the Sports Utility Vehicle (SUV),
vans and other industrial transportation vehicles (such as, for
example, trucks). According to statements by the Brazilian
tax authorities in the tax assessment notices issued during
the course of 2015, 2017 and 2021 the aforementioned tyres
should have been subjected to the IPI tax rate for the production
and importation of tyres for cars – with an applicable rate of
15% - instead of the 2% rate applied by Pirelli Pneus Ltda, as is
required for the production and importation of tyres destined
for heavy industrial use vehicles. To date, the dispute is pending
before the competent administrative and tax commissions and,
also in light of the recent judgement in favour of Pirelli Pneus
Ltda, the Group maintains that it has a good chance of winning.
This position is also supported by an appraisal prepared by a
Brazilian government institution (the INT - National Institute
of Technology) specifically commissioned by Pirelli Pneus
Ltda, who concluded their analysis by comparing the tyres
discussed, in light of their similar characteristics, with those
used for heavy industrial vehicles.
The risk is estimated at approximately euro 32 million,
inclusive of tax, interests and penalties.
The risk of losing the case has not been assessed as probable
and, therefore, as a result no liability has been accrued in the
Financial Statements for this dispute.
LITIGATION CONCERNING TRANSFER PRICING APPLIED TO SOME
INTRA-GROUP TRANSACTIONS Pirelli Pneus Ltda is involved
in a dispute with the Brazilian tax authorities for income tax
purposes (IRPJ - Imposto sobre a renda das pessoas jurídicas)
and social security contributions (CSLL - Contribuição Social
sobre o Lucro Líquido) due from the company for the 2008,
2011 and 2012 tax periods, deriving from the application of
transfer pricing regulations to import transactions with related
parties. Based on the notices of the assessment served on
the company during the course of 2013, 2015 and 2016, the
Brazilian tax authorities are mainly contesting the incorrect
application by the company, of the methodology provided
for by the administrative practice in force at the time (IN -
Instrução Normativa 243), for the assessment of transfer
prices applied to the importation of goods from related parties.
To date, the dispute filed by the company is pending before the
competent administrative-judicial courts. The Group maintains
that it has a good chance of winning and, in this regard, Pirelli
Pneus Ltda has already obtained a favourable ruling from the
administrative court, which has recognised the company’s
arguments by reducing the amount originally contested by the
Brazilian tax authorities.
In light of the above, the risk is estimated at approximately
euro 13 million inclusive of taxes, sanctions and interest.
The risk of losing the case has not been assessed as probable
and, therefore, as a result no liability has been accrued in the
Financial Statements for this dispute.
LITIGATION CONCERNING THE IPI TAX RATE WITH RESPECT
TO THE SALE OF TYRES TO THE AUTOMOTIVE SECTOR Pirelli
Pneus Ltda is also party to a dispute concerning the IPI tax
rate, (Imposto sobre Produtos Industrializados or tax on
industrialised products), concerning the sale of components
to companies operating in the automotive sector. According
to the Brazilian tax authorities in a notice of assessment
issued in 2013, Pirelli Pneus Ltda was not entitled to
benefit, with reference to its secondary office located in
the city of Ibiritè in the Federal State of Minas Gerais, from
the IPI exemption provided for by law in the case of sales
of particular components to companies operating in the
automotive sector. The dispute is under discussion before the
competent administrative-judicial courts, however the Group
maintains that it has well founded reasons to object to the tax
administration’s claim.
The risk is estimated at approximately euro 17 million,
inclusive of tax, interests and penalties.
The risk of losing the case has not been assessed as probable
and, therefore, as a result no liability has been accrued in the
Financial Statements for this dispute.
LITIGATION CONCERNING THE TAX IMPACT DERIVING FROM
THE SO CALLED “PLANO VERÃO” Pirelli Pneus Ltda is involved
in a dispute over taxes with the Brazilian tax authorities, which,
in the company’s opinion, levied more tax than was actually
due - for the period from 1989 to 1994 - following the so called
“Plano Verão”, an economic measure introduced by the then
Brazilian government, in order to control the hyperinflation
that was affecting the country, by freezing prices. However, the
difference between the actual and the indexed inflation had
the effect of creating significant distortions in the financial
statements of companies and ultimately, the amount of taxes
paid by them. Pirelli Pneus Ltda used the actual inflation rate
for its financial statement assessments, and, at the same time,
initiated legal proceedings to assert its arguments regarding
the correct amount of taxes due. During the course of the
aforementioned proceedings, Pirelli Pneus Ltda first adhered
to an amnesty for tax disputes in order to settle the dispute in
question and, only subsequently, on the basis of a ruling with
binding effect erga omnes by the Brazilian Supreme Court,
did it request the annulment of the effects of the amnesty, to
which it had previously adhered.
Proceedings are underway before the competent judicial
courts and the risk is estimated to be up to a maximum euro
30 million, inclusive of taxes, interest and sanctions.
352
Pirelli Annual Report 2021 The risk of losing the case has not been assessed as probable and, therefore, as a result no liability has been
accrued in the Financial Statements for this dispute.
LITIGATION REGARDING THE PIS AND COFINS TAX BASE Pirelli Pneus Ltda is party to new and significant tax
proceedings regarding federal taxes, namely the PIS - Programa de Integração Social, the COFINS tax-
Contribução para Financiamento de Seguridade Social and the ICMS state value added tax. Specifically, Pirelli
Pneus Ltda is a party to a dispute concerning the methods for calculating the tax base for PIS and COFINS taxes
and the right to deduct the ICMS reported on invoices, based on the tax authorities’ interpretation provided in the
Solução - COSIT Internal Consultation Solution No. 13.
Proceedings are underway before the competent jurisdictions with the risk estimated as being up to a maximum
euro 15 million, inclusive of taxes, interest and sanctions.
The risk of losing the case has not been assessed as probable and, therefore, as a result no liability has been
accrued in the Financial Statements for this dispute.
ITALY
In June 2021, the Regional Directorate of Lombardy served the Company a notice of assessment for the 2015
tax period contesting the amount of tax credit for taxes paid abroad.
The Company initiated a dispute with the Agenzia delle Entrate (Italian Tax Office), which recognised the technical
merits of the Company’s position and reduced its claim to a non-material amount, which was settled in 2021.
29. REVENUES FROM SALES AND SERVICES
Revenues from sales and services were as follows:
Revenues from sales of goods
Revenues from services
Total
(in thousands of euro)
2021
2020
5,192,948
4,191,752
138,502
110,379
5,331,450
4,302,131
These revenues refer to contracts with customers.
For further information on the performance of revenues from sales and services, refer to the section “Group
Performance and Results” in the Directors’ Report on Operations which is an integral part of this document.
353
Consolidated Financial Statements
30. OTHER INCOME
The item is composed as follows:
Other income from the Prometeon Group
Sales of Industrial products
Gains on disposal of property, plant and equipment
Rent income
Income from sublease of rights of use assets
Recoveries and reimbursements
Government grants
Other income
Total
(in thousands of euro)
2021
2020
40,836
38,897
145,247
136,305
1,794
3,307
867
6,187
2,907
922
21,557
31,598
13,578
13,613
76,682
75,884
303,868
306,313
The item other revenues from the Prometeon Group includes royalties recorded in respect of the trademark
licence agreement in the amount of euro 16,436 thousand, in respect of the know-how agreement to the amount
of euro 10,000 thousand, for the rendering of services to the amount euro 11,020 thousand, and for the sales of
raw materials, semi-finished and finished products to the amount of euro 3,382 thousand.
The item sales of industrial products mainly refers to revenues generated by the sale of tyres for trucks and
agricultural vehicles, purchased mainly from the Prometeon Group, and which are sold by the distribution network
controlled by the Pirelli Group.
The item recoveries and reimbursements includes, in particular:
→ refunds for taxes and customs duties totalling euro 3,271 thousand, received mainly from the Brazilian
subsidiary;
→ tax refunds totalling euro 3,769 thousand deriving from tax incentives obtained mainly in Germany for excise
duties on electricity and gas;
→ income from the sale of tyres and scrap materials carried out in the United Kingdom for a total of euro 1,160
thousand;
→ income from the sale of tyres for testing and the recovery of transport expenses in Germany to the amount
of euro 1,039 thousand;
The item other includes income related to the sale of goods and services for sporting activities linked to
sponsorship contracts to the amount of euro 34,916 thousand, and royalties from the Aeolus Tyre Co., Ltd. in the
amount of euro 7,000 thousand.
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Pirelli Annual Report 2021
31. PERSONNEL EXPENSES
The item is composed as follows:
Wages and salaries
Social security and welfare contributions
Costs for employee leaving indemnities and similar
Costs for defined contribution pension funds
Costs for defined benefit pension funds
Costs for jubilee awards
Costs for defined contribution healthcare plans
Other costs
Total
(in thousands of euro)
2021
2020
861,638
721,058
165,302
140,469
8,627
11,474
23,461
23,143
2,299
13,210
10,495
2,847
6,630
3,180
27,244
30,514
1,101,913
949,678
The item other costs includes the portion of the retention plan (equal to euro 4,662 thousand for 2021 and euro
8,423 thousand for 2020) which was approved by the by the Pirelli Board of Directors on February 26, 2018, and
intended for Key Managers, as well as a selected number of senior Managers and Executives whose contribution
to the implementation of the Strategic Plan is considered particularly significant.
Personnel expenses for 2021 included non-recurring events for a total of euro 2,537 thousand (euro 11,205
thousand for 2020), and refers to the buy-out of the UK pension funds.
32. DEPRECIATION, AMORTISATION AND IMPAIRMENTS
The item is composed as follows:
Amortisation
Depreciation (excl. right of use)
Depreciation of right of use
Impairment of property, plant and equipment and intang.assets (excl. right of use)
Impairment of right of use
Total
(in thousands of euro)
2021
2020
129,393
128,049
290,877
289,379
88,408
88,626
5,711
2,803
9,138
1,960
517,192
517,152
For the composition of the depreciation of the right of use, refer to Note 9.2 - “Right of Use”.
355
Consolidated Financial Statements
33. OTHER COSTS
The item is subdivided as follows:
Selling costs
Purchases of goods for resale
Advertising
Fluids and energy
Warehouse operating costs
IT expenses
Consultants
Maintenance
Insurance
Leases and rentals
Outsourcing
Duty stamps, duties and local taxes
Other provisions
Travel expenses
Remuneration for Key Managers
Cleaning expenses
Canteen
Security expenses
Waste disposal
Telephone expenses
Other
Total
(in thousands of euro)
2021
2020
323,545
255,395
395,301
326,737
207,794
193,039
180,815
142,214
69,281
67,045
55,752
38,376
49,076
48,038
57,278
41,436
32,471
30,401
31,073
24,281
41,495
24,561
28,944
24,190
40,675
32,673
20,721
16,676
28,194
7,469
16,174
13,092
18,228
10,950
9,887
5,232
12,811
10,214
8,010
5,427
147,632
144,209
1,770,518
1,466,294
The total increase for this item is mainly attributable to the resumption of production activity following the
temporary lockdown of manufacturing plants during the course of the previous financial year, and is mainly
reflected in the items “Selling costs”, “Purchases of goods for resale” and “Fluids and energy”.
The item Fluids and energy includes the cost of purchasing greenhouse gas emission allowances and renewable
energy certificates.
The item leases and rentals is composed as follows:
→ euro 13,935 thousand for lease contracts with a duration of less than twelve months (euro 12,358
thousand for 2020);
→ euro 6,727 thousand for lease contracts for low unit value assets (euro 6,820 thousand at December 31, 2020);
→ euro 10,411 thousand for lease contracts with variable payments (euro 5,103 thousand at December 31, 2020);
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Pirelli Annual Report 2021
The item other includes, amongst others, labour provided by third parties to the amount of euro 25,648 thousand,
(euro 27,230 thousand for 2020), and expenses for technological testing to the amount of euro 17,780 thousand
(euro 11,974 thousand for 2020);
34. NET IMPAIRMENT OF FINANCIAL ASSETS
This item which amounted to a loss of euro 7,950 thousand, compared to a loss of euro 17,385 thousand for
2020, mainly includes the net impairment of trade receivables to the amount of euro 7,906 thousand (euro
16,843 thousand for 2020).
35. NET INCOME/(LOSS) FROM EQUITY INVESTMENTS
35.1. SHARE OF NET INCOME/(LOSS) OF ASSOCIATES AND JOINT VENTURES
The share of the net income/(loss) from equity investments in associates and joint ventures is evaluated using
the equity method, and amounted to an income of euro 1,697 thousand, and refers mainly to investments in the
joint venture Xushen Tyre (Shanghai) Co., Ltd. which recorded a loss of euro 68 thousand (a loss of euro 4,558
thousand for 2020), and in the joint venture PT Evoluzione Tyres in Indonesia which amounted to an income of
euro 1,049 thousand (a loss euro 1,299 thousand for 2020).
35.2. DIVIDENDS
For 2021, this item amounted to euro 2,274 thousand, and mainly included dividends received from the RCS
MediaGroup S.p.A. (euro 741 thousand), from Fin.Priv. S.r.l. (euro 1,292 thousand), and from Genextra S.p.A. (euro
154 thousand). For 2020, the item had amounted to euro 65 thousand.
36. FINANCIAL INCOME
The item is composed as follows:
Interest
Other financial income
Fair value measurement of other financial assets
Fair value measurement of foreign exchange derivatives
Fair value measurement of other derivatives
Total
(in thousands of euro)
2021
2020
21,453
21,000
1,767
11,499
-
281
86
2,750
124,631
667
35,000
149,134
The item interest includes euro 3,886 thousand for interest on fixed income securities, and euro 9,426
thousand for interest receivables due from financial institutions and from associates and joint ventures. The item
also includes euro 3,039 thousand in interest matured on tax credits and on security deposits provided by the
Brazilian subsidiaries as a guarantee for legal and tax disputes.
The fair value measurement of other financial assets was positive to the amount of 11,499 thousand euro
and refers to the fair value measurement of dollar-linked bonds in which the Argentinian subsidiary has invested
in order to mitigate the effects of depreciation of the local currency. The exchange rate component of the fair
value measurement of dollar-linked bonds equalled euro 8,769 thousand, and partially offset the effect of
hyperinflation on the Argentinian subsidiary Pirelli Neumaticos SAIC. Reference should be made to Note 37 -
“Financial Expenses” for further details.
357
Consolidated Financial Statements
The fair value measurement of other derivative instruments mainly includes;
→ the effectiveness of cross currency interest rate swaps to the amount of euro 1,363 thousand, following the
early liquidation of two CCIRS in February 2021;
→ the ineffectiveness of the IRS in the amount of euro 1,089 thousand following early liquidation in February 2021.
Refer to Note 27 - “Derivative Financial Instruments”.
37. FINANCIAL EXPENSES
The item is composed as follows:
Interest
Commissions
Hyperinflation effect
Other financial expenses
Interest expense on lease liabilities
Net losses on exchange rates
Net interest expense on provisions for employee benefit obligations
Fair value measurement of foreign exchange derivatives
Total
(in thousands of euro)
2021
2020
102,764
101,602
12,601
11,712
15,024
10,054
6,297
11,108
19,529
21,334
2,339
147,683
1,241
2,142
19,486
-
179,281
305,636
Interest which totalled euro 102,764 thousand included:
→ euro 48,147 thousand for bank credit facilities held by Pirelli & C. S.p.A
→ euro 22,522 thousand in financial expenses relative to bond loans, of which euro 9,104 thousand refers
to unrated bonds, euro 4,112 thousand to the “Schuldschein” loan, and euro 9,305 thousand to the senior
unsecured guaranteed equity-linked bond loan, all of which were issued by Pirelli & C. S.p.A.;
→ euro 4,676 thousand in net interest payables for interest on Cross Currency Interest Rate Swaps and Interest
Rate Swaps, for which hedge accounting has been adopted, to rectify the flow of financial expenses for the
bank credit facilities and bond loans mentioned above. For further details reference should be made to Note
27 - “Derivative Financial Instruments”;
→ euro 15,647 thousand in financial expenses related to bank loans held by foreign subsidiaries.
The item commissions includes, in particular, euro 2,146 thousand in costs for the assignment of receivables
with non-recourse clauses mainly in South America, Italy and Germany and euro 10,455 thousand relative to
expenses for sureties and other bank commissions.
The item hyperinflation effect refers to the effect on monetary items deriving from the application of IAS 29
- Hyperinflation, on the part of the subsidiary company Pirelli Neumaticos SAIC. Reference should be made to
Note 41 - “Hyperinflation” or more details.
The item net losses on exchange rates which amounted to euro 2,339 thousand (a net income of euro 559,472
thousand and a loss of euro 561,811 thousand), refers to, the adjustment of period-end exchange rates for
items expressed in currencies other than the functional currency and still outstanding at the closing date of the
Consolidated Financial Statements, and to the net losses realised on items closed during the course of the period.
They also include income to the amount of euro 83,860 thousand due to the exchange rate component of the fair
value valuation of the cross currency interest rate swaps, for which hedge accounting of the cash flow hedge type
was adopted, to offset both realised and unrealised exchange rate losses recorded on the hedged liability.
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Pirelli Annual Report 2021
The item fair value measurement of exchange rate derivatives refers to forward foreign exchange buy/sell
transactions to hedge commercial and financial transactions, in accordance with the Group’s exchange rate risk
management policy. For transactions still open at period-end, the fair value is determined by applying the forward
exchange rate at the reporting date of the Consolidated Financial Statements. The fair value measurement
is composed of two elements: the interest component related to the interest rate differential between the
hedged currencies, equal to a net cost of euro 18,379 thousand and the exchange rate component equal to
a net cost of euro 1,107 thousand. In comparing the net losses on exchange rates, which equalled euro 2,339
thousand, recognised on receivables and payables in currencies other than the functional currency of the various
subsidiaries, with the fair value measurement of the exchange rate component of the exchange rate derivatives
used for hedging, which amounted to a net cost of euro 1,107 thousand, the result is a negative difference of euro
3,446 thousand.
38. TAXES
Taxes were composed as follows:
Current taxes
Deferred taxes
Total
(in thousands of euro)
2021
2020
143,910
106,938
(28,752)
(92,245)
115,158
14,693
Taxes for 2021 amounted to euro 115,158 thousand against a net income before tax of euro 436,751 thousand,
compared to the amount of euro 14,693 thousand for 2020 against a net income before tax of euro 57,366
thousand. The tax rate for 2021 stood at 26.4% compared to 25.6% for 2020.
The reconciliation between theoretical and effective taxes is as follows:
A) Net income/(loss) before taxes
B) Theoretical taxes
Main causes for changes between estimated and effective taxes:
Taxes incentives
Non-deductible costs
Non-recoverable withholding taxes
Other
C) Effective taxes
Theoretical tax rate (B/A)
Effective tax rate (C/A)
(in thousands of euro)
2021
2020
436,751
57,366
112,279
5,924
(18,008)
15,913
2,282
2,692
(9,710)
12,965
2,175
3,339
115,158
14,693
25.7%
26.4%
10.3%
25.6%
The negative impact on the tax rate resulting from non-deductible costs and other items, including non-
recoverable withholding taxes, was substantially offset by tax incentives.
359
Consolidated Financial Statements
The Group’s theoretical tax burden is calculated by taking into account the nominal tax rates of the countries
where the Group’s main companies operate, as shown below:
Europe and Turkey
Italy
Germany
Romania
Great Britain
Turkey
Russia, Nordics and MEAI
Russia
North America
USA
Mexico
South America
Argentina
Brazil
APAC
China
2021
2020
27.90%
27.90%
30.00%
30.00%
16.00%
16.00%
19.00%
19.00%
25.00%
22.00%
20.00%
20.00%
25.00%
25.00%
30.00%
30.00%
35.00%
30.00%
34.00%
34.00%
25.00%
25.00%
The incidence of taxes paid according to geographical Region during the course of the financial year, equal to
euro 125,633 thousand, (90,692 thousand euros for 2020), was as follows:
→ 30% APAC (36% in 2020);
→ 29% Europe and Turkey (13% in 2020);
→ 22% South America (38% in 2020);
→ 12% North America (8% in 2020);
→ 7% Russia, Nordics and MEAI (5% in 2020).
Taxes paid means the total amount of income taxes effectively paid during the tax period by the Group companies
to their respective jurisdictions of tax residence, to income tax advances paid in 2021, to income taxes paid
during the course of 2021 but relative to previous financial years (e.g. income tax balances relative to 2020),
or payments relative to tax assessments for previous financial years. Taxes paid also include withholding taxes
incurred on cross-border payments such as dividends, interest and royalties which have been reported in the
jurisdiction of the recipient’s tax residence. Taxes paid in the South American region included the withholding
taxes paid by the Brazilian subsidiary Pirelli Pneus Ltda on cash flows collected when closing out derivative
contracts entered into, to hedge exchange rate risks.
Taxes include non-recurring events of euro 23,223 thousand related to tax credits recorded by the Brazilian
subsidiary. For further information, please refer to the note “Tax receivables” (Note 16).
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Pirelli Annual Report 2021
39. EARNINGS/(LOSSES) PER SHARE
Basic earnings/(losses) per share are calculated by dividing the earnings/(losses) attributable to the Parent Company
by the weighted average number of ordinary shares outstanding for the period, excluding of treasury shares.
Net income/(loss) attributable to the Parent Company
Weighted average number of ordinary shares outstanding (in thousands)
Earnings /(losses) per ordinary share (in euro per share)
(in thousands of euro)
2021
2020
302,796
29,781
1,000,000
1,000,000
0.303
0.030
It should be noted that the basic and diluted earnings/(losses) per share are the same. It should also be noted that
the option to convert the shares relating to the bond loan has no dilutive effect, as the average market price of the
shares was lower than the exercise price of the option itself during 2021.
40. DIVIDENDS PER SHARE
During 2021, Pirelli & C. S.p.A. distributed to its shareholders, also by way of withdrawing part of the earnings
accrued during previous financial years, euro 0.08 per share equal to a total dividend payout of euro 80 million
before withholding taxes.
41. HYPERINFLATION
Based on the provisions of the Group’s accounting standards, regarding the entry/exit criteria for inflation
accounting, the Argentinian subsidiary Pirelli Neumaticos SAIC has adopted inflation accounting since July 1,
2018 and is the only Group company operating under hyperinflation. The price index used for this purpose was
the national consumer price index (CPI) published by the National Institute for Statistics and Census (INDEC).
For the Consolidated Financial Statements at December 31, 2021 the official inflation index of 50.9% was used.
Losses on the net monetary position were recognised in the Income Statement as “Financial Expenses” (Note
37), to the amount of euro 15,024 thousand.
42. NON-RECURRING EVENTS
Pursuant to CONSOB Communication No. DEM/6064293 of July 28, 2006, information on the impact of
non-recurring events and transactions on the Group’s Income Statement, Statement of Financial Position and
Financial Statement for the 2021 financial year is shown below:
Financial statement (a)
Operating costs
Taxes
Total impact non-recurring items (b)
Total adjusted (a-b)
(in millions of euro)
Equity
Net income/(loss)
Cash flow
5,042.6
321.6
(422.0)
(2.5)
23.2
20.7
(2.5)
23.2
20.7
(3.0)
-
(3.0)
5,021.9
300.9
(419.0)
361
Consolidated Financial Statements
The impact on the individual items of the Consolidated Income Statement was as follows:
Personnel expenses:
- UK pension fund buy-out
Impact on operating income
Impact on net income/(loss) before taxes
Taxes:
- Brazilian tax receivables
Impact on net income/(loss)
(in millions of euro)
2021
2020
(2.5)
(2.5)
(2.5)
23.2
20.7
(11.2)
(11.2)
(11.2)
-
(11.2)
43. RELATED-PARTY TRANSACTIONS
Related party transactions, including intra-group transactions, do not qualify as either atypical or unusual, but
are part of the ordinary course of business for companies of the Group. Such transactions, when not carried out
under standard conditions or indicated by specific regulatory conditions, are in any case regulated by conditions
consistent with those of the market and carried out in compliance with the provisions of the Procedure for
Related Party Transactions which the Company has adopted.
The following table summarises the items from the Statement of Financial Position, the Income Statement and
the Cash Flow Statement that include related party transactions and their relative impact.
STATEMENT OF FINANCIAL POSITION
12/31/2021
of which
related
parties
% incidence
12/31/2020
(in millions of euro)
of which
related
parties
% incidence
Non current assets
Other receivables
Current assets
Trade receivables
Other receivables
Non-current liabilities
362.9
6.7
1.8%
402.1
5.8
1.4%
659.2
19.5
3.0%
597.7
470.6
105.9
22.5%
469.2
12.8
111.3
14.7
0.2
5.9
2.4
2.1%
23.7%
0.3%
0.3%
8.1%
1.0%
4,971.0
77.3
73.3
243.9
883.6
2.2
0.2%
1,317.0
134.6
10.2%
325.3
5.0
6.7
3.0
2.1%
60.2%
Borrowings from banks and other financial institutions
3,789.4
Other payables
Provisions for liabilities and charges
Provisions for employee benefit obligations
Current liabilities
Borrowings from banks and other financial institutions
Trade payables
Other payables
Provisions for employee benefit obligations
76.5
81.2
220.6
1,489.2
1,626.4
314.2
-
362
0.3%
0.3%
27.1%
3.2%
0.2%
8.9%
4.3%
13.2
0.2
22.0
7.2
2.8
144.1
13.4
-
Pirelli Annual Report 2021
INCOME STATEMENT
Revenue from sales and services
Other income
Raw materials and comsumables used (net of changes in
inventories)
Personnel expenses
Other costs
Financial income
Financial expenses
Net income / (loss) from equity investments
CASH FLOW
Net cash flow operating activities:
Change in Trade receivables
Change in Trade payables
Change in Other receivables
Change in Other payables
Uses of Provisions for employee benefit obligations
Net cash flow investing activities:
2021
5,331.5
303.9
(1,820.6)
of which
related
parties
23.7
56.3
(3.6)
% incidence
2020
(in millions of euro)
of which
related
parties
% incidence
0.4%
4,302.1
18.5%
306.3
0.2%
(1,280.4)
15.1
49.4
(4.9)
0.4%
16.1%
0.4%
1.6%
(1,101.9)
(23.1)
2.1%
(949.7)
(15.0)
(1,770.5)
(312.5)
17.6%
(1,466.3)
(241.8)
16.5%
35.0
(179.3)
4.0
3.7
(1.5)
1.7
10.4%
149.1
0.8%
(305.6)
n.a.
(5.3)
2.3
(0.9)
(5.6)
1.6%
0.3%
n.a.
2021
of which
related
parties
% incidence
2020
(in millions of euro)
of which
related
parties
% incidence
(51.4)
214.5
23.7
(59.1)
(48.8)
(6.4)
19.5
(1.2)
(5.2)
(3.0)
n.a.
n.a.
n.a.
n.a.
n.a.
(35.3)
(184.6)
21.9
60.6
(37.2)
(4.0)
0.4
(6.9)
2.5
(2.3)
n.a.
n.a.
n.a.
n.a.
n.a.
Change in Financial receivables from associates and J.V.
15.3
15.3
n.a.
(64.1)
(64.1)
n.a.
Net cash flow financing activities:
Repayment of principal and payment of interest for lease
obligations
(105.4)
(3.8)
n.a.
(99.9)
(2.9)
n.a.
363
Consolidated Financial Statements The effects of the related party transactions, contained in the Income Statement and the Statement of Financial
Position, on the consolidated data of the Pirelli Group were as follows:
STATEMENT OF FINANCIAL POSITION
(in millions of euro)
12/31/2021
12/31/2020
Associates
and joint
ventures
Other related
parties
Remuneration
for Directors
and Key
Managers
Associates
and joint
ventures
Other related
parties
Remuneration
for Directors
and Key
Managers
Other non-current receivables
of which financial
Trade receivables
Other current receivables
of which financial
Borrowings from banks and other financial institutions non-
current
Other non-current payables
Provisions for liabilities and charges non-current
Provisions for employee benefit obligations non-current
Borrowings from banks and other financial institutions current
Trade payables
Other current payables
Provisions for employee benefit obligations current
6.7
6.7
14.7
92.4
81.4
13.0
-
-
-
2.3
26.9
-
-
-
-
4.8
13.5
-
0.2
-
-
-
0.5
117.2
1.5
-
-
-
-
-
-
-
0.2
22.0
7.2
-
-
11.9
-
5.8
5.8
6.9
102.3
88.8
13.7
-
-
-
1.7
30.6
-
-
-
-
5.9
9.0
-
1.0
-
-
-
0.5
104.0
6.2
-
-
-
-
-
-
-
0.2
5.9
2.4
-
-
0.5
3.0
INCOME STATEMENT
(in millions of euro)
Revenues from sales and services
Other income
"Raw materials and consumables used
(net of change in inventories)"
Personnel expenses
Other costs
Financial income
Financial expenses
Net income/ (loss) from equity investments
12/31/2021
12/31/2020
Associates
and joint
ventures
Other related
parties
Remuneration
for Directors
and Key
Managers
Associates
and joint
ventures
Other related
parties
Remuneration
for Directors
and Key
Managers
20.9
8.4
(1.1)
-
2.8
47.9
(2.5)
-
-
-
-
(23.1)
12.8
3.4
(2.6)
-
2.3
46.0
(2.3)
-
(137.5)
(146.8)
(28.2)
(98.2)
(136.1)
3.7
(0.4)
1.7
-
(1.1)
-
-
-
-
2.3
(0.5)
(5.6)
0.1
(0.4)
-
-
-
-
(15.0)
(7.5)
-
-
-
364
Pirelli Annual Report 2021 TRANSACTIONS WITH ASSOCIATES AND JOINT VENTURES
TRANSACTIONS - STATEMENT OF FINANCIAL POSITION The
item other non-current receivables refers to a loan granted
by Pirelli Tyre S.p.A. to the Indonesian joint venture PT
Evoluzione Tyres.
The item trade receivables includes receivables for services
rendered mainly to the Chinese joint venture Jining Shenzhou
Tyre Co., Ltd.
The item other current receivables mainly refers to:
→ receivables for the royalties of Pirelli Tyre S.p.A. from PT
Evoluzione Tyres and Jining Shenzhou Tyre Co., Ltd. to
the amount of euro 1.2 million and euro 0.8 million each
respectively;
→ receivables for the sale of materials and moulds to the
Joint Stock Company the “Kirov Tyre Plant” to the amount
of euro 3.1 million;
→ service fee receivables of the Pirelli Tyre Co., Ltd. from
the Jining Shenzhou Tyre Co., Ltd. to the amount of euro
3.6 million;
The financial portion refers to a loan granted by Pirelli Tyre
Co., Ltd. to the Jining Shenzhou Tyre Co., Ltd.
The item non-current borrowings from banks and other
financial institutions refers to the payables of the company
Pirelli Deutschland GmbH to Industriekraftwerk Breuberg
GmbH for machinery hire, and the payables of Pirelli Tyre Co.,
Ltd. to the Jining Shenzhou Tyre Co., Ltd.
item current borrowings
The
from banks and
other financial institutions refers to a portion of the
aforementioned short-term debt.
The item trade payables mainly refers to payables for the
purchase of energy from Industriekraftwerk Breuberg GmbH
and trade payables to the Jining Shenzhou Tyre Co., Ltd.
TRANSACTIONS - INCOME STATEMENT The item revenues from
sales and services mainly refers to the sales of materials and
semi-finished products to the Jining Shenzhou Tyre Co., Ltd.
to the amount of euro 20.5 million.
The item other financial income refers mainly to the
recharging of labour costs to the amount of euro 4.3 million,
and to royalties in the amount of euro 3.9 million.
The item other costs mainly refers to costs for:
→ the purchase of tyres from Jining Shenzhou Tyre Co., Ltd.
to the amount of euro 63.3 million;
→ the purchase of Motorcycle products from PT Evoluzione
Tyres to the amount of euro 41.4 million;
→ the purchase of energy and machine hire from
Industriekraftwerk Breuberg GmbH to the amount of euro
15,8 million.
The item financial income refers to interest on loans
disbursed to the two joint ventures.
OTHER RELATED-PARTY TRANSACTIONS
The transactions detailed below refer mainly to transactions
with the Aeolus Tyre Co., Ltd. and to transactions with the
Prometeon Group, both of which are subject to the control
of the direct Parent company or indirect Parent companies of
Pirelli & C. S.p.A.
TRANSACTIONS - STATEMENT OF FINANCIAL POSITION The
item trade receivables refers to receivables from companies
of the Prometeon Group.
The item other current receivables refers to receivables
from companies of the Prometeon Group to the amount of
euro 11.7 million mainly for royalties, and from the Aeolus Tyre
Co., Ltd. to the amount of euro 1.8 million.
The item non-current borrowings from banks and other
financial institutions refers to payables of Pirelli Otomobil
Lastikleri A.S. for machine hire from Prometeon Turkey
Endüstriyel ve Ticari Lastikler A.S.
The item current borrowings from banks and other financial
institutions refers to euro 0.2 million for the short-term
portion of the aforementioned debt, and to euro 0.3 million
for the debt of Pirelli Pneus Ltda payable to Prometeon Tyre
Group Industrial Brasil Ltda.
The item trade payables refers to payables to companies of
the Prometeon Group.
TRANSACTIONS - INCOME STATEMENT The item other income
includes royalties recognised from the Aeolus Tyre Co., Ltd. to
the amount of euro 7 million, in respect of the license agreement
entered into in 2016, some of whose terms and conditions were
renegotiated in February 2019. The item also includes income
from Prometeon Group companies mainly relative to:
→ royalties recorded in respect of the license agreement for
the use of the Pirelli trademark to the amount of euro 16.4
million;
→ the sale of raw materials, finished and semi-finished
products for the total amount of euro 3.3 million of which
euro 2.1 million was carried out by Pirelli Pneus Ltda;
→ the licence agreement for know-how charged by Pirelli
Tyre S.p.A. to the amount of euro 10 million.
→ the Long-Term Service Agreement to the amount of euro
4.8 million of which euro 3.3 million was earned by Pirelli
Sistemi Informativi S.r.l., and euro 0.8 million by Pirelli
Pneus Ltda;
→ logistics services for a total amount of euro 1.3 million
of which euro 0.8 million was carried out by the Spanish
company Pirelli Neumaticos S.A. - Sociedad Unipersonal.
The item raw and consumable materials used refers to
costs payable to companies of the Prometeon Group for the
purchase of direct materials/consumables/compounds, of
which euro 1.7 million were costs of by the Brazilian company
Pirelli Pneus Ltda.
365
Consolidated Financial Statements item other costs
The
includes contributions to the
HangarBicocca Foundation and the Pirelli Foundation to the
amount of euro 0.9 million, and costs payable to companies
of the Prometeon Group mainly for:
→ the purchase of truck products for a total amount of euro
90.7 million of which euro 76.8 million was carried out by
the Brazilian company Comercial e Importadora de Pneus
Ltda. and subsequently resold to retail customers, euro
8.9 million by the Russian Limited Liability company Pirelli
Tyre Russia, and euro 3.7 million by the German company
Driver Reifen und KFZ-Technik GmbH.
→ the purchase of Car/Motorcycle and semi-finished
products for a total amount of euro 37.8 million of which
euro 37 million was carried out by the Turkish company
Pirelli Otomobil Latikleri A.S. in respect of the Off-Take
contract, and euro 0.8 million on the part of Pirelli Pneus
Ltda for the purchase of inner tubes for tyres;
→ costs to the amount of euro 5.7 million incurred by Pirelli
Pneus Ltda for services for the transformation of raw
materials as a result of activities pertinent to the Toll
manufacturing contract.
The item financial expenses refers to the aforesaid interest
relative to machine hire
RELATIONS WITH DIRECTORS AND KEY MANAGERS
Statement of Financial Position and Income Statement
transactions regarding Directors and Key Managers can be
summarised as follows:
→ the Statement of Financial Position items provisions for
liabilities and charges and provisions for employee
long-term
benefit obligations non-current,
benefits relative to the monetary three-year 2020-2022
and 2021-2023 Long Term Incentive Plans for euro 18.9
million, short-term benefit related to Short Term Incentive
plan for euro 3.1 million, as well as employee leaving
indemnities for euro 7.2 million;
include
→ the Statement of Financial Position items other current
payables include the short-term portion related to the
Short Term Incentive plan;
→ the item personnel expenses and other costs includes
euro 5.9 million relative to employees’ leaving indemnity
(TFR) and retirement benefits (euro 1.2 million for
2020), as well as short term benefits to the amount of
euro 14.6 million (euro 6.1 million for 2020) and long-
term benefits to the amount of euro 14.7 million (euro
4.4 million for 2020).
SIGNIFICANT EVENTS SUBSEQUENT TO THE END OF THE YEAR
On February 1, 2022 Pirelli was awarded Gold Class
recognition in the 2022 Sustainability Yearbook published
by S&P Global, which examined the sustainability profile
of more than 7,500 companies. Pirelli obtained the S&P
Global Gold Class recognition in the ranking that is carried
out annually on the basis of the results of the Corporate
Sustainability Assessment for the Dow Jones Sustainability
Indexes of S&P Global. In 2021 Pirelli confirmed its position
among the excellent performers of the Automobiles &
Parts sector, within the Dow Jones Sustainability World and
Europe indexes, with a score of 77 points against a sector
average of 31.
On February 21, 2022, Pirelli, in keeping with that which
had been announced to the market on November 11, 2021,
finalised the signing of a euro 1.6 billion five-year multi-
currency bank credit facility with a pool of leading Italian and
international banks.
The new credit facility, which is geared towards the Group’s
ESG objectives, will mainly enable the Group to:
→ repay debt maturing in June 2022 (approximately euro
950 million at December 31, 2021) by using euro 600
million from the new credit facility and the remainder from
the Company’s liquidity;
→ replace euro 700 million from an available and unused
credit facility maturing in June 2022 with euro 1.0 billion
from the new credit facility, thereby increasing financial
flexibility by euro 300 million.
This operation, which was finalised with improved terms and
conditions than for the credit facilities that will be replaced,
was consistent with the Company’s plans, and allows for the
optimisation of the debt profile by extending maturity dates.
On February 23, 2022 Pirelli announced that it had been
assigned an investment grade rating by S&P Global Ratings
and Fitch Ratings. This follows the Company’s request
for a public rating, in keeping with the Group’s objectives
of optimising conditions of access to the credit market.
Specifically, Fitch Ratings assigned Pirelli an Investment Grade
rating of BBB- with a stable outlook, emphasising, amongst
other things, the solidity of the Company’s operating margins
and its ability to generate cash flow, which make it possible
to forecast a significant reduction in debt over the next two
to three years. The agency highlighted Pirelli’s leadership
position in the Premium segment, its consolidated know-how
for high-performance products, its exposure to aftermarket
activities that are less volatile than that of the Standard
segment and the reputation of its Brand. S&P Global Ratings
assigned an Investment Grade rating of BBB- with a stable
outlook, highlighting, amongst other things, the solid position
Pirelli holds in the Premium and Prestige markets, its ability to
efficiently utilise its manufacturing plants, which is reflected
in an EBITDA margin that exceeds the sector average and the
agency’s expectation of continuous debt reduction, through
the careful management of a solid free cash flow.
On February 24, 2022 tensions between Russia and
Ukraine became more severe. At the date of this document,
the outcomes and implications of the Russia-Ukraine crisis
remain uncertain. The tightening of international sanctions
is also having repercussions on the economy of the Russian
Federation in terms of growth expectations, the currency
market and the sustainability of the domestic economic
and financial system in the medium-term. These factors are
compounded by the additional complications arising from the
restrictive countermeasures that the Russian government is
preparing - and in some cases has already implemented - in
response to the pressure of international sanctions.
366
Pirelli Annual Report 2021 The current situation is also bringing about rising prices
for energy, metal and agricultural commodities, with
repercussions on consumer price pressure and growth
prospects for the Eurozone. These elements of uncertainty
could lead to an alteration of normal market dynamics and,
more generally, of business operating conditions.
Pirelli has an industrial presence in Russia with two
manufacturing plants, located in Kirov and Voronezh,
dedicated to the production of tyres of which 85% are
Standard and 15% are High Value, and a production
capacity of 8.2 million units at December 31, 2021.
Approximately 50% of this capacity is intended for export,
mainly Standard products. The tyres sold in Russia are
almost entirely produced inside the country, and only a
small quantity is obtained through imports from other
Group manufacturing plants.
Pirelli has constituted a “Crisis Committee” to constantly
monitor the development of the Russia-Ukraine crisis for
which mitigation actions and a contingency plan have
already been activated, including the progressive production
reallocations of export flows to other Group plants. When the
company presented its preliminary 2021 results it announced
an initial analysis of the impact on 2022 guidance. That
analysis assumed the persistence of February level energy
and oil prices until the end of the year, as well as the potential
impact on local operations linked to imports and exports to
and from Russia of raw materials and finished goods.
In the analysis of this scenario, which does not take into
account the idea of a total interruption of the import and
export flows from Russia and a recessionary scenario in
Europe because of an escalation of geopolitical tensions,
the guidance for profitability and cash generation would
be positioned in the lower part of the range (EBIT Adjusted
around euro 890 million and cash generation before dividends
around euro 450 million).
Pirelli is against this war and is supporting the Ukrainian
population with a donation of 500,000 euro and facilitating
the collection of funds among employees. The investments
in the local market, excluding those linked to security, have
been halted. The activities of the factories in Russia will be
progressively limited to those needed to guarantee the
financing of salaries and social services for employees.
Pirelli continues to monitor the evolution of the situation and
will inform the market if the forecasts shift significantly from
the assumptions of the initial analysis.
The current event qualifies as a non-adjusting event according
to IAS 10 “Events after the reporting period” and therefore
has no impacts on consolidated financial statements as at
December 31, 2021.
and property, plant and equipment mainly in Kirov and
Voronezh production sites;
→ Inventories for euro 42.2 million;
→ Trade and other receivables for euro 89.4 million, of which
euro 18.7 million are intercompany towards other Group
subsidiaries;
→ Cash and cash equivalents for euro 6.7 million;
→ Borrowings from banks and other financial institutions
for euro 83.6 million of which euro 15.2 million are
intercompany towards other Group subsidiaries;
→ Trade and other payables for euro 102.4 million, of which
euro 15.9 million are intercompany towards other Group
subsidiaries.
At the date of this document, Pirelli Tyre S.p.A. has released/is
in process of releasing guarantees on borrowings from banks
and trade payables of Russian subsidiaries towards third
parties and other Group entities.
Total equity amounts to euro 112.8 million, of which euro 73.3
million attributable to the owners of the Parent Company and
euro 39.5 million attributable to non-controlling interests.
2021 revenues from sales made in the Russian market
amount to euro 162.1 million with an EBIT Adjusted of euro
29.4 million.
OTHER INFORMATION
CLIMATE CHANGE INFORMATION
In March 2021, Pirelli published its 2021-2022 Sustainability
Plan with a view to 2025 and 2030, which is fully integrated
into the Company’s Industrial Plan, in which targets were set,
consistent with the materiality of the socio-environmental
impacts of the Company, and in support of the United Nations’
Sustainable Development Goals for 2030.
The Sustainability Plan addresses the risks relative to climate
change, by forecasting targets and performances for:
→ production processes, in terms of reducing absolute
CO2 emissions, increasing the share of electricity from
renewable sources and efficiency in the use of natural
resources;
→ products, through the evolving ranges of products with
a lower environmental impact throughout their life cycle,
while at the same time ensuring greater driving safety;
→ raw materials, in terms of increasing the share of recycled
and renewable materials used in new product lines;
→ the supply chain, by monitoring and reducing absolute
CO2 emissions that are associated, particularly, with raw
materials suppliers.
The achievement of these objectives foresees specific
measures that include:
At December 31, 2021 financial position sub-consolidated
figures related to subsidiaries based in Russia include:
→ Non-current assets amounting to euro 178.0 million,
of which euro 169.3 million refer to intangible assets
→ the purchase of certificates of origin for electricity, that is,
documents that certify the renewable origin of the energy
sources used, which are recorded under Other costs;
→ investment projects for new products and energy
efficiency, which had already begun in 2021, and which
367
Consolidated Financial Statements therefore have been included as increases to property, plant and equipment. It should be noted that these
investments do not impact the measurement of the useful lives of the fixed assets currently in use and the
recoverability of their carrying amount at December 31, 2021;
→ research and development costs for the development of new products and operating costs for improving
the efficiency of energy use. For 2021 the percentage growth for the new IP Code tyres, which were put
on the market with parameters consistent with the highest ratings (A or B) in European labelling for rolling
resistance, (an environmental aspect with an indirect impact on vehicle CO2 emissions), equalled 49% of
the total.
With regard to the impact on the financial structure, it should be noted that at December 31, 2021 Pirelli had
two credit facilities in place for a total amount of euro 1.2 billion (of which euro 800 million had been signed in
2020 with a maturity of five years and euro 400 million in 2021 with a maturity of three years), geared towards
environmental sustainability targets (CO2 emissions and the sustainable management of natural resources).
For further information, reference should be made to Note 23 - “Borrowings from Banks and Other Financial
Institutions”.
With regard to climate change risks, Pirelli monitors these elements of uncertainty through sensitivity analyses
and risk assessments, to assess and quantify the financial impacts (risks and opportunities) relative to climate
change, in relation to IPCC (Intergovernmental Panel on Climate Change) climate scenarios, to IEA (International
Energy Agency) energy transitions and to put in place appropriate prevention and mitigation measures to protect
its business. In accordance with the findings of the most recent Climate Change Risk Assessment of the Group,
in the short to medium-term there are no significant risks relative to production processes or to the markets in
which Pirelli operates.
With regard to the medium-long term scenario, however, the tyre sector could be subject to a number of risks
both of a physical nature (extreme weather events with potential impacts on the continuity of production at the
manufacturing plants), as well as of a regulatory nature (possible effects on operating costs).
At December 31, 2021, there were no risks for probable losses that would require specific provisions to be
accrued in the Financial Statements.
With regard to the declarations of a non-financial nature and in particular to risks related to climate change as
well as to sustainable development goals and the main international commitments for sustainability, reference
should be made to the relevant sections of the Directors’ Report on Operations and the Report on Responsible
Value Chain Management, in particular to section “Joining the Task Force on Climate-Related Financial
Disclosures (TCFD)” section within this Annual Report and Pirelli’s public responses to the CDP Climate
Change 2021 questionnaire.
RESEARCH AND DEVELOPMENT EXPENSES
Research & Development expenses for 2021 amounted to euro 240.4 million and represented 4.5% of sales,
and refer to expenses for product and process innovation, as well as for the development of new materials.
The share allocated to research and development for High Value activities amounted to euro 225.1 million and
equalled 6.0% of High Value revenues. For further details, reference should be made to the section “Research
and Development Activities” in the Directors’ Report on Operations, which is an integral part of this document.
REMUNERATION FOR DIRECTORS AND STATUTORY AUDITORS
The remuneration paid to the Directors and Statutory Auditors was as follows:
Directors
Statutory Auditors
Total
(in thousands of euro)
2021
2020
28,194
377
28,571
7,469
315
7,784
368
Pirelli Annual Report 2021
EMPLOYEES- AVERAGE HEADCOUNTS
The average headcounts for employees, sub-divided by category, for the companies included in the scope of
consolidation were as follows:
Executives and white collar staff
Blue collar staff
Temporary workers
Total
2021
2020
5,934
6,082
23,221
23,708
1,488
898
30,643
30,688
REMUNERATION FOR INDEPENDENT AUDITORS
Pursuant to the applicable laws, the total remuneration paid for the 2021 financial year for auditing services and
for services other than auditing, rendered by the company PricewaterhouseCoopers S.p.A. and by other entities
belonging to its network, were as follows:
Company that provided
the service
Company that received
the service
Partial fees
Total fees
(in thousands of euro)
Independent auditing services
PricewaterhouseCoopers
S.p.A.
Pirelli & C. S.p.A.
PricewaterhouseCoopers
S.p.A.
Subsidiaries
Network
PricewaterhouseCoopers
Subsidiaries
Independent certification services (1)
PricewaterhouseCoopers
S.p.A.
Pirelli & C. S.p.A.
Services other than auditing
PricewaterhouseCoopers
S.p.A.
Subsidiaries
Network
PricewaterhouseCoopers
Subsidiaries
PricewaterhouseCoopers
S.p.A.
Pirelli & C. S.p.A.
PricewaterhouseCoopers
S.p.A.
Subsidiaries
Network
PricewaterhouseCoopers
Subsidiaries
75
1,135
1,252
243
81
34
150
-
-
2,462
83%
358
12%
150
2,969
5%
100%
1) the item “certification services” indicates the amounts paid for other services that require the issuance of an auditor’s report, as well as the amounts paid for the so-called certification services,
as they are concomitant with the statutory auditing services
INFORMATION REQUIRED BY LAW NO.124 / 2017 ARTICLE 1 PARAGRAPHS 125-129
Pirelli Tyre S.p.A. received incentives from the Region of Lombardy in the form of a non-repayable grant, in the
amount of euro 1,695 thousand and euro 2,462 thousand, for the implementation of two R&D projects on Safety
and Smart Manufacturing. The first project was completed, whilst the second received euro 558 thousand during
the financial year for the remaining balance. With reference to the agreement signed with the MiSE (Ministry of
Economic Development) during the 2019 financial year for the subsidisation of three Research and Development
projects, for up to a maximum of euro 6.3 million in total for the current year, the Company obtained the three
respective decrees granting the subsidies from the MiSE.
For the purposes of providing complete information, it should be noted that during the financial year, Pirelli Tyre
S.p.A. received from M.I.U.R. - Ministero dell’Istruzione, dell’Università e della Ricerca (Ministry of Education,
Universities and Research) - a subsidised loan of euro 5,305 thousand with a duration of 5 years, and with an
interest rate of 0.50% per annum, granted as an incentive for an R&D project for the development of innovative
materials for the tyre manufacturing process.
369
Consolidated Financial Statements
ATYPICAL AND/OR UNUSUAL OPERATIONS
Pursuant to CONSOB Notice No. 6064293 of July 28, 2006, it should be noted that during the course of the
2021 financial year, that no atypical and/or unusual transactions as defined in the aforesaid Notice, were carried
out by the Company.
EXCHANGE RATES
The main exchange rates used for consolidation were as follows:
Swedish Krona
Australian Dollar
Canadian Dollar
Singaporean Dollar
U.S. Dollar
Taiwan Dollar
Swiss Franc
Egyptian Pound
Turkish Lira
Romanian Leu
Argentinian Peso
Mexican Peso
(local currency vs euro)
Period-end exchanges rates
Average exchange rates
Change in %
Change in %
12/31/2021
12/31/2020
2021
2020
10.2269
10.0375
1.89%
10.1449
10.4862
(3.26%)
1.5615
1.5896
(1.77%)
1.5749
1.6549
(4.83%)
1.4393
1.5633
(7.93%)
1.4826
1.5300
(3.10%)
1.5279
1.6218
(5.79%)
1.5891
1.5742
0.95%
1.1326
1.2271
(7.70%)
1.1827
1.1422
3.55%
31.3436
34.4742
(9.08%)
33.0389
33.6519
(1.82%)
1.0331
1.0802
(4.36%)
1.0812
1.0705
0.99%
17.8708
19.3879
(7.82%)
18.6428
18.1303
2.83%
14.6823
9.0079
62.99%
10.4698
8.0186
30.57%
4.9481
4.8694
1.62%
4.9208
4.8376
1.72%
116.3407
103.2605
12.67%
116.3407
103.2605
12.67%
23.3129
24.4791
(4.76%)
23.9812
24.5637
(2.37%)
South African Rand
18.0625
18.0219
0.23%
17.4766
18.7655
(6.87%)
Brazilian Real
Chinese Yuan
Russian Rouble
British Pound Sterling
Japanese Yen
6.3210
6.3779
(0.89%)
6.3782
5.8989
8.13%
7.2211
8.0067
(9.81%)
7.6305
7.8802
(3.17%)
84.0695
90.6824
(7.29%)
87.0941
82.4781
5.60%
0.8403
0.8990
(6.53%)
0.8596
0.8897
(3.38%)
130.3800
126.4900
3.08%
129.8767
121.8458
6.59%
370
Pirelli Annual Report 2021
NET FINANCIAL POSITION
(the Alternative Performance Indicators not provided for by the accounting standards)
Current borrowings from banks and other financial institutions
Current derivative financial instruments (liabilities)
Non-current borrowings from banks and other financial institutions
Non-current derivative financial instruments (liabilities)
Total gross debt
Cash and cash equivalents
Other financial assets at fair value through Income Statement
Current financial receivables**
Current derivative financial instruments (assets)
Net financial debt *
Non-current derivative financial instruments (assets)
Non-current financial receivables**
(in thousands of euro)
12/31/2021
12/31/2020
of which related
parties (note 43)
of which related
parties (note 43)
1,489,249
2,751
883,567
2,192
10,331
32,499
3,789,369
13,210
4,970,986
14,693
3,519
5,292,468
(1,884,649)
(113,901)
87,601
5,974,653
(2,275,476)
(58,944)
(81,819)
(81,402)
(102,574)
(88,769)
(38,849)
3,173,250
(4,612)
(13,339)
3,524,320
-
(261,522)
(6,664)
(265,945)
(5,826)
Note
23
27
23
27
19
18
15
27
27
15
Total net financial (liquidity) / debt position
2,907,116
3,258,375
* Pursuant to CONSOB Notice of July 28, 2006 and in compliance with the ESMA guidelines regarding disclosure requirements pursuant to the Prospectus Regulation applicable from May 05,
2021.
** The item “financial receivables and other assets” is reported net of the relative provisions for impairment which amounted to euro 9,315 thousand at December 31, 2021 (euro 8,505 thousand
at December 31, 2020).
371
Consolidated Financial Statements
SCOPE OF CONSOLIDATION
COMPANIES CONSOLIDATED LINE-BY-LINE
Company
Europe
Austria
Pirelli GmbH
Belgium
Business
Headquarter
Currency
Share Capital
% holding
Held by
Pirelli Tyre
(Suisse) SA
Pirelli Tyre
(Suisse) SA
Pneus Pirelli
S.A.S,
Pirelli Tyre
S.p.A,
Pirelli Tyre
S.p.A,
Deutsche Pirelli
Reifen Holding
GmbH
Deutsche Pirelli
Reifen Holding
GmbH
Deutsche Pirelli
Reifen Holding
GmbH
Deutsche Pirelli
Reifen Holding
GmbH
Deutsche Pirelli
Reifen Holding
GmbH
Pirelli Tyre
S.p.A,
Pirelli Tyre
(Suisse) SA
Pirelli Tyre
S.p.A,
Elastika Pirelli
C.S.A,
Tyre
Wien
Euro
726,728
100.00%
Pirelli Tyres Belux S.A.
Tyre
Brussels
Euro
700,000
99.996%
0.004%
France
Pneus Pirelli S.A.S,
Germany
Deutsche Pirelli Reifen Holding GmbH
Driver Handelssysteme GmbH
Pirelli Deutschland GmbH
Pirelli Personal Service GmbH
PK Grundstuecksverwaltungs GmbH
Driver Reifen und KFZ-Technik GmbH (ex
Pneumobil Reifen und KFZ-Technik GmbH)
Greece
Elastika Pirelli C.S.A.
Tyre
Villepinte
Euro
1,515,858
100.00%
Tyre
Tyre
Tyre
Tyre
Tyre
Tyre
Breuberg /
Odenwald
Breuberg /
Odenwald
Breuberg /
Odenwald
Breuberg /
Odenwald
Hoechst /
Odenwald
Breuberg /
Odenwald
Euro
7,694,943
100.00%
Euro
26,000
100.00%
Euro
23,959,100
100.00%
Euro
25,000
100.00%
Euro
26,000
100.00%
Euro
259,225
100.00%
Tyre
Elliniko-
Argyroupoli
Euro
11,630,000
99.90%
0.10%
Pirelli Hellas S.A. (in liquidation)
The Experts in Wheels - Driver Hellas C. S.A.
Tyre
Tyre
Athens
US $
22,050,000
79.86%
Elliniko-
Argyroupoli
Euro
100,000
73.20%
372
Pirelli Annual Report 2021
COMPANIES CONSOLIDATED LINE-BY-LINE
Business
Headquarter
Currency
Share Capital
% holding
Held by
Company
Italy
Driver Italia S.p.A.
Driver Servizi Retail S.p.A.
HB Servizi S.r.l.
Maristel s.r.l.
Pirelli Digital Solutions S.r.l.
Pirelli Industrie Pneumatici S.r.l.
Tyre
Tyre
Services
Services
Services
Milan
Milan
Milan
Milan
Milan
Euro
350,000
71.21%
Euro
Euro
Euro
120,000
100.00%
10,000
100.00%
50,000
100.00%
Euro
500,000
100.00%
Tyre
Settimo
Torinese (To)
Euro
40,000,000
100.00%
Pirelli International Treasury S.p.A.
Financial
Milan
Euro
125,000,000
70.00%
Pirelli Servizi Amministrazione e Tesoreria S.p.A.
Services
Pirelli Sistemi Informativi S.r.l.
Pirelli Tyre S.p.A.
Poliambulatorio Bicocca S.r.l.
Services
Tyre
Services
Milan
Milan
Milan
Milan
Servizi Aziendali Pirelli S.C.p.A.
Services
Milan
30.00%
Euro
2,047,000
100.00%
Euro
1,010,000
100.00%
Euro
558,154,000
100.00%
Euro
Euro
10,000
100.00%
104,000
90.35%
2.95%
0.95%
0.98%
0.95%
0.98%
0.95%
Pirelli Tyre
S.p.A.
Pirelli Tyre
S.p.A.
Pirelli & C.
S.p.A.
Pirelli & C.
S.p.A.
Pirelli Tyre
S.p.A.
Pirelli Tyre
S.p.A.
Pirelli Tyre
S.p.A.
Pirelli & C.
S.p.A.
Pirelli & C.
S.p.A.
Pirelli & C.
S.p.A.
Pirelli & C.
S.p.A.
Pirelli Tyre
S.p.A.
Pirelli & C.
S.p.A.
Pirelli Tyre
S.p.A.
Poliambulatorio
Bicocca S.r.l.
Pirelli
International
Treasury S.p.A.
Driver Italia
S.p.A.
Pirelli Industrie
Pneumatici S.r.l.
Pirelli Servizi
Amministrazione
e Tesoreria
S.p.A.
0.95%
Pirelli Sistemi
Informativi S.r.l.
0.95%
HB Servizi S.r.l.
The Netherlands
E-VOLUTION Tyre B.V.
Tyre
Rotterdam
Euro
170,140,000
100.00%
Pirelli China Tyre N.V.
Tyre
Rotterdam
Euro
38,045,000
100.00%
Pirelli Tyres Nederland B.V.
Tyre
Rotterdam
Euro
18,152
100.00%
Poland
Driver Polska Sp. z o.o.
Pirelli Polska Sp. z o.o.
Tyre
Tyre
Warsaw
Pol. Zloty
100,000
66.00%
Warsaw
Pol. Zloty
625,771
100.00%
Pirelli Tyre
S.p.A.
Pirelli Tyre
S.p.A.
Pirelli Tyre
(Suisse) SA
Pirelli Polska
Sp. z o.o.
Pirelli Tyre
S.p.A.
373
Consolidated Financial Statements
COMPANIES CONSOLIDATED LINE-BY-LINE
Company
United Kingdom
CTC 2008 Ltd
Pirelli Cif Trustees Ltd
Financial Burton-on-Trent
Tyre Burton-on-Trent
Business
Headquarter
Currency
Share Capital
% holding
Held by
British Pound
Sterling
British Pound
Sterling
100,000
100.00%
4
25.00%
25.00%
25.00%
25.00%
Pirelli UK Tyres
Ltd
Pirelli General
Executive
Pension
Trustees LTD
Pirelli General
& Overseas
Pension
Trustees LTD
Pirelli Tyres
Executive
Pension
Trustees LTD
Pirelli Tyres
Pension
Trustees LTD
Pirelli Tyre
S.p.A.
Pirelli International Limited (ex Pirelli International
plc)
Financial Burton-on-Trent
Euro
5,000,000
100.00%
Pirelli Motorsport Services Ltd
Tyre Burton-on-Trent
Pirelli General Executive Pension Trustees Ltd
Financial Burton-on-Trent
Pirelli General & Overseas Pension Trustees Ltd
Financial Burton-on-Trent
Pirelli Tyres Executive Pension Trustees Ltd
Financial Burton-on-Trent
Pirelli Tyres Ltd
Tyre Burton-on-Trent
Pirelli Tyres Pension Trustees Ltd
Financial Burton-on-Trent
Pirelli UK Ltd
Pirelli UK Tyres Ltd
Slovakia
Financial Burton-on-Trent
Tyre Burton-on-Trent
British Pound
Sterling
British Pound
Sterling
British Pound
Sterling
British Pound
Sterling
British Pound
Sterling
British Pound
Sterling
British Pound
Sterling
British Pound
Sterling
1
1
1
1
100.00%
Pirelli UK Ltd
100.00%
Pirelli UK Ltd
100.00%
Pirelli UK Ltd
100.00% Pirelli Tyres Ltd
16,000,000
100.00%
Pirelli UK Tyres
Ltd
1
100.00% Pirelli Tyres Ltd
163,991,278
100.00%
85,000,000
100.00%
Pirelli Slovakia S.R.O.
Tyre
Bratislava
Euro
6,639
100.00%
Romania
Pirelli & C. Eco Technology RO S.r.l.
Sustainable
mobility
Slatina
Rom. Leu
20,002,000
99.995%
0.005%
Pirelli Tyres Romania S.r.l.
Tyre
Slatina
Rom. Leu
2,189,797,300
100.00%
Russia
Closed Joint Stock Company "Voronezh Tyre Plant"
Tyre
Voronezh
Russian Rouble
1,520,000,000
100.00%
Limited Liability Company Pirelli Tyre Services (in
liquidation)
Tyre
Moscow Russian Rouble
54,685,259
95.00%
5.00%
Limited Liability Company "Industrial Complex
"Kirov Tyre"
Tyre
Kirov
Russian Rouble
348,423,221
100.00%
Limited Liability Company Pirelli Tyre Russia
Tyre
Moscow Russian Rouble
6,153,846
65.00%
374
Pirelli & C.
S.p.A.
Pirelli Tyre
S.p.A.
Pirelli Tyre
S.p.A.
Pirelli Tyre
S.p.A.
Pirelli Tyres
Romania S.r.l.
Pirelli Tyre
S.p.A.
Limited Liability
Company Pirelli
Tyre Russia
Pirelli Tyre
(Suisse) SA
Pirelli Tyre
S.p.A.
Limited Liability
Company Pirelli
Tyre Russia
E-VOLUTION
Tyre B.V.
Pirelli Annual Report 2021
COMPANIES CONSOLIDATED LINE-BY-LINE
Company
Spain
Business
Headquarter
Currency
Share Capital
% holding
Held by
Euro Driver Car S.L.
Tyre
Valencia
Euro
960,000
58.44%
Neumaticos Arco Iris, S.A.
Tyre
Valencia
Euro
302,303
66.20%
Pirelli Neumaticos S.A. - Sociedad Unipersonal
Tyre
Valencia
Euro
25,075,907
100.00%
Tyre & Fleet S.L. - Sociedad Unipersonal
Tyre
Valencia
Euro
20,000
100.00%
Sweden
Dackia Aktiebolag
Tyre
Stockholm
Swed. Krona
31,000,000
100.00%
Pirelli Tyre Nordic Aktiebolag
Tyre
Stockholm
Swed. Krona
950,000
100.00%
Switzerland
Driver (Suisse) SA
Tyre
Bioggio
Swiss Franc
100,000
100.00%
Pirelli Group Reinsurance Company SA
Services
Basel
Swiss Franc
3,000,000
100.00%
Pirelli Tyre (Suisse) SA
Tyre
Basel
Swiss Franc
1,000,000
100.00%
Turkey
Pirelli Lastikleri Dis Ticaret A.S.
Pirelli Otomobil Lastikleri A.S.
Hungary
Tyre
Tyre
Istanbul
Turkish Lira
50,000
100.00%
Istanbul
Turkish Lira
190,000,000
100.00%
Pirelli Hungary Tyre Trading and Services Ltd
Tyre
Budapest
Hun. Forint
3,000,000
100.00%
Pirelli
Neumaticos
S.A. - Sociedad
Unipersonal
Pirelli
Neumaticos
S.A. - Sociedad
Unipersonal
Pirelli Tyre
S.p.A.
Pirelli
Neumaticos
S.A. - Sociedad
Unipersonal
Pirelli Tyre
S.p.A.
Pirelli Tyre
S.p.A.
Pirelli Tyre
(Suisse) SA
Pirelli & C.
S.p.A.
Pirelli Tyre
S.p.A.
Pirelli Otomobil
Lastikleri A.S.
Pirelli Tyre
S.p.A.
Pirelli Tyre
S.p.A.
North America
Canada
Pirelli Tire Inc.
U.S.A.
Pirelli North America Inc.
Pirelli Tire LLC
Prestige Stores LLC
Tyre
St-Laurent
(Quebec)
Can. $
6,000,000
100.00%
Pirelli Tyre
(Suisse) SA
Tyre
New York (New
York)
Tyre Rome (Georgia)
Tyre
Los Angeles
US $
US $
US $
10
1
10
100.00%
100.00%
Pirelli Tyre
S.p.A.
Pirelli North
America Inc.
100.00%
Pirelli Tire LLC
375
Consolidated Financial Statements COMPANIES CONSOLIDATED LINE-BY-LINE
Company
Business
Headquarter
Currency
Share Capital
% holding
Held by
Central/South America
Argentina
Pirelli Neumaticos S.A.I.C.
Tyre
Buenos Aires
Arg. Peso
2,948,055,176
99.83%
0.17%
Brazil
Comercial e Importadora de Pneus Ltda.
Tyre
Sao Paulo
Bra. Real
381,473,982
100.00%
Pirelli Comercial de Pneus Brasil Ltda.
Tyre
Sao Paulo
Bra. Real
1,149,296,303
85.00%
15.00%
Pirelli Latam Participaçoes Ltda.
Tyre
Sao Paulo
Bra. Real
343,514,252
100.00%
Pirelli Ltda.
Pirelli Pneus Ltda.
Financial
Santo Andrè
Bra. Real
14,000,000
100.00%
Tyre
Campinas (Sao
Paulo)
Bra. Real
1,132,178,494
85.00%
15.00%
Comércio e Importação Multimarcas de Pneus Ltda.
Tyre
Sao Paulo
Bra. Real
3,691,500
85.00%
C.P.Complexo Automotivo de Testes, Eventos e
Entretenimento Ltda.
Tyre
Elias Fausto
(Sao Paulo)
Bra. Real
89,812,000
60.00%
15.00%
TLM - Total Logistic Management Serviços de
Logistica Ltda.
Tyre
Santo Andrè
Bra. Real
3,074,417
99.99%
40.00%
Pirelli Tyre
S.p.A.
Pirelli Pneus
Ltda
Pirelli
Comercial de
Pneus Brasil
Ltda
Pirelli Tyre
S.p.A.
Pirelli Latam
Participaçoes
Ltda
Pirelli Tyre
S.p.A.
Pirelli & C.
S.p.A.
Pirelli Tyre
S.p.A.
Pirelli Latam
Participaçoes
Ltda
Pirelli Tyre
S.p.A.
Pirelli Latam
Participaçoes
Ltda
Pirelli Pneus
Ltda
Pirelli
Comercial de
Pneus Brasil
Ltda.
Pirelli Pneus
Ltda
0.01%
Pirelli Ltda
Chile
Pirelli Neumaticos Chile Ltda
Tyre
Santiago
US $
3,520,000
85.25%
14.73%
Pirelli
Comercial de
Pneus Brasil
Ltda
Pirelli Latam
Participaçoes
Ltda
0.02%
Pirelli Ltda
Colombia
Pirelli Tyre Colombia S.A.S.
Mexico
Tyre
Santa Fe De
Bogota
Col. Peso/000
1,863,222,000
85.00%
15.00%
Pirelli Neumaticos S.A. de C.V.
Tyre
Silao
Mex. Peso
11,595,773,848
99.83%
0.17%
Pirelli
Comercial de
Pneus Brasil
Ltda
Pirelli Latam
Participaçoes
Ltda
Pirelli Tyre
S.p.A.
Pirelli Latam
Participaçoes
Ltda
376
Pirelli Annual Report 2021
COMPANIES CONSOLIDATED LINE-BY-LINE
Business
Headquarter
Currency
Share Capital
% holding
Held by
Company
Africa
Egypt
Pirelli Egypt Tyre Trading S.A.E.
Pirelli Egypt Consumer Tyre Distribution S.A.E.
Tyre
Tyre
Giza
Egy. Pound
84,250,000
100.00%
Giza
Egy. Pound
89,000,000
99.89%
0.06%
0.06%
Tyre
Gauteng 2090
S.A. Rand
1
100.00%
South Africa
Pirelli Tyre (Pty) Ltd
Oceania
Australia
Pirelli Tyres Australia Pty Ltd
Tyre Pyrmont (NSW)
Aus. $
150,000
100.00%
Asia
China
Pirelli Tyre
S.p.A.
Pirelli Egypt
Tyre Trading
S.A.E.
Pirelli Tyre
S.p.A.
Pirelli Tyre
(Suisse) SA
Pirelli Tyre
(Suisse) SA
Pirelli Tyre
(Suisse) SA
Pirelli Logistics (Yanzhou) Co., Ltd
Tyre
Jining
"Chinese
Renmimbi"
5,000,000
100.00%
Pirelli Tyre Co.,
Ltd
Pirelli Taiwan Co. Ltd
Tyre New Taipei City
N.T. $
10,000,000
100.00%
Pirelli Trading (Beijing) Co., Ltd.
Pirelli Tyre (Jiaozuo) Co., Ltd.
Pirelli Tyre Co., Ltd
Pirelli Tyre Trading (Shanghai) Co., Ltd
Korea
Pirelli Korea Ltd
Japan
Tyre
Tyre
Tyre
Tyre
Beijing
Jiaozuo
Yanzhou
"Chinese
Renmimbi"
"Chinese
Renmimbi"
"Chinese
Renmimbi"
4,200,000
100.00%
350,000,000
80.00%
2,071,150,000
90.00%
Shanghai
US $
700,000
100.00%
Tyre
Seoul
Korean Won
100,000,000
100.00%
Pirelli Japan Kabushiki Kaisha
Tyre
Tokyo
Jap. Yen
2,200,000,000
100.00%
Singapore
Pirelli Asia Pte Ltd
Tyre
Singapore
Sing. $
2
100.00%
Pirelli Tyre
(Suisse) SA
Pirelli Tyre
S.p.A.
Pirelli Tyre
S.p.A.
Pirelli China
Tyre N.V.
Pirelli China
Tyre N.V.
Pirelli Asia Pte
Ltd
Pirelli Tyre
S.p.A.
Pirelli Tyre
(Suisse) SA
377
Consolidated Financial Statements
INVESTMENTS ACCOUNTED FOR BY THE EQUITY METHOD
Business
Headquarter
Currency
Share Capital
% holding
Held by
Company
Europe
Germany
Industriekraftwerk Breuberg GmbH
Electricity
generation
Hoechst /
Odenwald
Euro
1,533,876
26.00%
Greece
Eco Elastika S.A.
Italy
Tyre
Athens
Euro
60,000
20.00%
Consorzio per la Ricerca di Materiali Avanzati
(CORIMAV)
Financial
Milan
Euro
103,500
100.00%
Eurostazioni S.p.A.
Financial
Rome
Euro
160,000,000
32.71%
Focus Investments S.p.A.
Financial
Milan
Euro
183,333
8.33%
Poland
Centrum Utylizacji Opon Organizacja Odzysku
S.A.
Slovakia
Tyre
Warsaw
Pln
1,008,000
20.00%
ELT Management Company Slovakia S.R.O.
Tyre
Bratislava
Euro
132,000
20.00%
Romania
S.C. Eco Anvelope S.A.
Tyre
Bucarest
Rom. Leu
160,000
20.00%
Russia
Joint Stock Company "Kirov Tyre Plant"
Tyre
Kirov
Russian Rouble
5,665,418
20.00%
Spain
Signus Ecovalor S.L.
Tyre
Madrid
Euro
200,000
20.00%
Asia
China
Xushen Tyre (Shanghai) Co, Ltd
Tyre
Shanghai
Jining Shenzhou Tyre Co, Ltd
Tyre
Jining City
"Chinese
Renmimbi"
"Chinese
Renmimbi"
1,050,000,000
49.00%
1,050,000,000
100.00%
Indonesia
PT Evoluzione Tyres
Tyre
Subang
Rupees
1,313,238,780,000
63.04%
Pirelli
Deutschland
GmbH
Elastika Pirelli
C.S.A.
Pirelli & C.
S.p.A.
Pirelli & C.
S.p.A.
Pirelli & C.
S.p.A. (25% of
the voting share
capital)
Pirelli Polska
Sp. z o.o.
Pirelli Slovakia
S.R.O.
S.C. Pirelli Tyres
Romania S.r.l.
Limited Liability
Company Pirelli
Tyre Russia
Pirelli
Neumaticos
S.A. - Sociedad
Unipersonal
Pirelli Tyre
S.p.A.
Xushen Tyre
(Shanghai) Co,
Ltd
Pirelli Tyre
S.p.A.
378
Pirelli Annual Report 2021 379
Consolidated Financial Statements Pirelli & C. S.p.A.
Separate Financial
Statements at
December 31, 2021
381
A Beautiful Place
STATEMENT OF FINANCIAL POSITION
(in euro)
Property, plant and equipment
Intangible assets
Investments in subsidiaries
Investments in associates
Other financial assets at fair value through other
comprehensive income
Other receivables
Derivative financial instruments
Non-current assets
Trade receivables
Other receivables
Cash and cash equivalents
Tax receivables
Derivative financial instruments
Current assets
Total assets
Shareholders’ equity:
-Share capital
- Other reserves
- Retained earnings reserve
- Net income of the year
Total shareholders’ equity
Borrowings from banks and other financial institutions
Other payables
Provisions for liabilities and charges
Provision for deferred tax liabilities
Employee benefit obligations
Derivative financial instruments
Non-current liabilities
Borrowings from banks and other financial institutions
Trade payables
Other payables
Provisions for liabilities and charges
Employee benefit obligations
Tax payables
Derivative financial instruments
Current liabilities
Total Liabilities and Equity
Note
12/31/2021
12/31/2020
of which related
parties (Note 39)
of which related
parties (Note 39)
8
9
10
11
12
13
17
14
13
15
16
17
18
19
23
20
24
21
17
19
22
23
20
21
25
17
69,988,482
2,276,388,200
4,632,419,637
6,374,501
54,817,356
76,326,337
2,273,753,812
4,633,665,637
6,374,501
41,073,518
2,000,566,023
2,000,000,000
2,000,575,034
2,000,000,000
4,382,882
-
9,044,937,082
9,031,768,839
40,115,549
39,313,992
80,567,655
76,654,853
792,729,529
781,788,854
1,166,741,332
1,154,822,631
40,217
1,741,849
65,074,474
64,524,862
32,675,745
31,368,963
5,132,143
5,132,143
2,894,124
2,894,124
903,091,911
1,284,620,705
9,948,028,993
10,316,389,544
1,904,374,936
2,187,923,539
504,214,886
216,618,625
4,813,131,985
3,410,178,031
1,904,374,936
2,162,640,657
540,084,129
43,956,054
4,651,055,776
4,623,295,428
821,950
211,512
538,238
211,512
30,604,390
22,028,088
11,105,042
5,925,871
526,016,984
524,338,063
21,442,451
3,707,657
8,463,592
1,349,130
3,554,179
3,554,179
109,696,906
109,696,906
3,992,617,984
5,277,437,269
1,070,540,924
1,186,589
307,349,886
2,084,327
18,386,788
2,854,236
27,570,277
3,080,055
38,602,730
15,310,925
25,312,098
6,575,851
509,463
-
-
2,447,901
1,697,946
13,565,489
13,336,607
11,985,460
11,756,578
673,630
673,630
13,230,877
13,230,877
1,142,279,024
387,896,499
9,948,028,993
10,316,389,544
382
Pirelli Annual Report 2021 INCOME STATEMENT
(in euro)
Note
2021
2020
Revenues from sales and services
Other income
Raw materials and consumables used
Personnel expenses
Amortisation, depreciation and impairment
Other costs
Net impairment loss on financial assets
Operating income (loss)
27
28
29
30
31
32
33
of which related
parties (Note 39)
of which related
parties (Note 39)
69,600,631
69,476,717
53,485,963
53,336,756
107,345,247
104,371,766
124,405,233
111,602,641
(213,962)
(228,201)
(72,790,903)
(14,395,169)
(49,952,080)
(8,909,020)
(9,362,065)
(9,916,348)
(114,063,118)
(41,247,192)
(108,667,961)
(20,456,756)
(91,749)
(19,575,918)
(23,024)
9,103,582
39,650,001
1
Net income (loss) from equity investments
34
230,262,609
- gains on equity investments
-
- losses on equity investments
(1,246,000)
(1,246,000)
(14,000,000)
(14,000,000)
- dividends
Financial income
Financial expenses
231,508,609
229,311,733
53,650,000
53,650,000
33,642,838
31,957,128
68,152,687
30,994,080
(79,622,905)
(2,826,774)
(104,537,534)
(34,837,663)
35
36
Net income (loss) before taxes
164,706,624
Taxes
37
51,912,001
Total net income of the year
216,618,625
12,368,736
31,587,318
43,956,054
383
Financial Statements at December 31, 2021 STATEMENT OF COMPREHENSIVE INCOME
(in euro)
A
Net income of the year
216,618,625
43,956,054
- Remeasurement of employee benefits
21
(80,709)
(18,491)
- Tax effect
19,370
4,438
- Fair value adjustment of other financial assets at fair value through other comprehensive income
12
13,763,515
(16,129,415)
B
Total items that may not be reclassified to income statement
13,702,176
(16,143,468)
Note
2021
2020
Fair value adjustment of derivatives designated as cash flow hedge:
- Gains / (losses) for the year
- (Gains) / losses reclassified to income statement
- Tax effect
Cost of hedging
- Gains / (losses) for the year
- (Gains) / losses reclassified to income statement
- Tax effect
17
17
17
17
95,022,233
(118,508,558)
(76,129,810)
120,951,632
(4,534,181)
(586,338)
1,149,212
4,682,676
(4,801,545)
(5,022,200)
876,560
81,486
C
D
Total items reclassified / that may be reclassified to income statement
11,582,469
1,598,698
Total other components of comprehensive income (B+C)
25,284,645
(14,544,770)
A+D Total comprehensive income / (loss) for the financial year
241,903,270
29,411,284
384
Pirelli Annual Report 2021 STATEMENT OF CHANGES IN EQUITY
Share
Capital
Legal
Reserve
Share
Premium
Reserve
Concentration
Other
Reserve
Reserves
Other O.C.I.
Reserves (*)
Merger
Reserve
(in euro)
Reserve
from results
carried
forward
Net result
of the year
Total
Total at 12/31/2019
1.904.374.936
380.874.988
630.380.599
12.466.897
92.534.791
(3.199.371)
1.022.927.715
266.842.318
273.241.811 4.580.444.684
Result carried forward as per
resolution of June 18, 2020
Bond conversion reserve
Other components of
comprehensive income
Result for the year
Total comprehensive income/(loss)
for the year
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
41.199.808
-
-
-
-
-
(14.544.770)
-
(14.544.770)
-
-
-
-
-
273.241.811
(273.241.811)
-
-
-
-
-
-
-
41.199.808
(14.544.770)
43.956.054
43.956.054
43.956.054
29.411.284
Total at 12/31/2020
1.904.374.936
380.874.988
630.380.599
12.466.897
133.734.599
(17.744.141)
1.022.927.715
540.084.129
43.956.054 4.651.055.776
Dividend distribution as per
resolution of June 15, 2021
Other components of
comprehensive income
Result for the year
Total comprehensive income/(loss)
for the year
Other changes
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
25.284.645
-
25.284.645
(1.764)
-
-
-
-
-
(36.043.946)
(43.956.054)
(80.000.000)
-
-
-
-
25.284.645
216.618.625
216.618.625
216.618.625
241.903.270
174.703
-
172.939
Total at 12/31/2021
1.904.374.936
380.874.988
630.380.599
12.466.897
133.734.599
7.538.741
1.022.927.715
504.214.886
216.618.625
4.813.131.985
BREAKDOWN OF OTHER O.C.I. RESERVES *
Reserve for fair value
adjustment of financial assets
at fair value through other
comprehensive income
Reserve for
cost of hedging
Cash flow hedge
reserve
Reserve
Remeasurement
for employee
benefit
Tax effect
Total other
O.C.I. Reserves
(in euro)
Balance at 12/31/2019
10,637,571
4,558,755
(25,326,962)
1,923,791
5,007,474
(3,199,371)
Other components of
comprehensive income
(16,129,415)
(339,524)
2,443,074
(18,491)
(500,414)
(14,544,770)
Balance at 12/31/2020
(5,491,844)
4,219,231
(22,883,888)
1,905,300
4,507,060
(17,744,141)
Other components of
comprehensive income
13,763,515
(3,652,333)
18,892,424
(80,709)
(3,638,251)
25,284,645
Other changes
(1,764)
-
-
-
-
(1,764)
Balance at 12/31/2021
8,269,907
566,898
(3,991,464)
1,824,591
868,809
7,538,741
385
Financial Statements at December 31, 2021
CASH FLOW STATEMENT
Note
2021
of which
related parties
(Note 39)
Net income (loss) before taxes
164,706,624
Reversals of amortisation, depreciation, impairment losses
31
9,362,065
Reversal of accruals
32
35,195,093
(in euro)
of which
related parties
(Note 39)
2020
12,368,736
9,916,348
11,834,568
Reversal of (Financial income)/financial expenses
36
45,980,067
(29,130,354)
36,384,847
3,843,583
Reversal of Dividends
34
(231,508,609)
(229,311,733)
(53,650,000)
(53,650,000)
Reversal of (gain)/losses on investments
Reversal of (Gains)/losses from sales of property,plant and equipment
34
28
Net taxes paid
1,246,000
1,246,000
13,999,999
13,999,999
(395)
-
(7,939,419)
-
Change in Trade receivables
14
40,360,358
37,340,862
(56,815,726)
(54,929,831)
Change in Trade payables
22
(11,702,230)
(225,819)
8,307,914
(1,690,827)
Change in Other receivables
13
(3,050,692)
923,721
13,731,447
247,000
Change in Other payables
23
13,574,345
8,735,075
(5,745,869)
(5,517,611)
Change in Tax receivables/Tax payables
Use of Provisions for employee benefit obligations
16
21
19,133,970
(31,575,870)
9,237,046
9,237,046
(2,981,095)
(1,697,946)
(2,119,269)
(1,099,996)
Use of Other provisions
20
(1,663,189)
(38,459,199)
A Net cash flows provided by/(used in) operating activities
78,652,311
(48,948,576)
Investments in property, plant and equipment
Disposal of property, plant and equipment
Investments in intangible assets
8
8
9
(252,277)
5,000,395
(2,015,819)
Reimbursement of other non current financial assets at fair value through
other comprehensive income
12
5,142
(2,671,000)
4,683,035
(858,351)
-
Dividends received
34
231,508,609
229,311,733
53,650,000
53,650,000
B Net cash provided/(used) by investment activities
234,246,050
54,803,684
Change in Financial receivables
13
372,070,333
372,109,827
(827,567,175)
(821,528,964)
Financial income
35
27,131,633
28,107,646
24,606,201
24,524,783
Change in Borrowings from banks and other financial institutions due to
draw down
Change in Borrowings from banks and other financial institutions due to
repayments
Dividends paid
Financial expenses
19
868,549,294
2,427,978,000
19
(1,419,656,199)
(1,557,746,749)
18
(79,929,783)
-
36
(75,385,176)
(3,724,512)
(67,338,777)
22,625,758
Repayment of principal and payment of interest for lease liabilities
19
(7,380,095)
(5,798,851)
C Net cash provided/(used) by financing activities
(314,599,994)
(5,867,352)
D Total net cash generated/(used) in the year (A+B+C)
E Opening balance of Cash and cash equivalents
F Closing balance of Cash and cash equivalents (D+E)
(1,701,632)
1,741,849
40,217
(12,244)
1,754,093
1,741,849
386
Pirelli Annual Report 2021 Explanatory notes
1. GENERAL INFORMATION
Pirelli & C. S.p.A. (hereinafter also the “Company” or the
“Parent Company”) is a corporation organized under the laws
of the Republic of Italy.
Founded in 1872, it is a holding company that manages,
coordinates and
the activities of subsidiaries
funds
(hereinafter Pirelli Group).
The registered office of the Company is in Viale Piero e
Alberto Pirelli 25 – Milan.
As from October 4, 2017, Pirelli & C. S.p.A. shares are now
traded on the Mercato Telematico Azionario (MTA Telematic
Stock Market), managed by Borsa Italiana S.p.A.
The audit of the financial statements
is entrusted to
PricewaterhouseCoopers S.p.A. pursuant to Legislative
Decree January 27, 2010 no. 39 and in execution of the
resolution of the shareholders’ meeting of August 1, 2017,
which assigned the mandate to this company for each of
the nine financial years ending from December 31, 2017 to
December 31, 2025.
Pirelli & C. S.p.A. is directly controlled by Marco Polo
International Italy S.r.l. which in turn, through China National
Chemical Corporation (“ChemChina”) and other subsidiaries
of the latter, is indirectly controlled by Sinochem Holdings
Corporation Ltd, a company of State-owned Chinese law
(State-owned enterprise or SOE) controlled by the State-
owned Assets Supervision and Administrative Commission of
the State Council (SASAC) of the People’s Republic of China.
There are no entities that exercise management and
coordination activities over the Company.
On March 17, 2022, the Board of Directors authorized
publication of these Annual Financial Statements (“Annual
Financial Statements or Separate Financial Statements”).
SIGNIFICANT EVENTS 2021
On February 25, 2021, Pirelli communicated the terms
of the termination, with effect from February 28, 2021,
of the employment relationship with the co-CEO General
Manager Angelos Papadimitriou, announced to the market
on January 20, 2021.
In accordance with the Pirelli Remuneration Policy, Mr.
Papadimitriou was attributed by the Board of Directors, in
addition to the amounts due by way of remuneration and
other employment law services accrued up to the date of
termination: (i) 10 months of gross annual remuneration
as an incentive to retirement, equal to the value of the
expected indemnity in lieu of the notice, based on the
conventional seniority attributed at the time of hiring as
executive (ii) euro 100,000 gross as a general novative
settlement, to be paid once the termination is defined in
accordance with the current employment law procedures
as well as the maintenance until December 31, 2021 of
some non-monetary benefits attributed at the time of hiring
as executive. Mr. Papadimitriou will remain bound, for two
years following the termination of the office of Director, to a
non-competition agreement, valid for the main countries in
which Pirelli operates, against a fee, for each year of validity,
equal to 100% of the gross annual remuneration, to be paid
in 8 deferred quarterly installments starting from July 1,
2021; the non-competition agreement includes a non-solicit
clause as well as penalties in the event of violation of the
obligations deriving from the non-competition agreement.
The termination of the office of director of Angelos
Papadimitriou took place on March 31, 2021.
On March 24, 2021, the shareholders’ meeting approved, in
an extraordinary session, the convertibility of the equity-linked
bond loan referred to as “EUR 500 million Senior Unsecured
Guaranteed Equity-linked Bonds due 2025”,
issued on
December 22, 2020. It also approved a divisible share capital
increase, with the exclusion of the option right, to service the
conversion for a total value, including any share premium, of
euro 500 million. On the basis of the initial conversion ratio of
the bond of euro 6.235, this increase will correspond to the
issue of a maximum of 80,192,461 ordinary shares of Pirelli
& C. S.p.A. (it being understood that the maximum number of
Pirelli & C. S.p.A. ordinary shares may increase on the basis of
the effective conversion ratio applicable from time to time).
The holders of the bond have the possibility, on the basis of
the Physical Settlement Notice sent by the company on April
15, 2021, to exercise, from May 6, 2021, the right to convert
the bonds into Pirelli ordinary shares as provided for in the
conditions of the bond.
On March 31, 2021, the Board of Directors approved the
20212022|2025 Business Plan, which was presented to the
financial community on the same date. It also approved the
financial statements at December 31, 2020, which closed
with a consolidated net profit of euro 42.7 million and a net
profit of the Parent Company of euro 44 million.
On June 15, 2021, the Company’s Shareholders’ Meeting
approved the 2020 financial statements, resolving the
distribution of a dividend of euro 0.08 per share, equal to a
total dividend of euro 80 million, gross of withholding taxes.
The dividend was paid on June 23, 2021 (with ex-dividend
date June 21, 2021 and record date June 22, 2021).
On November 11, 2021, the Board of Directors approved a
syndicated line, which will be finalized in the next few months,
for a total of euro 1.6 billion. It will be used to refinance and/or
replace the bank lines maturing in June 2022. The transaction
will make it possible to optimize the debt profile by extending
the maturities.
Furthermore, on the same date, the Board of Directors –
subject to the favorable opinion of the Board of Statutory
Auditors and verification of the requisites envisaged by the
Articles of Association – resolved to appoint Mr. Giorgio
Luca Bruno as Chief Reporting Officer, replacing Francesco
387
Financial Statements at December 31, 2021 Tanzi who, as anticipated to the market, left the company on
December 31, 2021.
Mr. Giorgio Luca Bruno holds 500 Pirelli shares.
2. BASIS FOR PREPARATION
These Financial Statements have been prepared on a going
concern assumption since the Directors have verified the
absence of financial, operational or other types of indicators
that could indicate critical issues regarding the ability of the
Company to meet its obligations in the foreseeable future
and in particular in the next 12 months. The description of
the ways in which the Company manages financial risks is
contained in Chapter 4 Financial risk management policy and
Chapter 6 Capital management policy of these Notes.
In application of Legislative Decree of February 28, 2005,
no. 38, “Exercise of the options provided for by article
international
5 of regulation (EC) no. 1606/2002 on
accounting standards”, issuers are required to prepare not
only the consolidated financial statements but also the
financial statements of the Company in compliance with
the international accounting standards (IFRS) issued by
the International Accounting Standards Board (IASB) and
published in the Official Journal of the European Community
(GUCE).
IFRS include all International Financial Reporting Standards,
International Accounting Standards (IAS), all interpretations
of the
Interpretations
Committee (IFRIC), formerly the Standing Interpretations
Committee (SIC).
International Financial Reporting
The financial statements have been prepared on the basis of
the historical cost criterion with the exception of the following
items valued at fair value:
The Statement of Comprehensive Income includes the result
for the period and, for homogeneous categories, the revenues
and costs which, in accordance with IFRS, are recorded
directly in equity.
The Company opted for the presentation of the tax effects
and reclassifications to the income statement of profits/
losses recorded in equity in previous years directly in the
Statement of Comprehensive Income and not in the Notes.
The Statement of Changes in Equity includes, in addition
to the total gains/losses of the period, the amounts from
transactions with equity holders and the changes in reserves
during the year.
In the Statement of Cash Flows, the cash flows deriving
from operating activities are presented using the indirect
method, according to which the profit or loss for the period
is adjusted by the effects of non-monetary items, by any
deferment or accrual of past or future operating receipts or
payments, and by any revenue or cost items connected with
the cash flows arising from investing activities or financing
activities.
It shall also be noted that the Group has applied the provisions
of Consob Resolution no. 15519 of July 27, 2006 in regard to
the formats of financial statements and Consob Notice no.
6064293 of July 28, 2006 in regard to corporate disclosure.
In order to provide greater clarity and comparability of the
financial statement items, the amount of the corresponding
items of the previous year were adjusted where necessary.
All amounts included in the Notes, unless otherwise specified,
are in euro thousands.
3. ACCOUNTING STANDARDS
→ derivative financial instruments;
→ other financial assets at fair value recorded in the other
components of the comprehensive income statement;
→ other financial assets at fair value through the income
The accounting standards used in the preparation of separate
financial statements are the same as those used for the
purposes of preparing the consolidated financial statements
where applicable, except as indicated below.
statement.
FINANCIAL STATEMENTS
The separate Financial Statements at December 31, 2021
consist of the Statement of Financial Position, the Income
Statement, the Statement of Comprehensive Income, the
Statement of Changes in Equity, the Statement of Cash
Flows and the Explanatory Notes, and are accompanied by
the Directors’ Report on Operations.
The format adopted for the Statement of Financial Position
classifies assets and liabilities as current and non-current.
The Company has opted to present the components of profit/
loss for the year in a separate Income Statement, rather than
include these components directly in the Comprehensive
Income Statement. The income statement format adopted
classifies costs by nature.
INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES
Investments in subsidiaries and associates are recorded at
cost, net of any impairment losses.
In the presence of specific impairment indicators, the value
of investments in subsidiaries and associates, determined
based on the historical cost basis, is tested for impairment.
The indicators are as follows:
→ the carrying amount of the investment in the separate
financial statements exceeds the carrying amount of the
investee’s net assets (inclusive of any associates goodwill)
expressed in the consolidated financial statements;
→ the dividend distributed by the investee exceeds the total
comprehensive income of the investee company in the year
to which the dividend refers;
388
Pirelli Annual Report 2021 → the operating income (loss) achieved by the investee
company is significantly lower than the amount envisaged
in the management plan;
→ there are expectations of significantly decreasing operating
considers a financial asset in default when internal or external
information indicates that it is unlikely that the Company will
receive the entire contracted amount overdue (for example,
when the receivables are with the lawyer).
results for future years;
→ existence of changes in the technological, market,
economic or regulatory environment in which the investee
operates that may generate significant negative economic
effects on the company’s results.
The impairment test consists of comparing the carrying
amount and the recoverable value of the investment.
If the recoverable amount of an investment is lower than the
carrying amount, the latter is reduced to the recoverable
amount. This reduction constitutes an
loss
recorded in the Income Statement.
impairment
The recoverable amount of an investment is identified as the
greater of fair value, less costs to sell, and value in use.
For the purposes of impairment testing, the fair value of an
investment in a subsidiary, associate or joint venture with
shares listed on an active market is always equivalent to its
market value, irrespective of the percentage of ownership. In
the case of investments in unlisted companies, the fair value
is determined using estimates based on the best information
available.
For the purposes of determining the value in use of a
subsidiary and associated company, an estimate is made of
the future net operating cash flows discounted, net of the net
financial position of the company considered at the reference
date of the estimate (Discounted Cash Flow criterion – Asset
side). The value in use reflects the effects of factors that may
be specific to the entity, factors that may not be applicable to
any entity.
If the reason for impairment ceases to exist, the carrying
amount of the
Income
Statement, up to the original cost.
is recorded
investment
in the
IMPAIRMENT OF FINANCIAL RECEIVABLES
FROM SUBSIDIARIES AND ASSOCIATES
The calculation of the impairment of financial receivables
from subsidiaries and associates is made with reference
to the expected losses in the following twelve months. This
calculation is based on a matrix that includes the ratings of
companies provided by independent market operators. In the
event of a significant increase in the credit risk subsequent
to the origin date of the receivable, the expected loss is
calculated with reference to the entire life of the receivable.
The Company assumes that the credit risk related to a
financial instrument has not increased significantly after initial
recognition, if it is determined that the financial instrument
has a low credit risk at the reporting date.
The Company assesses whether there has been a significant
increase in credit risk when the counterparty rating, attributed
by independent market operators, undergoes a change that
shows an increase in the probability of default. The Company
389
DIVIDENDS
Dividend income is recorded in the Income Statement when
the right to receive payment is established, which normally
corresponds to the resolution approved by the Shareholders’
Meeting for the distribution of dividends.
3.1. ACCOUNTING STANDARDS AND INTERPRETATIONS
ENDORSED AND IN FORCE FROM JANUARY 1, 2021
In accordance with IAS 8 “Accounting standards, changes in
accounting estimates and errors”, the IFRS effective from
January 1, 2021 are indicated below:
→ Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
(Interbank Offered Rate - IBOR reform – phase 2)
Said amendments introduce temporary easing of the
operating methods for managing the impacts deriving from
the replacement of an interest rate offered on the interbank
market (IBOR) with a substantially risk-free alternative rate.
In particular, the amendments provide for the following
practical expedients:
→ handling contractual changes or changes in cash flows
directly required by the reform as changes in a floating
market interest rate;
→ introduction of some exemptions relating to the
termination of hedging;
→ temporary exemption from the obligation to separately
identify a risk component (where such separate
component subject to hedging is represented by an
alternative interest rate);
→ introduction of some additional disclosures regarding
the impacts of the reform.
Said amendments have no
impact on the Company’s
financial statements as the expiry of the potentially impacted
instruments is expected to be a date prior to the transition to
the new IBOR.
→ Amendments to IFRS 16 Leases – reductions in fees related
to Covid-19
Said amendments extend by one year the possibility of
applying optional accounting treatment for lessees in the
presence of reductions in permanent (rent holidays) or
temporary fees related to Covid-19. The amendments were
to be applicable until June 30, 2021. However, as the impact
of the pandemic continues, said option was extended until
June 30, 2022.
Lessees can choose to account for lease reductions as
variable lease payments recorded directly in the income
statement for the period in which the reduction applies,
or treat them as a modification of the lease contract with
the consequent obligation to re-measure the lease payable
based on the revised fee using a revised discount rate.
The Company expects to apply this optional accounting
treatment should the case occur within the permitted
application period. There are no impacts on the Company’s
Financial Statements at December 31, 2021 financial statements following the extension of this optional
accounting treatment.
3.2. INTERNATIONAL ACCOUNTING STANDARDS AND/OR
INTERPRETATIONS ISSUED BUT NOT YET IN FORCE IN 2021
IAS 8 “Accounting standards, changes
Pursuant to
in
accounting estimates and errors”, the following are the new
Standards or Interpretations that have been issued but have
not yet come into force or have not yet been endorsed by
the European Union at December 31, 2021, and which are
therefore not applicable, and the foreseeable impacts on the
Separate Financial Statements.
None of these standards and interpretations have been
adopted in advance by the Group.
→ Amendments to IAS 1 - Presentation of Financial Statements
- Classification of liabilities as current or non-current
The amendments clarify the criteria that must be applied for
the classification of liabilities as current or non-current and
specify that the classification of a liability is not influenced
by the probability that the settlement of the liabilities be
deferred by twelve months following the reference year.
The Group’s intention to liquidate in the short term has no
impact on the classification. Said amendments, which are
scheduled to come into force on January 1, 2023, have
not yet been endorsed by the European Union. No impacts
are expected on the classification of financial liabilities
following these amendments.
→ Amendments to IAS 16 - Property, plant and machinery -
Fees received before intended use
These amendments prohibit the deduction of amounts
received from the sale of products from the cost of
property, plant and equipment, while the asset is being
prepared for its intended use. The proceeds from the sale
of the products, and the related production cost must be
recorded in the Income Statement.
Said amendments have been endorsed by the European
Union and will be applicable from January 1, 2022. No
impacts on the Company’s financial statements are
foreseen as a result of these amendments.
→ Amendments to IAS 37 - Provisions, contingent liabilities
and contingent assets - Onerous contracts - Costs of
fulfilling a contract
These amendments specify that the costs to be taken into
consideration when evaluating onerous contracts are both
the incremental costs for the fulfillment of the contract (for
example direct labor and materials) and a share of other
costs that relate directly to the fulfillment of the contract
(for example, a breakdown of the depreciation rate of the
assets used for the fulfillment of the contract).
Said amendments have been endorsed by the European
Union and will be applicable from January 1, 2022. No
impacts on the Company’s financial statements are
foreseen as a result of these amendments.
→ Annual Improvements (cycle 2018 – 2020) issued in
May 2020
These are amendments limited to some standards (IFRS 1
First-time adoption of IFRS, IFRS 9 Financial Instruments,
IAS 41 Agriculture and illustrative examples of IFRS 16
Leases) that clarify the formulation or correct omissions
or conflicts between the requirements of IFRS. Said
amendments have been endorsed by the European Union
and will be applicable from January 1, 2022. No impacts
on the Company’s financial statements are foreseen as a
result of these amendments.
→ Amendments to IAS 1 Presentation of the financial
statements and IFRS Practice Statement 2: Disclosure on
accounting standards
These amendments provide a guide for the application
of materiality judgments to disclosure on accounting
standards so that they are more useful; in particular:
→ the obligation to indicate the “significant” accounting
standards has been replaced with the obligation to
indicate the “relevant” ones;
→ a guide has been added on how to apply the concept
of relevance to disclosures on accounting standards.
In assessing the relevance of disclosures on accounting
standards, entities must consider the amount of
transactions, other events or conditions and their nature.
These amendments, which will come into force on January
1, 2023, have not yet been endorsed by the European Union.
No impacts on the disclosures of the Company’s financial
statements are foreseen as a result of these amendments.
→ Amendments to IAS 8 - Accounting standards, changes in
accounting estimates and errors
These amendments
introduce a new definition of
“accounting estimates”, distinguishing them more clearly
from accounting standards, and provide guidance for
determining whether changes should be treated as changes
in estimates, changes in accounting standards or errors.
These amendments, which will come into force on January
1, 2023, have not yet been endorsed by the European Union.
No impacts on the Company’s financial statements are
foreseen as a result of these amendments.
→ Amendments to IAS 12 Income taxes – deferred tax assets
and liabilities deriving from a single transaction
These amendments eliminate the possibility of not
recording deferred taxes at the time of the initial recognition
of transactions that give rise to taxable and deductible
temporary differences (e.g. lease contracts).
With reference to lease contracts, these amendments also
clarify that, when lease payments are deductible for tax
purposes, it is a matter of judgement (after considering
the applicable tax law) whether such deductions are
attributable for tax purposes to the recorded lease liability
or to the related right of use. If the tax deductions are
attributed to the right of use, the tax values of the right
of use and the lease liability are equal to their carrying
390
Pirelli Annual Report 2021 amounts, and no temporary differences arise at the time
of initial recognition. However, if the tax deductions are
attributed to the lease liability, the tax values of the right
of use and the lease liability are null, giving rise to taxable
and deductible temporary differences, respectively. Even if
the gross temporary differences are the same, a deferred
tax liability and a deferred tax asset must still be recorded.
These amendments, which will come into force on January
1, 2023, have not yet been endorsed by the European
Union. The impacts on the Company’s Financial Statements
following said amendments are being analyzed.
4. FINANCIAL RISK MANAGEMENT POLICY
The measurement and management of the financial risks of
Pirelli & C. S.p.A. are consistent with as defined by the Group
policies.
The Pirelli Group
is exposed to financial risks. These
are principally associated with foreign exchange rates,
fluctuations in interest rates, the price of financial assets
held as investments, the ability of customers to meet their
obligations to the Group (credit risk), and raising funds on the
market (liquidity risk).
Financial risk management is an integral part of Group
business management and
is handled directly by the
headquarters in accordance with guidelines issued by the
Finance Department on the basis of general risk management
strategies defined by the Managerial Risk Committee.
The main financial risk categories to which the Company is
exposed are shown below:
EXCHANGE RATE RISK
This risk is generated by the commercial and financial
transactions that are executed in currencies other than
euro exchange rate fluctuations between the time when the
commercial or financial relationship is established and when
the transaction is completed (collection or payment) may
generate foreign exchange gains or losses.
The Group aims to minimise the impact of transaction
exchange rate risk related to volatility. To achieve this objective,
Group procedures make the Operating Units responsible for
collecting complete information about the assets and liabilities
that are subject to transaction exchange rate risk. This risk is
hedged with forward contracts made with the Group Treasury.
The items subject to exchange rate risk are mainly represented
by receivables and payables denominated in foreign currency.
The Group Treasury is responsible for hedging the net
position for each currency. In accordance with established
guidelines and restrictions, it closes all risk positions by
trading derivative contracts on the market, which typically
take the form of forward contracts.
The Group has decided not to opt for hedge accounting
pursuant to IFRS 9, insofar as the representation of the
economic and financial effects of the hedging strategy on
foreign exchange rate risk is still substantially guaranteed
even without adopting such option.
Furthermore, it shall be noted that as part of the annual and
three-year planning process, exchange rate forecasts are
made using the best information available on the market.
The fluctuation in exchange rates between the time when
the forecast is made and the time when the commercial or
financial transaction occurs represents the exchange rate
risk on future transactions.
From time to time, the Group assesses the need to engage
in hedging transactions on future transactions for which it
typically uses both forward and optional purchase or sale
transactions, such as risk reversal (e.g. zero cost collar).
Hedge accounting in accordance with IFRS 9 is referred to
when the conditions are met.
With reference to some foreign currency loans, the Company
enters into derivative contracts, cross currency interest rate
swaps, to hedge for which hedge accounting is activated in
compliance with the requirements of IFRS 9.
The effects on the shareholders’ equity and on the income
in
statement of the Company deriving from changes
exchange rates calculated on the hedging
instruments
in place at December 31, 2021 are described in note 17
“Derivative financial instruments”.
391
Financial Statements at December 31, 2021 INTEREST RATE RISK
Interest rate risk is the risk that the fair value or the future cash flows of a financial asset or liability will change
due to fluctuations in market interest rates.
The Group assesses based on market circumstances whether to enter into derivative contracts, typically interest
rate swaps, to hedge for which hedge accounting is activated when the conditions set out in IFRS 9 are fulfilled.
The following is an outline of the effects on net result of the Company arising from an increase or decrease of
0.50% in the level of interest rates, with all other conditions being equal:
+0.5%
-0.5%
12/31/2021
12/31/2020
12/31/2021
12/31/2020
(in thousands of euro)
Impact on Net income (loss)
(7,020)
(4,982)
7,020
4,982
The effects on the Company shareholders’ equity resulting from changes in the LIBOR and EURIBOR rates
calculated on the interest rate hedging instruments outstanding at December 31, 2021 are described in note 17
“Derivative financial instruments”.
PRICE RISK ASSOCIATED WITH FINANCIAL ASSETS
The Company is exposed to price risk, which is limited to the volatility of financial assets such as listed and unlisted
stocks and bonds; these assets are classified as financial assets at fair value recorded as other components of
the statement of comprehensive income.
Derivatives hedges are not set up to limit the volatility of these assets.
Financial assets at fair value recorded as other components of the statement of comprehensive income consist
of listed securities amounted to euro 21,855 thousand (euro 14,076 thousand at December 31, 2020) and
those represented by securities indirectly associated with listed shares (Fin. Priv. S.r.l.) amounted to euro 21,172
thousand (euro 15,902 thousand at December 31, 2020); these financial assets represent 78% of total financial
assets subject to price risk; a +5% price change in the above listed securities, other things being equal, would
result in a positive change of euro 1,093 thousand of the Company’s shareholders’ equity (positive for euro 704
thousand at December 31, 2020), while a -5% negative change of these listed securities, other things being
equal, would result in a negative change of euro 1,093 thousand of the Company’s shareholders’ equity (negative
for euro 704 thousand at December 31, 2020).
CREDIT RISK
Credit risk represents the Company’s exposure to contingent losses resulting from default by commercial and
financial counterparties.
The Company’s exposure to commercial and financial obligations is mainly towards Group companies.
To limit the risk for commercial obligations towards third parties, the Company has implemented procedures
to evaluate its customers’ potential and financial solidity, for the monitoring of expected cash flows and taking
credit recovery action if necessary. The Company operates only with highly rated financial counterparties for the
management of its temporary cash surpluses and constantly monitors its exposure to individual counterparties.
The Company does not hold public debt instruments from any European country, and constantly monitors its net
credit exposure to the banking system.
Liquidity is deposited according to risk diversification principles and in compliance with minimum rating levels.
392
Pirelli Annual Report 2021
LIQUIDITY RISK
Liquidity risk represents the risk that the financial resources available are insufficient to meet the financial and
commercial obligations pursuant to the contractual terms and conditions.
The principal instruments used by the Group to manage liquidity risk are comprised by its annual and three-year
financial and cash-pooling plans. These allow complete and fair detection and measurement of incoming and
outgoing cash flows. The differences between plans and actual data are constantly analyzed.
The Group has implemented a centralised cash pooling system for the management of collection and payment
flows in compliance with various local currency and tax laws. Banking relationships are negotiated and managed
centrally, in order to ensure coverage of short and medium-term financial needs at the lowest possible cost. The
procurement of medium and long-term resources on the capital market is also streamlined through centralised
management.
Prudent management of the risk described above requires maintaining an adequate level of cash or cash
equivalents and/or highly liquid, short-term financial instruments, and the availability of funds through an
adequate amount of committed credit facilities and/or recourse to the capital market, while diversifying the
products and their maturities to seize the best available opportunities.
Furthermore, the Group adopts an extremely prudent approach with respect to the maturities of its financial debt,
with refinancing well in advance in order to minimize the risks associated with liquidity crises or market shutdowns.
At December 31, 2021, the Company had, aside from cash equal to euro 40 thousand (euro 1,742 thousand
at December 31, 2020), unused credit facilities equal to euro 700,000 thousand, maturing June 2022 (euro
700,000 thousand at December 31, 2020).
The maturities of financial liabilities at December 31, 2021 may be broken down as follows:
(in thousands of euro)
12/31/2021
up to 1 year
from 1 to 2 years
from 2 to 5 years
over 5 years
Total 12/31/2017
Payables to banks and other lenders
1,091,588
1,138,943
2,358,358
18,819
4,607,707
of which lease liabilities:
7,187
6,916
19,277
16,834
Trade payables
Other payables
18,387
38,603
-
822
-
-
Derivative financial instruments
3,196
1,908
300
-
-
-
50,214
18,387
39,425
5,404
Total
1,151,774
1,141,673
2,358,658
18,819
4,670,923
The maturities of financial liabilities at December 31, 2020 may be broken down as follows:
(in thousands of euro)
12/31/2020
Payables to banks and other lenders
347,480
1,683,574
3,068,653
22,821
5,122,528
up to 1 year
from 1 to 2 years
from 2 to 5 years
over 5 years
Total 12/31/2017
of which lease liabilities:
Trade payables
Other payables
7,301
27,570
25,312
-
538
-
-
Derivative financial instruments
13,180
90,838
2,865
-
-
-
27,570
25,850
106,883
7,073
19,393
22,821
56,587
Total
413,542
1,774,950
3,071,518
22,821
5,282,831
393
Financial Statements at December 31, 2021
5. INFORMATION ON FAIR VALUE
5.1. FAIR VALUE MEASUREMENT
In relation to financial instruments measured at fair value, the following table shows the classification of these
instruments on the basis of the hierarchy of levels pursuant to IFRS 13, reflecting the significance of the inputs
used in determining the fair value. The levels are as follows:
→ level 1 – unadjusted quotations recorded on an active market for assets or liabilities subject to valuation;
→ level 2 – inputs different from the quoted prices referred to at the preceding level, which are observable on the
market either directly (as in the case of prices) or indirectly (because they are derived from prices);
→ level 3 – inputs that are not based on observable market data.
The following table shows assets measured at fair value at December 31, 2021, divided into the three levels
defined above:
Note
12/31/2021
Level 1
Level 2
Level 3
(in thousands of euro)
FINANCIAL ASSETS
Other financial assets at fair value through income statement
Current derivative financial instruments
Other financial assets at fair value through other
comprehensive income
Equities and shares
Investment funds
Derivative hedging instruments
Non-current derivative financial instruments
Current derivative financial instruments
TOTAL ASSETS
FINANCIAL LIABILITIES
Financial liabilities at fair value through profit or loss
Current derivative financial instruments
Derivative hedging instruments
Non-current derivative financial instruments
Current derivative financial instruments
TOTAL LIABILITIES
17
12
12
17
17
17
17
17
14
-
14
-
51,993
21,855
2,825
4,383
5,118
-
-
-
21,172
2,825
4,383
5,118
8,966
-
-
-
64,332
21,855
33,511
8,966
(4)
(670)
(3,554)
(4,228)
-
-
-
-
(4)
(670)
(3,554)
(4,228)
-
-
-
-
394
Pirelli Annual Report 2021
The breakdown at December 31, 2020 was as follows:
Note
12/31/2020
Level 1
Level 2
Level 3
(in thousands of euro)
FINANCIAL ASSETS
Other financial assets at fair value through income statement
Current derivative financial instruments
17
2,894
-
2,894
-
Other financial assets at fair value through other
comprehensive income
Equities and shares
Investment funds
Derivative hedging instruments
Non-current derivative financial instruments
Current derivative financial instruments
TOTAL ASSETS
FINANCIAL LIABILITIES
Financial liabilities at fair value through profit or loss
12
12
17
17
38,288
14,076
15,903
8,309
2,786
-
-
-
-
-
2,786
-
-
-
-
-
43,968
14,076
21,583
8,309
Current derivative financial instruments
17
(13,231)
Derivative hedging instruments
Non-current derivative financial instruments
Current derivative financial instruments
TOTAL LIABILITIES
17
17
-
(109,697)
(122,928)
-
-
-
-
(13,231)
-
(109,697)
(122,928)
-
-
-
-
395
Financial Statements at December 31, 2021
The following table shows the changes of financial assets that occurred in level 3:
Opening balance
Fair value adjustments through other comprehensive income
Closing balance
(in thousands of euro)
12/31/2021
12/31/2020
8,309
657
8,966
7,799
510
8,309
These financial assets mainly consist of the equity investment in Istituto Europeo di Oncologia (European Institute
of Oncology) (euro 8,006 thousand).
In the year ended December 31, 2021, there were no transfers from level 1 to level 2 and vice versa, nor from level
3 to other levels and vice versa.
The fair value of financial instruments traded on active markets is based on the price quotations published at
the reporting date of the Financial Statements. These instruments, included in level 1, primarily comprise equity
investments classified as financial assets at fair value through other comprehensive income.
The fair value of financial instruments not traded on active markets (e.g. derivatives) is determined by the use
of evaluation techniques widely used in the financial sector, which maximise the utilisation of observable and
available market data:
→ market prices for similar instruments;
→ the fair value of interest rate swaps is calculated by discounting estimated future cash flows based on observable
yield curves;
→ the fair value of cross currency interest rate swaps is calculated by discounting estimated future cash flows
based on observable yield curves;
→ the fair value of foreign exchange derivatives (forward contracts) is determined by using the forward exchange
rate at the reporting date.
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Pirelli Annual Report 2021
5.2. CATEGORIES OF FINANCIAL ASSETS AND LIABILITIES
The following are the carrying amounts for each class of financial asset and liability identified by IFRS 9:
FINANCIAL ASSETS
Financial assets at fair value through Income Statement
Current derivative financial instruments
Financial assets at amortized cost
Other non-current receivables
Current trade receivabels
Other current receivables
Cash and cash equivalents
Financial assets at fair value through Other Comprehensive Income
Financial assets at fair value through Other Comprehensive Income
Derivative hedging instruments
Current derivative financial instruments
Non-current derivative financial instruments
TOTAL FINANCIAL ASSETS
FINANCIAL LIABILITIES
Financial liabilities at fair value through Income Statement
Current derivative financial instruments
Financial liabilities at amortized cost
Non-current borrowings from banks and other financial institutions (excl. Lease payables)
Current borrowings from banks and other financial institutions (excl. Lease payables)
Current trade payables
Other non-current payables
Other current payables
Lease payables
Non-current lease payables
Current lease payables
Derivative hedging instruments
Current derivative financial instruments
Non-current derivative financial instruments
TOTAL FINANCIAL LIABILITIES
397
(in thousands of euro)
Note
12/31/2021
12/31/2020
17
13
14
13
15
12
17
17
17
19
19
22
23
23
19
19
17
17
14
2,894
2,000,566
2,000,575
40,116
80,568
792,730
1,166,741
40
1,742
2,833,451
3,249,626
54,817
41,074
5,118
4,383
9,501
-
-
-
2,897,783
3,293,594
4
13,231
3,371,179
4,579,366
1,064,767
301,571
18,387
27,570
822
538
38,603
25,312
4,493,757
4,934,357
38,999
43,929
5,774
5,779
44,773
49,708
670
3,554
4,224
-
109,697
109,697
4,542,758
5,106,994
Financial Statements at December 31, 2021
6. CAPITAL MANAGEMENT POLICY
The Company’s objective is to maximise the return on net
invested capital while maintaining the ability to operate
over time, ensuring adequate returns for its shareholders
and benefits for the other stakeholders, with progressive
deleverage of the financial structure in the short/medium
term, as also outlined in the section relating to the “Outlook
over 2022” in the Directors’ Report on Operations.
7. ESTIMATES AND ASSUMPTIONS
The preparation of the Separate Financial Statements
entails Management making estimates and assumptions,
which, under certain circumstances, are based on difficult
that are
and subjective assessments and estimates
based on historical experience, and assumptions that are
periodically considered reasonable and realistic in light of
the circumstances. Therefore, the actual results achieved
may differ from said estimates. Estimates and assumptions
are reviewed periodically and the effects of any changes
made to them are reflected in the Income Statement in the
period in which the estimate is revised. If such estimates and
assumptions, based on the best evaluation currently available,
should differ from actual circumstances, they will be modified
accordingly in the period of the change of the circumstances.
The estimates and assumptions mainly refer to the valuation
of the recoverability of other intangible assets with indefinite
useful life and of the investments in subsidiaries, to the
determination of payables for leasing and rights of use, to
the determination of taxes (current and deferred), and to the
recognition/valuation of provisions for risks and charges.
PIRELLI BRAND (INTANGIBLE ASSETS
WITH INDEFINITE USEFUL LIFE)
The Pirelli Brand is an intangible asset with indefinite useful
life not subject to amortization, but, pursuant to IAS 36, to
impairment test annually or more frequently, if specific events
or circumstances occur which may lead to the presumption
of impairment.
The impairment test at December 31, 2021 was performed
using the assistance of an independent third-party professional.
The recoverable value configuration for the purposes of
the impairment test at December 31, 2021 is the Fair Value,
calculated on the basis of the income approach (Level 3 of
the hierarchy of IFRS 13 – Fair Value measurement). The
key assumptions used by management are the estimate
of future increases in sales, their growth rate beyond the
explicit forecast period, the royalty rate and the discount
rate, which is based on the weighted average cost of capital
plus a premium determined according to the riskiness of the
specific asset.
RIGHTS OF USE AND LEASE PAYABLES
With regard to the estimates and assumptions used to
determine lease payables and rights of use, the application of
IFRS 16 introduced some elements of professional judgement
and the use of assumptions and estimates in relation to the
lease term and to the definition of the incremental borrowing
rate. The standards are summarized as follows:
→ the contract renewal clauses are considered for the
purposes of determining the duration of the contract when
the Company has the option of exercising them without
the need to obtain the consent of the counterparty and
when their exercise is deemed reasonably certain. In the
case of clauses which provide for multiple renewals that
can be exercised unilaterally by the Company, only the first
extension period has been considered;
→ the automatic renewal clauses of contracts in which both
parties have the right to terminate the contract have
not been considered for the purposes of determining
the duration of the contract, as the ability to extend the
duration of the same is not under the unilateral control of
the Company and the penalties to which the lessor could
be exposed to is not significant. However, in the event that
the lessor is exposed to a significant penalty, the Company
considers including a renewal option in determining the
duration of the contract. This assessment is also carried
out considering the degree of customization of the asset
subject to leasing: if the customization is high, the lessor
may incur a significant penalty if opposing the renewal;
→ early termination clauses in contracts: these clauses are
not considered in determining the duration of the contract
if they can only be exercised by the lessor or by both parties.
If they are unilaterally exercised by the Company, specific
assessments are contractually conducted (for example,
the Company is already negotiating a new contract or has
already given notice to the lessor).
INVESTMENTS IN SUBSIDIARIES
Investments are assessed to establish whether there was
a decrease in value, to be recorded with impairment, if
there are indications that it will be difficult to recover their
net accounting value. To establish the presence of said
indications, Directors must make subjective assessments on
the basis of information available within the Company and the
market, as well as historical experience.
Moreover, if it is determined that a potential impairment
loss may be generated, the Company calculates this loss
using appropriate measurement techniques. The proper
identification of elements indicating the existence of a
potential impairment loss, and the estimates for calculating
the amount of such losses, depend on factors that may
vary over time, affecting the assessments and estimates
made by Directors. In particular, the key assumptions used
by management are estimates of future increases in sales,
operating cash flows, growth rate of operating cash flows
beyond the explicit forecast period for the purpose of
estimating the terminal value, and the weighted average cost
of capital (discount rate).
PROVISIONS FOR RISKS AND CHARGES
Provisions are set aside against legal and fiscal risks related
to indirect taxes, representing the risk of losing lawsuits. The
amount of provisions recorded in relation to these liabilities
represents the best estimate at the reporting date made by
management for lawsuits and tax claims regarding a vast
398
Pirelli Annual Report 2021 range of issues, which are subject to the jurisdiction of various countries. Such an estimate entails making
assumptions that depend on factors that may change over time and could therefore have a material impact with
respect to the current estimates made by management for the preparation of the Separate Financial Statements.
INCOME TAXES (CURRENT AND DEFERRED)
Income taxes (current and deferred) are determined according to a prudent interpretation of the tax regulations
in force. This process sometimes involves complex estimates in determining taxable income and temporary
deductible and taxable differences between accounting and tax values. In particular, deferred tax assets are
recorded to the extent that it is probable that future taxable income will be available, against which they can
be recovered. The assessment of the recoverability of deferred tax assets, recorded in relation both to tax
losses that may be used in subsequent years and to temporary deductible differences, takes into account the
estimate of future taxable income and is based on prudent tax planning. With regard to situations in which the tax
legislation in force lends itself to interpretation, if the Group considers it probable (greater than 50%) that the tax
authority will accept the tax treatment adopted, the income (loss) before taxes is determined in accordance with
the tax treatment applied in the tax return. Otherwise, the effect of uncertainty is reflected in the determination
of the income (loss) before taxes. The probability refers to the fact that the tax authority does not accept the tax
treatment adopted, and not to the probability of the assessment.
8. PROPERTY, PLANT AND EQUIPMENT
The breakdown of these items is as follows:
- Tangible assets
- Rights of use
Net Value
(in thousands of euro)
12/31/2021
12/31/2020
32,433
37,555
69,988
33,988
42,338
76,326
399
Financial Statements at December 31, 2021
8.1. PROPERTY, PLANT AND EQUIPMENT
The breakdown and changes of these items are as follows:
Gross Value
12/31/2021
Accumulated
Depreciation
Net Value
Gross Value
(in thousands of euro)
12/31/2020
Accumulated
Depreciation
Net Value
Land
Buildings
5,245
-
5,245
5,245
-
5,245
44,273
(23,180)
21,093
44,179
(21,866)
22,313
Plant and machinery
Industrial and trade equipment
2,848
1,891
(1,916)
(1,250)
931
641
2,787
1,891
(1,820)
(1,011)
967
880
Other assets
Total
14,653
(10,130)
4,523
14,938
(10,355)
4,583
68,909
(36,476)
32,433
69,040
(35,052)
33,988
NET VALUE
12/31/2020
Increases
Decreases
Reclassif.
Depreciation
12/31/2021
(in thousands of euro)
Land
Buildings
Plant and machinery
Industrial and trade equipment
Other assets
Total
5,245
22,313
967
880
4,583
33,988
-
93
60
-
54
207
-
-
-
-
-
-
-
-
-
-
-
-
-
5,245
(1,314)
21,092
(96)
(239)
(113)
931
641
4,524
(1,762)
32,433
(in thousands of euro)
NET VALUE
12/31/2019
Increases
Decreases
Reclassif.
Depreciation
12/31/2020
Land
Buildings
Plant and machinery
Industrial and trade equipment
Other assets
Assets under construction
6,584
24,040
247
6
3,836
165
-
45
884
949
793
-
(1,339)
(355)
(33)
-
(16)
-
-
1
98
-
66
(165)
-
5,245
(1,418)
(229)
(76)
(95)
-
22,313
967
880
4,583
-
Total
34,878
2,671
(1,743)
-
(1,818)
33,988
There were no significant increases and divestments in 2021.
Financial expenses were not capitalized on property, plant and equipment.
400
Pirelli Annual Report 2021
8.2. RIGHTS OF USE
The net value of the assets for which the Company has stipulated a lease contract is as follows:
Rights of use Buildings
Rights of use Other assets
Net value
(in thousands of euro)
12/31/2021
12/31/2020
36,384
1,171
40,588
1,750
37,555
42,338
Rights of use on buildings mainly refer to contracts relating to offices.
Rights of use on other assets mainly refer to contracts relating to motor vehicles. These contracts also include
the service component (non-lease component).
Lease contracts are negotiated on an individual basis and include a wide variety of terms and conditions.
The increases in rights of use in 2021, including remeasurement, amounted to euro 1,034 thousand (euro 15,648
thousand in 2020) for lease contracts related to motor vehicles and properties.
There were no reassessments or changes to significant contracts in 2021.
Amortization of rights of use recorded in the income statement and included in the item “amortization
depreciation and impairment” (note 31) are as follows:
Buildings
Other assets
Total depreciation of right of use
(in thousands of euro)
2021
2020
4,928
772
5,700
4,839
792
5,631
For interest expense recorded in connection with lease contracts, refer to the information in note 36 “Financial
expenses”.
For information on costs for lease contracts with a duration of less than twelve months, lease contracts for low
unit value goods and lease contracts with variable fees, refer to note 32 “Other costs”.
For information on lease liabilities, refer to note 19 “Borrowings from banks and other lenders”.
9. INTANGIBLE ASSETS
The items in question and the related changes are detailed as follows:
12/31/2020
Increase
Transfers
Amortisation
12/31/2021
(in thousands of euro)
Pirelli Brand - indefinite life
2,270,000
Software licenses
Other intangible assets
Assets under construction
567
2,962
225
-
209
3,738
587
-
90
135
(258)
(1,642)
(225)
-
-
2,270,000
608
5,193
587
Total
2,273,754
4,534
-
(1,900)
2,276,388
401
Financial Statements at December 31, 2021
12/31/2019
Increase
Transfers
Amortisation
12/31/2020
(in thousands of euro)
Pirelli Brand - indefinite life
2,270,000
Software licenses
Other intangible assets
Assets under construction
Total
489
4,875
-
2,275,364
-
357
276
225
858
-
-
-
-
-
-
2,270,000
(279)
(2,189)
-
567
2,962
225
(2,468)
2,273,754
The Pirelli Brand (asset with indefinite useful life) for euro 2,270,000 thousand, originated following the allocation
of the merger deficit, generated following the incorporation of the parent company Marco Polo Industrial Holding
S.p.A. in 2016. The allocation of the deficit was made consistently with the consolidated financial statements as
a result of the completion of the Purchase Price Allocation.
The valuation of the useful life of the brands is based on a series of factors including the competitive environment,
market share, history of the brand, life cycles of the underlying product, operational plans and macroeconomic
environment of the countries in which the related products are sold. In particular, the useful life of the Pirelli Brand
was assessed indefinitely on the basis of its history of one hundred and fifty years of success (established in
1872) and the intention and ability of the Group to continue investing in order to support and maintain the brand.
The increases in the year mainly refer to the enhancement of the information systems aimed at creating a new
integrated operating model.
No impairment was carried out in 2021.
Impairment test of the Pirelli Brand (asset with indefinite useful life)
The Pirelli Brand, amounting to euro 2,270,000 thousand, is an intangible asset with indefinite useful life and
therefore not subject to amortization. However, pursuant to IAS 36, it is subject to impairment annually or more
frequently, if specific events or circumstances occur that may lead to the presumption of impairment.
The impairment test at December 31, 2021 was performed using the assistance of an independent third-party
professional.
The recoverable value configuration for the purposes of the impairment test at December 31, 2021 is the
Fair Value, calculated on the basis of the income approach (Level 3 of the hierarchy of IFRS 13 – Fair Value
measurement) and is based on:
→ Management’s forecasts which are based, with reference to 2022, on the Guidance presented to the financial
community on February 23, 2022 and, with reference to the years 2023 - 2025, on the Industrial Plan presented
to the financial community on March 31, 2021. It should be noted that analysts’ consensus forecasts for the
period 2022 - 2024 are higher than management’s projections and therefore have not been considered for
the purposes of the financial year. The revenue growth rate for the period 2022 - 2025, calculated relative to
2021 revenues, is 4.5%;
→ evaluation criterion for the sum of parts that also considers the contribution in terms of royalties from the
Prometeon Tyre Group for the use of the Pirelli brand in the Industrial segment;
→ royalty rate applied to the revenues of the Consumer High Value and Consumer Standard valuation units taken
from the royalty rates implicit in the valuations made by an independent entity relative to the main brands of
the listed companies of the Tyre sector and equal to an average royalty rate of 3.94%. With reference to the
contribution in terms of royalties from the Prometeon Tyre Group, reference was made to the royalties provided
by existing contracts;
→ discount rate of 7.90%, which includes a premium with respect to WAAC determined on the basis of the risk
of the specific asset;
→ growth rate g in the terminal value assumed to be zero;
→ TAB (Tax Amortization Benefit), which is the tax benefit that could potentially benefit the market participant
that acquired the asset separately due to the possibility of fiscally amortizing it.
402
Pirelli Annual Report 2021
For the purposes of the impairment test, the recoverable value of the Pirelli Brand cum TAB is compared with the
respective carrying amount (cum TAB) and no impairment has emerged.
The recoverable value is higher than the carrying amount of the Brand (12.5%) while, in order for the Fair Value
to be equal to the carrying amount, a worsening variation of the key parameters is necessary and in particular:
→ decrease in the royalty rates of the Consumer valuation units of 45 basis points and the simultaneous
cancellation of royalties from the license contract with Prometeon Tyre Group;
→ increase in the discount rate of 89 basis points;
→ negative “g” growth rate of -141 basis points.
10. INVESTMENTS IN SUBSIDIARIES
At December 31, 2021, this item amounted to euro 4,632,420 thousand compared to euro 4,633,666 thousand
at December 31, 2020, and the breakdown is as follows:
HB Servizi S.r.l.
Maristel S.p.A.
Pirelli Group Reinsurance Company S.A.
Pirelli Ltda
Pirelli Servizi Amministrazione e Tesoreria S.p.A.
Pirelli Sistemi Informativi S.r.l.
Pirelli Tyre S.p.A.
Pirelli UK Ltd.
Pirelli International Treasury S.p.A.
Servizi Aziendali Pirelli S.C.p.A.
Total investments in subsidiaries
Below are the changes during the year:
Opening balance
Write-downs
Closing balance
(in thousands of euro)
12/31/2021
12/31/2020
230
1,315
6,346
8,420
3,238
1,655
230
1,315
6,346
9,666
3,238
1,655
4,528,245
4,528,245
7,871
7,871
75,000
75,000
100
100
4,632,420
4,633,666
(in thousands of euro)
12/31/2021
12/31/2020
4,633,666
4,647,666
(1,246)
(14,000)
4,632,420
4,633,666
The company checks the recorded values of its investments and the existence of impairment indicators on the
basis of as set out in paragraph 3 - Accounting standards – Investments in subsidiaries and associates.
Following the verification of the indicators, the subsidiary on which it was necessary to carry out the test is Pirelli
Ltda. In the specific case, the carrying amount was compared to the recoverable value. The impairment test
determined the need for impairment of euro 1,246 thousand.
Further details are set out in the Annexes to the Explanatory Notes.
403
Financial Statements at December 31, 2021
11. INVESTMENTS IN ASSOCIATED COMPANIES
At December 31, 2021, this item amounted to euro 6,375 thousand, unchanged compared to December 31,
2020, and the breakdown is as follows:
Consorzio per le Ricerche sui Materiali Avanzati (CORIMAV)
Eurostazioni S.p.A. - Roma
Total investment in associates
(in thousands of euro)
12/31/2021
12/31/2020
104
6,271
6,375
104
6,271
6,375
No changes occurred during the year. Further details are set out in the Annexes to the Explanatory Notes.
12. OTHER FINANCIAL ASSETS AT FAIR VALUE RECORDED IN THE OTHER
COMPONENTS OF THE STATEMENT OF COMPREHENSIVE INCOME (FVOCI)
Other financial assets at fair value recorded in the other components of the statement of comprehensive income
amounted to euro 54,817 thousand at December 31, 2021 (euro 41,074 thousand at December 31, 2020). The
breakdown of the item for each security is as follows:
Listed securities
RCS Mediagroup S.p.A. - Milano
Unlisted securities
Fin. Priv Srl
Fondo Comune di Investimento Immobiliare Anastasia
Istituto Europeo di Oncologia S.r.l.
Other companies
(in thousands of euro)
12/31/2021
12/31/2020
21,855
14,076
21,171
2,825
8,006
960
15,902
2,786
7,962
348
Total financial assets at fair value through other comprehensive income
54,817
41,074
The changes in the year are shown below:
Opening balance
Decreases
Adjustment to fair value recognized in other comprehensive income
Closing balance
(in thousands of euro)
41,074
(20)
13,763
54,817
The fair value adjustments in the other components of the statement of comprehensive income mainly
refer to the investments in RCS MediaGroup S.p.A (positive for euro 7,779 thousand), in Fin.Priv. S.r.l. (positive
for euro 5,269 thousand), in Genextra S.p.A. (positive for euro 608 thousand), in Istituto Europeo di Oncologia
(positive for euro 44 thousand), in Fondo Comune di investimento Anastasia (positive for euro 39 thousand) and
in Nomisma - Società di Studi Economici S.p.A. (positive for euro 30 thousand).
404
Pirelli Annual Report 2021
The fair value of listed securities corresponds to the stock market price at December 31, 2021. For unlisted
securities and real estate funds, the fair value was estimated according to available information.
13. OTHER RECEIVABLES
The breakdown of other receivables is as follows:
12/31/2021
12/31/2020
Total
Non-current
Current
Total
Non-current
Current
(in thousands of euro)
Other receivables from subsidiaries
1,380
-
1,380
2,307
-
2,307
Financial receivables from subsidiaries
2,780,305
2,000,000
780,305
3,151,544
2,000,000
1,151,544
Financial receivables from third parties
Guarantee deposits
Other receivables from third parties
Receivables from tax authorities for taxes not related to
income
Financial accrued interest income
Financial prepaid expenses
-
281
6,489
4,583
72
186
-
281
285
-
-
-
-
-
5,000
267
6,204
3,705
4,583
3,390
72
186
943
160
-
5,000
267
308
-
-
-
-
3,397
3,390
943
160
Total other receivables
2,793,296
2,000,566
792,730
3,167,316
2,000,575
1,166,741
Financial receivables from subsidiaries include the current portion of the short-term use of a long-term credit
line (maturity January 31, 2023) disbursed to Pirelli International Treasury S.p.A. for an amount of euro 770 million.
They also include the receivable for interest accrued not yet paid on the same line for euro 9,922 thousand and
the relation with Pirelli International Treasury S.p.A. for the interest-bearing current account, which is regulated at
interest rates market for euro 384 thousand (at December 31, 2020 equal to euro 1,622 thousand).
The amount shown in non-current other financial receivables from subsidiaries refers to an existing loan with
Pirelli International Treasury S.p.A. taken out on January 31, 2020 with maturity on January 31, 2023.
For the purposes of applying the IFRS 9 accounting standard in relation to loans to Group companies,
management has made an estimate of the expected credit losses in the 12 months following the closing of the
financial statements. The analysis takes into consideration qualitative, quantitative, historical, and prospective
information to determine whether the intra-group loan has a credit risk at December 31, 2021. Referring to a
probability of default of a loan from the Pirelli & C. Group and considering the financial position of subsidiaries,
Pirelli & C. management concluded that any impairment required by the standard would be of an immaterial
amount.
Receivables from the tax authorities for taxes not related to income for euro 4,583 thousand mainly refer to
receivables for VAT, which increased compared to the previous year.
Accrued financial assets refer to portions of interest accrued but not yet collected on cross currency interest
swap derivative contracts related to the unsecured syndicated financing “Facilities” granted to Pirelli & C. S.p.A..
Deferred financial assets relate mainly to the commissions on the revolving and term loan credit line.
The carrying amount of financial receivables and other receivables approximates their fair value.
405
Financial Statements at December 31, 2021
14. TRADE RECEIVABLES
Trade receivables amounted to euro 40,116 thousand compared to euro 80,568 thousand of the previous year
and the breakdown is as follows:
Receivables from subsidiaries
Receivables from associates
Receivables from other companies
Total receivables - gross amount
Provision for bad debt
Total receivables
(in thousands of euro)
12/31/2021
12/31/2020
39,115
3
1,732
40,850
(734)
40,116
76,578
3
4,630
81,211
(643)
80,568
Below is the breakdown of trade receivables based on the currency in which they are expressed:
EUR
USD (Dollar USA)
RUB (Ruble Russia)
CHF
Total
(in thousands of euro)
12/31/2021
% of total trade
receivables
12/31/2020
% of total trade
receivables
33,760
906
650
5,534
40,850
82%
2%
2%
14%
74,625
111
1,556
4,919
92%
0%
2%
6%
100%
81,211
100%
Receivables from subsidiaries at December 31, 2021 mainly include the amounts that Pirelli & C. S.p.A. charges
for services rendered through Corporate functions and charge-backs of costs. The aforementioned receivables
are due within the financial year and do not show past due balances of significant amount.
Receivables from other companies of euro 1,732 thousand (euro 4,630 thousand at December 31, 2020),
shown gross of the provision for bad debts of euro 734 thousand, are past due for euro 1,544 thousand.
Past due receivables and receivables due have been valued in accordance with the Group policies described in
the paragraph relating to credit risk management in the “Financial risk management policy”.
Impaired receivables include both significant positions impaired separately, and positions with similar
characteristics in terms of credit risk, grouped and impaired on a collective basis.
The change in the provision for bad debts is shown below:
Opening balance
Accruals
Closing balance
406
(in thousands of euro)
12/31/2021
12/31/2020
643
91
734
620
23
643
Pirelli Annual Report 2021
Accruals to the provision for bad debts are recorded in the Income Statement as “Impairment of financial
assets” (note 33).
For trade receivables, the carrying amount is considered to approximate the applicable fair value.
15. CASH AND CASH EQUIVALENTS
At December 31, 2021, they amounted to euro 40 thousand, against euro 1,742 thousand at December 31, 2020.
They refer to balances of bank accounts in euro repayable on demand.
The credit risk associated with cash and cash equivalents, is to be considered limited because the counterparties
are represented by leading national and international banking institutions.
It is believed that the value of cash and cash equivalents is in line with their fair value.
16. TAX RECEIVABLES
At December 31, 2021, they amounted to euro 65,074 thousand (euro 32,676 thousand at December 31, 2020).
The amount mainly includes:
→ receivables from Group companies participating in the tax consolidation for euro 64,525 thousand (euro
31,369 thousand at December 31, 2020). The increase compared to the previous year substantially depends
on the greater contribution of the positive taxable result by the subsidiary Pirelli Tyre S.p.A.;
→ receivables for IRAP advances for euro 125 thousand (euro 125 thousand at December 31, 2020).
17. DERIVATIVE FINANCIAL INSTRUMENTS
The item includes the fair value of derivative instruments. The breakdown is as follows:
12/31/2021
12/31/2020
Non Current
Assets
Current
Assets
Non Current
Liabilities
Current
Liabilities
Non Current
Assets
Current
Assets
Non Current
Liabilities
Current
Liabilities
(in thousands of euro)
Without adoption of hedge accounting
Forex instruments - trade positions
Forex instruments -
included in net financial position
Derivatives for interest rate -
included in net financial position
In hedge accounting
- cash flow hedge:
Derivatives for interest rate -
included in net financial position
Other derivatives instruments -
included in net financial position
-
-
-
9
5
-
-
-
-
(4)
-
-
4,383
-
(3,554)
(670)
-
5,118
-
-
Total derivative instruments
4,383
5,132
(3,554)
(674)
-
-
-
-
-
-
25
2,642
227
-
-
-
-
-
(9,733)
(99,964)
(5)
(13,226)
-
-
-
2,894
(109,697)
(13,231)
The above derivatives are intercompany derivatives stipulated mainly with the Group’s treasury company, Pirelli
International Treasury S.p.A..
407
Financial Statements at December 31, 2021
DERIVATIVE FINANCIAL INSTRUMENTS IN HEDGE ACCOUNTING
The value of derivatives on interest rates, recorded as non-current assets for euro 4,383 thousand, non-
current liabilities for euro 3,554 thousand and current liabilities for euro 670 thousand, refers to the fair value
measurement of 10 cross currency interest rate swaps with the following characteristics:
Instrument
Covered Item
Notional
(in thousands of euro)
Start date
Deadline
Description
IRS
IRS
IRS
IRS
Term loan in Eur
250,000
June 2019
June 2022
receive fix / pay floating
Term loan in Eur
62,500
August 2019
August 2023
receive fix / pay floating
Schuldschein
180,000
July 2020
July 2023
receive fix / pay floating
Schuldschein
20,000
July 2020
July 2025
receive fix / pay floating
IRS forward start
Pre-hedge
500,000
March 2022
March 2026
receive floating / pay fix
Total
1,012,500
In the first half of 2021, an IRS receive floating EURIBOR/pay fix EURIBOR was closed early following the partial
repayment of the unsecured loan (“Facilities”) for euro 756 million (see note 19).
For these derivatives, cash flow hedge accounting was adopted. Items subjected to hedge accounting are:
→ future interest flows on liabilities in euro at floating rate;
→ future interest flows on the Schuldschein loan (see note 19);
→ future financing (pre-hedge).
The change in the fair value for the period, positive for euro 4,773 thousand, was entirely suspended in equity,
while in the Income Statement, net interest expense for euro 3,955 thousand was reversed to the item “Financial
expenses” (note 36), correcting the financial expenses recorded on the liability hedged, as well as euro 1,104
thousand for ineffectiveness relating to the early settlement of the IRS.
A change of +0.5% in the EURIBOR curve, all other conditions being equal, would result in a positive change
of euro 11,812 thousand in the Company’s equity, while a change of -0.5% in the same curve would result in a
negative change of euro 12,111 thousand in the Company’s equity.
The value of other derivatives, recorded as current assets for euro 5,118 thousand, refers to the fair value
measurement of 2 cross currency interest rate swaps with the following characteristics:
Instrument
Notional
(in thousands of USD)
Start date
Deadline
Description
CCIRS
CCIRS
Total
170,422
908,920
1,079,342
July 2019
July 2019
June 2022
June 2022
pay fix EURIBOR / receive
floating LIBOR
pay fix EURIBOR / receive
floating LIBOR
In the first half of 2021, two CCIRS pay floating EURIBOR / receive floating LIBOR were closed early following
the partial repayment of the unsecured loan (“Facilities”) for euro 756 million (see note 19).
The objective of these derivatives, for which hedge accounting of the cash flow hedge type was adopted, is to
hedge the Company against the risk of fluctuations in cash flows associated with changes in the LIBOR rate and
changes in the USD/EUR exchange rate, generated by a liability in USD at floating rate with a notional value of
USD 1,079,341 thousand (see note 19 Borrowings from banks and other financial institutions).
408
Pirelli Annual Report 2021 The positive change in fair value for the period was suspended
in equity for euro 91,398 thousand (positive cash flow hedge
reserve for euro 90,249 thousand and positive cost of
hedging reserve for euro 1,149 thousand), while the following
were reversed in the income statement:
→ profits of euro 83,860 thousand to offset net unrealised
exchange rate losses recorded on the hedged liability;
→ net interest expense of euro 849 thousand to adjust the
Possible causes of ineffectiveness are as follows:
→ application of adjustment for credit risk only to the hedging
instrument but not to the hedged item;
→ the hedged item incorporates a floor that is not reflected
in the hedging instrument;
→ misalignment between the actual contractual conditions of
the future transaction and those of the hedging instrument.
financial expenses recorded on the hedged liability;
For further details, see note 36 “Financial expenses”.
→ positive effect for euro 1,281 thousand following the
liquidation of two CCIRS in February 2021.
A parallel change of +0.5% of the EURIBOR and LIBOR
curves, all other conditions being equal, would entail a
positive variation of euro 1,899 thousand in the Company’s
equity, while a variation of -0.5% of the same curves would
result in a negative change of euro 1,914 thousand in the
Company’s equity.
A change of +10% in the USD/EUR exchange rate, all other
conditions being equal, would result in a negative change
of euro 135 thousand in the Company’s equity; a negative
change of 10%, on the other hand, would entail a positive
change of euro 180 thousand in the Company’s equity.
Hedging relationships relating to IRS and CCIRS are
considered effective prospectively as
following
conditions are met:
the
→ there is an economic relationship between the hedging
instrument and the hedged item, as the characteristics
of the hedging instrument (nominal interest rate, reset of
the interest rate and frequency of the payment of interest)
are substantially in line with those of the hedged item. As
a consequence, changes in the fair value of the hedging
instrument regularly offset those of the hedged item;
→ the effect of credit risk is not predominant within the
hedging relationship: based on the Group’s operating rules,
derivatives are traded only with high standing banking
counterparties and the credit quality of the existing
derivatives portfolio is constantly monitored;
→ the designated hedge ratio is in line with the one used for
financial risk management and is 100% (1:1).
The ineffectiveness of the hedging relationship is calculated
at each reporting date with the Dollar Offset method, which
provides for the comparison of changes in the fair value risk
adjusted of the hedging instrument (with the exception of those
attributable to the spread referring to the currency basis) with
changes in the fair value risk free of the hedged item, through
the identification of a hypothetical derivative with the same
characteristics of the underlying financial liability.
18. SHAREHOLDERS’ EQUITY
Equity amounted to euro 4,813,132 thousand (euro 4,651,056
thousand at December 31, 2020).
The statement of changes in equity is shown in the main
financial statements.
Equity went from euro 4,651,056 thousand at December 31,
2020 to euro 4,813,132 thousand at December 31, 2021. The
change is essentially due to the net result for the year (positive
for euro 216,619 thousand), the adjustment to the fair value
of derivatives designated as cash flow hedges, net of the tax
effect (positive for euro 11,582 thousand), the adjustment
to the fair value of financial assets at fair value recorded
as other components of the statement of comprehensive
income (positive for euro 13,764 thousand) and the dividend
distribution of euro 80,000 thousand.
SHARE CAPITAL
The share capital at December 31, 2021, fully subscribed
and paid-in, amounted to euro 1,904,374,935.66 divided
into 1,000,000,000 ordinary shares without nominal value,
unchanged compared to December 31, 2020.
LEGAL RESERVE
The legal reserve at December 31, 2021 amounted to euro
380,875 thousand, unchanged compared to December 31,
2020, having already reached the limit set by article 2430
Civil Code.
SHARE PREMIUM RESERVE
At December 31, 2021, the share premium reserve
amounted to euro 630,381 thousand, unchanged compared
to December 31, 2020.
CONCENTRATION RESERVE
At December 31, 2021, concentration reserves amounted to
euro 12,467 thousand, unchanged compared to December
31, 2020.
OTHER RESERVES
At December 31, 2021, other reserves amounted to euro 133,735
thousand, unchanged compared to December 31, 2020.
409
Financial Statements at December 31, 2021 OTHER O.C.I. RESERVES
At December 31, 2021, Other O.C.I. reserves were positive for euro 7,539 thousand and refer to the reserve for
the fair value adjustment recorded in the statement of comprehensive income (positive for euro 8,270 thousand),
to the employee benefits re-measurement reserve (positive for euro 1,825 thousand) and the cash flow hedge
reserve and the cost of hedging reserve, net of the tax effect (negative for euro 2,556 thousand).
MERGER RESERVE
At December 31, 2021, the merger reserve amounted to euro 1,022,928 thousand, unchanged compared to
December 31, 2020. The reserve was generated following the merger by incorporation of Marco Polo Industrial
Holding S.p.A. in Pirelli & C. S.p.A. in 2016.
RESERVE FROM RESULTS CARRIED FORWARD
The reserve from results carried forward amounted to euro 504,215 thousand compared to a 540,084 at
December 31, 2020. The decrease is attributable to the withdrawal and consequent distribution of euro 36,044
thousand, as per the resolution of the shareholders’ meeting of June 15, 2021.
In accordance with the provisions of article 2427, no. 7-bis of the Italian Civil Code, in the following table each
item of equity is indicated analytically, with indication of its origin, possibility of use and distributability, as well as
of its use in previous years:
Amount
Possible use
Available portion
(in thousands of euro)
Summary of reserves
uses in the last 3
previous years
1,904,375
630,381
380,875
12,467
41,200
92,535
7,539
1,022,928
504,215
4,596,515
Share capital
Share premium reserve
Legal reserve
Other reserves
- Concentration reserve
- Convertible bond loan reserve
- Other reserves
- Other O.C.I. reserves
- Merger reserve
Retained earnings
Total
Non distributable
Residual quota available
A to increase the share capital
B to cover losses
C to distribute to the shareholders
A, B, C
B
A, B, C
A
A, B
-
A, B, C
A, B, C
630,381
380,875
12,467
41,200
92,535
-
1,022,928
504,215
2,684,601
514,610
2,169,991
-
-
-
-
-
-
-
(36,044)
(36,044)
410
Pirelli Annual Report 2021
19. BORROWINGS FROM BANKS AND OTHER FINANCIAL INSTITUTIONS
The item borrowings from banks and other financial institutions, is broken down as follows:
12/31/2021
12/31/2020
Total
Not currents
Currents
Total
Not currents
Currents
(in thousands of euro)
Bonds
1,453,762
1,453,762
-
1,524,500
1,442,650
81,850
Borrowings from banks
2,967,539
1,917,417
1,050,122
3,336,716
3,136,716
200,000
Lease liabilities
44,773
38,999
49,708
43,929
1,984
12,661
-
-
7,335
12,661
12,386
-
-
5,774
1,984
5,779
7,335
12,386
4,480,719
3,410,178
1,070,541
4,930,645
4,623,295
307,350
Other financial payables
Accrued liabilities
Total borrowings from banks
& other financial institutions
The item bonds, refers to:
→ a non-interest-bearing senior unsecured guaranteed equity-linked bond, for a nominal value of euro 500
million maturing on December 22, 2025. The bond, reserved for institutional investors, issued by Pirelli & C.
S.p.A. on December 22, 2020, guaranteed by Pirelli Tyre S.p.A. and admitted to trading on the Vienna MTF,
multilateral trading facility managed by the Vienna Stock Exchange. The bond is convertible, at the discretion
of the bondholders, into new ordinary shares of the Company at a price of euro 6.235 per share, subject to the
anti-dilutive adjustments envisaged by the loan regulations. At December 31, 2021, the component recorded
under financial payables was equal to euro 461 million. The difference with the nominal value refers to the fair
value of the call option sold to the underwriters of the loan, represented by the option to convert it into new
ordinary shares of the Company at a predefined price, and accounted for as shareholders’ equity reserves for
euro 41.2 million;
→ the unrated bond for the nominal amount of euro 553 million (originally for euro 600 million which was partially
repurchased for the total amount of euro 47 million during the last quarter of 2018), placed on January 22,
2018 with a fixed coupon of 1.375% and an original maturity of 5 years. This bond, guaranteed by Pirelli Tyre
S.p.A. and placed with international institutional investors, was issued as part of the EMTN (Euro Medium-
Term Note) program approved by the Board of Directors at the end of 2017, signed on January 10, 2018 and
updated on December 19, 2018;
→ the Schuldschein loan at floating rate (Euribor + spread) for a total nominal value of euro 443 million placed on
July 26, 2018. The loan, guaranteed by Pirelli Tyre S.p.A. and entered into by leading market operators, consists
of a tranche of euro 423 million with 5-year maturity and a tranche of euro 20 million with 7-year maturity.
The loan, placed on July 26, 2018, also included a tranche of euro 82 million with original maturity on July 31,
2021 repaid early in January 2021.
The carrying amount for the item bonds was determined as follows:
Nominal value
Equity convertible bond component
Transaction costs
Bond discount
Amortisation of effective interest rate
Non- monetary interest convertible bond loan
Total
411
(in thousands of euro)
12/31/2021
12/31/2020
1,496,000
1,578,000
(41,791)
(14,957)
(2,988)
9,282
8,216
(41,791)
(15,133)
(2,988)
6,216
196
1,453,762
1,524,500
Financial Statements at December 31, 2021
Below are the changes of the item bonds.
Bonds as at 12/31/2020
Transactions costs
Bond repayments (EMTN program)
Non-cash interest convertible bond
Amortised cost of the year
Bonds as at 12/31/2021
The change in the item bonds relating to the previous year is shown below:
Bonds as at 12/31/2019
Bond issues (Convertible bond)
Transactions costs
Bond repayments (EMTN program)
Reclassification of convertible option at issue date
Non-cash interest convertible bond
Amortised cost of the year
Bonds as at 12/31/2020
(in thousands of euro)
(in thousands of euro)
1,524,500
(262)
(82,000)
8,020
3,504
1,453,762
1,271,392
500,000
(8,041)
(200,000)
(41,200)
196
2,153
1,524,500
Borrowings from banks, which amounted to euro 2,967,539 thousand, mainly refer to:
→ use of the unsecured loan (“Facilities”) granted to Pirelli & C. S.p.A. for euro 950,197 thousand, classified as
current payables. The nominal refinanced total subscribed to on June 27, 2017 (with a closing date of June
29, 2017), amounted to euro 1.65 billion (the net amount of repayments made since the date of signing – the
original amount of the credit facility granted was euro 4.2 billion). The loan is guaranteed by Pirelli Tyre S.p.A.,
Pirelli Deutschland GmbH, Pirelli Tires Romania S.r.l., Pirelli Pneus Ltda, Pirelli International Treasury S.p.A. and
Pirelli Neumaticos Sa de CV. On November 29, 2018, the loan was modified to include the right of the Pirelli
Group to extend the maturity of the individual lines of the loan up to 2 years at its discretion with respect to
their original contractual maturity of 3 and 5 years. The facilities are denominated in euro and US dollar and
carry a floating interest rate of Euribor + spread and Libor + spread, respectively. In February 2021, part of
the loan for euro 756 million was repaid. It is also noted that all the credit lines with original maturity of 3 years
have been fully repaid; the value of the outstanding loan at December 31 therefore refers only to the lines with
original maturity of 5 years;
→ “Sustainable Credit Line” for euro 795,993 thousand relating to the credit line of euro 800 million at floating
rate (Euribor + spread), guaranteed by Pirelli Tyre S.p.A. and stipulated on March 31, 2020 with a pool of
leading Italian and international banks and with a 5-year maturity. The bank line consists of a “sustainable”
tranche for an amount of euro 600 million, i.e. parametrized to the Group’s economic and environmental
sustainability objectives (sustainable KPI) and a “circular economy” tranche, i.e. parametrized to the Group’s
circular economy objectives. It should be noted that following the first reporting of sustainable KPIs and
having achieved the objectives for the year, the Group is benefiting from the related incentives to reduce
the cost of the credit line on the “sustainable” tranche. The reporting of the “circular economy” tranche is
instead foreseen only in 2023;
→ euro 722,622 thousand relating to two bilateral loans disbursed to Pirelli & C. S.p.A. by leading banking
institutions, of which nominal euro 600 million maturing in February 2024 at floating rate (Euribor +
412
Pirelli Annual Report 2021
spread) and guaranteed by Pirelli Tyre S.p.A., and euro 125 million with maturity August 2023 at floating
rate (Euribor + spread);
→ euro 498,728 thousand relating to two new bilateral loans disbursed in December 2021 to Pirelli & C. S.p.A. by
leading banking institutions, of which a nominal amount of euro 400 million, guaranteed by Pirelli Tyre S.p.A.
and parametrized to some sustainability targets of the Group, maturing in December 2024 at floating rate
(Euribor + spread) and euro 100 million maturing in December 2022 at fixed rate.
At December 31, 2021, the Company had a liquidity margin equal to euro 700,040 thousand composed of euro
700,000 thousand of unused committed credit lines, and euro 40 thousand in cash.
Below are the changes in borrowings from banks:
Borrowings from banks at 12/31/2020
Drawdown of unsecured financing (Facilities)
Reimbursements of unsecured financing (Facilities)
New bilateral borrowings
Transactions costs
Amortised cost of the year
Translation differences
Borrowings from banks at 12/31/2021
The change in total borrowings from banks for the previous year is shown below:
Borrowings from banks at 12/31/2019
Drawdown of unsecured financing (Facilities)
Reimbursements of unsecured financing (Facilities)
New bilateral borrowings
Transactions costs
Amortized cost for the period
Translation differences
Borrowings from banks at 12/31/2020
(in thousands of euro)
3,336,716
368,549
(1,337,656)
500,000
(1,275)
14,243
86,962
2,967,539
(in thousands of euro)
2,921,413
1,127,978
(1,342,297)
800,000
(10,520)
11,124
(170,982)
3,336,716
413
Financial Statements at December 31, 2021
Lease liabilities represent financial liabilities relating to the application of IFRS 16 starting from January 1, 2019.
Below are the changes in lease liabilities:
Lease liabilities as at 12/31/2020
Increase of lease obligations
Remeasurement and early termination
Cash outflow for lease obligations - principal amount
Lease liabilities as at 12/31/2021
The change in lease liabilities for the previous year is shown below:
Lease liabilities as at 12/31/2019
Increase of lease obligations
Remeasurement and early termination
Cash outflow for lease obligations - principal amount
Lease liabilities as at 12/31/2020
(in thousands of euro)
(in thousands of euro)
49,708
667
205
(5,807)
44,773
38,226
14,967
541
(4,026)
49,708
Non-discounted future payments for lease contracts for which the exercise of extension options is not considered
reasonably certain, amounted to euro 50,936 thousand at December 31, 2021 and are not included in this item
(euro 50,144 thousand at December 31, 2020).
The item other financial payables includes euro 1,200 thousand for the short-term portion of the upfront fee
on the new bilateral loan line signed in December 2021 and euro 784 thousand for the payable to shareholders
following the squeeze out operation.
The item accrued liabilities refers for euro 8,510 thousand to the interest accrued on the bonds and for the
remainder mainly to the interest accrued but not yet paid on the term loans.
The carrying amount of current financial payables is considered to approximate their fair value. The table below
compares the fair value of non-current financial payables with their carrying amount:
Bonds
Borrowings from banks
Lease payables
(in thousands of euro)
12/31/2021
12/31/2020
Carrying amount
Fair value
Carrying amount
Fair value
1,453,762
1,469,529
1,442,650
1,465,120
1,917,417
1,925,000
3,136,716
3,160,117
38,999
38,999
43,929
43,929
Total borrowings from banks and other financial institutions
- non current
3,410,178
3,433,528
4,623,295
4,669,166
The public bond issued by Pirelli & C. S.p.A. as part of the EMTN program is listed and its relative fair value was
measured on the basis of prices at year-end. It has therefore been classified in level 1 of the hierarchy, as provided
for by IFRS 13 – Fair Value Measurement. The fair value of the debt component of the convertible bond, of the
Schuldschein loan and of borrowings from banks was calculated by discounting each expected borrowings cash
414
Pirelli Annual Report 2021
flow at the market swap rate for the currency and at the maturity date, increased by the Group’s creditworthiness
for debt instruments similar by nature and technical characteristics, which therefore places it at level 2 of the
hierarchy as provided for by IFRS 13 – Fair Value Measurement.
The distribution of borrowings from banks and other financial institutions by currency of origin of the payable at
December 31, 2021 and December 31, 2020 is as follows:
EUR
USD (Dollar USA)
Total
(in thousands of euro)
12/31/2021
12/31/2020
3,529,236
3,499,002
951,483
1,431,643
4,480,719
4,930,645
At December 31, 2021, there are derivative hedging instruments for interest rates and exchange rates on floating
rate payables in foreign currency.
Considering the effects of the aforementioned hedging derivatives, the Company’s exposure to fluctuations in
interest rates on financial payables, both in terms of the type of interest rate and their resetting, is as follows:
→ floating-rate payables for euro 1,847,414 thousand, the interest rate of which is subject to renegotiation in 2022;
→ fixed-rate payables for euro 2,618,560 thousand, the interest rate of which is not subject to renegotiation until
the natural maturity of the reference debt (euro 1,056,748 thousand maturity in the next twelve months and
euro 1,561,812 thousand maturity beyond twelve months).
With regard to the existence of financial covenants, it is noted that (i) the Group’s main bank credit facility
(Facilities) granted to Pirelli & C. S.p.A. and Pirelli International Ltd (formerly Pirelli International Plc) (currently
usable only by Pirelli & C. S.p.A.), (ii) the “Schuldschein” loan (iii) the bilateral line of euro 600 million granted to
Pirelli & C. S.p.A. in the first quarter of 2019 (“Bilateral 600”), (iv) the bilateral line of euro 125 million granted to
Pirelli & C. in the third quarter of 2019 (“Bilateral 125”), (v) the “Sustainable Credit Line” entered into March 31,
2020, and (vi) the bilateral “ESG linked” line of euro 400 million granted to Pirelli & C. S.p.A. in December 2021
(“Bilateral 400”), require compliance with a maximum ratio (Total Net Leverage) between net debt and gross
operating margin, as reported in the consolidated Financial Statements of Pirelli & C. S.p.A..
In all the loans indicated above, failure to comply with the financial covenant is identified as a default event.
Specifically, this event of default will have the consequence, in cases of exercise of the relative remedies by the
lending banks (i) as part of the Facilities, only if requested by a number of lending banks representing at least 66
2/3% of the total commitment, the early (partial or total) repayment of the loan with simultaneous cancellation of
the related commitment; (ii) as part of the Schuldschein loan, individually and independently if requested by each
lending bank for its portion, the early repayment of the loan only for said portion; (iii) as part of the Bilateral 600,
the Bilateral 125 and the Bilateral 400, if requested by the only bank that granted said loan, the termination of
the contract and the early repayment for the entire amount disbursed; and (iv) as part of the Sustainable Credit
Line, only if requested by a number of lending banks that represents at least 50% of the total commitment (or
at least 60% if an additional lending bank is added to the current four), the termination of the contract and early
repayment of the loan.
In relation to the above, it is noted that at December 31, 2021, no event of default or default has occurred.
The other outstanding financial payables at December 31, 2021 do not contain financial covenants.
The Facilities, the Schuldschein loan, the Bilateral 600, the Bilateral 125, the Sustainable Credit Line, the Bilateral
400 as well as the 100 million euro bilateral line granted to Pirelli & C. S.p.A. in December 2021 also provide for
Negative Pledge clauses and other usual provisions, the terms of which are in line with market standards for each
of the aforementioned types of credit facility.
415
Financial Statements at December 31, 2021
NET FINANCIAL POSITION
(ALTERNATIVE PERFORMANCE INDICATOR NOT REQUIRED BY IFRS ACCOUNTING STANDARDS)
The table below shows the breakdown of the net financial position and net financial debt at December 31, 2021 and
December 31, 2020, determined in accordance with the provisions of Consob communication DEM/6064293 of
July 28, 2006 and in compliance with the ESMA guidelines on disclosure obligations pursuant to the prospectus
regulation applicable from May 5, 2021:
Note
12/31/2021
of which related
parties (note 39)
12/31/2020
of which related
parties (note 39)
(in thousands of euro)
Current borrowings from banks and other financial
institutions
Current derivative financial instruments (liabilities)
Non-current borrowings from banks and other
financial institutions
Non-current derivative financial instruments
(liabilities)
Total gross debt
Cash and cash equivalents
Current financial receivables and other assets
Derivative financial instruments - assets
Net financial debt *
Non-current financial receivables and other assets
Derivative financial instruments
19
17
19
17
15
13
17
13
17
1,070,541
670
3,410,178
-
670
-
307,350
-
13,226
13,226
4,623,295
-
3,554
3,554
109,697
109,697
4,484,942
5,053,568
(40)
-
(1,742)
-
(780,563)
(780,378)
(1,157,648)
(1,152,488)
(5,123)
(5,123)
(2,869)
(2,869)
3,699,215
3,891,309
(2,000,280)
(2,000,000)
(2,000,267)
(2,000,000)
(4,383)
(4,383)
-
-
Total net financial (liquidity)/debt position
1,694,552
1,891,042
* Pursuant to CONSOB Notice of July 28, 2006 and in compliance with the ESMA guidelines regarding disclosure requirements pursuant to the Prospectus Regulation applicable from May 5, 2021
20. PROVISIONS FOR LIABILITIES AND CHARGES
The following is a detail of changes of the item in question:
Provision for employees controversies
Provision for tax risks
Provision for environmental risks
Provision for other risks and charges
Provision for liabilities and charges -
non current portion
Provision for other risks and charges
Provision for liabilities and charges -
current portion
12/31/2020
Increases
Uses
12/31/2021
(in thousands of euro)
1,914
1,141
1,727
6,323
11,105
-
-
362
-
4,700
16,101
21,163
509
509
(574)
-
(1,045)
(45)
(1,664)
-
-
1,702
1,141
5,382
22,379
30,604
509
509
Total Provisions for risks and charges
11,105
21,672
(1,664)
31,113
The increases are mainly related to the other provisions for risks and charges, and refer to the STI (Short-term
Incentive) and LTI (Long-term Incentive 2020 – 2022 and 2021 – 2023) incentive plans of the Directors, which
reflect the improvement in performance on parameters underlying the plans.
The uses are mainly attributable to closures of labor disputes and costs incurred for environmental reclamations.
416
Pirelli Annual Report 2021
21. EMPLOYEE BENEFIT OBLIGATIONS
Employee benefit obligations amounted to euro 21,442 thousand (euro 10,912 thousand at December 31, 2020),
and the breakdown is as follows:
12/31/2021
12/31/2020
Total
Non current
Current
Total
Non current
Current
(in thousands of euro)
Employee leaving indemnities (TFR)
1,997
1,997
Other benefits
19,445
19,445
Total employees’ benefit obligation
21,442
21,442
-
-
-
2,518
8,394
2,518
-
5,946
2,448
10,912
8,464
2,448
EMPLOYEE LEAVING INDEMNITIES (TFR)
The changes in the year 2021 for the employee leaving indemnities are the following:
Opening balance
Movements through income statement:
- current service cost
- interest expense
Remeasurements recognised in equity:
- actuarial (gains) or losses arising from changes in financial assumption
- increase related to prior year experience
Indemnities, advance payments, relocations, payment to funds
Total employees’ leaving indemnities (TFR)
(in thousands of euro)
12/31/2021
12/31/2020
2,518
2,672
15
21
60
(617)
1,997
23
18
-
(195)
2,518
The amounts recorded in the income statement are included in the item “Personnel expenses” (note 30).
Net actuarial losses accrued in 2021, recorded directly in equity, amounted to euro 81 thousand, and are
related to the change in the economic parameters of reference (discount rate and inflation rate) and to prior
year experience.
In accordance with national legislation, the amount due to each employee accrues based on the service provided
and is paid when the employee leaves the company. The treatment due to the termination of the employment
relationship is calculated based on its duration and the taxable remuneration of each employee. The liability,
annually revalued on the basis of the official cost of living and statutory interest rate, is not associated with
any accrual condition or period, nor with any financial funding obligation; therefore, there is no activity at the
service of the provision.
The discipline was supplemented by Legislative Decree no. 252/2005 and by Law no. 296/2006 (Finanziaria
2007) which, for companies with at least 50 employees, has established that the portions accrued since 2007,
are allocated, on the employees’ option, either to the INPS Treasury Fund or to supplementary pension schemes,
assuming the nature of “Defined contribution plan”. In any case, for all companies, the revaluations of the
amounts outstanding at the option dates are still accounted for under staff severance indemnities as well as, for
companies with less than 50 employees, also the portions accrued and not allocated to supplementary pensions.
417
Financial Statements at December 31, 2021
The principal actuarial assumptions used at December 31, 2021 are as follows:
Discount rate
Inflation rate
The main actuarial assumptions used at December 31, 2020 were as follows:
Discount rate
Inflation rate
2021
2020
0.9%
1.7%
0.6%
1.0%
Hired employees at December 31, 2021 amounted to 357 units (345 units at December 31, 2020).
In other conditions being equal, a hypothetical change of 0.25% in the discount rate would result in a decrease in
liabilities equal to 1.80%, in the case of an increase (1.81% at December 31, 2020), and an increase in liabilities of
1.86%, in the case of a decrease (1.84% at December 31, 2020).
OTHER EMPLOYEE BENEFITS
The breakdown of other benefits is as follows:
12/31/2021
12/31/2020
Total
Non current
Current
Total
Non current
Current
(in thousands of euro)
Long-term incentive plans
15,672
15,672
Jubilee awards
Other benefits
Total
1,761
2,013
1,761
2,013
19,445
19,445
-
-
-
-
4,253
4,253
1,692
1,692
-
-
2,448
-
2,448
8,394
5,946
2,448
The item Long-term incentive plans relates to the amount set aside for the monetary, three-year 2020-2022
long-term incentive and 2021-2023 long-term incentive plans for Group management and related to the
objectives contained in the 2020 guidance and in the 2021 – 2022|2025 business plan. The increase over the
previous year reflects the improvement in performance on the parameters underlying the plans.
The item “Other benefits – non-current portion” refers to the short-term incentive plan for employees, which
was canceled in 2020 following the Covid-19 pandemic.
The decrease in “Other benefits – current portion” compared to December 31, 2020 of euro 2,448 thousand
is due to the payment of the fourth and last part of the retention plan approved by the Board of Directors on
February 26, 2018 and intended for Key Managers and a selected number of Senior Managers and Executives.
418
Pirelli Annual Report 2021
22. TRADE PAYABLES
The breakdown of trade payables is as follows:
Payables to subsidiaries
Payables to associates
Payables to other companies
Total trade payables
(in thousands of euro)
12/31/2021
12/31/2020
2,783
72
15,532
18,387
2,815
265
24,490
27,570
The carrying amount of trade payables is considered to approximate their fair value.
23. OTHER PAYABLES
The breakdown of other payables is as follows:
(in thousands of euro)
12/31/2021
12/31/2020
Total
Non-current
Current
Total
Non-current
Current
4,718
5,323
13,415
15,927
27
15
-
-
-
4,718
5,997
5,323
13,415
3,810
4,431
-
-
-
5,997
3,810
4,431
822
15,105
11,370
538
10,832
-
-
27
15
56
186
-
-
56
186
Payables to subsidiaries
Payables to social security and
welfare institutions
Payables to employees
Other payables
Accrued liabilities
Deferred income
Total other payable
39,425
822
38,603
25,850
538
25,312
Payables to subsidiaries mainly refer to receivables related to VAT consolidation.
Payables to social security and welfare institutions mainly consist of contributions to be paid to the INPS
(National Social Welfare Institute).
Payables to employees refer to the remuneration to be paid to employees. The increase over the previous
year mainly refers to the STI (Short-term Incentive) plan, which was canceled in 2020 following the Covid-19
pandemic.
Other payables include liabilities for compensation to be paid to directors and auditors, for withholding taxes on
income from self-employed and employed work.
For other current payables, it is considered that the carrying amount approximates their fair value.
419
Financial Statements at December 31, 2021
24. DEFERRED TAX LIABILITIES
Deferred tax liabilities amounted to euro 526,017 thousand at December 31, 2021 (euro 524,338 thousand at
December 31, 2020).
The breakdown of deferred tax liabilities gross of offsetting is as follows:
Deferred tax assets
- of which within 12 months
- of which over 12 months
Provision for deferred tax liabilities
- of which within 12 months
- of which over 12 months
Total
(in thousands of euro)
12/31/2021
12/31/2020
107,313
114,631
87,405
19,908
46,362
68,269
(633,330)
(638,969)
-
(5,639)
(633,330)
(633,330)
(526,017)
(524,338)
The breakdown of deferred taxes, relating to temporary differences and tax losses carried forward is shown in
the following table:
Deferred tax assets
Provision for risk and charges
Employees provision
Provision for bad debt
Tax losses carried forward
ACE Benefit
Interests
Derivatives
Other
Total deferred tax assets
Provision for deferred tax liabilities
Brand Pirelli
Exchange differences not realised
Total provision for deferred tax liabilities
Total
(in thousands of euro)
12/31/2021
12/31/2020
5,695
4,775
126
13,153
69,985
11,282
822
1,476
1,533
2,202
126
34,596
66,306
5,253
4,480
135
107,313
114,631
(633,330)
(633,330)
-
(5,639)
(633,330)
(638,969)
(526,017)
(524,338)
At December 31, 2021, the value of unrecorded deferred tax assets relating to unlimited tax losses that can
be carried forward was zero (euro 25,294 thousand at December 31, 2020), while those relating to temporary
differences amounted to euro 25,856 thousand (unchanged from December 31, 2020).
420
Pirelli Annual Report 2021
The tax effect of gains and losses recorded directly in equity
was negative for euro 3,638 thousand (negative for euro
500 thousand in 2020). It is disclosed in the Comprehensive
income statement; these changes were mainly due to the tax
effects associated with actuarial gains/losses on employee
benefits obligations and to the adjustment of derivatives in
cash flow hedges to their fair value.
25. TAX PAYABLES
These amounted to euro 13,565 thousand (euro 11,985
thousand at December 31, 2020) and mainly include payables
to subsidiaries that adhere to the tax consolidation, which
arose following the transfer of withholding taxes incurred
abroad (WHT).
26. COMMITMENTS AND RISKS
LEASE CONTRACT COMMITMENTS
At December 31, 2021, there were no commitments for lease
contracts not yet in force.
LITIGATION AGAINST THE COMPANIES OF THE PRYSMIAN
GROUP BEFORE THE COURT OF MILAN
A judgement (resulting from the joining of two separate
proceedings – see below) is currently pending before the
Court of Milan. This is following the decision issued on April
2, 2014 by the European Commission (as confirmed in
the final instance by the Court of Justice of the European
Union on October 28, 2020) at the conclusion of the
antitrust investigation in relation to restrictive practices of
competition in the European market for high voltage electric
cables. This decision had imposed a sanction against
Prysmian Cavi e Sistemi S.r.l. (Prysmian CS) as directly
involved in the cartel. For a part (euro 67 million), Pirelli,
despite having been found to not have been involved directly
in the activities of said cartel, was held as being jointly liable
with Prysmian CS. This is based solely on the application of
the principle of parental liability, in that during part of the
period of the infringement, the capital of Prysmian CS was
directly or indirectly held by Pirelli.
On December 31, 2020, Pirelli paid its portion of the
the European
in
aforementioned sanction
Commission (corresponding to 50% of this sanction, plus
interest), in relation to which it had previously made the
appropriate provisions.
favor of
Pending the definition of the aforementioned Community
proceeding, in November 2014, Pirelli took action before
the Court of Milan in order to obtain the ascertainment
and declaration of the obligation of Prysmian CS to hold it
free from any claim relating to the alleged anti-competitive
agreement in the energy cables sector, including the penalty
imposed by the European Commission.
Prysmian CS appeared in the aforementioned judgement,
requesting the rejection of Pirelli’s claims, and as counter-
in relation to the
claim, to be
indemnified by Pirelli
consequences deriving from or related to the decision of the
European Commission. The judgement had been suspended
pending the definitive sentence of the EU judges and was
resumed by Pirelli on November 30, 2020 following the
sentence of the Court of Justice.
In October 2019, Pirelli took further action before the Court
of Milan against Prysmian CS and Prysmian S.p.A. requesting
the assessment and declaration of the obligation of Prysmian
CS to indemnify and release it also from any charge, expense,
cost and/or damage resulting from claims of private and/
or public third parties (including authorities other than
the European Commission) relating, connected and/or
consequential to the facts covered by the decision of the
European Commission, as well as the consequent conviction
of Prysmian CS to reimburse any charge, expense, cost or
damage incurred or suffered by Pirelli.
On this occasion, Pirelli also requested to ascertain the
liability of Prysmian CS and Prysmian S.p.A. in relation to
certain illegal conduct connected to the aforementioned
anti-competitive agreement, carried out by the same and,
as a result, the conviction to compensation for all damages
suffered and being suffered by Pirelli.
Lastly, Pirelli requested the ascertainment and declaration
of the joint liability of Prysmian S.p.A. with Prysmian CS
in relation to the amounts that will be paid both in this new
judgement and in the one in November 2014 and that may
not be settled by the latter.
Prysmian CS and Prysmian S.p.A. appeared
the
aforementioned judgement in November 2020, requesting
the rejection of Pirelli’s claims and, as counter-claim, to be
held harmless and indemnified by Pirelli in relation to any
consequences deriving from claims of private and/or public
third parties relating, connected and/or consequential to the
facts covered by the decision of the European Commission.
in
In April 2021, the two judgements were combined.
On the basis of thorough analysis supported by authoritative
external legal opinions, the evaluation of the risk relative to
the disputes described above is such as to not require the
allocation of any specific provision in the Separate Financial
Statements at December 31, 2021.
OTHER LITIGATION CONSEQUENT TO THE EUROPEAN
COMMISSION DECISION
In November 2015, some companies of the Prysmian Group
notified Pirelli of proceedings for the recovery of damages
before the High Court of Justice of London against
them and other recipients of the European Commission
Decision of April 2, 2014 by National Grid and Scottish
Power, companies that claim to have been injured by the
cartel. Specifically, the companies of the Prysmian Group
requested that Goldman Sachs and Pirelli, the latter based
on the role of parent company for a part of the period of the
cartel, hold them harmless in respect of any obligations to
pay any damages claims (to date unquantified) by National
Grid and Scottish Power. As the aforementioned legal action
421
Financial Statements at December 31, 2021 is pending before the Court of Milan, filed in November 2014, Pirelli challenged the lack of jurisdiction of the
High Court of Justice of London claiming that, that any decision on the merits should be assigned to the Court
previously referred to. In April 2016, the High Court of Justice, at the request of Pirelli and the companies of
the Prysmian Group, suspended the proceedings until the final passing of judgement that will define the Italian
judgement already pending.
In April 2019, Terna S.p.A. – Rete Elettrica Nazionale (“Terna”) summoned Pirelli, three Prysmian Group companies
and another company of the aforementioned European Commission decision, before the Court of Milan, to
obtain compensation for the damage allegedly suffered as a result of the anti-competitive conduct, quantified
by the claimant at euro 199.9 million. Pirelli appeared in court contesting the claims made by Terna and filing,
like the other defendants, and against them, a counter-claim in recourse for the denied case in which it was held
jointly liable for the anti-competitive agreement. In October 2021, the Judge removed from the proceedings the
fragment of the dispute consisting of the “cross” indemnity requests mutually made between Pirelli, on the one
hand, and Prysmian CS and Prysmian S.p.A., arranging for a meeting with the pending judgement between them
before the Court of Milan (see above).
Lastly, also in April 2019, the Electricity and Water Authority of Bahrain, the GCC Interconnection Authority, the
Kuwait Ministry of Electricity and Water and the Oman Electricity Transmission Company, served a summons
against Pirelli, some Prysmian Group companies and others recipients of the aforementioned European
Commission Decision. They jointly agreed with each other to obtain compensation for the damage allegedly
suffered as a result of the alleged anti-competitive conduct. These proceedings were brought before the Court
of Amsterdam, which, with its ruling of November 25, 2020, upheld the objection raised by Pirelli and excluded
its jurisdiction over Pirelli itself. In February 2021, the claimants appealed against said sentence before the
Amsterdam Court of Appeal and the related proceedings are in progress.
On the basis of thorough analysis supported by authoritative external legal opinions, the evaluation of the risk
relative to the disputes described above is such as to not require the allocation of any specific provision in the
Separate Financial Statements at December 31, 2021.
INCOME STATEMENT
27. REVENUES FROM SALES AND SERVICES
Revenues from sales and services amounted to euro 69,601 thousand for 2021 compared to euro 53,486
thousand in 2020 and the breakdown is as follows:
Sales of services to subsidiaries
Sales of services to other companies
Total revenues from sales and services
Revenues from subsidiaries refer to services provided by the central functions.
(in thousands of euro)
2021
2020
69,141
460
53,125
361
69,601
53,486
422
Pirelli Annual Report 2021
28. OTHER INCOME
Other income amounted to euro 107,345 thousand in 2021 (euro 124,405 thousand in 2020), and the breakdown
is as follows:
Other income from subsidiaries
Other revenues from third parties
Other income from other companies
(in thousands of euro)
2021
2020
104,328
111,548
3,017
12,857
107,345
124,405
Other income from subsidiaries mainly include royalties paid by Group companies for the use of the brand (euro
77,474 thousand in 2021 compared to euro 57,610 thousand in 2020) and also include cost recovery and other
revenues deriving from the charge-back of costs to Group companies.
Other revenues from other companies include royalties paid by other companies for the use of the Pirelli brand
(euro 2,029 thousand in 2021 compared to euro 1,370 thousand in 2020). In 2020, the gains deriving from the
sale of the property located in Milan and of land located in Settimo Torinese were also recorded for approximately
euro 8,000 thousand.
29. RAW MATERIALS AND CONSUMABLES USED
They amounted to euro 214 thousand in 2021 (euro 228 thousand in 2020) and include purchases of advertising
material, fuels and various materials.
30. PERSONNEL EXPENSES
Personnel expenses amounted to euro 72,791 thousand (euro 49,952 thousand in 2020), and the breakdown is
as follows:
Wages and salaries
Social security and welfare contributions
Employee leaving indemnities
Retirement and similar obbligations
Other costs
Total
(in thousands of euro)
2021
2020
57,229
10,809
1,963
602
2,188
35,441
8,046
1,901
563
4,001
72,791
49,952
The increase in wages and salaries is mainly attributable to accruals for the short-term incentive plan for the
management, which was cancelled in 2020 following the Covid-19 pandemic, and for long-term incentive plans
for the management, which reflect the improvement in performance on parameters underlying the plans.
The item other costs includes the portion of the retention plan (euro 1,784 thousand in 2021 and euro 3,297
thousand in 2020) that was approved by the Board of Directors on February 26, 2018 and intended for Key
Managers and a selected number of senior Managers and Executives.
423
Financial Statements at December 31, 2021
The average staff headcount is the following:
→ Executives 78
→ White collars 255
→ Workers
5
31. AMORTIZATION, DEPRECIATION AND IMPAIRMENT
The breakdown of the item is as follows:
Amortisation - intangible assets
Depreciation - property, plant and equipment (excl. Depreciation of Right of Use)
Depreciation of right of use
Total depreciation, amortisation and impairments
For the breakdown of the amortization of the rights of use, see note 9.2 - Rights of use.
32. OTHER COSTS
The breakdown of other costs is the following:
Advertising and sponsorship
Consultancy and collaboration services
Accruals to provisions (net of reversals)
Legal and notarial expenses
Travel expenses
Remuneration of Directors and supervisory bodies
Membership fees and contributions
Rental and lease instalments
IT expenses
Energy, gas and water expenses
Security service
Insurance premiums
Patents and trademarks expenses
Cleaning and property ordinary maintenance expenses
Property maintenance
Other
Total other costs
(in thousands of euro)
2021
2020
1,900
1,762
5,700
9,362
2,468
1,817
5,631
9,916
(in thousands of euro)
2021
2020
38,690
13,560
5,017
776
1,928
28,671
2,953
359
7,409
1,217
1,712
3,103
803
817
1,809
5,239
59,806
12,580
2,212
762
2,734
7,919
2,272
969
5,674
1,271
1,856
2,896
874
444
1,829
4,570
114,063
108,668
424
Pirelli Annual Report 2021
The item Leases and rentals includes costs relating to the application of the accounting standard IFRS 16, in
particular:
→ euro 113 thousand for lease contracts with a duration of less than twelve months (euro 661 thousand in 2020);
→ euro 132 thousand for lease contracts for low value assets (euro 197 thousand in 2020).
33. NET IMPAIRMENT OF FINANCIAL ASSETS
The item, negative for euro 92 thousand, mainly includes the net impairment of trade receivables. In 2020, the
net impairment of trade receivables amounted to euro 23 thousand.
34. RESULT FROM INVESTMENTS
34.1. GAINS ON EQUITY INVESTMENTS
No gains from equity investments were recorded in the year 2021, in line with the previous year.
34.2. LOSSES ON EQUITY INVESTMENTS
In 2021, impairment of 1,246 thousand of the investment in the company Pirelli Ltda was recorded. In 2020,
impairment of 14,000 thousand of the investment in the subsidiary Pirelli UK Ltd was recorded.
34.3. DIVIDENDS
They amounted to euro 231,509 thousand in 2021 compared to euro 53,650 thousand in 2020, and the
breakdown is as follows:
From subsidiaries:
- Pirelli Tyre S.p.A. - Italy
- Pirelli Group Reinsurance Company SA - Switzerland
- Pirelli Servizi Amministrazione e Tesoreria S.p.A. - Italia
- Pirelli Sistemi Informativi S.r.l. - Italy
- Pirelli International Treasury S.p.A. - Italy
From other financial assets:
- RCS S.p.A. - Italy
- Fin. Priv. S.r.l. - Italy
- Genextra S.p.A. - Italy
- Tiglio I - Italy
Total
(in thousands of euro)
2021
2020
220,000
50,000
2,290
-
500
6,522
741
1,292
154
10
-
200
1,050
2,400
-
-
-
-
231,509
53,650
The higher amount of dividends from subsidiaries received in 2021 compared to 2020 is essentially attributable
to the higher dividends distributed by the subsidiary Pirelli Tyre S.p.A..
425
Financial Statements at December 31, 2021
35. FINANCIAL INCOME
The breakdown of the item is as follows:
Interest and other financial income
Valuation at fair value of derivatives
Net gains on exchange rates
Total financial income
(in thousands of euro)
2021
2020
28,874
4,769
-
33,643
31,086
-
37,067
68,153
The item Interest and other financial income mainly refer to interest accrued on loans granted in 2021 to
subsidiaries.
The fair value measurement of foreign exchange derivatives refers to forward currency purchase/sale
transactions to hedge commercial and financial transactions, in accordance with the Group’s exchange rate risk
management policy. For transactions open at the end of the period, the fair value is determined by applying the
forward exchange rate at the closing date of the Consolidated Financial Statements.
36. FINANCIAL EXPENSES
The breakdown of the item is as follows:
Interest and other financial expenses
Commissions
Interest expenses on lease liability
Net interest on employee benefit obligations
Net exchange rate losses
Valuation at fair value of forex derivatives
Total financial expenses
(in thousands of euro)
2021
2020
71,989
65,763
2,988
1,572
24
3,050
2,241
1,725
28
-
-
34,781
79,623
104,538
Interest and other financial expenses for a total of euro 71,989 thousand include:
→ euro 46,087 thousand for the bank loan lines;
→ euro 22,522 thousand of financial expenses related to bonds, of which euro 9,104 thousand related to unrated
bonds, euro 4,112 thousand related to the Schuldschein loan and euro 9,305 thousand related to the senior
unsecured guaranteed equity-linked bond;
→ euro 3,178 thousand net interest expense related to interest on Cross Currency Interest Rate Swap and Interest
Rate Swaps, for which hedge accounting was adopted, to adjust the flow of financial expenses of the bank
lines and bonds referred to in the previous points. For further details, refer to as reported in note 17 “Derivative
financial instruments”.
Net exchange rate losses of euro 3,050 thousand in 2021 refer to the adjustment to the year-end exchange
rate of the items expressed in the currency other than the functional one still in effect at the closing date of the
Financial Statements and the exchange rate differences on items closed during the year.
426
Pirelli Annual Report 2021
They also include gains for euro 83,860 thousand related to the exchange rate component of the fair value
measurement of cross currency interest rate swaps, for which cash flow hedge accounting was adopted to offset
the realized and unrealized exchange rate losses on the hedged liability.
37. TAXES
The breakdown of taxes is as follows:
Current taxes
Deferred taxes
Total income taxes
(in thousands of euro)
2021
2020
(49,953)
(16,523)
(1,959)
(15,064)
(51,912)
(31,587)
Current taxes for the year 2021 were positive for euro 49,953 thousand compared to euro 16,523 thousand in
the previous year and mainly include income from tax consolidation. The increase compared to the previous year
is essentially attributable to the higher taxable income of the subsidiary Pirelli Tyre.
Deferred tax assets are positive for euro 1,959 thousand and mainly refer to the use of deferred assets on
previous tax losses offset by the recognition of deferred tax assets taxes on the ACE benefit, on previous tax
losses and other temporary differences.
The table below shows the reconciliation of the effective tax rate with the theoretical rate of the Parent Company:
A) Profit/(loss) before taxes
B) Theoretical taxes
Main causes that give rise to changes between theoretical and effective taxes:
(in thousands of euro)
2021
2020
164,707
39,530
12,369
2,968
Dividends and gains from investments not subject to taxation
(52,784)
(12,232)
Loss on investments
Non-deductible costs
Uses losses previous years - deferred assets not activated
299
(2,830)
(11,282)
3,360
1,179
(4,431)
Deferred tax assets on previous tax losses and other temporary differences
(24,845)
(22,431)
C) Effective taxes
Theoretical tax rate (B/A)
Effective tax rate (C/A)
(51,912)
(31,587)
24%
-31.5%
24%
-255.4%
427
Financial Statements at December 31, 2021
TAX CONSOLIDATION
It shall be noted that starting from 2004, the Company
exercised the option for consolidated taxation as consolidator,
pursuant to article 117 and following of the TUIR, with
regulation of relations arising from adhesion to consolidation
through a special Regulation, which involves a common
procedure for the application of laws and regulations.
Said regulation was updated in subsequent years as a result
of amendments made within the companies participating in
the agreement and the related shareholding structure, as well
as in light of the corrective and supplementary interventions
of the relevant legislation.
The above amendments particularly concerned
the
remuneration of the tax losses used by the companies adhering
to the consolidation. The adoption of the consolidation makes
it possible to compensate, with regard to the parent company
Pirelli & C. S.p.A., the taxable income or loss of the same
parent company with those of its resident subsidiaries which
have exercised the option. This is given that the tax losses
accrued during periods prior to the introduction of Group
taxation can be used by those companies which are eligible.
38. NON-RECURRING EXPENSES AND INCOME
Pursuant to Consob Communication no. DEM/6064293
of July 28, 2006, no non-recurring events were recorded in
2021.
39. TRANSACTIONS WITH RELATED PARTIES
Transactions with related parties mainly include transactions
with subsidiaries relating to:
→ services (technical, organizational, general) provided by
head office;
→ charge-back of royalties for the use of the brand;
→ financial transactions.
All the transactions listed above are part of the ordinary
management of relations between the Parent Company and
the subsidiaries.
Transactions with related parties also include the fees paid to
Directors and Key Managers.
428
Pirelli Annual Report 2021 The statement below shows a summary of the Balance Sheet and the Income Statement that include transactions
with related parties and their impact:
12/31/2021
of which
related parties
% share
12/31/2020
of which
related parties
% share
(in thousands of euro)
BALANCE SHEET
Non current assets
Other receivables
2,000,566
2,000,000
100.0%
2,000,575
2,000,000
100.0%
Derivative financial instruments
-
-
0.0%
-
-
0.0%
Current assets
Trade receivables
Other receivables
Tax receivables
40,116
39,314
792,730
781,789
65,074
64,525
98.0%
98.6%
99.2%
80,568
76,655
1,166,741
1,154,823
32,676
31,369
95.1%
99.0%
96.0%
Derivative financial instruments
5,132
5,132
100.0%
2,894
2,894
100.0%
Non-current liabilities
Other payables
822
212
Provision for liabilities and charges
30,604
22,028
Employee benefit obligations
Derivative financial instruments
Current liabilities
Payables to banks and other
financial lenders
Trade payables
Other payables
Employee benefit obligations
21,442
3,554
1,070,541
18,387
38,603
-
3,708
3,554
1,187
2,854
15,311
-
Tax payables
13,565
13,337
Derivative financial instruments
674
674
100.0%
25.7%
72.0%
17.3%
538
11,105
8,464
212
5,926
1,349
39.3%
53.4%
15.9%
100.0%
109,697
109,697
100.0%
15.5%
39.7%
0.0%
98.3%
0.1%
307,350
2,084
0.7%
11.2%
26.0%
69.4%
98.1%
100%
27,570
25,312
2,448
11,985
13,231
3,080
6,576
1,698
11,757
13,231
(in thousands of euro)
2021
of which
related parties
% share
2020
of which
related parties
% share
INCOME STATEMENT
Revenues from sales and services
69,601
69,477
Other income
107,345
104,372
Personnel expenses
(72,791)
(14,395)
99.8%
97.2%
19.8%
53,486
53,337
124,405
111,603
(49,952)
(8,909)
Other costs
(114,063)
(41,247)
36.2%
(108,668)
(20,457)
Income on equity investments
-
-
0.0%
-
-
Losses on equity investments
(1,246)
(1,246)
100.0%
(14,000)
(14,000)
Dividends
231,509
229,312
Financial income
33,643
31,957
99.1%
95.0%
53,650
53,650
68,153
30,994
Financial expenses
(79,623)
(2,827)
3.6%
(104,538)
(34,838)
99.7%
89.7%
17.8%
18.8%
0.0%
100.0%
100.0%
45.5%
33.3%
429
Financial Statements at December 31, 2021
The equity and economic effects of transactions with related parties for the year ended December 31, 2021 are
detailed below.
(in thousands of euro)
Subsidiaries
Associates
Other related
parties
Directors and
Key Managers
Total
12/31/2021
Other non current receivables
2,000,000
Trade receivables
Other current receivables
Tax receivables
Derivative financial instruments (current
assets)
Other payables (Non-current liabilities)
Provision for liabilities and charges (Non-
current liabilities)
Employee benefit obligations (Non-current
liabilities)
Derivative financial instruments (non-current
liabilities)
Payables to banks and other lenders (current
liabilities)
Trade payables
Other payables (current liabilities)
Employee benefit obligations (current
liabilities)
Tax payables
Derivative financial instruments (current
liabilities)
39,115
781,789
64,525
5,132
-
-
-
3,554
1,187
2,783
4,718
-
13,337
674
Subsidiaries
Associates
Revenues from sales and services
Other income
Personnel expenses
Other costs
Losses from investments
Dividends
Financial income
Financial expenses
69,141
104,328
-
(12,651)
(1,246)
229,312
31,957
(2,827)
-
3
-
-
-
-
-
-
-
-
72
-
-
-
-
-
-
-
-
195
-
-
-
-
-
-
-
-
-
1
-
-
-
-
-
-
-
-
212
2,000,000
39,314
781,789
64,525
5,132
212
22,028
22,028
3,708
-
-
-
10,591
-
-
-
3,708
3,554
1,187
2,854
15,311
-
13,337
674
(in thousands of euro)
Other related
parties
Directors and
Key Managers
Total
2021
336
43
-
-
-
69,477
104,372
(14,395)
(14,395)
(252)
(150)
(28,194)
(41,247)
-
-
-
-
-
-
-
-
-
-
-
-
(1,246)
229,312
31,957
(2,827)
430
Pirelli Annual Report 2021
Below is a breakdown of the equity and economic effects of transactions with related parties for the previous year:
(in thousands of euro)
Subsidiaries
Associates
Other related
parties
Directors and
Key Managers
Total
12/31/2020
-
3
-
-
-
-
-
-
-
-
265
-
-
-
-
-
-
-
Other non current receivables
Trade receivables
Other current receivables
Tax receivables
Derivative financial instruments (current
assets)
Other payables (Non-current liabilities)
Provision for liabilities and charges (Non-
current liabilities)
Employee benefit obligations (Non-current
liabilities)
Derivative financial instruments (non-current
liabilities)
Payables to banks and other lenders (current
liabilities)
Trade payables
Other payables (current liabilities)
Employee benefit obligations (current
liabilities)
Tax payables
Derivative financial instruments (current
liabilities)
2,000,000
76,578
1,154,823
31,369
2,894
-
-
-
109,697
2,084
2,815
5,929
-
11,757
13,231
Subsidiaries
Associates
Revenues from sales and services
Other income
Personnel expenses
Other costs
Losses from investments
Dividends
Financial income
Financial expenses
53,125
111,548
-
(12,423)
(14,000)
53,650
30,994
(34,838)
-
74
-
-
-
-
-
-
-
-
-
197
-
-
-
-
-
-
-
-
212
5,926
1,349
-
-
-
450
1,698
-
-
2,000,000
76,655
1,154,823
31,369
2,894
212
5,926
1,349
109,697
2,084
3,080
6,576
1,698
11,757
13,231
(in thousands of euro)
Other related
parties
Directors and
Key Managers
Total
2020
-
-
(8,909)
(7,469)
-
-
-
-
53,337
111,603
(8,909)
(20,457)
(14,000)
53,650
30,994
(34,838)
212
55
-
(265)
(300)
-
-
-
-
-
-
-
-
431
Financial Statements at December 31, 2021
TRANSACTIONS WITH SUBSIDIARIES
TRANSACTIONS – BALANCE SHEET Other non-current
receivables amounted to euro 2,000,000 thousand, in line with
prior year, and refer to credit lines granted to Pirelli International
Treasury S.p.A., maturity 2023.
Trade receivables from subsidiaries amounted to euro
39,115 thousand (euro 76,655 thousand at December
31, 2020). They mainly refer to receivables for services/
provisions provided to Group companies (euro 31,645
thousand from Pirelli Tyre S.p.A., euro 5,544 thousand from
Pirelli Group Reinsurance Company SA, euro 708 thousand
from Limited Liability Company Pirelli Tyre Russia, euro 400
thousand from Pirelli Tyre Trading (Shanghai) Co).
Other current receivables amounted to euro 781,789
thousand (euro 1,154,823 thousand at December 31, 2020).
They refer for euro 779,994 thousand to the loan and related
interest accrued but not yet paid with Pirelli International
Treasury S.p.A., for euro 1,380 thousand to VAT receivables
transferred from subsidiaries (of which euro 1,145 thousand
from Pirelli Industrie Pneumatici S.r.l. and euro 231 thousand
from Pirelli Servizi Amministrazione e Tesoreria S.p.A.), and
for euro 384 thousand to the intragroup current account with
Pirelli International Treasury S.p.A..
Tax receivables amounted to euro 64,525 thousand
(euro 31,369 thousand at December 31, 2020) and refer
to receivables from Group companies that adhere to tax
consolidation (mainly euro 62,534 thousand from Pirelli Tyre
S.p.A., euro 1,530 thousand from Pirelli International Treasury
S.p.A., euro 300 thousand from Pirelli Industrie Pneumatici
S.r.l., euro 125 thousand from Pirelli Sistemi Informativi S.r.l.).
Derivative financial instruments (current assets) for euro
5,132 thousand (euro 2,894 thousand at December 31,
2020) refer to hedging transactions with Pirelli International
Treasury S.p.A..
The amount of euro 3,554 thousand (euro 109,697 thousand
at December 31, 2020) of derivative financial instruments
(non-current liabilities) refers to the valuation of the IRS
with Pirelli International Treasury S.p.A..
Other payables (current liabilities) to subsidiaries amounted
to euro 4,718 thousand (euro 6,576 thousand at December
31, 2020) and mainly refer to payables with Group companies
that adhere to the VAT consolidation. The main ones are euro
4,569 thousand to Pirelli Tyre S.p.A., euro 66 thousand to HB
Servizi S.r.l..
Tax payables amounted to euro 13,337 thousand (euro
11,757 thousand at December 31, 2020) and refer to payables
to subsidiaries that adhere to tax consolidation (euro 10,965
thousand to Pirelli Tyre S.p.A., euro 2,290 thousand to Pirelli
International Treasury S.p.A.).
The amount of euro 674 thousand (euro 13,231 thousand at
December 31, 2020) of derivative financial instruments –
current liabilities refers to hedging transactions with Pirelli
International Treasury S.p.A..
TRANSACTIONS – INCOME STATEMENT Revenues from sales
and services to subsidiaries amounted to euro 69,141 thousand
in 2021 (euro 53,125 thousand in 2020) and mainly refer to
service contracts. The main transactions with subsidiaries
are: euro 67,386 thousand with Pirelli Tyre S.p.A., euro 740
thousand with Pirelli Servizi Amministrazione e Tesoreria S.p.A.,
euro 313 thousand with Pirelli International Treasury S.p.A..
Other income from subsidiaries amounting to euro 104,328
thousand in 2021 (euro 111,548 thousand in 2020) mainly refer
to: royalties (euro 69,321 thousand from Pirelli Tyre S.p.A., euro
5,543 thousand from Pirelli Group Reinsurance Company SA,
euro 2,600 thousands from Limited Liability Company Pirelli
Tyre Russia); other recoveries (euro 25,262 thousand from
Pirelli Tyre S.p.A., euro 534 thousand from Pirelli Tyre Co. Ltd,
and euro 390 thousand from Pirelli Tire LLC).
Other costs to subsidiaries for euro 12,651 thousand in 2021
(euro 12,423 thousand in 2020) mainly refer to charges for
services and miscellaneous costs (euro 4,676 thousand HB
Servizi S.r.l., euro 3,539 thousand Pirelli Sistemi Informativi
S.r.l., euro 2,072 thousand Pirelli Tyre S.p.A., euro 1,146
thousand Pirelli Servizi Amministrazione e Tesoreria S.p.A.).
The item losses from investments, shows the impairment of
the investment in Pirelli Ltda.
Borrowings from banks and other financial institutions
(current) amounted to euro 1,187 thousand (euro 2,084
thousand at December 31, 2020) and mainly refer to the
accrued liability to Pirelli International Treasury S.p.A. on the
hedging transactions of the existing interest rate swap at
December 31, 2021.
Dividends for euro 229,312 thousand in 2021 (euro 53,650
thousand in 2020) refer to dividends collected during the
year (euro 220,000 thousand from Pirelli Tyre S.p.A., euro
6,522 thousand from Pirelli International Treasury S.p.A., euro
2,290 thousand from Pirelli Group Reinsurance Company SA
and euro 500 thousand from Pirelli Sistemi Informativi S.r.l.).
Trade payables amounted to euro 2,854 thousand (euro
3,080 thousand at December 31, 2020) and mainly refer to
payables for the provision of services. These payables mainly
refer for euro 1,169 thousand to HB Servizi S.r.l. and for euro
887 thousand to Pirelli Tyre S.p.A..
Financial income for euro 31,957 thousand in 2021 (euro
30,994 thousand in 2020) mainly refers to interest income
on receivables from Pirelli International Treasury S.p.A..
Financial expenses for euro 2,827 thousand in 2021 (euro
34,838 thousand in 2020) mainly refer to net expenses on
derivatives with Pirelli International Treasury S.p.A..
432
Pirelli Annual Report 2021 TRANSACTIONS WITH ASSOCIATED COMPANIES
40. OTHER INFORMATION
TRANSACTIONS – BALANCE SHEET Trade payables to associated
companies amounted to euro 72 thousand in 2021 (euro 265
thousand in 2020) and refer to payables to the Consortium for
the Research of Advanced Materials (CORIMAV).
TRANSACTIONS – INCOME STATEMENT Other costs to associated
companies amounted to euro 252 thousand in 2021 (euro 265
thousand in 2020) and refer to relations with the Consortium
for Research on Advanced Materials (CORIMAV).
TRANSACTIONS WITH OTHER RELATED PARTIES
TRANSACTIONS – BALANCE SHEET Trade receivables from
other related parties for euro 195 thousand in 2021 (euro
74 thousand in 2020) include commercial relations with the
Prometeon Group.
TRANSACTIONS – INCOME STATEMENT Revenues from sales
and services from other related parties for euro 336 thousand
in 2021 (euro 212 thousand in 2020) refer to the service/
performance contract with Prometeon Tyre Group S.r.l..
Other income with other related parties for euro 43 thousand
mainly refers to service contracts with Camfin S.p.A. (euro
18 thousand), and with Marco Tronchetti Provera & C. S.p.A.
(euro 25 thousand).
Other costs with other related parties for euro 150 thousand
in 2021 refer to consultancy services to related parties.
DIRECTORS AND AUDITORS’ FEES
The fees due to Directors of Pirelli & C. S.p.A. amounted to
euro 28,194 thousand in 2021 (7,469 thousand in 2020). The
fees due to the Auditors for the function performed at Pirelli
& C. S.p.A. amounted to euro 377 thousand in 2021 (315
thousand in 2020).
INDEPENDENT AUDITORS’ FEES
For the fees pertaining to 2021 for the auditing activities
and other services rendered by the Auditing Company
PricewaterhouseCoopers S.p.A., reference should be made
to the information contained in the notes to the Consolidated
Financial Statements.
DISCLOSURE REQUESTED BY LAW NO. 124/2017 ARTICLE 1,
PARAGRAPHS 125-129
There is no information to highlight pursuant to the legislation
in question referring to Pirelli & C. S.p.A. for 2021.
Any information referring to the subsidiaries of Pirelli & C.
S.p.A. are included in the consolidated financial statements.
41. ATYPICAL AND/OR UNUSUAL TRANSACTIONS
Pursuant to Consob Communication no. 6064293 of July 28,
2006, the Company certifies that no atypical and/or unusual
transactions as defined in said Communication were carried
out in 2021.
TRANSACTIONS WITH DIRECTORS AND KEY MANAGERS
Equity and economic transactions regarding Directors and
Key Managers can be detailed as follows.
42. SIGNIFICANT EVENTS SUBSEQUENT
TO THE END OF THE YEAR
The item provisions for risks and charges and provisions
for personnel (non-current liabilities) includes benefits
relating to the three-year 2020 – 2022 and 2021 – 2023
Long Term Incentive monetary incentive plan for euro 15,980
thousand, benefits relating to the Short Term Incentive
monetary incentive plan for euro 2,535 thousand and finally
the directors’ end-of-term indemnity for euro 7,221 thousand.
The balance sheet item other current payables includes the
short-term portion of Short Term Incentive plan.
The economic items personnel expenses and other costs
include euro 5,749 thousand relating to employee severance
indemnity and end-of-term indemnity (eur 1,038 thousand at
December 31, 2020), as well as short-term benefits for euro
11,143 thousand (eur 3,750 thousand at December 31, 2020)
and long-term benefits for euro 11,725 thousand (eur 3,311
thousand at December 31, 2020).
On February 1, 2022, Pirelli was confirmed as “Gold Class”,
as part of the Sustainability Yearbook 2022 published by
S&P Global, which examined the sustainability profile of over
7,500 companies. Pirelli obtained the “S&P Global Gold Class”
recognition in the ranking that is created annually on the basis
of the results of the Corporate Sustainability Assessment
for the S&P Global Dow Jones Sustainability indices. In
2021, Pirelli confirmed excellence in the Automobiles &
Components sector within the Dow Jones Sustainability
World and Europe indices, with a score of 77 points against
the sector average of 31.
On February 21, 2022, Pirelli, in line with as was anticipated
to the market on November 11, 2021, finalized the signing of a
5-year multicurrency banking line worth euro 1.6 billion with a
pool of leading national and international banks.
433
Financial Statements at December 31, 2021 The new line, parameterized to the Group’s ESG objectives,
will mainly make it possible to:
→ repay debt maturing in June 2022 (approximately euro
950 million at December 31, 2021) using the new line for
euro 600 million and the remaining part of the company’s
liquidity;
→ replace euro 700 million of an available and unused line
maturing in June 2022 with euro 1.0 billion of the new line,
thus increasing financial flexibility by euro 300 million.
The operation, concluded on better terms, in line with the
company’s plans, with respect to those lines that will be
replaced, allows optimizing the debt profile by extending
its maturity.
On February 23, 2022, Pirelli announced that it had been
assigned the investment grade rating from S&P Global
Ratings and Fitch Ratings. The assignment follows the
request for a public rating by the company, in line with the
group’s objectives for optimizing the conditions of access
to the credit market. In particular, Fitch Ratings assigned
Pirelli an Investment Grade BBB- rating with stable outlook,
underlining, among other things, the solidity of the company’s
operating margins and its ability to generate cash flow, which
allow for a significant reduction in debt over the course
of the of the next 2 or 3 years. The agency highlighted the
leadership position held by Pirelli in the premium segment,
its consolidated know-how in high-performance products,
exposure to less volatile aftermarket activities than the
Standard segment and the reputation of its brand. S&P Global
Ratings assigned an Investment Grade BBB- rating with stable
outlook. It highlighted, among other things, the solid position
held by Pirelli on the Premium and Prestige market, its ability
to efficiently use its manufacturing plants, which is reflected
in an EBITDA margin higher than the sector average, and the
agency’s expectation of a continuous reduction of the debt
through the careful management of a solid free cash flow.
On February 24, 2022 tensions between Russia and
Ukraine became more severe. At the date of this document,
the outcomes and implications of the Russia-Ukraine crisis
remain uncertain. The tightening of international sanctions
is also having repercussions on the economy of the Russian
Federation in terms of growth expectations, the currency
market and the sustainability of the domestic economic
and financial system in the medium-term. These factors are
compounded by the additional complications arising from the
restrictive countermeasures that the Russian government is
preparing - and in some cases has already implemented - in
response to the pressure of international sanctions.
The current situation is also bringing about rising prices
for energy, metal and agricultural commodities, with
repercussions on consumer price pressure and growth
prospects for the Eurozone. These elements of uncertainty
could lead to an alteration of normal market dynamics and,
more generally, of business operating conditions.
Pirelli has constituted a “Crisis Committee” to constantly
monitor the development of the Russia-Ukraine crisis for
which mitigation actions and a contingency plan have
already been activated, including the progressive production
reallocations of export flows to other Group plants.
434
Pirelli Annual Report 2021 ANNEXES TO THE NOTES
MOVEMENTS OF INVESTMENTS IN SUBSIDIARIES
FROM 12/31/2020 TO 12/31/2021
12/31/2020
CHANGES
12/31/2021
Number
of shares
Carrying
amount
(€/
thousand)
% of
total
invest-
ments
of
which
direct
Number
of shares
(€/
thousand)
Number
of shares
Carrying
amount
(€/
thousand)
% of
total
invest-
ments
of
which
direct
(in thousands of euro)
INVESTMENTS IN SUBSIDIARIES
ITALY
Unlisted:
Pirelli Servizi Amministrazioni
e Tesoreria S.p.A. - Milan
2,047,000
3,238
100
100
Maristel S.r.l. - Milan
1 share
1,315
100
100
Pirelli International Treasury
SpA - Milan
Pirelli Sistemi Informativi S.r.l.
- Milan
37,500,000
75,000
100
30
1 share
1,655
100
100
Pirelli Tyre S.p.A. - Milan
558,154,000
4,528,245
100
100
Servizi Aziendali Pirelli S.C.p.A.
- Milan
92,950
100
100
90
HB Servizi Srl - Milan
1 share
230
100
100
Total investments
in Italian subsidiaries
4,609,783
-
-
-
-
-
-
-
-
-
-
-
2,047,000
3,238
100
100
1 share
1,315
100
100
37,500,000
75,000
100
30
1 share
1,655
100
100
- 558,154,000
4,528,245
100
100
-
-
-
92,950
100
100
90
1 share
230
100
100
4,609,783
12/31/2020
CHANGES
12/31/2021
Number
of shares
Carrying
amount
(€/
thousand)
% of
total
invest-
ments
of
which
direct
Number
of shares
(€/
thousand)
Number
of shares
Carrying
amount
(€/
thousand)
% of
total
invest-
ments
of
which
direct
FOREIGN COMPANIES
Brazil
Pirelli Ltda - Sao Paulo
13,999,991
9,666
100
100
-
1
-
-
-
-
-
-
163,991,278
7,871
100
100
300,000
6,346
100
100
-
-
-
-
-
(1,246)
13,999,991
8,420
100
100
-
-
-
1
-
-
-
-
-
-
-
163,991,278
7,871
100
100
-
300,000
6,346
100
100
Prometeon Tyre Group
Industria Brasile Ltda
Pirelli Latam Participações
Ltda.
UK
Pirelli UK ltd. - London -
ordinary
Switzerland
Pirelli Group Reinsurance
Company S.A.
Total investments in foreign
subsidiaries
Total investments in
subsidiaries
23,883
4,633,666
(1,246)
(1,246)
22,637
4,632,420
435
Financial Statements at December 31, 2021
MOVEMENTS OF INVESTMENTS IN ASSOCIATES
FROM 12/31/2020 TO 12/31/2021
12/31/2020
CHANGES
12/31/2021
Number
of shares
Carrying
amount
(€/
thousand)
% of total
invest-
ments
of which
direct
Number
of shares
(€/
thousand)
Number
of shares
Carrying
amount
(€/
thousand)
% of total
invest-
ments
of which
direct
(in thousands of euro)
INVESTMENTS
IN ASSOCIATES
ITALY
Unlisted:
Consorzio per le
Ricerche sui Materiali
Avanzati (CORIMAV)
-Milan
Eurostazioni S.p.A. -
Rome
Focus Investments
S.p.A.
Total unlisted
companies
Total investments
in associates - Italy
Total investments
in associates
1 share
104
100
100
52,333,333
6,271
111,111
-
33
8
33
8
-
-
-
6,375
6,375
6,375
-
1 share
104
100
100
33
8
33
8
- 52,333,333
6,271
-
-
-
-
111,111
-
6,375
6,375
6,375
436
Pirelli Annual Report 2021
MOVEMENTS OF OTHER FINANCIAL ASSETS AT FAIR VALUE
THROUGH OTHER COMPRENSIVE INCOME FROM 12/31/2020 TO 12/31/2021 (Continue)
(in thousands of euro)
12/31/2020
CHANGES
12/31/2021
Number
of shares
Carrying
amount
(€/
thousand)
% of total
invest-
ments
of which
direct
Number
of
shares
(€/
thousand)
Number
of shares
Carrying
amount
(€/
thousand)
% of total
invest-
ments
of
which
direct
INVESTMENTS
IN OTHER COMPANIES
ITALIAN LISTED
COMPANIES
RCS Mediagroup S.p.A. -
Milan
Total other Italian listed
companies
Total other listed
companies
24,694,918
14,076
4.7
4.7
-
7,779
24,694,918
21,855
4.7
4.7
14,076
14,076
7,779
7,779
21,855
21,855
12/31/2020
CHANGES
12/31/2021
Number
of shares
Carrying
amount
(€/
thousand)
% of total
invest-
ments
of which
direct
Number
of
shares
(€/
thousand)
Number
of shares
Carrying
amount
(€/
thousand)
% of total
invest-
ments
of
which
direct
ITALIAN UNLISTED
COMPANIES
Aree Urbane S.r.l. (in
liquidazione) - Milan
C.I.R.A. - Centro Italiano
di Ricerche Aerospaziali
S.c.p.A. - Capua (CE)
Alitalia Compagnia Aerea
Italiana S.p.A. - Rome
CEFRIEL - Società
Consortile a Responsabilità
limitata
Consorzio DIXIT (in
liquidazione) - Milan
MIP Politecnico di Milano
- Graduate School of
Business società consortile
per azioni già Consorzio per
L’Innovazione nella Gestione
di Azienda -Mip -(Master
Imprese Politecnico) Milan
Consorzio Milano Ricerche
- Milan
Societa’ Generale per la
Progettazione
Consulenze e Partecipazioni
( ex Italconsult ) S.p.A. -
Rome
1 share
30
1,162,098,622
1 share
1 share
12,000
1 share
1,100
F.C. Internazionale Milano
S.p.A. - Milan
55,805,625
-
-
-
-
-
-
-
-
-
-
-
0.1
0.1
1.4
1.4
4.9
4.9
14.3
14.3
2.9
2.9
9.0
9.0
3.7
3.7
0.4
0.4
Fin. Priv. S.r.l. - Milan
1 share
15,902
14.3
14.3
Istituto Europeo di
Oncologia S.r.l. - Milan
Nomisma - Società di Studi
Economici S.p.A. - Bologna
1 share
7,962
959,429
293
Tiglio I S.r.l. - Milan
1 quota
Genextra S.p.A.
592,450
Total other Italian
unlisted companies
17
26
24,200
6.1
3.3
0.6
0.6
6.1
3.3
0.6
0.6
437
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1 share
30
- 1,162,098,622
-
-
-
-
-
-
1 share
1 share
12,000
1 share
1,100
55,805,625
-
-
-
-
-
-
-
-
-
-
-
0.1
0.1
1.4
1.4
4.9
4.9
14.3
14.3
2.9
2.9
9.0
9.0
3.7
3.7
0.4
0.4
5,270
1 share
21,172
14.3
14.3
44
1 share
8,006
6.1
6.1
30
959,429
323
3.3
3.3
(14)
1 quota
2
609
592,450
635
0.6
0.6
0.6
0.6
5,938
30,138
Financial Statements at December 31, 2021
MOVEMENTS OF OTHER FINANCIAL ASSETS AT FAIR VALUE
THROUGH OTHER COMPRENSIVE INCOME FROM 12/31/2020 TO 12/31/2021
(in thousands of euro)
12/31/2020
CHANGES
12/31/2021
Number
of shares
Carrying
amount
(€/
thousand)
% of total
invest-
ments
of which
direct
Number
of
shares
(€/
thousand)
Number
of shares
Carrying
amount
(€/
thousand)
% of total
invest-
ments
of
which
direct
FOREIGN COMPANIES
Libia
Libyan-Italian
Joint Company -
ordinary shares B
Belgium
Euroqube S.A.
(in liquidation)
UK
300
-
1.0
1.0
67,570
11
18.0
18.0
Eca International
100
2.8
2.8
-
11
-
-
-
-
300
(11)
67,570
100
-
(11)
1.0
1.0
18.0
18.0
2.8
2.8
-
-
-
-
Total other foreign
companies
OTHER PORTFOLIO
SECURITIES
Fondo Comune di
Investimento Immobiliare -
Anastasia
TOTAL AVAILABLE-FOR-
SALE FINANCIAL ASSETS
TOTAL FINANCIAL
ASSETS AT FAIR VALUE
THROUGH OTHER
COMPRENSIVE INCOME
53 shares
2,786
-
-
-
39
53 shares
2,824
-
-
2,786
41,073
39
2,824
13,744
54,817
438
Pirelli Annual Report 2021
INVENTORY AT 12/31/2021
LIST OF INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES
(PURSUANT TO ART. 2427 OF THE CIVIL CODE)
INVESTMENTS IN SUBSIDIARIES - ITALY
Pirelli Servizi Amministrazioni e Tesoreria S.p.A.
Maristel S.p.A.
Pirelli Sistemi Informativi S.r.l.
Legal
address
Carrying
amount
Share %
Share
capital
Attributable
equity
Attributable net
income (loss)
(in thousands of euro)
Milan
Milan
Milan
3,237
100%
2,047
2,985
(195)
1,315
100%
50
3,317
1,656
100%
1,010
2,562
62
226
Pirelli Tyre S.p.A.
Milan
4,528,245
100%
558,154
1,747,216
252,473
Servizi Aziendali Pirelli S.c.p.a.
HB Servizi S.r.l.
Milan
Milan
100
91.3%
230
100%
104
10
480
392
(75)
(64)
Pirelli International Treasury S.p.A.
Milan
75,000
30%
125,000
81,402
5,932
Total investments in subsidiaries - Italy
4,609,783
INVESTMENTS IN FOREIGN SUBSIDIARIES
Switzerland
Pirelli Group Reinsurance Company S.A.
Lugano
6,346
100%
2,904
13,860
2,773
Brasil
Pirelli Ltda
UK
Pirelli UK Ltd
Total investments in foreign subsidiaries
Total investments in subsidiaries
INVESTMENTS IN ASSOCIATES - ITALY
Consortium for the Reserach into Advanced Materials
(CORIMAV)
Eurostazioni S.p.A. **
Focus Investments S.r.l. *
Total investments in associates - Italy
Total investments in associates
* balance sheet at December 31, 2020
** balance sheet at July 31, 2021
Sao Paulo
8,420
100%
2,215
(701)
(1,673)
London
7,871
100%
195,162
18,530
(7,980)
22,637
4,632,420
Milan
Rome
Milan
104
100%
104
104
6,271
32.7%
16,000
6,575
-
93
-
8.3%
183
(2,589)
(826)
6,375
6,375
439
Financial Statements at December 31, 2021
REPORT OF THE BOARD OF STATUTORY AUDITORS TO THE SHAREHOLDERS’ MEETING
Dear Shareholders,
The Board of Statutory Auditors of Pirelli & C. S.p.A. (“Pirelli” or the “Company”) (which, pursuant
to legislative decree no. 39 of 27 January 2010, also acts as the Internal Control and Audit
Committee), pursuant to Article 153 of legislative decree no. 58 of 24 February 1998 (“TUF”)
and the applicable provisions of the Italian Civil Code, is called on to report to the Shareholders’
Meeting, convened to approve the financial statements for the year ending on 31 December
2021, on the supervisory activities carried out during the financial year and on any omissions and
misconduct it might have detected. The Board of Statutory Auditors may also make proposals
regarding the financial statements and their approval and other matters under its responsibility.
The Board of Statutory Auditors, as of the date of drafting and publication of this report
(“Report”), has been constantly informed and updated about the current and foreseeable
effects, direct and indirect, in both qualitative and quantitative terms, of the Russia-Ukraine crisis
on business activities, exposures to affected markets, supply chains, the financial situation and
economic results reported in the Directors’ Report on Operations and the financial statements;
the Board of Statutory Auditors has obtained information about the effects on the Group of
the restrictive measures adopted by the EU in the context of the Russia-Ukraine crisis. A more
detailed explanation can be found in the section of the Report dealing with significant events
occurring after the end of the financial year.
The Board of Statutory Auditors has also been continually informed of the actions taken to
monitor the situation and the social, economic and financial effects, both for Pirelli and the Group
of which it is the parent company, of the ongoing health emergency associated with the spread,
from January 2020, of the Sars-Cov-2 virus (“COVID-19”). The considerations made are set out
in a specific paragraph of this Report.
During the year, the Board of Statutory Auditors carried out its supervisory activities as required
by the law in force, taking account of the provisions of European Regulation 537/2014, the
standards of conduct for the Boards of Statutory Auditors of listed companies, as recommended
in the document issued by the Consiglio Nazionale dei Dottori Commercialisti e degli Esperti
Contabili (the Italian national association of chartered accountants and auditors) last updated
in April 2018 (“Standards of Conduct”), and the Consob provisions on company controls and
the activities of the Boards of Statutory Auditors and the indications contained in the current
Corporate Governance Code for listed companies, to which Pirelli has adhered.
This took place - as well as through the attendance of all or some of the Statutory Auditors at
meetings of the Board of Directors and its committees - also by means of the constant exchange
of information between the Board of Statutory Auditors and the relevant corporate administrative,
audit and compliance departments in charge of risk control and management, and with the
Supervisory Body created pursuant to Legislative Decree no. 231 of 8 June 2001, as well as with
the members of the boards of statutory auditors of the principal subsidiaries and with the firm
appointed as external auditor.
440
Pirelli Annual Report 2021 APPOINTMENT AND COMPOSITION OF THE BOARD OF STATUTORY AUDITORS
The Board of Statutory Auditors in office as of the date of the Report was appointed by the
Shareholders’ Meeting of 15 June 2021 for the financial years 2021-2023 (and, therefore, will
expire with the approval of the financial statements as of 31 December 2023). It is composed
of the Standing Auditors Riccardo Foglia Taverna (Chairman), Francesca Meneghel, Teresa
Naddeo, Antonella Carù and Alberto Villani, and the Alternate Auditors Marco Taglioretti, Franca
Brusco and Maria Sardelli.1
Until 15 June 2021, the Board of Statutory Auditors was made up of the following: Francesco
Fallacara (Chairman), Antonella Carù, Luca Nicodemi, Alberto Villani, Fabio Artoni (Standing
Auditors), Franca Brusco, Giovanna Oddo, Elenio Bidoggia (Alternate Auditors).
All the information provided in this Report, taking into account the activities carried out by the
control body in office until 15 June 2021 and of which the current Board of Statutory Auditors has
been duly informed, should be understood to refer to the work of the control body throughout
the entire financial year.
Pursuant to article 148, paragraph 3 of the TUF, and the provisions of the Corporate Governance
Code for listed companies, to which, as previously mentioned, Pirelli has resolved to adhere,
the Board of Statutory Auditors checked that as of 31 December 2021 its serving members had
retained the requirements of independence (that they already ascertained to possess at the time
of their appointment, together with the correct application of the criteria and the ascertainment
procedures adopted by the Board of Directors to assess the independence of Directors). For
more details in this regard see paragraph “Self-assessment process for the Board of Statutory
Auditors”.
ADHESION TO CODES OF CONDUCT
As anticipated, Pirelli has decided to adhere to the Corporate Governance Code approved
by the Corporate Governance Committee and promoted by Borsa Italiana S.p.A., ABI, Ania,
Assogestioni, Assonime and Confindustria, as well as the most recent recommendations of the
Corporate Governance Committee.
The Board of Statutory Auditors has assessed the effective and correct application of corporate
governance rules provided herein by the Company and ensured that these are implemented in
the corporate governance model currently in force, described in the Report on the Corporate
Governance and Share Ownership (as described in more detail below), that is substantively in
line with the principles contained in both codes of conduct mentioned above. Furthermore, the
Board of Statutory Auditors concurred with the Board of Directors’ assessment that the current
provisions of the articles of association and corporate governance practices followed by the
Company are adequate to achieve the Company’s interest.
1 The appointment was made by applying the list voting mechanism that allowed the so-called “minorities” to elect their
own representatives on the Board of Statutory Auditors. In addition, shareholders were provided with a document by the
outgoing Board of Statutory Auditors drawn up in accordance with the Rules of Conduct.
441
Financial Statements at December 31, 2021 COMMENTS ON THE 2021 FINANCIAL STATEMENTS AND ON TRANSACTIONS OF MAJOR
IMPORTANCE CARRIED OUT DURING THE YEAR
It should be noted that Pirelli’s Financial Statements have been drawn up based on the IAS/IFRS
international accounting standards issued by the International Accounting Standards Board
(IASB) and endorsed by the European Union, in force on 31 December 2021 and in accordance
with the instructions issued in implementation of article 9 of Legislative Decree 38/2005. The
Financial Statements also include the notice required by law 124/2017 (art. 1, subsections 125-
129).
The Board of Statutory Auditors also verified in particular: (i) that the data and information
contained in the financial statements were codified in accordance with the provisions of the
XBRL taxonomy in force and that (ii) the directors, depending on the assessments made on the
conformity or non-conformity of the XBRL financial statements with the provisions of Article
2423 of the Italian Civil Code, made the statements required by the regulations.
The principal risks and uncertainties are summarised in the Directors’ Report on Operations, and
there is a section on the outlook for the coming year.
The Company’s financial statements are composed of the Statement of Financial Position,
Income Statement, Statement of Comprehensive Income, Statement of Changes in Equity,
Statement of Cash Flows and Explanatory Notes.
The Financial Statements are accompanied by the Directors’ Report on Operations, and include
the Report on the Corporate Governance and Structure of Share Ownership – prepared pursuant
to Article 123-bis of the TUF – as well as the Report on responsible management of the value chain
(consolidated non-financial declaration pursuant to legislative decree No. 254, of 30 December
2016), drawn up by the Company in accordance with (i) the Sustainability Reporting Standards of
the Global Reporting Initiative (GRI) - Comprehensive option -, (ii) the principles of inclusiveness,
materiality and compliance with the AA1000 Standard and (iii) the Autoparts Sustainability
Accounting Standards drawn up by the SA.S.B. (Sustainability Accounting Standards Board),
(iv) the priorities highlighted by the European Securities and Markets Authority (ESMA) in circular
ESMA32-63-1186 and (v) the assessments required by the European Taxonomy Regulation in its
areas of application (EU Regulation 2020/852 of 18 June 2020 and related Delegated Regulations
(EU) 2021/2178 and (EU) 2021/2139). It should be noted that the assurance activities carried out
by the auditing firm PricewaterhouseCoopers S.p.A. (“PWC”) in connection with the latter entail
the verification of the preparation and publication of the information required by Reg. 852/20, in
compliance with the indications given by Assirevi to the auditing firms in Research Document
No. 243 of February 2022, entitled “Auditor’s activities on disclosures pursuant to Article 8 of
Regulation 2020/852 - Taxonomy Regulation”. The financial statements also include the Report
on the remuneration policy and the compensation paid, comprising the 2022 Remuneration
Policy (“2022 Policy”) and the Report on Compensation Paid in 2021.
The 2021 financial statements and consolidated financial statements of Pirelli include statements
of compliance by the CEO and by the Manager responsible for the preparation of the corporate
financial documents (“Manager Responsible”).
442
Pirelli Annual Report 2021 Pirelli’s 2021 consolidated financial statements present the following summary data:
Revenues
Operating income (EBIT)
Adjusted EBIT
Consolidated net profit
5,331.5 million euro
577.1 million euro
815.8 million euro
321.6 million euro
Net financial debt was equivalent to 2,907.1 million euro, compared to 3,258.4 million euroat 31
December 2020.
Parent company Pirelli closed the financial year with positive net income to the amount of 216.6
million euro(44 million euroin 2020).
Events of major importance are accounted for in detail in the Directors’ Report on Operations,
and in the financial statements. The following events, in particular, should be noted:
-
in January and February 2021, Pirelli made early repayment of some of its debt due in
2021 and 2022, for a total amount of 838 million euro. In particular, the Company repaid
a tranche of the “Schuldschein” loan, due on 31 July 2021, equal to 82 million euro and
part of the unsecured loan, due in 2022, equal to 756 euro. The repayments, for which
part of the liquidity received in 2020 was used, allowed the financial structure of the debt
to be optimised;
- on 25 February 2021, Pirelli communicated the terms of the termination, with effect
from 28 February 2021, of the employment contract with the General Manager co-CEO
Angelos Papadimitriou, disclosed to the market on 20 January 2021;
- on 31 March 2021 , the Board of Directors approved the proposal of the Executive Deputy
Chairman and CEO, Marco Tronchetti Provera, of which the market was previously
informed on 24 March 2021, to ask the Shareholders’ Meeting of 15 June 2021 to appoint
Giorgio Luca Bruno as Director and - consequently - to appoint him as his direct Deputy-
CEO. Informed of this proposal, Angelos Papadimitriou withdrew his candidacy for the
position of Director on the agenda of the Shareholders’ Meeting of 24 March 2021, which
took no decision on the appointment of a new director. Angelos Papadimitriou, previously
co-opted, has therefore resigned from his position as Director from 24 March 2021;
- on 31 March 2021, the Board of Directors approved the 2021- 2022|2025 Business Plan,
which was presented to the financial community on the same date, and also approved
the financial statements for the year ended 31 December 2020, which closed with a
consolidated net profit of 42.7 million euro and a net profit for the Parent Company of
443
Financial Statements at December 31, 2021 44 million euro. On the same date, the Board of Directors resolved to propose to the
Shareholders’ Meeting called for 15 June 2021 the distribution of a dividend, also by
withdrawing part of the profits set aside in previous financial years, of 0.08 euro per share
for a total of 80 million euro;
- on 1 April 2021, Pirelli announced that on 31 March 2021 it received a communication
from ChemChina informing it that it had received a notification regarding the restructuring
of ChemChina and Sinochem Group Co. Ltd. by the Assets Supervision and Administration
Commission of the State Council (“SASAC”) which provides for the establishment of a
new holding company by SASAC that will perform the duties of the transferor on behalf
of the State Council and the consolidation of Sinochem and ChemChina into the new
holding company. Upon completion of the joint restructuring, ChemChina will remain the
largest shareholder in Pirelli;
- on 15 June 2021, the Shareholders’ Meeting of Pirelli approved the 2020 financial
statements and the distribution of a dividend of 0.08 euro per share, equal to a total
dividend payout of 80 million euro before withholding taxes. The dividend was paid on 23
June 2021 (with a coupon date of 21 June 2021 and a record date of 22 June 2021). The
Shareholders’ Meeting also confirmed the number of members of the Board of Directors
at 15 and - on a proposal from the Board of Directors - appointed Giorgio Luca Bruno
as a new Director, whose term of office will expire, along with that of the other members
of the Board of Directors, on approval of the financial statements as of 31 December
2022. The Shareholders’ Meeting then appointed the Board of Statutory Auditors for the
financial years 2021-2022-2023 in its current composition. The Shareholders’ Meeting
also approved the Remuneration Policy for 2021, expressed its favourable opinion on
the Report on compensation paid in the 2020 financial year and approved the adoption
of the three-year 2021-2023 monetary incentive plan for the Group’s management.
Lastly, with reference to the 2020-2022 three-year monetary incentive Plan approved
by the Shareholders’ Meeting of 18 June 2020, the Shareholders’ Meeting approved the
proposal to adjust the Cumulative Group Net Cash Flow objective (before dividends)
and the possibility to normalise potential effects on the TSR (Total Shareholder Return)
objective of the acquisition of Cooper by Goodyear (at the start of 2021), included in the
reference panel of that objective;
- also on 15 June 2021, the Board of Directors, in accordance with the information
previously provided to the market, appointed Giorgio Luca Bruno as Deputy-CEO. The
newly appointed Deputy-CEO was given powers for the operational management of
Pirelli, to be exercised vicariously. The Board also appointed Giorgio Luca Bruno as a
member of the Strategies Committee, confirming the number of its members at 8;
- on 20 September 2021 Pirelli, the only global company in the Automobiles & Parts sector,
was confirmed as a United Nations Global Compact LEAD. Comprising 37 companies this
year, the Global Compact LEAD brings together the world’s companies most committed
to implementing the Ten Principles of the United Nations Global Compact;
444
Pirelli Annual Report 2021 - on 28 October 2021, Pirelli announced the start of a three-year project in the Hutan
Harapan forest in Indonesia, in collaboration with BMW Group and BirdLife International,
involving activities to support local communities, forest conservation and the protection
of endangered animal species;
- on 11 November 2021, the Board of Directors approved a line of credit, to be finalised
in the coming months, for a total of 1.6 billion euro, which will be used to refinance and/
or replace the bank credit lines expiring in June 2022. The transaction will allow the debt
profile to be optimised by extending its maturities. In addition, on the same date, the
Board of Directors - with the approval of the Board of Statutory Auditors, pursuant to art.
154-bis of the TUF, and verification of fulfilment of the requirements stated in the Bylaws -
resolved to appoint, as of 11 November 2021, Giorgio Luca Bruno as Manager responsible
for the preparation of the corporate financial documents, to replace Francesco Tanzi who,
as previously notified to the market, left the company on 31 December 2021.
SIGNIFICANT EVENTS THAT OCCURRED AFTER THE CLOSURE OF THE FINANCIAL YEAR
The most significant events that occurred after the closure of the financial year are detailed in the
Directors’ Report on Operations, and in the financial statements.
In particular, on 28 January 2022, Pirelli kicked off the celebrations for the 150th anniversary
of its foundation on 28 January 1872 with an event at the Piccolo Teatro in Milan, which will
continue throughout 2022.
On 1 February 2022, Pirelli was confirmed as a “Gold Class” in the Sustainability Yearbook 2022
published by S&P Global, which examined the sustainability profile of over 7,500 companies.
Pirelli was awarded the “S&P Global Gold Class” in the ranking that is produced annually on the
basis of the results of the Corporate Sustainability Assessment for the Dow Jones Sustainability
indices of S&P Global. In 2021, Pirelli was confirmed as an excellence in the Automobiles &
Components sector within the Dow Jones Sustainability World and Europe indices with a score
of 77 points against the sector average of 31.
On 21 February 2022 Pirelli, in accordance with the information previously provided to the market
on 11 November 2021, finalised the signing of a 1.6 billion euro 5-year multicurrency bank credit
line with a pool of leading Italian and international banks. The new line, which is benchmarked
against the Group’s ESG objectives, will mainly allow:
-
-
repayment of the debt maturing in June 2022 (approximately 950 million euro as of 31
December 2021) using 600 million euro from the new line and the remainder from the
company’s liquidity;
replacement of 700 million euro of an available and undrawn line of credit expiring in June
2022 with 1.0 billion euro from the new line, thus increasing financial flexibility by 300
million euro.
445
Financial Statements at December 31, 2021 The transaction, which, in accordance with the company’s plans, was concluded on better terms
than the lines replaced, allows the debt profile to be optimised by extending its maturity.
On 23 February 2022, Pirelli announced that it had been assigned an investment grade rating
by S&P Global Ratings and Fitch Ratings. The assignment follows the company’s request for
a public rating, in line with the group’s objectives of optimising the conditions of access to the
credit market. In particular, Fitch Ratings has assigned Pirelli an Investment Grade BBB- rating
with a stable outlook, emphasising, among other things, the solidity of the company’s operating
margins and its ability to generate cash flow, which mean that a significant reduction in debt over
the next two or three years can be envisaged. The agency highlighted Pirelli’s leadership in the
premium segment, its consolidated know-how in high-performance products, its exposure to
less volatile after-market activities than in the standard segment and its brand awareness. S&P
Global Ratings assigned an Investment Grade BBB- rating with a stable outlook, highlighting,
among other things, Pirelli’s solid position in the Premium and Prestige markets, its ability to
efficiently utilise its manufacturing facilities, reflected in an EBITDA margin above the sector
average, and the agency’s expectation of continued debt reduction through careful management
of solid free cash flow.
On 24 February 2022, tensions escalated between Russia and Ukraine. As of the date of the
Report, the outcome and implications of the current crisis remain uncertain. The tightening
of international sanctions is also having repercussions on the Russian Federation’s economy
in terms of growth expectations, the currency market and the sustainability of the domestic
economic and financial system in the medium term. These factors are compounded by the
additional complexity arising from the restrictive countermeasures that the Russian government
is preparing - in some cases already implemented - in response to the pressure of international
sanctions. The current scenario is also leading to rising prices for energy, metal and agricultural
commodities, with repercussions on consumer price pressure and growth prospects for the
Eurozone. These elements of uncertainty could lead to an alteration of normal market dynamics
and, more generally, of business operating conditions. Pirelli has an industrial presence in Russia
with two plants in Kirov and Voronezh. Pirelli has set up a “Crisis Committee” to constantly
monitor the development of the Russia-Ukraine crisis, with respect to which it has already
implemented mitigation actions and a contingency plan, including the progressive reallocation
of export production flows to other Group plants. The Company had already announced that it
had conducted an initial analysis of the impact on its 2022 guidance at the time of the preliminary
2021 figures. This analysis assumed that the cost of energy and oil would remain at the levels
seen in February until the end of the year, and considered the potential impacts on local
operations related to the import and export of raw materials and finished products to and from
Russia. Investments in the local market, except those related to security, have been blocked. The
activities of the factories in Russia will be gradually limited to what is strictly necessary to ensure
the payment of salaries and social services for employees. It should be noted that the reported
event qualifies as a non-adjusting under IAS 10 “Events after the reporting period” and therefore
has no impact on the consolidated financial statements as at 31 December 2021. Please refer to
the section “Significant events after the end of the financial year” contained in the Explanatory
Notes to the consolidated financial statements as at 31 December 2021 for further details on the
financial position of the sub-consolidate aggregating the Russian-based subsidiaries. As of the
446
Pirelli Annual Report 2021 date of this document, guarantees have been issued/are being issued by Pirelli Tyre S.p.A. on
financial and commercial payables of its Russian subsidiaries to third parties and other Group
companies.
UNUSUAL OR EXCEPTIONAL TRANSACTIONS
We are unaware of any atypical or unusual transactions, as defined by Consob in Decision
DEM/6064293 of 28 July 2006.
INTRAGROUP OR RELATED PARTY TRANSACTIONS
Pursuant to article 2391-bis of the Italian Civil Code and Consob resolution 17221 of 12
March 2010 on the “Regulation of related-party transactions”, as subsequently updated and
amended (“Consob Regulation”), the Board of Directors approved the “Procedure for related-
party transactions” (“RPT Procedure”), subject to the favourable opinion of the Related-Party
Transactions Committee (“RPT Committee”). The RPT Procedure was updated during the year
(“Amendments to the RPT Procedure”) in order to take into account the changes made to
the Consob Regulation implementing the amendments to the European shareholders directive
(“Shareholders’ rights directive II”).2
In this context, the Board of Statutory Auditors, in accordance with the supervisory tasks required
by current legislation, expressed its favourable opinion on the RPT Committee’s proposal to
the Board of Directors regarding the Amendments to the RPT Procedure and monitored the
compliance of the RPT Procedure with the principles set out in the Consob Regulation. Pursuant
to article 4, paragraph 6, of the Consob Regulation, it should be noted that the RPT Procedure
adopted by the Company and currently in force is coherent with the principles contained in said
Regulation, and is published on the Company’s website (www.pirelli.com).
During the 2021 financial year there were both intragroup and non-intragroup related-party
transactions.
The intragroup transactions, the effects of which are reported in the financial statements, are
ordinary in that they are essentially made up of the reciprocal provision of services (technical,
organisational, general) provided by the headquarters to the subsidiaries and charging royalties
for the use of patents to the Group companies that benefit from them. They were regulated
applying normal conditions determined using standard parameters that reflect the actual use
made of the services, and were carried out in the interests of the Company, since they were
aimed at rationalising the use of the Group’s resources.
We attended the meetings of the RPT Committee during which the Committee expressed a
favourable opinion of some related party transactions of “lesser importance”, after having
2 The RPT Procedure was approved by the Board of Directors (again by a unanimous vote of the Directors present) on 31
August 2017, confirmed on 6 November 2017 and updated on 11 November 2020 and 15 June 2021 and amended to take
into account the new organisational structure on 17 March 2022.
447
Financial Statements at December 31, 2021 considered the interest of the Company in the completion of the transaction and the expediency
and substantial correctness of their conditions. Regarding such transactions, we have always
expressed the view that they were in the interests of the Company.
The Board of Statutory Auditors received periodic communications from the Company regarding
related-party transactions not examined by the RPT Committee, noting that they were of an
ordinary nature (i.e. they were part of normal business operations or related financial activities)
and/or concluded at market equivalent or standard terms and/or intragroup and were in the
interest of the Company.
The effects of the aforementioned transactions for the 2021 financial year are fully reflected in
the financial statements.
The Board of Statutory Auditors monitored compliance with the RPT Procedure and the
correctness of the process followed by the Board of Directors and the relevant RPT Committee
regarding the qualification of related parties and we have nothing to report.
The transactions with related parties are detailed in the notes to the Company’s separate and
consolidated financial statements, including information on the consequent effects on the
Income Statement and the Statement of Financial Position. The Board of Statutory Auditors
deems the information on transactions with related parties provided in the financial statements
to be adequate.
IMPAIRMENT TEST PROCEDURE
It should be noted that, as required by the joint Banca d’Italia/Consob/ISVAP document of 3
March 2010, on 23 February 2022, and therefore independently and before the approval on
17 March 2022 of the respective periodic financial report as at 31 December 2021, the Board
of Directors resolved that the impairment test procedure complied with the prescriptions of
international accounting standard IAS 36, after said procedure had been approved by the Audit,
Risks, Sustainability and Corporate Governance Committee and the Board of Statutory Auditors
at the joint meeting held on 18 February 2022.
The Company carried out an impairment test on the goodwill allocated to the group of Consumer
Business cash generating units and to the Pirelli brand, the latter with the assistance of an
independent expert.
The explanatory notes to the financial statements contain information and results of the evaluation
process conducted and, in relation to information on the impairment test on the Pirelli brand, also
with the help of the aforementioned expert.
The Board of Statutory Auditors deems the procedure adopted by the Company for the
preparation of the financial statements as at 31 December 2021 adequate and the relative
information comprehensive.
SUPERVISORY ACTIVITY PURSUANT TO LEGISLATIVE DECREE 39/2010 “EXTERNAL AUDITORS”
The Board of Statutory Auditors, also in collaboration with the Audit, Risks, Sustainability and
448
Pirelli Annual Report 2021 Corporate Governance Committee and pursuant to changes to the regulations introduced by
legislative decree no. 135 of 17 July 2016, supervised:
·
·
·
·
·
the financial reporting process;
the effectiveness of the internal control, internal audit and risk management systems;
the external audit of the annual and consolidated accounts;
the independence of the external auditor, in particular with regard to the provision of non-
auditing services;
the results of the external audit with specific reference to the additional report pursuant to
article 11 of European Regulation 537/2014.
SUPERVISING THE FINANCIAL REPORTING PROCESS
***
The Board of Statutory Auditors, having verified that there are adequate rules and processes
governing the “formulation” and “dissemination” of financial information, considers that the
financial reporting information process is adequate, and believes that there are no issues to raise
with the Shareholders’ Meeting in this regard.
In addition to the annual and half-year reports, the Company voluntarily publishes the additional
periodic financial information specified in article 82-ter of Consob Regulation 11971/99 (“interim
reports on operations”) for the periods that end on 31 March and 30 September each year.
In relation to the single electronic reporting format for annual financial reports (so-called ESEF),
in line with the provisions of Directive 2013/50/EU, amending Directive 2004/109/EC, and
Delegated Regulation (EU) 2019/815, the draft financial statements as at 31 December 2021
have been prepared in accordance with the ESEF format.
SUPERVISING THE NON-FINANCIAL REPORTING PROCESS
The Board of Statutory Auditors has monitored compliance with the provisions contained in
legislative decree no. 254 of 30 December 2016 with reference to the non-financial declaration
(the “NFD”), also verifying that there are adequate rules and processes governing the process
of “formulating” and “disseminating” non-financial information, and considers that the non-
financial reporting information process is adequate, and believes that there are no issues to raise
with the Shareholders’ Meeting in this regard.
In particular, the Board of Statutory Auditors acknowledged that the Company has adopted a
structured system to monitor the content of the NFD which includes: (i) a dedicated operating
rule to ensure adequate reporting of information of a non-financial nature; (ii) a control system
to ensure greater assurance that the principal non-financial information is reported correctly; (iii)
checks of the data of a non-financial nature in the NFD, after appropriate highlighting and
449
Financial Statements at December 31, 2021 verification; (iv) signature of a letter of attestation by the senior management on the non-financial
data included in the paragraphs on this subject in the financial statements.
The Company did not avail itself of its right pursuant to article 3, paragraph 8 of legislative
decree no. 254 of 30 December 2016 to omit information concerning imminent developments
and transactions being negotiated.
SUPERVISING THE EFFECTIVENESS OF THE INTERNAL CONTROL, INTERNAL AUDIT AND
RISK MANAGEMENT SYSTEMS, AND THE EXTERNAL AUDIT OF THE ANNUAL SEPARATE
AND CONSOLIDATED FINANCIAL STATEMENTS
The Board of Statutory Auditors, also in collaboration with the Audit, Risks, Sustainability and
Corporate Governance Committee, met with the Head of Internal Audit once every quarter. At
those meetings, information was provided on the results of the audits designed to ascertain
the adequacy and operational effectiveness of the Internal Control System, compliance with
the laws and the business procedures and processes, as well as on the implementation of
the related improvement plans. The Board of Statutory Auditors confirmed the efficiency and
adequacy of the internal control system and also received the Audit Plan for the financial year, its
final results and the risk analysis, expressing a favourable opinion of their approval by the Board,
where requested. During the meetings it was also constantly updated about the application of
the “Whistleblowing” procedure in the Pirelli Group.
Furthermore, every six months it received the reports of the Audit, Risks, Sustainability and
Corporate Governance Committee and the Supervisory Body on the activities they had
undertaken.
In light of the changes to the organisational structure, the Board of Statutory Auditors was able
to verify the appropriateness of the procedure adopted to appoint the new Manager Responsible
and, therefore, after assessing that the requirements of the Bylaws were met, expressed its
opinion in favour of appointing Mr Giorgio Luca Bruno as the new Manager Responsible. The
Board of Statutory Auditors also took note of the report made by the Manager Responsible
who, when the draft financial statements were being approved, confirmed the adequacy and
appropriateness of the powers and resources conferred on him by the Board of Directors, and
also confirmed that he had been given direct access to all the information necessary to produce
accounting data, without needing to obtain any authorisation. The Board of Statutory Auditors
also acknowledged that the Manager Responsible had reported that he had participated in the
development of internal flows of information for accounting purposes and had approved all
corporate procedures which impacted the Company’s profitability, financial position and/or
assets and liabilities.
The Board of Statutory Auditors confirmed that at present there is no need for measures to
guarantee the effectiveness and impartiality of the corporate departments involved in the internal
control and risk management system and, specifically, other than the Internal Audit department
(mentioned above), the Compliance and Rules department, the Tax Risk Officer, the Enterprise
Risk Management and the Information Security.
450
Pirelli Annual Report 2021 Accordingly, the Board of Statutory Auditors expresses a positive opinion of the adequacy of
the internal control and risk governance system as a whole and has no issues to raise with the
Shareholders’ Meeting in this regard.
The Board of Statutory Auditors also met with the external auditor at least once every quarter.
No fundamental issues or significant shortcomings in the internal control system related to the
financial reporting process arose in these meetings, also with regard to the provisions set out in
article 19, paragraph 3 of legislative decree no. 39 of 27 January 2010.
In particular, it should be noted that the Board of Statutory Auditors found that the controls
specified in law 262/2005 on the financial statements as at 31 December 2021 evidenced that
the administrative-accounting procedures had been applied correctly. The prescribed controls
on the application of the control framework for the NFD evidenced that the internal procedures
had also been applied correctly.
The Board of Statutory Auditors assessed the updates received on the activities carried out by
the Information Security office following the launch of the Transformation Program in this area
and the initiatives undertaken to counter any cyber threats with the aim of mitigating cyber
security incidents to the maximum extent possible.
The Board of Statutory Auditors considered that no “significant shortcomings” in the internal
control system for the financial reporting process and the NFD emerged in the letter of
recommendations to the management drafted by the external auditor.
The firm appointed to undertake the external audit of the accounts of the Company is
PricewaterhouseCoopers S.p.A. (“PWC”). The appointment as external auditor of the accounts
was made by the Shareholders’ Meeting, on the reasoned proposal of the control body, in its
meeting on 1 August 2017, for the nine year period 2017/2025, pursuant to the applicable
provisions for listed companies (the appointment was effective from 4 October 2017, the date
Pirelli’s shares were admitted to trading). PWC was also appointed as external auditor of the
accounts of the principal Pirelli Group companies in Italy and abroad.
Pursuant to article 14 of legislative decree no. 39 of 27 January 2010, and article 10 of Regulation
(EU) 537/2014, on 24 March 2022 PWC issued its Reports on the separate and consolidated
financial statements as at 31 December 2021. On the same date, the auditing firm issued its
Additional report for the internal control and audit committee, drafted pursuant to article 11
of Regulation (EU) 537/2014. On the same date, PWC issued its Report on the consolidated
non-financial disclosure pursuant to article 3, paragraph 10 of legislative decree no. 254 of 30
December 2016.
The texts of the aforementioned reports - drafted in accordance with the applicable legal
provisions - do not contain any elements to bring to the attention of the Shareholders’ Meeting.
451
Financial Statements at December 31, 2021 SUPERVISING THE INDEPENDENCE OF THE EXTERNAL AUDITOR, IN PARTICULAR WITH
REGARD TO THE PROVISION OF NON-AUDITING SERVICES
The Board of Statutory Auditors monitored the independence of the external auditor and in
particular received periodic evidence of non-audit work assigned to PWC, also by virtue of
specific regulatory provisions.
Regarding the independence of the external auditor, a structured procedure has been issued at
Group level. In line with the provisions of legislative decree no. 39 of 27 January 2010, this sets
out that no Pirelli Group company may assign tasks other than the external audit of the accounts
to companies that are members of the network of the appointed external auditor without the
prior express authorisation of the Board of Statutory Auditors, which, with the help of the
relevant corporate structures, has the responsibility of checking that the proposed assignment
is not listed as not permitted by article 5 of Regulation (EU) no. 537/2014, and that in any event,
given its characteristics (considering the payment planned, the nature of the service and the
reasons for the assignment), said assignment complies with the principles of independence of
the external auditor and has no impact on the independence of the external auditor.
In a letter dated 24 March 2022, PWC confirmed its independence pursuant to article 6,
paragraph 2) of Regulation EU 537/2014 and paragraph 17, letter a) of International Audit
Standard (IAS) 260.
During the 2021 financial year, PWC and its network carried out the activities summarised
below for the Group. These activities were the object of assignments approved by the Board of
Statutory Auditors where they do not relate to tasks assigned before the Company was listed:
2021 EXTERNAL AUDITOR FEES
(in thousands of euro)
Company that provided
the service
Company that received
the service
Partial fees
Total fees
Independent auditing services
PricewaterhouseCoopers S.p.A.
Pirelli & C. S.p.A.
Independent certification services (1)
PricewaterhouseCoopers S.p.A.
Pirelli & C. S.p.A.
PricewaterhouseCoopers S.p.A.
Subsidiaries
Network PricewaterhouseCoopers
Subsidiaries
PricewaterhouseCoopers S.p.A.
Subsidiaries
Network PricewaterhouseCoopers
Subsidiaries
Services other than auditing
PricewaterhouseCoopers S.p.A.
Pirelli & C. S.p.A.
PricewaterhouseCoopers S.p.A.
Subsidiaries
Network PricewaterhouseCoopers
Subsidiaries
75
1,135
1,252
243
81
34
150
-
-
2,462
83%
358
12%
150
5%
2.970
100%
1) the item “certification services” indicates the amounts paid for other services that require the issuance of an auditor’s report, as well as the amounts paid for the so-called certification services, as
they are concomitant with the statutory auditing services
The Board of Statutory Auditors considers the fees mentioned above to be adequate to the size,
complexity and characteristics of the work carried out, and also considers that the non-audit
assignments (and their fees) are not such as to have an impact on the independence of the
external auditor.
452
Pirelli Annual Report 2021 In this latter regard, it should be noted that the Board of Directors, after having obtained the
assessment of the Audit, Risks, Sustainability and Corporate Governance Committee, was in
agreement with the Statutory Auditors’ opinion.
We would like to remind you that pursuant to Regulation (EU) no. 537/2014, the Board of Statutory
Auditors, as the Internal Control and Audit Committee, is required to monitor the assignments
other than auditing attributed to the external auditor in order to comply with the limit of 70% of
the average fees paid in the last three financial years for the external audit. The Company has
launched a procedure to comply with the aforementioned standard.
The Board of Statutory Auditors notes:
-
-
-
that it assessed the adequacy of these procedures which are adequate to allow the Board
of Statutory Auditors to understand the reasons for the proposal to assign a service other
than an external audit and to possess all the data required to carry out the assessments;
that it shared with the auditing firm the methodological system used for the calculation
and periodic update of the aforementioned fee cap and payments made to the auditing
firm for non-audit tasks carried out, and that said methodological system is deemed
adequate for the purpose of monitoring compliance with the independence requirements
of the auditing firm itself, and
that the remuneration received by PWC during 2021 for services other than external
auditing do not exceed 70% of the average remuneration for the external audit carried
out at Pirelli and received in the three-year period 2018-2020.
ORGANISATIONAL STRUCTURE
The Board of Statutory Auditors considered the Company’s organisational structure to be
adequate for the needs of the Company and appropriate to ensure that the principles of correct
administration are respected.
The Report on corporate governance and the share ownership structure describes in detail the
types of powers conferred on the Executive Vice Chairman and Chief Executive Officer Marco
Tronchetti Provera and the Deputy-CEO and indicates the matters reserved to the competence
of the Board of Directors of Pirelli.
It should be noted that on 17 March 2022 the Board of Directors confirmed its preceding
assessments regarding the absence of a subject that exercises direction and coordination of
the Company pursuant to article 2497 of the Italian Civil Code, without prejudice to the right
of the parent company to include Pirelli within its own consolidation perimeter for accounting
purposes.
It is useful to note that Pirelli exercises direction and coordination activity on numerous
subsidiaries, having made the communications required by article 2497-bis of the Italian Civil
Code. The Company imparted instructions to the subsidiaries regarding compliance with the
provisions pursuant to article 114 of the TUF that Board deems adequate.
453
Financial Statements at December 31, 2021 REMUNERATION OF THE DIRECTORS, GENERAL MANAGER AND KEY MANAGERS WITH
STRATEGIC RESPONSIBILITIES
During 2021, the Board of Statutory Auditors has expressed the opinions required by law
regarding proposals for the remuneration of directors holding special offices, pursuant to the
provisions of article 2389 of the Italian Civil Code.
In particular, the Board of Statutory Auditors:
- at the Board of Directors’ meeting of 25 February 2021, expressed its favourable opinion
on the consensual termination of the managerial employment contract with Angelos
Papadimitriou (former General Manager co-CEO), from 28 February 2021, and on the
economic terms of the relative termination agreement;
- at the Board of Directors meeting of 31 March 2021, it expressed its favourable opinion
on (i) the 2021 STI plan; (ii) the review of the “Cumulative Group Net Cash Flow (before
dividends)” objective included in the 2020-2022 LTI plan and the possibility of normalising
the effects on the promotion of the TSR relative to Cooper’s integration in Goodyear; (iii)
the adoption of the new 2021-2023 LTI plan, to support the 2021-2022/2025 Strategic
plan; (iv) the approval of the 2021 Remuneration Report (composed of the 2021 Policy
and the Report on Compensation Paid in 2020), as well as the relative Directors’ reports
to the Shareholders’ Meeting on compensation and the remuneration of the Deputy CEO,
for all intents and purposes;
- at the Board of Directors’ meeting on 15 June 2021, it expressed its favourable opinion,
in accordance with Policy 2021, to granting the Deputy-CEO the remuneration package
described in the 2021 Policy.
In addition, following the close of the 2021 financial year, the Board of Statutory Auditors:
- at the Board of Directors’ meeting of 23 February 2022, it expressed its favourable opinion
on the approval of the 2022 STI Plan;
- at the Board of Directors’ meeting of 17 March 2022, it expressed its favourable opinion
on the approval of the 2022-2024 LTI Plan and the approval of the 2022 remuneration
report (made up of the 2022 Policy and the Report on Compensation Paid in 2021), as
well as the relative Directors’ Reports to the Shareholders’ Meeting on compensation.
For more details see the Report on the Remuneration Policy and on Compensation Paid.
FURTHER ACTIVITIES OF THE BOARD OF STATUTORY AUDITORS AND INFORMATION
REQUIRED BY CONSOB
In exercising its duties, the Board of Statutory Auditors, as prescribed in article 149 of the TUF,
monitored:
- observance of the law and the deed of incorporation;
454
Pirelli Annual Report 2021 - compliance with the principles of correct administration;
-
the adequacy, for those aspects within its remit, of the organisational structure of the
Company, the internal control system and the administrative accounting system, and of
the reliability of the latter to correctly represent operations;
- as already pointed out, how the corporate governance rules contained in the codes of
conduct which the Company, in a notice to the public, declares that it complies with
are actually implemented. In this respect, it should be noted that, pursuant to article
123-bis of the TUF, the Company has, also for the 2021 financial year, drafted its annual
Report on corporate governance and share ownership which provides information on (i)
the corporate governance practices actually applied by the Company, over and above the
obligations specified in the legal or regulatory provisions, (ii) the principal features of the
risk and internal control systems that exist in relation to the financial reporting process,
including the consolidate financial reports, (iii) how the Shareholders’ Meeting functions,
including its principal powers and shareholders’ rights and how they are exercised,
(iv) the composition and operation of the administration and control bodies and their
committees, and the other information specified in article 123-bis of the TUF;
-
the adequacy of the instructions imparted by the Company to its subsidiaries pursuant
to article 114, paragraph 2 of the TUF, having ascertained that the Company is able
to promptly and regularly fulfil the disclosure obligations set out in law and in the EU
regulations, as prescribed in the aforementioned article, also by collecting information
from the heads of the organisational departments, and periodic meetings with the external
auditor, to exchange relevant data and information. In this regard, we have no particular
comments to make.
It should also be noted that the Directors’ Report on Operations includes a paragraph containing
a description of the principal features of the internal control and risk management system in
relation to the financial reporting process, including the reporting of consolidated financial
information.
The Board of Statutory Auditors notes:
-
-
that the Directors’ Report on Operations complies with the current laws, reflecting the
resolutions made by the administrative body and the results in the financial statements,
and contains adequate information on operations during the year and on intra-group
transactions. The section containing the report on transactions with related parties has
been included in the explanatory notes to the financial statements, in compliance with
the IFRS standards;
that the explanatory notes comply with the current standards, indicating the criteria used
in determining the balance sheet items and in the value adjustments, and that the separate
and consolidated financial statements of the Company appear to have been drafted in
accordance with the structure and frameworks imposed by the current standards. In
application of Consob’s provisions, the effects of relations with related parties on the
Company’s profitability, financial position, assets and liabilities and cash flows;
455
Financial Statements at December 31, 2021 -
that Directors and/or Senior Managers of the Parent Company are members of the Boards
of Directors of the principal subsidiary companies to guarantee coordinated direction and
an adequate flow of information, also supported by suitable accounting information.
It should also be noted that the Board of Statutory Auditors:
-
received information from the Directors at least once every quarter concerning their
activity and the transactions carried out by the Company having the greatest impact on
its strategy, earnings, financial position and equity, and that it received this information in
compliance with the specific procedure approved by the Board of Directors. The Board
of Statutory Auditors can give reasonable assurance that the resolved and executed
transactions comply with the law and the Articles of Association, and are not manifestly
imprudent, reckless or in conflict of interest, or in violation of the resolutions passed by
the Shareholders’ Meeting, or capable of compromising the integrity of the company’s
assets;
-
received from the Supervisory Body, of which Statutory Auditor Ms. Antonella Carù is
a member, information about the results of its own control activity, which did not reveal
anomalies or misconduct;
- held periodic meetings with representatives of the external auditor in order to exchange
important data and information for the performance of its duties, as prescribed in article
2409-septies of the Italian Civil Code and in article 150, paragraph 3 of the TUF. In this
regard, it should be noted that no important data and information were identified which
would require a mention in this Report;
- obtained information from the corresponding bodies of the main subsidiaries with regard
to their management and control systems and their general operating performance
(pursuant to paragraph 1 and 2 of article 151 of the TUF);
-
following the appointment of Mr Giorgio Luca Bruno as Director, which took place at the
Shareholders’ Meeting held on 15 June 2021, it was able to verify the correct application
of the criteria and procedures adopted by the Board of Directors to assess the absence
of independence requirements, the fulfilment of the requirements of integrity as well as
the number of offices held by him, which was found to comply with the requirements of
the specific procedure adopted by the Company;
- expressed a favourable opinion on the appointment of Mr Giorgio Luca Bruno as the
Manager Responsible following the resignation of Mr Francesco Tanzi, resolved by the
Board of Directors on 11 November 2021;
-
received the annual report from the Company’s Data Protection Officer which showed the
Company is fully compliant with privacy legislation
-
issued a certificate relating to the subscription and payment, in full, of the share
456
Pirelli Annual Report 2021 capital, during the Shareholders’ Meeting held on 24 March 2021, which resolved on
the convertibility of the bond loan denominated “EUR 500 million Senior Unsecured
Guaranteed Equity-linked Bonds due 2025” and the capital increase to service the same
bond loan;
-
took part in the meetings of the Related-Party Transactions Committee during which
opinions were expressed on the performance of Related-Party Transactions, meeting the
requirements set out in the relevant Consob Regulation and the procedure adopted by
the Company in particular:
(i) it supervised compliance with the aforesaid procedure and with the provisions of laws
and regulations on related-party transactions and the correctness of the process followed
by the Board and the relevant Committee on the subject of defining related parties and had
no comments to make in this respect; (ii) it periodically received detailed information from
the Company on transactions carried out with related parties that were “not intragroup”
and (iii) it made a positive assessment of the compliance of minor transactions examined
by the Related-Party Transactions Committee with the interests of the Company;
- verified, taking into account the supervisory tasks prescribed by the regulations in force,
the compliance of the New RPT Procedure with the principles of the RPT Regulation, as
recently amended, and endorsed the content of the New RPT Procedure;
- on the occasion of the Board of Directors’ meeting that approved the new organisational
structure, it expressed a favourable opinion, for all intents and purposes, in relation to
the structure of the Deputy-CEO’s remuneration for inclusion in the 2021 Policy and the
proposed organisational structure.
For the sake of completeness, it should be noted that, pursuant to Article 2412 of the Italian Civil
Code, the Board of Statutory Auditors, on the occasion of the bond issues within the framework
of the establishment of the new Euro Medium Term Note (“EMTN”) programme, has certified, for
all intents and purposes, that due to the listing of the bonds on a stock market or a multilateral
trading system, the waiver pursuant to Article 2412, paragraph 1, of the Italian Civil Code,
provided for in paragraph 5 of the same article, is applicable.
During the 2021 financial year the Board of Statutory Auditors did not receive any complaints or
reports pursuant to article 2408 of the Italian Civil Code.
With regard to the external auditor, the Board of Statutory Auditors noted that PWC:
-
issued its report pursuant to article 14 of legislative decree of 27 January 2010 article
no. 39 and no. 10 of Regulation (EU) 537/2014 on 24 March 2022. This containing its
unqualified opinion stating that the separate and consolidated financial statements
provide a truthful and accurate representation of the equity and financial position of Pirelli
and of the Group as at 31 December 2021, and of the economic results and cash flow
for the financial year that closed on that date, in compliance with applicable accounting
standards, and provided evidence of key aspects of their audit;
457
Financial Statements at December 31, 2021 -
issued a coherence opinion indicating that the Report on Operations accompanying
the separate and consolidated financial statements as at 31 December 2021, and
some specific information contained in the Report on corporate governance and share
ownership, as laid down in article 123-bis, paragraph 4, of the TUF have been drafted in
compliance with current legislation;
- as regards possible significant errors in the Report on Operations, stated that, based on
the knowledge and understanding of the company and its market that it had acquired in
the course of the audit activities, it had no matters to raise;
- confirmed the Company’s statement regarding the fact that no other assignments
have been given to persons or entities with on-going relationships with the external
auditor itself;
- on 24 March 2022, provided the Board of Statutory Auditors with the Additional
Report referred to in article 11 of regulation EU 537/2014, indicating that there were
no significant shortcomings in the internal control system in relation to the financial
reporting process that needed to be brought to the attention of persons responsible for
“governance” activities;
- on 24 March 2022, pursuant to article 3, paragraph 10 of legislative decree no. 254 of 30
December 2016, issued the Report on the responsible management of the value chain
(consolidated non-financial declaration pursuant to legislative decree no. 254, of 30
December 2016), concluding that no elements had come to PWC’s attention that led it to
believe that the group’s NFD for the year to 31 December 2021 had not been drawn up,
in all significant aspects, in accordance with the requirements set out in legislative decree
254/2016 and the GRI Standards;
- annexed to the Additional report, the external auditor provided the Board of Statutory
Auditors, pursuant to article 6 of Regulation EU 537/2014, with a statement from which
no situations emerge that could compromise the independence of the external auditor
(for more details concerning the provision of non-auditing services, see the paragraph
entitled “supervising the independence of the external auditor, in particular with regard to
the provision of non-auditing services” in this Report).
The Board of Statutory Auditors also took note of the Transparency Report drafted by the external
auditor and published on its web site, pursuant to article 18 of legislative decree 39/2010.
Furthermore, with regard to the corporate bodies, the Board of Statutory Auditors noted that
the current Board of Directors - the mandate of which will expire with the Shareholders’ Meeting
called to approve the financial statements for the year to 31 December 2022 - as of the date of
the Report is composed of 15 Directors, 13 of whom qualified as non-executive directors and,
of these, 8 deemed to possess the requirements of independence specified be expiring the
Corporate Governance Code and the TUF.
The whole Board of Statutory Auditors is entitled to participate in the activities of the Audit,
Risks, Sustainability and Corporate Governance Committee, the Remuneration Committee and
458
Pirelli Annual Report 2021 the Related-Party Transactions Committee; the Chairman is invited to attend meetings of the
Appointments and Succession Committee and Strategies Committee, as representative. The
Board of Statutory Auditors is also entitled to attend the Shareholders’ Meeting.
At the date of the Report:
-
-
-
-
-
the Audit, Risk, Sustainability and Corporate Governance Committee is composed of five
Directors, the majority of whom are independent. During 2021 it met 5 times;
the Remuneration Committee is composed of five Directors, the majority of whom are
independent (the Chairman is an independent Director). During 2021 it met 5 times;
the Related-Party Transactions Committee is composed of three Directors, all independent.
During 2021 it met 7 times;
the Appointments and Successions Committee is composed of four Directors, one of
whom is the executive Director. During 2021 it met 1 time;
the Strategies Committee is composed of eight Directors, including the Executive Director,
the Deputy-CEO and three independent Directors. During 2021 it met 2 times.
The Board of Statutory Auditors attended 8 meetings of the Board of Directors and, also through its
Chairman, the meetings of the board Committees, also in its capacity as Internal Control and Audit
Committee pursuant to article 19 of legislative decree no. 39 of 27 January 2010. In particular, it
should be noted that the Board of Statutory Auditors attended 5 meetings of the Risk and Corporate
Governance Committee, 5 meetings of the Remuneration Committee, 7 meetings of the Related-
Party Transactions Committee, 2 Shareholders’ Meetings and, through its Chairman, 1 meeting
of the Appointments and Successions Committee and 2 meetings of the Strategies Committee.
In addition, the Board of Statutory Auditors attended 4 induction sessions organised by the
Company.
The percentage attendance figures of the single members of the Board of Statutory Auditors at
the meetings of the above bodies are provided in the Report on corporate governance and share
ownership.
Finally, the Statutory Auditors acknowledge:
-
-
that they have monitored fulfilment of the requirements linked to the “Market Abuse” and
“Investor Protection” regulations on the subject of corporate information and internal
dealing, with particular reference to the handling of inside information and the procedure
for the dissemination of press releases and information to the public;
that they periodically ascertained, upon their appointment and most recently in their
meeting on 14 March 2022, as recommended by the Borsa Italiana Corporate Governance
Code, that members possess the same independence requirements - where applicable -
as those requested for the directors in the aforementioned Codes of Conduct;
459
Financial Statements at December 31, 2021 -
-
-
that they have found that the criteria and procedures to ascertain the independence
requirements adopted by the Board of Directors to annually check the independence of
its members are correctly applied, and have no comments to make on this point;
that they have determined that the Director’s report on the Company’s financial statements
describes the principle risks and uncertainties to which the Company is exposed;
that, with reference to the provisions of article 15 of Consob Regulation 20249 of 28
December 2017 concerning market discipline, they have ascertained that the organisation
of the company and the procedures adopted enable Pirelli to ensure that the companies
it controls and which are constituted in and regulated by the laws of States that are
not members of the European Union subject to respecting the aforementioned Consob
provisions, have administrative-accounting systems appropriate to regularly provide
the senior management and external auditor of the Company with the information
on its profitability, financial position and assets and liabilities needed to draw up the
consolidated financial statements. The subsidiaries set up in and regulated by the laws of
States that are not members of the European Union which, as of 31 December 2021, are
of significant importance under article 15 of Consob Market Regulation are listed in detail
by the Company in the financial statements.
During the course of its supervisory activities, and on the basis of the information obtained
from the external auditor, no omissions, misconduct, irregularities or significant facts were found
which are worthy of being reported or mentioned in this Report.
The activities described above, conducted both collectively and individually, have been
documented in the minutes of the 10 meetings of the Board of Statutory Auditors held during
2021 (3 of them held after its renewal by the Shareholders’ Meeting of 15 June 2021).
***
The Board of Statutory Auditors noted that, at the date of this Report, the COVID-19 health
emergency was still ongoing around the world, including in Italy.
In this regard, the Board of Statutory Auditors was constantly informed by the competent
departments of the company of the assessments carried out by the management and the actions
implemented to monitor the possible social, economic and financial impact of the COVID-19
emergency on the Group. This exchange of information was continuous throughout 2021 and
will continue until the end of the ongoing pandemic.
SELF-ASSESSMENT OF THE BOARD OF STATUTORY AUDITORS
In 2021, the Board of Statutory Auditors – in continuity with the previous financial year and as
recommended by the Standards of Conduct – conducted a self-assessment with the assistance
of an independent consulting firm.
This process was carried out through individual interviews, based on a questionnaire containing
questions on the suitability, size, composition and operation of the Board of Statutory Auditors
460
Pirelli Annual Report 2021 in order to attest that the body is operating correctly and effectively and that its composition is
adequate and the related outcomes were discussed and agreed upon by the Board of Statutory
Auditors during a dedicated meeting held on 14 March 2022.
In particular, the 2021 self-assessment (the current Board of Statutory Auditors’ first year of
mandate) confirmed the broadly positive picture found in previous mandates regarding the
composition and operation of the Board of Statutory Auditors. And in fact, despite the exceptional
circumstances due to the pandemic and the renewed composition of the Control Body, the
Company ensured that the Board of Statutory Auditors was kept abreast of the business and
dynamics of the Group, ensuring the efficient performance of its work.
In relation to the areas for which the greatest appreciation was recorded, mention should be
made, inter alia, of the adequacy of the size and five-member composition of the Board of
Statutory Auditors, which, together with the cohesive, collaborative atmosphere and dialogue
between its members, allows the control body to perform its role effectively as well as offering
a constructive range of opinions; the extreme usefulness of the induction sessions for the
in-depth examination of multiple topics (i.e. fiscal, controls, risks, ESG, digitalisation, cyber
security) and knowledge of the Pirelli business and group; effective supervision by the control
body, in the first six months of its activity, of compliance with the law, regulations and bylaws,
proper administration, and the adequacy of the Company’s organisational and accounting
structures, having gained knowledge of the Audit Plan launched during the previous mandate;
the effective role of the Board of Statutory Auditors in the overall and timely coordination of
activities; the adequacy of the flow of information to and from the Board of Statutory Auditors,
particularly thanks to the excellence demonstrated by the Company’s managerial and
operational structures in charge of this; the adequate frequency of the meetings of the Board
of Statutory Auditors and positive interactions, including informal ones, between the members
whenever necessary; the high quality level of the documentation in view of the meetings and
full compliance with the timeframes for sending it by the support structures.
Particular appreciation was also expressed by the Statutory Auditors regarding (i) the diverse
backgrounds and respective experiences within the control body, as an element of constant
enrichment for the Board’s work, which promoted the exchange and sharing of the various
positions, through the contributions made by all the members of the Board of Statutory Auditors
itself, (ii) the presence of three female Statutory Auditors as evidence of Pirelli’s attention to
the issues of equity and inclusion and (iii) the effectiveness of the role played by the Chairman
of the Board of Statutory Auditors highlighted by all the Statutory Auditors with reference, in
particular, to the level of commitment made to create a cohesive working climate, and to the
inclusive approach intended to encourage debate and constructive discussion.
Lastly, from the investigation, some areas have been identified for future reflection, including
the arrangement, when possible, of face-to-face meetings and informal get-togethers with
Company Directors and managers, to consolidate and strengthen interpersonal relationships
and facilitate integration and continued careful planning and holding of a selected number of
induction sessions.
461
Financial Statements at December 31, 2021 BOARD OF DIRECTORS SELF-ASSESSMENT PROCESS
The Board of Statutory Auditors notes that the Board of Directors carried out the process to
evaluate its operation and the operation of its Committees (board performance evaluation) for
the 2021 financial year.
PROPOSALS TO THE SHAREHOLDERS’ MEETING
Financial Statements at 31 December 2021
The Board of Statutory Auditors expresses its favourable opinion on the approval of the Financial
Statements at 31 December 2021 and has no objections to raise regarding the proposal made
1) to distribute to shareholders a dividend, gross of withholding taxes, of 0.161 euro for each of
the 1,000,000,000 outstanding ordinary shares, for a total of 161,000,000.00 euro;
2) to carry forward the remaining profits, amounting to 55,618,625.00 euro;
3) to authorise the Directors to allocate to profits carried forward the balance of the rounding that
may be determined at the time of payment of the dividend;
4) to establish, for the case in which, before the ex dividend date, the number of outstanding
ordinary shares changes following the bond conversion of the equity-linked bond named “EUR 500
million Senior Unsecured Guaranteed Equity-linked Bonds due 2025”, that the abovementioned
dividend unit remains unchanged and that the amount required for the distribution of any new
shares is taken from the item “Reserve retained earnings”.
Remuneration policy and compensation paid
Please note that the Board of Statutory Auditors expressed a favourable opinion of the
Remuneration Policy for the 2022 financial year subject to the binding vote of the Shareholders’
Meeting and the Report on Compensation Paid in the 2021 financial year, subject to the advisory
vote of the Shareholders’ Meeting. Therefore, it has no objections.
Three-year monetary incentive plan for the Pirelli group’s management
We inform you that the Board of Statutory Auditors has expressed a favourable opinion, to the
extent of its competence, on the adoption of the new 2022-2024 LTI plan, in support of the
new 2021-2022/2025 Strategic Plan, expressing a favourable opinion, within its remit, on the
criteria to adjust only the quantification of the objectives set out in the current LTI plans to make
allowance for any negative effects resulting from a worsening geopolitical and macroeconomic
scenario. Therefore, the Board of Statutory Auditors has no objections.
***
462
Pirelli Annual Report 2021 Pursuant to article 144-quinquiesdecies of the Issuers’ Regulations, duly approved by Consob
with resolution 11971/99, as subsequently amended and supplemented, the list of offices held by
members of the Board of Statutory Auditors in the companies listed in Book V, Title V, Chapters
V, VI and VII of the Italian Civil Code is published by Consob on its website (www.consob.it).
It should be noted that article 144-quaterdecies (Consob reporting obligations) establishes that a
person who is a member of the controlling body of just one issuer is not subject to the reporting
obligations provided by said article, and therefore, in that case, they do not appear in the lists
published by Consob.
The Company lists the main positions held by the members of the Board of Statutory Auditors in
its Report on corporate governance and share ownership.
The Board of Statutory Auditors here acknowledges that all its members were in full compliance
of the aforementioned regulatory provisions laid down by Consob governing the “maximum
number of positions to be held”.
Milan, 24 March 2022
For the Board of Statutory Auditors
The Chairman, Mr Riccardo Foglia Taverna
463
Financial Statements at December 31, 2021 Resolutions
465
A Beautiful Place
PROPOSAL FOR APPROVAL OF THE FINANCIAL STATEMENTS
AND ALLOCATION OF THE RESULT FOR THE YEAR
Shareholders,
The year ended December 31, 2021 closed with a profit of
eur 216,618,625.00.
that following
the shareholders’ meeting
Considering
resolutions adopted in 2017, the legal reserve was completed
and reached the limit established by article 2430 of the Civil
Code, the Board of Directors proposes the distribution of a
dividend, gross of withholding taxes, of eur 0.161 for each
of the 1,000,000,000 outstanding ordinary shares and the
carry-forward of the remaining profit of eur 55,618,625.00.
The aforementioned proposal is in line with the dividend policy
approved by the Board of Directors on March 31, 2021, which
provides for a distribution equal to ~50% of the consolidated
net result in the period 2021-2022.
The proposed dividend was calculated taking into account the
number of shares currently outstanding. This number could
vary following any requests for conversion of the bonds of
the “EUR 500 million Senior Unsecured Guaranteed Equity-
linked Bonds due 2025”. In this case, the Board proposes that
you withdraw any necessary amounts from the item “Reserve
for results carried forward”.
to above will remain unchanged and that the amount
necessary for distribution to any new shares will taken
from the item “Retained earnings reserve”.
The dividend for the year 2021 will be paid as from May 25,
2022, with ex-dividend date on May 23 (record date May 24).
REMUNERATION POLICY AND COMPENSATION PAID:
APPROVAL OF THE REMUNERATION POLICY FOR
2022 FINANCIAL YEAR PURSUANT TO ARTICLE
123-TER, PARAGRAPHS 3-BIS AND 3-TER OF
LEGISLATIVE DECREE 24 FEBRUARY 1998 NO. 58;
ADVISORY VOTE ON THE REPORT ON COMPENSATION
PAID FOR 2021 FINANCIAL YEAR PURSUANT TO
ARTICLE 123-TER, PARAGRAPH 6 OF LEGISLATIVE
DECREE 24 FEBRUARY 1998 NO. 58;
RELATED AND CONSEQUENT RESOLUTIONS.
(item 2 on the agenda)
Illustrative reports drawn up by the Directors pursuant to
Article 125-ter of Italian Legislative Decree no. 58 of 24
February 1998 as subsequently amended and supplemented,
approved by the Board of Directors on 17 March 2022.
If you agree with our proposal, we request that you adopt the
following
A. Approval of the 2022 remuneration policy
Dear Shareholders,
RESOLUTIONS
“The Shareholders’ Meeting,
→ having examined the annual report at December 31, 2021;
→ having acknowledged the Statutory Auditors’ Report;
→ having acknowledged the Independent Auditors’ Report;
RESOLVED
a)
b)
c)
d)
e)
to approve the Company’s financial statements for the
year ended December 31, 2021, as presented by the
Board of Directors as a whole, in the individual entries
and with the proposed provisions, showing a profit of eur
216,618,625.00;
to distribute
to shareholders a dividend, gross
of withholding taxes, of eur 0.161 for each of the
1,000,000,000 outstanding ordinary shares, for a total
of eur 161,000,000.00;
to carry
55,618,625.00;
to authorize the Directors to allocate to retained earnings
the balance of the rounding that may be determined at
the time of payment of the dividend;
to establish, in the event that before the ex-dividend
date, the number of outstanding ordinary shares
changes following the eventual conversion of the “EUR
500 million Senior Unsecured Guaranteed Equity-
linked Bonds due 2025”, that the unit dividend referred
remaining profit of eur
forward
the
in accordance with Art. 123-ter of the Consolidated Law on
Finance (“TUF”), as amended and supplemented by Art. 3
of Legislative Decree no. 49 of 10 May 2019 (“Decree”), the
Shareholders’ Meeting has also been called to vote on the
first section of the Report on the Remuneration Policy and
on the compensation paid (“Remuneration Report”) which
outlines the remuneration policy (“Policy”) for members of
administrative bodies, General Managers and Key managers
and to whom Pirelli refers in order to define the remuneration
of the Senior Managers and Executives of Pirelli.
The Policy submitted for your vote was drawn up pursuant to
Art. 123-ter of the TUF and the regulations adopted by Consob,
pursuant to Art. 84-quater of the Issuers’ Regulations, as well
as on the basis of Scheme 7-bis of Annex 3 A of the Issuers’
Regulations, as recently amended and supplemented by
Consob under Resolution no. 21623 of 10 December 2020.
With respect to the 2021 Remuneration Policy, the Policy
includes some new elements, the main ones being:
→ the increased weight of sustainability objectives in the STI
plan from 10% to 15% with the introduction of the “Diversity
and Inclusion (D&I): Women Hiring” objective;
→ the replacement, starting from the LTI 2022-2024 cycle,
of the CDP Ranking objective with the CO2 Emissions
Reduction objective;
→ the reference panel used to compare the Annual Total
466
Pirelli Annual Report 2021 Direct Compensation on Target of the Executive Vice
Chairman and Chief Executive Officer, which was redefined
by excluding Cooper Tyre (given its delisting following the
acquisition by Goodyear) and FCA (following the merger
with Stellantis) and including Brembo, thus maintaining
the focus on the companies in the sector in which Pirelli
operates;
→ the possibility of revising the targets or closing the STI and
LTI plans early, which is limited to circumstances where
extraordinary transactions affecting the Group perimeter
and/or profound changes in the macroeconomic and
geopolitical scenario take place;
→ the STI and LTI plan objectives (at minimum/threshold
access, target and maximum level) were quantified on
the assumption that until the end of 2022 the prices of
energy and oil will remain at the levels they were in February
2022; this quantification does not consider potential
impacts on local operations of imports and exports from
and to Russia of raw materials and finished products nor
the possibility of a total interruption of import and export
flows from and to Russia and a recession in Europe due
to worsening geopolitical tensions. With reference to the
STI and LTI plans, in implementation for these latter of the
possibility contained therein to amend the objectives if a
profound change occurs in the macro-economic scenario
in order to ensure the alignment of company objectives
and the objectives underlying the Management incentive
system, the Board of Directors, upon the proposal of the
Remuneration Committee, having obtained the favourable
opinion of the Board of Statutory Auditors, defined the
criteria to adjust only the objectives set for the relative plans
(which remain otherwise unchanged) to make allowance
for any negative effects resulting from a worsening
geopolitical and macroeconomic scenario;
→ the increase in the value of the consideration under the
non-competition agreement up to a maximum of 80%
of the GABS (compared to the previous 60%) to include
roles with a high technical content and specialist know-
how, consequently an increase in the regular payment
percentages to a maximum of 15% of the GABS (compared
to the previous 10%).
The Policy takes into account the definition of the objectives
of the new LTI Plan for the three-year period 2022-2024,
applying the rolling mechanism, in support of the objectives
of the 2021-2022/2025 Strategic Plan.
The Policy no longer includes the medium-long term Retention
Plan for the General Manager Operations, the KM and selected
Senior Managers/Executives, approved on 26 February 2018
and terminated in 2021.
The Policy also provides for the launch of an analysis process
for the adoption of equity-based long-term plans (LTI).
As provided for in Art. 123-ter TUF, the first section of the
Remuneration Report brought to your attention outlines:
Art. 2402 of the Italian Civil Code, for members of the
controlling bodies, and to whom Pirelli refers to define the
remuneration of the Senior Managers and Executives;
the procedures used for the adoption and implementation
of this Policy.
b.
As prescribed in the Consolidated Law on Finance, the
Shareholders’ Meeting is asked to express its favourable vote
on the first section of the Remuneration Report.
B. Advisory vote on the remuneration paid in 2021
Dear Shareholders,
pursuant to Art. 123-ter of the Consolidated Law on
Finance (“TUF”), as amended and supplemented by Art. 3
of Legislative Decree no. 49 of 10 May 2019 (“Decree”),
we have also called you to submit to your advisory vote the
second section (“Report on Compensation Paid”) of the
Report on the remuneration policy and compensation paid
(“Remuneration Report”) which provides, by name, for
the members of the administrative and controlling bodies,
for the General Managers, as well as, in aggregate form, for
the Key Managers, a summary of the remuneration paid in
implementation of the remuneration policy adopted by the
Group in 2021, highlighting its compliance with the same.
The Report on Compensation Paid submitted for your advisory
vote was drawn up pursuant to Art. 123-ter of the TUF and the
regulations adopted by Consob, pursuant to Art. 84-quater
of the Issuers’ Regulations, as well as on the basis of Scheme
7-bis of Annex 3 A of the Issuers’ Regulations, as recently
amended and supplemented by Consob under Resolution no.
21623 of 10 December 2020.
As required by Article 123-ter of the TUF, the second section
of the Remuneration Report that we submit to you illustrates,
by name, for the members of the administrative and controlling
bodies, the General Managers, as well as, in aggregate form,
the Key Managers:
a.
b.
the items of which the remuneration is composed,
including payments prescribed in case of resignation
from office or termination of employment;
the sums paid in the 2021 financial year for any reason
and in any form by the Company and its subsidiaries or
affiliates, indicating any components of said payments
that are referable to activities undertaken in years
preceding the year of reference and also highlighting the
payments to be made in one or more subsequent years
for activity undertaken in the reference year, providing, if
applicable, estimates for the components that cannot be
objectively quantified in the year of reference.
The subject appointed to carry out the external audit of the
financial statements verifies that the Directors have prepared
the Report on Compensation Paid.
a.
the remuneration Policy for the members of the
administrative bodies, General Managers and Key
Managers and, without prejudice to the provisions of
As prescribed in the Consolidated Law on Finance, the
Shareholders’ Meeting is asked to express itself on the second
section of the Remuneration Report in an advisory vote.
467
Resolutions THREE-YEAR MONETARY INCENTIVE PLANS
FOR THE PIRELLI GROUP MANAGEMENT:
APPROVAL OF THE MONETARY INCENTIVE
PLAN FOR THE THREE-YEAR PERIOD 2022-2024
FOR PIRELLI GROUP MANAGEMENT;
APPROVAL OF THE ADJUSTMENT MECHANISMS OF THE
QUANTIFICATION OF THE OBJECTIVES INCLUDED IN THE
MONETARY INCENTIVE PLANS FOR THE THREE-YEAR PERIODS
2020-2022 AND 2021-2023 FOR PIRELLI GROUP MANAGEMENT;
RELATED AND CONSEQUENT RESOLUTIONS
AND GRANTING OF POWERS.
(item 3 on the agenda)
Illustrative reports drawn up by the Directors pursuant to
Article 125-ter of Italian Legislative Decree no. 58 of 24
February 1998 as subsequently amended and supplemented,
approved by the Board of Directors on 17 March 2022.
3.1. Approval of the monetary incentive plan for the three-
year period 2022-2024 for Pirelli Group Management.
Dear Shareholders,
in view of the Shareholders’ Meeting of Pirelli & C. S.p.A.
(hereinafter “Pirelli”) called for 18 May 2022 (in a single
call) (the “Shareholders’ Meeting”), we inform you that,
at its meeting of 17 March 2022, the Board of Directors
approved the targets for the three-year monetary incentive
Plan of the three-year period 2022-2024 for Pirelli Group
Management (“2022-2024 LTI Plan” or “LTI Plan”) in line
with the targets of the 2021-2022/2025 Strategic Plan
(“Strategic Plan”). The 2022-2024 LTI Plan was also
approved pursuant to Article 2389 of the Italian Civil Code,
on the proposal of the Remuneration Committee and with
the favourable opinion of the Board of Statutory Auditors
in relation to the parties for whom such opinion is required.
The 2022-2024 LTI Plan is subject to the approval of the
Shareholders’ Meeting pursuant to Article 114-bis of the
Consolidated Law on Finance (“TUF”) as it states, inter alia,
that part of the incentive is determined based on a relative
Total Shareholder Return target, in that it is linked to the
stock market price trends of Pirelli shares against an index
made up of select Tier 1 peers in the Tyre sector.
Moreover, pursuant to Article 123-ter of the TUF, the 2022-
2024 LTI Plan is set out in the 2022 Remuneration Policy
adopted by Pirelli and submitted to the binding vote of the
Shareholders’ Meeting (“2022 Policy”), the definitions of
which – unless otherwise specified – are fully recalled herein.
Below is a summary of the main features and conditions of
the 2022-2024 LTI Plan. For a more analytical description
of the 2022-2024 LTI Plan, please review the Information
Document drafted pursuant to Article 84-bis, paragraph 1,
of Consob Resolution No. 11971 of 14 May 1999 (“Issuers’
Regulation”), which is available to the public at Pirelli’s
registered office (in Milan, Viale Piero e Alberto Pirelli 25),
on the website www.pirelli.com, as well as on the authorised
emarket Storage platform
in
accordance with applicable regulations.
(emarketstorage.com)
****
REASONS FOR ADOPTING THE PLAN102
In line with national and international best practices, the 2022
Policy is tailored to Pirelli’s objective of attracting, motivating
and retaining resources with the professional attributes
required to pursue corporate objectives. In addition, through
the confirmation of the multi-year variable components
assigned, in particular, to the Executive Vice Chairman and
Chief Executive Officer, Deputy-CEO, General Managers,
Key Managers (“KMs”), Senior Managers and Executives,
the 2022 Policy also aims to achieve long-term interests,
contributing to the achievement of strategic objectives and
sustainable success of the company, as well as aligning the
interests of Management with those of shareholders.
Starting from LTI Plan of the three-year period 2020-2022,
included in the 2020 Remuneration Policy approved by Pirelli’s
Shareholders’ Meeting of 18 June 2020 (“2020 Policy”), the
Company introduced a “rolling” mechanism for medium-long
term incentive plans. In applying this mechanism, Pirelli’s
Board of Directors set the objectives of the LTI Plans for the
period 2020-2022, 2021-2023 and most recently also for the
period 2022-2024, all of which are tied to the achievement of
the Strategic Plan objectives.
BENEFICIARIES OF THE PLAN103
The 2022-2024 LTI Plan is extended to Directors holding
specific offices (except the Chairman), to General Managers,
to Key Managers (“Top Management”), as well as to all
managers of Italian companies and employees of foreign
companies who fall within Pirelli’s scope of consolidation who
have been granted the title of Executive (the “Executives”)
with a grade (determined using the Korn Ferry method) of 20
or higher (Top Management and Executives, jointly referred
to as “Management”). It is also assigned to those who, during
the three-year period, join the Group and/or take over, due
to internal career progression, the position of Executive. In
this case, their inclusion is subject to participation in the LTI
Plan for at least one full financial year and the incentive is
calculated in relation to the period of actual participation in
the LTI Plan.
In particular, as at the date of this report, Executive Vice
Chairman and Chief Executive Officer Marco Tronchetti
Provera, Deputy-CEO Giorgio Luca Bruno, Director Giovanni
Tronchetti Provera (as Senior Manager), General Manager
Operations Andrea Casaluci, and the other KMs among others
are participants of the LTI Plan.
PERFORMANCE TARGETS AND BONUS CALCULATION104
The LTI incentive is set as a percentage of the base salary
with increasing percentages in relation to the role held and
102 Information required by Article 114-bis, paragraph 1, letter a) of the TUF.
103 Information required by Article 114-bis, paragraph 1, letters b) and b-bis) of the TUF.
104 Information required by Article 114-bis, paragraph 1, letter c) of the TUF.
468
Pirelli Annual Report 2021 taking into account the reference benchmarks of each figure.
Applying the “rolling” mechanism, the 2022-2024 LTI Plan
confirms the three-year incentive percentages set forth in
the 2021-2023 LTI Plan which, if targets are achieved, can
go from a 15% minimum for Executives to a 70% maximum
for Directors holding specific offices to whom further specific
duties have also been attributed. There is also a limit to the
maximum achievable LTI incentive.
The 2022-2024 LTI Plan, which is monetary and does not
include the assignment of shares or options on shares, is subject
to the achievement of three-year objectives and is determined
as a percentage of the gross annual base salary (GABS).
The LTI plans’ “rolling” structure introduced with the 2020
Policy enables the value of the following three-year period
targets to be established on a yearly basis, while ensuring
Management loyalty and a proper focus on performance
targets. The date of any first medium-long term incentive plan
payment applying the “rolling” mechanism is April 2023 (if
the 2020-2022 results are achieved) and, thereafter, April of
each subsequent year if the results of the previous three-year
period have been achieved.
In compliance with the 2021-2023 LTI Plan, the 2022-2024
Plan foresees three target objectives, all independent of each
other and each assigned a specific weight:
→ an objective represented by the “Cumulative Group Net
Cash Flow (before dividends)”, with a weight of 40% of the
overall LTI bonus;
→ Total Shareholder Return (“TSR”) target, with a weight of
40%, to a panel of selected Tier 1 peers. The document
made available at the Shareholders’ Meeting provides more
detailed information on the application of the TSR target;
→ the remaining 20% is tied to sustainability objectives and,
in particular: (i) 10% is calculated in relation to Pirelli’s
positioning in the Dow Jones Sustainability World Index
ATX Auto Component sector and (ii) 10% is linked to CO2
Emissions Reduction (a target which replaces the CDP
Ranking index applicable to the 2020-2022 LTI Plan and
2021-2023 LTI Plan).
For all three objectives (cumulative Group Net Cash Flow, TSR
and Sustainability) there is a minimum value associated with
the recognition of a payout of 75% of the bonus achievable at
target performance.
Regarding each objective, where the set minimum value is
not attained, no right is accrued by the beneficiary to the
corresponding part of the incentive.
For intermediate results falling between the “access threshold”
and the target or between the target and the maximum,
performance will be calculated by linear interpolation, except
for the Sustainability target represented by the positioning
in the Dow Jones Sustainability World Index ATX Auto
Component sector, which will be calculated in three steps
only: entry level, target and maximum, without enhancing
intermediate performance.
In light of the recent macroeconomic and geopolitical
developments, the 2022-2024 LTI Plan sets out the
mechanisms for the Board of Directors (on the proposal
of the Remuneration Committee, after consulting with the
Board of Statutory Auditors) to adjust the sole quantification
of targets for the exclusive purpose of accounting for any
negative impact caused by the worsening geopolitical and
macroeconomic reference scenario (compared to the time
when the assumptions underlying the quantification of the LTI
Plan targets were made). In particular, the approved criteria
allow to reduce the quantification of the objectives in a non-
proportional way the negative effects generated (in order to
push Management towards compensatory actions) by factors
resulting from the deepening of the crisis and affecting, for
example, the trend of sales in Russia, the increase of the
landed cost due to productions in alternative plants and the
substitution of suppliers of raw materials.
BONUS PERIOD
If the targets are achieved, the bonus for the 2022-2024
LTI Plan (LTI Bonus) will be paid out in the first half of 2025,
provided that the employment relationship on the basis of
which the 2022-2024 LTI Plan was granted is maintained
through to 31 December 2024.
In the event of termination and/or employment for any reason
prior to the end of the three-year period (subject to the
provisions laid out below), the beneficiary shall no longer be
part of the 2022-2024 LTI Plan and, as such, the LTI Bonus
shall not be paid, not even in part. For Directors holding
specific offices to whom further specific duties have also
been attributed who (i) cease to hold office before the end of
the three-year period due to their mandate ending or due to
the termination of the entire Board of Directors, and (ii) are
not later re-appointed even as Directors, a pro rata temporis
payment of the LTI Bonus is provided.
PLAN DURATION AND AMENDMENTS
The 2022-2024 LTI Plan implements the third LTI Plan cycle
based on the “rolling” mechanism already included in the 2020
Policy, which is structured based on three-year performance
periods (cycles) that start each year, when the performance
indicators and respective targets are set.
The “rolling“ mechanism allows performance indicators to
be aligned, for each new cycle, with market changes and the
company’s strategic objectives which could be revised from
year to year.
SPECIAL FUND TO ENCOURAGE WORKERS’
PARTICIPATION IN ENTERPRISES 105
The 2022-2024 LTI Plan does not receive any support from
the Special Fund to encourage workers’ participation in
enterprises, referred to in Article 4, paragraph 112, of Law
No. 350 of 24 December 2003.
****
105 Information required by Article 114-bis, paragraph 1, letter d) of the TUF.
469
Resolutions The 2022-2024 LTI Plan is to be considered “of particular
significance” as it is addressed, at the date of this report, to the
Executive Vice Chairman and Chief Executive Officer, Deputy-
CEO, General Manager Operations and KMs among others.
They have the power to make decisions that may affect the
Group’s development and future outlook.
Considering that the LTI Plan is monetary in nature (as it does
not envisage any assignment of Pirelli shares or other financial
instruments, but only a cash incentive partly linked to the stock
market price trends of Pirelli ordinary shares against an index
composed of selected Tier 1 peers in the Tyre sector), the
Information Document drawn up pursuant to the applicable
laws and regulations does not contain the information required
for plans that envisage an assignment of shares or other
financial instruments.
3.2. Approval of the adjustment mechanisms of the
quantification of the objectives included in the monetary
incentive plans for the three-year periods 2020-2022
and 2021-2023 for Pirelli Group Management.
Dear Shareholders,
at the meeting of 17 March 2022, the Board of Directors – on
the proposal of the Remuneration Committee, subject to the
favourable opinion of the Board of Statutory Auditors – established
the mechanisms for adjusting the current quantification of the
targets under the short-term incentive (STI) and medium-long
term incentive (LTI) plans106, solely to account for any negative
impact caused by a worsening macroeconomic and geopolitical
scenario (compared to the time when the assumptions underlying
the quantification of the Plans’ targets were made). In particular,
the approved criteria allow to reduce the quantification of
the objectives in a non-proportional way the negative effects
generated (in order to push Management towards compensatory
actions) by factors resulting from the deepening of the crisis and
affecting, for example, the trend of sales in Russia, the increase
of the landed cost due to productions in alternative plants and
the substitution of suppliers of raw materials.
This criteria was approved by the Board of Directors, in
implementation of the provisions (regarding the revision of
the plans and adjustment of targets) set out in the Information
Documents on the 2020-2022 LTI Plan and 2021-2023 LTI
Plan, which was made available to the public on 20 April 2021107
pursuant to Article 84-bis, paragraph 1, of the Issuers’ Regulation.
Said criteria – included in the 2022 Policy, approved by the
Board of Directors and submitted to the binding vote of the
Shareholders’ Meeting – was approved by the Board of Directors,
subject to the same criteria and the 2022 Policy being approved
by the Shareholders’ Meeting.
For a more analytical description of the effects of this adjustment
on the quantification of the targets of the LTI Plans for the 2020-
2022 and 2021-2023 cycles, as well as for further updates
and coordination amendments, please review the Information
106 This refers to the 2022 STI Plan and LTI Plans for the three-year cycles 2020-2022, 2021-2023 and
for the new cycle 2022-2024.
107 For the Information Document relating to the 2020-2022 LTI Plan, this date refers to when the update was
made available; the Information Document of the 2020-2022 LTI Plan was made available on 28 April 2020.
Documents (drafted pursuant to Article 84-bis, paragraph 1, of
the Issuers’ Regulation, as amended) which, at the same time
as this report, are also available to the public (with evidence of
the relevant amendments) at the registered office of Pirelli & C.
S.p.A. (in Milan, Viale Piero e Alberto Pirelli 25), on the website
www.pirelli.com and on the authorised emarket Storage platform
(emarketstorage.com) in accordance with applicable regulations.
****
Dear Shareholders,
on the basis of the above, we hereby ask you to:
in relation to item 3.1 on the agenda, given that the 2022-2024 LTI
Plan states – inter alia – that a portion of the bonus be determined
based on a Total Shareholder Return target calculated based on
stock market price trends of Pirelli ordinary shares against an
index made up of select Tier 1 peers in the Tyre sector:
1.
2.
approve – pursuant to Article 114-bis of Legislative Decree
No. 58 of 24 February 1998, as subsequently amended
and supplemented – the adoption of the 2022-2024 LTI
Plan for Pirelli Group Management, regarding the part
where it is also based on the performance of Pirelli shares,
under the terms set out herein and as better described in
the Information Document (drawn up pursuant to Article
84-bis, paragraph 1, of the Issuers’ Regulation);
grant the Board of Directors the broadest powers needed
or appropriate to implement the 2022-2024 LTI Plan
and to adjust or amend the performance indicators and
respective targets of the 2022-2024 LTI Plan, submitting
the new performance indicators and respective targets
to the Shareholders’ Meeting if they relate to or concern
the relevant features pursuant to Article 114-bis of the TUF
(compensation plan based on financial instruments);
in relation to item 3.2 on the agenda:
3.
approve the adjustment mechanisms of the quantification
of targets under the LTI Plans for the 2020-2022 and
2021-2023 cycles for Pirelli Group Management and the
updates and coordination amendments, under the terms
set out herein and better described in the Information
Documents (drafted pursuant to Article 84-bis, paragraph
1, of the Issuers’ Regulation), as amended, as a result of
the adjustment made to mitigate any negative effects
caused by a worse macroeconomic and geopolitical
scenario due to a worsening of the crisis;
4. grant the Board of Directors – on the proposal of the
Remuneration Committee and after consulting with the
Board of Statutory Auditors – the broadest powers needed
or appropriate to implement the 2020-2022 and 2021-
2023 LTI Plans (last amended pursuant to the resolution
passed under section 3) and to proceed with any further
adjustment or amendment of the performance indicators
and respective targets, submitting the new performance
indicators and respective targets to the Shareholders’
Meeting if they relate to or concern the features referred
to in Article 114-bis of the TUF (compensation plan based
on financial instruments).
470
Pirelli Annual Report 2021 471
Resolutions Certifications
473
A Beautiful Place
474
Pirelli Annual Report 2021 475
Certifications 476
Pirelli Annual Report 2021 PIRELLI & C SPA INDEPENDENT AUDITOR’S REPORT IN ACCORDANCE WITH ARTICLE 14 OF LEGISLATIVE DECREE 39/2010 AND ARTICLE 10 OF REGULATION (EU) 537/2014 CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2021 477
Certifications Independent auditor’s report in accordance with article 14 of Legislative Decree 39/2010 and article 10 of Regulation (EU) 537/2014 To the shareholders of Pirelli & C SpA Report on the Audit of the Consolidated Financial Statements Opinion We have audited the consolidated financial statements of Pirelli & C SpA and its subsidiaries (Pirelli group), which comprise the statement of financial position as of 31 December 2021, the income statement, the statement of comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended, and the notes to the consolidated financial statements, including a summary of significant accounting policies. In our opinion, the consolidated financial statements give a true and fair view of the financial position of Pirelli group as of 31 December 2021, and of the result of its operations and cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union, and with the regulations issued to implement article 9 of Legislative Decree 38/2005. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISA Italia). Our responsibilities under those standards are further described in section Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements of this report. We are independent of Pirelli & C SpA (the Company) based on ethic and independence regulations and standards applicable to audits of financial statements under Italian law. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. 478
Pirelli Annual Report 2021 2 of 7 Key audit matters How our audit addressed the key audit matter Recoverability of brands with indefinite useful life and goodwill Note 10 “Intangible assets” As of 31 December 2021 the indefinite-lived intangible assets Pirelli brand and goodwill amount to € 2,270 million and € 1,884 million, respectively. Recoverability of the carrying amount of Pirelli brand and goodwill were tested for impairment at the year-end, in accordance with IAS36 – “Impairment of Assets”. The recoverable amount of Pirelli brand is measured using its fair value less cost to sell, based on an income approach. This requires the use of estimates for revenue projections, implied royalty rates and discount rate. The recoverable amount of goodwill, entirely allocated to the the group of cash generating units (“CGU”) “Consumer segment”, which represents the sole sector of activity of Pirelli group, is measured using its fair value less cost to sell, calculated based on the market price of the Company shares. The recoverable amount of Pirelli Brand is compared with its carrying amount. The recoverable amount of the Consumer segment is compared with the carrying amount of segment assets and liabilities, including brand and goodwill. Considering the magnitude of the carrying amounts and the subjective judgment in some of the assumptions used for the calculation of the recoverable amounts, the impairment test of Pirelli brand and goodwill represented a key matter in the audit of the consolidated financial statements. We have performed an understanding and evaluation of the internal controls in place over the impairment testing of brand and goodwill. We have tested the operating effectiveness of such controls. We have performed, with the support of PwC experts, the following audit procedures: • assessment over the adequacy of the impairment testing process in accordance with the requirement of the accounting standard; • assessment of the key assumptions used when determining the fair value of Pirelli brand, with focus to revenue projections, implied royalty rates and discount rate, including benchmarking and sensitivity analysis; • assessment of the allocation of goodwill to CGUs; • testing of the accuracy of the carrying amounts of assets and liabilities directly attributable to the Consumer segment; • testing the mathematical accuracy of the calculation model used; • assessment of variances between projections used in previous years and actual results to evaluate reliability and coherence with market trends. We have tested the accuracy and completeness of the disclosure presented in the notes to the consolidated financial statements. 479
Certifications 3 of 7 Key audit matters How our audit addressed the key audit matter Revenue recognition Note 3 “ Adopted Accounting Standards” Revenue recognition, in accordance with the accounting standard IFRS15 - “Revenue from contracts with customers”, considering the magnitude and the high volume of sales transactions carried out through a global distribution network, different sales channels and logistic platforms, represented a key matter in the audit of the consolidated financial statements. We have carried out our procedures to verifying existence, completeness, accuracy and cut off of sales transactions. We have performed, with the support of PwC specialists, the following audit procedures: • for the main revenue streams identified using the requirements of IFRS15, we have performed an understanding and evaluation of the internal controls over the revenue recognition process and a validation of relevant controls; • we have tested the proper recognition of revenue through testing samples of sales transactions, obtaining appropriate supporting evidence with specific attention to key contractual terms regulating the various performance obligations; • we have performed external confirmation procedures over accounts receivable balances with the objective of validating trade receivable balances recorded in the consolidated accounts; • we have tested samples of sales returns transactions, credit notes and year-end accruals. We have tested the accuracy and completeness of the disclosure presented in the notes to the consolidated financial statements. 480
Pirelli Annual Report 2021 4 of 7 Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements Management is responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the European Union, and with the regulations issued to implement article 9 of Legislative Decree 38/2005 and, in the terms prescribed by law, for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Management is responsible for assessing the group ability to continue as a going concern and, in preparing the consolidated financial statements, for the appropriate application of the going concern basis of accounting, and for disclosing matters related to going concern. In preparing the consolidated financial statements, management uses the going concern basis of accounting unless management intends either to liquidate Pirelli & C SpA or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing, in the terms prescribed by law, the group financial reporting process. Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with International Standards on Auditing (ISA Italia) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the consolidated financial statements. As part of an audit conducted in accordance with International Standards on Auditing (ISA Italia), we exercise professional judgment and maintain professional scepticism throughout the audit. Furthermore: • we identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error; we design and perform audit procedures responsive to those risks; we obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control; • we obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the group internal control; • we evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management; • we conclude on the appropriateness of management use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists 481
Certifications 5 of 7 related to events or conditions that may cast significant doubt on the group ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the group to cease to continue as a going concern; • we evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation; • we obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion on the consolidated financial statements. We communicate with those charged with governance, identified at an appropriate level as required by ISA Italia regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we complied with the regulations and standards on ethics and independence applicable under Italian law and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and, where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that are of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our report. Additional Disclosures required by Article 10 of Regulation (EU) 537/2014 We were appointed by the shareholders of Pirelli & C SpA at the general meeting held on 1 August 2017 to perform the audit of the Company consolidated and separate financial statements for the years ending 31 December 2017 through 31 December 2025. We declare that we did not provide any prohibited non-audit services referred to in article 5, paragraph 1, of Regulation (EU) 537/2014 and that we remained independent of the Company in conducting the audit. We confirm that the opinion on the consolidated financial statements expressed in this report is consistent with the additional report to those charged with governance, in their capacity as audit committee, prepared in accordance with article 11 of the aforementioned Regulation. 482
Pirelli Annual Report 2021 6 of 7 Report on Compliance with other Laws and Regulations Opinion on compliance with the provisions of Commission Delegated Regulation (EU) 815/2019 Management of Pirelli & C SpA is responsible for the application of the provisions of the Commission Delegated Regulation (EU) 815/2019 concerning the regulatory technical standards for the specification of a single electronic reporting format ESEF – European Single Electronic Format (Commission Delegated Regulation) to the consolidated financial statements, to be included in the annual report. We have performed the procedures required under auditing standard (SA Italia) 700B to express an opinion on the compliance of the consolidated financial statements with the provisions of the Commission Delegated Regulation. In our opinion, the consolidated financial statements have been prepared in XHTML format and have been marked up, in all significant respects, in compliance with the provisions of the Commission Delegated Regulation. Opinion in accordance with Article 14, paragraph 2, letter e), of Legislative Decree 39/2010 and Article 123-bis, paragraph 4, of Legislative Decree 58/1998 Management of Pirelli & C SpA is responsible for preparing a report on operations and a report on the corporate governance and ownership structure of the Pirelli group as of 31 December 2021, including their consistency with the relevant consolidated financial statements and their compliance with the law. We have performed the procedures required under auditing standard (SA Italia) 720B to express an opinion on the consistency of the report on operations and of the specific information included in the report on corporate governance and ownership structure referred to in article 123-bis, paragraph 4, of Legislative Decree 58/1998, with the consolidated financial statements of the Pirelli group as of 31 December 2021 and on their compliance with the law, as well as to issue a statement on material misstatements, if any. In our opinion, the report on operations and the specific information included in the report on corporate governance and ownership structure mentioned above are consistent with the consolidated financial statements of the Pirelli group as of 31 December 2021 and are prepared in compliance with the law. With reference to the statement referred to in article 14, paragraph 2, letter e), of Legislative Decree 39/2010, issued on the basis of our knowledge and understanding of the group obtained in the course of the audit, we have nothing to report. 483
Certifications 7 of 7 Statement in accordance with article 4 of Consob Regulation implementing Legislative Decree 254/2016 Management of Pirelli & C SpA is responsible for the preparation of the non-financial disclosure in accordance with Legislative Decree 254/2016. We have verified that the non-financial disclosure was approved by the board of directors. In accordance with article 3, paragraph 10, of Legislative Decree 254/2016, the non-financial disclosure is subject to separate audit reporting by our firm. Milan, 24 March 2022 PricewaterhouseCoopers SpA Signed by Paolo Caccini (Partner) This report has been translated into English from the Italian original solely for the convenience of international readers 484
Pirelli Annual Report 2021 485
Certifications 486
Pirelli Annual Report 2021 PIRELLI & C SPA INDEPENDENT AUDITOR’S REPORT IN ACCORDANCE WITH ARTICLE 14 OF LEGISLATIVE DECREE 39/2010 AND ARTICLE 10 OF REGULATION (EU) 537/2014 SEPARATE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2021 487
Certifications Independent auditor’s report in accordance with article 14 of Legislative Decree 39/2010 and article 10 of Regulation (EU) 537/2014 To the shareholders of Pirelli & C SpA Report on the Audit of the Separate Financial Statements Opinion We have audited the separate financial statements of Pirelli & C SpA (the “Company”), which comprise the statement of financial position as of 31 December 2021, the income statement, the statement of comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended, and the notes to the separate financial statements, including a summary of significant accounting policies. In our opinion, the separate financial statements give a true and fair view of the financial position of the Company as of 31 December 2021, and of the result of its operations and cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union, and with the regulations issued to implement article 9 of Legislative Decree 38/2005. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISA Italia). Our responsibilities under those standards are further described in section Auditor’s Responsibilities for the Audit of the Separate Financial Statements of this report. We are independent of the Company based on ethic and independence regulations and standards applicable to audits of financial statements under Italian law. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the separate financial statements of the current period. These matters were addressed in the context of our audit of the separate financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. 488
Pirelli Annual Report 2021 2 of 6 Key audit matter How our audit addressed the key audit matter Recoverability of brands with indefinite useful life Note 9 “Intangible assets” As of 31 December 2021 the indefinite-lived intangible asset Pirelli brand amounts to € 2,270 million. Recoverability of the carrying amount of Pirelli brand was tested for impairment at the year-end, in accordance with IAS36 – “Impairment of Assets”. The recoverable amount of Pirelli brand is measured using its fair value less cost to sell, based on an income approach. This requires the use of estimates for revenue projections, implied royalty rates and discount rate. The recoverable amount of Pirelli brand is compared with its carrying amount. Considering the magnitude of the carrying amount and the subjective judgment in some of the assumptions used for the calculation of the fair value less cost to sell, the impairment test of Pirelli brand represented a key matter in the audit of the separate financial statements. We have performed an understanding and evaluation of the internal controls in place over the impairment testing of the Pirelli brand. We have tested the operating effectiveness of such controls. We have performed, with the support of PwC experts, the following audit procedures: • assessment over the adequacy of the impairment testing process in accordance with the requirement of the accounting standard; • assessment of the key assumptions used when determining the fair value of Pirelli brand, with focus on revenue projections, implied royalty rates and discount rate, including benchmarking and sensitivity analysis; • testing the mathematical accuracy of the calculation model used; • assessment of variances between projections used in previous years and actual results to evaluate the reliability and coherence with market trends. We have tested the accuracy and completeness of the disclosure presented in the notes to the separate financial statements. 489
Certifications 3 of 6 Responsibilities of Management and Those Charged with Governance for the Separate Financial Statements Management is responsible for the preparation of separate financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the European Union, and with the regulations issued to implement article 9 of Legislative Decree 38/2005 and, in the terms prescribed by law, for such internal control as management determines is necessary to enable the preparation of separate financial statements that are free from material misstatement, whether due to fraud or error. Management is responsible for assessing the Company ability to continue as a going concern and, in preparing the separate financial statements, for the appropriate application of the going concern basis of accounting, and for disclosing matters related to going concern. In preparing the separate financial statements, management uses the going concern basis of accounting unless management intends either to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing, in the terms prescribed by law, the Company financial reporting process. Auditor’s Responsibilities for the Audit of the Separate Financial Statements Our objectives are to obtain reasonable assurance about whether the separate financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with International Standards on Auditing (ISA Italia) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the separate financial statements. As part of an audit conducted in accordance with International Standards on Auditing (ISA Italia), we exercise professional judgment and maintain professional scepticism throughout the audit. Furthermore: • we identify and assess the risks of material misstatement of the separate financial statements, whether due to fraud or error; we design and perform audit procedures responsive to those risks; we obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control; • we obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company internal control; 490
Pirelli Annual Report 2021 4 of 6 • we evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management; • we conclude on the appropriateness of management use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the separate financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern; • we evaluate the overall presentation, structure and content of the separate financial statements, including the disclosures, and whether the separate financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance, identified at an appropriate level as required by ISA Italia regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we complied with the regulations and standards on ethics and independence applicable under Italian law and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and, where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that are of most significance in the audit of the separate financial statements of the current period and are therefore the key audit matters. We describe these matters in our report. Additional Disclosures required by Article 10 of Regulation (EU) 537/2014 We were appointed by the shareholders of Pirelli & C SpA at the general meeting held on 1 August 2017 to perform the audit of the Company consolidated and separate financial statements for the years ending 31 December 2017 through 31 December 2025. We declare that we did not provide any prohibited non-audit services referred to in article 5, paragraph 1, of Regulation (EU) 537/2014 and that we remained independent of the Company in conducting the audit. We confirm that the opinion on the separate financial statements expressed in this report is consistent with the additional report to those charged with governance, in their capacity as audit committee, prepared in accordance with article 11 of the aforementioned Regulation. 491
Certifications 5 of 6 Report on Compliance with other Laws and Regulations Opinion on compliance with the provisions of Commission Delegated Regulation (EU) 815/2019 Management of Pirelli & C SpA is responsible for the application of the provisions of Commission Delegated Regulation (EU) 815/2019 concerning the regulatory technical standards for the specification of a single electronic reporting format ESEF - European Single Electronic Format (Commission Delegated Regulation) to the separate financial statements, to be included in the annual report. We have performed the procedures required under auditing standard (SA Italia) 700B to express an opinion on the compliance of the separate financial statements with the provisions of the Commission Delegated Regulation. In our opinion, the separate financial statements have been prepared in XHTML format in compliance with the provisions of the Commission Delegated Regulation. Opinion in accordance with Article 14, paragraph 2, letter e), of Legislative Decree 39/2010 and Article 123-bis, paragraph 4, of Legislative Decree 58/1998 Management of Pirelli & C SpA is responsible for preparing a report on operations and a report on the corporate governance and ownership structure of Pirelli & C SpA as of 31 December 2021, including their consistency with the relevant separate financial statements and their compliance with the law. We have performed the procedures required under auditing standard (SA Italia) 720B to express an opinion on the consistency of the report on operations and of the specific information included in the report on corporate governance and ownership structure referred to in article 123-bis, paragraph 4, of Legislative Decree 58/1998, with the separate financial statements of the Company as of 31 December 2021 and on their compliance with the law, as well as to issue a statement on material misstatement, if any. In our opinion, the report on operations and the specific information included in the report on corporate governance and ownership structure mentioned above are consistent with the separate financial statements of the Company as of 31 December 2021 and are prepared in compliance with the law. 492
Pirelli Annual Report 2021 6 of 6 With reference to the statement referred to in article 14, paragraph 2, letter e), of Legislative Decree 39/2010, issued on the basis of our knowledge and understanding of the Company obtained in the course of the audit, we have nothing to report. Milan, 24 March 2022 PricewaterhouseCoopers SpA Signed by Paolo Caccini (Partner) This report has been translated into English from the Italian original solely for the convenience of international readers GRI CONTENT INDEX
GRI
STANDARD
DISCLOSURE
PAGE NUMBER, URL
OMISSION
MATERIAL TOPIC
101: FOUNDATION 2016
102-1 Name of the organization
192
102-2 Activities, brands, products, and services
193, corporate website
(www.pirelli.com) section
about
102-3 Location of headquarters
192
102-4 Location of operations
372-377, corporate website
(www.pirelli.com) section
about
102-5 Ownership and legal form
192, 195, 228
102-6 Markets served
102, corporate website
(www.pirelli.com) section
about
102-7 Scale of the organization
58-59, 131, 151, 195
102-8 Information on employees and other workers
151-152, 157
102-9 Supply chain
117-118
102-10 Significant changes to the organization and
its supply chain
117-118, 151, 195
102-11 Precautionary Principle or approach
74-81
102-12 External initiatives
90-91, 119-121, 177-178
102-13 Membership of associations
171-182
102-14 Statement from senior decision-maker
Corporate website (www.
pirelli.com) sustainability
area/Pirelli’s model
102-15 Key impacts, risks, and opportunities
74-81
102-16 Values, principles, standards, and norms of
behavior
95-96, 109, 119, 155,
164, 195-196, corporate
website (www.pirelli.com)
sustainability area/main
sustainability policies
GRI 102:
GENERAL
DISCLOSURES
2016
102-17 Mechanisms for advice and concerns about
ethics
95-97
102-18 Governance structure
194, 201-203, 205-208,
210-213, 219-220
Business Ethics & Integrity
Corporate Governance
102-19 Delegating authority
91, 216, 219-220
Corporate Governance
102-20 Executive-level responsibility for economic,
environmental, and social topics
91
102-21 Consulting stakeholders on economic,
environmental, and social topics
91, 93, 112-114
102-22 Composition of the highest governance body
and its committees
202-204, 212-216, 219-
220, 234-235,
102-23 Chair of the highest governance body
202-204
102-24 Nominating and selecting the highest
governance body
194, 202-203
102-25 Conflicts of interest
221
102-26 Role of highest governance body in setting
purpose, values, and strategy
91, 216, 219-220
102-27 Collective knowledge of highest governance
body
205
102-28 Evaluating the highest governance body’s
performance
205-208
102-29 Identifying and managing economic,
environmental, and social impacts
216
493
Corporate Governance
Corporate Governance,
Corporate Citizenship
Corporate Governance
Corporate Governance
Corporate Governance
Corporate Governance
Corporate Governance
Corporate Governance
Corporate Governance
Corporate Governance
Certifications GRI
STANDARD
DISCLOSURE
PAGE NUMBER, URL
OMISSION
MATERIAL TOPIC
Corporate Governance
Corporate Governance
Corporate Governance
Corporate Governance
Confidentiality
Constraints
Corporate Governance
Corporate Governance
Corporate Governance
Corporate Governance
Corporate Governance
Corporate Governance
Confidentiality
Constraints
Confidentiality
Constraints
101: FOUNDATION 2016
102-30 Effectiveness of risk management processes
74-81, 216
102-31 Review of economic, environmental, and
social topics
102-32 Highest governance body’s role in
sustainability reporting
216-217
91, 216
102-33 Communicating critical concerns
216
102-34 Nature and total number of critical concerns
102-35 Remuneration policies
245-267
102-36 Process for determining remuneration
247-248
102-37 Stakeholders’ involvement in remuneration
247-248
102-38 Annual total compensation ratio
102-39 Percentage increase in annual total
compensation ratio
102-40 List of stakeholder groups
93-94
102-41 Collective bargaining agreements
102-42 Identifying and selecting stakeholders
102-43 Approach to stakeholder engagement
166
93
93
102-44 Key topics and concerns raised
93-94
102-45 Entities included in the consolidated financial
statements
90, 131, 372-377
102-46 Defining report content and topic Boundaries 90, 493-500
102-47 List of material topics
102-48 Restatements of information
93-94
90
102-49 Changes in reporting
93-94, 493-500
102-50 Reporting period
102-51 Date of most recent report
102-52 Reporting cycle
102-53 Contact point for questions regarding the
report
102-54 Claims of reporting in accordance with the
GRI Standards
102-55 GRI content index
102-56 External assurance
90
90
90
91
90
493-500
506-510
GRI 102:
GENERAL
DISCLOSURES
2016
GRI 201:
ECONOMIC
PERFORMANCE
2016
GRI 103: Management Approach 2016
76, 99-100, 119-121, 169
201-1 Direct economic value generated and
distributed
99
201-2 Financial implications and other risks and
opportunities due to climate change
76, 119-121
201-3 Defined benefit plan obligations and other
retirement plans
169, 332-340, 355
201-4 Financial assistance received from
government
100
Financial Health
Financial Health
Financial Health
Financial Health
494
Pirelli Annual Report 2021 GRI
STANDARD
GRI 202:
MARKET
PRESENCE
GRI 203:
INDIRECT
ECONOMIC
IMPACTS 2016
GRI 204:
PROCUREMENT
PRACTICES 2016
DISCLOSURE
PAGE NUMBER, URL
OMISSION
MATERIAL TOPIC
101: FOUNDATION 2016
GRI 103: Management Approach 2016
155-160
202-1 Ratios of standard entry level wage by gender
compared to local minimum wage
157
202-2 Proportion of senior management hired from
the local community
155-156
GRI 103: Management Approach 2016
99, 181-185
203-1 Infrastructure investments and services
supported
99, 181-189
203-2 Significant indirect economic impacts
99, 181-189
GRI 103: Management Approach 2016
117-118
204-1 Proportion of spending on local suppliers
117-118
Corporate Citizenship
GRI 103: Management Approach 2016
95-96, 109-111
205-1 Operations assessed for risks related to
corruption
95-97
GRI 205:
ANTI-CORRUPTION
2016
205-2 Communication and training about anti-
corruption policies and procedures
95-96, 205
GRI 206:
ANTI-COMPETITIVE
BEHAVIOR 2016
205-3 Confirmed incidents of corruption and actions
taken
96-98
GRI 103: Management Approach 2016
95-96
206-1 Legal actions for anti-competitive behavior,
anti-trust, and monopoly practices
96
Information Unavailable:
% of employees trained
on anti-corruption
currently not disclosed
by category and region
Business Ethics & Integrity
Business Ethics & Integrity
Business Ethics & Integrity
Business Ethics & Integrity
GRI 103: Management Approach 2016
207-1 Approach to tax
GRI 207:
TAX 2019
207-2 Tax governance, control, and risk management
207-3 Stakeholder engagement and management of
concerns related to tax
359-360
Corporate website
(www.pirelli.com) area
Sustaibanility/Main
Sustainability Policies/
Global Tax Policy
Investors/Key financials/
Tax Overview
Corporate website
(www.pirelli.com) area
Sustaibanility/Main
Sustainability Policies/
Global Tax Policy
Investors/Key financials/
Tax Overview
97-98, Corporate website
(www.pirelli.com) area
Sustaibanility/Main
Sustainability Policies/
Global Tax Policy
Investors/Key financials/
Tax Overview
Corporate website
(www.pirelli.com) area
Sustaibanility/Main
Sustainability Policies/
Global Tax Policy
Business Ethics & Integrity,
Financial Health
Business Ethics & Integrity,
Financial Health
Business Ethics & Integrity,
Financial Health
207-4 Country-by-country reporting
359-360, 372-377
GRI 103: Management Approach 2016
95, 118, 126, 139-140, 143
Information Unavailable:
information provided
by Region
Business Ethics & Integrity,
Financial Health
GRI 301:
MATERIALS 2016
301-1 Materials used by weight or volume
118
301-2 Recycled input materials used
118, 126-127
301-3 Reclaimed products and their packaging
materials
130, 139-140, 143
Circular Economy
Product Environmental
Sustainability
Circular Economy
495
Certifications GRI
STANDARD
DISCLOSURE
PAGE NUMBER, URL
OMISSION
MATERIAL TOPIC
101: FOUNDATION 2016
GRI 103: Management Approach 2016
127-128, 131-133
302-1 Energy consumption within the organization
131-133
302-2 Energy consumption outside of the
organization
GRI 302:
ENERGY 2016
302-3 Energy intensity
124-125
131-133
302-4 Reduction of energy consumption
132-133
302-5 Reductions in energy requirements of
products and services
127-128
GRI 103: Management Approach 2016
78, 119, 124-125, 137
GRI 303:
WATER AND
EFFLUENTS 2018
303-1 Interactions with water as a shared resource
137-139
303-2 Management of water discharge-related
impacts
139
303-3 Water withdrawal
303-4 Water discharge
303-5 Water consumption
138-139
139
138-139
GRI 103: Management Approach 2016
112-114, 119, 124-125, 126-
127, 137, 141-142
304-1 Operational sites owned, leased, managed
in, or adjacent to, protected areas and areas of high
biodiversity value outside protected areas
141-142
GRI 304:
BIODIVERSITY 2016
304-2 Significant impacts of activities, products, and
services on biodiversity
139, 141-142
304-3 Habitats protected or restored
137, 141-142
304-4 IUCN Red List species and national
conservation list species with habitats in areas
affected by operations
142
GRI 103: Management Approach 2016
76, 78, 119-126, 134-137
305-1 Direct (Scope 1) GHG emissions
131, 134-136
305-2 Energy indirect (Scope 2) GHG emissions
131, 134-136
GRI 305:
EMISSIONS 2016
305-3 Other indirect (Scope 3) GHG emissions
116, 134, 137
305-4 GHG emissions intensity
134-135
305-5 Reduction of GHG emissions
134-137
305-6 Emissions of ozone-depleting substances
(ODS)
143
305-7 Nitrogen oxides (NOX), sulfur oxides (SOX),
and other significant air emissions
141-143
496
Responsible Management
of Natural Resources
Responsible Management
of Natural Resources
Responsible Management
of Natural Resources
Responsible Management
of Natural Resources
Responsible Management
of Natural Resources,
Product Environmental
Sustainability
Responsible Management
of Natural Resources
Responsible Management
of Natural Resources
Responsible Management
of Natural Resources
Responsible Management
of Natural Resources
Responsible Management
of Natural Resources
Biodiversity Protection
Biodiversity Protection
Biodiversity Protection
Biodiversity Protection
Climate Change and
Greenhouse Gas
Emissions Reduction
Climate Change and
Greenhouse Gas
Emissions Reduction
Climate Change and
Greenhouse Gas
Emissions Reduction
Climate Change and
Greenhouse Gas
Emissions Reduction
Climate Change and
Greenhouse Gas
Emissions Reduction
Pirelli Annual Report 2021 GRI
STANDARD
DISCLOSURE
PAGE NUMBER, URL
OMISSION
MATERIAL TOPIC
GRI 103: Management Approach 2016
78, 119, 121-126, 139-141
101: FOUNDATION 2016
306-1 Waste generation and significant waste-
related impacts
126, 139-141
306-2 Management of significant waste-related
impacts
126, 139-140
GRI 306:
WASTE 2020
306-3 Waste generated
139-141
306-4 Waste diverted from disposal
140-141
306-5 Waste directed to disposal
140-141
GRI 307:
ENVIRONMENTAL
COMPLIANCE 2016
GRI 308:
SUPPLIER
ENVIRONMENTAL
ASSESSMENT 2016
GRI 103: Management Approach 2016
78, 119, 143
307-1 Non-compliance with environmental laws and
regulations
132, 134, 143
GRI 103: Management Approach 2016
80-81, 95, 109-112
308-1 New suppliers that were screened using
environmental criteria
109-112
308-2 Negative environmental impacts in the supply
chain and actions taken
111-112
GRI 103: Management Approach 2016
78, 154-155, 168
GRI 401:
EMPLOYMENT
2016
401-1 New employee hires and employee turnover
154-155
401-2 Benefits provided to full-time employees
that are not provided to temporary or part-time
employees
401-3 Parental leave
168
157
GRI 402: LABOR/
MANAGEMENT
RELATIONS 2016
GRI 103: Management Approach 2016
78, 95, 166-167
402-1 Minimum notice periods regarding operational
changes
166
Responsible Management
of Natural Resources,
Circular Economy
Responsible Management
of Natural Resources,
Circular Economy
Responsible Management
of Natural Resources,
Circular Economy
Responsible Management
of Natural Resources,
Circular Economy
Responsible Management
of Natural Resources,
Circular Economy
Business Ethics & Integrity
Responsible Management
of the Supply Chain
Responsible Management
of the Supply Chain
Talent Acquisition,
Development and
Retention
Diversity, Equity and
Inclusion
Labour Relations
Management
497
Certifications GRI
STANDARD
DISCLOSURE
PAGE NUMBER, URL
OMISSION
MATERIAL TOPIC
GRI 403:
OCCUPATIONAL
HEALTH AND
SAFETY 2018
101: FOUNDATION 2016
GRI 103: Management Approach 2016
78, 168
403-1 Occupational health and safety management
system
403-2 Hazard identification, risk assessment, and
incident investigation
403-3 Occupational health services
168
170
170
403-4 Worker participation, consultation, and
communication on occupational health and safety
168-169
403-5 Worker training on occupational health and
safety
169-170
403-6 Promotion of worker health
165-166, 170
403-7 Prevention and mitigation of occupational
health and safety impacts directly linked by business
relationships
110, 127, 170
403-8 Workers covered by an occupational health
and safety management system
169
403-9 Work-related injuries
171-175
403-10 Work-related ill health
174-175
GRI 103: Management Approach 2016
78, 161-165
GRI 404:
TRAINING AND
EDUCATION 2016
404-1 Average hours of training per year per
employee
164
404-2 Programs for upgrading employee skills and
transition assistance programs
161-165
404-3 Percentage of employees receiving regular
performance and career development reviews
161
GRI 103: Management Approach 2016
155-156, 204-205
405-1 Diversity of governance bodies and employees
153, 202, 204-205
405-2 Ratio of basic salary and remuneration of
women to men
157-158
GRI 103: Management Approach 2016
155-156
406-1 Incidents of discrimination and corrective
actions taken
97-98, 155-156
GRI 103: Management Approach 2016
407-1 Operations and suppliers in which the right to
freedom of association and collective bargaining may
be at risk
GRI 103: Management Approach 2016
78, 80-81, 109-111, 149-
150, 166-167
109-112, 149-150, 166-167
80-81, 109-111, 149-150,
167
408-1 Operations and suppliers at significant risk for
incidents of child labor
109-112, 149-150, 167
GRI 103: Management Approach 2016
80-81, 109-111, 149-150,
167
409-1 Operations and suppliers at significant risk for
incidents of forced or compulsory labor
109-112, 149-150, 167
GRI 405:
DIVERSITY
AND EQUAL
OPPORTUNITY
2016
GRI 406:
NON-
DISCRIMINATION
2016
GRI 407:
FREEDOM OF
ASSOCIATION
AND COLLECTIVE
BARGAINING 2016
GRI 408:
CHILD LABOR 2016
GRI 409:
FORCED OR
COMPULSORY
LABOR 2016
498
Information
Unavailable: absolute
number of contractors
not available
Confidentiality
Constraints: absolute
numbers, hours worked
not disclosed publicly
Occupational
Health&Safety
Occupational
Health&Safety
Occupational
Health&Safety
Occupational
Health&Safety, Labour
Relations Management
Occupational
Health&Safety
Occupational
Health&Safety
Occupational
Health&Safety
Occupational
Health&Safety
Occupational
Health&Safety
Training and Development
Training and Development
Training and Development
Diversity, Equity and
Inclusion
Diversity & Equal
Opportunities,
Human Rights
Diversity, Equity and
Inclusion, Human Rights
Human Rights,
Responsible Management
of the Supply Chain
Human Rights,
Responsible Management
of the Supply Chain
Human Rights,
Responsible Management
of the Supply Chain
Pirelli Annual Report 2021 DISCLOSURE
PAGE NUMBER, URL
OMISSION
MATERIAL TOPIC
GRI
STANDARD
GRI 410:
SECURITY
PRACTICES 2016
GRI 411:
RIGHTS OF
INDIGENOUS
PEOPLES 2016
GRI 103: Management Approach 2016
149-150
101: FOUNDATION 2016
410-1 Security personnel trained in human rights
policies or procedures
GRI 103: Management Approach 2016
149-150
411-1 Incidents of violations involving rights of
indigenous peoples
97-98
GRI 103: Management Approach 2016
80-81, 149-150
412-1 Operations that have been subject to human
rights reviews or impact assessments
149-150, 167-168
GRI 412:
HUMAN RIGHTS
ASSESSMENT 2016
412-2 Employee training on human rights policies or
procedures
149-150
412-3 Significant investment agreements and
contracts that include human rights clauses or that
underwent human rights screening
109-111
GRI 103: Management Approach 2016
149-150
Information Unavailable:
% of security personnel
trained on human rights
currently not available
Information
Unavailable: number
of hours of training on
human rights and %
of employees trained
currently unavailable
Human Rights
Human Rights
Human Rights
GRI 413:
LOCAL
COMMUNITIES
2016
413-1 Operations with local community engagement,
impact assessments, and development programs
93, 149-150
413-2 Operations with significant actual and
potential negative impacts on local communities
149-150
Information Unavailable:
information currently
unavailable
Information Unavailable:
information currently
unavailable
Corporate Citizenship
Corporate Citizenship
GRI 103: Management Approach 2016
80-81, 95, 109-111
GRI 414:
SUPPLIER SOCIAL
ASSESSMENT 2016
414-1 New suppliers that were screened using social
criteria
109-112
GRI 415:
PUBLIC POLICY
2016
GRI 416:
CUSTOMER
HEALTH AND
SAFETY 2016
GRI 417:
MARKETING AND
LABELING 2016
GRI 418:
CUSTOMER
PRIVACY 2016
GRI 419:
SOCIOECONOMIC
COMPLIANCE 2016
414-2 Negative social impacts in the supply chain
and actions taken
GRI 103: Management Approach 2016
415-1 Political contributions
GRI 103: Management Approach 2016
416-1 Assessment of the health and safety impacts
of product and service categories
416-2 Incidents of non-compliance concerning the
health and safety impacts of products and services
GRI 103: Management Approach 2016
417-1 Requirements for product and service
information and labeling
417-2 Incidents of non-compliance concerning
product and service information and labeling
417-3 Incidents of non-compliance concerning
marketing communications
GRI 103: Management Approach 2016
418-1 Substantiated complaints concerning
breaches of customer privacy and losses of
customer data
GRI 103: Management Approach 2016
419-1 Non-compliance with laws and regulations in
the social and economic area
111-112
99-100
99-100
78, 95
110
105
127-130
127-130
105
105
95
105
95
105
499
Responsible Management
of the Supply Chain
Responsible Management
of the Supply Chain
Product Quality and Safety
Business Ethics and
Integrity
Business Ethics and
Integrity
Business Ethics and
Integrity
Cybersecurity
Business Ethics and
Integrity
Certifications OTHER MATERIAL TOPICS IDENTIFIED
(NOT COVERED OR PARTIALLY COVERED BY THE GRI STANDARDS)
Material Topic
Page Number
Employees Well-Being & Work-life Balance
165-166, 169-170
Customer Satisfaction
Product Quality & Safety
Product Environmental Sustainability
Road Safety Initiatives
102-107
104-105
127-129
182
500
Pirelli Annual Report 2021 SASB CONTENT INDEX
SUSAINABILITY ACCOUNTING STANDARDS BOARD (SASB) - AUTO PARTS
TOPIC
ACCOUNTING METRIC
PAGE NUMBER
SASB CODE
TR-AP-130a.1
TR-AP-150a.1
TR-AP-250a.1.
TR-AP-410a.1.
TR-AP-440a.1.
TR-AP-440b.1.
TR-AP-440b.2.
TR-AP-520a.1.
TR-AP-000.A
TR-AP-000.B
TR-AP-000.C
Energy Management
Waste Management
(1) Total energy consumed, (2) percentage grid electricity,
(3) percentage renewable
132-133
(1) Total amount of waste from manufacturing, (2) percentage
hazardous, (3) percentage recycled
Product Safety
Number of recalls issued, total units recalled
Design for Fuel Efficiency
Revenue from products designed to increase fuel efficiency
and/or reduce emissions
Materials Sourcing
Description of the management of risks associated with the use
of critical materials
Materials Efficiency
Competitive Behavior
Percentage of products sold that are recyclable
Percentage of input materials from recycled or remanufactured
content
Total amount of monetary losses as a result of legal proceedings
associated with anti-competitive behavior regulations
140
105
50
115-116
130
118, 126
96
ACTIVITY METRICS
PAGE NUMBER
SASB CODE
Number of parts produced
Weight of parts produced
Area of manufacturing plants
NA
131
50
501
Certifications UNGC PRINCIPLES SUMMARY TABLE
AREAS OF THE
GLOBAL COMPACT
GLOBAL COMPACT
PRINCIPLES
DIRECTLY RELEVANT
GRI INDICATORS
INDIRECTLY RELEVANT
GRI INDICATORS
Principle 1 - Business
should promote and
respect internationally
proclaimed human rights
in their respective spheres
of influence.
Disclosure 407: Freedom of Association
and Collective Bargaining
Disclosure 408: Child Labor
Disclosure 409: Forced or Compulsory Labor
Disclosure 410: Security Practices
Disclosure 411: Rights of Indigenous Peoples
Disclosure 412: Human Rights Assessment
Disclosure 414: Supplier Social Assessment
Disclosure 103-2: Grievance Mechanism
Principle 2 - Business should
ensure that they are not,
albeit indirectly, complicit
in human rights abuses.
Disclosure 410: Security Practices
Disclosure 412: Human Rights Assessment
Disclosure 414: Supplier Social Assessment
Disclosure 413: Local Communities
Disclosure 402: Labour/Management Relations
Disclosure 403: Occupational Health and Safety
Disclosure 407: Freedom of Association and
Collective Bargaining
Disclosure 410: Security Practices
Disclosure 102-11: Precautionary Principle or
Approach
Disclosure 102-41: Collective Bargaining Agreements
Disclosure 409: Forced or Compulsory Labor
Disclosure 410: Security Practices
Disclosure 412: Human Rights Assessment
Disclosure 408: Child Labor
Disclosure 410: Security Practices
Disclosure 412: Human Rights Assessment
HUMAN RIGHTS
LABOUR
STANDARDS
Principle 3 - Businesses
should uphold the freedom
of association of workers
and recognise the right
to collective bargaining.
Principle 4 - Business should
uphold the elimination of
all forms of forced and
compulsory labour.
Principle 5 - Business
should uphold the effective
elimination of child labour.
Principle 6 - Business should
uphold the elimination of
discrimination in respect of
employment and occupation.
Disclosure 401: Employment
Disclosure 404: Training and Education
Disclosure 405: Diversity and Equal Opportunity
Disclosure 406: Non-Discrimination
Disclosure 410: Security Practices
Disclosure 102-8: Information on Employees and
other Workers
Principle 7 - Businesses
should support a
precautionary approach to
environmental challenges.
Disclosure 102-11: Precautionary Principle or
Approach
Disclosure 201: Economic Performance
Disclosure 301: Materials
Disclosure 302: Energy
Disclosure 303: Water and Effluents
Disclosure 304: Biodiversity
Disclosure 305: Emissions
Disclosure 306: Effluents and Waste
Disclosure 307: Environmental Compliance
Disclosure 308: Supplier Environmental Assessment
Disclosure 103-2: Grievance Mechanism
Disclosure 301: Materials
Disclosure 302: Energy
Disclosure 303: Water and Effluents
Disclosure 305: Emissions
ENVIRONMENT
Principle 8 - Business
should undertake initiatives
to promote greater
environmental responsibility.
Principle 9 - Businesses
should encourage the
development and diffusion
of environmentally friendly
technologies.
Principle 10 - Businesses
should work against
corruption in all its forms,
including extortion
and bribery.
ANTI-CORRUPTION
Disclosure 202: Market Presence
Disclosure 401: Employment
Disclosure 412: Human Rights Assessment
Disclosure 414: Supplier Social Assessment
Disclosure 102-41: Collective Bargaining
Agreements
Disclosure 301: Materials
Disclosure 302: Energy
Disclosure 303: Water and Effluents
Disclosure 304: Biodiversity
Disclosure 305: Emissions
Disclosure 306: Effluents and Waste
Disclosure 307: Environmental Compliance
Disclosure 201: Economic Performance
Disclosure 205: Anti-Corruption
Disclosure 419: Socioeconomic Compliance
Disclosure 102-16: Values, Principles, Standards,
and Norms of Behavior
Disclosure 102-17: Mechanism for Advice and
Concerned about Ethics
Disclosure 205: Anti-Corruption
Disclosure 419: Socioeconomic Compliance
Disclosure 102-16: Values, Principles, Standards,
and Norms of Behavior
Disclosure 102-17: Mechanism for Advice
and Concerned about Ethics
502
Pirelli Annual Report 2021 SDGs SUMMARY TABLE
SUSTAINABLE DEVELOPMENT GOALS
(SDGs)
PARAGRAPHS DESCRIBING THE GROUP’S ACTIVITIES IN SUPPORT OF THE SDGs
AND RELEVANT TARGETS (FROM SUSTAINABILITY PLAN 2025-2030)
1 - NO POVERTY
Company Initiatives for the External Community (Solidarity p. 184)
2 - ZERO HUNGER
Company Initiatives for the External Community (Solidarity p. 184)
3 - GOOD HEALTH AND WELL-BEING
Welfare and Initiatives for the Internal Community (pp. 165-166)
Occupational Health, Safety and Hygiene (pp. 168-175)
Company Initiatives for the External Community (Road Safety pp. 183, Sport and Social Responsibility pp. 183-184,
Health pp. 184)
Target:
→ Accident Frequency Index: ≤ 0.15 by 2022 and ≤ 0.1 by 2025
Training (pp. 163-165)
Company Initiatives for the External Community (Training pp. 182-183, Culture and Social Value pp. 185)
4 - QUALITY EDUCATION
Target:
→ Training: training on new digital competences
5 - GENDER EQUALITY
Diversity, Equity and Inclusion (pp. 155-161)
Water Management (pp. 137-139)
6 - CLEAN WATER AND SANITATION
Target:
→ Specific water withdrawal: -43% by 2025 compared to 2015
Joining the Task Force on Climate-Related Financial Disclosures (TCFD) (pp. 119-121)
Energy Management (pp. 131-133)
Management of Greenhouse Gas Emissions and Carbon Action Plan (pp. 134-137)
7 - AFFORDABLE AND CLEAN ENERGY
Targets:
→ Specific Energy Consumption: -10% by 2025 compared to 2019
→ Renewable Electricity purchased at Group level: 100% by 2025
→ Group Carbon Neutrality by 2030
8 - DECENT WORK
AND ECONOMIC GROWTH
Our Suppliers (pp. 109-118)
Internal Community (pp. 151-175)
Product: Research and Development of Raw Materials (pp. 126-127)
9 - INDUSTRY, INNOVATION
AND INFRASTRUCTURE
Target:
→ For new product segments, by 2025: > 40% renewable materials, > 3% recycled materials and < 40% fossil-based
materials; by 2030: > 60% renewable materials, > 7% recycled materials and < 30% fossil-based materials
10 - REDUCED INEQUALITIES
Diversity Management (pp. 155-161)
11 - SUSTAINABLE CITIES
AND COMMUNITIES
Main International Commitments for Sustainability (WBCSD pp. 179-180)
Company Initiatives for the External Community (Road Safety pp. 223-225, Solidarity pp. 184)
Target:
→ Absolute CO2 Emissions: -25% by 2025 compared to 2015
→ Group Carbon Neutrality by 2030
→ Eco & Safety Performance Revenues: > 66% on total car tyres revenues e > 71% on High Value revenues by 2
→ Raw Materials Suppliers Absolute CO2 Emissions: -8.6% by 2025 compared to 2018
→ Evolution of the total product range, by 2025:
→ more than 70% of new products will be in Rolling Resistance Class A/B;
→ more than 90% of new products will be in Wet Grip Class A/B.
503
Certifications SUSTAINABLE DEVELOPMENT GOALS
(SDGs)
PARAGRAPHS DESCRIBING THE GROUP’S ACTIVITIES IN SUPPORT OF THE SDGs
AND RELEVANT TARGETS (FROM SUSTAINABILITY PLAN 2025-2030)
12 - RESPONSIBLE
CONSUMPTION
AND PRODUCTION
13 - CLIMATE ACTION
Joining the Task Force on Climate-Related Financial Disclosures (TCFD) (pp. 119-121)
Energy Management (pp. 131-133)
Management of Greenhouse Gas Emissions and Carbon Action Plan (pp. 134-137)
Water Management (pp. 137-139)
Waste Management (pp. 139-141)
Company Initiatives for the External Community (Environmental Initiatives p. 184-185)
Targets:
→ Specific Energy Consumption: -10% by 2025 compared to 2019
→ Absolute CO2 Emissions: -25% by 2025 compared to 2015
→ Renewable Electricity purchased at Group level: 100% by 2025
→ Group Carbon Neutrality by 2030
→ Water Specific Withdrawal: -43% by 2025 compared to 2015
→ Waste Recovery: ≥ 98% by 2025
CDP Supply Chain (pp. 116)
Joining the Task Force on Climate-Related Financial Disclosures (TCFD) (pp. 119-121)
Management of Greenhouse Gas Emissions and Carbon Action Plan (pp. 134-137)
Main International Commitments for Sustainability (International Commitments against Climate Change pp. 181)
Targets:
→ Specific Energy Consumption: -10% by 2025 compared to 2019
→ Absolute CO2 Emissions: -25% by 2025 compared to 2015
→ Renewable Electricity purchased at Group level: 100% by 2025
→ Group Carbon Neutrality by 2030
→ Eco & Safety Performance Revenues: > 66% on total car tyres revenues e > 71% on High Value revenues by 2025
→ Evolution of the total product range, by 2025:
→ more than 70% of new products will be in Rolling Resistance Class A/B;
→ more than 90% of new products will be in Wet Grip Class A/B;
14 - LIFE BELOW WATER
Water Management (pp. 137-139)
15 - LIFE ON LAND
16 - PEACE, JUSTICE
AND STRONG INSTITUTIONS
Sustainability of the Natural Rubber Supply Chain (pp. 112-114)
Company Initiatives for the External Community (Environmental Initiatives p. 184-185)
Programmes of Compliance 231, Anti-corruption, Privacy, Trade Compliance and Antitrust (pp. 95-96)
17 - PARTNERSHIPS FOR THE GOALS
Sustainability of the Natural Rubber Supply Chain (pp. 112-114)
Main International Commitments for Sustainability (WBCSD pp. 179-180)
Company Initiatives for the External Community (Road Safety pp. 182)
504
Pirelli Annual Report 2021 CORRELATION TABLE WITH TOPICS LISTED IN ART. 2, D. LGS 254/2016
TOPICS FROM D. LGS 254/2016
REFERENCE PARAGRAPH
PAGE NUMBER
Use of Energy Resources (from
renewables and non-renewables)
• Risks Related To Environmental Issues
• Energy Management
ENVIRONMENTAL
ASPECTS
Use of Water Resources
Greenhouse Gas Emissions
and Air-Polluting Emissions
Health and Safety
Training and Development
Welfare
SOCIAL ASPECTS
Dialogue with Employees
Actions for Gender Equality
Respect for Human Rights:
Measures Taken and Prevention
GOVERNANCE
ASPECTS
Fight against Active
and Passive Corruption
• Risks Related To Environmental Issues
• Water Management
• Risks Linked To Climate Change
• Joining the Task Force on Climate-Related
Financial Disclosures (TCFD)
• Management Of Greenhouse Gas Emissions
and Carbon Action Plan
• Solvents
• NOx Emissions
• Other Emissions and Environmental Aspects
• Coronavirus risk (COVID -19)
• Employee Health and Safety Risks
• Occupational Health, Safety and Hygiene
• Risks associated with Human Resources
• Development
• Training
• Welfare and Initiatives for the Internal
Community
• Litigation Risks
• Listening: Group Opinion Survey
• Industrial Relations
• Diversity, Equity and Inclusion
• Diversity Policies
• Risks relative to Corporate Social
and Environmental Responsibility
and Business Ethics
• Respecting Human Rights
• Diversity, Equity and Inclusion
• Risks relative to Corporate Social
and Environmental Responsibility
and Business Ethics
• Programmes of Compliance 231,
Anti-corruption, Privacy, Trade Compliance
and Antitrust
78, 131-133
78, 137-139
76, 119-121, 134-137, 141; 142-143
76, 78, 168-175
78, 161-165
165-166
78, 165-167
155-160, 204-205
80-81, 149-150, 155-160
80-81, 95-96
505
Certifications 506
Pirelli Annual Report 2021 PIRELLI & C SPA INDEPENDENT AUDITOR’S REPORT ON THE CONSOLIDATED NON-FINANCIAL DISCLOSURE IN ACCORDANCE WITH ARTICLE 3, PARAGRAPH 10, OF LEGISLATIVE DECREE 254/2016 AND ARTICLE 5 OF CONSOB REGULATION 0267/2018 CONSOLIDATED NON-FINANCIAL DISCLOSURE FOR THE YEAR ENDED 31 DECEMBER 2021 507
Certifications Independent auditor’s report on the consolidated non-financial disclosure In accordance with article 3, paragraph 10, of Legislative Decree 254/2016 and article 5 of CONSOB regulation 20267/2018 To the board of directors of Pirelli & SpA In accordance with article 3, paragraph 10, of Legislative Decree 254/2016 (the Decree) and article 5 of CONSOB Regulation 20267/2018, we have performed a limited assurance engagement on the consolidated non-financial disclosure of Pirelli & C SpA and its subsidiaries (the Pirelli group) for the year ended 31 December 2021 prepared in accordance with article 4 of the Decree, and included in section Report on Responsible Management of the Value Chain annual report 2021 of Pirelli group, and approved by the board of directors on 17 March 2022 (NFD). Our review does not extend to the information set out in paragraph “The European Regulation on the Taxonomy of sustainable economic activities” of the NFD, required by article 8 of European Regulation 2020/852. Responsibilities of the Directors and the Board of Statutory Auditors for the NFD The directors are responsible for the preparation of the NFD in accordance with articles 3 and 4 of the Decree and with the Sustainability Reporting Standards, issued by the Global Reporting Initiative in 2016 and updated up to 2020 (GRI Standards), the SASB indicators, international standards issued by the Sustainability Accounting Standards Board, with reference to the “Auto-parts” industry (SASB), identified by them as the reporting standard, and with the process suggested in AA1000APS (AccountAbility Principles Standards). The directors are also responsible, in the terms prescribed by law, for such internal control as they determine is necessary to enable the preparation of a NFD that is free from material misstatement, whether due to fraud or error. Moreover, the directors are responsible for identifying the content of the NFD, within the matters mentioned in article 3, paragraph 1, of the Decree, considering the activities and characteristics of the group and to the extent necessary to ensure an understanding of the group activities, its performance, its results and related impacts. 508
Pirelli Annual Report 2021 3 of 5 Finally, the directors are responsible for defining the business and organisational model of the group and, with reference to the matters identified and reported in the NFD, for the policies adopted by the group and for the identification and management of risks generated and/or faced by the group. The board of statutory auditors is responsible for overseeing, in the terms prescribed by law, compliance with the Decree. Auditor’s Independence and Quality Control We are independent in accordance with the principles of ethics and independence set out in the Code of Ethics for Professional Accountants published by the International Ethics Standards Board for Accountants, which are based on the fundamental principles of integrity, objectivity, competence and professional diligence, confidentiality and professional behaviour. Our audit firm adopts International Standard on Quality Control 1 (ISQC Italia 1) and, accordingly, maintains an overall quality control system which includes processes and procedures for compliance with ethical and professional principles and with applicable laws and regulations. Auditor’s responsibilities We are responsible for expressing a conclusion, on the basis of the work performed, regarding the compliance of the NFD with the Decree, with the GRI Standards and SASB and with the process suggested in AA1000APS. We conducted our work in accordance with International Standard on Assurance Engagements 3000 (Revised) – Assurance Engagements Other than Audits or Reviews of Historical Financial Information (ISAE 3000 Revised), issued by the International Auditing and Assurance Standards Board (IAASB) for limited assurance engagements. The standard requires that we plan and apply procedures to obtain limited assurance that the NFD is free from material misstatements. The procedures performed in a limited assurance engagement are less in scope than those performed in a reasonable assurance engagement in accordance with ISAE 3000 Revised, and, therefore, do not provide us with a sufficient level of assurance that we have become aware of all significant facts and circumstances that might be identified in a reasonable assurance engagement. The procedures performed on the NFD were based on our professional judgement and consisted of interviews, primarily of company personnel responsible for the preparation of the information presented in the NFD, analyses of documents, recalculations and other procedures designed to obtain evidence considered useful. In detail, we performed the following procedures: 1. analysis of the relevant matters reported in the NFD relating to the activities and characteristics of the group, in order to assess the reasonableness of the selection process used, in accordance with article 3 of the Decree and with the reporting standards adopted and considering AA1000SES (Stakeholder Engagement Standard); 2. analysis and assessment of the criteria used to identify the consolidation area, to assess their compliance with the Decree; 509
Certifications 4 of 5 3. comparison of the financial information reported in the NFD with the information reported in the consolidated financial statements of Pirelli group; 4. understanding of the following matters: • business and organisational model of the group with reference to management of the matters specified by article 3 of the Decree; • policies adopted by the group with reference to the matters specified in article 3 of the Decree, actual results and related key performance indicators; • key risks generated and/or faced with reference to the matters specified in article 3 of the Decree. With reference to those matters, we compared the information obtained with the information presented in the NFD and carried out the procedures described under point 6 a) below; 5. understanding of the processes underlying the preparation, collection and management of the significant qualitative and quantitative information included in the NFD. In detail, we held meetings and interviews with the management of Pirelli & C SpA and with the personnel of Pirelli Neumáticos SAIC and Pirelli Tyres Romania Srl and we performed limited analyses of documentary evidence, to gather information about the processes and procedures for the collection, consolidation, processing and submission of the non-financial information to the function responsible for the preparation of the NFD; 6. analysis of policies and procedures in place and of the coherence of the sustainability management model compared to UNI ISO 26000 principles, among which: governance, human rights, relationship and work conditions, and environment. Moreover, for material information, considering the activities and characteristics of the group: • at a group level, a) with reference to the qualitative information included in the NFD, and in particular to business model, policies adopted and main risks, we carried out interviews and acquired supporting documentation to verify its consistency with available evidence; b) with reference to quantitative information, we performed analytical procedures as well as limited tests, in order to assess, on a sample basis, the accuracy of the consolidation of the information; • for the industrial sites located in Merlo (Argentina) and Slatina (Romania), which were selected on the basis of their activities, their contribution to the performance indicators at consolidated level and their location, we carried out site visits during which we met local management and gathered supporting documentation regarding the correct application of the procedures and calculation methods used for the key performance indicators. 510
Pirelli Annual Report 2021 5 of 5 Conclusion Based on the work performed, nothing has come to our attention that causes us to believe that the NFD of Pirelli group for the year ended 31 December 2021 is not prepared, in all material respects, in accordance with articles 3 and 4 of the Decree, with the GRI Standards, the SASB indicators with reference to the “Auto-parts” industry, and with the principles of inclusivity, materiality and responsiveness of AA1000APS, as described in the Methodological Note of the Report on the Responsible Management of the Value Chain. Our conclusions on the NFD of Pirelli group do not extend to the information set out in paragraph “The European Regulation on the Taxonomy of sustainable economic activities” of the NFD, required by article 8 of European Regulation 2020/852. Milan, 24 March 2022 PricewaterhouseCoopers SpA Signed by Paolo Caccini Paolo Bersani (Partner) (Authorized signatory) This report has been translated from the Italian original solely for the convenience of international readers 511
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Project
MoSt
more-studio.it
Concept, art direction
Teresa Bellemo, Leonardo Pertile
Layout
Common
Essays
Manufacturing and Beauty, Vito Mancuso
Literary agency Sosia & Pistoia
The Factory Game, Nadia Owusu
Italy
Artist: Giovanni Mengoni
Photo: Juri de Luca
Video: Alessandro Zorio
Brazil
Artists: Fernanda Broggi, Susy Garcia, Tony Felix, Pinguim
Photo: Guilherme Tichauer Vieira
Video: Felipe Schmidt, Rodrigo Barros
USA
Artist: Lisette Correa
Photo and video: Salim Garcia
Romania
Artist: Andrei Cavassi
Photo: Andrei Tobosaru
Video: Andrei Popescu
China
Artist: Tu Yonghong
Foto e video: Li Ang
Video
Art direction: Alessandro Zorio
Portfolio
Alessandro Scotti
Photos taken at the Pirelli factory in Settimo Torinese
Print
Faenza Group S.p.A.
Fabric (cover)
Manifattura del Seveso
Paper (inside)
Fedrigoni Arena Natural 120 g
Paper (flyleaves)
Fedrigoni Sirio Ultra Black 200 g
In line with Pirelli’s Green Sourcing Policy, the planning phase
or this report included an analysis of the environmental impact
of the material used with the help of the supplier chosen, which
has been certified by way of an environmental management
system. Thanks to this approach, in order to carry out this pro-
ject, we have used FSC®️ certified paper, vegetable-based inks,
and water- based paints. The final package is made out of recy-
clable cardboard and polypropylene.
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