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Financial Results and Documents Archive
3
INDEX Annual Report 2022
CHAIRMAN’S LETTER
EXECUTIVE VICE CHAIRMAN AND CEO’S LETTER
MA(N)CHINE LEARNING
THE NEW ELECTRICITY
BY GIORGIO METTA
LEARNING FROM ERROR:
A JOURNEY THROUGH THE HUMAN MIND AND ARTIFICIAL INTELLIGENCE
INTERVIEW WITH CHATGPT
WRITING WITH ARTIFICIAL INTELLIGENCE
BY HANIF KUREISHI E SACHIN KUREISHI
TO ERR IS HUMAN, THANKFULLY
BY NICOLA LAGIOIA
PERFECT TIME
BY PETER CAMERON
ARTIFICIAL INTELLIGENCE AND PIRELLI
NOTICE OF SHAREHOLDERS’ MEETING
CORPORATE BODIES
PRESENTATION OF 2022 INTEGRATED ANNUAL REPORT
DIRECTORS’ REPORT ON OPERATIONS
Directors’ Report on Operations
Macroeconomic and market scenario
Significant events of 2022
Group performance and results
Research and development
Parent company highlights
Risk factors and uncertainty
Outlook for 2023
Significant events subsequent to the end of the year
Alternative performance indicators
Other information
59
60
63
65
78
81
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN
CONSOLIDATED NON-FINANCIAL DISCLOSURE
Report on Responsible Management of the Value
97
Chain - Consolidated Non-Financial Disclosure
pursuant to Legislative Decree of December
30, 2016, n. 254
Methodological note
Economic dimension
Environmental dimension
Social dimension
06
10
14
18
22
26
30
36
40
53
54
56
83
90
91
92
93
98
116
140
176
4
Pirelli Annual Report 2022 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
227
System of internal control and risk management
252
- Audit, Risks, Sustainability and Corporate
Governance Committee
Interests of the Directors and Related-Party
transactions
Board of Statutory Auditors
General Management Operations
Information flows to the Directors and Statutory
257
257
259
260
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
260
260
262
262
262
Corporate Governance Committee
228
229
229
231
235
236
246
246
250
251
REPORT ON THE REMUNERATION POLICY AND COMPENSATION PAID
Report on the Remuneration Policy and
279
compensation paid
Remuneration Policy or the 2023 financial year
Report on compensation paid in 2022
283
306
CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2022
Consolidated Financial Statements
Financial statements
325
326
Explanatory notes
Scope of consolidation
332
416
PIRELLI & C. S.P.A. SEPARATE FINANCIAL STATEMENTS AT DECEMBER 31, 2022
Pirelli & C. S.p.A. Separate Financial Statements
Financial statements
Explanatory notes
425
426
431
Annexes to the notes
Report of the Board of Statutory Auditors to the
480
485
Shareholders’ Meeting
Resolutions
511
Proposal for approval of the financial statements
512
and allocation of the result for the year
RESOLUTIONS
CERTIFICATIONS
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
b. 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
515
516
518
526
d. Independent auditors report on the Separate
528
Financial Statements
e. GRI Content Index and Correlation Tables
Independent Auditor’s Report on the
f.
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
536
553
5
INDEX 6
Pirelli Annual Report 2022 7
CHAIRMAN’S LETTER
8
Pirelli Annual Report 2022 10
Pirelli Annual Report 2022 11
EXECUTIVE VICE CHAIRMAN & CEO’S LETTER
12
Pirelli Annual Report 2022 17
MA(N)CHINE LEARNING
Pirelli Annual Report 2022
18
19
THE NEW ELECTRICITY
Pirelli Annual Report 2022
20
21
THE NEW ELECTRICITY
Pirelli Annual Report 2022
22
23
LEARNING FROM ERROR
24
Pirelli Annual Report 2022 25
LEARNING FROM ERROR
Pirelli Annual Report 2022
26
27
WRITING WITH ARTIFICIAL INTELLIGENCE
Pirelli Annual Report 2022
28
29
WRITING WITH ARTIFICIAL INTELLIGENCE
Pirelli Annual Report 2022
30
31
TO ERR IS HUMAN, THANKFULLY
32
Pirelli Annual Report 2022 33
TO ERR IS HUMAN, THANKFULLY
34
Pirelli Annual Report 2022 35
TO ERR IS HUMAN, THANKFULLY
Pirelli Annual Report 2022
36
37
PERFETCT TIME
Pirelli Annual Report 2022
38
39
PERFETCT TIME
Pirelli Annual Report 2022
40
41
ARTIFICIAL INTELLIGENCE AND PIRELLI
Pirelli Annual Report 2022
42
Pirelli Annual Report 2022 43
ARTIFICIAL INTELLIGENCE AND PIRELLI
44
Pirelli Annual Report 2022 45
Titolo Capitolo
Pirelli Annual Report 2022
46
Pirelli Annual Report 2022 47
ARTIFICIAL INTELLIGENCE AND PIRELLI
48
Pirelli Annual Report 2022 49
Titolo Capitolo
Pirelli Annual Report 2022
50
Pirelli Annual Report 2022 51
ARTIFICIAL INTELLIGENCE AND PIRELLI
52
Pirelli Annual Report 2022 NOTICE OF SHAREHOLDERS’ MEETING*
The persons entitled to vote at the shareholders’ meeting of Pirelli & C. Società per Azioni are called to an Ordinary
Shareholders’ Meeting in Milan, at the offices of Studio Notarile Marchetti in Via Agnello n. 18, at 10.30 a.m. on
Thursday 29 June 2023, in a single call, to discuss and resolve on the following
AGENDA
1. Financial Statements at 31 December 2022:
1.1. Approval of the financial statements at 31 December 2022. Presentation of the consolidated financial
statements at 31 December 2022. Presentation of the Report on Responsible Management of the
Value Chain for the year 2022;
1.2. Proposal to allocate the period result and distribute the dividend.
Related and consequent resolutions.
2. Decision on the postponement, to a subsequent Shareholders' Meeting to be called by the Board of Directors
presumably by 31 July 2023, of the discussion and decisions on the items on the agenda relating to the
appointment of the Board of Directors as per points 3), 4), 5) and 6) below, with the consequent extension
in the medium term of the entire Board of Directors currently in office. Related and consequent resolutions.
3. Appointment of the Board of Directors:
3.1. Determination of the number of members of the Board of Directors;
3.2. Appointment of the Directors;
3.3. Appointment of the Chairman of the Board of Directors;
3.4. Determination of the annual remuneration of the members of the Board of Directors.
4. Report on the Remuneration policy and compensation paid:
4.1. Approval of the first section of the Report pursuant to article 123-ter, subsection 3-bis and 3-ter of
Legislative Decree No. 58 of 24 February 1998;
4.2. Resolutions related to the second section of the Report pursuant to article 123-ter, subsection 6 of
Legislative Decree No. 58 of 24 February 1998;
related and consequent resolutions.
5. Three-year monetary incentive plan 2023-2025 for the Pirelli Group’s Management. Related and
consequent resolutions.
6. The “Directors and Officers Liability Insurance” policy. Related and consequent resolutions.
*The Board of Directors resolved upon the convening of the Ordinary Shareholders' Meeting on May 11, 2023.
53
NOTICE OF SHAREHOLDERS’ MEETING
CORPORATE BODIES
THE 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
Li Fanrong
Marco Tronchetti Provera
Giorgio Luca Bruno
Yang Shihao
Wang Feng
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 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. Changes in the composition of the Board of Directors following the
date of the appointment are detailed on the Pirelli website (www.pirelli.com), in the Corporate Governance
section.
2 Appointment: June 15, 2021. Expiry: Shareholders’ Meeting convened for the approval of the Financial
Statements at December 31, 2023.
54
Pirelli Annual Report 2022
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
Li Fanrong
Wang Feng
Giovanni Tronchetti Provera
Tao Haisu
Wang Feng
Paola Boromei
Fan Xiaohua
Marisa Pappalardo
Marco Tronchetti Provera
Li Fanrong
Giorgio Luca Bruno
Yang Shihao
Wang Feng
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
Fabio Bocchio5
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 from the date of the commencement of trading of Pirelli shares
on the stock exchange (on 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 Appointed by the Board of Directors’ Meeting on November 3, 2022.
55
CORPORATE BODIES
PRESENTATION
OF 2022 INTEGRATED
ANNUAL REPORT
The 2022 integrated annual report6 of Pirelli (“Annual
Report”) aims to provide a comprehensive overview of the
process of creating value for the Company’s Stakeholders,
resulting from the integrated management of the financial,
productive, intellectual, human, natural, social and relational
capitals. The reporting reflects the business model adopted
by Pirelli, which is inspired by the United Nations Global
Compact, the principles of Stakeholder Engagement set
forth by the AA1000, and the Guidelines of ISO 26000.
The financial assets, which comprise the company’s
financial resources, supply the sustainable management of
other capital and are in turn influenced by the value created
by the latter. Impacts on the economy, the environment,
society and human rights are central to the definition of
corporate development strategies with a view to minimising
negative impacts and increasing positive ones, and are
transversal to the management of the aforementioned
capitals, which in turn evolve through the commitment,
competence and dedication of human capital, the heart of
the Company’s growth.
Investment in a “culture of health and safety at work” is a
priority. The accident frequency index in 2022 stands at
2.007 compared to 2.07 in 2021, confirming the steady
downward trend.
Merit, ethics, dialogue, focus on well-being, inclusion and
diversity are pillars of the employee experience and are
accompanied by advanced instruments to attract and retain
the best talent. 24.5% of management positions are held by
women, with the number of women in executive positions
increasing. Compared to 2021, the workforce grew by 611
new employees.
In 2022 the management of the business produced an
adjusted EBIT8 of €977.8 million (€815.8 million in 2021)
with a margin of 14.8% (15.3% in 2021). Internal levers (price/
mix, efficiencies) more than compensated for the negative
external scenario (raw materials,
inflation, exchange
rate impact), enabling the company to achieve a higher-
than-expected result (~€960m the target implied by the
November target) and an adjusted Return on net Invested
Capital (ROIC) of 20.3% (~19% the November target).
Important steps were taken in the area of sustainable
finance, with the publication of the Sustainability Linked
Financing Framework in May 2022 and the placement of
the first benchmark sustainability-linked bond in the global
tyre sector in January 2023.
includes a
The Company’s production capital, which
geographically diversified production structure with 18
plants in 12 countries on four continents, is managed with a
view to environmental efficiency and respect for biodiversity,
with targets in terms of reducing water withdrawal, energy
consumption, CO2 emissions, increasing waste recovery
and adoption of the “No net loss of biodiversity” model
through the “mitigation hierarchy” (i.e. avoid, minimise,
restore and compensate).
The decarbonisation plan of the group’s value chain
continued, in line with the 2030 ‘carbon neutrality’ target.
In terms of absolute CO2 emissions in 2022 Pirelli obtained
an upgrade of its Science Based Target in line with the 1.5°C
scenario from SBTi and formalised its commitment to Net
Zero. The growth in the use of renewable electricity was very
significant. In particular, 100% of the electricity purchased
in North America in 2022 is certified renewable, adding
to the 100% certified renewable electricity purchased by
Europe as of 2021. Globally, 74% of the total electricity used
is from renewable sources (compared to 62% in 2021), with
absolute group CO2 emissions down 14% compared to
2021 and 41% compared to 2015 (base year of the Science
Based Target for group sites - Scopes 1 and 2). Absolute
supply chain emissions decrease by 3.1% compared to 2021
and by 8.9% compared to 2018 (base year of the Science
Based Target for Supply Chain - Scope 3).
to
the
The research and development activities contribute
substantially
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 2022 totalled €263.9 million (4.0% of sales), of
which €247.1 million was for High Value activities (5.3% of
High Value revenues).
The heavy investment in innovation also fuels Pirelli’s
intellectual assets, as it has a portfolio of active patents
grouped into 695 families covering product, process and
materials innovations, as well as a globally recognised brand.
In turn, Pirelli’s Eco & Safety Performance products, which
combine performance and respect for the environment, at
the end of 2022 represent 67%9 of total car tyre turnover
(63% in 2021 and 58% in 2020). By restricting the scope
of the analysis to High Value products10, the percentage of
Eco & Safety Performance products rises to 73.2% (68.4%
in 2021 and 63.8% in 2020).
6 Integrated Annual Report is defined as the document including the Directors’ Report on Operations,
Report on the Responsible Management of the value chain, Report on Corporate Governance and Share
Ownership, Report on Remuneration Policy and Compensation Paid, Consolidated Financial Statements,
Separate Financial Statements, Proposal for the allocation of the result and Certifications.
7 Accident Frequency Index per 1,000,000 hours worked.
8 Alternative indicator to EBIT from which amortisation of intangible assets related to assets recognised
as a result of business combinations and operating costs attributable to non-recurring, restructuring and
one-off charges are excluded. In the comparative period, the indicator also included Covid-19 direct costs
and charges related to the retention plan approved by the Board of Directors on 26 February 2018.
9 Figure obtained by weighing the value of sales of Eco & Safety Performance tyres on the total value
of sales of Group tyres. Eco & Safety Performance products identify the 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.
10 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).
56
Pirelli Annual Report 2022 The reporting of Sustainability strategy and performance
2022 is prepared in accordance with the Global Reporting
Initiative (GRI) Sustainability Reporting Standards 2021, “In
accordance with” 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
Integrated
the
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). The Annual Report 2022 concludes with
third-party assurances.
International
in
The Financial Statements and Consolidated Financial
Statements of Pirelli & C. S.p.A. (hereinafter referred to
as the “Separate Financial Statements” and “Consolidated
Financial Statements”, respectively) have been prepared on
the basis of IAS/IFRS.
ESEF OBLIGATIONS
(EUROPEAN SINGLE ELECTRONIC FORMAT)
This document has not been prepared pursuant to the EU
Delegated Regulation 2019/815 (ESEF Regulation), which
was adopted with the implementation of the Transparency
Directive. This document which has been prepared
pursuant to the ESEF Regulation, is available (in Italian
only) on the website of the authorised eMarket Storage
mechanism (emarketstorage.com) and on the Company’s
website www.pirelli.com.
In addition, in 2022, 50% of the new IP Codes11 placed on
the market have parameters in line with the highest class
(A or B) of European labelling for rolling resistance (the
environmental aspect of indirect impact on vehicle CO2
emissions), in line with Pirelli’s target of 70% by 2025. At
the same time, the percentage of new IP Codes produced
globally with values in line with the European labelling
classes A/B for wet grip (an aspect of direct impact on
safety), including ice grip (ICE pictogram), remains very
high at 93% of the total.
The average rolling resistance of Pirelli tyres worldwide
decreased by more than 3% compared to 2021 and by
13.6% compared to 2015.
Regarding Tyre Wear, the new product lines launched in
2021-22 (Cinturato and Scorpion) show an improvement in
wear rates of up to 33% compared to the previous generation.
There was a significant Research & Development commitment
on innovative, renewable and recycled materials, which,
among other things, enabled an acceleration in the use of
silica from rice husks, a bio-circular material that reached 5%
of the total silica used in 2022 (compared to 1% in 2021 and
the expected 10% in 2023).
Innovation and sustainability of materials for Pirelli includes
attention to people and biodiversity, and it is with this
conviction that Pirelli has also worked in 2022 to protect
the sustainability of natural rubber. In addition to the
ongoing commitment to natural rubber traceability, which
already in 2021 saw Pirelli produce the world’s first tyres
with Forest Stewardship Council (FSC)-certified natural
rubber and rayon, implementation continued of the multi-
year project in partnership with BMW GROUP and the NGO
BirdLife International in the Hutan Harapan area (Sumatra
Island - Indonesia), with the aim to protect 2,700 hectares
of rainforest and its biodiversity and improving the living
conditions of the local population dedicated to natural
rubber production.
Pirelli’s sustainable performance in 2022 also received
excellent ratings from the main Sustainable Finance Indices.
Following the annual review of the Dow Jones Sustainability
indices by S& P Global, the company recorded the Auto
Components Sector Top Score globally, followed by the
Sustainability Yearbook 2023’s “Top 1%” award. Pirelli has
been reconfirmed as a leader in the fight against climate
change by 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, as well as being
awarded the top sector rating in FTSE4GOOD and the “ESG
Top Rated” recognition by Sustainalytics.
11 Identification Product Codes.
57
PRESENTATION OF 2022 INTEGRATED ANNUAL REPORT
58
Pirelli Annual Report 2022 DIRECTORS’ REPORT
OPERATIONS
ON
AT DECEMBER 31, 2022
59
DIRECTORS’ REPORT ON OPERATIONS
EU
US
China
Brazil
Russia
World
EU
US
China
Brazil
Russia
World
MACROECONOMIC AND MARKET SCENARIO
ECONOMIC OVERVIEW
Economic performance in 2022 was characterised by high volatility, which was heavily influenced by the
Russian-Ukrainian war and high inflation. Global GDP grew by +3%, a marked slowdown compared to the trend
for 2021 (+6%). The growth dynamics of the global economy were also affected by the restrictive monetary
policies implemented to counter inflationary tensions, and the lockdowns in China to combat the pandemic.
ECONOMIC GROWTH, YEAR-ON-YEAR PERCENTAGE CHANGE IN GDP
1Q 2022
2Q 2022
3Q 2022
4Q 2022
2021
2022
5.6
3.7
4.8
2.4
3.5
4.4
4.4
1.8
0.4
3.7
-4.1
3.0
2.5
1.9
3.9
3.6
-3.7
3.0
1.7
0.9
2.9
1.9
-3.5
1.9
5.4
5.9
8.4
5.0
4.7
6.0
3.5
2.1
3.0
2.9
-2.1
3.0
Note: year-on-year percentage changes compared to the same period of the previous year.
Preliminary data for the fourth quarter of 2022; forecasts for the world. Source: National statistics offices and S&P Global, February 2023.
Difficulties along the supply chain and the rising cost of energy due to the conflict in Ukraine, pushed inflation to
its highest levels in 40 years, with an increase in the global price index of +7.6% in 2022.
CONSUMER PRICES, CHANGE IN YEAR-ON-YEAR PERCENTAGES
1Q 2022
2Q 2022
3Q 2022
4Q 2022
2021
2022
6.5
8.0
1.1
10.7
11.5
6.0
8.8
8.6
2.2
11.9
16.9
7.6
10.3
8.3
2.7
8.6
14.4
8.1
11.0
7.1
1.8
6.1
12.2
7.8
2.9
4.7
0.9
8.3
6.7
3.9
Source: National statistics offices and S&P Global Market Intelligence for world estimate, February 2023.
In the Eurozone, economic growth for 2022 stood at +3.5% compared to +5.4% for 2021. Following a strong
start due to the removal of lockdown measures, GDP growth in the region decelerated as a result of the Russia-
Ukraine war and the energy crisis. The cut in Russian gas supplies led to an increase in the price of natural gas
with repercussions on the baskets of goods and services, bringing inflation in the EU area to 11% for the fourth
quarter of 2022, and to a more restrictive monetary policy (the European Central Bank raised rates by 250
basis points during the year). Reduced consumer purchasing power and the burden of high production costs for
companies, held back year-on-year GDP growth during the fourth quarter to +1.7%.
9.2
8.0
2.0
9.3
13.7
7.6
60
Pirelli Annual Report 2022 In the US, GDP grew by +2.1% for 2022, sustained by household consumption despite the marked decline in
real estate investments due to rising interest rates. To counter inflation (7.1% for the fourth quarter, with core
inflation - which excludes food and energy prices - at 6.0%), the Fed intervened by raising interest rates by 425
basis points between March and December 2022.
In China, GDP growth (+3.0% for 2022 compared to +8.4% for 2021), was impacted by COVID-19 and the
resulting lockdowns. Growing social tensions in November and December, following disruptions in production
activities, prompted the government to suspend COVID-19 containment measures and introduce further
measures to support the economy.
In Brazil, GDP growth slowed to +2.9% for 2022 from +5.0% in 2021. The positive effects derived from post-
pandemic mobility and government assistance for households, were offset by a slowdown in investment as
interest rates rose by 450 basis points during the year, to finish at 13.75% in December 2022.
Economic performance in Russia was affected by international sanctions following the invasion of Ukraine,
resulting in restrictions on foreign trade, the freezing of the Central Bank’s foreign exchange reserves, and the
blocking of access to international markets. Russia’s GDP recorded a change of -2.1% for 2022, compared to
growth of +4.7% for 2021.
EXCHANGE RATES
KEY EXCHANGE RATES
1Q
2Q
3Q
4Q
FULL YEAR
AVERAGE
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
US$ per euro
1.12
1.20
1.07
1.21
1.01
1.18
1.02
1.14
1.05
1.18
Chinese renminbi per US$
6.35
6.48
6.61
6.46
6.83
6.47
7.06
6.39
6.73
6.45
Brazilian real per US$
5.24
5.49
4.93
5.30
5.25
5.23
5.25
5.58
5.17
5.40
Russian rouble per US$
87.37
74.32
66.36
74.20
59.40
73.49
63.05
72.61
67.89
73.64
Note: Average exchange rates for the period. Source: National central banks.
The currency market in 2022 was dominated by the strength of the US dollar, due to the Fed’s monetary
policy which widened interest rate differentials compared to other currencies. The escalation of international
geopolitical tensions, also favoured the US dollar as a safe haven currency. After falling below parity during
the course of the year, the US dollar/euro exchange rate averaged 1.05 for 2022, appreciating by +12%
compared for 2021.
The Greenback’s strength was also reflected in the exchange rate against the renminbi, which averaged 6.73
per US dollar in 2022 (6.45 in 2021), impacted by repeat lockdowns and by the resulting economic slowdown.
The euro was weak against the Chinese currency, against which it depreciated by approximately -7%.
In Brazil, the central bank’s interest rate hike to combat inflation, lent support to the Brazilian real during 2022,
which appreciated by +4% against the US dollar and by +17% against the euro.
The rouble/US dollar exchange rate averaged 67.89 in 2022, appreciating by +8.5% against the US dollar and
by +22% against the euro. During the first half of March, sanctions imposed by Western countries drove the
currency to more than 130 roubles to the US dollar before appreciating, due to controls on outgoing capital and
the sharp increases in energy prices, which supported export revenues.
61
DIRECTORS’ REPORT ON OPERATIONS RAW MATERIALS PRICES
RAW MATERIALS
PRICES
1Q
2Q
3Q
4Q
ANNUAL AVERAGE
2022
2021 % chg.
2022
2021 % chg.
2022
2021 % var,
2022
2021 % chg.
2022
2021 % chg.
Brent (US$ / barrel)
97.4
61.1
59%
111.8
69.0
62%
98.2
73.2
34%
88.6
79.8
11%
98.9
70.8
40%
European natural
gas (€ / MWh)
Butadiene
(€ / tonne)
Natural rubber
TSR20
(US$ / tonne)
100
18
444%
101
25
307%
205
49
319%
124
96
29%
133
47
184%
1,067
715
49%
1,353
853
59%
1,380
1,265
9%
1,203
1,192
1%
1,251
1,006
24%
1,772
1,668
6%
1,654
1,653
0%
1,467
1,659
-12%
1,299
1,729
-25%
1,548
1,678
-8%
Note: Data are averages for the period. Source: S&P Global, Reuters.
Raw materials prices, especially energy prices, experienced a very volatile trend during 2022 which was
accentuated in the wake of the Russian-Ukrainian crisis.
The average price of Brent for 2022 stood at US$ 99 per barrel, an increase of +40% compared to the
average price of approximately US$ 71 per barrel for 2021. Daily prices exceeded US$ 120 per barrel, both
in March - immediately following the escalation of the Russian-Ukrainian crisis - and in June, following the
confirmation of the Russian oil embargo announced by the European Union, (which entered into force as of
December 2022). Prices then fell below US$ 100 per barrel on average from September onwards, in the wake
of fears of a slowdown in the global economy.
Even more volatile was the price of natural gas, which recorded an average of euro 133 per MWh (megawatt-
hour) in 2022, an increase of +184% compared to euro 47 per MWh for 2021. Following the all-time high prices
recorded in August in Europe in view of the possible reduction in gas flow from Russia (as then happened at the
end of August with the closure of the Nord Stream 1 pipeline), prices fell sharply during the final weeks of the
year, despite remaining historically high, thanks to good stockpile levels and mild temperatures in Europe.
The price of butadiene in Europe was bolstered during the first nine months by the scarcity of supply, and by the
increased demand from the automobile industry, which was partially offset by a slowdown during the final quarter
of the year, as a result of lower natural gas prices, and lower logistical costs due to the easing of congestion in
ports. Overall, the butadiene price per tonne increased by +24% in 2022 compared to the previous year.
Natural rubber prices which remained high during the first months of 2022 fell sharply during the third and
fourth quarter, following signs of a global economic slowdown. During 2022, natural rubber prices averaged
US$ 1,548 per tonne, down by -8% compared to 2021.
TRENDS IN CAR TYRE MARKETS
For 2022, the global automotive tyre market recorded a -1.7 % drop in volumes, which remained lower than
pre-pandemic levels (-9 % compared to 2019).
Volume performance for the Original Equipment channel was more sustained compared to the Replacement
channel:
→ +4.2% for Original Equipment, (+0.6% for the fourth quarter due to the effect of COVID-19 lockdowns in China,
and the slowdown of automobile production in other regions);
→ -3.7% for Replacement (-9.9% for the fourth quarter), due to the gradual fall in demand during the second
half of the year in North America and Europe, which was compounded by weak demand in China during the
final months of 2022.
Demand was more resilient for the Car ≥18” segment which thanks to a +5.4% increase compared
regained and surpassed
to 2021
pre-pandemic levels, also thanks to an improved car parc mix. Compared to 2019, growth in overall Car ≥18”
demand stood at +10.9% (+16.4% for Replacement and +3.8% for Original Equipment).
for Original Equipment, +3.1%
for Replacement),
(+8.9%
62
Pirelli Annual Report 2022 Market demand for Car ≤17’ (-3.4% compared to 2021), remained in sharp decline compared to pre-pandemic
figures (-13.2% overall compared to 2019) in all regions.
TRENDS IN CAR TYRE MARKETS
% CHANGE YEAR-ON-YEAR
1Q 2022
2Q 2022
3Q 2022
4Q 2022
2022
2022/2019
Total Car Tyre Market
Total
Original Equipment
Replacement
Market ≥ 18"
Total
Original Equipment
Replacement
Market ≤ 17"
Total
Original Equipment
Replacement
Source: Pirelli estimates.
1.0
-3.6
2.8
7.8
0.3
13.3
-0.7
-5.3
0.9
-3.6
-0.6
-4.6
3.4
4.9
2.5
-5.3
-2.9
-6.0
3.1
23.7
-2.8
9.8
26.0
0.6
1.5
22.6
-3.5
-7.1
0.6
-9.9
0.7
6.7
-3.5
-9.1
-2.0
-11.2
-1.7
4.2
-3.7
5.4
8.9
3.1
-3.4
2.2
-5.0
-9.0
-11.7
-8.0
10.9
3.8
16.4
-13.2
-17.3
-11.8
SIGNIFICANT EVENTS OF 2022
On January 28, 2022 Pirelli celebrated the 150th Anniversary of its foundation on January 28, 1872, 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 2021 results
of the Corporate Sustainability Assessment for the Dow Jones Sustainability Index of S&P Global, where Pirelli
obtained a score of 77 points against a sector average of 31.
On February 21, 2022, Pirelli finalised the signing of a euro 1.6 billion five-year multi-currency bank credit
facility, with a pool of leading national and international banks.
This credit facility, geared towards the Group’s ESG objectives, has allowed 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
objectives of optimising the conditions for 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 emphasised 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 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
production plants, which is reflected in an EBITDA margin that exceeds the sector average and the agency’s
63
DIRECTORS’ REPORT ON OPERATIONS expectation of continued debt reduction, through the careful
management of a solid free cash flow.
On February 23, 2022 Pirelli’s Board of Directors approved,
as part of the strategy to refinance and optimise the
Company’s financial structure, a new EMTN (Euro Medium
Term Note) programme for the issue of non-convertible
senior unsecured bond loans for a maximum countervalue
of euro 2 billion, to replace the previous euro 2 billion EMTN
programme approved on December 21, 2017.
As part of this programme, on the same date, the Board of
Directors authorised the issuance of one or more bond loans,
to be placed with institutional investors, for a total maximum
amount of up to euro 1 billion. In light of the changed
market conditions, on June 22, 2022, Pirelli updated this
authorisation, revoking the resolution and concurrently
approving a new resolution for the issuance, again as part of
the EMTN programme, of non-convertible bond loans to be
placed with institutional investors for up to euro 1 billion, to be
executed by May 2023.
On March 4, 2022 Pirelli announced that it would donate
euro 500 thousand to help Ukrainian refugees affected
by the war, and also made a current account available to
employees for the collection of their donations.
On March 17, 2022 Pirelli’s Board of Directors approved
and endorsed the consolidated results at December 31,
2021, which had already been disclosed to the market in a
preliminary unaudited form on February 23.
On May 9, 2022 Pirelli announced that the Science Based
Targets initiative (SBTi) had validated the upgrade of Pirelli’s
greenhouse gas emission reduction targets, which by the
end of 2021 had reached the previous targets validated by
SBTi for Scope 1 and 2, four years ahead of schedule.
The new targets include measures consistent with keeping
global warming “to within 1.5°C”, compared to the previous
scenario that envisaged staying “well below 2°C”.
In particular, the SBTi - which defines and promotes science-
based best practices for reducing emissions - has validated
Pirelli’s targets of a -42% reduction in absolute greenhouse
gas emissions (Scope 1 and 2) by the end of 2025, compared
to 2015, and a -9% reduction in absolute greenhouse gas
emissions from purchased raw materials by the end of 2025,
compared to 2018 (Scope 3).
On May 10, 2022 Pirelli’s Board of Directors co-opted Yang
Shihao to replace Yang Xingqiang, who had resigned on April
28, 2022. The Board of Directors also proceeded to appoint
Yang Shihao - qualified by the Board as a non-executive
Director - as a member of the Strategies Committee.
Yang Shihao, whose curriculum vitae is available on the
www.pirelli.com website, at the date of the appointment did
not possess the requisites to qualify as independent, pursuant
to the Italian Consolidated Law on Financial Intermediation
(TUF) and the Corporate Governance Code, and did not hold
any shares in the Company.
On May 18, 2022, the Pirelli’s Shareholders’ Meeting
(convened on April 13, 2022), which was attended by
83.68% of the voting capital, approved - with more than
99.9% of the capital represented - the Financial Statements
for the 2021 financial year, and resolved to distribute a
dividend of euro 0.161 per ordinary share, equal to a total
dividend pay-out of euro 161 million gross of withholding
taxes. The dividend was placed for payment on May 25,
2022 (with an ex-dividend date of May 23 and a record date
of May 24). The Shareholders’ Meeting also approved the
remuneration policy for 2022 (with 85.19% of the capital
present) and gave its favourable opinion (with 84.54% of
the capital present) on the Report on remunerations paid
in the 2021 financial year. The Shareholders’ Meeting also
approved (with 88.31% of the capital present) the adoption
of the monetary incentive Plan for the 2022-2024 three-
year period aimed at the Group’s general management.
Lastly, the Shareholders’ Meeting approved (with 85.62%
of the capital present), the mechanisms for the possible
adjustment of the sole quantification of the targets included
in the monetary incentive plans for the three-year periods of
2020-2022 and 2021-2023, consistent with the provisions
of the remuneration policy for 2022.
On May 23, 2022, with reference to the non-interest-
bearing “EUR 500 million Senior Unsecured Guaranteed
Equity-linked Bonds due 2025”, Pirelli & C. S.p.A. announced
that - following the resolution of the Shareholders’ Meeting
of May 18, 2022 to distribute a dividend of euro 0.161 per
ordinary share - the conversion price of the bonds was
changed from euro 6.235 to euro 6.1395, in accordance
with the regulations of the bond loan itself, effective as of
May 23, 2022.
On June 22, 2022, Pirelli’s Board of Directors approved
the signing with a selected pool of international banks of a
“sustainability-linked” credit facility for an amount of up
to euro 400 million with a maturity of 19 months, for the
further optimisation of the Group’s financial structure. The
credit facility is geared to Pirelli’s goal of reducing absolute
greenhouse gas emissions from the raw materials purchased
(Scope 3), which has been validated by the Science Based
Targets initiative (SBTi). This KPI (key performance indicator)
is among those identified in Pirelli’s first “Sustainability-
Linked Financing Framework”,
(the document which
contains the Company’s guidelines and commitments to its
stakeholders regarding sustainable finance).
On October 11, 2022, Pirelli’s Board of Directors co-opted
Li Fanrong to replace Ning Gaoning who - as announced on
October 8, 2022 - resigned from the Board of Directors
following the termination of his position as Chairman
of Sinochem Holdings Corporation Ltd. The Board of
Directors proceeded to appoint non-executive Director Li
Fanrong as Chairman, granting him the legal representation
of the Company, as well as all other powers attributed under
the existing Articles of Association, without prejudice to
the powers and prerogatives of the Board of Directors.
It was also resolved to appoint Li Fanrong as a member
of the Strategies Committee and the Nominations and
Successions Committee. Li Fanrong, who will remain in
64
Pirelli Annual Report 2022 office until the Shareholders’ Meeting for the approval
of the financial statements for 2022, does not possess
the requisites to qualify as
independent pursuant, to
the Corporate Governance Code and at the date of the
appointment did not hold shares and/or other financial
instruments issued by Pirelli.
On October 25, 2022 Pirelli repaid in advance and in full
the “Euro 600,000,000 1.375 per cent Guaranteed Notes
due January 25, 2023” (ISIN: XS1757843146) listed on the
Luxembourg Stock Exchange, whose residual outstanding
amount was euro 553 million. As provided for by the Issuer
Call Option regulations, the repayment – carried out using the
Company’s available cash - was at par plus interest accrued
up until the date of early repayment.
On October 29, 2022, Pirelli announced the start of a euro
114 million investment - already provided for by the 2021-
2022|2025 Industrial Plan, to be implemented during the
2022/2023 two-year period - aimed at further increasing
High Value production at the Mexican manufacturing site.
This investment – which was announced on the occasion
of the factory’s 10th anniversary - will enable the plant to
increase its production capacity by more than one million
units when fully operational, to a total of 8.5 million tyres
by the end of 2025 (from 7.2 million by the end of 2022),
with an expansion of the production area by 16 thousand
square metres to more than 220 thousand square metres.
This increase in production and further improvement to
the mix will be accompanied by the creation of 400 new
jobs, bringing the total workforce to 3,200 people when
fully operational.
On December 10, 2022 Pirelli was confirmed to be
in the Dow Jones Sustainability World and
included
European Index, following the
index review conducted
annually by S&P Global. This confirmation follows the
announcement of the global Top Score achieved by Pirelli on
October 21, 2022 in the ATX Auto Components sector
in S&P Global’s Corporate Sustainability Assessment for
2022, with a score of 85 points. Pirelli achieved the highest
score in several management areas, including Corporate
Governance and Due Diligence in the areas of human rights,
natural resource management and CO2 emissions reduction,
innovation and cyber security, and thoroughness and
transparency in social and environmental reporting.
In December 2022 Pirelli was confirmed, for the fifth
consecutive year, as a global leader in the fight against
climate change, earning a place on the Climate A List for
2022 drawn up by the CDP, the international non-profit
organisation that collects, disseminates and promotes
information on environmental issues. The “A” rating assigned
to Pirelli at the conclusion of the analysis process, was the
highest score, and was awarded to only 294 companies out
of more than 18,700 participants, assessed on the basis of
the effectiveness of their efforts to reduce emissions and
climate risks and to develop a low-carbon economy, as well
as on the basis of the completeness and transparency of
the information provided and the adoption of best practices
associated with environmental impact.
65
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 section “Alternative
Performance Indicators” for a more analytical description of
these indicators.
* * *
Given an external environment characterised by high
volatility (higher inflation, difficulties along the supply chain,
lockdowns in China), which was further exacerbated by
the problematic geopolitical scene (the Russian-Ukrainian
conflict), Pirelli closed 2022 with results that exceeded
the targets set last November 3rd, targets which had been
revised upwards during the course of the year. These results
confirmed the resilience of the business model, and reflect
the implementation of the key programmes of the 2021-
2022|2025 Industrial Plan.
On the Commercial front:
→ strengthened positioning of the high-end range of products
with particular focus on Car ≥19”, on Specialties and on
electric vehicles. During 2022 Pirelli outperformed the
market for Replacement Car ≥18” (+6.8% for Pirelli
volumes compared to +3.1% for the market), despite price
increases, thanks to the further renewal of the product
portfolio. Growth for Original Equipment Car ≥18” was
substantially consistent with that of the market (+8.5% for
Pirelli volumes, +8.9% for the market), but with an increasing
focus on higher tyre rim diameters (≥19” volumes grew by
approximately +6 percentage points and accounted for
78% of Original Equipment ≥18” volumes), and on electric
vehicles (which accounted for 17% of Original Equipment
≥18” volumes, which were 2.7 times higher compared to
2021);
→ a reduction in exposure to the Standard segment (-9.2% for
Pirelli Car ≤17” volumes compared to -3.4% for the market),
with a mix increasingly oriented towards the Replacement
channel and higher rim diameter products.
On the Innovation front:
→ over 300 new technical homologations were obtained for
the Car sector, concentrated mainly in ≥19” and Specialties;
→ the launch of nine new Car product lines (six in 2021), of
which four were dedicated to the SUV segment (the New
Scorpion, Scorpion All-Season SF2, Scorpion Winter and
Scorpion WeatherActive), with a particular focus on electric
or hybrid plug-in cars. The Winter range was expanded
DIRECTORS’ REPORT ON OPERATIONS with the introduction of a product line dedicated to colder
temperatures, (the Ice Zero Asymmetric) and other regional
lines (the Cinturato WeatherActive, Cinturato Rosso and
Powergy), with a focus on safety and comfort;
→ the two-wheel business sector was expanded to meet
the different needs of consumers. For Motorbikes, 3 new
ultra-performance products were launched for road and
off-road use. For Cycling the range was completed, thanks
to the introduction of 10 new products for Pirelli’s target
segments: Racing, Sport, Urban and Travel.
The Competitiveness Programme achieved gross benefits
of euro 136.0 million, which concerned:
→ 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 costs, by leveraging an optimised logistics and
warehouse network and measures for negotiating
purchases;
→ organisation, through the recourse to digital transformation.
For the Operations Programme:
→ the production capacity for Car increased to 74 million
pieces (+1 million compared to 2021) of which 54 million
were High Value (+3 million compared to 2021);
→ plant saturation levels stood at approximately 90%, >90%
for High Value;
→ the production of cycling tyres began at the Bollate plant;
→ the expansion of the factory in Mexico began, which will
reach a capacity of 8.5 million High Value tyres by 2025
(7 million by December 31, 2022);
→ a plan of mitigating actions was implemented to ensure
the continuity of production and business activities, in the
face of the volatility triggered by the Ukraine crisis and the
energy crisis in Europe.
For the Digitisation Programme:
→ the Digital Solutions Centre opened in Bari for the
development of Machine Learning and Artificial Intelligence
software and algorithms to support business functions, the
realisation of new digital products and services for the
Tyre world;
→ the implementation of the new CRM integration for
customer relationship management was completed;
→ coverage for the main factories with Industrial Internet
of Things (IioT) technology to improve the efficiency of
production processes began;
→ the cloud strategy for all central IT systems was completed.
The new fully upgraded infrastructure guarantees business
continuity and reduced cyber security risks, lower operating
costs and a reduction in CO2 emissions (-40% compared
to the previous infrastructure).
Regarding sustainability, during 2022 Pirelli further improved
its performance, with the acceleration of decarbonisation,
and inclusion in the main sustainability indexes at international
level. In more detail:
→ on the people front, Pirelli implemented new measures
concerning the employee experience and the consolidated
programmes for employee flexibility and well-being. New
initiatives were launched to improve the attraction and
retention of talent, as well as to foster the development of a
corporate culture which is increasingly based on inclusion
and valuing diversity. This attention and protection of
employees, led to a further drop in the work accident
frequency index, which fell by -4.5% compared to 2021
(from 0.21 to 0.20).
→ on the product front, the percentage of new IP Code
(Product Identification Code) tyres placed on the market,
which comply with the highest classes (A or B) of
European labelling for rolling resistance (an environmental
aspect with an indirect impact on vehicle CO2 emissions)
rose to 50% of the total, consistent with Pirelli’s target of
70% by 2025. At the same time, the percentage of new
IP Code tyres produced globally, which complied with
European labelling classes A/B for grip on the wet (an
aspect with a direct impact on safety), including grip on
the ice (the ICE pictogram), was confirmed as 93% of the
total. Also as a reflection of this trend, revenues from Eco
& Safety Performance12 tyres reached 67% of total Car
tyre sales (63% in 2021). The average rolling resistance
of Pirelli tyres worldwide decreased by more than -3%
compared to 2021 and by -13.6% compared to 2015.
In terms of Tyre Wear, the new product lines launched
in 2021-2022 (the Cinturato and Scorpion), featured an
improvement in the wear rate of up to 33% compared
to the previous generation.
→ on the innovative and recycled materials front, the
commitment to Research & Development enabled an
acceleration in the use of silica from rice husks, a bio-
circular material, which reached 5% of the total silica
used in 2022 (compared to 1% in 2021 and an expected
10% for 2023.
→ on the natural rubber front, initiatives continued to protect
the sustainability of natural rubber, which already in 2021,
had seen Pirelli produce the world’s first tyres in natural
rubber and rayon certified by the Forest Stewardship
Council (FSC). In addition to the ongoing commitment to
the traceability of natural rubber, the multi-year project
in partnership with the BMW GROUP and the BirdLife
International NGO in the Hutan Harapan area (Sumatra
Island - Indonesia) continued, with the aim of protecting
2,700 hectares of rainforest and its biodiversity, and
of improving the quality of life of the local population
involved in natural rubber production.
12 Calculated on the total number of labelled products on the global market which are reparametered to
European labelling A/B/C standards.
66
Pirelli Annual Report 2022 → diversified its service providers for logistics services
in order to ensure the continuity of supplies of finished
products and raw materials;
→ guaranteed its financial support through local banks.
Pirelli’s results for 2022 were characterised by:
→ net sales which equalled euro 6,615.7 million, an increase
of +24.1% compared to 2021, and higher than the target of
approximately euro 6.5 billion indicated on November 3,
2022, thanks to a strong price/mix improvement (+19.7%,
a target of ≥+17%), which more than offset volume trends
(-1%, stable on 2021, the target), due to increased market
weakness during the fourth quarter;
→ EBIT adjusted which amounted to euro 977.8 million (an
implied target of euro 960 million), an increase of +19.9%
compared to euro 815.8 million for 2021, with profitability
at 14.8% (a target of approximately 15%), supported by the
contribution of internal levers (price/mix and efficiencies),
which more than offset the strong impact of raw materials
and inflation;
→ a net income/loss which amounted to an income of
euro 435.9 million (euro 321.6 million for 2021) which
reflected an improved operational performance, a net
income/(loss) adjusted which amounted to an income
of euro 570.4 million net of one-off, non-recurring and
restructuring expenses, and the amortisation of intangible
assets recognised in the PPA (euro 468.8 million for 2021);
→ a Net Financial Position which at December 31, 2022
showed a debt of euro 2,552.6 million (euro 2,907.1 million
at December 31, 2021), with a cash generation before
dividends of euro 515.5 million, a marked improvement
compared to the figure for 2021 (euro 431.2 million) and to
the target (approximately euro 480 million), was supported
by an improved operating performance and the careful
management of working capital. There was a reduction
in the level of debt: EBITDA adjusted of 1.8x compared to
2.4x for 2021, and to the 1.9x indicated in November 2022
as the target for the year;
→ a liquidity margin which equalled euro 2,536.6 million;
→ ROIC (net of goodwill and the intangible components of the
PPA) which equalled 20.3%, an improvement compared
to the figure for 2021 (17.9%) and to the target for 2022
(approximately 19%), thanks to the improvement in the
operational performance of the business.
→ on the environmental front, in keeping with the goal of
carbon neutrality by 2030, the Group’s decarbonisation
plan for the value chain continued in 2022. In terms of
absolute CO2 emissions, in 2022 Pirelli obtained an
upgrade from the SBTi for its Science Based Target
of 1.5°C, and formalised its commitment to SBTI’s Net
Zero target. Regarding the use of renewable electricity
in particular, in 2022, 100% of the electricity purchased
in North America was certified as from renewable
sources, in addition to the certified 100% renewable
electricity purchased in Europe since 2021. Globally,
74% of total electricity used is from renewable sources
(compared to 62% in 2021), with absolute Group CO2
emissions dropping by -14% compared to 2021 and by
-41% compared to 2015 (base year of the Science Based
Target for Group’s sites - Scopes 1 and 2). Absolute supply
chain emissions decreased by -3% compared to 2021
and by -8.9% compared to 2018 (base year of the Science
Based Target for the supply chain - Scope 3).
→ in the area of sustainable finance, in May the Sustainability
Linked Financing Framework was published, and in
January 2023, the first benchmark-size sustainability-
linked bond was placed in the global tyre sector.
In 2022 Pirelli also received a favourable assessment from
the main Sustainable Finance Indexes. Following the
annual review of the Dow Jones Sustainability Index by
S&P Global, the Company achieved the top score in the
global Auto Components Sector, followed by the maximum
“top 1%” ranking in the 2023 Sustainability Yearbook.
Pirelli was also once again recognised as a leader in the fight
against climate change and placed on the CDP “Climate A
List”, as well as being awarded top rating for the sector in
the FTSE4GOOD index and “ESG Top Rated” recognition
from Sustainalytics.
ACTIVITIES IN RUSSIA
As announced on May 10, 2022, Pirelli has suspended
investments in its factories in Russia, with the exception
of those intended for the safety of carrying out operations.
Russia accounted for 4% of turnover and 11% of total
capacity for 2022.
In compliance with international sanctions imposed by
the EU, starting from the second half-year of 2022, which
included, amongst other things, a ban on the import of
Russian finished products into the EU, and a ban on the
export of some raw materials to Russia, Pirelli has:
→ geared production towards the domestic market;
→ identified alternative sources for
import/export
streams, with the gradual activation of the sourcing of
supplies of finished products from Turkey and Romania
to replace Russian exports to European markets and the
use of mainly local suppliers of raw materials to replace
European suppliers;
67
DIRECTORS’ REPORT ON OPERATIONS The Group’s Consolidated Financial Statements can be summarised as follows:
(in millions of euro)
2022
2021
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
EBIT
% of net sales
Net income/(loss) from equity investments
Financial income/(expenses)
Net income/(loss) before taxes
Taxes
Tax rate %
Net income/(loss)
Earnings/(loss) per share (in euro per basic share)
Net income/(loss) adjusted
Net income/(loss) attributable to owners of the Parent Company
6,615.7
1,408.3
21.3%
1,335.7
20.2%
977.8
14.8%
(113.7)
(72.6)
791.5
12.0%
5.8
(201.7)
595.6
(159.7)
26.8%
435.9
0.42
570.4
417.8
(°) The adjustments refer to one-off, non-recurring and restructuring expenses to the amount of euro 72.6 million (euro 101.4 million for 2021). For 2021, this item also included expenses relative to
the retention plan approved by the Board of Directors on February 26, 2018 to the amount of euro 4.7 million and COVID-19 direct costs to the amount of euro 18.9 million.
5,331.5
1,210.7
22.7%
1,085.7
20.4%
815.8
15.3%
(113.7)
(125.0)
577.1
10.8%
4.0
(144.3)
436.8
(115.2)
26.4%
321.6
0.30
468.8
302.8
68
Pirelli Annual Report 2022 (in millions of euro)
12/31/2022
12/31/2021
8,911.1
1,457.7
636.5
8,912.4
1,092.2
659.2
(1,973.3)
(1,626.4)
120.9
1.8%
42.3
163.2
2.5%
9,074.3
5,453.8
1,067.9
2,552.6
5,323.8
397.7
79.7
263.9
4.0%
247.1
5.3%
31,301
18
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
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)
69
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)
1Q
2Q
3Q
4Q
TOTAL YEAR
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
1,521.1
1,244.7
1,675.9
1,320.1
1,836.3
1,414.5
1,582.4
1,352.2
6,615.7
5,331.5
22.2%
19.0%
26.9%
19.8%
29.8%
21.2%
17.0%
14.8%
24.1%
18.7%
333.1
266.5
362.2
307.4
383.9
320.1
329.1
316.7
1,408.3
1,210.7
21.9%
21.4%
21.6%
23.3%
20.9%
22.6%
20.8%
23.4%
21.3%
22.7%
325.6
223.5
350.2
278.5
367.4
304.8
292.5
278.9
1,335.7
1,085.7
21.4%
18.0%
20.9%
21.1%
20.0%
21.5%
18.5%
20.6%
20.2%
20.4%
228.5
168.8
253.1
208.6
271.9
221.4
224.3
217.0
977.8
815.8
15.0%
13.6%
15.1%
15.8%
14.8%
15.7%
14.2%
16.0%
14.8%
15.3%
(28.4)
(28.4)
(28.5)
(28.5)
(28.4)
(28.4)
(28.4)
(28.4)
(113.7)
(113.7)
(7.5)
(43.0)
(12.0)
(28.9)
(16.5)
(15.3)
(36.6)
(37.8)
(72.6)
(125.0)
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
EBIT
% of net sales
192.6
97.4
212.6
151.2
227.0
177.7
159.3
150.8
791.5
577.1
12.7%
7.8%
12.7%
11.5%
12.4%
12.6%
10.1%
11.2%
12.0%
10.8%
Net income/(loss) from equity investments
0.8
(0.1)
1.5
2.1
0.8
(0.4)
2.7
2.4
5.8
4.0
Financial income/(expenses)
(43.6)
(40.0)
(46.0)
(31.8)
(55.5)
(35.1)
(56.6)
(37.4)
(201.7)
(144.3)
Net income/(loss) before taxes
149.8
57.3
168.1
121.5
172.3
142.2
105.4
115.8
595.6
436.8
Taxes
Tax rate %
(40.0)
(15.1)
(44.9)
(32.1)
(46.0)
(37.6)
(28.8)
(30.4)
(159.7)
(115.2)
26.7%
26.4%
26.7%
26.4%
26.7%
26.4%
27.3%
26.3%
26.8%
26.4%
Net income/(loss)
109.8
42.2
123.2
89.4
126.3
104.6
76.6
85.4
435.9
321.6
* before exchange rate effect and hyperinflation in Argentina and Turkey.
Net sales amounted to euro 6,615.7 million, an increase of +24.1% compared to 2021, +18.7% excluding the
combined impact of the exchange rate effect and the adoption of hyperinflation accounting in Argentina and
Turkey (totalling +5.4%).
High Value sales were confirmed at 71% of total revenues for the Group.
70
Pirelli Annual Report 2022 The following table shows the market drivers for net sales performance compared to the same periods of the
previous year:
Volume
of which:
- High Value
- Standard
Price/mix
Change on a like-for-like basis
Exchange rate effect /Hyperinflation accounting
in Argentina and Turkey
Total change
1Q
2Q
2022
3Q
4Q
Total year
-1.4%
-0.6%
1.8%
-3.8%
-1.0%
5.8%
-9.7%
20.4%
19.0%
3.2%
22.2%
5.7%
-7.9%
20.4%
19.8%
7.1%
26.9%
8.2%
-5.7%
19.4%
21.2%
8.6%
29.8%
1.6%
-8.8%
18.6%
14.8%
2.2%
17.0%
4.7%
-6.3%
19.7%
18.7%
5.4%
24.1%
Volumes declined slightly (-1%), reflecting the weakness in demand during the final quarter of the year. The trend
was different for High Value (Car and Motorcycle) with volumes increasing by +4.7%, while for the Standard
segment Pirelli reported a decrease of -6.3%.
More specifically for Car, Pirelli recorded stable volumes compared to 2021, against a market decline of -1.7%:
→ Car ≥18” volumes grew by +7.6%, compared to +5.4% for the market with a stronger positioning for the
Replacement channel (+6.8% for Pirelli volumes compared to +3.1% for the market), particularly in North
America and APAC. Volumes increased for the Original Equipment channel (+8.5%, with market growth at
+8.9%), where Pirelli has continued its selectivity strategy, with its increased focus on higher tyre rim diameters
(≥19’’) and new technologies (EV);
→ reduced exposure to Car ≤17” (-9.2% for Pirelli volumes, compared to -3.4% for the market). For the
Replacement channel (-4.7% compared, to -5.0% for the market), the increased focus on the product
mix continued in favour of higher rim diameters (16” and 17”). The trend for Original Equipment (-22.6%
compared, to +2.2% for the market), reflected both the increased selectivity for this channel and the
impact of the Russian crisis, following the freeze on automobile production by the main OEMs (Original
Equipment Manufacturers).
For the fourth quarter, Pirelli reported a -3.8% decrease in overall volumes (Car and Motorcycle), which reflected
the aforementioned slowdown in market demand. More specifically, Car volumes declined by -7.1%, consistent
with the drop in market demand mainly due to the general slowdown in automobile production, the lockdowns
in China and the delayed start of the winter campaign in Europe. In this context, Pirelli outperformed in the
Car ≥18’’ segment (+1.9% compared to +0.7% for the market), particularly for the Original Equipment channel
(+8.5% compared to +6.7% for the market), while Replacement channel performance (-3.5%) was consistent
with that of the market but with gains in market share for ≥19’’ tyres.
Pirelli volumes for Car ≤17” declined for the fourth quarter by -18.5% (-9.1% for the market), with a -17.8%
decline for the Original Equipment channel (-2.0% for the market) and -18.7% for the Replacement channel
(-11.2% for the market), due to reduced exposure for this channel (limited mainly to Russia and South America)
and to greater selectivity.
The trend for Motorcycle volumes was negative (-6.8 % for volumes for 2021, -4% for the fourth quarter), due
to the decline in Standard sales.
The price/mix which sharply improved during 2022 (+19.7%) was supported by:
→ price increases in all regions to counter rising inflation in the costs of production factors;
→ an improved product mix, this latter linked to the gradual conversion from Standard to High Value, and to the
improved micro-mix within both segments.
71
DIRECTORS’ REPORT ON OPERATIONS
Price/mix for the fourth quarter equalled +18.6%, slightly lower than for previous quarters (+20.4% for the
price/mix for the first and second quarters, +19.4% for the third quarter), thanks to a solid price discipline and
to the aforementioned improvement in the product mix, which more than offset the trend for the channel mix
which was linked to the aforementioned outperformance by the Original Equipment channel, compared to the
Replacement channel.
The positive impact of the exchange rate effect (+5.4% for 2022, +2.2% for the fourth quarter), reflected the
appreciation of the main currencies against the euro (+12% for the US dollar, +7% for the Chinese renminbi,
+17% for the Brazilian real and +22% for the Russian rouble, for 2022).
The performance for net sales according to geographical region was as follows:
2022
%
yoy
Organic YoY*
(in millions of euro)
2021
%
Europe and Turkey
2,441.6
36.9%
North America
APAC
South America
Russia, Nordics and MEAI
1,592.1
1,093.1
902.2
586.7
24.1%
16.5%
13.6%
8.9%
Total
6,615.7
100.0%
* before exchange rate effect and hyperinflation in Argentina and Turkey.
18.6%
39.0%
7.3%
35.2%
33.1%
24.1%
19.0%
26.9%
0.9%
27.7%
23.8%
18.7%
38.6%
21.5%
19.1%
12.5%
8.3%
100.0%
EBITDA adjusted amounted to euro 1,408.3 million (euro 1,210.7 million for 2021), with a margin of 21.3%
(22.7% for 2021), which reflected the dynamics described in the following paragraph in terms of EBIT adjusted.
EBIT adjusted for 2022 amounted euro 977.8 million (euro 815.8 million for 2021), with an EBIT margin adjusted
of 14.8% (15.3% for 2021). The contribution of internal levers (price/mix and efficiencies), more than offset the
negativity of the external scenario.
More specifically, the growth in EBIT adjusted reflected:
→ the positive contribution of the price/mix (euro +890.7 million) and structural efficiencies (euro +136.0
million), which more than offset the decline in volumes (euro -21.8 million) due to the weakness in market
demand during the fourth quarter, the increase in the cost of raw materials (euro -491.5 million), the negative
impact of inflation in the costs of production factors (euro -327.4 million), the increased depreciation and
amortisation (euro -30.0 million) and the increase in other costs (euro -24.7 million, the latter concentrated
in the third quarter);
→ the positive impact of the exchange rate effect to the amount of euro 30.7 million, but with a dilutive
impact on margins.
For the fourth quarter EBIT adjusted amounted to euro 224.3 million, an increase compared to euro 217.0
million for the fourth quarter of 2021, thanks to internal levers, whose contribution more than offset the
negativity of the external scenario (a decline in demand, raw materials and inflation), as shown in the table below.
The EBIT margin adjusted which stood at 14.2%, had decreased compared to the fourth quarter of 2021 and
previous quarters, due to the aforementioned drop in demand and the increased impact of inflation in the costs
of production factors, (mainly energy and transport costs following the renewal of contracts), compared to
previous quarters.
72
Pirelli Annual Report 2022 2021 EBIT adjusted
168.8
208.6
221.4
217.0
815.8
1Q
2Q
3Q
4Q
TOTAL YEAR
(in millions of euro)
- Internal levers:
Volumes
Price/mix
Amortisation and depreciation
Efficiencies
Other
- External levers:
Cost of production factors (commodities)
Cost of production factors (labour/energy/other)
Exchange rate effect
Total change
2022 EBIT adjusted
(7.4)
206.2
(4.8)
28.6
4.3
(119.9)
(53.3)
6.0
59.7
228.5
(3.5)
229.2
(4.7)
23.1
(5.4)
(116.1)
(87.6)
9.5
44.5
253.1
11.0
242.0
(10.3)
33.9
(23.8)
(128.7)
(85.8)
12.2
50.5
271.9
(21.9)
213.3
(10.2)
50.4
0.2
(126.8)
(100.7)
3.0
7.3
224.3
(21.8)
890.7
(30.0)
136.0
(24.7)
(491.5)
(327.4)
30.7
162.0
977.8
EBIT amounted to euro 791.5 million (euro 577.1 million for 2021), and included the amortisation of intangible
assets identified in the PPA to the amount of euro 113.7 million, consistent with 2021, and one-off, non-recurring
and restructuring expenses and other expenses (including the depreciation and amortisation of tangible and
intangible fixed assets) to the amount of euro 72.6 million, a sharp decrease compared to the figure for 2021
(euro 125.0 million, which reflected costs relative to the transfer of production in Brazil from the Gravatai factory
to the Campinas factory, and costs relative to structural rationalisation plans).
Net income/(loss) from equity investments amounted to an income of euro 5.8 million, (euro 4.0 million
for 2021).
Net financial expenses for 2022 amounted to euro 201.7 million compared to euro 144.3 million for 2021.
The changed market conditions and the interventions by central banks were reflected in the cost of debt, which
at December 31, 2022, calculated as the average over the last twelve months, had increased to 4.04% compared
to 2.38% at December 31, 2021. This increase reflected the rise in interest rates and costs in particular, which
reflected the scarceness of liquidity in the financial markets for the hedging of risk in Brazil and Russia. Net of
this effect, the average cost of debt would have stood at 3.49%. This increase was partially offset by a reduction
in the financial expenses of the Parent Company, thanks to an improvement in the contractually agreed financial
terms for the reduction of the Group’s financial leverage.
Taxes for 2022 amounted to euro 159.7 million against a net income before taxes of euro 595.6 million, with a
tax rate of 26.8%. In 2021, taxes had amounted to euro -115.2 million against a net income before taxes of euro
436.8 million (a tax rate of 26.4%).
Net income/(loss) amounted to an income of euro 435.9 million, an increase of +35.5% compared to an income
of euro 321.6 million for 2021. This dynamic mainly reflected the improvement in operating performance.
73
DIRECTORS’ REPORT ON OPERATIONS Net income/(loss) adjusted amounted to an income of euro 570.4 million, compared to an income of euro
468.8 million for 2021. The following table shows the calculations:
Net income/(loss)
Amortisation of intangible assets included in PPA
One-off, non-recurring and restructuring expenses
Retention plan
Taxes
Net income/(loss) adjusted
(in millions of euro)
2022
2021
435.9
113.7
72.6
-
(51.8)
570.4
321.6
113.7
120.3
4.7
(91.5)
468.8
Net income/(loss) attributable to the owners of the Parent Company amounted to an income of euro 417.8
million, compared to an income of euro 302.8 million for 2021.
Equity went from euro 5,042.6 million at December 31, 2021 to euro 5,453.8 million at December 31, 2022.
Equity attributable to the owners of the Parent Company at December 31, 2022 equalled euro 5,323.8
million, compared to euro 4,908.1 million at December 31, 2021.
This change is shown in the table below:
Equity at 12/31/2021
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 Turkey
Effect of hyperinflation in Argentina
Other
Total changes
Equity at 12/31/2022
(in millions of euro)
Group
Non-controlling interests
Total
4,908.1
134.5
5,042.6
54.8
417.8
34.2
(20.2)
(161.0)
16.9
72.1
1.1
415.7
5,323.8
1.8
18.1
-
-
56.6
435.9
34.2
(20.2)
(24.4)
(185.4)
-
-
-
(4.5)
130.0
16.9
72.1
1.1
411.2
5,453.8
74
Pirelli Annual Report 2022 The table below shows the reconciliation between the equity of the Parent Company and the consolidated
equity attributable to the Owners of the Parent Company:
Share Capital
Treasury
reserves
Net income/
(loss)
Total
(in millions of euro)
Equity of Pirelli & C. S.p.A. at 12/31/2022
1,904.4
2,781.1
252.5
4,938.0
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
-
-
-
-
-
-
438.8
438.8
4,552.7
(4,636.6)
-
-
306.8
(306.8)
(2.4)
33.3
4,552.7
(4,636.6)
-
30.9
Consolidated equity of the Group at 12/31/2022
1,904.4
3,001.6
417.8
5,323.8
Net financial position showed a debt of euro 2,552.6 million, compared to a debt of euro 2,907.1 million at
December 31, 2021. 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)
12/31/2022
12/31/2021
800.4
89.0
15.0
3,690.1
396.5
-
4,505.5
(1,289.7)
(246.9)
(270.9)
(14.2)
2,683.8
(26.4)
(104.8)
2,552.6
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
* 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 10.5 million at December 31, 2022 (euro 9.3 million at December 31, 2021).
75
DIRECTORS’ REPORT ON OPERATIONS The structure of gross debt which amounted to euro 4,505.5 million, was as follows:
12/31/22
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)
Convertible bond
Schuldschein
Bilateral facilities
Bilateral EUR 400m
ESG 2021 3y facility
Club Deal EUR 1.6bn
ESG 2022 5y
Club Deal EUR 400m
ESG 2022 19m
Club Deal EUR 800m
ESG 2020 5y
Bank debt held
by subsidiaries
Other financial debt
Lease liabilities
470.5
242.6
723.8
399.2
597.6
399.7
797.2
-
222.6
124.9
-
-
-
-
-
-
598.9
399.2
-
399.7
470.5
20.0
-
-
-
-
-
797.2
324.1
313.6
65.3
485.5
65.3
89.0
10.5
-
77.3
-
-
66.1
Total gross debt
4,505.5
815.4
1,485.6
1,353.8
18.1%
33.0%
30.0%
-
-
-
-
-
-
-
-
-
-
-
-
-
597.6
-
-
-
-
-
-
-
-
-
-
-
-
-
50.8
50.8
1.1%
46.9
155.4
644.5
155.4
14.3%
3.5%
At December 31, 2022 the Group had a liquidity margin equal to euro 2,536.6 million, composed of euro
1,000.0 million in the form of non-utilised committed credit facilities, and euro 1,289.7 million in cash and cash
equivalents, in addition to financial assets at fair value through the Income Statement to the amount of euro
246.9 million. The liquidity margin guarantees coverage for maturities for borrowings from banks and other
financial institutions, until the end of the first quarter of 2025.
76
Pirelli Annual Report 2022 Net cash flow for the 2022 financial year can be summarised as follows:
1Q
2Q
3Q
4Q
TOTAL
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
(in millions of euro)
EBIT adjusted
228.5
168.8
253.1
208.6
271.9
221.4
224.3
217.0
977.8
815.8
Amortisation and depreciation
(excluding PPA amortisation)
Investments in intangible and owned
tangible assets (CapEx)
104.6
97.7
109.1
98.8
112.0
98.7
104.8
99.7
430.5
394.9
(48.6)
(89.8)
(67.1)
(63.0)
(73.0)
(60.5)
(209.0)
(132.3)
(397.7)
(345.6)
Increases in right of use
(8.1)
(26.7)
(33.2)
(23.2)
(9.2)
(9.7)
(29.2)
(62.8)
(79.7)
(122.4)
Change in working capital and other
(841.6)
(717.2)
138.6
73.3
(49.6)
(61.7)
830.5
756.5
77.9
50.9
Operating net cash flow
(565.2)
(567.2)
400.5
294.5
252.1
188.2
921.4
878.1
1,008.8
793.6
Financial income / (expenses)
(43.6)
(40.0)
(46.0)
(31.8)
(55.5)
(35.1)
(56.6)
(37.4)
(201.7)
(144.3)
Taxes paid
(32.9)
(37.1)
(71.5)
(34.9)
(46.8)
(26.8)
(54.3)
(26.8)
(205.5)
(125.6)
Cash-out for non-recurring,
restructuring expenses and other
(23.6)
(28.9)
(11.9)
(40.4)
(11.0)
(33.4)
(11.8)
(19.0)
(58.3)
(121.7)
Dividends paid to minority shareholders
-
-
(24.4)
-
(0.2)
-
0.2
-
(24.4)
-
Differences from foreign currency
translation and other
Net cash flow before dividends, extraordinary
transactions and investments
(7.6)
15.9
(37.5)
(14.9)
1.9
11.4
39.8
13.0
(3.4)
25.4
(672.9)
(657.3)
209.2
172.5
140.5
104.3
838.7
807.9
515.5
427.4
(Acquisition) / Disposals of investments
-
3.8
-
-
-
-
-
-
-
3.8
Net cash flow before dividends paid
by the Parent Company
(672.9)
(653.5)
209.2
172.5
140.5
104.3
838.7
807.9
515.5
431.2
Dividends paid by the Parent Company
-
-
(159.9)
(79.3)
(0.3)
(0.5)
(0.8)
(0.1)
(161.0)
(79.9)
Net cash flow
(672.9)
(653.5)
49.3
93.2
140.2
103.8
837.9
807.8
354.5
351.3
Net cash flow before dividends paid by the Parent Company amounted to euro 515.5 million, compared to a
cash flow of euro 431.2 million for 2021. Operating net cash flow had increased significantly and was positive
to the amount of euro 1,008.8 million (euro 793.6 million for 2021), and which reflected:
→ the improved operating performance (EBITDA adjusted for the 2022 financial year to the amount of euro
1,048.3 million, compared to euro 1,210.7 million for the 2021 financial year);
→ investments in property, plant and equipment and intangible assets to the amount of euro 397.7 million for
2022 (compared to euro 345.6 million for 2021), aimed mainly at High Value activities and at the constant
improvement of the mix and quality in all factories. The figure for capital expenditure was significant for
the fourth quarter of 2022, compared to the same period of the previous year (euro 209.0 million in 2022
compared to euro 132.3 million in 2021), impacted by the rescheduling and geographical reallocation of
investment projects carried out during the course of the year as a result of the changed external environment,
as well as delays in the delivery of some machinery during the first nine months of the year, due to the lack of
availability of electronic components;
→ the decrease in the value of the right of use to the amount of euro 42.7 million associated with the new lease
agreements (euro 79.7 million for 2022 compared to euro 122.4 million for 2021);
→ the improvement in the management of “working capital and other” which was the result of:
→ the careful management of inventories (22.0% of revenues) which decreased by approximately 1 percentage
point for the fourth quarter of 2022, thanks to the normalisation of raw materials inventories whose impact
had increased by more than 2 percentage points during the first nine months of the year, due to inflation
and measures to contain supply chain risks. Finished product inventories were stable (16% of revenues,
which was substantially unchanged from the figure at December 31, 2021);
77
DIRECTORS’ REPORT ON OPERATIONS → the trend in trade payables saw a slight decline in terms
of their impact on revenues compared to the previous
year (29.8% of revenues at December 31, 2022
compared to 30.5% at December 31, 2021), which
reflected the impact of the high level of investments
during the fourth quarter of 2022, and the reduction in
raw material inventories during the same period;
→ the reduction in trade receivables following the
slowdown in sales growth during the fourth quarter,
(9.6% of revenues for 2022 compared to 12.4% for
2021). This decrease compared to the figure at
September 30, 2022 (18.3% of sales), was mainly due
to the usual seasonality of business during the final
quarter of the year.
Of note was the significant reduction in cash-out for non-
recurring and restructuring expenses to the amount of euro
63.4 million (euro -58.3 million for 2022 compared to euro
-121.7 million for 2021), which mitigated the effects:
→ of increased financial expenses (euro -201.7 million for
2022 compared, to euro -144.3 million for 2021);
→ of increased taxes (euro -205.5 million for 2022 compared
to euro -125.6 million for 2021);
→ of dividends paid to minority shareholders to the amount of
euro 24.4 million in 2022 (no dividends were paid in 2021);
→ of differences from foreign currency translation and
other to the amount of euro -3.4 million (euro +25.4
million for 2021).
Net cash flow before dividends paid by the Parent
Company for the fourth quarter of 2022 amounted to euro
838.7 million, an improvement of euro 30.8 million compared
to euro 807.9 million for the corresponding period of the
previous year, thanks to the trend in operating net cash flow.
RESEARCH
AND DEVELOPMENT
Research and Development plays a central role at Pirelli. The
activity, which involves approximately 2,000 people, (equal
to approximately 7% of the total employee headcount of
the Group) between the Milan headquarters and its twelve
technology centres located all over the world, is based on
an “Open Innovation” model, that involves external partners
- suppliers, universities and the vehicle manufacturers
themselves - in order to anticipate the sector’s technological
innovations and meet the needs of the end consumer.
Central to Pirelli’s innovation strategy is the Eco & Safety
Design approach, which aims to maximise its environmental
performance and at the same time safety for people, by
embracing the entire life cycle of the product with a view to a
circular economy.
A part of this, is the collaboration between Pirelli and the Milan
Polytechnic which continued during the course of 2022,
and which involved the integrated use of the university’s
dynamic simulator with the static simulator at Pirelli’s Milan
R&D centre, for virtual tyre development activities which are
fundamental to Pirelli’s Eco & Safety strategy.
Research and Development expenses for the 2022
financial year totalled euro 264 million, (4% of net sales),
of which euro 247 million was earmarked for High Value
activities (5.3% of High Value revenues).
The development of CYBER™ technologies also continued,
which, thanks to sensor technology inside the tyre, will
contribute in making essential information available in order
to improve vehicle performance and driving safety. The Pirelli
Cyber Tyre system, consisting of a sensor in each tyre and
software integrated into the car’s electronics, was mounted
for the first time in the world on the McLaren Artura in 2021.
March saw the start of production for cycling tyres at
the Pirelli plant in Bollate, which is now the only factory to
produce “Made in Italy” bicycle tyres on an industrial scale.
This factory is in fact dedicated to the production of high-
tech tyres, designed both for amateurs and for the athletes
from some of the top UCI cycling teams, including Trek-
Segafredo, AG2R Citroën, and from the MTB teams such
as Wilier Triestina-Pirelli, all of which are already Pirelli’s
partners and who play an active role in tyre development.
The Bollate factory is unique in this sector in terms of the
innovative processes developed in the fields of compound
creation (continuous mixing), extrusion and robotisation.
INNOVATION IN PRODUCTS,
MATERIALS AND PRODUCTION PROCESSES
During the course of 2022, collaborations continued with
the major manufacturers of Premium and Prestige vehicles
continued.
In the Prestige segment, where Pirelli is the absolute leader
with an Original Equipment market share of more than 50%,
several innovations were introduced;
→ the P Zero Trofeo R for the Lamborghini Urus Performante,
which conquered the Pikes Peak International Hill Climb,
setting a record time for the category;
→ the P Zero Corsa for the Utopia, Pagani’s most recent
hypercar, which was unveiled at the Leonardo da Vinci
National Museum of Science and Technology in Milan;
→ the P Zero and Scorpion Zero All Seasons for the
powerful Aston Martin DBX707 SUV.
Lastly, for the first time in its history, a Porsche 911 - the Dakar,
a reinterpretation of the coupé in an all-terrain version with
technical characteristics that make it suitable for going off-
road - has been fitted with a Pirelli off-road tyre as Original
Equipment: the Scorpion All Terrain Plus which is designed
for the most demanding off-road conditions.
For the Premium segment, however, the special relationship
78
Pirelli Annual Report 2022 with companies such as Alfa Romeo, Audi, BMW, Mercedes,
Jaguar, Land Rover and Ford continued. In 2022, for example,
the P Zero tyres were developed in conjunction with the new
Alfa Romeo Tonale, Alfa Romeo’s first ordinary production
electric vehicle.
In 2022, Pirelli, as part of the renewal of the Scorpion range,
dedicated to Sports Utility Vehicles (SUV), launched:
→ the Pirelli Scorpion, a safe and quiet summer tyre
dedicated to the new sustainable mobility with an
asymmetric tread pattern which, thanks to greater rigidity
and to the configuration of the longitudinal and lateral
tread recesses, allows for improved braking on both dry
(+7%) and wet (+7%) surfaces compared to the previous
product. The more homogeneous footprint of the new
tread also reduces rolling resistance and consequently
fuel consumption, or battery consumption for an electric
vehicle. The compound for the new Scorpion, developed
using a process patented by Pirelli, and derived from
its motorsport experience, contains a new generation
synthetic rubber, and has the ability to change behaviour
according to operating temperatures.
→ the Scorpion All Season SF2, a tyre that boasts excellent
performance even in winter conditions, as certified by the
tests required by European regulations. The directional
design of the Scorpion All Season SF2’s tread pattern allows
the tyre to trap snow, which improves vehicle control on
snow-covered surfaces, and to shed water in rainy situations
and maintain constant contact with the ground. When driving
in wintery conditions and in low temperatures, the tread
sipes remain open to promote better braking on snow, while
when braking in dry or wet conditions, they close to generate
more grip on the road surface. The tread compound is
characterised by innovative components, including bi-
phase polymeric materials bonded to silica particles: a
solution which also guarantees - in addition to mobility at
low temperatures - low rolling resistance, resulting in lower
fuel consumption and/or longer battery life.
→ the Scorpion Winter 2 tyre features a tread with variable
“extendable” geometrical sipes which, thanks to their
3D structure, change shape according to the state of
wear of the tread, allowing it to perform on snowy, wet
and dry surfaces even when worn, and to last longer than
the previous product. In total, there are approximately 51
metres of siping which promote greater grip on snowy
terrain, with a +20% increase in the tyre surface area useful
for grip on the snow, compared to the previous Scorpion.
Presented in the Motorbike field were:
→ the DIABLO ROSSO IV Corsa, a high performance
hypersport product from the DIABLO ROSSO family,
the latter being voted in 2022 as the best supersport
tyre on the market by German MOTORRAD magazine.
Thanks to a bi-compound pattern for the front and rear,
to a slicker tread pattern compared to DIABLO ROSSO IV,
and to racing-derived technologies applied to its profiles
and structures, the new tyre delivers better grip, precise
feedback and consistent performance even at high speeds.
79
For Cycling, Pirelli presented several new product lines:
→ the P ZERO Race 4S, the four-season version of the P
ZERO clincher, characterised by the SmartEVO compound
designed to provide high levels of performance in terms
of grip, conditions of use, rolling resistance and reactivity
of the tyre, even in colder climates;
→ the P ZERO Race 150°, a special version of the racing
clincher dedicated to the Company’s 150th Anniversary;
→ the Scorpion Enduro and Scorpion E-MTB, from the
enduro and longer distance range, which were updated
to allow for an even broader and more complete use. In
addition to the new design and the new SmartGRIP Gravity
compound, for the Enduro the ProWALL casing option was
added, which is lighter and more pedal-friendly, with the
sidewalls reinforced with a nylon fabric;
→ the Cinturato Gravel RC, the tubeless tyre which is ready
for gravel competitions, and which is fast and highly
resistant to punctures;
→ the ANGEL URBAN, for bicycles and e-bikes, developed
in three models dedicated to urban mobility, travel and
trekking, with motorcycle derived technologies. The
HyperBELT reinforcement specifically designed for
metropolitan and extra-urban use, ensures excellent
protection against punctures;
→ the Cinturato Gravel S, the tyre with the most off-road
tread in the range, and which is highly sculpted for
those who use their bikes on roads, gravel tracks and
demanding terrain;
→ the Scorpion Race, for Gravity Racing, Enduro and
Downhill, developed in collaboration with multi-time
Downhill World Champion, Fabien Barel. These tyres
feature four different tread patterns and two different
diameters, to tackle any track in race competition set-
ups. The SmartEVO DH compound, derived from Pirelli’s
Motorsport technology, is super-soft and formulated to
provide maximum performance and control in all riding
situations. Two types of casing also offer the most
appropriate support depending on the specific use.
COMMITTENT TO MOTORSPORTS
In the history of Pirelli, motorsport has always played a major
role. 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, there are more than
350 competitions in which Pirelli participates each year,
and 2022 was particularly relevant in terms of technical
innovations. The introduction of 18 inch tyres in the FIA
Formula 1 World Championship, the tyres made for hybrid
cars in the FIA World Rally Championship and a new range
of cross-class products made for GT racing. Thanks to its
commitment to sustainability in Motorsport, Pirelli was the
first and only tyre manufacturer in the world to have been
awarded Three Star Certification from the Environmental
Accreditation Programme promoted by the FIA.
DIRECTORS’ REPORT ON OPERATIONS 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, has introduced a technological revolution. After
more than half a century, tyres went from 13 to 18 inches.
The change in size involved all elements of the tyre, from
profiles to structure to compounds, with a wider window of
use. The 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, and which lead
to the 30 specifications being tested by almost all the teams,
over a total of more than 20,000 kilometres. The 18 inch tyres
are more similar to the those used daily by drivers around the
world. This will give Pirelli the opportunity to better 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 Championship in 1973 and in the role
of sole tyre supplier from 2021 to 2024. Technological
evolution during the 2022 season was particularly marked
by the introduction of the new hybrid engines for the WRC
cars. Pirelli developed the full range of P ZERO, Scorpion and
Sottozero tyres to cope with the extra weight and increased
power of the new WRC1 cars. Also launched was the P7
Corsa D3B, the latest product development for classic Group
A cars (up to 1990).
In Gran Turismo, a single family of tyres, the P ZERO DHF, was
designed to cover the specific needs of all GT racing classes
(GT2, GT3 and GT4). Even the mono-brand championships -
Ferrari, Lamborghini and McLaren - have used the upgraded
products and in 2022 the TRANS-AM series stopped using
16 inch tyres in order to switch to 18 inches.
In 2022, Pirelli continued its commitment in the role of
Official Tyre Supplier for all classes of the MOTUL FIM
Superbike World Championship. This technical partnership,
which began in 2004, can claim the record for the longest
running single tyre brand ever in the history of international
motor sport, and which has been continually sustained by
intense research and development work. Since 2004, Pirelli
has provided a total of more than 1 million racing tyres for
the Superbike circuits, with the development of 750 new
solutions during the period of collaboration stipulated in
the contract. The most important novelty for 2022, was
the debut of the new extra-soft SCQ compound, a formula
designed for use in sprint and time attack competitions.
In Motocross Pirelli has won 79 world titles, winning the world
titles in the three maximum classes: MXGP, MX2 and WMX
(the FIM Women’s Motocross World Championship).
In the field of cycling, for 2022 Pirelli added to the
reconfirmation of its agreements with the top UCI teams, with
the partnership with another World Tour team, the UAE Team
Emirates, which benefits from a high-profile roster, including
Tadej Pogacar. The partnership also includes Colnago for the
first time, which will be equipping its product range with Pirelli
in the near future. This partnership with the teams is also and
above all aimed at product evolution, for a constant exchange
of feedback on the tyres and the continuous improvement in
their performance, thanks to the suggestions of the athletes.
Pirelli also launched a new project in the world of Gravity
racing: the CANYON CLLCTV PIRELLI international DH
team. The team will race in the most important trials of the
sport, and has set its sights on the top 10 in the major events
such as the Downhill World Cup.
For further information on the sustainability aspects of
products - for Motorsport also - 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. 254/2016.
80
Pirelli Annual Report 2022 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)
12/31/22
12/31/21
(3.7)
(37.9)
277.3
16.8
252.5
4,677.3
4,938.0
1,451.6
(19.6)
(46.0)
230.3
51.9
216.6
4,693.6
4,813.1
1,694.6
Operating income/(loss) of the Parent company amounted to a loss of euro 3.7 million, compared to a loss of
euro 19.6 million for 2021. This improvement was mainly attributable to the increase in royalties accrued from
companies of the Group for the use of the trademark, due to increased sales.
Net financial expenses amounted to euro 37.9 million, compared to euro 46 million for the previous financial
year. This reduction reflected the improved financial terms of the financing contracts, due mainly to the
Company’s deleverage plan.
Net income/(loss) from equity investments amounted to an income of euro 277.3 million, compared to
an income of euro 230.3 million for the previous financial year. This increase was essentially attributable to
higher dividends distributed by the subsidiary Pirelli Tyre S.p.A. (euro 300 million in 2022 compared to euro
220 million in 2021).
Taxes for 2022 were positive to the amount of euro 16.8 million, compared to the positive amount of euro 51.9
million for 2021.
81
DIRECTORS’ REPORT ON OPERATIONS 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)
12/31/22
12/31/21
4,528.2
4,528.2
8.4
-
6.3
3.2
75.0
3.4
8.4
7.9
6.3
3.2
75.0
3.4
Total equity investments in subsidiaries
4,624.5
4,632.4
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
16.6
18.9
1.8
8.1
1.1
52.8
6.3
21.9
21.2
2.8
8.0
1.0
61.2
Total financial assets
4,677.3
4,693.6
Equity went from euro 4,813.1 million at December 31, 2021 to euro 4,938.0 million at December 31, 2022, as
detailed below:
(in millions of euro)
Equity at 12/31/2021
Net income/(loss) for the financial year
Dividends approved
Other components of Comprehensive Income
Equity at 12/31/2022
4,813.1
252.5
(161.0)
33.4
4,938.0
82
Pirelli Annual Report 2022 The table below shows the composition of equity:
Share capital
Legal reserve
Share premium reserve
Concentration reserve
Merger reserve
Other reserves
Other O.C.I. reserves
Retained earnings reserve
Net income/(loss) for the financial year
Total Equity
(in millions of euro)
12/31/2022
12/31/2021
1,904.4
1,904.4
380.9
630.4
12.5
380.9
630.4
12.5
1,022.9
1,022.9
133.7
40.9
559.8
252.5
133.7
7.5
504.2
216.6
4,938.0
4,813.1
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, provides the Board of Directors and Management with the instruments needed to anticipate and manage
the effects of such 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 (economic, security related,
political and environmental risks).
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 areas of risk linked to markets, to innovation in products and processes, to human
resources, to production processes, to financial risks and risks connected to mergers and acquisitions.
3. Operational Risks
Risks generated by organisation and corporate processes, whose assumption does 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.
In addition to these risk categories mentioned above are the emerging risks related to climate change and
water stress. To date, these risks are potentially difficult to quantify, as their manifestation is expected
mainly in the medium to long-term, and their identification and assessment to date shows a high degree of
volatility and interdependence.
For further information on risk governance, assessment methods and mitigation measures, please refer to the
corporate website.
83
DIRECTORS’ REPORT ON OPERATIONS EXTERNAL RISKS
RISK RELATED TO THE MACROECONOMIC OUTLOOK
Following the slowdown of the global economy in 2022,
mainly conditioned by the energy crisis and an unfavourable
inflationary scenario that
led to restrictive monetary
policies, Pirelli expects a further deceleration of global
growth in 2023. The effect of the restrictive monetary
policies of mature countries will be one of the driving
factors, especially if consumer price pressures continue
beyond expectations. The economy of the People’s
Republic of China is expected to grow in the face of the
recent removal of restrictions linked to the Zero-COVID
policy, together with measures to support the real estate
market and the recovery of private consumption.
Moreover, elements of uncertainty linked to geopolitical
tensions persist, especially with regard to the current Russia-
Ukraine crisis, as well as the emergence of possible new
variants of COVID-19.
With regard to emerging markets, the risk of financial
instability in those countries with a high level of public debt
remains significant, also in the light of new local policies that
could further aggravate the situation of public finance, which
was already tested by the recent pandemic and energy crisis.
industrial and
COUNTRY RISK
Pirelli primarily adopts a local-for-local strategy, creating
a productive presence in countries undergoing rapid
development,
local demand
in order to respond to
with competitive
logistical costs. This
strategy is aimed at increasing the competitiveness of
the Group, as well as at allowing 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.). Within the framework of this strategy,
Pirelli operates in countries (Argentina, Brazil, Mexico,
Russia) where
the general political and economic
environment, the tax regime, the business conditions and
the circulation of monetary flows, could prove unstable.
These elements could alter the normal market dynamics,
the business operating conditions and the Group’s ability
to fully benefit from the monetary flows generated locally.
Lastly, elements of uncertainty persist in connection to the
redefinition of the geopolitical and regulatory framework,
as well as regarding the balance of current international
trade agreements, which could lead to an alteration in the
normal market dynamics. The Group constantly monitors
the evolution of risks (political, economic/financial and
security related) associated with the countries in which
it operates, in order to promptly (and where possible
pre-emptively) adopt measures to mitigate the potential
impacts of any changes arising at local level.
RISKS RELATED TO THE RUSSIAN-UKRAINIAN
CRISIS AND ISSUES RELATED TO ENERGY COSTS
At the date of this document, the outcome and implications
of the crisis between Russia and Ukraine remain uncertain.
International sanctions are 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 short and
medium-term.
These factors are compounded by the additional complexity
arising from the restrictive countermeasures that the Russian
government has implemented in response to international
sanctions pressure.
Moreover, even though at the beginning of 2023, energy
commodity prices had fallen back from the peaks of the
previous year, elements of uncertainty related to possible
repercussions on consumer price pressure and growth
prospects for the Eurozone persist. These elements of
uncertainty could lead to the alteration of normal market
dynamics and, more generally, business operating conditions.
Pirelli constantly monitors issues related to energy costs
and the development of the Russian-Ukrainian crisis through
internal committees, for which it has activated a series
of mitigation measures and a contingency plan which, in
compliance with the international sanctions imposed by the
EU (which prohibit the import of Russian finished products
into the EU and the export of certain raw materials to Russia),
envisages, amongst other things:
→ the gearing of production towards the domestic market;
→ the identification of alternative sources for import/export
streams;
→ the diversification of logistics service providers in order to
ensure the continuity of supply streams;
→ the identification of solutions and tools aimed at minimizing the
expected volatility of costs related to the energy component;
→ financial support through local banks.
BREXIT RISKS
The Group constantly monitors potentially critical issues
(and their relative mitigation plans) concerning the trade
agreements stipulated between the UK and the EU, and in
effect since 2021. These risks concern both operations
(because of possible delays in the supply of raw materials
and/or finished products) in the short-term, while elements
of structural uncertainty also persist in the long-term which
to date are difficult to estimate, and which could impact the
Automotive and Auto & Parts sector, and the UK domestic
market in terms of exports to the EU.
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. The automotive
sector, which is strongly dependent on the availability of semi-
conductors on the one hand, and on a just-in-time strategy
on the other, was 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 the supply and demand
of semi-conductors is a factor of uncertainty for the Auto &
84
Pirelli Annual Report 2022 Parts sector. The Group constantly monitors these elements
of risk, in order to continue to take timely measures to mitigate
any possible impacts on demand.
CORONAVIRUS RISK (COVID-19)
Pirelli sells its products on a world-wide basis in over 160
countries and owns industrial sites located in different
countries, some of which were considerably affected in
the recent past by COVID-19 and its subsequent variants.
Although there is broad consensus on the improvement of
the global health situation in the short-term, this hypothesis
contains elements of uncertainty, mainly linked to the
evolution of new variants. If these uncertainties were to
persist during the year, they could lead to an alteration in
normal market dynamics and, more generally, in business
operating conditions. In terms of operational risks, Pirelli
monitors, among other things, potential risk events relative
to both supply chain resilience and the massive use of new
technological devices linked to 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,
where required or deemed necessary, check and prevention
measures in respect of all employees worldwide.
RISKS ASSOCIATED WITH THE EVOLUTION
OF LONG-TERM DEMAND
Mobility in recent years has been undergoing an unprecedented
in recent years due to technological changes
evolution
(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 this, the sudden spread of smart-working as a
consequence of the COVID 19 pandemic has brought about
further rapid change in people’s mobility habits, creating an
overlay of effects that are still settling.
Daily commuting has declined in many places, while travel
related to non-systematic trips, especially those related to
recreation and leisure, seem to have increased.
The use of public transport, partly as a result of this, seems
to be declining, while all means of individual travel (cars,
motorbikes, mopeds, bicycles, and scooters), both private
and shared, have increased in most cities.
The return to the pre-pandemic levels of public transport
use and beyond, as desired by the policies of all major cities,
will be conditioned by the ability to respond effectively to the
new mobility needs of people. In any case, a reduction in the
presence of the private car in urban areas seems very likely,
which could be more than compensated for by greater use
over long distances, both due to what has been mentioned
above and to increasing driving automation, which could allow
for competition with flights and trains over medium distances.
In light of these opposing trends, it is not easy to predict the
85
potential impacts on the tyre sector. Pirelli constantly monitors
these trends, both by analysing studies and data available at
global and local level, by participating in both international
projects (such as the Transforming Urban Mobility Initiative
(TUMI), promoted by the World Business Council for
Sustainable Development - WBCSD), and in national and
international webinars and conferences on the subject.
RISKS RELATED TO PRICE TRENDS
AND THE AVAILABILITY OF RAW MATERIALS
Natural rubber, synthetic rubber and petroleum 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 past 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
various 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
have significant financial and industrial resources 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
the potential intensification of the competitive arena in the
Group’s core market sector. In addition to this, is also the
uniqueness of Pirelli’s strategy which relies on - amongst
other things - an extensive homologation parc focused on
the Prestige and Premium segments, and an ever increasing
capacity focused on High Value.
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
DIRECTORS’ REPORT ON OPERATIONS the commercial/financial relationship originates and the time
when the transaction is settled (collection/payment).
The Group’s policy is to minimise - where the financial
market permits this in an efficient manner - 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), which are hedged 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 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,
determines 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 financial resources available to meet financial
and commercial obligations within the terms and deadlines
established, are constituted by annual 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 coverage 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 easily
liquidated 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) for a total of euro 1 billion,
which at December 31, 2022 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 exposure to the variability
in the fair value or in the future cash flows of financial assets
or liabilities due to changes in the market interest rates. The
Group assesses, 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 equity securities
and bonds, which represent 1.5% 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 its 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. Another
instrument used for commercial credit risk management is
the taking out of insurance policies. For over 10 years a master
agreement has been in place, which was recently renewed
for the 2023-2024 two-year period, with a leading insurance
company with an AA credit rating according to Standard
& Poors, for the worldwide coverage of credit risk mainly
related to sales in the Replacement channel (the coverage
ratio at December 31, 2022 exceeded 70%). However, as
regards the financial counterparties for the management of its
temporary cash surpluses, or for the negotiation of 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.
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
86
Pirelli Annual Report 2022 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 business-related activities. Lastly, specific “management”
policies have been adopted, which provide for career plans,
internal and external training paths and upskilling/reskilling
projects aimed at motivating and retaining talent.
OPERATIONAL RISKS
RISKS RELATED TO ENVIRONMENTAL ISSUES
The activities and products of the Pirelli Group are subject
to numerous environmental laws that vary according to
the specifics of the different 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 increasingly stringent laws on the various
environmental aspects that companies may impact on
(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 on
health and safety in the workplace (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
organisational models for the allocation of liabilities. Failure
to comply with the regulations in force entails penal and/or
civil sanctions against those responsible, and in certain cases
with the breach of health and safety regulations, against
the companies, in accordance with the European model of
corporate responsibility which 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 connected with the
alleged defectiveness of materials sold, or may be required to
implement product recall campaigns. Although no significant
events have occurred in recent years and such events are
however covered by insurance, their 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.
LITIGATION RISKS
In carrying out its activities, Pirelli may become involved in
legal, fiscal, commercial, trade or labour law disputes. The
87
Group takes the necessary measures to prevent and mitigate
any consequences that may arise from any such proceedings.
in the countries
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
in which these companies
applicable
operate or are present. The Group has therefore put in place
measures to achieve full compliance with all applicable data
protection legislation (while maintaining as the reference
introduced by
legislative framework, that which was
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,
any changes in applicable legislation, the entry into force of
new regulations, the launch of new products or services onto
the market and, more generally, any new initiative involving
the processing of personal data (or substantial amendments
to existing treatments of personal data) could entail the
need to incur specific expenses or lead the Group to review
its modus operandi in the context of compliance measures
pertaining to this area.
the
CYBER AND INFORMATION SECURITY RISKS
The continuous exacerbation of cyber security risks and the
complexity of the international context in which it operates,
exposes the Group to cyber-attack risk scenarios of (e.g.
ransomware, malware, attacks on internet faced systems)
that could lead to the interruption of business activities for
more or less prolonged periods of time, or events involving
the loss of the confidentiality of data critical to the Group
(e.g. Data Exfiltration, Insider Threat, Social Engineering).
Consistent with
Information Security Strategic
Roadmap, which is defined on the basis of international
standards, initiatives have been implemented to increase
the Group’s cyber security status with respect to identified
risks. The monitoring of these risks through an information
security management system integrated with the Company’s
operational risk management process, which includes the
monitoring of supply chain cybersecurity risk, is an essential
part of their proper management. At the technological level,
having visible and active monitoring of security events in the
manufacturing plant environment is a necessary prerogative
for the protection of the Group’s infrastructures, such as the
continuous updating of technology and operating systems,
in order to reduce vulnerabilities and the risks of outages and
incidents which impact business activities. The execution
of cybersecurity awareness initiatives through testing, ad
hoc training, education and communication to update users
on key cybersecurity risks, develops the human factor,
which forms an additional layer of protection in addition to
processes and technologies.
In 2022, certification of Pirelli’s
information security
management system according to the German Automotive
market standard “VDA-TISAX” was obtained on the Group’s
most relevant OE headquarters, offices and production plants.
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 malfunctions in the auxiliary production 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 affects
high volume or specific product (high-end) production sites.
Pirelli monitors their vulnerability to catastrophic natural
events (particularly floods, hurricanes and earthquakes)
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). The Pirelli supply chain is also regularly assessed
for potential business interruption risks.
its compliance with
RISKS RELATIVE TO THE FINANCIAL
REPORTING PROCESS
Pirelli has also implemented a specific and articulated
risk management and internal control system, supported
by dedicated Information Technology, in relation to the
process of preparing the consolidated half-year and annual
Financial Statements, in order to safeguard the Company’s
assets,
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 preparation
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 the data for the Income Statement, the Statement
of Financial Position and the Financial Statements. 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
criteria consist of the identification those Group companies
which, in relation to the selected processes, represent an
aggregate value which is superior to a certain materiality
threshold. Qualitative criteria consist of the examination of
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 control risks/objectives associated
with the preparation of the Financial Statements, as well as
with the efficiency of the internal control system in general,
were
identified. For each control objective, punctual
verification measures have been provided for and specific
responsibilities have been assigned. A supervisory system
has been implemented on the checks carried out by way of
a mechanism of “chain” attestations extending all the way
to the Chief Executive Officers of each company within the
control perimeter. Any critical issues that emerge within the
evaluation process are subject to a plan of actions whose
implementation is then verified within the subsequent half-
year. Provisions have also been made for the issue of a half-
yearly 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. Lastly, 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, or in Mergers and Acquisitions, ad-hoc
assessments are conducted, even by way of due diligence,
on possible political, financial, environmental and social
risks, including those related to the compliance with human
rights and labour laws. Alongside the ongoing monitoring
of the application of Pirelli’s internal regulations regarding
financial, social (especially regarding human and labour
rights), environmental and business ethics at 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 for its own supply chain which is periodically audited
88
Pirelli Annual Report 2022 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 questionnaire.
RISKS RELATED TO INCREASING COSTS RELATIVE
TO CLIMATE CHANGING GAS EMISSIONS
Consistent with the findings of the Group’s latest Climate
Change and Water Stress Risk Assessment, the introduction
and/or tightening of the current CO2 emission pricing
schemes in the countries where the Group operates, could
entail the risk of increased production costs for a large part
of the Company’s operations.
This adverse phenomenon could in fact materialise not only
at a European level, where the Emissions Trading System
(ETS) mechanism has already been active for years, with
impacts that are already evident in the Group’s factories in
the EU, but also in other economies that already have carbon
taxation policies in place or are in the policy evaluation phase
(China, Brazil, Mexico, UK, among others).
In order to monitor the possible impacts, different evolutions
of the price of CO2 have been hypothesised, both on the basis
of the forecasts published by the IEA for the STEPS, APS,
NZE, and on three possible pathways for carbon emission
intensity for the Group:
1. constant emissions compared to 2022;
2. emission reductions consistent with current Group targets;
3. emission reductions greater than current Group targets.
The impact of the risk was evaluated in financial terms for the
2022-2050 time period, by calculating the potential added
costs for the Group based on the options described above,
should the current carbon pricing system be introduced
and/or worsened. The assessment did not reveal a material
impact for the short (2022) and medium-term (up until
2029). However, uncertainty remains with respect to the
significance of the long-term impacts (>2030) if the NZE and
APS scenarios occur.
Due to the potential impacts on aspects of production, Pirelli
constantly monitors potential developments in the carbon
pricing policies of the main countries in which it operates, so
as to proactively intercept any deviations from the announced
targets, and to be able to implement mitigation measures. In
this regard, Pirelli has already adapted its production strategy
with regard to energy procurement, with a plan which aims to
reach 100% of electricity purchased from renewable sources
by 2025, with the improvement of the energy efficiency of
production plants with the 2025 target of specific energy
consumption that is -10% lower than 2019 levels, and with
the progressive electrification of processes.
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 auditing
body. In recent years, there has been an evident increase in
external risks relative to the capacity of the supply chain
to be resilient, in the face of the expected, increasingly
stringent regulations, which require the ability to control the
underlying chain in a highly detailed and structured manner,
and at the same time relative to the unexpected challenges
posed by public health and geopolitical and natural crises,
with their impacts on operational management. The ability of
the supply chain to be resilient determines the significance
of the risk, which in the short-term is not material, but in the
long-term, also taking into account that which is described in
the following paragraph, could entail a substantial revision of
the Company’s procurement model. For further information,
on the model used for managing sustainability risks
along the supply chain, reference should be made to the
paragraph “Our Suppliers”, for the corporate governance
aspects of human rights issues, reference should be made
to the paragraph “Compliance of Human Rights”, for
the management of internal risk within the subsidiaries,
reference should be made to the paragraph “Compliance
with the Legislative-Contractual Requirements on Overtime,
Rest, Association and Bargaining, Equal Opportunities and
Non-Discrimination, Prohibition of Child and Compulsory
Labour”, and for the management of climate change risks,
reference should be made to the TCFD (Task Force on
Climate-Related Financial Disclosures), in the Consolidated
Non-Financial Statement.
EMERGING RISKS RELATED
TO CLIMATE CHANGE AND WATER STRESS
Having joined the Task Force on Climate-Related Financial
Disclosures (TCFD) in September 2018, Pirelli applies all
the recommendations made by the TCFD, and is committed,
on a voluntary basis, to the dissemination of transparent
accounting and the disclosure of any relevant information on
climate change related risks and opportunities. To this end,
Pirelli monitors these elements of uncertainty along its value
chain through sensitivity analyses and risk assessments,
to assess and quantify the financial impacts (risks and
opportunities) related to climate change and water stress,
and to put in place appropriate prevention and mitigation
measures to protect its business. An instrument to support
these analyses is the Group’s Climate Change and Water
Stress Risk Assessment, which is updated bi-annually to
integrate the analysis with forecasts over a medium to long-
term time scale, with respect to IPCC13 (Intergovernmental
Panel on Climate Change) climate scenarios (RCP 2.6, RCP
4.5 and RCP 8.5)14 and IEA15 (International Energy Agency)
energy transitions (STEPS, APS and NZE)16.
13 Intergovernmental Panel on Climate Change.
14 The group of scenarios which represent a projected end-of-century global temperature increase of
between 1.5°C (RCP2.6) and >4°C (RCP8.5).
15 International Energy Agency.
16 Stated Policies Scenario (STEPS), Announced Pledges Scenario (APS), Net Zero by 2050 (NZE).
89
DIRECTORS’ REPORT ON OPERATIONS RISKS RELATED TO CHANGES IN THE ENERGY REQUIREMENTS OF PRODUCTION PLANTS
The global rise in temperature due to climate change determines, among other things, variations in the
demand for energy at the Group’s production plants. This phenomenon could lead to an increase in energy
consumption used for cooling the plants and production processes, with a consequent increase in costs.
Pirelli recently conducted a study to quantify changes in net energy demand using both IPCC data (HDD
index, CDD index) and Group production plant specifications. Although it emerged that some production sites
will require a greater supply of energy, the impact of the risk did not emerge as material in either the short
(2022) or medium to long-term (2025-2050).
PHYSICAL RISKS DUE TO CLIMATE CHANGE IMPACTING PRODUCTION PLANTS AND SUPPLY CHAINS
Current climate change involves, among other things, an increase both in terms of the frequency as well as the
severity of catastrophic natural events (such as floods, droughts, wildfires, hailstorms and tornadoes), which
could impact both Pirelli’s production units and those of its suppliers.
The Group’s Climate Change and Water Stress Risk Assessment takes into account the main climate risk
assessment models (IPCC), the EU Copernicus satellite datasets, as well as the risk mitigation and adaptation
measures already installed in various production facilities, and then estimates the potential number of
business interruption days, for the Group’s production plants and for strategic suppliers resulting from floods,
droughts, wildfires and storms. Where possible, risks have been projected on a time scale up to 2050, in
accordance with the different degrees of global temperature increase defined by the IPCC climate scenarios
(RCP 2.6, RCP 4.5 and RCP 8.5).
Business Interruption days were estimated by calibrating the climate models on historical events, and therefore
correlating the intensity of the events with consequent production stoppages. In terms of potential criticality
for the Group, no significant impacts are foreseen in the short-medium term (2022-2030), while elements of
uncertainty remain on the time scale up to 2050.
The Pirelli Group constantly monitors these risk elements both in terms of production plants and the supply
chain, in order to proactively promote mitigation strategies both in terms of CapEx, and in scouting and
compounding for the supply chain, aimed at reducing the risk of damage to its strategic assets and the risk of
business interruption.
OUTLOOK FOR 2023
Revenues
EBIT margin adjusted
Investments (CapEx)
% of net sales
Net cash flow
before dividends
Net financial position
NFP/EBITDA adj.
ROIC
post taxes
(in billion of euro)
2022
2023E
6.62
14.8%
0.40
6.0%
0.52
-2.55
1.8x
20.3%
~6.6 ÷ ~6.8
>14% ÷ ~14.5%
~0.40
~6%
~0.44 ÷ ~0.47
~-2.35
~1.65x ÷ ~1.7x
~20%
MARKET OUTLOOK FOR 2023
For 2023, forecasts are for a general slowdown in economic growth, weighed down by geopolitical tensions
and persistent inflation in the cost of production factors, (raw materials, energy and logistics). Global GDP is
expected to grow by +2% (the estimate for 2022 had been +3%), with more limited growth in the USA (+0.7%
compared to +2.1% for 2022) and in Europe (+0.5% compared to +3.5% for 2022), compared to more positive
expectations for China, whose GDP is expected to grow by +5.2% (+3% in 2022), thanks to the relaxation of the
restrictive policies connected to COVID.
90
Pirelli Annual Report 2022 In this scenario, demand in the global market for car tyres
is forecast to remain substantially unchanged year-on-year.
Car ≥18’’ confirmed its resilience with a growth in demand of
+4%, compared to -2% for ≤17’’.
Specifically, market expectations are as follows:
→ for Original Equipment ≥18’’ volumes are expected to
grow by approximately +7%, sustained by a solid order
portfolio, and by the expected easing of the chip crisis that
had impacted new automobile production;
→ for Replacement ≥18’’ volumes are expected to grow by
approximately +3%, with a less sustained performance
for the first half-year in Europe, North America and China,
followed by a recovery in demand during the second half
of the year.
For Car ≤17’’ volumes are expected to decline by
approximately -2%, with Original Equipment to decline
by approximately -2%, and the Replacement channel
to decline by approximately -1%, due to the weak
macroeconomic scenario.
Given this scenario, Pirelli will continue to consistently pursue
its strategy:
→ strengthening of High Value positioning, especially for
higher rim diameters (≥19’’), Specialties and electric
vehicles, while maintaining a solid price discipline;
→ the implementation of the third phase of the efficiency
plan envisaged in the 2021-25 Industrial Plan, with benefits
amounting to approximately euro 100 million, which are
also the result of the digitisation of all business processes.
→ by maintaining an effective management of inventories
and working capital in general.
In light of the results achieved for 2022 and the scenario
forecast for 2022 at a macroeconomic level, Pirelli expects
the following for 2023:
→ Revenues of between euro ~6.6 billion and euro~6.8
billion, with:
→ volumes expected to increase from stable to growth
of ~+1%;
→ price/mix to improve by ~+4.5% / ~+5.5%, benefiting
from the price increases carried out in 2022 and those
announced at the beginning of this year, as well as from
the improved product mix;
→ impact from the exchange rate effect of between
~-4.5% /~-3.5%.
→ EBIT margin adjusted of between >14% and ~14,5%.
Efficiencies and the price/mix will offset the impact of the
external scenario (raw materials, inflation and the exchange
rate effect);
→ Net cash generation before dividends is expected to be
between euro 440 million and euro 470 million, thanks to
the operating performance and the efficient management
of working capital. This target includes the payment of
91
long-term incentives to management, relative to the 2020-
2022 three-year period. It should be noted that from 2024
onwards, following the transition to a “rolling” system,
incentives will be paid annually, with a substantial alignment
expected between the impact on the Income Statement
and cash outflow.
→ Investments of approximately euro 400 million (~ 6% of
revenues);
→ a Net Financial Position which shows a debt of ~-2.35
billion with a NFP/EBITDA adjusted ratio of ~1.65 /~1.7 times.
SIGNIFICANT EVENTS
SUBSEQUENT TO THE
END OF THE YEAR
On January 11, 2023, Pirelli placed its first sustainability-
linked bond with institutional investors for a total nominal
amount of euro 600 million, with demand equal to almost six
times the offer, which amounted to approximately euro 3.5
billion. The issue of the first benchmark-size sustainability-
linked bond of this type placed by a global tyre company,
as well as the first carried out since Pirelli obtained its
investment grade rating from S&P Global and Fitch Ratings,
testifies to the Company’s commitment to further integrate
sustainability into its business strategy, and is linked to
the 2025 targets of reducing absolute greenhouse gas
emissions (Scopes 1 and 2) and emissions from purchased
raw materials (Scope 3). The transaction, which took place
within the framework of the EMTN Programme (Euro
Medium Term Note Programme) which was approved by the
Board of Directors on February 23, 2022, offers an effective
yield at maturity of 4.317% (145 basis points above the mid
swap), and allows for the optimisation of the debt structure,
by extending maturities and diversifying sources. These
securities are listed on the Luxembourg Stock Exchange.
On February 7, 2023 Pirelli was confirmed as amongst
the best companies at global
level for sustainability
obtaining “Top 1%” ranking, the highest recognition in the
2023 Sustainability Yearbook published by S&P Global,
after examining the sustainability profile of more than
13,000 companies. This result follows the score recorded
by Pirelli in the 2022 Corporate Sustainability Assessment
for the Dow Jones Sustainability Index of S&P Global,
where the Company had obtained the Top Score of 86
points (revised from the initial 85), the highest in the ATX
Auto Components sector of the Dow Jones Sustainability
World and European Index.
On February 14, 2023, Pirelli announced that Bai Xinping
had resigned as a Director of the Company, effective as
of February 22, 2023, following the assumption of new
professional responsibilities within the Sinochem Group.
Bai Xinping has received Pirelli’s sincere thanks for his
contribution during more than seven years in office. On
DIRECTORS’ REPORT ON OPERATIONS February 22, 2023, the Board of Directors co-opted Wang
Feng to replace Bai Xinping, and also proceeded to appoint
him as a member of the Remuneration Committee, the
Nominations and Successions Committee and the Strategies
Committee, roles previously held by Bai Xinping.
Wang Feng – who was qualified by the Board as a non-
executive Director – and who will remain in office until
the next Shareholders’ Meeting, does not possess the
requisites to qualify as
independent pursuant to the
Corporate Governance Code, and at the date of the
appointment, did not hold shares and/or other financial
instruments issued by Pirelli.
On February 22, 2023, Pirelli announced that the shareholder
CNRC had announced that it will submit the notification required
by Legislative Decree 21/2012 (the Golden Power Regulation)
regarding the renewal of the Shareholders’ Agreement signed
on May 16, 2022 by and between, amongst others, the CNRC,
Marco Polo International S.r.l., Camfin S.p.A. and Marco
Tronchetti Provera & C. S.p.A., which will become effective with
the convening of the Shareholders’ Meeting for the approval of
the Financial Statements at December 31, 2022.
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 Indicators (ESMA/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.
Specifically, the Non-GAAP Measures used were as follows:
→ EBITDA: is equal to the EBIT but which excludes the
depreciation and amortisation of property, plant and
equipment and intangible assets. 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. For the comparative period, this measure also
included 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 impacts deriving
from investments;
→ 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 one-off
expenses. For the comparative period, this measure also
included 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. EBIT is used to measure the ability to generate
earnings, including the impacts deriving 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.
For the comparative period, this measure also included
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. For the comparative period, this
measure also included 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. For
the comparative period, this measure also included
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
financial income and expenses;
→ 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;
92
Pirelli Annual Report 2022 → Net operating working capital: this measure
is
constituted by the sum of “Inventory”, “Trade receivables”
and “Trade payables”;
→ Net working capital: this measure is constituted by the
net operating working capital and by other receivables and
payables, including tax receivables and payables, and by
the 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 regarding 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 the derivative hedging
instruments for items 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”) and the non-current derivative hedging
instruments for items 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: is calculated as the change in the
net financial position relative to operations management;
→ Net cash flow before dividends, 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;
93
→ 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;
→ 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 the authority to take the most important decisions
in financial/strategic terms, or in terms of their structural
impact on management, or that are 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 to the Board of Directors
regarding the Industrial Plan and budgets, as well as any
deliberations regarding any strategic industrial partnerships
or joint ventures to which Pirelli is a party.
The Deputy-CEO is attributed the powers for the operational
management of Pirelli, to be exercised in a vicarious capacity.
The Board has internally instituted the following Committees
with advisory and propositional tasks:
→ 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
DIRECTORS’ REPORT ON OPERATIONS Governance and Ownership Structure contained in the 2022
Annual Report group of documents, as well as to the additional
information published in the Corporate Governance section
on the Pirelli 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 registered ordinary
shares without indication of their nominal value.
The Extraordinary Shareholders’ Meeting held on 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, to 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 has been 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 any 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 stake of approximately 37% of the
capital, and does not exercise management and coordination
activities over the Company.
Updated extracts of the existing agreements between some
of the shareholders, including indirect shareholders, of the
Company, which contain the provisions of the Shareholders’
Agreements relative, amongst other things, to the corporate
governance of Pirelli, are available on the Company’s website.
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
2022 Annual Report group of documents, as well as to
the additional information published on the Pirelli website
(www.pirelli.com) in the Corporate Governance section.
WAIVER OF THE PUBLICATION
OF INFORMATION DOCUMENTS
The Board of Directors, taking into account the simplifications
of the regulatory requirements introduced by CONSOB in
the Issuer’s Regulation No. 11971/99, resolved to avail itself of
the option to waive, pursuant to the provisions of Article 70,
paragraph 8 and Article 71, paragraph 1-bis of the aforesaid
Regulation, the obligations to publish the prescribed
disclosure documents in the event of significant mergers,
de-mergers, capital increases through the 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 a number
of companies based in countries which do not belong to
the European Community (“Extra-EU Companies”), which
are of significance pursuant to Article 15 of CONSOB
Regulation No. 20249 of December 28, 2017, concerning
Market Regulations.
With reference to data at December 31, 2022, 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 were:
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) S.A.
(Switzerland).
In particular,
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 Extra-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
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.
94
Pirelli Annual Report 2022 Lastly, the aforementioned Operating Regulation, consistent
with regulatory provisions, governs the disclosure to the public
of the financial statements (Statement of Financial Position
and Income Statement) of relevant Extra-EU Companies
which are predisposed for the purpose of preparing 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”).
On the occasion 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 in the implementation of the amendments to
the European Shareholders’ Rights Directive II. The new
Procedure entered 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 2022 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 - updated on March 17, 2022, solely
to take
into account the changes to the Company’s
organisational structure which took place at the end of 2021
- is available, together with the other corporate governance
procedures on 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.
28, 2006 is presented in the Annual Report at December
31, 2022. Related Party Transactions, are neither atypical
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.
Furthermore, there were no Related Party Transactions - or
changes or developments to the transactions described in
the preceding financial report - which significantly affected
the Group’s financial position or the results for the 2022
financial year.
ATYPICAL AND/OR UNUSUAL OPERATIONS
Pursuant to CONSOB Notice No. 6064293 of July 28,
2006, it should be noted that during 2022, the Company did
not carry out any atypical and/or unusual transactions, as
defined in the aforementioned Notice.
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 fulfil the new requirements of the legislation,
including, among others, the drafting of the records of
data processing activities. These activities are subject to a
periodical annual review with the support of the competent
departments. The Company has also appointed a Data
Protection Officer (“DPO”) in the person of lawyer Alberto
Bastanzio whose contact details were duly communicated
to the Guarantor for the Protection of Personal Data on
July 25, 2018. The DPO can be contacted not only at the
Company’s registered office, but 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 information on Related Party Transactions as required,
pursuant to CONSOB Notice No. DEM/6064293 of July
The Board of Directors
Milan, April 5, 2023
95
DIRECTORS’ REPORT ON OPERATIONS Pirelli Annual Report 2022
96
REPORT
RESPONSIBLE
ON
OF
VALUE
MANAGEMENT
THE
CHAIN
CONSOLIDATED NON-FINANCIAL
DISCLOSURE PURSUANT TO LEGISLATIVE
DECREE OF DECEMBER 30, 2016, N. 254
97
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN
METHODOLOGICAL
NOTE
This section of the Annual Report 2022, 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
value maintenance and creation,
relationships with
Stakeholders and related connection with the development of
financial, production, intellectual, human, natural, social and
relational capital, which was mentioned in the “Presentation
of the 2022 Integrated Financial Statements”.
responsiveness), and considering
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
2021 option “In accordance with”, the SASB Auto Parts
Sustainability Accounting Standard, following the process
suggested by the APA1000 APS principles (materiality,
inclusivity and
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
exclusively 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 Research Document No. 243 of February
2022, entitled “Auditor’s activity on the disclosure pursuant
to Article 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 and relative impacts
indicated in the “Impact Materiality”, 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 2022 compared to 2021 and 2020, with respect to
the targets set in the 2021-2025 Industrial Plan.
The Report, published annually, covers the time period from
1 January 2022 to 31 December 2022 and covers the same
scope of consolidation as the Group’s consolidated financial
statements as expressed in the Notes to the Consolidated
Financial Statements at 31 December 2022 included in Note
2 - Basis of Presentation - Scope of Consolidation of this
Annual Report.
The main information systems that contribute to collect the
data accounted 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 upgrading and reporting of non-financial
information, to which an additional assurance process is
added for that information considered to be of special
importance since, for example, they fall within the Group
Sustainability Plan target;
→ the conducting of a third-party verification (different and
additional to the external auditor issuing the certification)
by circulating all the quantitative data included in this
Report with the aim of conducting a further independent
verification of the data reported and the related
information sources;
→ the signing of a letter of certification by top management
members concerning the data that go back through the
CSR-DM information system and the applicable sections
of the financial statements.
As regards external audits, the sustainability performance
accounted in the Report is subject to limited assurance by
an independent firm (PricewaterhouseCoopers S.p.A.) 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 Revised), issued by the
International Auditing and Assurance Standards Board. For
further information, reference is made to the related Auditor’s
Assurance 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, Impact
Materiality, 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 product life cycle and presents the
assessments required by the European Taxonomy
Regulation;
→ a “Social Dimension”, which brings together the sections
98
Pirelli Annual Report 2022 dedicated to respect for human rights, the internal
community and the external community.
At the end of the Annual Report 2022, before the
Independent Auditor’s Assurance mentioned above, the
following summary Tables are available:
→ a GRI Content Index, which shows the full list of indicators
accounted based on the GRI Standards, indicating the
relative page reference in the 2022 Annual Report;
→ 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 2022 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 issues indicated by Legislative
Decree no. 254/2016.
There are no restatements to previous reporting, as there
have been no changes in the scope of consolidation, the
reporting boundary or the method of calculating individual
indicators compared to 2021.
For any clarifications and further information on what
is published
is made to the
“Contacts” page of the “Sustainability” section of the website
www.pirelli.com.
in the Report, reference
PIRELLI AND ITS MANAGEMENT MODEL
Founded in 1872, Pirelli is a company with deep Italian
roots, a brand recognised worldwide for its cutting-edge
technologies, its capacity for innovation and the quality of
its products.
With 18 production plants in 12 countries, a commercial
presence in more than 160 countries, 31,301 employees
and a turnover of around €6.6 billion (2022 figures), it
is one of the world’s leading manufacturers of tyres and
tyre-related services and the only one entirely dedicated
to the consumer market, which includes tyres for cars,
motorbikes and bicycles.
Within the tyre industry, Pirelli competes with “Tier 1”
manufacturers, characterised by high product quality and
above-average price positioning.
17 Specifically, the High Value segment includes: (I) Auto tyres with rim size ≥18”; (II) Auto tyres, defined
as Specialties and Super Specialties, which meet specific customer needs: Run FlatTM, Seal Inside TM,
PNCSTM, Elect™, Pirelli Cyber™, Racing, Collezione, regardless of rim size; (III) Motorcycle and Scooter
tyres with radial structure; Motorcycle tyres with conventional structure for racing, custom touring and
with speed index ≥H (enduro and sport touring segments).
99
Among these players, Pirelli stands out for its exclusive
positioning in the Consumer Tyre segment, and in particular
for its focus on High Value17, which represents 71% of Group
sales in 2022.
Pirelli is constantly committed to developing products made
to reach the highest levels in terms of performance, safety,
silence and road grip. Innovative tyres capable of satisfying
even the most specific mobility needs of the end consumer.
Pirelli’s technological excellence
is also the result of
innovations and expertise derived from motorsports, an area
in which the company has been active for more than 110
years. Pirelli is currently present at more than 350 sporting
events in the car and motorbike sectors and, since 2011,
has been the exclusive supplier to the Formula 1© World
Championship, of which it is the Global Tyre Partner.
The Sustainability Model implemented by Pirelli 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, including the procurement of goods and services
(including in and out logistics), research & development,
management models and processes, production processes,
product positioning on the market, and its use and end-of-
life phase. A value chain that did not register any significant
change during 2022, same as for business relations.
A detailed description of sustainability objectives and
performance impacting the value chain are described in
the sections dedicated to the relevant stakeholders (see in
particular ‘Sharing of Added Value’, ‘Relations with Investor
and the Financial Market’, ‘Our Customers’, ‘Our Suppliers’,
‘Environmental Dimension’,
‘Internal Community’ and
‘External Community’).
Every operating unit of the Company integrates economic,
social and environmental
its own
activity, while cooperating constantly with the other units,
implementing the Group strategic guidelines.
responsibility
for
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 refers to ISO 14064 for the quantification
and reporting of greenhouse gas emissions (GHG), and
to 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 full compliance of
its Sustainable Procurement
Management model with the dictates of the ISO 20400
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN Standard (first certification obtained during 2018).
Details on the coverage of these certifications and
methodological reference tools have been given in the
“Compliance Programmes, Anti-Corruption,
sections
Privacy, Trade Compliance, Antitrust, Compliance With
Laws and Regulations”, “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 Board Committee, approves the strategies
and objectives for sustainable management integrated in
the Group Plan with reference to all areas of management,
including, inter alia, those relating to human rights, health
and safety, climate change and decarbonisation, reduction
of environmental impacts of products and processes, supply
chain sustainability, cyber security, diversity and inclusion,
and ESG risks and opportunities, mapping of impacts on the
economy, society, environment and human rights.
The company performs due diligence activities to identify
its current and potential impacts on economy, society,
the environment, and human rights along the value chain,
with a view to
identifying, preventing, mitigating and
managing these impacts responsibly. The results of risk
assessments on Human Rights, Climate Change, as well as
the materiality mapping of Impacts and the related mitigation
and responsible management strategies are submitted to
the Audit, Risk, Sustainability and Corporate Governance
Committee and then to the Board of Directors. The Board of
Directors also approves Pirelli’s annual financial statements,
including the Consolidated Non-Financial Disclosure, 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 delegated to
sustainability topics and, in this capacity, he is entrusted
with the task of overseeing sustainability issues related to
the company’s operations and implementing the guidelines
defined by the Board of Directors, with the support of the Audit,
Risk, Sustainability and Corporate Governance Committee.
The increase of knowledge on the part of the members of
corporate bodies on the impacts, risks and opportunities
in the area of Sustainability is also promoted through the
in Committee
systematic participation of management
meetings. In fact, in the course of 2022, management - and in
particular the Head of Compliance, the Manager responsible
for preparing financial documents, the Head of Financial
Statement, the Head of Sustainability and Future Mobility,
the Head of Sustainability and Diversity, the Head of Internal
Audit, SVP Sustainability and Future Mobility, the Head of
Finance, Cyber Security and Risk Management - assiduously
attended the meetings of the Audit, Risk, Sustainability and
Corporate Governance Committee, contributing to a periodic
and updated information to the Committee. In addition to this,
third parties are invited for training and/or in-depth analysis
of specific topics, which in 2022 dealt with the evolution of
non-financial reporting and taxonomy.
For more information on Corporate Governance and, in
particular, on the functioning of the Board of Directors and
the Audit, Risk, Sustainability and Corporate Governance
Committee, as well as the Board’s self-assessment
activities, please refer to the Report on the Corporate
Governance and Share Ownership of Pirelli & C. S.P.A., part
of this Annual Report.
The strategic evolution of Group Sustainability is entrusted to
the Strategic Sustainability 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
competence and holds ordinary meetings at least twice a
year. The Strategic Sustainability Committee is supported
by an Operational Sustainability Committee, chaired
by the Deputy CEO and consisting of the Company’s
Top Management, with responsibility for the strategic-
operational management of the Group’s sustainability
issues, including, among others, human rights, health and
safety, climate change and decarbonisation, reduction of
environmental impacts of products and processes, supply
chain sustainability, cyber security, diversity and inclusion,
ESG risks and opportunities, addressed in consideration of
the Group’s sustainability objectives to manage impacts on
economy, environment and society including Human Rights.
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 and Diversity
Officer, the Decarbonisation Officer, the Future Mobility
Officer and the Product Stewardship Officer work in the
Sustainability and Future Mobility Department.
The Department receives support from:
→ a Sustainability Working Group made up of sustainability
representatives within the different central company
departments in order to guarantee constant monitoring
and coordination of strategic programmes with an impact
on the areas of competence of specific departments;
→ Country Sustainability Managers & Diversity Managers
to oversee activities covering all Group affiliates. The
role of the Country Sustainability Manager is held by the
Country CEOs, who are supported by their direct reports
in operational management of Country plans.
ESG objectives are an integral part of the short-term
incentive plans (with a weight of 15% on the STI) and long-
term incentive plans (with a weight of 20% on the LTI),
details of which are available in the “Remuneration” Policy
published on the Company’s website, in the “Remuneration
and Sustainability” section of this Report, and in a dedicated
section of the Corporate Governance Report included in
this Annual Report.
100
Pirelli Annual Report 2022 IMPACT MATERIALITY
In 2022 Pirelli updated its materiality analysis considering the
GRI Universal Standards published in 2021, which envisage
the identification of topics representing the most significant
impacts - positive and negative, actual and potential - of
organisations on the economy, environment and people,
including impacts on human rights. This perspective, which
therefore considers the impacts generated or which could be
generated by Pirelli, is defined as Impact Materiality.
Pirelli’s Impact Materiality, with the associated impacts,
was submitted for approval to the Strategic Sustainability
Committee, then to the Audit, Risks, Sustainability and
Corporate Governance Board Committee, to the Board of
Statutory Auditors, to the Board of Directors, and was finally
published in this Report.
The Mapping of the Group’s material impacts on the economy,
the environment, society and human rights is carried out with
annual frequency and the results, together with Stakeholder
assessments and expectations, are considered in the update
of Group objectives and strategies.
Pirelli also carried out an internal analysis exercise using a
“Dual Materiality” approach. This approach integrates the
perspective of Impact Materiality with that of Financial
Materiality, which envisages identifying those issues that
represent sustainability risks and opportunities that influence
or could significantly affect the company’s future cash flows,
with financial repercussions on development, performance
and corporate positioning in the short, medium or long
term. The exercise will be refined following the approval of
the european18 Efrag19 standards, which incorporates the
requirements introduced by the Corporate Sustainability
Reporting Directive (CSRD), which will come into force as
of 1 January 2024, providing for reporting according to the
double materiality approach.
In methodological terms, the process that led to Pirelli’s
Impact Materiality included the following main stages:
1.
Identification of material topics and relevant
prioritization (materiality map)
A thorough Stakeholder Engagement activity, completed in
early 2022 and published within the Annual Report 2021,
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 the comparison and
matching of these expectations with the importance of the
same issues for the success of the business according to the
experience and expectations of the Top Management.
topics considered
relevant were pre-selected
The
considering their relevance to the automotive components
18 European Sustainability Reporting Standards – ESRS.
19 European Financial Reporting Advisory Group.
101
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). 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 Table and the Matrix reported below.
The prioritization among material topics was defined
according to the results of the interview process with
Stakeholders and Management from all regions of the World,
specifically including:
→ 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
with the Group.
2.
Identification of the Impacts Generated by the
Organisation
Initially, the internal and external context of the company was
analysed.
Available
internal documents were analysed, such as
information on the company profile, values, and the Group’s
sustainability plan, in order to gain an in-depth understanding
of the sustainability context
in which the organisation
operates, as well as the Group’s activities, business relations
and stakeholders. In addition, a benchmark analysis was
conducted that included comparable industry and non-
industry companies, in particular Automobile and Auto parts
manufacturers, manufacturing and chemical companies, the
expectations of the main sustainability standards, sustainable
finance indices and major international fora (such as SASB,
S&P Global indices for Dow Jones, OECD publications and the
World Economic Forum), the external context was analysed
starting with the evolution of legislation and regulations in
order to intercept the main trends and relevant factors related
to sustainability aspects in the tyre sector.
The analysis of the organisation’s context was integrated
with the Group’s Enterprise Risk Management (ERM)
function, in consideration of the analysis and assessment
of corporate risks.
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN This resulted in a list of the main impacts generated by the
Company (impact materiality perspective), positive and
negative, actual and potential, correlated to the initiatives and
objectives implemented by Pirelli to mitigate them.
3.
Evaluation of the impacts generated on the economy,
the environment, people and human rights
In this phase, the identified impacts were subjected to
Stakeholder and Senior Management assessment to
determine their significance according to the perspective
of Impact Materiality, considering both the magnitude
includes the aspects of severity, extent and
(which
irretrievable character, the latter character only for negative
impacts), and the likelihood of the impact occurring,
which determines the potential or actuality of the impact.
The assessment was requested considering the residual
impacts against the initiatives and objectives implemented
by Pirelli to mitigate them.
In particular, the Stakeholder Engagement activity envisaged
the involvement of five categories of Stakeholders at
the international level: Senior Management, Employees,
Original Equipment Customers, Group Suppliers, Non-
Governmental Organisations.
4.
Impact materiality: list of material issues ordered by
priority and assessments of the impacts generated
on the economy, the environment, people and
human rights
Finally, in line with the requirements of the new GRI Universal
Standards 2021, the results obtained from the assessments
were reprocessed, prioritising the significance of the impacts
and related material themes. This process made it possible
to identify the Group’s material sustainability themes.
The Impact Materiality is represented below, highlighting:
→ the material themes listed in order of relevance (highest
to lowest) as resulting in the Materiality Map concluded in
early 2022 and published in Annual Report 2021, confirmed
in the same relevance order for the whole year 2022;
→ the SDGs of reference;
→ the description of the correlated positive and negative
impacts;
→ the levels of significance (magnitude * probability which
determines the potentiality or actuality of the impact) of
positive and negative impacts as resulting from the above
mentioned five Stakeholder categories who took into
consideration the strategies and actions implemented by
Pirelli to manage the specific impacts;
→ Pirelli's Strategies and actions;
→ the reference to the specific paragraphs of this Report
where the adopted strategies, the relevant management
model and the performances are detailed.
The analysis of the impacts (Impact Materiality) shows how,
in view of the measures implemented by Pirelli on material
issues, the actual/potential positive
impacts are more
significant than the actual/potential negative impacts, thus
giving value to the actions, policies and targets implemented
by Pirelli and demonstrating that Stakeholders consider them
appropriate for mitigating negative impacts and maximising
positive ones.
In order to make it easier for the reader to understand,
the Impact Materiality is also presented below in the form
of a matrix, with the themes positioned in consideration
of the relevance attributed by Senior Management and
Stakeholders and the size of the bubbles representing the
significance of the residual positive and negative impacts,
consolidated with respect to the assessments of Impact
Materiality by Senior Management and Stakeholders.
102
Pirelli Annual Report 2022 The following is a list of material topics ordered by relevance with details of related impacts, levels of significance
of the Impact Materiality and their contribution to the United Nations Sustainable Development Goals (SDGs).
MATERIAL THEME
SDGs
POSITIVE (+) AND
NEGATIVE (-) IMPACTS
IMPACT SIGNIFICANCE
(IMPACT MATERIALITY)
ACTIONS, POLICIES
AND TARGETS
UNDERTAKEN BY PIRELLI
STRATEGY AND
PERFORMANCE
(descendent
priority order)
(potential/actual)
(magnitude*probability)
●●●
●●
●
High
Medium
Low
Product Quality
and Safety
Climate change
and GHG emission
reduction
Responsible
management of
Natural Resources
+ Contribution to road
safety by reducing
possible car accidents
thanks to tyres that meet
the highest quality and
safety standards.
- Customer dissatisfaction
due to defective and
unsafe products, negative
impact on road safety.
+ Contribution to the
reduction of atmospheric
emissions.
- Contribution to
climate change through
atmospheric emissions
from fossil energy
consumption during tyre
manufacturing and by the
supply chain.
+ Contribution to the
conservation of natural
resources.
- Contribution to natural
resource depletion,
through consumption of
raw materials and natural
resources.
●●●
●
● ●
●
● ●
●
(Ref. chapters/sections
of the Report)
• PRODUCT SAFETY
PERFORMANCE AND ECO-
SUSTAINABILITY
• PRODUCT ECO & SAFETY
PERFORMANCE TARGETS
• ADHESION TO TCFD
• PIRELLI GROUP
ENVIRONMENTAL FOOTPRINT
AND STRATEGY
• ENERGY MANAGEMENT
• GREENHOUSE GAS EMISSION
MANAGEMENT AND CARBON
ACTION PLAN
• SUSTAINABILITY OF THE
NATURAL RUBBER SUPPLY
CHAIN
• BIODIVERSITY
• PIRELLI’S APPROACH TO THE
CIRCULAR ECONOMY: THE 5
R’S
• PRODUCT: RAW MATERIAL
RESEARCH AND
DEVELOPMENT
• ENERGY MANAGEMENT
• WATER MANAGEMENT
• WASTE MANAGEMENT
Pirelli applies the most
advanced technologies to offer
tyres with high levels of quality
and performance, with the aim
of having 90% of new tyres in
2025 classified according to
the highest European labelling
standards for ‘wet grip’.
Pirelli has created a
decarbonisation roadmap in
line with the objectives of the
Paris Agreement and aims
for zero net CO2 emissions
by 2050 at the latest along
the entire value chain. To this
end, the Company is active on
several fronts including:
- investments in process
energy efficiency and the
procurement of 100%
electricity from renewable
sources by 2025;
- the commitment to achieve
Group carbon neutrality by
2030;
- engaging the most impactful
suppliers to reduce their
emissions;
- product innovation to ensure
increasing levels of energy
efficiency.
Pirelli promotes initiatives to
manage natural resources
responsibly in order to:
- prevent unnecessary
consumption of raw
materials, with targets by
2025 to increase the use
of renewable materials by
40%, recycled materials20
by 8%, and decreasing the
consumption of fossil-
derived materials by 40%;
- prevent the generation of
waste upstream, through
innovation in production
processes and the
implementation of the Zero
Waste to Landfill initiative,
with the goal of sending 98%
of the waste produced for
recovery;
- make water consumption
more efficient, with a target
to reduce specific water
withdrawals by 43% by 2025
compared to 2015 levels.
20 > 3% by 2025 and > 7% by 2030 excluding recycled metals.
103
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN MATERIAL THEME
SDGs
POSITIVE (+) AND
NEGATIVE (-) IMPACTS
IMPACT SIGNIFICANCE
(IMPACT MATERIALITY)
ACTIONS, POLICIES
AND TARGETS
UNDERTAKEN BY PIRELLI
STRATEGY AND
PERFORMANCE
(descendent
priority order)
Product
Environmental
Sustainability
Occupational
Health & Safety
Innovation
Business Ethics
and Integrity
Future Mobility
(magnitude*probability)
●●●
●●
●
High
Medium
Low
● ●
● ●
● ● ●
●
● ● ●
●
● ● ●
●
● ● ●
●
(potential/actual)
+ Contribution to the
reduction of cited
environmental impacts
through the use of low-
impact tyres.
- Contribution to tyre-
related CO2 emissions and
pollution from the release
of wear particles into the
environment (soil, air,
water).
+ Health and safety at
work, greater well-being for
people in the company and
a positive social impact
outside the company.
- Accidents to workers
due to non-compliance
with company rules and
regulations, social costs.
+ Contribution to the
technological advancement
of the industry by
accelerating progress
towards the mobility of
the future, to customer
satisfaction through
innovation and the provision
of innovative products and
technologies.
- Lack of positive
contribution to the
evolution of mobility due
to inadequate or obsolete
solutions, customer
dissatisfaction.
+ Contribution to the
prevention and reduction
of corruption and
misconduct in the conduct
of business, with benefits
to both the company and
the public good.
- Incidents of corruption
and misconduct in the
performance of activities
that can affect both the
company and the public
good.
+ Substantial contribution
to improving customer
mobility, both in terms
of safety and eco-
sustainability.
- Difficulties in the
development of innovative
and competitive
technologies, products and
services in relation to the
evolving mobility scenario,
decreased road safety and
increased environmental
pollution.
(Ref. chapters/sections
of the Report)
• PRODUCT SAFETY
PERFORMANCE AND ECO-
SUSTAINABILITY
• PRODUCT: RAW MATERIAL
RESEARCH AND
DEVELOPMENT
• PRODUCT: ECO & SAFETY
PERFORMANCE OBJECTIVES
• TYRE WEAR AND TRWP
• END-OF-LIFE TYRE
MANAGEMENT
• HEALTH, SAFETY AND HYGIENE
AT WORK
• PRODUCT SAFETY
PERFORMANCE AND ECO-
SUSTAINABILITY
• PRODUCT: RAW MATERIAL
RESEARCH AND
DEVELOPMENT
• PIRELLI AND ITS MANAGEMENT
MODEL
• MAIN POLICIES
• COMPLIANCE PROGRAMMES,
ANTI-CORRUPTION, PRIVACY,
TRADE COMPLIANCE,
ANTITRUST, COMPLIANCE WITH
LAWS AND REGULATIONS
• REPORTING PROCEDURE
• RESPECT FOR HUMAN RIGHTS
• REMUNERATION AND
SUSTAINABILITY
• HIGH VALUE APPROACH TO
THE MOBILITY OF THE FUTURE
Pirelli promotes research and
development of innovative
technologies and materials
through major investments
in innovation that contribute
to the reduction of product
environmental impact, through
the creation of tyres with low
rolling resistance, designed
to last for longer mileage and
to increase wear efficiency, in
order to contribute to lower fuel
consumption of conventional
cars/increase battery life of
electric vehicles, decrease the
release of wear particles into
the environment and reduce
noise pollution.
Pirelli has safeguards and
processes in place to ensure
regulatory compliance while
pursuing the company’s ‘zero
accidents’ objective.
Pirelli promotes the
development of innovative
and technological solutions
according to the ‘Open
Innovation’ model, in order
to anticipate technological
innovations in the sector, direct
research and development
activities and respond to the
needs of the end user, making
driving safer and improving the
driving experience
Pirelli places ethics and
integrity at the heart of its
essence as a company. It
has policies, processes and
organisational models in line
with best practices. Particular
attention is paid to making all
employees aware of company
rules, training and prevention.
Pirelli places the mobility of the
future at the core of its research,
innovation and business model,
so that its products and services
are competitive and anticipatory
with respect to an evolutionary
scenario that includes
digitalisation, electrification,
new consumer behaviour and
expectations (such as mobility
sharing), automated driving and
the circular product economy.
104
Pirelli Annual Report 2022 MATERIAL THEME
SDGs
POSITIVE (+) AND
NEGATIVE (-) IMPACTS
IMPACT SIGNIFICANCE
(IMPACT MATERIALITY)
ACTIONS, POLICIES
AND TARGETS
UNDERTAKEN BY PIRELLI
STRATEGY AND
PERFORMANCE
(descendent
priority order)
(potential/actual)
(magnitude*probability)
●●●
●●
●
High
Medium
Low
+ Contribution to the
protection of human and
labour rights.
● ● ●
Human Rights
Circular economy
Financial Health
Talent acquisition,
development
and retention
- Contribution to checking
on episodes of human and
labour rights violations
along the value chain.
+ Contribution to
maintaining availability of
raw materials and reducing
related environmental
damage, reducing
competition for access to
resources
- Depletion of raw
materials, environmental
damage due to waste and
inefficient use of natural
resources
+ Capacity for long-
term development and
contribution to the creation
of shared value.
- Erosion of generated
and shared value due to
the adoption of ineffective
plans to prevent, monitor
and manage potential risks
arising from competitive
positioning.
+ Contribution to the
support of deserving
students, to the
development of skills for
the market, to the creation
of quality employment
for both the company
and the socio-economic
environment.
- Dissatisfaction and high
employee turnover due to
inadequate development
initiatives and plans, failure
to contribute to the quality
of the socio-economic
environment.
●
● ●
●
● ● ●
●
● ●
●
Pirelli bases its activities on
respect for Human Rights and
promotes these rights in the
international, multicultural,
socially and economically
diversified context in which
it operates. Human Rights
related Policies and governance
systems are applied to cover the
value chain.
(Ref. chapters/sections
of the Report)
• MAIN POLICIES
• RESPECT OF HUMAN RIGHTS
• DIVERSITY, EQUITY AND
INCLUSION;
• OUR SUPPLIERS
• COMPLIANCE WITH
LEGISLATIVE-CONTRACTUAL
REQUIREMENTS ON OVERTIME,
REST PERIODS, ASSOCIATION
AND BARGAINING, EQUAL
OPPORTUNITIES AND NON-
DISCRIMINATION, PROHIBITION
OF CHILD AND FORCED
LABOUR
• PIRELLI’S APPROACH TO THE
CIRCULAR ECONOMY: THE 5 R’S
• PRODUCT: RAW MATERIALS
RESEARCH AND
DEVELOPMENT
• END-OF-LIFE TYRE
MANAGEMENT
• INTRODUCTION TO
INTEGRATED REPORT
• SHARING OF ADDED VALUE
• RELATIONS WITH INVESTORS
AND THE FINANCIAL MARKET
• CONSOLIDATED BALANCE
SHEET AS AT 31 DECEMBER
2022
• EMPLOYER BRANDING
• DEVELOPMENT
Pirelli pays continuous
attention to the definition and
implementation of increasingly
circular solutions, implementing
the “5Rs: Re-think, Refuse,
Reduce, Reuse, Recycle”
strategy (e.g. tyre design with
increasing content of renewable
or recycled raw materials,
increasing mileage to extend
tyre life and reduce resource
exploitation), in order to:
- Use over 40% renewable
materials by 2025 (over 60%
by 2030);
- More than 8% recycled
materials21 by 2025 (more
than 12% by 2030);
- Reduce the use of fossil-
derived raw materials to less
than 40% by 2025 (less than
30% by 2030).
Pirelli promotes the adoption of
appropriate economic-financial
risk management tools to
ensure responsible long-term
development and combine value
creation and societal progress,
including multiple environmental
performance indicators in
financial instruments already
adopted and to be adopted in
the future.
Pirelli promotes the
implementation of specific
management policies in order
to attract, motivate and retain
talent, create collaborative
environments and ensure
adequate support for the
development of professional life
while respecting people’s merit.
21 > 3% by 2025 and > 7% by 2030 excluding recycled metals.
105
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN MATERIAL THEME
SDGs
POSITIVE (+) AND
NEGATIVE (-) IMPACTS
IMPACT SIGNIFICANCE
(IMPACT MATERIALITY)
ACTIONS, POLICIES
AND TARGETS
UNDERTAKEN BY PIRELLI
STRATEGY AND
PERFORMANCE
(descendent
priority order)
(potential/actual)
+ Contribution to the
conservation and
protection of biodiversity.
(magnitude*probability)
●●●
●●
●
High
Medium
Low
● ●
Biodiversity
Protection
- Contribution to the loss of
biodiversity and potential
damage to ecosystems
during business operations
and throughout the
product life cycle.
Diversity, equity
and inclusion
Responsible
Management
of the Supply Chain
Training and
Development
+ Psycho-physical
wellbeing of employees,
influence on people’s
culture with positive
impact both within the
company and in the
community outside the
company due to the values
conveyed.
- Dissatisfaction, stress
and lowered quality of
life of people due to
misalignments between
individual expectations and
company response.
+ Contribution to the
development of a
responsible and resilient
supply chain, reducing
negative social and
environmental impacts.
- Contribution to
the generation of
environmental harm or
harm to employees by third
parties due to inadequate
monitoring of supplier
practices.
+ Employee engagement,
maintaining a high-quality
workforce that is useful
both to the company
and to the economic and
social context in which the
company operates.
- Dissatisfaction and low
employee performance
due to outdated or
inadequate training
programmes.
●
● ●
●
● ●
●
● ●
●
(Ref. chapters/sections
of the Report)
• BIODIVERSITY
• SUSTAINABILITY OF THE
NATURAL RUBBER SUPPLY
CHAIN
• ENERGY MANAGEMENT
• WATER MANAGEMENT
• WASTE MANAGEMENT
• DIVERSITY, EQUITY AND
INCLUSION
• OUR SUPPLIERS
• RESPECT FOR HUMAN RIGHTS
• POLICY ON CONFLICT
MINERALS
• DEVELOPMENT
• TRAINING
• TRAINING ON SUSTAINABILITY
AND CORPORATE
GOVERNANCE
Pirelli adopts the No Net Loss
Model and applies the mitigation
hierarchy. The Company
promotes initiatives to protect
biodiversity of the sites where
it operates and to support the
conservation of forests and
ecosystems along the supply
chain. Particular attention
is paid to the natural rubber
supply chain, which is based
on a No Deforestation Policy. In
addition, a multi-year project in
the Indonesian Hutan Harapan
(whose translation is Forest of
Hope) forest has been activated,
which includes activities to
support local communities, the
conservation of 2,700 hectares
of rainforest and numerous
endangered animal species
in the area, among which
Sumatran Tiger and Sumatran
Elephant.
Pirelli promotes the
development of initiatives and
campaigns to raise awareness
and training on issues of
diversity, equity and good
inclusion practices, with the aim
of increasing understanding of
the human and corporate value
inherent in diversity among
individuals, of guaranteeing
equal treatment opportunities
throughout all stages of working
life and of fostering an inclusive
culture that allows each person
to feel welcomed and heard in
the corporate community.
Pirelli promotes initiatives
aimed at continually improving
the qualitative and competitive
level of its supply chain, with
initiatives and management
models that focus on
the economic, social and
environmental performance
of suppliers. The Management
Model adopted is attested by
a third party as fully compliant
with ISO20400, which requires
the company’s ability to manage
and capitalise on economy,
quality, respect for human rights
and the environment in the
supply chain.
Pirelli has historically
made continuous training a
cornerstone of its development,
innovating processes and
contents in order to maintain a
workforce that is competitive
and involved in the evolution
of the business and the global
context to which it intends to
respond competitively.
106
Pirelli Annual Report 2022 MATERIAL THEME
SDGs
POSITIVE (+) AND
NEGATIVE (-) IMPACTS
IMPACT SIGNIFICANCE
(IMPACT MATERIALITY)
ACTIONS, POLICIES
AND TARGETS
UNDERTAKEN BY PIRELLI
STRATEGY AND
PERFORMANCE
(Ref. chapters/sections
of the Report)
• STAKEHOLDER ENGAGEMENT
• RELATIONS WITH INVESTORS
AND THE FINANCIAL MARKET
• LISTENING AND EXCHANGING
IDEAS WITH THE CUSTOMER
• AS A SOURCE OF CONTINUOUS
IMPROVEMENT
• TOGETHER FOR NATURAL
RUBBER SUSTAINABILITY THE
GPSNR PLATFORM
• SUPPLIER MANAGEMENT
• LISTENING AND ENGAGEMENT
(INTERNAL COMMUNITY)
• INDUSTRIAL RELATIONS
• SAFETY CULTURE AND
TRAINING
• INSTITUTIONAL RELATIONS OF
THE PIRELLI GROUP
• COMPANY INITIATIVES IN
FAVOUR OF THE EXTERNAL
COMMUNITY-ROAD SAFETY
• INFORMATION AND CYBER
SECURITY
Pirelli promotes the
development of strong relations
with stakeholders in order to
increase their satisfaction and
willingness to collaborate in
the continuous improvement
and competitiveness of the
Company. Dialogue aims to
reach an equitable satisfaction
of the different stakeholder
categories, ascertain their
expectations and create a
“licence to operate” especially
in those complex and critical
contexts that require a
collaborative approach in order
to be managed with a view to
continuous improvement and
shared value creation (one
example might be the issue
of sustainable natural rubber
management).
Pirelli promotes the protection
of the sensitive data of third
parties (e.g. customers,
employees, suppliers)
through the implementation
of safeguards against
unauthorised access, in order to
prevent and mitigate episodes
of breach of sensitive data.
Pirelli promotes the
implementation of plans and
policies in order to ensure
the presence of a solid and
responsible governance that
is able to plan, implement and
monitor strategic directions in
the medium to long term.
• PIRELLI AND ITS MANAGEMENT
MODEL
• REPORT ON CORPORATE
GOVERNANCE
• SHARING OF ADDED VALUE
• INITIATIVES IN FAVOUR OF THE
EXTERNAL COMMUNITY
Pirelli promotes the
development of local
communities through solidarity
initiatives, technical training
and support road safety in
order to create shared value
and enhance the well-being and
quality of life of the surrounding
external community.
(descendent
priority order)
(potential/actual)
(magnitude*probability)
●●●
●●
●
High
Medium
Low
+ Stakeholder satisfaction,
effectiveness of business
plans and creation of
shared value.
- Stakeholder
dissatisfaction due to
the inability to develop
effective engagement
plans.
+ Contribution to the
protection of sensitive
third-party data.
- Contribution to the loss
or disclosure of sensitive
data due to inadequate IT
facilities and unstructured
information management.
+ Strength and
accountability of
the company to all
stakeholders.
- Incidents of violations
of the code of ethics,
corruption, conflicts
of interest due to an
ineffective governance
system.
+ Contribution to the well-
being and improvement of
the quality of life of local
communities.
- Contribution to the
deterioration of the
living conditions of local
communities due to their
lack of involvement in
corporate strategy.
● ●
●
● ●
●
● ● ●
●
● ●
●
Stakeholder
Satisfaction
Cybersecurity
Corporate
Governance
Corporate Citizenship
107
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN IMPACT MATERIALITY – REPRESENTATION UNDER MATRIX FORMAT
The Impact Materiality is also shown below in the form of matrix in order to make it easier for the reader to
understand and easily grasping the significance of the main impacts, as a result of magnitude * probability,
which determines the potential or actuality of the impact, including the applicable SDGs.
The themes are prioritized in consideration of the relevance attributed by Management and Stakeholders and
the size of the bubbles represents the significance (magnitude * probability) of the residual positive and negative
impacts (residual as it considers the actions already put in place by Pirelli to mitigate negative impacts and
maximize positive ones), consolidated with respect to the assessments of Impact Materiality by Senior
Management and Stakeholders.
Climate Change & GHG Emissions Reduction
SDGs: 7, 13, 15
Responsible Management
of Natural Resources
SDGs: 3, 6, 7, 8, 11, 12, 14
Product Environmental Sustainability
SDGs: 12
Human Right
SDGs: 5, 8, 10, 16
Innovation
SDGs: 8, 9
Circular Economy
SDGs: 3, 6, 8, 11, 12
Product Quality
and Safety
SDGs: 3, 12
Occupational Health & Safety
SDGs: 3, 8
Responsible Management
of the Supply Chain
SDGs: 8, 12, 16
Biodiversity Protection
SDGs: 6, 15
Business Ethics and Integrity
SDGs: 10, 16
Diversity, Equity & Inclusion
SDGs: 5, 8, 10
Cybersecurity
SDGs: 16
Training & Development
SDGs: 5, 6, 10, 16
Future Mobility
SDGs: 3, 11
Financial Health
SDGs: 8, 9, 13
Talent Acquisition, Development & Retention
SDGs: 5, 8, 10
Corporate Governance
SDGs: 5, 6, 10, 16
Stakeholder Satisfaction
SDGs: 17
i
h
g
h
y
r
e
V
s
r
e
d
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o
h
e
k
a
t
S
e
h
t
r
o
f
e
c
n
a
v
e
l
e
R
Corporate Citizenship
SDGs: 8, 11, 16
h
g
H
i
High
Relevance for Pirelli
Bubble legend (Significance of Main Impacts):
The size and colour intensity of the bubbles represent the assessment of the significance of the main impacts,
as a result of magnitude x probability, which determines the potentiality or actuality of the impact, according
to the perspective of Impact Materiality
Significance
Positive Impacts
High
Medium
Low
Significance
Negative Impacts
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 sustainability 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.
The Sustainability Plan by 2025 and 2030 is fully integrated into the Company’s Industrial Plan. The Plan’s
Very high
High
Medium
Low
108
Pirelli Annual Report 2022
targets are defined in alignment with the materiality of the
Company’s impacts on the economy, environment, society
and Human Rights (see the description of Impacts in the
Impact Materiality section of this Report) and in support of
the United Nations 2030 Sustainable Development Goals, as
further discussed in this section.
Respect for Human Rights and the identification, prevention
and mitigation of related risks and impacts along the value
chain are transversal to the implementation of all the Plan’s
targets, see in this regard what is fully reported in the section
“Respect for Human Rights” in this Report.
A central role is dedicated to human capital, the core of the
company and its ability to achieve its goals. The culture of
safety at work will continue to support the Zero Accident
goal, with an accident frequency index ≤ 0.1 by 2025. The
Plan focuses on
innovative human capital
management.
increasingly
New marketing recruitment solutions for STEM (Science,
Technology, Engineering, Mathematics) talents will be
accompanied by experimentation with increasingly smart
ways of working and the training of new digital skills, in
an inclusive work environment capable of meeting the
challenges of the future in an agile and resilient manner.
At raw material level, for new product lines, the Plan foresees
the following:
→ by 2025: renewable materials >40%, recycled materials22
>8%, fossil-derived materials <40%;
→ by 2030: renewable materials >60%, recycled materials23
>12%, fossil-derived materials <30%.
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 8.6% 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
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.
As part of its decarbonisation strategy, in addition to the SBTi
targets mentioned above, Pirelli has formally expressed its
commitment to the Net Zero Science Based Target.
With reference to protecting Biodiversity, the Company has
adopted the No Net Loss Model and the mitigation hierarchy
in managing impacts. Moreover, on the deforestation risk
side of Natural Rubber, Pirelli has adopted 2019 as the cut-
off year, in line with the Policy Framework of the Global
Platform for Sustainable Natural Rubber.
For an extensive discussion of all the above Targets and
the performance achieved, please refer to the relevant
paragraphs in this Report.
With reference to the evolution of the product range, by 2025:
→ more than 70% of new products will be in Rolling Resistance
Class A/B24;
→ more than 90% of new products will be in WetGrip Class
A/B;
→ growth in Eco & Safety Performance revenues with a
target of >66% of total car sales and >71% of High Value
products only25.
The ESG objectives are an integral part of the short-term
incentive plans (with a weight of 15% of the STI premium)
and long-term incentive plans (with a weight of 20% of
the LTI bonus), details of which are publicly available in the
Remuneration Policy available on the Company’s website, in
the “Remuneration and Sustainability” section of this Report,
and in the dedicated section in the Corporate Governance
Report included in this Annual Report.
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 42% reduction in
absolute CO2 emissions compared to 2015 (Science Based
Target approved by SBTi in 2022); by 2030 it is planned
to achieve Carbon Neutrality (considering emissions both
from electrical and thermal energy);
→ with regard to natural resource efficiency, the following
are also planned by 2025: reductions of 10% in specific
22 > 3% by 2025 and > 7% by 2030 excluding recycled metals.
23 > 3% by 2025 and > 7% by 2030 excluding recycled metals.
24 On all new ipcodes with Label, converting the non-European scales to the European classification.
25 High Value products are determined by rim sizes equal to or greater than 18 inches and, in addition,
include all “Specialties” and “Super Specialties” products (Run Flat™, Seal Inside™, PNCS™, Elect™, Pirelli
Cyber™, Racing, Collezione) independently of rim size.
To support the achievement of Group targets, all Pirelli
commercial and industrial subsidiaries around the world
have a Country Sustainability Plan.
The Plan targets in alignment with the materiality of the
the
Company’s socio-environmental
following SDGs in particular:
impacts support
→ 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;
109
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN → 12 - Responsible Consumption and Production;
→ 13 - Climate Action;
→ 14 - Life Below water;
→ 15 - Life on Land;
→ 16 - Peace, Justice and Strong Institutions;
→ 17 - Partnership for Goals.
The link between the company’s impacts and the SDGs can
be found in the section “Impact Materiality”.
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 2022 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.
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. by sustainable and lasting growth that can
reconcile the interests and expectations of all those with
whom the Company interacts and especially;
→ customers, since the 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;
→ local communities, starting with those in the various
Countries where the Group operates on a stable basis,
while being aware of its responsibilities as a Corporate
Global Citizen.
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
influencing the
evaluation of the priorities for action,
materiality matrix and the development strategy set out in
the Sustainability Plan.
To the stakeholders mentioned, sections are dedicated within
this Report, to which reference is made for further qualitative
and quantitative study.
In the course of 2022, engagement and dialogue activities
with stakeholders also continued through digital channels,
compatible with the periods of attention to COVID-19 risk.
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
employees in their local language.
The Policies define the principles and general rules of
conduct that inspire all activities carried out at Group level
on specific topics: by their very nature they therefore apply to
all Group personnel and to all those who work for or on behalf
of Pirelli. In many cases, the Policies are also, or specifically
addressed, to the Pirelli supply chain and/or more generally
to all stakeholders (e.g. the Whistleblowing Policy).
Specifically, as at year-end 2022, the body of the Main
Group Policies on sustainable management consisted of the
following documents:
→ Pirelli’s Values and Code of Ethics
→ the “Global Human Rights” Policy
→ the “Health, Safety and Environment” Policy
→ the “Diversity, Equity & Inclusion” Policy
→ the “Product Stewardship” Policy
→ the “Global Quality” Policy
→ the “Supplier Code of Conduct”
→ the “Green Sourcing” Policy
→ the “Sustainable Natural Rubber Management Policy”
→ The “Group Code of Conduct”
→ The “Anti-Corruption” Programme
→ the “Global Antitrust and Fair Competition” Policy
→ the “Antitrust” Programme
→ the “Institutional Relations - Corporate Lobbying” Policy;
→ the “Global Tax” Policy
→ the “Global Personal Data Protection” Privacy Policy
→ the “Intellectual Property” Policy
→ the “Pirelli Social Media” Policy
→ the “Global Information Security” Policy
→ the “Whistleblowing” Policy – Complaint Procedure.
In addition to the Policies listed above, Pirelli has adopted a
number of Group documents known as “Corporate Policies”
that regulate aspects of Corporate Governance, e.g. the
rules on market abuse, the procedure for transactions
with related parties, the procedure on
information
flows to Directors and Statutory Auditors, the policy on
engagement with shareholders and financial market
stakeholders (issued in 2022), etc. These documents are
published in the Governance Section of Pirelli’s website.
Further details are available in the section “Report on
Corporate Governance and Ownership Structure of Pirelli
& C. S.p.A.” in this Annual Report.
110
Pirelli Annual Report 2022 The Policies and updates of existing Policies are approved
by the Executive Vice-Chairman & CEO or by the Board of
Directors of Pirelli & C. S.p.A. (or Board Committees).
All the Policies are published on the Pirelli website, in several
foreign languages.
Whenever a new Policy or its update is published, prompt
communication is made to every employee with a company
e-mail address, attaching the relevant documentation. The
Policies are made available to the internal community in the
appropriate section on the Company intranet.
Depending on the circumstances and the type of Policy in
question, further initiatives may be undertaken with the aim
of strengthening communication such as the publication
of news on the company intranet or posters on the notice
boards of the Group’s plants and offices. Training aimed at
policies implementation consider the materiality of impacts
linked to the specific roles of the different functions, with the
aim of maximizing effectiveness. Lastly, each new employee
during the hiring phase is provided with a copy of the most
relevant Policies in force (by e-mail or hard copy), for his or
her knowledge and acceptance.
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.
The commitments in the field of Human Rights, without
prejudice to the policies expressly dedicated to this, are
transversal to all the Group’s Policies and this by virtue of
the Management Model adopted by the Company. Pirelli
in fact bases its activities on the respect and protection
of universally affirmed human rights, in line with the
international standards adopted (in particular those of the
United Nations) and with the provisions of the laws and
regulations of the individual countries in which it operates.
For an extensive discussion of human rights management
activities, risk assessment, results and consequent actions,
please refer to the paragraph “Respect for Human Rights”
in this Report.
COMPLIANCE PROGRAMMES, ANTI-CORRUPTION,
PRIVACY, TRADE COMPLIANCE, ANTITRUST,
COMPLIANCE WITH LAWS AND REGULATIONS
With regard to the administrative liability of companies
and bodies provided for by Legislative Decree 231/2001
(hereinafter also the “Decree”), Pirelli has adopted an
Organisation 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.
111
In 2022, given the continuation of the public health
emergency situation declared in 2020 until the month of
May, the specific periodic monitoring information flows to the
Supervisory Board relating to the company’s management
of the Coronavirus emergency were maintained, which
were reported first separately and then together with the
information flows pursuant to Legislative Decree 231/01.
During the year, training and communication activities on the
current Organisational Model were completed for the entire
population of the Group’s Italian companies.
The process of communicating and implementing the
Group’s Anti-Corruption Programme in the main countries
where Pirelli operates also continued. The Programme,
available in twenty-three different languages on the 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, the Pirelli principles
already set out in the Code of Ethics and the Code of
Conduct, including zero tolerance of “any type of corruption
in any form or manner, in any jurisdiction, not even where
activities of this kind are in practice admitted, tolerated or
not judicially pursued” are restated. Among the provisions
of the Group Anti-Corruption programme is an explicit
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 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, where necessary, the updating of
the risk analysis.
Finally, specific procedures have been defined to formalise
the roles and responsibilities and operating procedures of
the third-party due diligence process through the analysis of
the activities, conducted in the main Countries, of gathering
and verifying information of ethical, legal and reputational
nature relating to counterparties and aimed at identifying
potential compliance risks in advance.
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN During 2022 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.
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 initiatives for the benefit of beneficiaries in respect
of whom there is direct or indirect evidence of failure to
abide by human rights, workers’ rights, environmental
rights or business ethics. “Pirelli Values and Code of
Ethics” set forth in their turn that the Company “does not
provide contributions, advantages, 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”.
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 Code of Ethics 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 Function 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 2022, on the basis of the reports received through the
whistleblowing reporting channel, one case of fraud to the
detriment of the Company was ascertained, while, as at
31 December 2022, 4 cases were in the process of being
verified and investigated.
There were no cases of public legal action against the
company regarding corruption practices.
Additionally, during the course of 2022 the Functional
Segregation model was also
(so-called
Segregation of Duties), aimed at strengthening the system
of internal controls and preventing the committing of fraud.
implemented
it subscribes as supporter
Also in 2022, Pirelli supported the activities of Transparency
in
International, to which
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.
In relation to the central role assumed by the topic
Trade & Sanctions during the course of 2022 following
the conflict between Russia and Ukraine, the tools
necessary for the strengthening and consolidation of
the internal control system related to these issues have
been updated/implemented and, in particular, specific
controls
in relation to countries, counterparties and
product codes. These screening operations guarantee
a meticulous control that is calibrated on the basis of
the monitoring of regulatory developments on a global
level, which in turn constitutes the fundamental point of
attention for a structured control activity.
With regard to the issue of Privacy, there was a continuous
update and comparison with the individual Regions in relation
to any new regulations with which they had to comply. The
subject of this activity were the most relevant issues in
the area of data protection, including, by way of example,
retention periods, data transfer, DPA, DPIA and requests for
personal data management by Users themselves.
During 2022, Pirelli was not involved in any proceedings
or significant investigations for alleged violation of privacy
regulations.
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 2022, 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 2022, Pirelli was not
in any antitrust
proceedings or significant investigations as participant in
anti-competitive conduct.
involved
In addition to the above and with reference to compliance
with laws and regulations, it should be noted that also in 2022:
→ no significant instances of non-compliance with laws and
regulations were registered;
→ no significant penalties were levied and/or paid relating to
non-compliance with laws and regulations.
For reporting on the contents of present paragraph in the
years 2020 and 2021, reference is made to the Annual
Reports 2020 and 2021.
INFORMATION AND CYBER SECURITY
Information is an asset, which has significant value for Pirelli
due to its competitive and innovative value. Hence Pirelli
is inherently responsible to provide appropriate levels of
protection to data and information against loss, damage,
theft or malware threats.
Due to the increase in cyber-attacks at global level and the
desire of Pirelli Group to ensure proper protection of data
112
Pirelli Annual Report 2022 and assets, the Group is focused on pursuing the following
objectives:
1. to support corporate strategy by making information
security an enabling factor for its business;
2. to safeguard the Group’s assets as regards their financial,
physical, intellectual property and reputation;
3. to comply with laws and regulations on information
security wherever Pirelli operates;
4. to guarantee the following information characteristics:
→ “Confidentiality”, understood as the ability to make
available or disclose
information only to those
individuals, entities or processes authorised to access
it (according to the minimum privilege principle);
→ “Integrity”‘, meaning the ability to safeguard the
accuracy and completeness of the information over
time;
→ “Availability”, meaning the ability to make information
accessible and usable at a time and in a manner
required by an authorised entity;
5. to protect data and confidential information of Pirelli,
its employees, subsidiaries, third parties and business
partners, including customers;
6. to respond proactively and effectively to the increase in
cyber threats.
The Information Security Committee was established in
2021 with the aim of assisting top management in the
management of Information and Cyber Security risks.
Specifically,
responsible for:
the
Information Security Committee
is
→ approving the risk management strategy and Information
Security objectives for the Organisation;
→ assessing the alignment of the Information Security
strategy and related initiatives with the Organisation’s
overall objectives;
→ ensuring compliance with internal and external Information
Security regulations;
→ ensuring the assignment of roles, responsibilities and
resources for Information Security initiatives;
→ evaluating, at least annually, the results with respect to the
strategies and objectives defined in the field of Information
Security, defining actions and initiatives for continuous
improvement, considering any changes in the scenario of
internal and external risks.
As at 31 December 2022, the
Committee consists of:
Information Security
→ Deputy CEO (as Board Member responsible for Information
and Cyber Security);
→ Head of Finance and Services;
→ Head of Information Security (Executive Manager
Information and Cyber Security
for
responsible
management);
→ Representatives of the main functions of the Organisation
impacted by Information and Cyber Security issues.
The
Information and Cyber Security function reports
113
hierarchically to the Finance and Services function (also
responsible for the Enterprise Risk Management areas) and
functionally to the Chief Digital Officer.
In addition, the function reports periodically on the status of
risks, significant events and updates on Information Security
strategy to the following committees:
→ Operational Risk Committee;
→ Board Committee Audit, Risks, Sustainability and
Corporate Governance Committee.
Where opportune induction meetings are also held for
members of the Board of Directors and Control Bodies.
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 the Pirelli
website, where it is published in 23 different languages in
order to facilitate accessibility.
The Procedure 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, in the Pirelli Supplier Code of Conduct, as well as
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, statutory 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.
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,
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN and is centrally managed by the Group Internal Audit function which, in the Pirelli organisation, has a functional
reporting to the Audit, Risk, 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 Management has the task of analysing all reports received, even involving corporate functions
felt to be competent for the activities necessary of verification, in addition to scheduling specific action plans. In
the event of a report being found to be grounded, the adoption of fitting disciplinary and/or legal actions for the
protection of the Company is foreseen.
In respect of reports received in the years 2022, 2021 and 2020, below is a summary table followed by an in-
depth analysis of those pertaining to 202226.
Total Reports
Of which anonymous
Of which filed closed for being
absolutely generic
Of which founded
Countries of origin
of the verified reports
Matter alleged in the reports
ascertained
Outcome of cases investigated
2022
2021
2020
90
30
13
26
59
35
12
12
50
17
3
20
Brazil, Germany, Italy, Mexico,
Romania, Sweden, UK
Violation of the Code of Ethics
and/or company procedures,
fraud against the Company
or third parties, discrimination
Argentina, Brazil and Romania
Argentina, Brazil and UK
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, claims
by employees, discrimination
Review and integration of processes
where deemed fitting, orders by
the functions concerned and the
Human Resources Department
Review and integration of processes
where deemed fitting, orders by
the functions concerned and the
Human Resources Department
Review and integration of processes
where deemed fitting, orders by
the functions concerned and the
Human Resources Department
During the course of 2022 the Whistleblowing procedure was activated 90 times. In particular:
→ these 90 reports came from 11 different countries (Argentina, Brazil, China, Germany, Italy, Mexico, Romania,
Russia, Sweden, UK and USA);
→ 89% of the reports (80 cases) were forwarded using the email address ethics@pirelli.com provided, while
11% (10 cases) by sending a letter to management which dealt with informing Internal Audit Department as
per corporate rules;
→ 67% of the reports (60 cases) were signed whereas the remaining 33% (30 cases) were received in anonymous
form;
→ among the signed notifications, 8 were activated by external stakeholders, of which 5 were related to breaches
of the Code of Ethics and/or company procedures, 3 cases attributable to fraud to the detriment of the
Company or third parties. 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 90 reports received during the 2022 year, at the beginning of 2023, 17 were found to be at the verification
and in-depth investigation stage, whereas 73 were found to have been concluded.
26 The data reported are related only to the consolidated perimeter of the Consumer business.
Furthermore, with regard to the 7 reports that were still in progress at the reporting date of the 2021
Annual Report, following the conclusion of the verification activities in 3 cases no objective evidence
was found to consider the facts alleged to be true, while in 4 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.
114
Pirelli Annual Report 2022 With regard to the 73 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 47 cases, objective corroborating evidence was detected
such as to hold the facts contended in the reports received
to be true;
→ in the remaining 26 cases, the substantial truthfulness of
the facts attributed was found and in particular:
→ 1 case involved discrimination;
→ 6 cases involved fraud against the company or third
parties;
→ 19 cases concerned violations of the Code of Ethics
and/or company procedures.
No reports were received of alleged violations of ILO
Core Labour Standards, with specific reference to
forced labour, child labour, freedom of association and
bargaining.
The Company has activated for all cases, intervening
with disciplinary sanctions (calls and dismissals) and with
actions aimed at removing the causes of complaints and/
or aimed at improving the internal control system.
In 2022, there is a 53% increase in reports compared to
2021 (equal to 31 reports).
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 addition to the Global Pirelli Complaint Procedure,
since 2022 Pirelli has made available to its stakeholders a
grievance procedure for reporting violations of the Policy on
Sustainable Natural Rubber Management throughout the
entire supply chain.
The Procedure has been published on the company’s website
(Sustainable Natural Rubber Section) and can be found at
the bottom of the Policy on Sustainable Management of
Natural Rubber.
Reports, including anonymous ones, are sent to the e-mail
address grievance.naturalrubber@pirelli.com
are
handled according to the procedure in terms of confidentiality,
non-retaliation, response time and appeal.
and
No reports were received during 2022.
115
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN 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 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 the Stakeholders and raising the 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 existing relations 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
2,523,729
2,194,760
2022
2021
(in thousands of €)
2020
1,674,788
Remuneration of personnel
(1,178,609)
46.7%
(1,101,913) 50.3%
(949,678)
56.7%
Remuneration of Public Administration
(159,734)
6.3%
(115,158)
5.2%
(14,693)
0.9%
Remuneration of borrowed capital
(201,696)
8.0%
(144,281)
6.5%
(156,502)
9.3%
Remuneration of the company27
(980,166)
38.9%
(830,269)
37.5%
(548,726)
32.8%
Contributions to the external community
(3,524)
0.1%
(3,138)
0.1%
(5,189)
0.3%
The added value created in 2022 is 15% higher than in 2021. Trends in the items determining gross global
added value, as shown above, are set out in the Directors’ Report on Operations and Consolidated Financial
Statements and Notes to the Financial Statements section of this report, to which reference should be made for
further in-depth study.
CONTRIBUTIONS FOR THE BENEFIT OF THE EXTERNAL COMMUNITY
The impact of expenses for corporate initiatives in 2022 for the external community on the net result of the
Group amounted to 0.8% (1% in 2021). The decrease in this ratio compared to the previous year is due to the
higher net result of the group compared to the previous year.
The table below shows the expenses incurred in the last three years.
CONTRIBUTIONS FOR THE BENEFIT OF THE EXTERNAL COMMUNITY
(in thousands of €)
2022
2021
2020
Training and research
Social-cultural initiatives
Sports and solidarity
Total contributions for the benefit of the external community
1,053
1,606
865
3,524
755
1,918
465
3,138
For further study of the main initiatives supported by the grants indicated above and relating to the model of
governance, please refer to the sections in this report devoted to corporate contributions and initiatives for the
benefit of the external community.
27 Company’s remuneration includes shareholder remuneration in the form of dividends approved by the
parent company Pirelli & C SpA in the amount of €161,000 thousand in 2022 (€80,000 thousand in 2021).
738
1,441
3,010
5,189
116
Pirelli Annual Report 2022
The amounts allocated to trade associations in 2022 totalled €1,453,000.
Next is the expenditure for trade associations, which are part of the lobbying activities and also interact with
policy makers.
TRADE ASSOCIATIONS
USMTMA - U.S. Tyre Manufacturing Association (United States)
Assolombarda (Italy)
Unione Industriale (Italy)
ANIP - National Association of Tire Manufacturers (Brazil)
Assogomma (Italy)
ETRMA – European Tyre and Rubber Manufacturers Association (Italy)
Assonime (Italy)
wdk - Wirtschaftsverband der deutschen Kautschukindustrie e.V. (Germany)
Other 28
Total Trade associations
(in thousands of €)
2022
2021
303
300
143
140
110
109
100
70
178
1,453
169
299
-
68
-
73
-
70
186
865
At the level of Associations in the United States, namely United States Tire Manufacturers Association (USTMA)
and Motor and Equipment Manufacturers Association (MEMA), the share dedicated exclusively to lobbying
activities in 2022 amounts to $49,234 and $2,869, respectively. The US Company Pirelli Tire LLC did not
perform lobbying activity.
For the other Trade Associations mentioned it is not possible to indicate the share they dedicated exclusively to
lobbying activities, Pirelli pays an all-inclusive membership fee.
For more details on the lobbying activities of the two trade associations in the United States and of which Pirelli
is a member, USTMA and MEMA, please refer to the paragraphs “USTMA” and “MEMA” of this Report.
For more details on lobbying activities with European institutions, please refer to the paragraph “ETRMA –
European Tyre and Rubber Manufacturers Association” of this Report.
In line with what is set forth in the Code of Ethics, Pirelli “does not give contributions or other benefits to political
parties and trade union organisations of workers, nor to their representatives, notwithstanding abidance by any
regulations that may apply”. Therefore, contributions in these areas are absent (zero).
Pirelli’s institutional relations are permeated by criteria of maximum transparency, legitimacy and accountability,
both with respect to information disseminated in public venues and to relations managed with institutional
interlocutors in accordance with the Code of Ethics and the Institutional Relations - Corporate Lobbying Policy.
28 Includes the membership fee for the Motor and Equipment Manufacturers Association (MEMA).
117
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN LOANS AND CONTRIBUTIONS RECEIVED
FROM THE PUBLIC ADMINISTRATION
During 2022, this communication activity continued
with meetings, roadshows and participation in industry
conferences.
The main contributions received by the Public Administration
in 2022 are shown below.
ROMANIA
Pirelli Tyres Romania S.r.l. received a non-repayable grant
totalling €28.5 million from the Romanian state as an
incentive for local investment of which €0.9 million was in
2022 (the incentives were paid from 2018). It should also
be noted that in the current financial year, the company
obtained approval from the Romanian state for a further
contribution of up to €23.8 million as an incentive for further
local investments.
ITALY
With reference to the agreement signed by Pirelli Tyre
S.p.A. with the MiSE (Ministry of Economic Development,
now the Ministry of Enterprise and Made in Italy) in the
2019 financial year for the facilitation of three Research
and Development projects up to a maximum of €6.3 million
in total, in the current financial year the company received
instalments of €1.5 million.
It should also be noted that in the current financial year, the
company obtained approval from the Romanian state for a
further contribution of up to €2.6 million as an incentive for
further local investments.
Within the framework of the PNRR (National Recovery and
Resilience Plan), the same company obtained a concession
decree from the MUR (Ministry of Universities and Research)
for the facilitation of research and development activities
within the “National Centre for Sustainable Mobility - MOST”
up to a maximum of €1.2 million.
in
line with
In accordance with Recommendation No. 3 of the Corporate
Governance Code and
international best
practices, the Board of Directors adopted the Engagement
Policy in 2022; this policy governs the management of
dialogue by the Board of Directors, through the Executive
Vice President and CEO with shareholders and key
stakeholders the financial market.
The Policy is published in the “Governance “section of
corporate website.
The “Investors” section of Pirelli’s website is constantly
information on strategy, business model,
updated with
market trends and positioning relative to competitors.
The interest of the financial community towards Pirelli
is proved by the broad coverage of the stock by 20 of the
leading national and international investment banks and
brokers and by the company’s inclusion 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 on the company’s website in
the ‘Investors’ section and periodically updated, based on
publications and model updates by analysts covering the
stock.
In 2022, the performance of equity markets was affected
by uncertainties in the macroeconomic scenario, which
were further exacerbated by the Russian-Ukrainian conflict.
Cyclical sectors suffered in particular, including Auto & Parts.
Also with regard to the PNRR, Pirelli &C. obtained a concession
decree from the MUR (Ministry of Universities and Research)
for the facilitation of Research and Development activities
within the Ecosystem for Innovation “MUSA – Multi-layered
Urban Sustainability Action” up to a maximum of €0.4 million.
Pirelli ended 2022 with a market capitalisation of €4.1
billion (average December capitalisation), down 30.8%.
This compares29 with -70.2% Nokian, -39.7% Continental,
-24.4% Michelin, -49.53% Goodyear, -17.9% Hankook,
+0.2% Bridgestone.
RELATIONS WITH INVESTORS AND THE
FINANCIAL MARKET
Pirelli believes that constant dialogue with shareholders
and, more generally, with key financial market stakeholders
contributes to the creation of sustainable value for the
Company.
In conducting such relations, the Company is inspired by
international best practices, ensuring equal, transparent,
timely and accurate communication, all in compliance with
current legislation on market abuse. Over time, the company
has developed multiple channels of communication with
shareholders and stakeholders the financial market.
29 Stock market trend 1 January - 31 December; the value is net of dividend distribution and/or other
extraordinary transactions.
118
Pirelli Annual Report 2022 Below is a summary of the stock market performance since the beginning of the year:
1-Jan
1-Feb
1-Mar
1-Apr
1-May
1-Jun
1-Jul
1-Aug
1-Sep
1-Oct
1-Nov
1-Dec
31-Dec
Pirelli
Nokian
Michelin
Continental
Goodyear
Bridgestone
Hankook
EU A&P Index
FTSE Mib
Source: Bloomberg
FOCUS: SUSTAINABLE FINANCE
As at 31 December 2022, sustainability index-linked loans accounted for almost 55% of the Group’s total gross
debt (excluding leasing).
In detail, “sustainable” bank lines amount to €3.2 billion, of which €2.2 billion was utilised and €1.0 billion was
available in the form of committed revolving credit facilities.
PORTION OF ESG GROSS DEBT
ESG Bank Loans
Other Debt
BANK LINES ESG FEATURES
Amount
Signing
Date
Maturity
Date
ESG
Adjustment
Type
KPIs and ESG Features
Testing
Type
Testing
Period
Eur 600m
Apr 2020
Apr 2025
Margin (+/-)
Sustainable
1: Absolute Scope 1 and Scope 2 CO2 Emission
2: Water withdrawal
Yearly
2019-2024
Eur 200m
Apr 2020
Apr 2025
Margin (+/-)
Circular
Economy
1: Fossil Based Materials
2: Rolling Resistance
One off
2023
Eur 400m
Dec 2021
Dec 2024
Margin (+/-)
Sustainable
Eur 1,600m Feb 2022
Feb 2027
Margin (+/-)
Sustainable
1: Absolute Scope 1 and Scope 2 CO2 Emission
2: Water withdrawal
Yearly
2022-2023
1: Water withdrawal
2: Scope 3 absolute CO2 emissions*
Yearly
2022-2025
Eur 400m
Jun 2022
Jan 2024
Margin (+/-)
Sustainable
1: Scope 3 absolute CO2 emissions*
One off
2022
* from the production of raw materials purchased or acquired by the Group
The Group’s first “sustainable” banking line dates back to the first quarter of 2020. This is a five-year line for a
total of €800 million divided into two tranches; a first tranche of €600 million with sustainability targets and a
second tranche of €200 million geared to circular economy targets.
119
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN In 2021, Pirelli confirmed its commitment and contribution to a sustainable economy with a three-year €400
million bilateral loan, parameterised on the Group’s environmental sustainability targets (CO2 emissions and
sustainable water management).
Over the past 12 months, Pirelli has refinanced its main bank financing line by introducing parameters linked
to environmental sustainability objectives. The transaction, totalling €1.6 billion with a five-year term, saw the
participation of 16 national and international lending banks, once again demonstrating the banking community’s
sensibility and support for the Pirelli Group’s sustainability strategy.
In June, Pirelli finally signed a €400 million club deal maturing in January 2024, again showing its commitment
to reducing CO2 emissions from raw material purchases (Scope 3).
In all of the above cases, the achievement of sustainability goals allows economic benefits for the Group
through a reduction in the interest margin applied. Conversely, failure to achieve sustainability goals results in
an economic penalty for the Group, which is therefore also economically incentivised to achieve them.
The Pirelli Group, first company in the tyre industry, also adopted a Sustainability-Linked Financing Framework
in May 2022. The framework, which can be downloaded from the company’s website, specifically identifies two
objectives for the Group’s sustainable finance: the reduction of GHG Scope 1 and 2 emissions and the reduction
of GHG Scope 3 emissions from raw material purchases.
The framework obtained, as is market practice, a second party opinion from Sustainalytics, which rated the
KPIs chosen by Pirelli as “very strong” because they collectively account for 87% of the Group’s total emissions
(Scope 1, 2 and 3) and the targets as “Highly Ambitious” in the case of Scope 1 and 2 emissions and “Ambitious”
for Scope 3. Once again, therefore, this certifies Pirelli’s validity and commitment to sustainability.
The framework covers a wide range of products, not only the more classic bank loans but also bond issues and
insurance and financial risk management instruments.
SUSTAINABILITY LINKED FINANCING FRAMEWORK - MAIN ESG FEATURES
Reference KPIs
Target
SDGs
Financial Products
1: Absolute Scope 1 and 2 Greenhouse gas (GHG) emission reduction
-42% in 2025 vs 2015
2: Absolute Scope 3 Greenhouse gas (GHG) emission from purchased raw
materials reduction
-9% in 2025 vs 2015
Sustainability Linked
Instruments: Bonds, Loans,
Derivatives, Guarantees and
Insurance Policies
The commitment to the creation of sustainable value that characterises the Company’s responsible management
and its economic, social and environmental performance, allow the inclusion of Pirelli in some of the most
prestigious sustainability stock indexes in the world.
Following the annual review of the Dow Jones Sustainability indices by S&P Global, the company recorded the
global Auto Components Sector Top Score, followed by the Sustainability Yearbook 2023 ‘Top 1%’ award.
Pirelli was also reconfirmed as a leader in the fight against climate change by 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, as well as being awarded the top sector rating in
FTSE4GOOD and the ‘ESG Top Rated’ recognition by Sustainalytics.
120
Pirelli Annual Report 2022 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 and truck makers;
→ - Replacement, for the replacement of tyres on vehicles
already in circulation.
In the field of Original Vehicle Equipment, Sport Utility
Vehicles (SUVs) and light commercial vehicles, Pirelli can
count on a Premium customer market share of around 20%
globally and around 25% in Europe; in the Original Equipment
Prestige segment, which represents the highest of the range,
Pirelli exceeds 50%.30
Within Replacement, there are two broad types of Pirelli
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
in terms of shared
is devoted to specialised dealers
development to enhance the product offering integrated
with a high-quality level of service, in compliance with Pirelli
values and consumer expectations. In 2022, Pirelli can
count on around 20,000 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), which has as main objective for Pirelli territorial
coverage and for the dealer sales support, to franchise
programmes, in which through the exclusive nature 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 (303 points of sale worldwide).
in
in 2016, and
Starting
line with Pirelli’s “Prestige”
strategy, a new retail concept called P ZERO WORLD™
was created, with the aim of offering top-class services
aimed at satisfying the most demanding consumers. P
ZERO WORLD™ offers its customers the full range of Pirelli
products (Car, P ZERO™ Trofeo®, Pirelli Collection, Moto
and Velo) and a series of customer oriented services such as
car valet and courtesy car, all immersed in an environment
that allows to fully experience Pirelli World, being able to
touch the most important assets such as F1®, the Calendar
and the continuous partnerships of Pirelli Design. The
30 Pirelli internal estimate.
121
Network P ZERO WORLD™ by 2023 will identify nearly
100 shops among the best Pirelli customers, located in
the main countries of the world. Of these, five are already
active Flagship Stores (Los Angeles, Munich, Monte Carlo,
Dubai and Melbourne), while the remainder are authorised
dealers, with about 15 new openings planned for 2023.
fundamental
Distributors are partners who are
to
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;
→ exploitation 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 provide 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.
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.
The Pirelli Group endorses the IAB (Interactive Advertising
is associated with the UPA (Associated
Bureau) and
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN 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 information distributed in
hard copy format, as well as the range of offline and online
training activities.
With 50 Car websites (in 29 languages), 20 Moto websites
(in 13 languages) and 6 Cycling websites (in 5 languages),
Pirelli online represents 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 or to purchase online on our partner e-commerce
platforms. In 2022, these websites attracted 14 million
unique users, for a total of 19 million sessions and around 48
million page views.
A further digital touchpoint that brings the consumer to the
point of sale is represented by the Retail sites: present in 9
countries, have intercepted in 2022 2.1 million users (for a
total of 5.7 million page views) and generated over 160,000
appointment bookings, more than 69,000 calls to the dealer
and more than 20,000 contact requests via e-mail.
In 2022, Pirelli also continued to inform its customers by
means of a Direct E-mail Marketing (DEM) programme,
whose main objective is to provide an additional means of
communication, training and ongoing contact. These DEMs
are intended to inform trade customers of the main news on
products, the Company and the courses available to become
Pirelli Product Experts.
In addition, during 2022, information about the introduction
of new products was carried out on digital channels: the new
Scorpion family and Elect technology were presented to
customers with digital events that allowed Pirelli to convey
its technological innovation in a new, fast and effective way.
The year 2022 saw the gradual resumption of open-door
events after the COVID health emergency years. In this
context, some of the most important car manufacturers in
the Prestige world presented their new models to the media
and public through static and dynamic launch events, in
which Pirelli participated as a partner. Highlights include the
media launch of the McLaren Artura in Marbella, the dynamic
launch of the Lamborghini Urus Performante in Vallelunga,
the static launches of the Pagani Utopia in Milan and the
Porsche 911 Dakar at the Los Angeles Auto Show. Through
partnerships with car manufacturers, Pirelli has also been
present at some of the world’s major automotive events,
such as the “Goodwood Festival of Speed” and “Monterey
Car Week”. Finally, the Pirelli P Zero calendar™ Experience
2022 gave rise to six events between Abu Dhabi, Silverstone,
Mugello, Hockenheim, Donington and Red Bull Ring, with
over 650 participants in total.
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
with the renewal in 2022 of the partnership started in 2018
with Luna Rossa, which will take part in the 37th America’s
Cup in 2024 in Barcelona. Added to this was the sponsorship
of sailor Ambrogio Beccaria and his boat Alla Grande Pirelli,
which took second place in the solo ocean race Route du Rhum
2022. In addition, Pirelli has consolidated its sponsorship of
FC Internazionale Milano, of which it has become Global Tyre
Partner from the 2021-2022 season after 26 years on the
Nerazzurri jersey; as well as the renewed partnership with the
Italian Winter Sports Federation and the Alpine Skiing World
Cup (Cortina d’Ampezzo stage, January 2022).
Customer training on the product was also intense in 2022
in all markets, continuing to be mainly virtual delivery. During
the year, almost 4,400 dealers from more than 30 major
markets participated in online training courses on Pirelli
products, technology and tyre sales.
In order to support the product trainers, Pirelli continues
to develop a library of technical content developed for
classroom courses and the TYRE CAMPUS™ tool, 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. In 2022, the TYRE-CAMPUS™ online training
site covered over 30 markets in 17 different languages. More
than 16,000 active users have registered on the training
platform to date. 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. Users are not only involved by a modern
and intuitive environment, they are also involved by obtaining
a ‘Product Expert’ certificate that can be downloaded from
the site once they have completed all the training courses
assigned during the year.
122
Pirelli Annual Report 2022 LISTENING AND EXCHANGING IDEAS
WITH THE CUSTOMER AS A SOURCE
OF CONTINUOUS IMPROVEMENT
Customer relationships are managed by Pirelli principally
through two channels:
→ the local sales organisation, 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, more than 20 worldwide with
more than 130 employees, performing information support
and order management (inbound), telemarketing and
teleselling (outbound).
In 2022, the overall fan base of Pirelli’s social media channels
increased by more than 1 million followers compared to the
previous year. Facebook remained the largest channel, with
2.6 million followers. Also on Twitter, the Pirelli accounts
reached more than 544,000 people, over 17% more than in
2021. A very important step forward was taken on Instagram,
where Pirelli channels reached more than 1.9 million
followers. There are about 30,000 followers of Pirelli on the
main online video platform, YouTube, where 46 million views
are recorded, and about 648,000 followers on LinkedIn.
Finally, Pirelli opened a new profile on the Tik Tok platform in
November 2022, which has reached 17,500 followers.
Regarding the site www.pirelli.com, Pirelli’s digital magazine,
about 290 articles were published in 2022 - 67% of which
on product and motorsport issues and 33% related to
brand and company dimensions - collecting more than 5.7
million visits (of which about 58% attracted through social
networks) and more than 5 million unique users. Among the
publications there is no shortage of content on sustainability
issues, including the ‘Thinking Ahead’ column and articles
supporting the three-year project in which Pirelli, BMW
Group and the NGO BirdLife International are involved in
protecting the rainforest on the island of Sumatra.
As for the Motorcycle world, the Pirelli and Metzeler
brands boast a structured and widepsread presence on
the main social networks; the Pirelli brand, in addition
to the Facebook channel (with more than 1 million fans
connected to the Global Page that includes 18 local pages)
is present on Instagram with almost 190,000 followers.
Also important to the business is the DIABLO™ Super Biker
mobile application, which has been further revamped and
improved in terms of graphics, usability and functionality
offered to motorcyclists. The Metzeler brand, in addition to
its international and geo-localised website in 21 countries
around the world, which in 2022 attracted 1.1 million unique
users, a total of 1.5 million sessions and 4.8 million page
views, is also present on Facebook with a Global Page that
has more than 440,000 fans and includes 17 local pages in
as many countries. As with the 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 the Pirelli
product by the registered motorcyclist community: over
123
510,000 for Pirelli Moto and around 90,000 for Metzeler.
Pirelli Cycling, in turn, also talks to its consumers 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 2022 direct customer listening activities were carried
out both through the Brand Tracking31 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
owners of Premium cars that can fit tyres of 18” and over,
the analysis carried out in 2022 saw Pirelli positioned among
the main tyre brands: in second place for Top of Mind, Brand
Awareness and Brand Consideration in the UK, in first place
for Top of Mind and Brand Awareness and in second place
for Brand Consideration in Italy, in second place for Brand
Awareness and in third place for Top of Mind and Brand
Consideration in Germany. Outside Europe, Pirelli ranks fifth
for Top of Mind, Brand Awareness and Brand Consideration in
the USA, while in China it ranks third for Brand Consideration,
fifth for Brand Awareness and sixth for Top of Mind.
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 the Company’s product offering and
commitment. In 2022, 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 2022, Pirelli marketed several product lines. Several
replacement products were introduced for the European
market, leading to the complete renewal of the SCORPION
family, dedicated to the SUV world: SCORPION, SCORPION
ALL SEASON SF2 and SCORPION WINTER 2.
SCORPION is the ultimate summer product for modern
SUVs and CUVs developed to combine safety and driving
pleasure with a focus on performance in the wet, mileage and
reduced rolling resistance. SCORPION, available in all Pirelli
technologies (Run Flat, NCS, Elect, Seal Inside) represents
Pirelli’s offering within the original equipment counting on a
portfolio of about 100 type approvals already in 2022.
31 Source: Kantar Brand Tracking July 2022.
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN Scorpion All Season SF2 is the product for those who want
to always meet winter regulations and not worry about
seasonal tyre changes, and is available in 34 sizes between
17 and 21 inches. The M+S symbol accompanied by the
3PMSF marking (Three-Peak-Mountain with Snowflake)
indicate the excellent performance even in winter conditions
and certified by the tests required by European regulations,
which guarantee compliance with the traffic regulations in
force in several European countries during winter. Safety
also confirmed in the excellent wet braking performance,
with 100% of the replacement range in class A on the
European label.
Pirelli’s European offering has also been renewed for the
Winter segment, with the introduction of the new Scorpion
Winter 2, the latest product introduced in the SCORPION
family, intended for modern SUV vehicles with a range of
over 50 items. The product offers high snow performance,
excellent mileage as well as reliable and safe performance in
winter conditions guaranteed by the TÜV performance mark
certification. The product is also equipped with Seal Inside
and ELECT technologies; and labelled class B-C for rolling
resistance values and 100% class A for wet grip.
With the renewal of the range, Pirelli has focused its efforts
strongly on products with the best rolling resistance values;
in Europe, Pirelli’s portfolio in class A/B is represented by
27% of the range (Pricat October 2022 data), up from the
previous year (2021 - 23%), showing the highest growth (vs.
January 2021) compared to the main reference players.
investment
This major
in products with excellent
environmental performance has not been at the expense
of safety (Wet Grip); in Europe, Pirelli’s A/B class portfolio
is represented by 86% of the range, an improvement over
the previous year (2021- 85%) and confirming Pirelli as the
leader in the segment.
Starting
in Q4 2022, the new products CINTURATO
WEATHERACTIVE and SCORPION WEATHERACTIVE were
introduced in North America. These tyres perfectly combine
the specific characteristics of Pirelli allseason tyres for the
American market with those of winter tyres. The result is
a tyre that can be used all year round, even in mild winter
conditions. Pirelli WEATHERACTIVE tyres offer confidence
in both snow and wet/dry conditions, providing year-round
peace of mind without the hassle of changing tyres when the
seasons change. The difference between ALL SEASON and
WEATHERACTIVE tyres is simple: the latter offer greater
safety and better performance in extreme conditions such
as snow and ice, certified by the Three-Peak Mountain
Snowflake (3PMS) rating.
The new 39-strong range is available in the CINTURATO
(for passenger cars) and SCORPION (for SUVs, CUVs and
pick-ups) families. With excellent wet performance and
outstanding snow traction, these new directional tyres
offer peace of mind in all weather conditions. A compound
that works over a wider temperature range is backed by a
60,000-mile tread wear guarantee.
The LATAM region introduced the new Powergy, Pirelli’s
product line for summer applications: the smart choice for
the consumer looking for the quality of a premium brand,
the safety of a product in Wet Grip class A/B, and at the
same time attention to efficiency (Rolling Resistance class
B/C). In fact, the product offers excellent levels of safety
and sustainability, offering the consumer reduced fuel
consumption in total safety in the wet, improving on the
performance of the previous product.
The line renewal also involved the APAC region with the
introduction of the two new products Cinturato Rosso and
Powergy to support Pirelli’s multi-channel and multi-country
strategy. The product lines are dedicated to CUVs, SUVs
and medium-large sedans and represent the choice for the
consumer looking for safety and green performance. The
products were developed with a high focus on dry and wet
safety, mileage and high acoustic comfort. High wet braking
performance (class A) and low rolling resistance (mainly
class B range) lead to low environmental impact without
compromising on performance and safety.
In terms of results in tests conducted by the European press,
several satisfying milestones were achieved (12 podiums and
3 victories in total).
In particular, among the Summer tyres, the Cinturato P7 was
on the podium twice, finishing first and second respectively
in tests conducted by Al Volante and Teknikens Varld, which
recognised the product’s excellent performance in terms
of manoeuvrability and wet performance, while maintaining
excellent Rolling Resistance values.
The P-Zero was on the podium twice (Auto Motor und Sport
and EVO), demonstrating its manoeuvrability and extremely
precise, snappy and sporty driving response as well as safety
in the wet.
The P Zero Trofeo R came second in two tests (Auto Bild
Sportscars and Auto Motor und Sport), being praised for its
high road handling and excellent braking performance.
Among the Winter tyres, the new Cinturato Winter 2 stood
out for its excellent press results. In fact, the product was on
the podium three times, ranking test winner twice (Auto Bild
and Tyre Seeker). High wet handling, aquaplaning resistance
as well as product durability and fuel efficiency contributed
to this important result.
The Winter Ice Zero FR was on the podium twice (Teknikens
Varld and Za Rulem), which recognised
its excellent
performance in terms of grip in extreme winter conditions
and comfort.
Finally, Ice Zero 2, a studded product specifically for extreme
winter conditions, took up a place on the podium in the
Teknikens Varld test.
Equally noteworthy results were achieved by Pirelli products
for the NAFTA market.
124
Pirelli Annual Report 2022 In the Grand Touring All Season segment test carried out
by Tire Rack, the P7 AS Plus 3 took first place, thanks to its
excellent handling qualities.
Scorpion Weatheractive, the new product for the North
American all weather tyre market, has been reviewed by
Tire Rack, receiving an excellent rating; in particular, the site
praises its versatility and excellent performance in all road
conditions.
In this regard, it is worth mentioning that most Pirelli
products are at the top of the consumer satisfaction rankings
published by Tire Rack:
→ Scorpion Zero All Season Plus in 1st place in the Street/
Sport Truck All Season category;
→ Scorpion Zero All Season in 4th place in the same category;
→ Scorpion AS Plus 3 ranked 1st in the Crossover/SUV
Touring All Season category;
→ Scorpion Winter ranked 1st in the Performance Winter/
Snow category;
→ P7 AS Plus 3 in 3rd place in the Grand Touring All Season
category.
The focus on the evolution of mobility and the environment
is also expressed in the ELECT-labelled tyre offering, which
distinguishes all tyres developed specifically, 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 peculiarities of electric cars,
particularly in terms of:
→ 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 holding.
Pirelli’s growing role within the electric segment and strategic
development partner is also made even clearer by the
achievement of more than 220 (pure BEV) type approvals
on 18 different carmakers, including numerous activities
within the OE BEV APAC world, which is experiencing strong
expansion and represents an element of diversification of
Pirelli’s presence in original equipment. Pirelli’s strong OE
investment has been reflected in a strong increase in OE
sales with ELECT technology: in 2022, ELECT sales in the
OE channel accounted for 13% of the channel total (vs. 5%
in 2021); 100% of the OE channel’s ELECT sales are 18’’up
and account for 17% of the OE channel’s 18’’up sales. In the
replacement channel, thanks to Pirelli’s pull-through strategy,
ELECT sales doubled to 2% of the replacement total by 2021.
stress between the road surface and the tread pattern.
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
and Rolls Royce, with 340 approvals. PNCS™ technology in
the OE channel accounts for 14% of the total (vs 9% in 2021)
and 19% of the 18” up (vs 13% in 2021). At the spare parts end
there is a continuous sales growth driven by the pull through
strategy of +35% vs. 2021 and accounting for 6.5% of the
total 18’’ up spare parts.
HIGH VALUE APPROACH TO
THE MOBILITY OF THE FUTURE
Pirelli closely monitors the evolution of mobility and its main
trends such as digitalisation, electrification, servitisation,
mobility sharing and automated driving, elements that
were already present before the health emergency and are
expected to evolve strongly in the coming years. In fact,
the health emergency has highlighted the importance of
personal health and safety, and we expect a recovery geared
towards greater sustainability for people and the planet, in
which technologies can play a key role in making the mobility
of the future safer, more accessible, efficient and with less
environmental impact.
The mobility of the future cannot be separated from
digitalisation, and in this area Pirelli is present with the
Cyber™ TYRE project. Tyre ‘sensorisation’ is an integral
part of the Group’s strategy that makes technological
innovation a distinctive and key element in responding to the
major themes that will transform the concept of mobility:
autonomous driving, electric, sharing and 5G connectivity.
The development of Cyber Tyre technology in 2021 saw the
market launch of the first car with tyres natively integrated
with the vehicle’s electronic systems. An integration project
that lasted several years, involving the R&D teams of Pirelli
and McLaren, paving the way for 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 for increased safety and
performance, both on the road and on the track.
As early as 2022, new iconic models of future mobility
have been equipped with Cyber Tyre sensorised tyres,
providing useful information that enables vehicles to improve
performance and performance.
Applying the market demand for mobility in the form of a
service (Tyre As A Service) to tyres, Pirelli introduced in April
2022 PIRELLI Care, a new way of purchasing tyres and car
care services via app with monthly payment. PIRELLI Care
offers several modular plans, which can be purchased via web
platform or app, and allows them to be further customised
with the type of service desired.
Particularly suitable for electric vehicles, but not only, is the
PNCS™ technology, a decisive innovation for the reduction
of interior noise generated by tyre rolling as a result of
The PIRELLI Care offer is constantly evolving and, as early
as September 2022, basic services such as puncture
protection or roadside assistance, provided in partnership
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REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN with Europ Assistance, were joined by the possibility of
recharging electric and plug-in hybrid cars at the network
of stations managed by Enel X Way spread throughout Italy.
Thanks to the collaboration between Pirelli and Enel X Way,
Enel’s new global business line dedicated to electric mobility,
users can now view the map of Enel X Way’s more than
16,000 recharge points directly on the PIRELLI Care app to
book a stop and fill up their electric vehicle.
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 19th century was a
bicycle tyre), in which it is present with several product lines:
P ZERO™ for high-performance racing bicycles, designed
for users devoted to maximum performance; CINTURATO™
for Endurance and Gravel bicycles, where the more playful
component of exploration and sporting activity understood
as well-being and lifestyle takes precedence over pure
performance; SCORPION™, the line dedicated to the off-
road world of Mountain Biking, with all its variants from
Cross Country to E-MTB; and finally the Angel™ Urban
line of tyres, ideal for all situations, urban and otherwise, of
commuting by pushbike.
A complete range of products developed by R&D Pirelli
also in collaboration with the best international professional
teams in each category, to achieve maximum performance.
Added to this is the start-up of bicycle tyre production at the
Pirelli plant in Bollate, which thus becomes the only factory
to produce ‘Made in Italy’ bicycle tyres on an industrial
scale. The historic facility, a few kilometres from Milan and
inaugurated by Pirelli in 1962, has undergone a process of
modernisation and reorganisation to house the production of
Pirelli Cycling’s high-end lines.
In the field of micro-mobility, Pirelli, with its 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 including a fleet of
top-of-the-range e-bikes, an app for managing bookings by
end users, routine maintenance of the bikes and marketing
and communication support to promote them within private
partner communities. The year 2022 saw further growth in
activities in the hotel and corporate channel in Italy. Among
the partners joining the service in 2022 are chains such as
Relais&Chateaux, the Horizons group for the hotel channel;
Terna S.p.A., Aon, Electrolux are just some of the new
partner companies.
QUALITY AND PRODUCT CERTIFICATION
ISO 9001: since 1970, the Group has had its own Quality
Management System introduced gradually at all 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
2020, following the Covid-19 pandemic situation, the IAF
(International Association Forum) admitted the possibility
of implementing remote audits and extending the validity
of expiring certificates. Pirelli ensured that surveillance and
recertification audits were carried out remotely and in the
field, 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.
In 2021, due to the continuation of the pandemic situation,
the Company continued to carry out surveillance audits
laid down by the
in accordance with the procedures
relevant third-party bodies, guaranteeing the continuity
of the certifications obtained. In 2022, following the re-
establishment of the general conditions of normality and in
accordance with the procedures laid down by the appointed
third-party bodies, the Company resumed carrying out
surveillance audits in presence, guaranteeing the continuity
of the certifications achieved.
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 2018. In 2020, due to the
pandemic situation, the International Automotive Task Force
allowed remote audits from 30 October 2020. Once again,
Pirelli ensured that surveillance and recertification audits
were carried out 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
and the company itself. In 2021, due to the continuation of
the pandemic situation, the Company continued to carry
out surveillance audits in accordance with the procedures
laid down by the relevant third-party bodies, guaranteeing
the continuity of the certifications obtained. In 2022,
following the re-establishment of the general conditions of
normality and in accordance with the procedures laid down
by the appointed third-party bodies, the Company resumed
carrying out surveillance audits in presence, guaranteeing
the continuity of the certifications achieved.
1993
the Materials and
ISO/IEC 17025: since
Experimentation Laboratory of the 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 transition rules to the ISO/ IEC 17025:2017 standard, in
2019 Pirelli Tyre S.p.A.’s Laboratory successfully achieved
accreditation to the new version. In 2020, the Laboratory
carried out its annual surveillance audit remotely, in 2021
and 2022 in hybrid mode, as stipulated by the Accreditation
Body Accredia.
Laboratories participate in proficiency tests organised by the
International Standard Organisation, the European Tyre and
Rim Technical Organisation (ETRTO) or international circuits
organised by car manufacturers. Specifically in regard to car
tyres, the focus on quality is confirmed by Pirelli’s supremacy
126
Pirelli Annual Report 2022 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.).
impartiality and respect for equal opportunities towards all
those involved in the purchasing processes as prescribed
by the Group Values and Code of Ethics and in line with the
OECD Guidelines on Duty of Care.
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, are coordinated and, for
some markets managed, directly by the Quality Function.
The prevailing certifications, obtained in the Pirelli Group,
cover the markets of Europe, North America, South America,
China, the Gulf States, 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 plants. These Certifications periodically require factory
audits by ministerial bodies from the countries concerned or
bodies delegated by them, with the aim of verifying product
compliance at the Pirelli production sites.
In 2022, on-site audits resumed, and only a few Government
and/or Type Approval Authorities (e.g. for the markets in
China and India) conducted remote audits for the purpose of
production conformity verification.
Some certifications have been
issued by third-party
certification bodies with delays (e.g. India, Indonesia) without
any impact on business activities.
COMPLIANCE
Also in 2022:
→ there were no significant cases of non-compliance with
laws and regulations related to products;
→ no significant penalties were applied and/or paid for non-
compliance with laws and regulations related to products.
For details of activities and performance with respect to
customers in the years 2020 and 2021, please refer to the
paragraph “Our Clients” in the respective Annual Reports.
OUR SUPPLIERS
SUPPLY CHAIN SUSTAINABLE MANAGEMENT SYSTEM
The Supply Chain Management Model adopted by Pirelli
fully meets the requirements dictated by the international
guidelines for sustainable procurement
ISO 20400 -
“Sustainable Procurement Guidance”, as attested by a third
party (SGS Italia S.p.A.) in 2018 and again in 2021 following
an in-depth assessment of the Pirelli Procurement Model,
the related corporate policies and strategies and the internal
processes applied to implement sustainability requirements
in purchasing dynamics and management of suppliers’
ethical performance. The assurance on full compliance with
the guidelines of ISO 20400 is flanked and complemented
by the certification of compliance obtained by the Company
with respect to 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 fairness,
127
The mission of Pirelli’s Purchasing Department is to promote
best practices and to purchase services and goods for
the effective and efficient operation of the Company and
to ensure the best supply base in line with the following
priorities: best market value, quality, on-time delivery,
speed, innovation, compliance with local and international
regulations and internal procedures.
The sustainable management of the supply chain at
Executive level is headed by the Group Procurement
Director, who works in constant coordination with the
Sustainability Department.
Sustainable management of the supply chain is addressed
in the “Global Health, Safety and Environment” Policy, the
“Global Human Rights” Policy, the “Quality” Policy, the
“Product stewardship” Policy, the Group’s “Sustainable
Natural Rubber Management” Policy, the “Green Sourcing”
Policy, the “Social Responsibility for Occupational Health,
Safety and Rights, and Environment” Policy, published in
several languages on the Company’s website so that they
are fully accessible to the general public. The Policies are
in turn the source of the details of what Pirelli requires of
its Suppliers, expressed in the Pirelli Suppliers’ Code of
Conduct, also published on the Company’s website, both
among the Policies and in the “Suppliers Area”. In all the
documents mentioned, with reference to the specific social
and environmental issues addressed by 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, and
to require its suppliers to implement a similar management
model in order to extend responsible management in the
supply chain as far as possible to its origin.
Policies and purchasing practices are subject to continuous
monitoring so that there is alignment with the Code of
Conduct and there are no conflicts with ESG expectations
and objectives.
is dedicated to Procurement Department and
Training
relevant buyers, as well as Internal Stakeholders, on ESG
management and processes, duly included in the Purchasing
Training Academy operated by Pirelli.
The Pirelli Suppliers’ Code of Conduct forms an integral
part of the Contractual Terms and Conditions of Purchase
applied by Pirelli to all its Suppliers, and its principles
acceptance is envisaged since the qualification phase of
the potential supplier.
The Code details what is required of Pirelli’s suppliers in the
following fields:
→ Human and Labour Rights, on employment contracts,
working hours, prohibition of child labour, prohibition of
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN forced labour and modern slavery, passport management,
health and safety, non-discrimination, pay equity,
freedom of association and collective bargaining, rights
of indigenous peoples and prevention of land conflicts,
privacy, conflict minerals, and internal security rules;
→ Environment, on the protection of biodiversity and
natural resources, circular economy, waste management,
reduction of greenhouse gas emissions, water saving,
elimination of single-use plastics;
→ Materials, sustainable chemistry, hazardous materials
management, governance to ensure there are no violations
in conflict minerals and with the intention of reducing them;
→ Business Ethics, with reference to the topics of fraud
prevention and illegal acts, corruption and abuse of
office, fair competition and anti-trust, conflicts of interest,
compliance with export controls and sanction provisions,
data protection and privacy, confidentiality, intellectual
property and adequacy of processes and records;
→ Due Diligence of the supply chain till upstream;
→ Whistleblowing procedure – Complaint Procedure.
Please refer to the text of the Pirelli Suppliers’ Code
of Conduct for an exhaustive reading of the specific
requirements to suppliers for each of the above elements
and areas.
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, as detailed below.
The analysis of ESG (Environment, Social, Governance)
performance continues with the qualification phase of the
potential supplier pre-analysed (and audited on-site by a
third party for all cases of potential suppliers of raw materials
and high value-added goods) in the assessment phase, to
then be “contractualised” through the Sustainability and
Business Ethics Clauses included in each contract/purchase
order (and of which the Pirelli Suppliers’ Code of Conduct is
an integral part).
Verification of the ESG compliance of those who become
part of Pirelli’s panel of suppliers is therefore carried out
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” section (https://corporate.
pirelli.com/corporate/en-ww/supplierarea/index-en-ww),
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 goods and services
around the world.
The detailed process follows.
THE ESG ELEMENTS IN THE
PROCUREMENT 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 scouting phase, 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 or otherwise by the requirements of the product
and ESG by the potential supplier. This makes it possible to
eliminate potential future suppliers that are clearly in possible
violation of Pirelli expectations.
Screening phase goes on with the on boarding. Pirelli asks
all potential suppliers who gain access during the on-
boarding phase (pre-qualification and qualification) to fill
in a questionnaire through which the supplier can view and
simultaneously accept Pirelli’s requests in terms of economic,
social, environmental and business ethics responsibilities.
The approach considers country, sector and commodity
specific economic and ESG risks (for example, the specific
risks related to natural rubber from the different countries).
Among the questions asked of the potential supplier, for
example in the area of Human and labour Rights, is 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. Further questions are
aimed at identifying potential integrity and corruption risks in
advance. The EcoVadis is also used to extensively investigate
the supplier’s sustainability profile, from management
systems to environmental performance, human and labour
rights, ethics and sustainable procurement. Raw material
suppliers are also required to complete the specific additional
module for emission reduction management.
Business relevance, country, sector and commodity specific
risks consideration are also at the origin of the on-site audit
approach to potential suppliers of raw materials and high
value added parts. Indeed 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, while often coming from
countries and sectors presenting specific ESG risks, which
characterise our definition of Significant Suppliers, 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 as a key
element to prevent future cases of business interruption.
The non-acceptance of the audit and/or not entering into a
reinstatement plan of any non-compliance shall block the
qualification of the supplier. At the same time, suppliers with
a good ESG performance are preferred.
128
Pirelli Annual Report 2022 Of particular importance are the preventive evaluation of new
raw materials and process aids with a view to safeguarding the
health of workers and the environment. These assessments
are conducted before the materials in question can be used
extensively by the Group’s operating units and are carried
out on the basis of appropriate technical documentation
(the so-called ‘Safety Data Sheet’), taking into consideration
not only the requirements of the most restrictive European
regulations on the management of hazardous substances
(see, for example, the ‘REACH’ and ‘CLP’ Regulations), but
also by virtue of the highest international technical standards
and the most up-to-date scientific knowledge (specific
UN databases, etc.). Furthermore, independently of and in
addition to the requirements of the laws in force, Pirelli asks
suppliers of raw materials and process aids used by the
Group to quantify the residual impurities contained.
Finally, of note are the well-established monitoring activities
of producers and suppliers of raw materials with regard
to compliance with the requirements of Regulation (EU)
2017/821 (as amended by Regulation (EU) 2020/1588)
concerning so-called ‘conflict minerals’ (to which a section is
devoted below). The process of managing ‘conflict minerals’
activities starts out from the qualification phase of potential
new suppliers associated with the issue and continues
throughout the duration of the supply as fully described in
the dedicated section within this Report.
With regard to the contractual stage, for more than a decade
the Sustainability and Business Ethics Clauses (including
anti-corruption) have been included systematically by Pirelli
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) or NGOs, worldwide.
In particular, the clauses require all suppliers to accept the
principles of the Pirelli Suppliers’ Code of Conduct, the
contents of which, as mentioned above, govern Pirelli’s
requirements in terms of human and labour rights, the
environment, decarbonisation, biodiversity, sustainable
management of materials and conflict minerals, business
ethics and the obligation of due diligence on the supply chain,
up to upstream, as well as Pirelli’s right to carry out audits and
subject to termination in the event of violation. The clause,
published in the “Suppliers Area” within the “General Terms
and Conditions of Purchase”, reads:
→ The Supplier declares to have read and understood
the Pirelli Suppliers’ Code of Conduct, published and
accessible at Supplier_CoC_EN.pdf (amazonaws.com),
which sets out the principles by which Pirelli conducts its
business and relations with third parties.
→ In light of the above, the Supplier undertakes, in connection
with the performance of each Contract(s) and/or Order(s),
to manage its business in compliance with the Pirelli
Suppliers’ Code of Conduct.
→ Pirelli has the right to verify, throughout the duration of the
Contract, directly or through third parties, the Supplier’s
compliance with the Pirelli Suppliers’ Code of Conduct,
subject to confidentiality and reasonable notice.
129
→ In case of breach by the Supplier of the obligations set
forth in the Pirelli Suppliers’ Code of Conduct, or in case
of refusal by the Supplier to implement an action plan
required by Pirelli or in case of failure to implement an
action plan agreed with Pirelli in relation to the Pirelli
Suppliers’ Code of Conduct, Pirelli may suspend with
immediate effect performance of the Contract and/
or Order, without prejudice to its right to terminate the
Contract(s) and/or Order(s) pursuant to Article 6.2 and
exercise any other remedy provided by law.
→ The Supplier is entitled to report to ethics@pirelli.com any
violation or suspected violation of the Pirelli Suppliers’
Code of Conduct and/or of any applicable legislation;
reports may be made anonymously, but must contain a
description of the facts constituting even a suspected
violation of the provisions contained in the Pirelli Suppliers’
Code of Conduct, including information on the time and
place of the facts represented, and the persons involved.
Pirelli will not tolerate threats or retaliation of any kind
against the whistleblower or anyone who has collaborated
in the activities of verifying the validity of the report, and
reserves the right to take all appropriate action against
anyone who carries out or threatens to carry out such
acts of retaliation. Pirelli guarantees the anonymity of the
whistleblower in compliance with the law.
In addition, always in line with the consideration of business
relevance, country, sector and commodity specific risks:
→ Suppliers that can be associated with Conflict Minerals
risk are required to sign a further dedicated clause, which
is set out later in this Report in the Conflict Minerals
Policy section and to which reference should be made for
further details on the management of the issue. Specific
sustainability clauses are applied to Natural Rubber
Suppliers, which implement the requirements of the
Policy on Sustainable Management of Natural Rubber,
without prejudice to Pirelli’s right to audit and terminate
the contract (as provided for in the Policy).
Finally, with reference to the Reports received by the Group’s
Whistleblowing channel available to Suppliers, it should
be noted that in 2022, three reports signed and sent by
Suppliers were received, in relation to violations of the code
of ethics and/or company procedures, one of which was
found to be well-founded. It remains objectively impossible
to confirm that the total number of reports from Suppliers
corresponds only to the three mentioned above, since some
reports were anonymous, as specified in the section: “Focus:
Group Whistleblowing Procedure”, to which reference should
be made for more details on Whistleblowing received and
handled in 2022. With reference to the Grievance Procedure
for reporting violations of the Policy on Sustainable Natural
Rubber Management, no reports were received during 2022.
FOCUS: ESG ON-SITE AUDITS
The 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.
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN Not only that, the on-site audit is also a capacity building
activity for the supplier while analysing the compliance of
its business with local and international legislation on the
environment, human and labour rights, and business ethics,
with the opportunity to draw up a remedy plan with the advice
provided by the auditor.
The on-site audit is carried out already in the pre-qualification
phase for all potential new suppliers and/or plants of raw
materials and high value-added goods, which by their
nature can become development/long-term partners for
the Company, and to which a large part of the procurement
spending is also allocated, usually located in development
countries, thus constituting significant suppliers that can
entail ESG risk.
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 and significant based on the results of economic
materiality and ESG risk criteria of the country, sector and
commodity.
The parameters considered
significant suppliers, are multiple:
in assessing critical and
→ 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 a high percentage of Pirelli’s purchase
for the specific product category;
→ the economic burden of the purchase is significant;
→ the supplier plays a relevant role in terms of impact on
innovation;
→ the supplier operates in a Country, sector and/or supplies a
commodity, good or service 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 critical issues 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.
The ESG risk assessment is performed annually with the
engagement of Purchasing Managers
in consultation
with the relevant departments, involving Enterprise Risk
Management and Sustainability Managers.
From the above assessment, and in particular from the last
three criteria identified above, comes the selection of high-
risk ESG significant suppliers to be audited on-site during the
annual campaign (in addition to the mandatory on-site audit
at the selection stage for potential raw material suppliers).
Each on-site audit has an average duration of two days in
the field and includes a factory visit, interviews with workers,
management and trade union representatives.
The external auditors carry out the audits on respect for
Human and Labour Rights, compliance with environmental
regulations, the level of sustainable management of the
supply chain by the supplier, and the codes of conduct and
policies adopted and implemented, following a checklist
of parameters derived from the SA8000® standard (a
reference tool officially adopted by the Group for managing
social responsibility since 2004), from the Pirelli Suppliers’
Code of Conduct (in turn consistent with the areas of social,
environmental and governance sustainability dictated by the
United Nations Global Compact and underlying OECD and
ILO regulations) and from the Pirelli Policies “Global Health,
Safety and Environment”, “Global Human Rights”, “Diversity,
Equity and Inclusion”, and “Sustainable Natural Rubber
Management”. Since 2019, KPIs related 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
line with the
Management of Natural Rubber and
expectations of the Global Platform for Sustainable Natural
Rubber (a specific section is dedicated to the topic of Natural
Rubber Sustainability below).
in
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 actual return from non-
compliance within the prescribed time limit is then verified
through follow-up activities followed by the third-party auditor
who reports to Pirelli. In the event of refusal by the Supplier
to implement an action plan requested by Pirelli or failure to
implement an agreed action plan, Pirelli may suspend with
immediate effect the execution of the Contract and/or the
Order, and/or terminate the contractual relationship.
The results of the on-site ESG Audit together with the
additional evaluations carried out during the on-boarding
of the supplier are integrated into the annual Vendor Rating
process whereby a rating is given to the supplier that sums
up ESG performance, the qualitative level of supplies, the
quality of the commercial relationship and the technical-
scientific collaboration.
local restrictions due to Pandemic
In the case of
(Covid-19), in order to guarantee the continuity of auditing
activities Pirelli’s third-party auditors use the verification
methodology in accordance with ISO/IEC 17021-1: 2015
(and relative guidance), IAF MD4: 2018, IAF MD 5: 2019 and
IAF ID 12: 2015.
130
Pirelli Annual Report 2022 Below is the number of third-party ESG audits performed in the last three years:
Year
2020
2021
2022
Audit Number
7132
9333
8234
In the year 2022, on-site audits involved Pirelli suppliers of all product categories operating in Argentina, Brazil,
China, Germany, Indonesia, Italy, Mexico, United Kingdom, Romania, United States, Turkey, Malaysia, Thailand,
France, Cameroon, Côte d’Ivoire, Austria, Hungary, Taiwan.
The results of audits carried out during the 2022 annual campaign show 43% of audited suppliers without any
non-conformity, an improvement of +11% vs. 2021, and 57% of the audited suppliers with at least one non-
conformity found.
The non-conformities registered in 2022 are substantially linked to the processes of health and safety
management, the use of overtime and the correct implementation of environmental management systems.
Suppliers where non-conformities have been found have signed a remedial plan to be implemented within
specific deadlines, which, as per the Procedure, entails follow-up by the third-party Auditor to evidence and
confirm that remedial action has been taken.
The results of the on-site ESG Audit together with the additional evaluations carried out during the on-boarding
of the supplier are integrated into the annual Vendor Rating process whereby a rating is given to the supplier
that sums up ESG performance, the qualitative level of supplies, the quality of the commercial relationship and
the technical-scientific collaboration.
Finally, the Group Internal Audit Department verifies the adequacy of the management and oversight of the ESG
audit process on suppliers by the responsible functions.
MATERIALITY OF ESG IMPACTS ON THE SUPPLY CHAIN
Occupational health and safety, human rights and labour rights are material issues and monitored in all categories
of purchases, with a higher risk of negative impact in the case of raw materials 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. With specific reference to the issue of Human Rights and the results of the risk assessment
on the supply chain, please refer to the section “Respect for Human Rights” within this Report.
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 accounted for by Pirelli.
With reference to the water footprint along the life cycle of Pirelli products, the impacts are prevalent again in
the area of raw materials and specifically in the area of natural rubber processing, a material on which particular
attention is also paid in terms of preventing the risk of deforestation and protecting biodiversity, as detailed in
the next section.
Pirelli mitigates the risks mentioned through the Management Model adopted and up to now described, which is
completed with the engagement and capacity building activities of the suppliers as referred to below.
32 Of which 6 on potential new suppliers of raw materials.
33 Of which 18 on potential new suppliers of raw materials.
34 Of which 29 on potential new suppliers of raw materials.
131
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN 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/growers, traders, processing plants,
distribution companies and manufacturing facilities. Pirelli is
at the end of the chain, as a tyre manufacturer that 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 Policy on Sustainable
Management of Natural Rubber, after a long process based
on consultation with key Stakeholders and companies
that have longstanding experience in terms of sustainable
procurement of materials.
Pirelli’s Policy is aligned with the Policy Framework of the
Global Platform for Sustainable Natural Rubber (GPSNR),
of which Pirelli is also a founding member and upon which a
focus is followed.
As stated in the Policy, Pirelli undertakes to promote,
develop and implement the sustainable and responsible
sourcing and use of natural rubber throughout its value
chain. In particular, the Policy emphasises the positioning
of the Company and what is required of the natural rubber
suppliers 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
bogs, 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;
→ 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;
→ provision of a dedicated grievance mechanism that allows
stakeholders to address any grievances and initiate
remedial action.
In terms of the Company’s commitment to non-deforestation,
it should be noted that the date and cut-off year for the non-
deforestation target is 1 April 2019, as stated in the Policy
and in line with the dictates of the GPSNR Platform.
The Company also released the Implementation Manual
for the Pirelli Policy on Sustainable Management of
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 in the supply chain. As already happened
for the preparation of the Policy, 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, all with the
support of the NGO Earthworm Foundation.
At the same time, Pirelli has defined and published its
own Business Plan, updating it periodically. The Plan up to
2025 is published on the company website together with
the performance KPIs in the Sustainable Natural Rubber
Management Policy area within the Sustainability section,
to which you are referred (https://corporate.pirelli.com/
corporate/en-ww/sustainability/policies/sust-sustainable-
natural-rubber-policy).
All KPIs planned for 2022 were achieved or exceeded,
particularly at the end of 2022:
→ 99% of the volume of natural rubber purchased comes
from suppliers audited on-site by a third party on the
implementation of the Pirelli Sustainable Natural Rubber
Policy;
→ 73% of the purchased natural rubber volumes come from
suppliers who are members of the Global Platform for
Sustainable Natural Rubber (to which the following section
is dedicated);
→ 98% of the volumes purchased come from Suppliers that
have implemented a roadmap of activities in line with
Pirelli’s Sustainable Natural Rubber Policy;
→ All volumes come from a known Tier 1 source;
→ 98% of the volumes purchased come from natural
rubber suppliers trained in both the Policy and Pirelli’s
Implementation Manual for Sustainable Natural Rubber
Management.
The Policy, the Implementation Manual and the 2021-2025
Business Plan are published on the Group website, in the
Sustainable Natural Rubber Management Policy area within
the Sustainability section.
132
Pirelli Annual Report 2022 Pirelli’s long-standing support of local producers continued
in 2022 together with the Indonesian supplier Kirana
Megatara: 80 scholarships were given to children of local
farmers and 90 farmers were trained on the correct ways to
extract natural rubber, so as to protect natural resources and
maximise yields while preserving and prolonging the life of
rubber trees.
Pirelli is committed to increasing the transparency and
traceability of the natural rubber supply chain, and to this
end it explores both individually and at the sector level the
tools that are being developed on the market with a view to
best meeting Stakeholders’ expectations and at the same
time intervening to support the sustainable development
of the chain from upstream to downstream. A significant
result, also in terms of innovation, was obtained by Pirelli in
2021, with the production of the first tyre line, at the world
level, certified by the Forest Stewardship Council (FSC)
for natural rubber and rayon; FSC forest management
certification confirms that plantations are managed in such
a way as to preserve biological diversity and bring benefits
to the lives of local communities and workers, while ensuring
economic sustainability.
Pirelli in partnership with BMW and Birdlife International
launched a multi-year project called “Living Rubber” in
2021, which aims to promote long-term sustainable and
deforestation-free natural rubber production in Indonesia.
Pirelli aims to protect 2,700 hectares of rainforest in Hutan
Harapan (Sumatra
Island) from deforestation, as well
as protecting the indigenous community and protecting
endangered animal species. The different activities are
implemented in coherence with the “Desired State” of the
Global Platform for Sustainable Natural Rubber (GPSNR).
More precisely, the Project sets precise performance
KPIs with respect to economic development for natural
rubber farming families, community rights, collaboration
with institutions, healthy ecosystems and resilient agro-
ecosystems for an ecologically sustainable supply chain.
In October 2022 (a delegation from BirdLife International,
Pirelli and BMW held meetings with the community on a
variety of topics such as literacy, women’s participation in
local community development, quality rubber cultivation,
cooperative development, forest protection and biodiversity
conservation. The visit provided the opportunity to discuss in
detail a number of field results that led to further refinements
of the project.
For details on the Project please refer to the “Sustainable
Natural Rubber” section of the company website.
For years Pirelli, together with Kirana Megatara (Pirelli’s
supplier in Indonesia) has been providing scholarships for the
children of farmers in Indonesia.
This was followed by an in-depth look at activities within the
Global Platform for Sustainable Natural Rubber (GPSNR).
133
TOGETHER FOR THE SUSTAINABILITY
OF NATURAL RUBBER - THE GPSNR PLATFORM
The Pirelli Policy on the Sustainable Management of Natural
Rubber states in Section VIII that: “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 from the fundamental contribution
deriving from the experience of major 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 GPSNR General
Assembly was held in March 2019.
In 2021, the General Assembly stipulated, inter alia, that from
2022 onwards, members must annually provide the status
of implementation of the GPSNR Policy (status provided by
Pirelli to GPSNR)
Also in 2022, Pirelli actively participated in several 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 2022 has continued its activities aimed
at developing a capacity building strategy in favour of
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN 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 participated until the working
group completed its task in early 2022 and the working
group was closed. The traceability and transparency work
was transferred to the Risk sub-working group, of which
Pirelli is a member, set up to identify and manage risks to
support the development of GPSNR.
→ Pirelli in 2022 also participated in the “Shared Responsibility
working group”, which aims to define the principles and
framework for implementing shared responsibility within
the platform. The work will continue in 2023, including a
first trial of the Traceability Working Group and the start
of a two-year capacity-building project for 5,000 farmers,
which Pirelli is sponsoring.
THE “GREEN SOURCING” POLICY
Since 2012 Pirelli has had a “Green Sourcing” Policy with
the aim of stimulating and incentivising an environmental
conscience along the entire supply chain and encouraging
choices that might reduce the impact on the environment
of provisioning activity by Pirelli of goods and services. The
system for implementing the Green Sourcing Policy was
defined in 2013, both within Pirelli and in relationships with
suppliers. It 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.
The 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 merchandise 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 the 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.
So, the Green Sourcing Manual is a unique document that
contains:
→ the general part on Green Sourcing issues;
→ the Green Engineering Guidelines (Materials, Capex);
→ the Green Operating Guidelines (Opex, Logistics).
On the basis of the Guidelines of the Green Sourcing Manual,
the Pirelli Green Purchasing Guidelines were published on
the website www.pirelli.com, so making them available both
to Pirelli suppliers and to other Stakeholders.
DECARBONISATION
In
implementing the decarbonisation strategy adopted
by the company, Pirelli’s current Industrial Plan includes
a target to reduce emissions attributable to its own supply
chain activities, which is an integral part of the group target
validated by the Science Based Targets initiative (SBTi). In
detail, the target is to reduce absolute CO2 emissions related
to the purchase of raw materials (Scope 3) by 8.6% by 2025
compared to 2018 values. The 2025 target was reached at
the end of 2022, which is why Pirelli is preparing to submit a
further reduction target to SBTi.
In addition, in June 2022, Pirelli expressed to SBTi its
commitment to the Net Zero standard to formalise, within
two years, a long-term target to reduce value chain emissions
by around 90% by 2050 at the latest.
To meet these objectives, Pirelli is engaged in capacity
building and engagement campaigns with its Suppliers
in order to identify possible actions to reduce emissions,
starting from their materiality in terms of spending and
emission impacts.
For more details on performance and targets regarding
Scope 3 emissions, SBTi targets and 2022 performance,
please refer to the section “Greenhouse Gas Emissions
Management and Carbon Action Plan” within this report.
Please refer instead to the Group Footprint infographic, in
the section “Environmental Footprint and Strategy of the
Pirelli Group” for the representation of the Scope 3 impacts
of the various life cycle phases.
POLICY ON CONFLICT MINERALS
Conflict minerals are normally defined as any mineral mined,
refined or traded under conditions of armed conflict and
human rights violations, mainly in the Democratic Republic of
the Congo, but also in any conflict-affected or high-risk area.
The concept of Conflict Minerals was introduced by Section
1502 of the Dodd-Frank Act, a United States federal law, in
2010. “Conflict minerals” means gold, columbite-tantalite
(coltan) cassiterite, wolframite and their derivates
like
tantalum, tin and tungsten that come from (or are extracted
in) the Democratic Republic of Congo and/or bordering
Countries. Such minerals are commonly called “3TG”
(Tungsten, Tin, Tantalum, Gold).
The objective of the Conflict Mineral Rules is to discourage
the use of minerals whose sale might finance violent
134
Pirelli Annual Report 2022 conflicts in Central Africa where serious 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 in January 2021.
In addition to the Conflict Minerals Policy, Pirelli expresses
its position on the management of the issue in a section
dedicated to it in its Global Human Rights Policy, where it is
stated that the Company “requires its suppliers to ensure
the commitment to carry out proper due diligence as part
of its supply chain in order to certify that products and
materials provided to Pirelli are “conflict free” along the
entire supply chain (i.e. that they do not come from mines
or foundries operating in conflict zones identified as such by
the applicable legislation on “conflict minerals” unless they
are certified as “conflict free”). Pirelli reserves the right to
discontinue the relationship with suppliers in case of clear
evidence of supply of minerals from conflict and in any event
in the case of violation of Human Rights”.
The above is further set out in the Pirelli Suppliers’ Code
of Conduct, which is in turn an integral part of the General
Terms and Conditions of Purchase.
https://www.responsiblemineralsinitiative.org/smelters-
refiners-lists/);
(CMRT),
the Contract or Orders,
(iv) to complete, for each type of Good and Service
provided under
the
latest version of the “Conflict Minerals Reporting
Template”
https://
w w w.responsiblemineralsinitiative.org/repor ting-
templates/cmrt/,
“Extended Minerals
the
Reporting Template” (EMRT), downloadable at https://
w w w.responsiblemineralsinitiative.org/repor ting-
templates/emrt/, and to send the same by e-mail to
conflictminerals@pirelli.com;
downloadable
and
at
(v) to send the documents referred to in (iv) updated annually
(always) or in the event of any change in the composition
and/or parts/components and/or production process
of the Goods and/or Services supplied, and/or any
change in the list of foundries and/or the “Conformant”
classification status referred to in (iii).
In the event of breach by the Supplier of any of its obligations
under this clause 1.15, Pirelli may suspend performance of
the Contract and/or Order with immediate effect, without
prejudice to its right to terminate the Contract(s) and/or
Order(s) and exercise any remedy provided by law.
The Global Human Rights Policy, the Pirelli Suppliers’ Code of
Conduct and the General Terms and Conditions of Purchase
are available on the Company’s website.
Over the years, Pirelli has progressively strengthened its
management model, firstly by extending its scope from the
so-called “3TG” minerals (tin, tantalum and tungsten, their
ores, and gold) to include, on a voluntary basis, first Cobalt
(from 2019) and, from 2022, also Natural Mica, both of which
are of increasing importance.
The objective is not to purchase goods or services containing
Minerals from Conflict Zones as evident from the clause
Pirelli asks Suppliers to sign, which reads:
The issue of conflict minerals is integrated in the annual
Vendor Rating process already mentioned in a previous
section.
The Supplier represents and warrants that the Goods and
Services supplied or to be supplied to Pirelli under the Contract
and/or the Orders do not contain and shall not contain for the
entire duration of the supply any Conflict Zone Minerals.
The Supplier undertakes:
(i) to provide Pirelli with a comprehensive description of
the procedures and tools that have been implemented
to ensure that the Goods and Services and the parties
involved in the supply of the different components of the
Goods and Services do not contain Conflict Minerals;
(ii) to maintain an active due diligence programme to
identify and track all Minerals from Conflict Zones in
its supply chain based on Organisation for Economic
Cooperation and Development (OECD) and Responsible
Minerals Initiative (RMI) procedures and tools;
(iii) to supply 3TG Minerals, Cobalt and Natural Mica from
smelters that have been classified as “Conformant” (as
described in https://www.responsiblemineralsinitiative.
and
org/responsible-minerals-assurance-process/
135
The increasing focus on Cobalt, used in the Lithium-ion
batteries that are an integral part of electric vehicles, mobile
phones and laptops, is motivated by three main reasons: the
growing worldwide demand for this mineral, the fact that its
extraction is concentrated in the Democratic Republic of
Congo, which holds about 50% of the world’s reserves35, and
the existence of numerous reports associating Cobalt mining
with the risk of negative social (e.g. child labour, human rights
violations) and environmental impacts.
Similarly with regard to Natural Mica (used on a large scale
in cosmetics and paints), numerous reports indicate that the
extraction and processing of the mineral, concentrated in
India and Madagascar and heavily linked to often artisanal
and low-scale manual processes, is often associated with
illegal activities, child labour and dangerous and unhealthy
working conditions.
35 Data updated to 2014.
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN In relation to the aforementioned conflict minerals, it is useful
to point out that the materiality of the subject for Pirelli
products is decidedly small: e.g., the volume of minerals (3TG)
used by Pirelli Tyre in a year weighs, in fact, less than one
tonne, a quantity less than one millionth of the volume of raw
materials used annually by the Company and which is equally
distributed among most 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 1 ppm
(one part per million).
Despite the negligible amount of these minerals in relation to
the volume of raw materials used, their presence inside tyres
is of significant technical importance, contributing to their
safety and performance.
With a view to sourcing only minerals that are ‘conflict free’,
Pirelli conducts a comprehensive survey of its supply chain
every year to identify the origin of minerals all the way to
the mines or smelters, in order to identify the existence of
any ‘conflict minerals’. To this end, the Company refers to
the procedures and tools indicated by the Organisation for
Economic Co-operation and Development (OECD) and the
Responsible Minerals Initiative (RMI); in particular, Pirelli
asks all suppliers associated with 3TG minerals to complete
the Conflict Minerals Reporting Template (CMRT) and those
associated with Cobalt or Natural Mica to complete the
Extended Minerals Reporting Template (EMRT).
The suppliers surveyed in 2022 cover 100% of the “conflict
minerals” risk associated with the tyres produced by
the Group. 100% of the suppliers involved have already
provided precise
indications as to the source of the
materials in question, listing all foundries as required by the
procedure. The investigation led to no evidence of critical
issues in the supply chain related to 3TG, Natural Mica and
Cobalt. Particularly with regard to cobalt, targeted supplier
awareness actions conducted in 2021-22 provided even
more precise indications of their sources of supply.
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.
impact
low environmental
R&D PARTNERSHIPS
Pirelli has established several partnerships with strategic
suppliers and universities for the development of innovative
materials with
(materials
described
in the sections 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 above-mentioned innovations ensured water
savings as well as a reduction in CO2 emissions of more
than 75%, saving about 39,000 m3 of water and about 700
tonnes of CO2 respectively.
These innovations provide economic benefits related directly
to the material for about €181,000 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 the Climate Change,
Forest and Water Security programmes promoted by the
CDP (formerly the 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 2022,
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
so as to identify and activate all possible opportunities for
reducing emissions of climate-altering gases. In 2022, the
set of emission reduction actions implemented by Pirelli
suppliers made it possible to avoid overall the emission of
approximately 30 million tonnes of CO2 equivalent into the
atmosphere, combined with estimated economic savings of
US$1 billion.
The first company among tyre manufacturers to globally
introduce CDP Supply Chain in its supply chain, Pirelli sets
a target of achieving a 90% response rate for raw material
suppliers by 2023. The response rate recorded in 2022 was
82%, in line with the performance of recent years: 88% in
2021, 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 2022
published by CDP, having obtained a score of A on an
assessment of the management of climate issues along its
supply chain.
ENGAGEMENT AND 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 2022, training activities and capacity building continued in
the area of natural rubber sustainability, involving a number
of partner suppliers and their supply chain. Also, continued
the programme of distributing infographics to facilitate the
continuous cascading along the entire supply chain of our
sustainable natural rubber management policy. In 2021-
2022, the programme covered about 90% of our suppliers.
136
Pirelli Annual Report 2022 A capacity building plan is also underway in the field of decarbonisation in favour of suppliers of raw materials
with the greatest impact in terms of CO2 emissions, aimed at supporting them in fully understanding Pirelli’s
expectations and defining low-carbon development plans.
During 2023, training courses in the field of Human Rights are also planned, in line with the materiality resulting
from the risk assessment carried out in 2022, see the chapter “Human Rights Risk Assessment”.
SUPPLIER AWARD
The 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 2022 edition of the Supplier Award was held at Pirelli Bicocca, in the presence of Pirelli’s Vice President
and CEO and the Company’s Chief Procurement Officer, who honoured nine suppliers operating internationally,
in particular in China, Italy, Japan, France, Germany, the United States, Turkey and the United Kingdom, who
distinguished themselves for quality, innovation, service level, performance and sustainability.
For Sustainability, the award was given to a supplier of bio-chemicals for its traceability achievements over the
entire supply chain.
The presence of the prestigious ‘Sustainability’ award confirmed the importance of ‘responsibility’ strategies
and the resulting tangible benefits along the entire value chain.
TREND OF PURCHASES
The following tables show the value of purchases made by Pirelli and the percentage of the relative suppliers
divided by geographical area. These figures show that the value of purchases is slightly higher in OECD areas
with respect to non-OECD areas36, as well as the number of suppliers.
69% of suppliers (up compared to 63% in 2021) work locally with respect to the Pirelli subsidiaries provided,
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
2022
2021
2020
OECD COUNTRIES
North America
Europe
NON-OECD COUNTRIES
Others
Latin America
Asia
Africa
Others
44.8%
6.9%
5.8%
18.7%
16.3%
0.3%
7.2%
49.8%
6.8%
5.6%
11.4%
17.5%
0.5%
8.4%
49.1%
8.0%
4.6%
12.1%
17.3%
0.5%
8.4%
36 For the complete list of OECD countries, please refer to the official website http://www.oecd.org/
about/membersandpartners/.
137
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN NUMBER OF SUPPLIERS BY GEOGRAPHIC AREA
2022
2021
2020
OECD COUNTRIES
North America
Europe
NON-OECD COUNTRIES
Others
Latin America
Asia
Africa
Others
54.2%
4.4%
5.9%
17.9%
8.3%
0.6%
8.8%
53.9%
4.5%
4.8%
18.9%
9.1%
0.2%
8.6%
The following table shows the breakdown in percentage of the value of Pirelli purchases by type. With a weight
equal to 44% of the total, the purchase category which is decidedly more relevant and significant, as in previous
years, is that of raw materials.
VALUE OF PURCHASES BY TYPE
Raw Materials37
Consumable Materials38
Services39
Capital goods40
2022
2021
2020
44%
11%
43%
2%
45%
11%
39%
5%
With reference to the percentage of Pirelli suppliers by type and in the table below, it is noted that suppliers of
consumables and services represent about 97% of the total number of suppliers, despite the weight on the total
value of purchases being lower, for example, than that of raw material purchases which, on the other hand, show
a substantial concentration on only a few operators.
NUMBER OF SUPPLIERS BY TYPE
Raw Materials41
Consumable Materials
Services
Capital goods
2022
2021
2020
1%
33%
64%
2%
2%
37%
58%
3%
37 Purchased to produce and package the organization’s primary products and services.
38 Indirect materials, auxiliary materials.
39 Energy, logistics services, shared services, ICT, R&D, marketing, trademarks and patents.
40 Machinery, civil works, moulds.
41 Purchased to produce and package the organization’s primary products and services.
55.2%
4.8%
4.5%
19.7%
6.9%
0.2%
8.7%
49%
8%
40%
3%
2%
36%
59%
3%
138
Pirelli Annual Report 2022 The following table represents the percentage composition in the value of the mix of raw materials purchased
by Pirelli in the three-year period 2020-2022.
MIX OF RAW MATERIALS42 PURCHASED (VALUE)
Natural Rubber
Synthetic Rubber
Carbon black
Chemicals
Textile
Steel
2022
2021
2020
14%
27%
11%
23%
15%
10%
14%
25%
11%
23%
16%
11%
13%
26%
10%
23%
18%
10%
TARGETS
→ CDP Supply Chain: increase in the response rate of suppliers of Raw Materials from 82% in 2022 to 90% in
2023;
→ Natural Rubber supply chain Sustainability: implementation of the 2022-2025 roadmap published on the
Sustainable Natural Rubber section of the website www.pirelli.com;
→ decarbonisation of the raw materials supply chain in line with the SBTi Scope 3 target;
→ training on Human Rights to suppliers identified on the basis of the match between business risk and country
risk in light of the results of the Risk Assessment (see section on Human Rights Governance for more on
risk assessment).
42 Purchased to produce and package the organization’s primary products and services.
139
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN ENVIRONMENTAL
DIMENSION
The Pirelli Group considers protection of the environment
and biodiversity as fundamental values in the exercise and
development of its activities.
The 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
the “Rio Declaration on Environment and Development”.
in
investment and business decisions
The Pirelli Values and Ethical Code states that “key
consideration
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’s Policies on “Health, Safety and Environment”,
“Product Stewardship”, “Quality”, “Green Sourcing”, based on
which Pirelli undertakes to:
→ govern its activities with regard to the protection of
the environment, in full compliance with the applicable
international, national and local regulations and all the
voluntary commitments signed, as well as in line with the
highest international management standards;
→ pursue the protection of the environment and biodiversity
through the continuous
identification, assessment,
prevention and mitigation of environmental risks along
the value chain;
→ minimise impacts on biodiversity, ecosystems and the
related ecosystem services of its business units, following
the principle of “No net loss of biodiversity” through the
“mitigation hierarchy” (i.e.: avoid, minimise, restore and
compensate);
→ minimise its operations in protected areas and/or sites
which are relevant for biodiversity and/or of special interest/
value, and ensure that the choice of any new production
sites is made with respect of protected areas, ensuring the
preservation of biodiversity, ecosystem services and the
prevention of deforestation;
→ develop products and production processes in compliance
with the principles of the circular economy, translated into
the “5Rs” approach (Re-think - Refuse - Reduce - Reuse
- Recycle), in order to pursue climate change mitigation
and progressive decarbonisation along the value chain,
the responsible use and reduction of natural resource
consumption (“Resources Stewardship”) and minimize
pollutant emissions;
→ assess and reduce the environmental impact of its products
and services throughout their entire life cycle, as well as of
products and services purchased;
→ develop and
implement emergency management
programmes designed to prevent harm to the environment
in the event of accidents;
→ define, monitor and communicate to its Stakeholders
specific goals for the continuous
improvement of
occupational health and safety and environmental
performance associated with its processes, products and
services throughout their life cycle;
→ monitor the environmental impacts of its suppliers by
requesting them to adopt the same management 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 reuse wherever possible;
→ empower, train and motivate its employees on how to work
in a safe and environmentally-friendly manner, involving
all levels of the organisation in a continuous training and
information programme, designed to promote a culture
of occupational health and safety and respect for the
environment, as well as to ensure that the company’s
responsibilities and procedures in these areas are
appropriately updated, communicated and understood;
→ collaborate actively at a national and international level with
institutional, academic, non-governmental, industry bodies
concerned with the regulation, study and sustainable
management of environmental issues;
→ require, through contractual clauses and the Pirelli
Suppliers’ Code of Conduct, that its suppliers implement
a management model at their sites and along their supply
chain with regard to occupational health and safety,
care of the environment, protection of biodiversity and
ecosystems, prevention of deforestation, conservation and
responsible use of natural resources, in accordance with
international standards and the laws and regulations of the
countries where they operate. For further details, please
refer to the section “Our Suppliers”, which also dedicates
an in-depth report to the issue of sustainable management
of Natural Rubber.
Pirelli has implemented integrated, structured, dynamic
management systems focused on continuous improvement,
based on best practices and
recognised
international standards.
relevant
integrated
In terms of Governance, the Board of Directors of Pirelli &
C. S.p.A., supported in its activities by the Control, Risks,
Sustainability and Corporate Governance Committee,
the environmental management objectives
approves
and targets
Industrial Plan, which
in the
include, for example, those pertaining to climate change,
decarbonisation of the value chain, reduction of product and
process environmental impacts, and biodiversity. In turn,
Pirelli’s Top Management, supported by the Health, Safety
and Environment department as well as other departments
variously involved (by way of non-limiting example R&D,
Sustainability, Purchasing, Quality, Manufacturing, Enterprise
Risk Management functions) has a strategic role in the full
implementation of Pirelli’s Environmental Management
Model and related strategic goals, ensuring the involvement
of all personnel and of those who collaborate with Pirelli,
so that they express behaviour coherent with the values
contained therein.
140
Pirelli Annual Report 2022 Pirelli makes available to all its Stakeholders a channel (the
“Whistleblowing Policy - Reporting Procedure”, published on
Pirelli’s website) dedicated to reporting, even anonymously,
any situations that constitute or may constitute a risk for
safeguarding the environment.
No reports concerning environmental issues were received
during 2022.
JOINING THE TASK FORCE ON CLIMATE-RELATED
FINANCIAL DISCLOSURES (TCFD)
In September 2018 Pirelli formally joined the Task Force on
Climate-Related Financial Disclosures (TCFD) set up by the
Financial Stability Board43. In supporting the initiative, Pirelli
is committing 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 publicly
reports this information both within this report and through
the CDP Climate Change programme where, in 2022, it was
again confirmed as one of the leading companies by being
placed on the A-list.
Specifically, the four thematic areas and their eleven
recommendations identified by the TCFD, since the Pirelli
financial statements are integrated, are addressed as follows.
GOVERNANCE (concerning risks and opportunities
related to climate change).
a) Board of Directors’ oversight
Pirelli’s Board of Directors, supported in its activities by the
Board Committee Audit, Risk, Sustainability and Corporate
Governance (to which the results of the Climate Change and
Water Stress Risk Assessment are brought), approves the
decarbonisation and climate change objectives and targets
integrated in the Company’s Industrial Plan and discusses
its performance at least annually, as well as approves
the contents of the Pirelli’s Annual Report, including the
consolidated Non-Financial Statement and all climate-
related data contained therein. Within the Board of Directors,
the position of CEO and Executive Vice President
is
delegated to sustainability topics, including those pertaining
to environmental management and related climate change
and decarbonisation targets. In this role, the CEO is entrusted
with the task of overseeing matters related to the company’s
operations and implementing the guidelines defined by
the Board of Directors, with the support of the Audit, Risk,
Sustainability and Corporate Governance Committee.
b) Role of management
The strategic evolution of Group Sustainability, including issues
relating to Climate Change and Decarbonisation, 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, which holds ordinary meetings at least twice a
year. As from 2021, the Operational Sustainability Committee
has also been set up, chaired by the Deputy CEO and consisting
of the Company’s Top Management, with responsibility for
the strategic and operational management of the Group’s
sustainability matters, including, among others, human rights,
health and safety, climate change and decarbonisation.
The organisational structure is thus made up of a Sustainability
and Future Mobility Department, reporting to the Company’s
Deputy CEO, in which the Director of Sustainability and Future
Mobility operates with the responsibility of overseeing at Group
level climate change and decarbonization related topics and
proposing associated targets to the Sustainability Strategic
Committee. Reporting to the Director, in the Sustainability and
Future Mobility Department work the Decarbonization Officer,
the Product Stewardship Officer, the Group Sustainability
and Diversity Officer, and the Future Mobility Officer. The
Sustainability and Future Mobility Department is supported by:
→ a Sustainability Working Group made up of sustainability
representatives within the various central company
departments in order to guarantee constant monitoring
and coordination of strategic programmes with an impact
on the competence of the specific departments;
→ Country Sustainability Managers overseeing activities
covering all Group affiliates. The role of the Country
Sustainability Manager is currently held by Country
CEOs, who are supported by their direct subordinates in
operational management of Country plans.
STRATEGY (actual and potential impacts of risks and
opportunities related to climate change on business,
strategy and financial planning).
With a view to 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 extensively
described in the section “The Environmental Strategy of
the Pirelli Group” of this report, the Company 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 for the Group and its value chain
with respect to transition scenarios44 towards a low-carbon
43 The Task Force on Climate-related Financial Disclosures (TCFD) was established in 2015 by the
Financial Stability Board (FSB) - the 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.
44 The Group’s latest Climate Change and Water Stress Risk Assessment considered the IPCC -
Intergovernmental Panel on Climate Change - climate scenarios (RCP 2.6, RCP 4.5, RCP 7.0 and RCP 8.5)
and the IEA - International Energy Agency - energy transition scenarios (STEPS, APS and NZE-2050) for
the analysis.
141
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN economy and climate scenarios, in order to have a constantly
updated picture of potential risks and opportunities linked to
climate change and water stress, which are of interest to the
business, with the relative quantification of potential financial
impacts. For further details, please refer to the section
“Emerging Risks Related to Climate Change and Water
Stress” within the “Directors’ Report on Operations” of this
report, and to Pirelli’s public responses to the CDP Climate
Change questionnaire45.
a) Climate-related risks and opportunities (short, medium
and long term)
In line with the results of the last Group Climate Change and
Water Stress Risk Assessment, in the short- to medium-term
(2022-2030), there are no significant impacts from physical
and transitional risks on the production activities of Pirelli’s
factories and those of its suppliers, or on the markets in
which the Group operates. On the other hand, elements of
uncertainty remain in the long term (>2030-2050), when
Pirelli’s plants could be subject to a series of risks of both
a physical nature (extreme weather events with potential
impacts on plant production continuity) and regulatory
nature (possible effects on operating costs). On the contrary,
there are opportunities for growth in the sales of Pirelli Eco
& Safety Performance46 products, which identify car tyres
characterised by rolling resistance and wet grip belonging
to the A, B, C values of European labelling, which is used as
an internal metric to classify all the products Pirelli produces
not only in Europe but worldwide.
b) Impacts of climate-related risks and opportunities
As discussed in the section “Emerging Risks Related to
Climate Change and Water Stress” within 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-
medium term were identified concerning the production
processes of the Group’s plants and those of its suppliers
(upstream value chain), or the markets in which the Group
operates (downstream value chain).
c) Resilience of the strategy
The results of the scenario analyses, carried out as part of
the Climate Change and Water Stress Risk Assessment,
were evaluated for the definition of climate-related targets,
constituting the company’s Climate Transition Plan, as
part of the sustainable development strategy to 2022,
2025, 2030 published in the current Industrial Plan. At
process level, should be highlighted the targets of reducing
energy consumption and absolute CO2 emissions, 100%
procurement of electricity from renewable sources by 2025
and the Group carbon neutrality by 2030. In particular, the
absolute CO2 emission reduction targets were developed in
45 https://www.cdp.net/en/responses
46 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, C values of
European labelling.
accordance with the guidelines of the Science Based Targets
initiative (SBTi), which validated them in May 202247, judging
them to be consistent with the actions needed to keep global
warming within 1.5°C. They cover both the production process
(Scope 1 and 2 emissions) and the reduction of emissions in
the supply chain (Scope 3). Furthermore, in June 2022, Pirelli
expressed to SBTi its commitment to the Corporate Net
Zero standard48, pledging to formalise, within two years, a
long-term target to reduce emissions from its value chain by
around 90% by 2050 at the latest. At product level, among the
many Eco & Safety performance targets, in terms of climate
impact there is the goal to have, by 2025, more than 70%
of new car products, (i.e. new labelled Ipcode considered at
group level) classified A or B for rolling resistance, according
to the highest European labelling standards, and more
than 90% classified A or B for ‘wet grip’. With regard to the
business strategy based on the development of the Eco &
Safety Performance product line, this 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 the Eco
& Safety Performance tyre revenue out of the Group’s total
revenue grow from 5% in 2009 to 67% in 2022, the 2025
Pirelli’s target of 66% has been achieved three years ahead
of schedule.
RISK MANAGEMENT (identification, assessment and
management of risks related to climate change).
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’s Climate
Change and Water Stress Risk Assessment, which
is
updated on a bi-annual basis by the Sustainability and
Future Mobility Department in collaboration with Enterprise
Risk Management and other relevant corporate functions
(Operations, Purchasing, Environmental Governance,
Compliance, among others). The analysis assesses the
evolution of possible physical, regulatory, technological,
reputational and market risks that may affect the company
and its value chain, both upstream and downstream, with
respect to transition scenarios towards a
low-carbon
economy and climate scenarios49 with short to medium
and long-term time horizons. For the conclusions of the
analysis, please refer to the section “Emerging Risks Related
to Climate Change and Water Stress” within the “Directors’
Report on Operations” of this report, and to Pirelli’s public
responses to the CDP Climate Change questionnaire50.
47 Pirelli’s previous emission targets, also validated in 2020 by SBTi in line with the “well below 2°C” scenario,
had already been reached by the end of 2021, four years ahead of the original deadline.
48 SBTi’s Corporate Net Zero Standard is the framework that the Science Based Targets initiative has
developed for companies to set consistent targets to achieve net zero emissions by 2050.
49 The Group’s latest Climate Change and Water Stress Risk Assessment considered the IPCC -
Intergovernmental Panel on Climate Change - climate scenarios (RCP 2.6, RCP 4.5, RCP 7.0 and RCP 8.5)
and the IEA - International Energy Agency - energy transition scenarios (STEPS, APS and NZE-2050) for
the analysis.
50 https://www.cdp.net/en/responses
142
Pirelli Annual Report 2022 b) Management processes
The most material risks identified through the Climate
Change and Water Stress Risk Assessment are weighed
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 initiated to capture the maximum benefit from
the opportunity.
c) Integration into overall risk management
The process of identifying, assessing and managing risks
related to climate change is fully integrated into Pirelli’s risk
governance model, as described in detail in the “Risk Factors
and Uncertainty” section included in the “Directors’ Report”
of this report.
METRICS AND TARGETS (metrics and targets used to
assess and manage risks and opportunities related to
climate change, where information is material).
a) Metrics used
its
impacts and performance related to
Pirelli reports
climate change according to the metrics defined by the GRI
Sustainability Reporting Standards and the Sustainability
Accounting Standard Board (SASB). See at the end of this
Annual Report the table “GRI content Index” (GRI Standard
Disclosure 305: Emissions) and “SASB content Index”.
b) GHG Emissions
Pirelli monitors and reports its direct (Scope 1) and indirect
(Scope 2 and Scope 3) climate-altering gas emissions as
described in the “Greenhouse Gas Emissions Management
and Carbon Action Plan” section of this report, and the
relative values are subject to specific limited audit activity
by an independent company in accordance with ISAE
3000.
c) Targets
Pirelli reports its environmental and product targets that are
most linked to the company Climate Transition Plan, within
the Industrial Plan, in this chapter “Environmental Dimension”
and in the “Sustainability Planning and the United Nations
Sustainable Development Goals (SDGs)” and “Our Suppliers”
(“Targets” section) of this report.
BIODIVERSITY
Pirelli pays the utmost attention to ensuring that corporate
activities do not interfere with the biodiversity characteristic
of the value chain in which the Company operates.
As specified in Pirelli’s Health, Safety and Environment Policy,
published on the company website, Pirelli is committed to
minimizing impacts on biodiversity, ecosystems and related
ecosystem services.
143
In terms of Governance, the Board of Directors of Pirelli &
C. S.p.A., supported in its activities by the Control, Risks,
Sustainability and Corporate Governance Committee,
approves the environmental management objectives and
targets integrated into the Industrial Plan, including those
relating to biodiversity. In turn, Pirelli’s Top Management also
plays a strategic role in the full implementation of Pirelli’s
Environmental Management Model and related strategic
objectives on this matter.
Biodiversity, such as climate change, is subject to risk
assessments in line with the company’s Enterprise Risk
Management methodology, both with reference to Pirelli’s
sites and the supply chain.
Pirelli applies the “No net loss of biodiversity” model through
the “mitigation hierarchy” (i.e. avoid, minimize, restore and
compensate). Since this Model is in place, it is not possible to
indicate a target year within which to implement it.
Pirelli pays attention to minimize its operations in protected
areas and/or in sites relevant to biodiversity and/or of
particular
interest/value and ensures that the choice
of each new production site takes place in compliance
with protected areas, guaranteeing the preservation of
biodiversity, ecosystem services and the prevention of
deforestation. “Biodiversity relevant sites” identify sites that
contain globally, regionally or nationally relevant biodiversity
(“Critical Biodiversity”) and therefore include protected
areas/habitats/species, species classified as “critically
threatened”, “threatened” or “vulnerable” on the IUCN Red
List, endemic species, internationally recognized areas, as
World Heritage Sites, Ramsar wetlands, Man and Biosphere
by UNESCO.
With reference to Non-Deforestation, as specified in Pirelli’s
Policy for the Sustainable Management of Natural Rubber
published on the Pirelli website, the Company has set the 1
April 2019 as a cut-off date or the date beyond which natural
rubber from deforested areas or areas with deteriorated
“High Carbon Value” is considered not to comply with the
Company Policy. In other words, the target year for rubber
deforestation free is 2019, and this is in line with the Policy
Framework of the Global Platform for Sustainable Natural
Rubber), a multi-stakeholder platform of which Pirelli is one
of the founding members.
In addition to GPSNR, Pirelli actively collaborates with third
parties to support Biodiversity.
In August 2022, an agreement was signed in Mexico
with local government institutions for the conservation
of biodiversity and the reforestation of the “Cuenca de la
Esperanza” protected natural area in the Guanajuato region.
With this initiative, in addition to the environmental protection
of flora and fauna, an area that is also an important water
resource for the population of the capital of Guanajuato and
Silao, the city where the Pirelli plant is located, is preserved.
Particularly relevant to diversity impact objectives is the
three-year “Living Rubber” project, which Pirelli launched
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN in 2021 in partnership with BMW and Birdlife International
with the aim of protecting 2,700 hectares of rainforest in the
Hutan Harapan area of Indonesia from deforestation and
conserving several endangered animal species. The forest in
Hutan Harapan is one of the last remaining rainforest areas in
Sumatra and has more than 1,300 species of flora and 620
species of fauna, including the Sumatran tiger, Sumatran
elephant and a variety of tropical birds. The forest protection
objective goes hand in hand with the development of initiatives
to sustain the eco-dependent indigenous community by
training them in best agro-forestry practices. The initiatives
are aligned with the Indonesian government’s programme to
reduce poverty and improve the quality of life of communities,
as well as to implement sustainable forest management.
For a detailed description of the 2022 activities related
to the sustainable management of natural rubber and
roadmap to 2025, please refer to the reporting in the
sections ‘Sustainability of the natural rubber supply chain’
and ‘Together for natural rubber sustainability - the GPSNR
platform’, within the chapter ‘Our Suppliers’ of this Report.
In support of biodiversity and ecosystem services, there are
also the Group’s decarbonisation targets (Scopes 1, 2 and 3),
validated by SBTi in line with the 1.5°C Scenario, SBTi’s Net
Zero commitment and water withdrawal reduction targets,
discussed in the following paragraphs and to which reference
should be made for further information.
Pirelli requires its suppliers to implement a management
model at their sites and along their supply chain to protect
biodiversity and ecosystems with conservation and
responsible use of natural resources, in compliance with
international standards and the laws and regulations of the
countries where they operate. More specifically, through
the Pirelli Suppliers’ Code of Conduct and the Sustainable
Natural Rubber Management Policy - which are an integral
part of purchasing contract clauses - Pirelli requires its
suppliers to:
→ actively contribute to the protection of natural ecosystems,
relevant biodiversity and ecosystem services, to prevent
the overexploitation of natural resources;
→ promote ecosystem restoration, stop any contribution
to deforestation, forest degradation and/or conversion
and act in line with the internationally recognised “High
Conservation Value” (HCV) and “High Carbon Stock”
(HCS) approaches;
→ identify, trace, monitor and, upon request, also share with
Pirelli their use of natural resources (e.g. raw materials,
freshwater, fossil and renewable fuels, etc.), analysing their
material impact, their level of influence, the actions to be
implemented and the objectives to be pursued to reduce
natural resources use and consumption;
→ adopting the hierarchical model of mitigation (avoid,
minimise, restore and compensate) to protect and
enhance biodiversity for all activities in areas containing
critical biodiversity.
for biological diversity: the Vizzola Ticino test field (Italy) and
the Elias Fausto test field (Brazil).The Vizzola site hosts the
tyre test track, has an area of 0.37 square kilometres and
is inserted in the Lombardy area of the Ticino Park, MAB
area51 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 1 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 Elias Fausto (Brazil) site is the new Brazilian test site,
has an area of 1.59 square kilometres, and is located in
a predominantly sugar cane cultivation area where there
are two watercourses (the Itapocu and Tietê Rivers) with
permanent protection areas. There are 162 species on
the IUCN Red List in the area; of these: 1 is classified as
“vulnerable” (V), 2 as “near threatened” (NT), 158 as “of
least concern” (LC) and 1 as “data deficient” (DD). In order
to maximise the environmental protection of the area, Pirelli
manages environmental issues, monitors and implements
measures to conserve fauna and water resources, including
the planting of native essences, and the control of noise
levels in accordance with the environmental impact study
carried out prior to the construction of the project, according
to which the environmental impact of the activities on the
region’s biodiversity is not significant.
THE PIRELLI GROUP ENVIRONMENTAL
STRATEGY AND FOOTPRINT
Monitoring and management of environmental
issues
has always played a key role in the business strategy at
Pirelli. With a view to long-term management of impacts,
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
Currently, on Pirelli’s entire footprint, two sites - both non-
productive - are located within protected areas of high value
51 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.
144
Pirelli Annual Report 2022 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.
The reporting of the emission impacts 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 Water
Footprint, Pirelli’s calculation model respectively follows the
standards ISO-TS 14067 and ISO 14046.
If the product life phases are considered according to the
GHG Protocol standard (Corporate Value Chain - Scope 3 -
Accounting and Reporting Standard) and as reflected in the
criteria of the Science Based Targets initiative, the emissions
of the use phase of the tyre are assessed as “indirect” and
already included in the accounting of the use phase of the
vehicle, of which the tyre is a component (with indirect
impact on the energy consumption of the vehicle during use).
These emissions, therefore, do not fall within the emission
perimeter that tyre makers must consider for value chain
reduction targets, which, instead, includes: Scope 1 and 2
emissions, generated by the group’s production activities,
and Scope 3 emissions mainly related to the supply chain,
logistics and product end-of-life. The Use Phase of the
tyre, as mentioned, is part of the Vehicle Use Phase and
therefore part of the Scope 3 emissions for Motor Vehicle
Manufacturer Customers.
As mentioned below, Pirelli has both emission reduction
targets approved by the Science Based Targets initiative,
to cover its own Scope 1, 2 and 3 emissions, and targets on
the rolling resistance of its products, thus contributing to the
reduction of indirect Scope 3 emissions in the use phase,
the benefit of which is in terms of the reduction of Scope 3
emissions borne by vehicle manufacturers.
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.
As regards the quantitative representation of Pirelli’s Carbon
Footprint, please refer to the section “Greenhouse Gas
Emissions Management and Carbon Action Plan” where
the emissions of the various life cycle phases are detailed
by scope. Meanwhile, for a representation of the impact
materiality in percentage terms of Pirelli’s Water Footprint,
on the various phases of the life cycle, please refer to the
section “Water Management”.
impacts throughout the product life cycle. The infographic
on the following pages shows the Pirelli approach to
environmental management and the specific multi-year
targets defined by the Industrial Plan, whose performance is
reported in the present report.
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 objectives of reducing the impacts that the
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
were analysed following the Life Cycle Assessment
methodology as defined by the ISO 14040 family rules,
the latter approach being able to corroborate in the
most objective way possible the results and the strategic
decisions connected to it, integrated with the indications of
the “Product Category Rule52“ for tyres developed by the
Tire 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 using dedicated models.
This method therefore 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 four main indicators used to summarise the quantitative
impacts in terms of Carbon Footprint and Water Footprint are:
→ Primary Energy Demand (PED), calculated in GJ of energy,
refers to the quantity of renewable or non-renewable
energy that is taken directly from the hydrosphere, the
atmosphere or the geosphere.
→ Global Warming Potential (GWP), calculated in tonnes
of CO2 equivalent, concerns the effect on the climate of
anthropic activities (the greenhouse effect potential of the
gas considered is assessed in relation to CO2, considering
a residence time in the atmosphere of 100 years).
→ Water Depletion (WD), calculated in cubic metres of water
and 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 (EP), calculated in kilograms of
phosphate equivalent, which represents 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
52 Set of specific rules, requirements and guidelines for the development of environmental declarations, for
one or more product categories, defined according to ISO 14025.
145
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN STAGES OF LIFE CYCLE
RAW MATERIALS
MANUFACTURING
DISTRIBUTION
USE
END-OF-LIFE
DRIVERS OF THE CARBON
AND WATER FOOTPRINT
Production and transport of raw materials: the
impact is due to the consumption of resources
on the part of the production sites of suppliers.
Tyre manufacturing: at Pirelli factories the
impact mainly derives from the consumption
of electricity and natural gas.
Consumption and related production of fuel
used by trucks and ships of logistics providers,
which deliver Pirelli tyres worldwide.
Consumption and related production of the
fuel used by customers’ vehicles in the portion
allocated to rolling resistance of the tyres.
End-of-life tyre management: old tyres are
prepared by specialised companies to be reused
either as energy or as regenerated raw material.
Suppliers
Pirelli
Suppliers
Customers
Waste Recovery Players
GHG DISTRIBUTION IN SCOPE
Scope 3
Scope 1+2+3
Scope 3
Scope 3 - indirect
(in charge to vehicle manufacturers)
Scope 3
RESPONSE STRATEGY
RAW MATERIAL INNOVATION
PROCESS EFFICIENCY
GREEN SOURCING POLICY
PRODUCT INNOVATION
Research and development of raw
materials with a low environmental
impact
Progressive introduction of new
materials from renewable and/or
recycled sources
Biomaterials, such as high performance
silica from renewable sources, biofillers
such as lignin and plasticisers/resins of
plant origin
Natural rubber: search for sustainable
alternative sources
Functionalised Polymers: research on
innovative polymers that guarantee
reduced environmental impact,
improved driving safety and improved
production efficiency
Targets
Reduction of CO2 emissions from raw
material suppliers by 8.6% by 2025
compared to 2018 (target approved
by SBTi*);
for selected product lines:
By 2025: >40% renewable materials,
>8% recycled materials*** and <40%
fossil-derived materials.
By 2030: >60% renewable materials,
>12% recycled materials*** and <30%
fossil-derived materials.
GREEN PURCHASING GUIDELINES/
GREEN SOURCING POLICY
CDP SUPPLY CHAIN
THIRD-PARTY AUDITS
OF CRITICAL SUPPLIERS
Target 2025
100%
renewable electricity sourcing
Green Logistics procedure
Engagement to reduce Supply chain
Carbon & Water Footprint
-42%
Absolute CO2
emissions vs 2015
(target approved 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
146
PRESENCE ON THE 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
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
* 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 FLAT™, SEAL INSIDE™,
PNCS™, Elect™, Pirelli Cyber™, Racing,
Collezione) regardless of rim size
*** > 3% by 2025 and > 7% by 2030
excluding recycled metals
Pirelli Annual Report 2022 STAGES OF LIFE CYCLE
RAW MATERIALS
MANUFACTURING
DISTRIBUTION
USE
END-OF-LIFE
DRIVERS OF THE CARBON
AND WATER FOOTPRINT
Production and transport of raw materials: the
impact is due to the consumption of resources
on the part of the production sites of suppliers.
Tyre manufacturing: at Pirelli factories the
impact mainly derives from the consumption
of electricity and natural gas.
Consumption and related production of fuel
used by trucks and ships of logistics providers,
which deliver Pirelli tyres worldwide.
Consumption and related production of the
fuel used by customers’ vehicles in the portion
allocated to rolling resistance of the tyres.
End-of-life tyre management: old tyres are
prepared by specialised companies to be reused
either as energy or as regenerated raw material.
Suppliers
Pirelli
Suppliers
Customers
Waste Recovery Players
GHG DISTRIBUTION IN SCOPE
Scope 3
Scope 1+2+3
Scope 3
Scope 3 - indirect
(in charge to vehicle manufacturers)
Scope 3
RESPONSE STRATEGY
RAW MATERIAL INNOVATION
PROCESS EFFICIENCY
GREEN SOURCING POLICY
PRODUCT INNOVATION
Target 2025
100%
renewable electricity sourcing
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
Research and development of raw
materials with a low environmental
impact
Progressive introduction of new
materials from renewable and/or
recycled sources
Biomaterials, such as high performance
silica from renewable sources, biofillers
such as lignin and plasticisers/resins of
plant origin
Natural rubber: search for sustainable
alternative sources
Functionalised Polymers: research on
innovative polymers that guarantee
reduced environmental impact,
improved driving safety and improved
production efficiency
Targets
Reduction of CO2 emissions from raw
material suppliers by 8.6% by 2025
compared to 2018 (target approved
by SBTi*);
for selected product lines:
By 2025: >40% renewable materials,
>8% recycled materials*** and <40%
fossil-derived materials.
By 2030: >60% renewable materials,
>12% recycled materials*** and <30%
fossil-derived materials.
GREEN PURCHASING GUIDELINES/
GREEN SOURCING POLICY
CDP SUPPLY CHAIN
THIRD-PARTY AUDITS
OF CRITICAL SUPPLIERS
-42%
Absolute CO2
emissions vs 2015
(target approved 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
PRESENCE ON THE 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
* 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 FLAT™, SEAL INSIDE™,
PNCS™, Elect™, Pirelli Cyber™, Racing,
Collezione) regardless of rim size
*** > 3% by 2025 and > 7% by 2030
excluding recycled metals
147
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN PIRELLI’S APPROACH TO THE
CIRCULAR ECONOMY: THE 5 RS
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.
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 their performance in
2022 are reported in the following sections.
Rethink is supported by the other four commitments of
Pirelli’s 5R approach:
PRODUCT: RESEARCH AND DEVELOPMENT
OF RAW MATERIALS
→ Refuse: avoiding processes, products, services and
materials that are redundant, while at the same time
promoting an increase in the safety of the products used,
through the replacement of those that are not considered
suitable, as a preventive measure and even going beyond
legislative requirements. The elimination of single-use
plastics within the Group 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 decarbonisation. 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 -42% of absolute CO2 emissions
compared to 2015, as approved by the SBTi in line with
the 1.5ºC scenario), the performance of new car products
in terms of Rolling Resistance (≥70% A/B labelling
classification by 2025) and the SBTi validated target for
the reduction of CO2 emissions of its raw material suppliers
(-8.6% by 2025 compared to 2018) of its raw material
suppliers, in addition to the Net Zero Science Based Target
commitment expressed in 2022.
→ 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 targets that
envisage that selected product lines to use over 40%
renewable materials by 2025 (over 60% by 2030), over
8% recycled materials53 (over 12% 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
The Research and Development of innovative materials is
essential in order to design and manufacture “Eco and Safe”
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 materials54 by
2025 (more than 60% by 2030), more than 8% recycled
materials55 (more than 12% by 2030) and reducing the use
of fossil-derived raw materials to less than 40% (less than
30% by 2030).
In 2022, the R&D effort on innovative renewable and recycled
materials was significant. With reference to Pirelli tyres on the
market in 2022, the highest share of renewable and recycled
materials in a single product reached 38% (30% renewable
+ 8% recycled), compared to 33% (28% renewable + 5%
recycled) in 2021.
The volume of raw materials used for tyre production in
2022 was approximately 843,000 tonnes, of which 3.3% is
recycled material and 19.6% is renewable material.
Also in the course of 2022, new product lines were validated
and industrialised, scheduled to start production next year,
with an even higher content of renewable and recycled
materials (including silica from rice husks, bio-resins, bio-
attributed polymers and natural rubber to replace synthetic
rubber).
In this context, Pirelli’s Research & Development focuses,
among others, on:
→ high-dispersion silica for wet grip, rolling resistance and
durability;
53 > 3% by 2025 and > 7% by 2030 excluding recycled metals.
54 Pirelli aligns with the OECD, which defines “Renewable Natural Resources” as those natural resources
that, after their use, can return to the levels of original stocks through natural processes of growth or
regeneration
55 > 3% by 2025 and > 7% by 2030 excluding recycled metals.
148
Pirelli Annual Report 2022 → new technologies applied to the development of polymers,
fillers and plasticisers for improving the wear rate of tyres;
→ materials of biological origin, 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.
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, i.e. the outer
shell of rice grain. The husk is by weight 20% of the raw rice
grain and 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 precisely 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 uses fossil energy sources. During 2022, the use
in normal production of silica from rice husks was increased,
involving plants in China and Europe, reaching a volume
scale-up of about 5% of total silica consumption (up from 1%
last year), with the aim of reaching 10% during 2023.
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
(Consortium for Materials
between Pirelli, CORIMAV
Research) Advanced) and Bicocca University.
In the context of the new nano-fillers, Pirelli has started to
introduce materials of mineral origin, such as sepiolite, in a
partial substitution of precipitated silica and carbon black.
The innovations mentioned provide a water saving, and a
reduction of emissions of CO2 in excess of 75% compared
to the production processes of the raw materials replaced.
Also with a view to the circular economy, it should be noted
that in 2022, on the basis of proprietary patents, Pirelli has
149
continued the development of tyres using recycled PET,
resins from renewable sources, lignin and, in collaboration
with the Politecnico of Milan, pyrroles from materials
obtained from renewable lignocellulosic biomass. Lignin, an
environmentally friendly additive of natural origin derived
from waste from the cellulose production process, is already
used in a compound for cycling 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 tyre (ELT), such as powder obtained by fine
grinding of the tyre or carbon black obtained by tyre
pyrolysis, allows them to be used in increasing proportions
without compromising performance or safety, unlike the
technologies of the past.
Some materials in use in compound formulations (such as
synthetic polymers, carbon-black and synthetic oils) can
in turn be produced by feeding the synthesis process with
certain proportions of feedstock from recycled materials
(recycled polystyrene, oil from pyrolysis of ELTs): during
2022, Pirelli expanded its collaboration with partners aimed
at developing, validating and applying of these technologies
in new materials.
There is constant research into material efficiency, 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 the 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, so-called conflict minerals
and the cobalt and mica 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 section “Our Suppliers” (“R&D
Partnership” section) of this report and in the Directors’
Report on Operations
(“Research and Development
Activities” section).
PRODUCT: ECO & SAFETY PERFORMANCE TARGETS
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.
‘Eco & Safety performance’ strategy aims to
Pirelli’s
maximise environmental performance while keeping safety
at the centre, without compromise.
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN investment
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:
In the course of 2022, more than 300 new technical approvals
were obtained with the leading Prestige and Premium car
manufacturers, mainly focusing on rims larger than 19 inches
and Specialties57. In addition, the renewal of the product
range continued with the introduction of new lines, with a
particular focus on electric cars and plug-in hybrids.
→ 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 particular,
it was seen that the tyre rolling resistance, linked to the
phase of vehicle use, is one of the factors responsible for
environmental impacts over the entire product life cycle. In
this regard, Pirelli is constantly striving to reduce the rolling
resistance of its car products, which, at the end of 2022, was
13.6% lower than the 2015 value (in 2021 the reduction was
10.3% and in 2020 9%), calculated as the weighted average
of all car tyres.
In addition, Pirelli has set a target for 2025 to have over
70% of new car products, i.e. new Ipcode labelled products
considered at group level, classified A or B for rolling
resistance, according to the highest European labelling
standards for energy efficiency, and more than 90%
classified A or B for “wet grip”. In 2022, the new IP-labelled
tyres placed on the market by Pirelli worldwide will have 50%
A or B Rolling Resistance and 93% A or B Wet Grip labels,
according to the European classification, including ice grip
(which is indicated by the presence of the ICE pictogram).
For an overview of product performance targets, please
refer to the “Sustainability Planning and the UN Sustainable
Development Goals (SDG)” section of this report.
include
Eco & Safety Performance56 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 European labelling 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™ tyres that runs 15,000 km a year consumes 5.1%
less fuel (equivalent to 52 litres), reduces greenhouse gas
emissions by 123.5 kilograms of CO2 and has a braking
distance in the wet 9% lower than the Pirelli benchmark
(class B of wet grip) in the same segment. Comparative
tests by TÜV SÜD show that at a speed of 80 km/h on a wet
surface, the CINTURATOP7™ Blue tyre reduces braking by
2.6 metres compared to a B labelled tyre.
At the R&D level, the introduction of virtual processes
using artificial intelligence enabled a 30% reduction in
development time, in terms of design and industrialisation
of innovative materials. These processes also allow the
reduction of material prototypes by 20%, resulting in savings
in raw materials.
Also noteworthy are the results achieved in the reduction of
the tyre wear rate, with improvements of up to 33% for the
new product lines compared to their predecessors.
In particular, the Pirelli Scorpion range, which is dedicated to
SUVs, shows improvements over the previous generation in
the various performance indices on the European labelling
system. In terms of wet performance, 100% of the sizes in
the new range belong to European labelling classes A or B,
with over 80% in class A. In terms of rolling resistance, the
Scorpion range has over 60% of sizes in class A or B, a sign
of a special efficiency that translates into environmental
awareness and a contribution to autonomy for electrified
vehicles. The level achieved is already very close to the
target of 70% for all class A and B rolling resistance products
that Pirelli has set for 2025. Excellent results were also
achieved in terms of quietness, with 100% of the products
in the Scorpion range in noise class A or B. In addition to
meeting higher levels of comfort, safety and performance,
some sizes of the Scorpion family are optimised for use
with electrified SUVs: around 30% of the range is equipped
with Elect technology, a solution specially developed for
electric and plug-in hybrid vehicles. This makes Scorpion the
Pirelli product range with the highest number of green car
approvals. The three new versions of the Scorpion range have
been designed by Pirelli following the “Eco-Safety Design”
approach that uses innovative materials and tools, including
inherited from motorsport experience, to
virtualisation
achieve high sustainability and safety performance. The
adoption of this method has resulted in improved braking
reliability, dry and wet grip and stability, all to the benefit of
safety, but also performance that limits environmental impact
such as optimised fuel consumption, reduced noise and
increased tyre durability. To achieve these results, the range
has been substantially redesigned, through research and
development work that has intervened on the composition of
the compounds, tread patterns and the structure, which has
been reinforced and equipped with new materials. Updating
the range enabled Pirelli to obtain the Performance Mark for
the Scorpion, an award given by the TÜV SÜD certifying body
to tyres that are among the best on the market in different
56 Eco & Safety Performance products identify the 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.
57 Auto tyres which meet specific customer needs: Run Flat™, Seal Inside™, PNCS™, Elect™, Pirelli Cyber™,
Racing, Collezione, regardless of rim size.
150
Pirelli Annual Report 2022 driving situations. In addition, with a view to optimising the
supply chain, production of the entire Scorpion range is
based in factories in the European Union.
In October 2022, the new Pirelli Cinturato Winter 2 was judged
the best winter tyre by the magazine Auto Bild. For the Winter
Supertest, the magazine selected 56 tyres in the 215/55 R17
size and tested the top 20 in snowy, wet and dry conditions,
in all typical safety manoeuvres such as handling, braking
and aquaplaning, while also testing efficiency parameters
such as durability and rolling resistance. The main innovation
of the Pirelli Cinturato Winter 2 is the 3D-structured siping
designed by Pirelli: as the tread wears down, the sipes change
shape from linear to sinusoidal, guaranteeing grip on dry, wet
and snowy ground throughout the tyre’s life.
With reference to products developed for electric and hybrid
vehicles, the Pirelli tyres that equip the new Ford Mustang
Mach-E GT Performance Edition, the most powerful and
high-performance version of the US carmaker’s first all-
electric SUV, feature the Elect marking. Thanks to specific
technical characteristics of the compound and structure,
Pirelli Elect-branded tyres offer several advantages: low
rolling resistance to increase battery autonomy, low rolling
noise to ensure optimum driving comfort, immediate grip for
the transmission stresses at start-up, and a structure suitable
for supporting the weight of the battery-powered vehicle.
Pirelli also supplies P Zero Elect tyres as original equipment
to the new BMW iX, a 100% electric SUV, for the xDrive50 and
M60 versions. The special profile of the tyre, which has better
aerodynamics than the standard P Zero, also contributes to
the mileage. In fact, thanks to a modification of the outer
profile, the P Zero Elect features a less prominent tyre bead
that reduces aerodynamic turbulence, further improving the
tyre’s efficiency. Added to this are the innovative inscriptions
on the tyre cheek made in the so-called Sunk mode, hollowed
out and not embossed.
In 2022, Polestar also chose Pirelli P Zero for the Polestar
2 BST edition 270. Pirelli has responded to the car’s needs
with a P Zero Elect with a high load index and HL marking on
the sidewall, which indicates that the tyre is able to support
the car in the best possible way and guarantee a high level
of comfort even when it is subjected to significant stresses,
such as when driving in a sporty manner. Specifically, the
HL-marked P Zero can support a ground weight that is more
than 20% greater than the weight supported by a standard
tyre and 9% greater than an XL tyre of the same size.
By the end of 2022, Pirelli is the tyre manufacturer with
the largest share of type approvals for electric and plug-in
hybrid cars.
In March 2022, the Pirelli Elect technology package received
an award in Spain as the Best Technological Innovation
during the third edition of Los Premios ‘Hevea’ de la Industria
del Neumático, an event organised by Europneus magazine
to recognise the work done by companies in the tyre and
car parts sectors. These prizes are awarded through the
voting of almost 12,000 automotive-related professionals,
151
from tyre production and the various car components, to the
management of the relevant service departments.
In addition to equipping the new models put on the market by
car manufacturers, the increasing popularity of electric cars
and their year-round use has made the development of tyres
for different seasons indispensable. In the electric winter
range, where demand is recent but growing fast, Pirelli Elect
can already equip 65% of Premium and Prestige models (in
the latter case, the share exceeds 80%).
In 2022, the activities of the Pirelli Sottozero Test Centre in
Swedish Lapland were extended to the summer period as
well, a choice dictated by the growing need for development,
particularly of all-season and winter products, on dry and wet
roads. Although development methodologies are increasingly
reliant on simulation and virtual reality, performance
validation through physical testing remains a cornerstone of
Pirelli’s development strategy, and as a result, proving ground
activity is growing. The variety of testing facilities at the Pirelli
Sottozero Centre makes it possible to develop tyres for every
type of car and now also for all seasons. In addition, thanks
to the charging infrastructure available in the area and the
type of tests that can be conducted, the proving ground also
lends itself to the development of tyres for plug-in hybrid
and electric cars. Among the latest manufacturers to use
the area for tests with Pirelli winter tyres was also Croatia’s
Rimac, which tested new winter solutions for its Nevera
electric hypercar.
The focus on 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 been awarded the 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 thanks to a supply
chain completely managed according to environmental and
social sustainability criteria. Among the measures Pirelli has
taken to achieve this in F1® are the use of 100% certified
renewable electricity in Motorsport factories as early as
2021, an increase in the use of renewable materials, the
elimination of single-use plastics from track activities and a
supply chain fully managed according to environmental and
social sustainability criteria. In addition, Pirelli’s motorsport
activity has passed a series of rigorous audits that take into
account several 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. As far as motorsport 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.
With reference to the Cycling business, Pirelli also launched
new product lines in 2022 (P ZERO Race 4S, P ZERO Race
150°, Scorpion Enduro and Scorpion E-MTB, Angel Urban,
Cinturato Gravel RC, Cinturato Gravel S and the Scorpion
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN Gravel for Enduro and Downhill competitions), renewing and
expanding the range of products dedicated to sportsmen and
women and cycling enthusiasts. In March 2022, production
of cycling tyres started at the Pirelli plant in Bollate, thus
becoming the only factory in Italy to produce “Made in Italy”
bicycle tyres on an industrial scale. The plant specialises in
the production of high-tech tyres, including all models of the
P Zero Race family, in the updated version with the “Made in
Italy” label, intended for both amateurs and athletes of some
of the top UCI cycling teams, all of which are already Pirelli
partners and play an active role in tyre development.
Pirelli’s high-tech products include the development of
technologies based on the introduction of sensors inside the
tyre. The Pirelli Cyber Tyre system, consisting of a sensor in
each of the tyres that collects fundamental information for
safe driving and software integrated into the car’s electronics,
was the first in the world to be fitted as original equipment
on a production car, the McLaren Artura. The Pirelli Cyber
Tyre system is able to detect potentially dangerous driving
situations, such as loss of grip and aquaplaning, allowing
the car’s electronics to intervene promptly. The next step
will see tyres networked, both with other vehicles and with
the road infrastructure. Pirelli was the first tyre company in
the world to share information about the road surface on
the 5G network from 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 given 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.
For further information on Cyber™ technologies, please refer
to the section “High Value Approach to Future Mobility” in
the chapter “Our Customers” in this report and the section
“Product, Material and Production Process Innovation” in the
Directors’ Report on Operations.
initiatives, the Joint Labs
Among the Open Innovation
agreement between Pirelli, the Politecnico of Milan and the
Polytechnic Foundation of Milan should be highlighted. The
collaboration, which began in 2011 and will be renewed in
2021 for a further three years, focuses on research projects
for the continuous technological innovation of tyres. In
addition to exploring the potential of virtual environments,
thanks to the static simulator installed at Pirelli’s R&D centre
in Milan and the dynamic simulator at the Politecnico of
Milan, 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
innovative modelling. The agreement between the
and
Politecnico of Milan, Fondazione Politecnico and Pirelli has
generated no less than 14 patent families filed and some 30
publications of articles in international scientific journals, as
well as dozens of presentations at international congresses.
Many topics were discussed and results achieved in the area
of tyre performance, its level of safety and sustainability,
thanks to the use of advanced materials identified as part
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 inaugurated recently,
created in collaboration with the Politecnico of Milan, involving
34 young engineers newly hired by the company, with the aim
of training specialised technicians.
TYRE WEAR AND TWRP
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
152
Pirelli Annual Report 2022 TRWP Platform” launched by ETRMA, which saw, in addition
to the Tyre Industry, the participation of Road Authorities,
Automobile Manufacturers Association, Automobile Clubs,
the waste water treatment industry, Universities and Research
Centres, NGOs, European Institutions and national authorities.
The platform will continue its work in 2023 and, as in the
previous editions 2018-22 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 2021-22 boast a wear rate improvement
of up to 33% 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 was begun
in 2022 by the “Task Force on Tyre Abrasion” (TFTA)
within the UNECE World Forum for Harmonisation of
Vehicle Regulations (WP.29). The objective is the technical
development of a globally harmonised methodology for
measuring tyre abrasion, to be realised by 2024, to support
possible future regulatory activities related to the topic of
tyre abrasion (see, specifically, also the “ETRMA” section of
this report about the new EURO 7 regulatory proposal for the
mitigation of particulate emissions into the environment).
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, in terms of 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, about 60%58 of out-
of-use tyres (ELTs) are recovered, while in Europe and the
United States the recovery stands at 95%59 and 71%60.
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
153
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) and a
toolkit (“End-of-life tire – ELT – management Toolkit” in 2021),
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.
100% of the tyres produced and sold by Pirelli can be
destined for recovery activities, both in terms of material
(recycling) or 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
con 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 (such as pyrolysis).
ENVIRONMENTAL IMPACT OF PIRELLI’S
PRODUCTION SYSTEM
ENVIRONMENTAL MANAGEMENT SYSTEM
AND FACTORY ENVIRONMENTAL
PERFORMANCE MONITORING
All the production facilities of Pirelli and the tyre testing field
in Vizzola Ticino have Environmental Management Systems
certified under International Standard ISO 14001. The
International Standard ISO 14001 was adopted by Pirelli as a
reference from 1997.
All the ISO 14001 certificates have been
international accreditation ANAB
issued with
(ANSI-ASQ National
58 WBCSD 2019 – “Global ELT Management – A global state of knowledge on regulation, management
systems, impacts of recovery and technologies”.
59 ETRMA 2021, 2019 data.
60 USTMA - 2019 2021 US Scrap Tyre Management Summary.
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN Accreditation Board: accrediting entity of the United States).
waste sent for recovery remained stable at 97%.
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.
In addition, as a result of 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 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 completed 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 sections concern
the three-year period 2020-2021-2022 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.
The amount of finished product used in the calculation of the
specific indices indicated below, in 2022 was approximately
762,000 tonnes.
ENVIRONMENTAL PERFORMANCE INDICES TREND
In 2022, the Group’s production activity recorded a slight
decrease in tonnes of finished product of about 1% compared
to 2021 (calculated on a like-for-like basis).
to
Compared
the previous year, all environmental
performance indices, expressed in absolute terms, on energy
consumption, greenhouse gas emissions, water withdrawal
and waste production improved. The same positive trend also
applies to all equivalent specific indicators weighted both
on tonnes of finished product and operating profit (related
to EBIT Adjusted). The share of electricity from renewable
sources used by Pirelli increased, while the percentage of
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, measured in GJ per tonne of
finished product;
→ specific consumption, as measured in GJ per euro of
Operating Income.
The Industrial Plan provides for a reduction of 10% in specific
energy consumption by 2025 compared to 2019 values.
In support of the achievement of this objective, during
2022 the energy efficiency plan continued at all Group
plants, already initiated in recent years and characterised
by actions aimed at:
→ improving and accelerating the digitalisation in an Industry
4.0 perspective of energy measurement and management
systems through monitoring of consumption;
→ designing a global platform aimed at generating technical
indicators and continuous improvement also through the
use of artificial intelligence tools;
→ 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 the 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
fulfills 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
154
Pirelli Annual Report 2022 The Energy Management System, certified according to ISO 50001, is being developed and has already been
adopted at the Breuberg (Germany) and Izmit (Turkey) plants. In 2022, the implementation process also started
for the factories in Campinas and Feira de Santana (Brazil) and is expected to be progressively extended to the
Group’s other 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, implementation of optimised control
systems and special projects assessed according to the needs of each manufacturing site.
During 2022, the installation of LED lighting systems at production sites continued, replacing less efficient
traditional systems, reaching a coverage of close to 80% in the Group’s plants. In light of the increasing inflation
and instability of gas costs, great attention has been paid to projects concerning thermal consumption. In
particular, the thermal insulation project with innovative vulcanisation system materials was extensively
developed in order to minimise heat loss. The project will continue in 2023 with the aim of covering all the Group’s
production units. The implementation of projects related to efficiency in the transformation of thermal energy
and the recovery of thermal waste for space heating and the improvement of steam generation performance
through flue gas recovery and combustion air preheating systems continued. Efficiency activities were also in
the field for both compressed air generation, using high-efficiency compressors, and energy flows, with a focus
on cold management, starting to expand the pilot projects developed in previous years. Efficiency in electricity
consumption was continued through the replacement of motors with more efficient models or power modulation.
Activities also continued in the area of reducing compressed air and steam leaks on both machinery (generators
and users) and distribution lines, through monitoring and periodic maintenance of the elements most at risk of
malfunctioning (leak management) or through their replacement with more reliable and efficient models.
Electricity absorption measurements performed on individual plants are also continuing in order to correlate the
specific consumption to production in greater detail, in order to optimise the operating conditions.
As regards the digitalisation of energy management, also in 2022 production plants have continued to be
equipped with smart systems (Green Button), which modulate the energy consumption based on the state
of operation of the machinery. The expansion of the real-time energy carrier measurement network and its
interconnection with Building Energy Management Systems (BEMS) is also continuing, and is currently already
underway at Slatina, while it is in the start-up phase for the other European plants and planned for the rest of the
Group’s factories.
In 2022, the energy efficiency index benefited from the actions described above, despite the negative impact
of the Russian conflict on the full operation of plants in the region and in response to an increasingly dynamic
automotive market. The result was achieved despite a high internal complexity of the factories aimed at coping
with an increased demand for flexibility and a production mix increasingly oriented towards High-Value products,
characterised by higher energy intensity in the production phase compared to standard tyres.
In 2022, the Group’s specific energy index decreased by 1.5%, compared to the 2021 figure, and was more than
1% lower than in 2019, the year in which the 2025 reduction target is based.
In absolute terms, energy consumption decreased by 3% compared to the previous year.
Absolute consumption
Specific consumption
GJ
GJ/tonFP
GJ/k€
2020
2021
2022
9,373,179
10,789,138
10,480,043
15.22
18.70
13.97
13.23
13.75
10.72
The application of energy management with a view to maximising industrial efficiency, implementing continuous
improvement logics, has resulted in savings of approximately 139.566 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 2022 compared to the previous year.
155
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN
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.
12,000,000
11,000,000
10,000,000
9,000,000
8,000,000
15.30
14.80
14.30
13.80
13.30
20.00
17.00
14.00
11.00
8.00
2020
2021
2022
2020
2021
2022
2020
2021
2022
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 30% 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 70%, with 43% electricity (39% electricity taken from national distribution networks) and 27% steam
purchased by the Group.
100%
80%
60%
40%
20%
0%
1%
31%
25%
43%
2020
1%
30%
27%
42%
2021
1%
29%
27%
43%
2022
Other
Natural gas
Steam purchased
Electricity
Of the total electricity used by the Group, more than 74%61 derives from renewable sources (up from 62% in
2021 and 52% in 2020), while for purchased steam, the share generated from renewable sources is around
17%62 of the total. Overall, compared to total energy consumed, the renewable share calculated as above is
around 37% (27% excluding the portion of the electricity mix from the grid 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.
As shown above, for all production sites in North America, Europe and Turkey, 100% of the electricity supply
from the grid in 2022 was from certified renewable sources.
MANAGEMENT OF GREENHOUSE GAS EMISSIONS AND CARBON ACTION PLAN
Pirelli monitors and reports its63 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
61 This value includes both the share from direct procurement initiatives (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),
which weighs 51%, and the contribution from national electricity distribution grids
evaluated on the basis of IEA (International Energy Agency) data for the remaining 23%.
62 Includes the supply of steam generated by biomass plants.
63 GHG inventory perimeter as indicated in section “Scope of Reporting”.
156
Pirelli Annual Report 2022 purchased and consumed by Pirelli. Scope 2 emissions are
reported in two distinct ways: location-based and market-
based (methodology introduced in 2015 with the guideline
“GHG Protocol Scope 2 Guidance” and current reference for
Pirelli’s emission reduction targets).
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.
With regard to “other indirect issues” attributable to Pirelli
value chain activities, or Scope 3 emissions, in addition to the
information below in this section, please refer to the section
“Our Suppliers” (“CDP Supply Chain” and “Decarbonisation”
sections) for further information about the specific activities
of the Pirelli Suppliers. Please refer instead to the Group
Footprint infographic, in the section “Environmental Footprint
and Strategy of the Pirelli Group” for the representation of
the Scope 3 impacts of the various life cycle phases, with
respect to the perimeter of emissions pertaining to Pirelli.
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)64;
→ Within location-based Scope 2:
→ National emission factors65 taken from IEA Emission
factors 202266:
→ Within market-based Scope 2:
→ Specific emission factors of suppliers where available;
→ Residual-mix emission factors67 taken from AIB
European Residual Mixes (EU)68 and Green-e Residual
Mix Emissions Rates (US)69;
→ 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.
Regarding Scope 2 emissions, the national average
coefficients are defined with respect to the last year
available on the above reports. It should be noted that the
As in the case of energy, Pirelli monitors and accounts for its
direct CO2e (Scope 1) and indirect CO2e (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 tonnes 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
ISAE 3000. According to the
company compared to
Guidelines of the GHG Protocol Guide, the level of inventory
uncertainty was evaluated as “Good”.
The current Industrial Plan, implementing the decarbonisation
strategy adopted by the company, envisages a 42% 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. In May 2022, these targets received validation
by the Science Based Targets initiative (SBTi), which judged
them to be consistent with the actions needed to keep climate
warming within 1.5°C. Pirelli’s previous emission targets, also
validated in 2020 by SBTi in line with the ‘well below 2°C’
scenario, had already been reached by the end of 2021, four
years ahead of the original deadline.
In June 2022, Pirelli also expressed to SBTi its commitment
to the Corporate Net Zero standard, pledging to formalise,
within two years, a long-term target to reduce emissions
from its value chain by around 90% by 2050 at the latest.
In addition, Pirelli envisages sourcing 100% of electricity
from renewable sources used by 2025 and Group carbon
neutrality by 2030.
64 Emission factors expressed in CO2 equivalent, obtained by considering the GWP (Global Warming
Potential) coefficients based on 100 years of the IPCC Sixth Assessment Report, 2021 (AR6).
65 Emission factors expressed in CO2/kWh.
66 2022 Publication with update to the 2021 figure.
67 Emission factors expressed in CO2/kWh.
68 2022 Publication with update to the 2021 figure.
69 2022 Publication with update to the 2020 figure.
157
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN The following graphs show the performance of the last three-year period.
800,000
700,000
600,000
500,000
400,000
1.10
1.00
0.90
0.80
0.70
1.30
1.10
0.90
0.70
0.50
2020
2021
2022
2020
2021
2022
2020
2021
2022
Absolute Emissions tonCO2
Specific Emissions tonCO2/tonFP
Specific Emissions tonCO2/k€
In 2022, the Group’s absolute emissions are 14% lower than the 2021 figure and 41% lower than the 2015 value,
the year on which the SBTi-validated absolute emissions reduction target to 2025 is based.
Specific CO2 emissions, weighed on tonnes of finished product, decreased by 13% in 2022 compared to the
2021 figure, thanks to the activation of new initiatives in the field of renewables, which, as mentioned above,
increased the share of electricity from renewable sources used by the group to over 74%70 of the total (compared
to 62% the previous year and 52% in 2020).
With regard to all production sites in Europe, North America and Turkey, 100% of the electricity supply from the
grid in 2022 was from certified renewable sources.
The portion of indirect emissions generated by the main “low carbon” projects described below was reported
in the manner 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 “location-based” and
“market-based” (target reference) methodology for Scope 2:
GHG EMISSIONS ACCORDING TO SCOPE
Absolute emissions (market-based Scope 1 and Scope 2)
Scope 1
Scope 2 (market-based)
Scope 2 (location-based)
Specific emissions (Scope 1 and Scope 2 market-based)
tonCO2e
tonCO2e
tonCO2e
tonCO2e
tonCO2e/tonFP
tonCO2e/k€
2020
2021
2022
638,730
636,190
548,132
168,158
187,510
179,399
470,572
448,680
368,733
508,390
528,332
533,086
1.037
1.27
0.824
0.78
0.719
0.56
70 This value includes both the share from direct procurement initiatives (such as the purchase of energy
from the grid certified with Energy Attribute Certificates or production in on-site wind or photovoltaic
plants), which weighs 51%, and the contribution from national electricity distribution grids evaluated on the
basis of IEA (International Energy Agency) data for the remaining 23%.
158
Pirelli Annual Report 2022
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
33%
Scope 1
67%
Scope 2
To support the goal of reducing climate-changing 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 supply of steam generated by biomass plant, fuelled with waste wood from local supply chains, activated
in Brazil for the Campinas and Feira da Santana plants. In the year 2022, thanks to this initiative, savings in
terms of avoided emissions of CO2e exceeded 26,000 tonnes (Scope 2);
→ the procurement of electrical energy from renewable sources at the plant in Silao (Mexico). In 2022 the
agreement continued for the dedicated supply of electricity generated from wind sources, which in the
year allowed the replacement of over 27 GWh of energy from fossil fuels, for a saving in terms of emissions
of CO2e of over 10,000 tonnes (Scope 2); In addition, a further 115 GWh of electricity consumed by the
factory is certified from renewable sources, for an annual savings in terms of CO2 emissions of over 42,000
tonnes (Scope 2);
→ the sourcing in 2022 of certified electricity from renewable sources at the sites of:
→ Rome (US): 24 GWh, for 9,000 tonnes of CO2e (Scope 2) avoided;
→ Slatina (Romania): 241 GWh, for 68,000 tonnes of CO2e (Scope 2) avoided;
→ Burton and Carlisle (UK): 58 GWh, for 20,000 tonnes of CO2e (Scope 2) avoided;
→ Breuberg (Germany): 40 GWh, for 24,000 tonnes of CO2e (Scope 2) avoided;
→ Izmit (Turkey): 12 GWh, for 5,000 tonnes of CO2e (Scope 2) avoided;
→ Yanzhou and JiaoZuo (China): 21 GWh, for 13,000 tonnes of CO2e (Scope 2) avoided;
→ Bollate, Settimo Torinese and the Headquarters (Italy): 98 GWh, for 45,000 tonnes of CO2e (Scope 2)
avoided.
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.
Considering the life phases of the product according to the GHG Protocol standard (Corporate Value Chain -
Scope 3) and as reflected in the criteria of the Science Based Targets initiative, the emissions of the use phase
of the tyre are assessed as “indirect” because they are 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). These
emissions, therefore, do not fall within the emission perimeter to be considered by tyre manufacturers for value
chain reduction targets, which, instead, includes: Scope 1 and 2 emissions, generated by the group’s production
activities, and Scope 3 emissions mainly related to the supply chain, logistics and product end-of-life.
159
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN DISTRIBUTION OF GHG EMISSIONS IN THE VALUE CHAIN (SCOPE 1,2 & 3)
Raw Materials (Scope 3)71
Manufacturing (Scope 1 + 2 + 3)72
Distribution (Scope 3)73
End-of-Life (Scope 3)74
Total
103 tonCO2e
103 tonCO2e
103 tonCO2e
103 tonCO2e
103 tonCO2e
2020
2021
2022
2,077.1
2,500.7
2,422.7
940.0
996.2
838.8
71.5
1.9
90.1
2.2
89.3
2.2
3,090.5
3,589.2
3,353.0
With reference to absolute Scope 3 emissions linked to the purchase of raw materials, which account for more
than 70% of the Group’s Carbon Footprint, Pirelli has a target approved by the Science Based Targets initiative
to reduce emissions by 8.6% by 2025 compared to the 2018 level. These emissions in 2022 were 3.1% lower
than in 2021 and 8.9% lower than in 2018 (compared to an expected reduction for 2022 of 4.9% vs. 2018,
calculated as an annual pro rata of the SBTi target to 2025). The company is developing a new target to be
submitted to SBTi, in line with the commitment to Net Zero SBTi expressed in 2022.
The Use Phase of the tyre, as mentioned above, is part of the Vehicle Use Phase and therefore part of the Scope
3 emissions for Motor Vehicle Manufacturer Customers. If, however, we were to present an estimate of the
vehicle use phase emissions attributable to the rolling resistance of tyres put on the market by Pirelli in 2022,
we would have:
Customers (Scope 3)75
103 tonCO2e
32,576.8
37,527.8
36,399.3
2020
2021
2022
In 2022, as it has for several years now, Pirelli continued in the compensation project of CO2 emissions produced
the previous year by its fleet of company cars, by purchasing and retiring carbon credits belonging to the VCS
(Verified Carbon Standard). Direct issuance of the 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 in 2021 emitted 773 tonnes of CO2. In order to offset this impact
on the climate, Pirelli supported a project to reforest degraded land in Mexico by planting new trees (85% of the
credits purchased), with a view to favouring an initiative that ensures the removal of atmospheric CO2 according
to an “additionality” principle, and a project to develop energy production from geothermal sources in Turkey
(for the remaining 15% of the credits). The activities financed with Pirelli’s contribution were carried out in 2022.
71 This includes the Scope 3 emissions of categories “1 - Purchased goods and services” and “4
- Upstream transportation and distribution” of the GHG Protocol (Corporate Value Chain - Scope 3 -
Accounting and Reporting Standard).
72 This includes the group’s Scope 1 and Scope 2 market-based emissions, Scope 3 emissions of the
categories “3 - Fuel-and-energy-related activities (not included in Scope 1 or 2)”, “5 - Waste generated in
operations”, “6 - Business travel” and “7 - Employee commuting” and “8 – Upstream leased assets” of the
GHG Protocol (Corporate Value Chain - Scope 3 - Accounting and Reporting Standard).
73 This corresponds to the Scope 3 emissions of category “9 - Downstream transportation and
distribution” of the GHG Protocol (Corporate Value Chain - Scope 3 - Accounting and Reporting
Standard).
74 This corresponds to the Scope 3 emissions of category “12 - End of life treatment of sold products” of
the GHG Protocol (Corporate Value Chain - Scope 3 - Accounting and Reporting Standard).
75 This corresponds to an estimate of the Scope 3 “indirect use phase emissions” of category “11 - End of
life treatment of sold products” of the GHG Protocol (Corporate Value Chain - Scope 3 - Accounting and
Reporting Standard).
160
Pirelli Annual Report 2022 WATER MANAGEMENT
Pirelli periodically monitors the Group’s Water Footprint
and, with a view to medium-long term management, is
committed to progressively reducing its impact on water
resources throughout the product life cycle. In analogy with
the attribution of impacts already explained in the Carbon
Footprint, the impact on water resources of the tyre use
phase is “indirect” for Pirelli, it is in fact accounted for as a
direct impact in the LCA of the vehicle use phase.
In terms of Water Depletion, the consumption of water cubic
metre equivalent linked to the purchase of raw materials
accounts for 72% of the Group total, the manufacturing
part for 27%, while
logistics and product end-of-life
account for less than 1%. In terms of Eutrophication, the
material-related impact is 97% of the Group total, while the
manufacturing logistics part and product end-of-life count
for the remaining 3%.
Aiming also to represent an estimate of water consumption
linked to the use phase of vehicles (borne by Car
Manufacturer Customers) attributable
the rolling
resistance of tyres put on the market by Pirelli in 2022, this
would be equal to 1.2 times the total consumption of all other
phases of the tyre life cycle. Meanwhile for Eutrophication,
the impact of the use phase is 3 times the total impact of all
other tyre life cycle phases.
to
The efficient and responsible use of water in production
processes and at workplaces is comprehensively addressed,
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.
Furthermore, the management of water resources, relations
with relevant stakeholders (local communities, authorities,
etc.) and the related potential impacts of the local contexts
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 in fact also addressed
by mapping the main stakeholders, their
interests and
expectations. These management systems also aim to ensure
that the qualitative-quantitative characteristics of emissions
are in line with the context and regulations in force.
In terms of Governance, the Board of Directors of Pirelli
& C. S.p.A., supported in its activities by the Audit, Risk,
Sustainability and Corporate Governance Committee,
approves the environmental management objectives and
targets integrated in the Business Plan, which include those
pertaining to the use of water in processes and the risks
associated with it (as identified by the Group’s Climate
Change and Water Stress Risk Assessment).
The Industrial Plan provides for a reduction target of specific
withdrawal of water of 43% by 2025 compared to the 2015
value.
Compared to the previous year, 2022 showed a reduction
in the Group’s specific withdrawal index of more than 3%,
or about 8.2 cubic metres per tonne of finished product.
Compared to 2015, the base year for the 2025 reduction
target, the specific water withdrawal index shows a reduction
of 36%.
In absolute terms, the water withdrawal amounted to
approximately 6.3 million cubic metres, down by 5% compared
to the 2021 figure. Thanks to the actions implemented, since
2015, Pirelli has saved a total of more than 18 million cubic
metres of water: an amount almost equivalent to the absolute
withdrawal for around three years by the entire Group.
161
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN To provide an overall view of the performance in terms of water withdrawal in the last three year period, 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
7,000,000
6,500,000
6,000,000
5,500,000
5,000,000
m3
m3/tonFP
m3/k€
11.0
10.0
9.0
8.0
7.0
2020
2021
2022
5,871,790
6,552,628
6,253,654
9.5
11.7
8.5
8.0
8.2
6.4
13.0
11.0
9.0
7.0
5.0
2020
2021
2022
2020
2021
2022
2020
2021
2022
Absolute Withdrawal m3
Specific Withdrawal m3 /tonFP
Specific Withdrawal m3/k€
All the figures reported in this section 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 WITHDRAWL SBY USE
TYPE OF WATER SOURCES (m3)
Other sites (warehouses, logistics, etc.)
Public water supply system and other sources
10%
Offices
2%
Tyre production sites
88%
24%
Surface water
13%
Inside wells
63%
63% of the water withdrawn is pumped from wells inside the facilities and authorised by the competent
authorities. Furthermore, Pirelli obtains 13% of its requirements from surface and stormwater. As far as water
from aqueduct or third-party sources is concerned, about 61% comes from groundwater, while the remainder
comes from surface water. The volume of water withdrawn from water stress areas76 is 52% of the total. Lastly,
about 240,000 cubic metres of water used, equivalent to approximately 4% of total withdrawal, are obtained
from the wastewater treatment of its production processes.
In 2022, the Silao site in Mexico put into operation the rainwater harvesting plant, which, after treatment, is
used in the production process for the benefit of less groundwater withdrawal. In 2022, a volume of rainwater of
approximately 23,000 cubic metres was collected.
A total of about 4.2 million cubic metres of domestic and industrial wastewater were discharged, with 55% of
this into surface water bodies. The remaining amount was discharged into sewer networks.
76 Water stress areas: this includes all those areas characterised by a level of “water stress” equal to or
greater than “high” according to the classification of the WRI Aqueduct (Aqueduct Water Risk Atlas wri.
org), as of 24 January 2022.
162
Pirelli Annual Report 2022
Before being discharged into the final recipient, industrial wastewater – 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:
7.7 mg/l of BOD5 (Biochemical Oxygen Demand), 24.2mg/l of COD (Chemical Oxygen Demand) and 10.0 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
Type of Water
Total
Water stress areas
Total Volume
Freshwater volume
Total Volume
Freshwater volume
Surface water
795,400
653,438
652,811
652,811
WITHDRAWAL FROM
Third Parties
1,513,394
1,512,721
944,272
944,272
Wells
3,944,860
3,883,337
1,627,076
1,627,076
Total
6,253,654
6,049,496
3,224,159
3,224,159
Surface water
2,295,673
1,311,542
0
0
DISCHARGE IN
Third Parties
1,885,473
1,384,143
1,163,222
1,060,128
CONSUMPTION
Total
Total
4,181,146
2,695,685
1,163,222
1,060,128
2,072,508
3,353,811
2,060,937
2,164,031
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. The initiatives guided by Pirelli’s Single Use Plastic Free Policy also fall within
this context.
In 2022, the value of specific waste production, weighed on tonnes of finished product, was substantially in line
with the previous year (-0.7%), while absolute waste production was 2% lower than in 2021. Of the total waste
produced in 2022, 97% is sent for recovery at third-party plants (about two-thirds of the amount is material
recovery), in line with the current Industrial Plan, which envisages sending 98% of the waste produced for
recovery by 2025, with a “Zero Waste to Landfill” vision.
In 2022, hazardous waste77 accounts for 10% (compared to 9% in 2021 and 8% in 2020) of the total waste
produced and is totally sent for treatment in third-party plants, authorised according to local regulations.
As for the waste generated by production sites, amounting to 102,501 tonnes, about 11% is hazardous waste, and
75% is sent for material recovery (recycling).
77 The hazardousness of waste is generally defined according to the applicable local regulations (e.g. in
Europe it is done according to the Waste Framework Directive 2008/9EC).
163
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN 100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
WASTE BY TYPE OF TREATMENT
TYPE OF WASTE - 2022
3%
3%
3%
97%
97%
97%
2020
2021
2022
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
9%
Non-hazardous waste sent for disposal
2%
Non-hazardous waste sent for recovery
88%
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.
Absolute production
Specific production
125,000
115,000
105,000
95,000
85,000
tonnes
kg/tonFP
kg/k€
160
155
150
145
140
2020
2021
2022
95,470
113,769
111,483
155
190
147
139
146
114
200
175
150
125
100
2020
2021
2022
2020
2021
2022
2020
2021
2022
Absolute Production ton
Specific Production kg/tonFP
Specific Production kg/k€
164
Pirelli Annual Report 2022
The following table summarises the main data on the management of waste produced in 2022 which are entirely
managed by external treatment plants.
TYPE OF PROCESSING AT EXTERNAL SITES
(data in tonnes)
Non-hazardous waste
Hazardous waste
Total
Preparation for re-use
Recycling
Other recovery operations
Waste not for disposal
Incineration (without energy recovery)
Incineration (with energy recovery)
Landfill disposal
Other disposal operations
Waste destined for disposal
Waste sent for recovery (of material & energy)
TOTAL
484
54,322
17,781
72,587
637
25,331
1,287
34
27,289
97,918
99,876
94
1,398
5,729
7,221
570
3,339
201
276
4,386
10,560
11,607
578
55,720
23,510
79,808
1,207
28,670
1,488
310
31,675
108,478
111,483
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 2022, the specific solvent consumption value was stabilised at 0.9 kg per tonne of
tyres produced, marking a reduction of 9% compared to 2021, with emission of VOCs78 slightly lower than total
consumption.
Absolute consumption
Specific consumption
tonnes
kg/tonFP
686
1.1
804
1.0
719
0.9
2020
2021
2022
900
800
700
600
500
1.2
1.1
1.0
0.9
0.8
2020
2021
2022
2020
2021
2022
Absolute Consumption tonSOLV
Specific Consumption kgSOLV/tonFP
NOX EMISSIONS NOX emissions derive directly from the energy-generating processes used. In 2022, the index
based on tonnes of finished product decreased by 12% compared to the 2021 figure, mainly due to a change in
the mix of energy consumed, which saw in particular a significant growth in the share from renewable sources,
as described above. The emissions were calculated by applying the emission factors indicated by the EEA
(European Environment Agency) to the energy consumption data.
78 Volatile Organic Compounds.
165
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN
In absolute terms, NOX emissions in 2022 decreased by 13% compared to the previous year.
Absolute emissions
Specific emissions
tonNOX
kgNOX/tonFP
743
1.21
800
1.04
694
0.91
2020
2021
2022
900
800
700
600
500
1.25
1.15
1.05
0.95
0.85
2020
2021
2022
2020
2021
2022
Absolute Emissions tonNOX
Specific Emissions kgNOX/tonFP
The graph on the right shows the weight in 2022 of the direct and indirect emissions of NOX out of the total NOX
emissions.
34%
Direct
66%
Indirect
OTHER EMISSIONS AND ENVIRONMENTAL ASPECTS
In 2022, Pirelli was awarded “Class A” certification for the performance of its emissions reduction programme
at Jiaozuo, following the conclusion of audits to assess parameters at the plant by the environmental
authorities of Henan Province. The “Class A” certification, already obtained in 2020 by the other Chinese site
in Yanzhou, refers to the guidelines defined by the Chinese Ministry of the Environment for the development
of measures aimed at reducing emissions in particularly critical general atmospheric situations. Thanks to
the “Class A” certification, the result of the technical and management measures Pirelli has implemented to
manage and reduce emissions, the Pirelli site in Jiaozuo is no longer subject to production restrictions during
periods when the province’s air quality falls below the alert threshold.
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 2022, the direct emission of SOX caused by the combustion of diesel and fuel oil is 9.3 tonnes (10.1 tonnes in
2021 and 10.7 tonnes in 2020, respectively) and is estimated according to EEA - European Environment Agency
emission factors.
As regards the management of packaging, car tyres are generally sold without packaging.
As a result of the environmental management systems implemented in the production units, and the
implementation of procedures dedicated to emergency prevention and response, constant and timely
monitoring and intervention is ensured on potential emergency situations that may occur, as well as on reports
received from stakeholders.
During 2022, a hydrocarbon spill occurred at the Carlisle (UK) plant, the source of which was promptly
intercepted and repaired in consultation with the local authorities without penalty. Apart from this incident, there
were no significant incidents, complaints or penalties related to environmental issues.
166
Pirelli Annual Report 2022
the
EXPENSES AND INVESTMENTS
In
three-year period 2020-2022, environmental
expenditure related to the production process was around
€62 million, of which about 34% was allocated in 2022.
Of this amount, 85% related to normal management and
administration of factories, while the remaining 15% 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 2022, the Company invested €263.9 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 a carbon price
internally. 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.
THE EUROPEAN REGULATION ON THE
TAXONOMY OF ENVIRONMENTALLY 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.
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 risks of greenwashing, and increase the quantity and
quality of information on the environmental and social
impacts of business, thereby promoting more responsible
investment decisions.
Currently, the Taxonomy is focused on the identification
of economic activities that are 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
167
that they do not cause significant harm to any of the other
environmental objectives and that they are carried out in
compliance 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;
→ protection of ecosystems and biodiversity.
In June 2021, the European Commission formally adopted
the Technical Delegated Acts (hereinafter referred to as the
“Climate Delegated Act”) 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 achieving the environmental
objectives of climate change mitigation and adaptation. As
explained in more detail below, at the time of publication
of this report, the delegated acts on the remaining four
environmental objectives have not yet been published.
In drawing up the content of the Taxonomy, the European
Commission envisaged that economic activities that
contribute substantially to the objective of climate change
mitigation can also be considered as 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”). In addition,
an economic activity is expected to contribute substantially
to one or more of the environmental objectives of 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-
term 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, which are designed
to ensure that economic activities are conducted in
compliance with the main international guidelines and
treaties related to human rights, including labour rights,
anti-corruption and anti-competitive practices, and in
compliance with tax laws.
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN REPORTING OBLIGATIONS AND GENERAL
PRINCIPLES FOR DEFINING KPI
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 2023, 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 operating
expenditure related to assets or processes associated
with economic activities considered 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
the aforementioned KPIs as well as the methodology to
be followed for their measurement and the qualitative
information that needs to accompany their reporting79.
Non-financial undertakings80 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 sheet items for
turnover and capital expenditure indicators in their non-
financial statements.
THE 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 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
79 See 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.
80 Pursuant to the legislation, a “non-financial undertaking” is defined as 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)).
taxonomy and for the management of the data collection
process and verification of technical screening criteria at all
the companies included in the scope of consolidation.
The methodological approach focused first of all on 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
discipline81 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 same82.
The interpretations published by the European Commission
in 2022 have confirmed that the manufacture of automotive
components is an economic activity automatically “eligible” and
that therefore these companies, including tyre manufacturers,
“can qualify” under the economic activity83 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 economy84, 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.
The Pirelli Group, albeit with the difficulties and limitations
deriving from the regulatory context described, has
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
its evaluations and
reserves the right to reconsider
81 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.
82 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.
83 The FAQs 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).
84 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).
168
Pirelli Annual Report 2022 in order to take
in future reports
interpretations
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. However, the
Pirelli Group reserves the right to reconsider its assessments
and interpretations on future reporting occasions to take into
account any changes in the regulatory framework or further
clarifications that may arise in the meantime from national
and European authorities or trade associations.
Finally, it is highlighted 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.
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 tyres, from which
it derives its total turnover.
In the absence of a shared interpretative model with respect
to the actual method of application of the Taxonomy to the
tyre sector, in the terms extensively described in the previous
section, Pirelli identified the share of “eligible” economic
activities with the turnover deriving from tyres dedicated
to vehicles with low environmental impact and from tyres
with high energy efficiency in terms of rolling resistance,
considering the values envisaged by the European labelling
as a reference parameter.
European tyre labelling85 provides a clear and common
classification of their performance for (i) rolling resistance,
(ii) wet braking and (iii) exterior noise. Since the taxonomy
is focusing on the environmental
labelling
parameter deemed consistent is therefore only that relating
to rolling resistance, which has an indirect impact on vehicle
fuel consumption and related greenhouse gas emissions.
For this reason, a high performance in terms of low rolling
resistance has a positive impact on the environmental
objective of mitigating climate change86.
impact, the
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).
The turnover from sales of car and van tyres produced by the
Group with European labelling in the rolling resistance classes
A, B and C was considered as permissible under the Taxonomy,
thus focusing on the “very high”, “high” and “medium” efficiency
levels (excluding the lower efficiency levels D and E), where
“C” is the most widespread on the market87.
169
Furthermore, as bicycles are zero-emission means of
transport, tyres dedicated to them are also considered
‘eligible’, therefore, the related turnover was added and
consolidated in the value described above (A+B+C).
We then proceeded to assess which activities could
be considered “aligned” with
the Taxonomy. Recent
interpretations published by the European Commission88,
in question,
have clarified that the economic activity
being a ‘residual category’, provides Technical Screening
Criteria to determine the “alignment” that are applicable
to numerous activities in different sectors; therefore, what
is required of operators is to justify whether and how their
technologies allow for a substantial reduction of greenhouse
gases in other sectors compared to the best available
alternative technologies on the market. The EU Delegated
Regulation 2021/2139 on Taxonomy indeed establishes
that only economic activities aimed at substantially reducing
greenhouse gas emissions compared to the best alternative
products available on the market can be considered “aligned”.
With reference to the parameter to be considered for the
calculation of the “alignment”, on the basis of Life Cycle
Assessment analyses89 to determine the Carbon Footprint
along the product life cycle, also reported at Group level
in the paragraph “Greenhouse gas emission management
and carbon action plan” for Scopes 1, 2 and 3, it is deemed
that the rolling resistance parameter, as already described,
is the best reference currently available to demonstrate
the contribution of tyres to the transport sector in reducing
greenhouse gas emissions.
Among the rolling resistance classes that were considered
for the eligibility. i.e. A, B, C, in consideration of the fact that
the “C” class is the most widespread on the market90, it is
deemed that the “C” cannot be included among the “best
alternatives on the market” and that, therefore, the “C”
class should not be included among the economic activities
“aligned” with the Taxonomy. For this reason, it is deemed
that taxonomy aligned economic activities should be referred
only to the A and B classes of rolling resistance. Contextually,
it is considered that the rolling resistance classes A and B,
which represent very high and high energy efficiency levels,
express the best alternatives available on the market and are
therefore aligned with the requirements of the Taxonomy.
With reference to the best available solutions in terms of
climate change mitigation in production processes and
the supply chain, Pirelli can boast near-term targets for the
85 Regulation (EU) 2020/740.
86 Regulation (EU) 2020/740 “(4) [...] Tyres, mainly due to their rolling resistance, account for between 20%
and 30% of vehicle fuel consumption. A reduction of the rolling resistance of tyres would therefore contribute
significantly to the fuel efficiency of road transport and thus to the reduction of greenhouse gas emissions
and the decarbonisation of the transport sector’.
87 EPREL - European Product Registry for Energy Labelling (extraction 17/2/2023). Focusing on the three
most efficient classes of Rolling Resistance (those identified as “permissible”), tyres labelled A and B cover
7.7% of sales, while those labelled C cover 41% (the remaining 51.3% are tyres labelled D and E).
88 The FAQs published by the European Commission on 19 December 2022 (ref. FAQ 42) clarify that
“Operators of the activity should justify whether and how their technology enables the achievement of
substantial GHG reductions in other sectors compared to other competing technologies”.
89 As already described in the ‘Pirelli Group Environmental Footprint and Strategy’ section of this report,
Pirelli annually monitors the Carbon Footprint of its entire organisation following the Life Cycle Assessment
methodology, as defined by the ISO 14040 family of standards, and drawing inspiration from ISO 14067 and
ISO 14046 for the calculation model.
90 EPREL - European Product Registry for Energy Labelling (extraction 17/2/2023). Focusing on the three
most efficient classes of Rolling Resistance (those identified as “permissible”), tyres labelled A and B cover
7.7% of sales, while those labelled C cover 41% (the remaining 51.3% are tyres labelled D and E).
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN reduction of absolute CO2 emissions (Scope 1, 2 and 3) approved by the Science Based Targets initiative (SBTi)
in line with the most ambitious scenario for keeping climate warming within 1.5°C. In addition, in 2022, Pirelli
expressed its commitment to the SBTi with respect to the Corporate Net Zero Standard, pledging to formalise,
within two years, a long-term target to reduce the emissions of its value chain by about 90% by, at least, 2050.
The allocation of turnover to the numerator was done by means of the system tracking of the European labelling
for each tyre produced. It should also be noted that turnover from the sale of car and van tyres produced by the
Group with rolling resistance values consistent with European labelling parameters was also taken into account
by re-parametrising non-European labelling to European labelling values. The risk of double counting with regard
to the turnover KPI is excluded as it is entirely attributed to economic activity 3.6.
The denominator of the KPI is the consolidated revenue for the financial year 2022 as indicated in Note 29
“Revenue from sales and services” within the consolidated financial statements.
PROPORTION OF TURNOVER91 FROM PRODUCTS OR SERVICES ASSOCIATED WITH
TAXONOMY-ALIGNED ECONOMIC ACTIVITIES (ROLLING RESISTANCE CLASSES A
+ B) — 2022 DISCLOSURE ILLUSTRATED IN COMPLIANCE WITH THE TEMPLATE
REFERRED TO IN ANNEX II OF DELEGATED REGULATION (EU) 2021/2178.
C
o
d
e
(
s
)
(
2
)
l
A
b
s
o
u
t
e
t
u
r
n
o
v
e
r
(
3
)
Substantial contribution criteria
P
r
o
p
o
r
ti
o
n
o
f
t
u
r
n
o
v
e
r
(
4
)
C
l
i
m
a
t
e
c
h
a
n
g
e
m
ti
g
a
ti
o
n
(
5
)
i
C
l
i
m
a
t
e
c
h
a
n
g
e
a
d
a
p
t
a
ti
o
n
(
6
)
W
a
t
e
r
a
n
d
m
a
r
i
n
e
r
e
s
o
u
r
c
e
s
(
7
)
P
o
l
l
u
ti
o
n
(
9
)
l
C
i
r
c
u
a
r
e
c
o
n
o
m
y
(
8
)
i
B
o
d
i
v
e
r
s
i
t
y
a
n
d
e
c
o
s
y
s
t
e
m
s
(
1
0
)
l
i
l
l
l
i
l
i
C
P
o
DNSH criteria ('Does Not Significantly Harm')
B
C
o
d
i
v
e
r
s
i
t
y
a
n
d
e
c
o
s
y
s
t
e
m
C
i
r
c
u
a
r
e
c
o
n
o
m
y
(
1
4
)
u
ti
o
n
(
1
5
)
W
a
t
e
r
a
n
d
m
a
r
i
n
e
r
e
s
o
u
r
c
e
s
i
m
a
t
e
c
h
a
n
g
e
m
ti
g
a
ti
o
n
(
1
1
)
m
a
t
e
c
h
a
n
g
e
a
d
a
p
t
a
ti
o
n
(
1
2
)
s
(
1
6
)
(
1
3
)
i
i
M
n
m
u
m
s
a
f
e
g
u
a
r
d
s
(
1
7
)
Taxonomy-aligned
proportion of
turnover, year
2022 (18)
Category (enabling
activity or) (20)
Category
(transitional
activity) (21)
€/'000
%
%
%
%
%
%
%
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N
Percent
3.6
1,655,260
25%
25%
0%
1,655,260
25%
25%
0%
Y
Y
Y
Y
Y
Y
25%
25%
T
E
E
3.6
2,522,483
2,522,483
4,177,743
38%
38%
63%
Economic activities (1)
A. TAXONOMY-ELIGIBLE ACTIVITIES
A.1 Environmentally sustainable activities
(Taxonomy-aligned)
Manufacture of other low carbon
technologies
Turnover of environmentally sustainable
activities (Taxonomy-aligned) (A.1)
A.2 Taxonomy-Eligible but not
envirnmentally sustainable activities (not
Taxonomy-aligned activities)
Manufacture of other low carbon
technologies
Turnover of Taxonomy-eligible but not
environmentally sustainable activities (not
Taxonomy-aligned activities) (A.2)
Total (A.1 + A.2)
B. TAXONOMY-NON-ELIGIBLE ACTIVITIES
Turnover of Taxonomy-non-eligible activities (B)
Total (A + B)
2,437,984
6,615,727
37%
100%
For information purposes only, if Pirelli had also considered the C class of rolling resistance, the aligned turnover
would have amounted to 63%. As mentioned, class C is considered not compatible with the definition of “best on
the market” for Taxonomy alignment purposes.
91 Values reported according to the template (“model”) set out in Annex II of Delegated Regulation (EU)
2021/2178 (“Models for key performance indicators – KPIs – of non-financial companies”). The darkened
cells refer to information that is not applicable for the current year to the Group’s economic activities.
170
Pirelli Annual Report 2022
CAPITAL EXPENDITURE INDICATOR
The share of “aligned” economic activities with reference to
capital expenditure refers mainly to productive investments
directly related to the above-mentioned “aligned” revenues,
which have been determined proportionally as allocation
drivers in the case of investments in manufacturing that are
common to several types of products.
As already specified, since class C of rolling resistance
is the most widespread on the market92, it is considered
that it cannot be included among the “best alternatives
available on the market” and, therefore, should not be
included among the economic activities “aligned” to the
Taxonomy, while it is considered that the aligned economic
activities should refer only to the rolling resistance classes
A and B, which represent the best alternatives available
on the market. For this reason, the alignment indicator of
Operating Expenses was determined by considering only
classes A+B and excluding C.
To this amount was added the entirety of the investments
aimed at the development of cycling products and
investments in energy efficiency at the Group’s factories
related to the environmental objective of mitigating
into account;
climate change have also been taken
in
included
these are therefore economic activities
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.
In this case the numerator was determined by involving
Group companies and individual production sites that were
asked to make an assessment of the individual investments
made during the year to identify “eligible” investments
for taxonomy purposes and to verify compliance with the
Technical Screening Criteria and Do No Significant Harm.
Finally, investments made during the year in technologies
to optimise the development and testing of tyres were
considered as Activity 9.1 Research, Development and
Innovation close to the market.
The denominator of the KPI is the sum of the gross additions
recognised in 2022 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.
92 EPREL - European Product Registry for Energy Labelling (extraction 17/2/2023). Focusing on the three
most efficient classes of Rolling Resistance (those identified as “permissible”), tyres labelled A and B cover
7.7% of sales, while those labelled C cover 41% (the remaining 51.3% are tyres labelled D and E).
171
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN PROPORTION OF CAPEX93 FROM PRODUCTS OR SERVICES ASSOCIATED WITH ECONOMIC
ACTIVITIES ALIGNED TO THE TAXONOMY (INCLUDES CAPEX FOR ROLLING RESISTANCE
CLASSES A + B) — 2022 DISCLOSURE ILLUSTRATED IN COMPLIANCE WITH THE
TEMPLATE REFERRED TO IN ANNEX II OF DELEGATED REGULATION (EU) 2021/2178.
Economic activities (1)
C
o
d
e
(
s
)
(
2
)
l
A
b
s
o
u
t
e
C
a
p
E
x
(
3
)
Substantial contribution criteria
P
r
o
p
o
r
ti
o
n
o
f
C
a
p
E
x
(
4
)
C
l
i
m
a
t
e
c
h
a
n
g
e
m
ti
g
a
ti
o
n
(
5
)
i
C
l
i
m
a
t
e
c
h
a
n
g
e
a
d
a
p
t
a
ti
o
n
(
6
)
W
a
t
e
r
a
n
d
m
a
r
i
n
e
r
e
s
o
u
r
c
e
s
(
7
)
P
o
l
l
u
ti
o
n
(
9
)
l
C
i
r
c
u
a
r
e
c
o
n
o
m
y
(
8
)
i
B
o
d
i
v
e
r
s
i
t
y
a
n
d
e
c
o
s
y
s
t
e
m
s
(
1
0
)
l
i
l
i
l
i
l
l
C
P
o
DNSH criteria ('Does Not Significantly Harm')
B
C
o
d
i
v
e
r
s
i
t
y
a
n
d
e
c
o
s
y
s
t
e
m
C
i
r
c
u
a
r
e
c
o
n
o
m
y
(
1
4
)
u
ti
o
n
(
1
5
)
W
a
t
e
r
a
n
d
m
a
r
i
n
e
r
e
s
o
u
r
c
e
s
m
a
t
e
c
h
a
n
g
e
m
ti
g
a
ti
o
n
(
1
1
)
i
m
a
t
e
c
h
a
n
g
e
a
d
a
p
t
a
ti
o
n
(
1
2
)
s
(
1
6
)
(
1
3
)
i
i
M
n
m
u
m
s
a
f
e
g
u
a
r
d
s
(
1
7
)
Taxonomy-aligned
proportion of
CapEx, year 2022
(18)
Category (enabling
activity or) (20)
Category
(transitional
activity) (21)
T
E
E
E
E
E
E
E
€/'000
%
%
%
%
%
%
%
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N
Percent
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
24%
1%
0%
0%
0%
0%
25%
A. TAXONOMY-ELIGIBLE ACTIVITIES
A.1 Environmentally sustainable activities
(Taxonomy-aligned)
Manufacture of other low carbon
technologies
Installation, maintenance and repair of energy
efficiency equipment
Installation, maintenance and repair of
charging stations for electric vehicles in
buildings (and parking spaces attached to
buildings)
Installation, maintenance and repair of
instruments and devices for measuring,
regulation and controlling energy
performance of buildings
Installation, maintenance and repair of
renewable energy technologies
Close to market research, development and
innovation
CapEx of environmentally sustainable
activities (Taxonomy-aligned) (A.1)
A.2 Taxonomy-Eligible but not
envirnmentally sustainable activities (not
Taxonomy-aligned activities)
Manufacture of other low carbon
technologies
Renovation of existing buildings
Installation, maintenance and repair of energy
efficiency equipment
Installation, maintenance and repair of
renewable energy technologies
CapEx of Taxonomy-eligible but not
environmentally sustainable activities (not
Taxonomy-aligned activities) (A.2)
Total (A.1 + A.2)
B. TAXONOMY-NON-ELIGIBLE ACTIVITIES
3.6
114,069 24%
24%
7.3
2,586
1%
1%
0%
0%
7.4
320
0%
0%
0%
7.5
7.6
9.1
196
0%
0%
0%
1,800
0%
828
0%
0%
0%
0%
0%
119,799 25%
25%
0%
3.6
173,832 36%
7.2
7.3
7.6
13,586
3%
2,072
0%
175
0%
189,665 40%
309,463 65%
Turnover of Taxonomy-non-eligible activities (B)
168,009 35%
Total (A + B)
477,472 100%
For information purposes only, if Pirelli had also considered the C class of rolling resistance, the aligned CAPEX
would have amounted to 65%. As mentioned, class C is considered not compatible with the definition of “best on
the market” for Taxonomy alignment purposes.
93 Values reported according to the template (“model”) set out in Annex II of Delegated Regulation (EU)
2021/2178 (“Models for key performance indicators – KPIs – of non-financial companies”).
The darkened cells refer to information that is not applicable for the current year to the Group’s economic
activities.
172
Pirelli Annual Report 2022
OPERATIONAL EXPENDITURE INDICATOR
The share of “aligned” economic activities with regard
to operating expenses refers mainly to production costs
incurred for research and development, which, if carried out
in-house and with the aim of improving the rolling resistance
parameter of A and B labelled tyres, was considered as part
of activity 3.694, otherwise as economic activity 9.1 ‘Research,
development and innovation close to the market’.
it cannot be included among the “best alternatives available
on the market” and, therefore, should not be included among
the economic activities “aligned” to the Taxonomy, while it is
considered that the aligned economic activities should refer
only to the rolling resistance classes A and B, which represent
the best alternatives available on the market. For this
reason, the alignment indicator of Operating Expenses was
determined by considering only classes A+B and excluding C.
In addition, the operating costs related to the investments in
energy efficiency described above were considered.
As already specified, since class C of rolling resistance is
the most widespread on the market95, it is considered that
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 2022.
94 The FAQ published by the European Commission on 19/12/2022 (ref. FAQ 164) clarifies that, “When R&D
is an integral part of the activity that is covered in the Climate Delegated Act (in-house R&D that is integrated
in the activity), it can be counted under that activity and the associated expenditures disclosed accordingly”.
95 EPREL - European Product Registry for Energy Labelling (extraction 17/2/2023). Focusing on the three
most efficient classes of Rolling Resistance (those identified as “permissible”), tyres labelled A and B cover
7.7% of sales, while those labelled C cover 41% (the remaining 51.3% are tyres labelled D and E).
173
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN PROPORTION OF OPEX96 FROM PRODUCTS OR SERVICES ASSOCIATED WITH ECONOMIC
ACTIVITIES ALIGNED WITH THE TAXONOMY (INCLUDES OPEX FOR ROLLING RESISTANCE
CLASSES A + B) — 2022 DISCLOSURE ILLUSTRATED IN COMPLIANCE WITH THE
TEMPLATE REFERRED TO IN ANNEX II OF DELEGATED REGULATION (EU) 2021/2178.
Economic activities (1)
C
o
d
e
(
s
)
(
2
)
l
A
b
s
o
u
t
e
O
p
E
x
(
3
)
Substantial contribution criteria
P
r
o
p
o
r
ti
o
n
o
f
O
p
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(
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)
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l
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m
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t
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(
5
)
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6
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9
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8
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l
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DNSH criteria ('Does Not Significantly Harm')
B
C
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d
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s
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s
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7
)
Taxonomy-aligned
proportion of
OpEx, year 2022
(18)
Category (enabling
activity or) (20)
Category
(transitional
activity) (21)
T
E
E
E
E
E
€/'000
%
%
%
%
%
%
%
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N
Percent
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
23%
0%
0%
0%
23%
A. TAXONOMY-ELIGIBLE ACTIVITIES
A.1 Environmentally sustainable activities
(Taxonomy-aligned)
Manufacture of other low carbon
technologies
Installation, maintenance and repair of energy
efficiency equipment
Installation, maintenance and repair of
charging stations for electric vehicles in
buildings (and parking spaces attached to
buildings)
Installation, maintenance and repair of
renewable energy technologies
OpEx of environmentally sustainable
activities (Taxonomy-aligned) (A.1)
A.2 Taxonomy-Eligible but not envirnmentally
sustainable activities (not Taxonomy-aligned
activities)
3.6
80,070
23%
23%
7.3
25
0%
0%
0%
0%
7.4
8
0%
0%
0%
7.6
53
0%
0%
0%
80,156
23%
23%
0%
Manufacture of other low carbon technologies
3.6
17,062
5%
Installation, maintenance and repair of
instruments and devices for measuring,
regulation and controlling energy
performance of buildings
Close to market research, development and
innovation
OpEx of Taxonomy-eligible but not
environmentally sustainable activities (not
Taxonomy-aligned activities) (A.2)
Total (A.1 + A.2)
B. TAXONOMY-NON-ELIGIBLE ACTIVITIES
7.5
3
0%
9.1
7,032
2%
24,097
7%
104,253
30%
Turnover of Taxonomy-non-eligible activities (B)
237,724
70%
Total (A + B)
341,977 100%
For information purposes only, if Pirelli had also considered the C class of rolling resistance, the aligned OPEX
would have amounted to 30%. As mentioned, class C is considered not compatible with the definition of “best on
the market” for Taxonomy alignment purposes.
With reference to the information pursuant to art. 8, paragraphs 6 and 7 of Delegated Regulation (EU) 2021/2178
which provides for the use of the models provided in Annex XII for the communication of activities related to
nuclear and fossil gases, it is specified that all models have been omitted as they are not representative of the
company’s activities.
96 Values reported according to the template (“model”) set out in Annex II of Delegated Regulation (EU)
2021/2178 (“Models for key performance indicators – KPIs – of non-financial companies”). The darkened
cells refer to information that is not applicable for the current year to the Group’s economic activities.
174
Pirelli Annual Report 2022
For more in-depth information on the Policies adopted, the
Management model, risk analysis, mitigation and prevention
actions and remedial mechanisms in the area of Human and
Labour Rights, please refer to the sections dedicated to this
in this Report, in particular:
→ “Principal Policies”
→ “Respect for Human Rights”
→ “Diversity, Equity and Inclusion”
→ “Training on Sustainability and Corporate Governance”
→ Compliance with legislative-contractual prescriptions
on overtime, rest, association and bargaining, equal
opportunities and non-discrimination, prohibition of child
and forced labour”
→ ESG elements in the purchasing process”
→ ESG On-site Audit
→ “Reporting procedure - Whistleblowing Policy”.
With reference to the adopted Policies, Management Model,
prevention and mitigation of risks in the areas of Anti-
Corruption, Competition and Taxation, please refer to the
relevant sections of this Report, in particular:
→ “Principal Policies”
→ “Compliance programmes, anti-corruption, privacy,
trade compliance, antitrust, compliance with laws and
regulations”
→ “9.6. Tax Risk Control System”
→ “Reporting Procedure - Whistleblowing Policy”.
FUTURE DEVELOPMENTS
The regulation on taxonomy is currently not complete as
we are awaiting the publication of delegated acts on the
environmental objectives of sustainable use and protection
of water and marine resources, transition to a circular
economy, pollution prevention and control, and protection of
ecosystems and biodiversity.
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,
forestry, water and waste management, some types of
manufacturing and construction) as well as on the drawing
up of a Social Taxonomy, which could allow the sustainability
assessment of economic activities to be broadened by
considering additional aspects such as the health and safety
of workers, human rights, inclusion policies and attention to
growth opportunities and staff training.
Awaiting further regulatory developments and, in particular,
the publication of the delegated acts referring to the
remaining four environmental objectives, the Pirelli Group
has begun the preparatory activities necessary to ensure
complete and accurate reporting in accordance with the
requirements of the regulations.
SOCIAL MINIMUM SAFEGUARDS
Article 18.1 of the EU Taxonomy Regulation describes
so-called “Social Minimum Safeguards” as procedures
implemented by a company to ensure that its business
activities are aligned with an internationally recognised set
of standards:
→ OECD Guidelines for Multinational Enterprises;
→ United Nations Guiding Principles on Business and Human
Rights (UNGP);
→ Eight core conventions identified by the International
Labour Organisation (ILO);
→ International Bill of Human Rights.
For the verification of compliance with minimum safeguards
in the absence of specific references from the European
Commission, the Pirelli Group considered the four themes
identified by the Platform on Sustainable Finance97: Human
Rights; Corruption; Taxation; Competition.
In order to identify, manage and mitigate the risks related
to the issues cited above, the Pirelli Group has adopted
policies, management models, prevention actions and
remedial mechanisms.
In particular, Pirelli promotes respect for human rights and
adherence to applicable international standards among
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 international ILO regulations, the International
Charter of Human Rights, the OECD Guidelines on Duty
of Vigilance and the recommendations contained in the
United Nations Guiding Principles on Business and Human
Rights, implementing the Protect, Respect and Remedy
Framework.
In line with international standards, Human Rights due
diligence at Pirelli includes the following activities:
→ Adoption and integration of a human rights due diligence
commitment within company policies and procedures.
→ Identification and assessment of risks and negative
impacts, including through stakeholder involvement.
→ Commitment to interrupt, prevent, mitigate and remedy
negative impacts.
→ Monitoring of the implementation of these actions and
their results.
→ Public communication of the approach to human rights
due diligence and the actions taken to avoid and address
negative impacts.
→ Commitment to remedy any negative impacts, including
establishing or participating in grievance mechanisms
where individuals and groups can voice grievances and
human rights concerns.
97 “Final Report on Minimum Safeguards” published by Platform on Sustainable Finance in 11 October 2022.
175
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN SOCIAL DIMENSION
RESPECT FOR 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
Internal and External Community. Human rights
the
management issues are brought to the attention of the
Sustainability Operations Management Committee, the
Managerial Sustainability Strategic Committee, the Board
Audit, Risk, Sustainability and Corporate Governance
Committee and the Board of Directors.
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. The Policy specifies its application to
the supply chain. Further references to respect for human
rights and its application to the supply chain are also found
in other company documents: “Values and the Code of
Ethics”, the Global “Health, Safety and Environment” Policy,
the “Global Personal Data Protection” (Privacy Policy),
the “Diversity, Equity & Inclusion” Policy and the “Equal
Opportunities Statement”, the “Sustainable Natural Rubber
Management” Policy and the “Whistleblowing” Policy
(Complaint Procedure).
With specific reference to the management of human rights
along the supply chain, a fundamental document is the Pirelli
Suppliers’ Code of Conduct. The Code is an integral part of
the purchasing contract applied to all Group suppliers and
it details, among other things, what is required of Pirelli’s
Suppliers in the area of Human and Labour Rights and
specifically in the areas of employment contracts, working
hours, prohibition of child labour, prohibition of forced labour
and modern slavery, passport management, health and
safety, non-discrimination, pay equity, freedom of association
and collective bargaining, rights of indigenous peoples
and prevention of land conflicts, privacy, conflict minerals,
and internal security rules. The Code also details the due
diligence system applied by Pirelli and at the same time that
required of suppliers with a view to virtuous due diligence
along the entire supply chain. Similarly, the Code details the
reporting system that Pirelli makes available to stakeholders
and prescribes the adoption of a similar reporting procedure
for all suppliers.
All the above documents were communicated to employees
in the local language and also 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. Please refer to the
“Sustainability Policies” section of the Pirelli website to read
the full contents of the above Policies.
To identify, assess, prevent and mitigate the risks of violation
of Human Rights, Pirelli has implemented a Due Diligence
system that crosses the value chain and integrates attention
to human rights in all the Company’s activities.
Before investing in a specific market, Pirelli conducts ad hoc
assessments on possible political, financial, environmental
and social risks, including those related to respect for human
and labour rights, while in countries where the Company
operates, internal and external context monitoring is carried
out to prevent negative impacts on human rights and, if
necessary, remedy them.
The Company 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 legislative-
contractual
rest periods,
association and bargaining, equal opportunities and non-
discrimination, prohibition of child and forced labour”.
requirements on overtime,
Pirelli also 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
requires its suppliers contractually to implement a similar
business model on the relevant supply chain, including the
performance of adequate due diligence aimed at certifying
that the Goods and Services supplied or to be supplied to
Pirelli under the Contract and/or Orders do not contain and
will not contain for the entire duration of the supply any of
the Conflict Zone Minerals (3TG, Mica, Cobalt etc.). With
specific reference to the natural rubber context, Pirelli
promotes decent working conditions, development of local
communities and prevention of conflicts related to land
176
Pirelli Annual Report 2022 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.
For an in-depth look at the Supply Chain Management
Model, the content of sustainability clauses, details of on-site
audits performed, and more on Conflict Minerals and Natural
Rubber, see the section “Our Suppliers” in this Report.
Pirelli raises awareness among its workers and suppliers
through information and training on the issue of Human
Rights, considering the materiality of the risks and actual and
potential impacts resulting from the risk assessment activity,
which is discussed below.
The Company also makes available to its Stakeholders
a dedicated channel for reporting, even anonymously,
any situations that constitute or may constitute a risk of
violation of Human Rights as well as any Group Policy, law
or regulation in relations with the Group, to which is added a
further Grievance Procedure for specific issues pertaining
to the Natural Rubber context. It should be noted that in
2022 no reports of violations concerning fundamental
Human Rights were received, nor was the Company subject
to any proceedings or convictions relating to violations of
Human Rights.
the
Pirelli cooperates and sustains
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).
HUMAN RIGHTS RISK ASSESSMENT
In 2022, Pirelli updated its analysis of the risk of human
rights violations within its sites and in the relevant supply
chain by defining a risk-based model for the management of
human rights aspects. This model included a Human Rights
Risk Assessment (HRRA) to identify the geographical areas
and production categories most at risk of human rights
violations. The assessment was conducted in line with the
Company’s Enterprise Risk Management (ERM) model and
allowed the identification of subsidiaries and suppliers on
which to intervene as a priority through the most appropriate
mitigation and prevention actions.
The risk assessment activity consisted of the following
work steps:
→ identification of Relevant Human Rights: an analysis of
internal documentation and the regulatory environment
was carried out in the context of due diligence, which
led to the identification of 12 priority human rights for
the Company’s activities along its value chain. These
177
rights are: the right to equality and non-discrimination,
child right, the right to an adequate standard of living and
equal and adequate remuneration, working hours and
overtime, health and safety right, freedom from modern
slavery, forced labour, inhumane treatment, and human
trafficking, the right to privacy, the right to association
and collective bargaining, land and natural resources
protection, indigenous peoples and minorities right,
access to justice and the right to education;
→ Country risk analysis: for each human right identified as
relevant, public indices were analysed to determine the
level of potential risk for the countries in which Pirelli
operates, both directly through subsidiaries and along the
supply chain, considering a scale from 1 to 4 (where 1 =
remote risk, 2 = low risk, 3 = medium risk and 4 = high risk).
In the country risk analysis, 55 countries were considered,
representing 99.8% of Pirelli’s 2021 expenditure and
including the 32 countries in which Pirelli operates
through subsidiaries. The analysis took into account the
geopolitical, socio-cultural and legislative conditions of
the countries, assessed according to the likelihood of
occurrence of human rights violations. In order to identify
the actual risk level, further analyses were carried out to
assess the risk situation detected both in the subsidiaries,
by investigating the effectiveness of the safeguards
adopted by the Company in the countries most at risk,
and along the supply chain, by analysing the results of non-
compliance in the field of human rights that emerged from
the third-party audit activities carried out over the last four
years. This analysis showed how the level of potential risk
in some countries can change considering the specific
risk level of Pirelli’s suppliers or subsidiaries operating in
those contexts;
→ Sector Risk Analysis: in order to define the level of
potential risk of human rights violations per Sector risk
along the supply chain, a qualitative-quantitative study
was carried out to investigate the risk exposure of Pirelli’s
main purchasing categories: Raw Materials, Capital
Goods, Consumables and Services. In order to assess
the potential risk exposure of subsidiaries instead, the
company’s operations were taken into account, and the
riskiness was defined for production sites, fitting units,
logistics and offices. Again, the non-compliances revealed
by third-party audit activities per purchasing category
along the supply chain and the safeguards adopted by
Pirelli were considered to identify the actual level of risk
along the supply chain. A scale of 1 to 4 was also used for
this analysis.
The results of the analysis show that countries with a
medium-high potential risk level are mainly concentrated in
the Asian, African and some Latin American countries; while
in the European continent, North America and Oceania in
general the risk was low-remote. With regard to the potential
risk related to the purchase categories, it should be noted
that the raw material and capital goods categories have a
higher level of risk than the others, as the raw material related
to these two categories originate from riskier supply chains.
An analysis of the non-conformities revealed by the audits
of the last four years shows that the actual risk level of the
company’s suppliers is significantly lower even in countries
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN with medium-high potential risk, such as Brazil and Indonesia.
Considering the safeguards and therefore the mitigation
actions adopted by the Company over the years, the actual
risk of human rights violations in Pirelli’s subsidiaries is also
significantly lower than the potential risk, precisely because
of the commitments undertaken by the Company, which, in
any case, maintains a high level of attention to human rights
in all the countries where it operates.
The Human Rights Risk Assessment (HRRA) allows Pirelli
to systemise all the mitigation and prevention actions
adopted with the aim of prioritising verification, monitoring,
awareness-raising and training actions to intervene in an
increasingly targeted manner on suppliers or subsidiaries that
might not be in line with Pirelli’s human rights provisions, thus
reinforcing the Due Diligence process already implemented.
is aware that
Furthermore, the Company
international
frameworks on Business and Human Rights insist on the
need for companies to involve stakeholders in assessing the
negative impacts that may be caused by their activities along
the value chain through a Human Rights Impact Assessment
(HRIA). For this reason, following the risk analysis, Pirelli
carried out a stakeholder engagement exercise involving
internal company functions and external organisations
with expertise in human rights, including NGOs, in order
to understand the extent of the negative impacts linked to
the 12 human rights identified as relevant. The assessment
was based on international and GRI Standards, asking
respondents to rate the likelihood and severity of negative
impacts (the latter understood as the scale, scope and
irremediable character of the impact).
The involvement of the corporate functions made it possible
to make this assessment in the subsidiaries, finding an
overall remote impact due to the effectiveness of the
safeguards adopted. These affect not only the probability of
occurrence, but also lower the level of severity, since even in
the remote possibility of a violation occurring, the company’s
management and control system would allow for immediate
action, limiting the severity of the possible negative impact.
With reference to the situation along the supply chain, the
results obtained from the interviews with external experts
show that although the necessary safeguards are in place
to mitigate potential negative impacts, in some countries
socio-political conditions may make it difficult for companies
to effectively mitigate such impacts along the supply chain.
For this reason, the probability and severity assigned by the
experts tend to be higher than the corporate perspective,
especially given the potential risks present in some of the
countries Pirelli sources from and with reference to freedom
of association and collective bargaining and occupational
health and safety.
To reinforce the risk containment measures already in
place, which the risk assessment carried out confirmed
to be effective for the mitigation and recovery of the
risk of human rights violations, considering the drive for
continuous improvement of the management model and in
response to regulatory changes and external expectations,
the company has put in place specific activities and in
particular in 2023:
→ new training sessions for all employees, covering all
company sites.
→ new Human Rights Training session targeting 100% of raw
material suppliers in countries where the risk is highest in
the light of the regulatory and social context of reference
as well as the results of on-site audits carried out by the
company.
→ continuation of on-site audits by the Internal Audit function/
second party at Pirelli sites and third-party at suppliers
located in countries where the risk is higher in light of
the regulatory and social reference context and/or of the
findings of previous on-site audits performed.
→ Human Rights Impact Assessment (local engagement)
activities on an annual basis to prioritise the activities.
178
Pirelli Annual Report 2022 PIRELLI EMPLOYEES AROUND THE WORLD
INTERNAL COMMUNITY
The total Pirelli workforce as at 31 December 2022 - expressed in Full Time Equivalent and including agency
workers - stood at 31,301 employees (vs. 30,690 in 2021 and 30,510 in 2020), recording a net increase of 611
employees compared to the previous year.
The following tables, with reference to the last three years, detail the composition of the workforce98 99 by
category, geographical area100, gender, type of contract, and the flow of employees by geographical area, 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 WORKFORCE BY CATEGORY
EXECUTIVES
MIDDLE MANAGERS
WHITE COLLARS
BLUE COLLARS
TOTAL
2022
2021
2020
253
247
257
1,775
1,754
1,752
4,196
4,052
4,060
25,077
24,636
24,441
31,301
30,690
30,510
BREAKDOWN OF EMPLOYEES BY GEOGRAPHICAL AREA AND GENDER
2022
2021
2020
Men
Women
Total
Men
Women
Total
Men
Women
Total
EUROPE
11,196
1,934
13,130
11,022
1,816
12,838
10,951
1,774
12,725
NORTH AMERICA
2,881
463
3,344
2,746
SOUTH AMERICA
APAC
7,633
3,023
RUSSIA, NORDICS & MEAI
1,966
711
8,344
7,321
907
588
3,930
2,999
2,554
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
7,940
3,927
2,686
TOTAL
26,698
4,603
31,301
26,278
4,412
30,690
26,199
4,311
30,510
98 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 sum may not correspond to the total.
99 These data include agency workers, corresponding to 0.2% of total workforce in 2019, 0.6% in 2020,
0.8% in 2021 and 0.2% in 2022. Agency workers are the workforce that is taken on to meet temporary
work peaks, linked to market demand. This workforce is intermediated through employment agencies, in
compliance with company policies, legal regulations and trade union agreements.
100 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, Korea, Japan,
Singapore, Taiwan. Russia, Nordics & MEAI: Saudi Arabia, Egypt, India, Russia, South Africa, Sweden, UAE.
179
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN
BREAKDOWN OF EMPLOYEES BY GEOGRAPHICAL AREA AND CONTRACT
2022
Permanent
Temporary
Agency
Total
EUROPE
NORTH AMERICA
SOUTH AMERICA
APAC
RUSSIA, NORDICS & MEAI
TOTAL
EUROPE
NORTH AMERICA
SOUTH AMERICA
APAC
RUSSIA, NORDICS & MEAI
1,284
0
75
4
117
1,480
11,827
3,312
8,253
3,926
2,434
29,751
2021
19
32
16
0
3
70
Permanent
Temporary
Agency
Total
11,636
3,166
7,666
3,898
2,658
1,192
0
112
0
125
10
31
197
0
0
238
TOTAL
29,023
1,429
2020
Permanent
Temporary
Agency
Total
EUROPE
NORTH AMERICA
SOUTH AMERICA
APAC
RUSSIA, NORDICS & MEAI
TOTAL
11,923
3,204
7,750
3,923
2,562
29,362
795
1
54
4
124
978
7
27
136
0
0
170
13,130
3,344
8,344
3,930
2,554
31,301
12,838
3,197
7,975
3,898
2,783
30,690
12,725
3,232
7,940
3,927
2,686
30,510
180
Pirelli Annual Report 2022
PERCENTAGE OF EMPLOYEES BY CATEGORY, GENDER AND AGE RANGE
2022
Executives
Middle Managers
White collars
Blue collars
Total
M
W
Tot.
M
W
Tot.
M
W
Tot.
M
W
Tot.
M
W
Tot.
0%
0%
0%
4%
3%
3%
20%
30%
23%
24%
15%
23%
22%
18%
22%
52%
61%
53%
65%
74%
67%
64%
58%
62%
63%
76%
64%
63%
70%
64%
48%
39%
47%
32%
23%
30%
16%
12%
14%
13%
8%
13%
15%
11%
14%
2021
Executives
Middle Managers
White collars
Blue collars
Total
M
W
Tot.
M
W
Tot.
M
W
Tot.
M
W
Tot.
M
W
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
Middle Managers
White collars
Blue collars
Total
M
W
Tot.
M
W
Tot.
M
W
Tot.
M
W
Tot.
M
W
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%
<30
30 - 50
>50
<30
30 - 50
>50
<30
30 - 50
>50
181
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN
EMPLOYEES WITH PART TIME CONTRACT BY GENDER AND REGION
(expressed in FTE) 2022
REGION
EUROPE
NORTH AMERICA
SOUTH AMERICA
APAC
RUSSIA, NORDICS & MEAI
NORTH AMERICA
SOUTH AMERICA
APAC
RUSSIA, NORDICS & MEAI
Total
REGION
EUROPE
Total
REGION
EUROPE
NORTH AMERICA
SOUTH AMERICA
APAC
RUSSIA, NORDICS & MEAI
Total
EMPLOYEES WITH FULL TIME CONTRACT BY GENDER AND REGION
(expressed in FTE) 2022
Men
Women
Total
EMPLOYEES WITH “NON-GUARANTEED HOURS” CONTRACT BY GENDER AND REGION (expressed in FTE) 2022
Men
Women
Total
26,462
4,482
30,944
Men
Women
Total
65
0
58
0
2
124
74
0
19
0
4
97
11,117
2,860
7,560
3,023
1,902
1,855
452
691
907
577
139
0
77
0
5
221
12,972
3,312
8,251
3,930
2,479
0
0
0
0
61
61
0
0
0
0
5
5
0
0
0
0
66
66
182
Pirelli Annual Report 2022 EMPLOYEE FLOWS BY GEOGRAPHIC AREA, GENDER AND AGE BRACKET
The following data refer to incoming/outgoing employees (all incoming and outgoing movements of employees
with permanent and temporary contracts, such as retirements, resignations, expiry of fixed-term contracts).
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 at 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.
In 2022, the total turnover rate, constant compared to previous years, is 13%, of which 6.5% is voluntary.
2022 FLOWS: ABSOLUTE VALUES AND RATES
INCOMING
OUTGOING
<30
30 - 50
>50
M
W
Total
<30
30 - 50
>50
M
W
Total
1,055
732
67
1,570
284
1,854
674
45%
9%
2%
14%
15%
14%
29%
611
8%
603
301
16
837
83
920
445
298
199
1,332
152
1,484
7%
18
12%
691
8%
70
11%
761
42%
18%
9%
29%
18%
28%
31%
18%
10%
24%
15%
23%
966
604
20
1,390
200
1,590
357
584
75
900
115
1,016
48%
11%
3%
18%
28%
19%
18%
11%
10%
12%
16%
12%
108
130
2
179
21%
4%
203
138
41%
8%
2%
15
3%
6%
280
61
7%
75
240
59
125
13
150
6%
12%
4%
14%
5%
356
198
276
70
461
47
5%
83
14%
13%
14%
40%
17%
16%
23%
14%
197
5%
543
21%
2,935
1,905
120
4,257
702
4,959
1,732
1,893
375
3,534
466
4,000
43%
10%
3%
16%
15%
16%
26%
9%
8%
13%
10%
13%
EUROPE
NORTH AMERICA
SOUTH AMERICA
APAC
RUSSIA, NORDICS & MEAI
TOTAL
183
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN
2021 FLOWS: ABSOLUTE VALUES AND RATES
EUROPE
NORTH AMERICA
SOUTH AMERICA
APAC
RUSSIA, NORDICS & MEAI
TOTAL
INCOMING
OUTGOING
<30
30 - 50
>50
M
W
Total
<30
30 - 50
>50
M
W
Total
918
575
50
1,341
202
1,542
562
522
360
1,290
154
1,444
39%
7%
2%
12%
11%
12%
24%
7%
13%
12%
525
245
10
726
54
781
458
330
24
730
8%
82
11%
812
36%
16%
7%
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%
11%
3%
19%
19%
19%
18%
19%
27%
20%
18%
20%
98
182
3
179
104
283
81
207
2
244
17%
6%
272
259
49%
15%
4%
26
6%
6%
12%
7%
14%
6%
434
123
557
156
256
2%
54
8%
354
112
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%
46
5%
290
7%
2020 FLOWS: ABSOLUTE VALUES AND RATES
EUROPE
NORTH AMERICA
SOUTH AMERICA
APAC
RUSSIA, NORDICS & MEAI
TOTAL
INCOMING
OUTGOING
<30
30 - 50
>50
M
W
Total
<30
30 - 50
>50
M
W
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%
The table below shows the percentage of only voluntary turnover of the entire company population, which
includes white and blue collars, over the last four years and refers to voluntary resignations and retirements.
Voluntary Turnover (Total)
5.8%
5.1%
6.7%
6.5%
2019
2020
2021
2022
184
Pirelli Annual Report 2022
At Pirelli there are 49 young people older than 15 and
under 18 - before birthday - years old (22 in Germany, 13 in
Switzerland, 7 in Sweden, 1 in Romania and 6 Brazil), 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,
inclusion and the enhancement of diversity in the workplace
is expressed in the Pirelli Global Policy “Diversity, Equity
and Inclusion”. The centrality of the issue for Pirelli also
sees DE&I covered in other relevant Group sustainability
documents, including the “Code of Ethics” and the “Global
Human Rights” Policy. All the above-mentioned Policies have
been communicated to employees in the local language and
are published on the Company’s website, which is available
to the external community
languages. With
specific reference to Diversity and Independence of the
Board of Directors, please refer to the related Policy called
“Statement on Diversity and Independence” published on
Pirelli’s website, in the Corporate Governance section.
in several
The aforementioned Policies are the subject of training
on Pirelli’s Sustainable Management Model through the
“Plunga” international on boarding 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 terms of Governance, Pirelli has a Diversity, Equity
& Inclusion Manager, who works in coordination with
the different corporate functions for their respective
competences. Plans and results in the area of Diversity,
Equity and Inclusion are discussed and approved in the
Sustainability Strategic Committee, a body chaired by
the CEO, and are part of the Sustainability Plans and
results presented and discussed in the competent Board
Committee and then presented, discussed and approved
by the Board of Directors.
The Pirelli DE&I Policy reaffirms Pirelli’s commitment to
guaranteeing a working environment in which each person
is treated and treats others with dignity and respect, free
from all forms of harassment, abuse, psychological and/or
physical coercion and discrimination against individuals or
groups by other individuals or groups, committing itself to
preventing and intervening to put an end to such behaviour,
should it occur.
The implementation of Policy DE&I passes through the active
support of Group employees, in compliance with internal
guidelines and the tools Pirelli makes available so to:
→ take decisions concerning
the employment and
development of people free from any form of discrimination;
185
→ continue to maintain a high level of sensitivity and
awareness in the organisation towards Diversity, Equity
and Inclusion issues, including with a view to preventing
potential unconscious bias;
→ maintain an inclusive and respectful working environment
both within Pirelli and in relations with external Stakeholders,
free from all forms of discrimination and harassment;
→ grant gender pay equity on an equal meritocratic basis,
identify gaps and progressively close them, if found, and
transparent reporting in this regard;
→ bolster of people’s motivation
through dialogue,
participation, services and initiatives supporting psycho-
physical wellbeing and work-life balance, including, for
example, through flexible working options, the dissemination
of a culture of sharing family burdens, the adoption of health
support programmes, and support for parenthood.
The Policy details the reporting procedure under DE&I,
available to employees as well as to the external community,
respecting confidentiality and ensuring non-retaliation. In
this regard, one report was received in 2022 concerning
discrimination that was found to be well-founded and was
resolved to the satisfaction of the reporting person. For
further information on the reports received, please refer to
the paragraph “Reporting procedure – Whistleblowing Policy”.
The centrality of Diversity, Equity and Inclusion in the
commitment of top management is also reflected in the
remuneration policies. ESG KPIs focused on Diversity &
Inclusion were introduced in the Company’s short-term
incentive schemes (STI) in 2022 and specifically targets
were set on female hires out of total annual hires. This KPI,
broken down in the different geographies, was awarded
to the Executive Vice-President and CEO, Deputy-CEO,
Region CEOs, Executives with strategic responsibility
and Group Senior Management with a weight of 5% of the
entire incentive.
In terms of management aimed at fostering equal opportunity,
the following practices and activities have been 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 section “Welfare and initiatives in favour of the Internal
Community” in this report).
Also in 2022, among the various initiatives, Pirelli continued
the initiative started in 2021 by setting up with Bocconi
University a fund called “Pirelli Women Awards” dedicated to
supporting university careers of deserving female students,
as well as other training initiatives such as those aimed at
improving the management of cross-cultural communication
provided during the “Plunga” international on boarding
programme dedicated to new people hired by the Group.
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN In 2022, Pirelli also started a journey that will continue in
2023 and that will include a global awareness and training
campaign on diversity management and good inclusion
practices, aimed at all employees and managers in the
Company. In particular, we highlight the DE&I campaign
aimed at all Group staff employees, which delivered a series
of live webinars called ‘Your DE& I Journey’ focusing on the
importance of an inclusive work environment, cognitive bias,
microagressions, and cultural intelligence.
A new section of the company intranet, named “Diversity,
Equity & Inclusion Hub”, accessible to all employees and
dedicated to awareness-raising and training, was also
inaugurated in 2022. The Pirelli Diversity Hub offers all
Group employees an opportunity to enhance their inclusive
and diversity culture with reference to the many facets of
DE&I. The website’s homepage is in English and contains
online courses, articles and reading suggestions. The group’s
affiliates have also developed local language pages for
widespread dissemination of content throughout the group.
In 2023, both a targeted training campaign for management
and DE&I awareness-raising activities in factories will be
launched globally.
Pirelli monitors the level of acceptance and appreciation
of diversity perceived by employees at its organisation, as
well as the priority given to the issue of Diversity and Equal
Opportunities by employees. In this regard, the new Group
survey “Nextoyou” was carried out in 2022 (see the dedicated
section for details), which included among the various areas
the one on ‘Diversity and Inclusion’.
This section is made up of dedicated and specific questions,
showing the importance given to listening to employees on
the subject, in order to better target subsequent awareness-
raising and training actions. The
level of satisfaction
regarding the perceived acceptance of diversity in the work
environment is 87%. The survey was carried out in November
and the results will be disseminated internally starting in
January 2023, followed by the preparation of action plans
related to the priorities identified.
Pirelli actively participates in various working groups and
growth paths on Diversity, Equity and Inclusion issues.
Among these we note:
→ The UN Global Compact’s Target Gender Equality track, an
international track designed to provide companies with the
tools to develop more equitable and inclusive businesses.
For more information, please refer to the section “Main
International Commitments on Sustainability”.
→ Participation in the Valore D network, the first business
association in Italy aimed at promoting gender balance
and an inclusive corporate culture. The working tables
and peer learning opportunities organised by the network
deepen the concrete and positive impacts of inclusiveness
on employees and the community, the definition of
improvement plans and targets, and the measurement of
Diversity, Equity and Inclusion results.
→ The “B20 - G20 Dialogue on Women Empowerment”
Working Group, of which Pirelli has signed the “Mind the
STEM Gap” Manifesto to support women’s access to
science, overcoming gender stereotypes.
FOCUS: THE FIGURES ON DIVERSITY
Internationality and multiculturalism are the distinguishing
features of the Group: Pirelli operates in 160 Countries on five
continents, and 90% of employees (as at 31 December 2022)
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 origin101:
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
2022. In order to develop the innovative and managerial
potential 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 2022 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, in 2022 44 new
expatriates were recorded, compared with 23 in 2021 and
15 in 2020. Approximately 40% of new departures were to
North America. At year-end 2022, the expatriate population
totalled 105 persons (vs. 85 in 2021 and 114 in 2020),
belonging to 15 nationalities and who moved to 24 different
Countries on five continents, of which 19% (compared to 15%
in 2021) were women. 45% of the total expatriate population
is made up of non-Italian employees.
With regard to the nationalities of Pirelli employees
as of 31 December 2022, there are 91 present. The
following table shows 6 nationalities most present in the
total population and the same 6 nationalities calculated in
relation to Management positions.
101 In the most significant locations, represented by Pirelli plants.
186
Pirelli Annual Report 2022 FOCUS: THE FIGURES ON DIVERSITY
SHARE IN TOTAL WORKFORCE
SHARE IN ALL MANAGEMENT POSITIONS
(as % of total workforce)
(as % of total workforce) including junior. middle and senior
(as % of total management workforce)
NATIONALITY
FTE
%
NATIONALITY
FTE
%
Brazilian
Romanian
Chinese
Italian
Mexican
Russian
Others
Grand Total
6,774
4,623
3,766
3,327
2,963
2,071
7,707
31,231
21.7%
14.8%
12.1%
10.7%
9.5%
6.6%
24.7%
100%
Brazilian
Romanian
Chinese
Italian
Mexican
Russian
Others
Grand Total
194
40
78
1,050
52
10
604
2,028
9.6%
2.0%
3.8%
51.8%
2.6%
0.5%
29.8%
100%
With regard to the incidence of women in the various professional categories in the 2020-2022 three-year period,
the data show a gradual increase, the number of female executives is growing for the third consecutive year, at
12.2% of the total number of executives (compared to 11.3% in 2021 and 10.5% in 2020); the percentage of women
in managerial positions (executives + middle managers) remains substantially stable at 24.5% in 2022 (compared
to 24.8% in 2021 and 24% in 202); the incidence of women in the total number of white collar workers rises to
34% (33.2% in 2021 and 33.0% in 2020); the incidence of women in the blue collar population rises to 10.7. The
percentage of women in the total population grows to 14.7% (compared to 14.4% in 2021 and 14.1% in 2020).
For the breakdown of the corporate bodies by gender and Diversity Policies in the “Report on Corporate Governance
and Ownership Structure of Pirelli & C. S.p.A.”, within the present Annual Report, paragraphs “Diversity Policies”,
“Board of Directors Administration - Composition”, “Board of Statutory Auditors - Composition”.
WOMEN AS A PERCENTAGE OF THE TOTAL WORKFORCE102 BY PROFESSIONAL CATEGORY
YEAR
2022
2021
2020
EXECUTIVES
MIDDLE
MANAGERS
EXEC+MID MGR
(=Tot. Manager)
WHITE COLLARS
BLUE COLLARS
TOTAL
12.2%
11.3%
10.5%
26.2%
26.6%
26.0%
24.5%
24.8%
24.0%
34.0%
33.2%
33.0%
10.7%
10.4%
10.2%
14.7%
14.4%
14.1%
Analysing the breakdown by gender in terms of employment contract, the table below shows that also in
2022, a substantial balance was maintained between men and women.
2022
2021
2020
Men
Women
Total
Men
Women
Total
Men
Women
Total
PERMANENT
25,398
4,353
29,751
24,807
4,216
29,023
25,184
4,180
29,364
TEMPORARY
AGENCY
1,250
51
231
19
1,480
1,246
183
1,429
70
225
13
238
857
159
120
11
977
170
102 The figures include agency workers, amounting to 0.2% of the total workforce in 2019, 0.6% in 2020, 0.8%
in 2021 and 0.2% in 2022.
187
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN
In 2022 the number of parental leaves used by Pirelli
employees corresponds to 175 for women and 662 for men.
With reference to the post-maternity/paternity return rate,
the Pirelli figure for the total workforce in all the countries
where the Company is present shows that in 2022, out of the
total number of workers who have completed their parental
leave, 86% of women and 99% of men have returned to the
Company. Also, in 2022, one year after the maternity and
paternity event (begun in 2021), 82% of women and 97%
of men are still employed by the company. It should also 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. The
impact of this initiative should be assessed over a three-
year time horizon. It should be noted that, with regard to the
variable incentive system (STI and LTI), months of maternity
and parental leave do not count as periods of absence for the
purposes of calculating any bonus.
In the context of gender diversity, Pirelli is particularly
attentive to remuneration equality, constantly monitoring
this issue and publishing the figures transparently for 12
years now.
The countries considered in the analysis at the end of
2022, in line with 2021, were Brazil, China, Germany,
Italy, Romania, Mexico, Argentina, USA, Russia, France,
Spain, UK, Turkey and Sweden, representing in terms of
materiality over 80% of the total workforce subject to the
remuneration policy (executives, middle managers and
white collars). 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 methodology of data collection allows
for an objective investigation and assessment, taking into
account the structural differences of the various local
markets and their specific remuneration logic.
Pirelli also made use of a leading consulting firm in 2022 in
order to deepen the analysis on the pay gap issue, validating
the calculation methodology.
The average of pay gaps between men and women white
collars recorded in these countries is equivalent to 4% in
favour of women; in line with 2021 and compared with 3% in
2020, also in favour of women; for middle managers, on the
other hand, the average pay gap is 3% in favour of men, in line
with 2021 and compared with substantial pay parity in 2020.
A few examples:
→ Italy, which has a difference between average remuneration
for men and women of around 4% in favour of women for
the white-collar category (compared to 3% in 2021 and
2020, also in favour of women) and 3% in favour of men
for the middle manager category (in line with 2021 and
compared to 1% in 2020, also in favour of men);
→ Romania, where for the white-collar category there is
2% in favour of women (compared to 1% in 2021 and 4%
in 2020 in favour of men) and for the middle manager
category there is 7% in favour of men (in line with 2021
and compared to 8% in 2020, also in favour of men);
→ Brazil, where for the white-collar category there is a pay
gap of 2% in favour of men (compared to 1% in favour of
women in 2021 and substantial parity in 2020) and for
the middle manager category there is 6% in favour of
men (compared to 2% in 2021 and 3% in 2020 also in
favour of men);
→ Germany, which shows a difference between average
male and average female pay of 1% in favour of men for
the white-collar category (compared to 2% in 2021 and
2020, also in favour of men) and 3% in favour of men for
the middle manager category (compared to 5% in 2021
and 2% in 2020, also in favour of men).
With reference to the population of executives, of which
women make up 12.2%, there is an average pay gap of 9% in
favour of women (compared to 6% in 2021 and 2020, also in
favour of women).
With regard to the population of blue collars, all countries
where Pirelli has an industrial presence were analysed.
For each of these countries the pay gap between men and
women has been calculated. The average, weighted by the
number of employees, showed 2% in favour of men. A few
examples:
→ China has a difference between average male and average
female pay of 12% in favour of men, in line with 2021 and
compared to 10% in 2020 also in favour of men;
→ Brazil has a pay gap of 3% in favour of men, compared
to 4% in favour of women in 2021 and 4% in favour of
men in 2020;
→ in Italy there is a 2% in favour of men, in line with 2021
and 2020;
→ in Romania there is a gap of 1% in favour of women
compared to substantial pay equity in 2021 and against a
2% in favour of women in 2020.
With reference 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.
laws,
inclusive culture towards different skills, as
Pirelli’s
explained in the Pirelli policy on equal opportunities, is
implemented by all the Group’s affiliates. Under current
local
in 2022 approximately 1.7% of the total
workforce (substantially unchanged from 2021 and down
0.2 percentage points from the 2020 figure)have some
form of disability, net of the following considerations:
the percentage of differently abled employees in the
Company’s multinational context is objectively difficult to
measure, both because in many countries where the Group
operates there are no specific regulations to promote their
employment and therefore disability is not automatically
188
Pirelli Annual Report 2022 detectable, and because in many countries this information is of a sensitive nature and is protected by privacy
laws; therefore, it is likely that the actual percentage of differently abled people working in Pirelli may be
higher than the figure indicated above.
With reference to the “age” factor of the company population by professional category, as can be seen from
the table below, it is homogeneous between genders.
AGE BY CATEGORY AND GENDER
2022
Executives
Middle Managers
White collars
Blue collars
Group Average
50
51
50
44
45
45
2021
37
39
39
39
38
38
Executives
Middle Managers
White collars
Blue collars
Group Average
50
50
50
44
45
45
2020
38
39
39
38
38
38
Executives
Middle Managers
White collars
Blue collars
Group Average
50
51
50
44
46
45
38
39
39
37
38
38
Instead, the following table represents the average seniority of service per professional category and gender:
also in 2022, there were no significant differences between men and women.
AVERAGE SENIORITY OF SERVICE OF EMPLOYEES BY PROFESSIONAL CATEGORY AND GENDER
2022
Executives
Middle Managers
White collars
Blue collars
Group Average
18
17
17
14
15
14
8
10
9
8
10
10
39
39
39
39
39
39
38
39
39
9
10
10
Women
Men
Total
Women
Men
Total
Women
Men
Total
Women
Men
Total
189
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN
Women
Men
Total
Women
Men
Total
2021
Executives
Middle Managers
White collars
Blue collars
Group Average
18
17
17
14
15
14
2020
9
10
10
8
10
10
Executives
Middle Managers
White collars
Blue collars
Group Average
16
17
17
14
15
15
9
10
10
7
10
10
REMUNERATION AND SUSTAINABILITY
The General Remuneration Policy, approved by the Board of Directors of Pirelli, establishes the principles to
which the Group adheres in order to determine and monitor the application of the remuneration guidelines
relating to the Directors vested with particular powers/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 the event of termination of employment;
→ clawback clauses.
The General Remuneration Policy also describes the process adopted and the stakeholders involved, as well as
the voting history.
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, albeit with
centralised supervision.
Both Short Term Incentives (STI) and Long-Term Incentives (LTI), the Group’s sustainability objectives are taken
into account in the definition of the Remuneration Policy, in order to manage the impacts on the economy,
environment and people, including Human Rights. Management is the holder of the annual Incentive Plan (Short
Time Incentive - STI) linked to the achievement of annual economic-financial and functional objectives, in addition
to two sustainability objectives identified in the “Eco & Safety Performance Revenues” with a weight equal to
10% of the total and in the “D&I: Women Hiring” with a weight equal to 5% of the total, the latter reserved only
for Directors with special powers and/or offices, General Managers, Executives with strategic responsibilities,
and Senior Managers. In accordance with market best practices, the impact of the (short- and medium-term)
variable component on the aggregate 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 Responsibility (ESR) and selected Senior Managers, a portion of the accrued incentive equal to a
minimum of 25% and a maximum of 50% is deferred for three years. The relevant payment, together with a
9
10
10
9
10
10
190
Pirelli Annual Report 2022
company matching component, is conditional on remaining
in the company at the end of that period.
For the rest of Management, the Plan provides for a deferred
payment to the following year of a portion (25%) of the
annual incentive accrued, subject to the achievement of the
STI targets for the following year. In return for this deferral, it
is envisaged that the portion to be returned will be equal to
the amount set aside, where the following year’s targets have
been achieved between entry level and target, or double the
amount set aside, where these targets have been achieved at
or above target level.
The majority of Executives whose grade, determined using
the Korn Ferry method, is equal to or greater than 20, in
line with the variable remuneration mechanisms adopted at
international level, are also holders of a multi-year Incentive
Plan (LTI), which is totally self-financed since the related
expenses are included in the economic data of the Industrial
Plan. In 2022, as well as in 2021, 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:
→ Net Cash Flow of the Group (before dividends) with a
weighting of 40%:
→ Total Shareholder Return (TSR) relative to a panel of
competitors (TIER 1) with a weighting of 40%;
→ Positioning in the Dow Jones Sustainability Index World
with a weighting of 10%;
→ CO2 emissions reduction with a weighting of 10%.
As regards the disclosure of remuneration paid during the
year, as well as the ratios comparing highest pay and average
pay, the Policy, to which reference is made, follows CONSOB
guidelines and market best practices.
For updates and details on the Remuneration Policy and
related sustainability indicators, refer to the Governance
section of the Pirelli website, “Remuneration” sub-section.
EMPLOYER BRANDING
In addition to disseminating the company principles and
values, 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 2022,
where the Company promoted its own Employer Branding
initiatives. These activities are carried out also thanks to
the network of contacts and partnerships with significant
universities in the various countries.
In Italy, Pirelli actively collaborates with Politecnico of Milan,
Politecnico of Turin, Bocconi University, UCSC Catholic
University and University of Turin. The latter Universities
191
are located close to the Pirelli offices in Italy 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, both
physically and virtually.
Over the past few years, among other initiatives, Pirelli:
→ has set up with Bocconi University a fund called “Pirelli
Women Awards” dedicated to supporting the university
career of deserving female students;
→ started a collaboration with the MIP Politecnico of
Milan for the organisation of the “Master in Sustainable
Industrial Management” and the “Master in Sustainability
Management & Corporate Social Responsibility”;
→ has developed a second-level university master’s degree
“R&D Excellence Next”, conceived in collaboration with
the Politecnico of Milan, with the aim of training a new
generation of
innovation-oriented researchers and
designers capable of tackling the company’s strategic
challenges;
→ has activated, in synergy with various universities and
car manufacturers, a collaboration with the MUNER
association (Motorvehicle University of Emilia-Romagna),
with the aim of attracting and training the young automotive
talents of the future.
Among the channels of Employer Branding used by Pirelli,
the web plays an important role: on the website www.
pirelli.com, 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 most
popular social media and university portals - are also chosen
by Pirelli for the publication of its job offers.
DEVELOPMENT
PERFORMANCE MANAGEMENT
With the Performance Management process, Pirelli defines
and evaluates the contribution of each employee to the
achievement of the company’s objectives in terms of results
obtained and behaviours acted upon. The process supports
the definition and sharing of key indicators for the realisation
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, open and
agile dialogue between the boss and the employee, from the
phase of sharing individual objectives to that of evaluating the
results achieved and the behaviours expressed in achieving
them.
The main features of the process of management by
objective are as follows:
→ the process and the platform are open all year, so as to
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN better support the continuity of dialogue between boss and employee and alignment on priorities;
→ the assessment is based on two dimensions: ‘what’ (results) and ‘how’ (behaviours expressed);
→ the key behaviours are functional to the achievement of the company’s strategic objectives and are the same
for the entire company population. The key behaviours are: Accountability, Teamwork and collaboration,
Forward thinking, Agility, Cross-functional approach, Initiative and drive;
→ the entire process is managed within a platform accessible from all company devices.
As usual in 2022, the process was accompanied by digital training resources focused on the evaluation and
feedback process.
The Performance Management process involves all staff worldwide (executives, middle managers and white
collars) and in 2022 saw a redemption rate (that is, assessment sheets completed compared to the total
number of people eligible) equal to 99.98%, of which the redemption rate for women was 99.94%, while that
for men was 100%.
The percentages of completion by level for 2022 are shown below:
Executives
Middle Managers
White collars
100%
100%
99.97%
In support of the quality of the performance evaluations, as part of the process Pirelli includes so-called Calibration
Meetings, i.e. meetings attended by the heads of the individual functions, Business Units and Countries, with their
respective first reports and the relevant Human Resources managers. During these meetings, the assessments
of the people belonging to a specific organisational unit are put into common use with the aim of ensuring a
shared and balanced distribution of the evaluations, enrich the assessment by supplementing it with feedback
complementary to that of the manager and thus guarantee 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 Group’s population of talent and critical know-how is around 580 people. As far as talent is concerned, the
average seniority within the company is 9 years; the strong international connotation represented by as many as
20 nationalities is confirmed.
In 2022, a structured periodic monitoring process of indicators and insights was introduced, shared with senior
management, aimed at achieving greater visibility and effectiveness of development and training initiatives in
the different corporate functions.
Following the success of the Mentoring programme launched in 2021, a global Mentoring programme dedicated
to the youngest segment of the talent population was also implemented. Each of the participants in the initiative,
or mentees, was paired with a senior leader in the role of mentor. Mentors and mentees were supported with some
training sessions aimed at sharing methodologies and tools to support the effectiveness of the programme. The
main objectives of the course were: the transfer of experience and vision between current leaders and the next
generation of leaders, the support for the professional development goals of young talent, and the development
of greater awareness of corporate culture and context.
TRAINING
All Pirelli affiliates have adopted the Learning@Pirelli training model, structured and equipped system to
respond to “Group” needs as well as any more specific needs that may emerge locally at any time from the
various affiliates.
The 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 that emerge from the contingencies of the socio-economic context.
192
Pirelli Annual Report 2022 The year 2022 saw a full resumption of training activities,
partially slowed down in previous years due to the health
emergency. Especially in 2022, there has been a gradual
recovery of the in-person sessions for a large part of the
corporate population, recording more than a doubling of the
percentage of training hours delivered in this mode. Despite
the variety of training topics covered, the focus on health
and safety issues, IT security awareness programmes and
general professional upskilling activities, including those
required by the advancement of the company’s digital
transformation process, is confirmed.
The four “pillars” on which the Pirelli training model is based
are the Professional Academy, the School of Management,
Global Activities and Local Education. The first three are
designed centrally and provided centrally and/or locally,
while Local Education is fully managed and implemented in
the individual countries to meet the specific local needs, a
large part of which is dedicated to training blue collars. This
is also accompanied by training programmes organised
by Headquarters in the English language to support all
colleagues in foreign offices.
PROFESSIONAL ACADEMIES
The Pirelli Professional Academies target 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 countries and support the implementation of
tools and 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.
Despite the specificity of the individual training offerings,
all Academies address a number of topics of increasing
relevance and across functions and process steps, including,
for example, environmental efficiency, health and safety,
sustainable supply chain management, risk management
and digitalisation of business processes.
The teaching staff 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 passing on know-how and skills.
Every year, the Professional Academies meet with both
Top Management and local training representatives with
the objective of defining strategic alignment, sharing
193
achievements and determining the training priorities to focus
on in the following months.
During 2022, the process of digitalising training, which had
already begun in the pre-Covid era, has continued, leading
all the Professional Academies to expand their training
offerings, supplementing the traditional training with a
portfolio of online courses to be taken in “asynchronous”
mode and at the times chosen by the end user.
The investment in the acquisition of already available digital
content, typically on cross-cutting and generalist topics, from
external providers therefore continued, as did the in-house
holding of e-learning courses on highly specialised Pirelli
content, which is often less well covered at the peripheral
level. This two-pronged strategy has made possible the
continuous enhancement of the digital library, the content
of which can be accessed at any time by all colleagues with
access to the Learning Lab platform, and often suggested as
a preparatory activity for participation in “live” courses.
During 2022 the Professional Academies at the same time as
resuming their in-presence training activities, also continued
with virtual training, thus managing more quickly to involve a
higher number of colleagues globally. In this regard, mention
is made of the important effort made by the Quality Academy
and the Product Academy, which held more than half of the
total number of courses held during the year for the benefit of
colleagues in the foreign offices; also particularly relevant in this
regard is the A DAY INTO initiative, organised by each academy
with the aim of providing an overview of the main processes
and targets of the individual functions and which in 2022 saw
at least one international edition of each title delivered, with
strong participation by colleagues from foreign offices.
Also continuing in 2022 was the specialised second-level
master’s degree designed and co-taught by Pirelli and the
Politecnico of Milan, part of the Ready to Develop programme,
launched in 2021 and aimed at R&D professionals. As part
of the upskilling initiatives, mention should also be made of
the new training offerings dedicated to professionals in the
Logistics and Purchasing functions, in line with the evolution
of professional and managerial skills considered strategic for
the business challenges of the two functions.
PIRELLI SCHOOL OF MANAGEMENT
The School of Management comprises the training offering
dedicated to the development of the managerial culture
within Pirelli; it targets 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 2022, School of Management courses accounted for
about 10% of total white-collar training.
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN The traditional two-year Warming Up course, dedicated
to all new graduates of the group, involved over 170
colleagues from 15 countries in 2022 and was enriched
with content aimed at strengthening interpersonal skills in
multicultural contexts.
As part of the School of Management’s offering, the traditional
“Plunga” on boarding programme was held in digital format
for all new employees in the Pirelli group, involving some 300
colleagues from 23 different countries.
Considering the School of Management’s entire training
offering, more than half of the courses were organised in
English, with the aim of involving more and more foreign
colleagues
in training programmes dedicated to key
behaviour, soft skills and managerial skills.
Also in 2022, the School of Management’s training offerings
were made available to all white collars within the Learning
Lab platform in the form of carefully selected and suggested
online digital content to complement the synchronous
training programmes, in order to facilitate - right from the
end of the in-person session - the learning process on the
part of the participants.
For the group’s new managers, the traditional annual
“Developing Managerial Excellence” course was conducted.
GLOBAL ACTIVITIES
Global Activities include all training campaigns launched
globally and designed to promote awareness of corporate
guidelines while respecting local diversity. Topics such as
Privacy, Information Security and Inclusiveness are, among
others, the focus of these activities.
In continuation of what was started in the last months of 2021,
the international awareness-raising campaign on information
security issues continued during 2022. The initiative covered
about 2,800 hours of training by employees in Italy and
abroad through online mini-training pills.
In addition, consistent with the issuance of the “Diversity,
Equity and Inclusion” global policy and the definition of a
plan of initiatives on a global scale to raise awareness and
training on issues of diversity, equity and inclusion, the
“Your DE&I Journey” course was launched in the second
half of 2022, delivered in both Italian and English, and will
continue in 2023. In continuity and consistency with the
corporate strategy of offering more and more English-
language training programmes delivered directly by HQ, the
skills training programme in the English language continued
in 2022, which involved over 160 colleagues from different
into
countries where Pirelli operates, who, distributed
subgroups, participated
language training sessions
in
sharing different views and perspectives.
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. A large part of the training at the local level is
represented by the training provided within the plants and
mainly dedicated to the continuous updating of the skills of
departmental operators. Also within this cluster are all the
courses related to the implementation of new regulations
or agreements.
TRAINING ON SUSTAINABILITY
AND CORPORATE GOVERNANCE
Also in 2022, training continued on the 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
integrated economic,
in
approach contextualised
environmental and social management.
the
Training on the Pirelli Model also draws the attention of
new recruits to Group Sustainability Policies and related
commitments in terms of ethics, anti-corruption, Diversity,
Equity and Inclusion, Human Rights, Health and Safety, and
the Environment.
Pirelli’s employee training academies, in turn, delve deeply
into all areas of sustainable management, e.g. product life
cycle or sustainable supply chain management.
Training campaigns are also launched during the year
and continuing in 2023 at the Group level with specific
focuses, for example, the aforementioned Diversity, Equity
and Inclusion Training campaign and the Human Rights
Training, which will also involve the supply chain in 2023.
194
Pirelli Annual Report 2022 STATISTICS ON PIRELLI TRAINING
Total training provided in 2022 was 7.6 average training days per capita, up for the third consecutive year.
This figure confirms the centrality of training in Pirelli’s culture. Among the countries with the highest training
investment are Mexico and Romania.
AVERAGE TRAINNING DAYS GROUP EMPLOYEES
5.09
6.9
7.6
2020
2021
2022
The high investment in training in 2022 involved both women and men with approximately 2.2 days more in
favour of men, which can be correlated with the clear predominance of men in the blue-collar population, subject
to more technical training.
TRAINING DAYS AVERAGE BY EMPLOYEES
GROUP
7.6
FEMALE*
5.7
MALE*
7.9
BLUE COLLARS
CADRES - STAFF
EXECUTIVES
8.6
3.5
1.2
Furthermore, 86% of employees (considering the average workforce of the year) participated in at least one
training activity lasting one hour or more during the year. At the same time, there was an increase in the average
number of training days per capita undertaken by the blue-collar population, characterised by less than hourly
and closely spaced formats.
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 in
addition to the usual attention to health and safety issues, particularly significant in 2022, explain the larger
investments on the blue-collar worker population.
On a global level, the Professional Academies cover the most significant portion (37.2%) of the training activities
on the total non-blue collar population; being aimed at training and the continuous updating of technical skills
linked to innovation processes and strategic for the company. In particular, with regard to white collar employee
training, in 2022 international training campaigns in the areas of Quality and Product were particularly important.
Health, Safety and Environment topics accounted for 19% of the total training, up from 14% in the previous year.
Consistent with the gradual return to in-person training activities, 2022 saw a better balance between
virtual and in-person activities, with 43% of staff training hours conducted in-person, compared to just over
27% in 2021.
LISTENING & ENGAGEMENT
Pirelli has for many years used the climate survey tool for actively listening to its employees around the world, on
the basis of which it can set up group and local improvement plans.
During the years 2020 and 2021, characterised 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 large-scale 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 (see the relevant chapter for 2022 actions).
195
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN During 2022, the survey was rebranded, replacing the old name “My Voice” - which referred to the centrality
of the employee’s voice - with the new name “NEXTOYOU” - strongly connoting the survey as a moment of
closeness of the company to its people through listening to their opinions.
The climate survey was delivered globally on the entire White Collar population in October 2022, collecting a
global participation rate of 79%, in line with that of the last survey and the external benchmark provided by the
specialised international external company that supports the company in this process.
During 2022, the global climate survey for White Collars was revised in content to better focus it on the specific
areas of the new post-pandemic employee experience, which is strongly impacted for this population by the new
hybrid work arrangements. Central to the survey model is the Sustainable Engagement index, which captures
people’s active engagement as well as other additional elements, such as Energy and Empowerment, also
predictive of how sustainable engagement is over time. This model is based on the assumption that when a work
environment enables individual performance, supports people’s well-being, and employees are engaged, the
engagement itself is more likely to last over time leading to positive business results in the long run.
The index consists of 5 questions.
Energy
SUSTAINABLE
ENGAGEMENT
Enablement
Engagement
80%
Sustainable engagement
score for Pirelli
4 out of 5
Pirelli employees
are engaged
In addition to Sustainable Engagement, the questionnaire also explores employee satisfaction through
the following dimensions of employee experience: Purpose, Capability, Wellbeing, Diversity&Inclusion,
Empowerment, Trust and Retention. Two final open-ended questions were also provided to collect free
comments. The demographics of the survey (Country, Location/Location, Business, Function/Business Unit,
Gender, Age, Company Seniority, Organizational Level, Managerial Position, Parenting, Caregiver, Expatriation,
Organizational Flexibility) were filled in by employees in self-coding, i.e., it is the individual employee to indicate
for each cluster the relevant response, without pre-coded fields.
The overall index of Sustainable Engagement in 2022 is equal to 80% increasing by 4 points compared
to the figure of the last survey (2018), thus signaling a positive impact of all actions introduced during the
previous years.
This means that “total favorable” responses, i.e., ratings 4 and 5 on a pentenary scale of agreement (from 1 -total
disagreement to 5-total agreement) were 80%. The goal is to maintain Sustainable Engagement at consistently
high values above 80 percent in the next editions of the survey as well.
Particular importance was given in this survey to the Wellbeing dimension: the category within the questionnaire
devoted to these issues (which included Health&Safety, Work-life balance, Stress level, Teamwork and Working
support), received an overall global score of 82%.
“Welfare & Benefits” also turns out to be the most commented category overall in the final open question “What
do you value most about working here?” with 35 percent of comments globally and 41 percent in Italy, a sign that
this area represents a strength of our company, particularly appreciated by employees.
The results will be reported internally in the first quarter of 2023, and following this, specific improvement
actions will be identified and implemented, as usual, with respect to the areas of focus identified by the survey,
both globally and locally.
Starting in 2022, the survey will take place every two years to enable the identification and implementation
of specific improvement actions on the identified focus areas: the next global survey on the White Collar
population will then be delivered in 2024. As for the Blue Collar population during 2023, the new questionnaire
to be offered in factories during the year will be defined, with the aim of surveying the opinions of the totality of
the colleagues working there. The questionnaire will have a centrally defined structure and each country will be
given full management of the timing of implementation during the year, according to its own priorities.
196
Pirelli Annual Report 2022 Delivery of the Blue Collar surveys will also take place every
two years, to allow each country to develop and implement
an action plan specific to its factory (or factories).
employee wellbeing and engagement through 3 international
workshops focused on the three priorities identified as
common areas of work at Group level: well-being, parenting,
engagement initiatives.
WELFARE AND INITIATIVES FOR
THE INTERNAL COMMUNITY
On the subject of well-being, which is a working priority in
the local Sustainability Plans, we cite the following examples:
Since years Pirelli has introduced the organisational figure
of the “Group Welfare Manager”, who is entrusted with the
supervision of welfare activities, jointly with the many central
and local functions concerned, including Health and Safety at
Work, Industrial Relations, Sustainability, Human Resources.
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 have been implementing
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, lifestyle and wellbeing (e.g. health care, information
and awareness campaigns, specific initiatives to improve
the well-being of employees);
→ family support (e.g. scholarships and summer camps for
employees’ children, inter-company crèches and specific
activities to support parents);
→ free time (e.g. open days, sports and cultural initiatives,
online portals of products and services with important
conventions and discounts for employees);
→ working life and working environments (e.g. flexible working
hours, individual development training, cultural growth and
group celebrations).
The post-pandemic period has further confirmed the
centrality of people’s all-round well-being as a qualifying
constituent element of the relationship between people and
the company, and a generator, like other factors, of motivation
and engagement, as well as a strategic lever for attracting
and retaining people. Many actions undertaken over the past
two years have been confirmed and strengthened. By way of
example, we mention the main ones activated in the various
affiliates of the group: online courses dedicated to promoting
physical well-being, sports activity and a “healthy lifestyles”,
such as yoga, pilates, total body workout, mindfulness and -
wellness training courses.
In addition, various programs such as the support desk for
care-givers and family problems, courses for new parents,
actions to support work from home have been activated to
support better work-life balance management.
Italy - a wellness training and stress management course
for all employees (called “Smart Living”) and periodic
conferences to raise awareness of health prevention and
promote healthy lifestyles.
Brazil - Introduction of a Mental Health programme for all
employees (called “Plenamente”) with in-person psychological
support sessions in factories and online for offices.
Spain and Portugal - Launch of a platform for the promotion
of health and well-being (physical, environmental, financial,
social and emotional) offered to colleagues and their families,
with daily advice and resources of various kinds.
Regarding parenthood, Pirelli has always supported its
employees’ childcare commitments through periods of paid
maternity and parental leave even beyond what is provided
for by local regulations; specifically, the majority of maternity
leave recognized by Pirelli to its employees exceeds 14 weeks.
To this are added specific programs to support parenthood
such as, facilitations or contributions for access to nurseries,
merit scholarships, part-time for specific needs, and training
courses for new parents.
To further support new mothers when
they return
from maternity leave, where required, in addition to the
breastfeeding breaks provided by local regulations, Pirelli is
going to set up a “lactation room.”
With reference to the new 2022 initiatives in support of
parenting, the following initiatives are mentioned:
Italy
→ Financial supplement by the company of 70% for the first 3
months of optional parental leave (thus reaching 100% pay);
→ The new area on the corporate intranet called “Parents at
Work” containing useful information and the various initiatives
and services offered by Pirelli to colleagues/parents;
→ A training course for new fathers, called “The courage to be
a father” and aimed at reflection and empowerment on the
aspects of “parenting at work”, in the logic of motivation,
development, and improvement of the aspects of person/
work integration;
→ Two additional days of working from home per month for
parents of children under 14 (from 8 days/month to 10
days/month).
France
During 2022, the company also increased coordination
on the activities of the affiliates, soliciting exchanges and
discussions between welfare managers on the topics of
→ Introduction of the possibility of working full from home
for the first month after returning from maternity and
paternity leave;
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REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN → Additional leave of 4 to 6 days for children’s illness.
Switzerland
→ Resolution of December 2022: two additional days of
working from home per month for parents of children
under 14, starting in January 2023.
In the area of engagement initiatives, at several sites
company open days for family and friends were resumed
after the suspension of activities due to Covid restrictions.
At the affiliates there are many initiatives such as Pirelli
employee sport teams and awards for those people who have
particularly distinguished themselves in the year.
To
improve work-life balance and offer employees a
greater degree of flexibility, remote and flexible working
arrangements between the social partners were formalised
in 2022 in most of the countries where Pirelli operates,
for example Italy, Germany, Brazil and USA. By way of
example, we mention the Working from home Regulations,
in place as of October 2022 for employees at the Bicocca
Headquarters. The new regulation provides for 8 days/month
of working from home, raised to 10 days/month for parents
of children under 14, plus 4 days/year. In addition, with a view
to fostering a better work-life balance, a new hour flexibility
was introduced in May 2022 on a voluntary basis.
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 equally active
participation on the part of the union and workers. In fact,
79% (an almost constant percentage over the three-year
period 2020-2022) of the Group’s employees are covered
by representative bodies that periodically, with the Company,
monitor and address the current issues and awareness and
intervention plans/programmes aimed at 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, and with the commitment to reduce
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.
there were no
During 2022,
rationalisation and/or
In the case of rationalisation
restructuring operations.
or organisational restructuring of the employment level,
the company uses tools to minimise the social impact in
full compliance with local legislation, current collective
agreements and trade union agreements.
The Company proceeded in the year 2022 with the renewal
of the collective agreements expiring in Argentina, Mexico
and Turkey.
EUROPEAN WORKS COUNCIL (EWC)
The 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
fullfill 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 LEGISLATIVE-CONTRACTUAL
REQUIREMENTS ON OVERTIME, REST PERIODS,
ASSOCIATION AND BARGAINING, EQUAL
OPPORTUNITIES AND NON-DISCRIMINATION,
PROHIBITION OF CHILD AND FORCED LABOUR
Pirelli’s commitment to Fundamental Labour 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 terms and
of sustainable working hours, protection of rights and values
of local communities, refusal of any form of corruption and
protection of privacy. The Policy specifies its application to the
supply chain. Further references can be found in the “Values
and Code of Ethics”, the “Human Rights” Policy, the “Diversity,
Equity & Inclusion” Policy, the “Global Health, Safety and
Environment” Policy, and the “Privacy” Policy.
All the aforementioned Policies are public and have been
communicated in the local language to employees.
Moreover, from 2004 Pirelli has adopted by the requirements
of Standard SA8000® as a reference tool for managing Social
Responsibility at its Affiliates and along the supply chain.
198
Pirelli Annual Report 2022 The 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.
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.
The non-conformities that emerged as a result of the
audits performed in 2022 were the subject of the action
plans agreed between the local managers and central
management, and will be subject to follow-ups by the Internal
Audit Department. It should be noted that in 2022 none of the
audits revealed any breach of ILO Core Labour Standards,
with specific reference to forced labour or child labour,
freedom of association and bargaining, and discrimination.
As a result, it was not necessary to establish remedial plans
and associated corrective actions.
In 2022, the Human Rights Risk Assessment (HRRA) was
updated to identify the geographical areas and production
categories most at risk of human rights violations. The
assessment was conducted in line with the Company’s
Enterprise Risk Management (ERM) model and allowed
the identification of subsidiaries and suppliers on which
to intervene as a priority through the most appropriate
mitigation and prevention actions.
For the results of the Risk Assessment and the planned
mitigation actions, please refer to what is reported in detail in
the section “Respect for Human Rights”.
Likewise, please refer to the sections on “Diversity, Equity
199
and Inclusion” and “Our Suppliers” for a detailed account
of the related Governance, and management, activity and
performance Model.
LABOUR AND SOCIAL SECURITY LAWSUITS
In 2022, 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, representing more than
89% of all the cases in 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
initiated when an
there. Labour
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
possible extent – including through settlement procedures.
lawsuits are generally
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 2022 it stood at 79% (aligned with the figure for 2021).
This figure is associated with the historical, regulatory and
cultural differences between each country.
in situations without a collective agreement, the
Even
company operates in full compliance with group policies and
local regulations and freedom of association.
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.
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN The Group also maintains various supplemental Company
medical benefit plans at its affiliates according to local
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
in favour of
The social benefits recognised by Pirelli
employees (including
invalidity/disability
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.
insurance,
OCCUPATIONAL HEALTH, SAFETY AND HYGIENE
MODEL
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”,
updated in 2022, makes explicit and confirms Pirelli’s
commitment to:
→ manage its activities in the field of occupational health and
safety protection in full compliance with the applicable
international, national and local regulations on the subject
and with all the voluntary commitments entered into, as
well as in accordance with the most qualified international
management standards;
→ pursue the objectives of “zero accidents” and “no harm to
persons” in healthy and safe working environments, through
the continuous identification, assessment, prevention and
protection from occupational health and safety risks, the
timely removal of potential causes of accidents, and the
implementation of staff health surveillance plans in relation
to specific tasks;
→ support the development of programmes to improve
psycho-physical well-being and work-life balance;
→ promote consultation and participation of workers and
their representatives in matters of health and safety at
work;
→ develop and
implement emergency management
programmes to prevent harm to people and the environment
in the event of accidents;
→ define, monitor and communicate to its Stakeholders
specific objectives of continuous improvement of health
and safety at work;
→ empower, train and motivate its workers to work safely,
involving all levels of the organisation in a continuous
programme of training and information, aimed at
promoting an occupational health and safety culture
and ensuring that the company’s responsibilities and
procedures in these areas are appropriately updated,
communicated and understood;
→ actively collaborate at national and international level with
institutional, academic, non-governmental, industry bodies
concerned with the regulation, study and sustainable
management of occupational health and safety issues;
→ require its suppliers to implement an occupational
health and safety management model at their sites and
along their supply chain in compliance with international
standards and the laws and regulations of the countries
where they operate;
→ 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 section “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 the Pirelli website, which
should be consulted for full display of the content.
GOVERNANCE AND RISK MANAGEMENT
The Top Management of Pirelli, supported by the Health,
Safety and Environment functions and with the involvement
of the functions involved in various ways (including but not
limited to the Human Resources, Research & Development,
Sustainability, Purchasing, Quality, Manufacturing, Enterprise
Risk Management functions) plays a strategic role in the full
implementation of this Policy, ensuring the involvement of
all Pirelli’s workers and collaborators so that they express
behaviour consistent with the values contained herein.
Plans and results are approved by the Board of Directors as
well as the reporting in the Annual Report.
In addition to the role of Top Management, the above-
mentioned functions and the Board of Directors, the Health
and Safety Governance provides for:
→ business review meetings at local, regional and global level,
which are held fortnightly and have health and safety issues,
performance and improvement programmes at the top of
the agenda, in order to ensure continuous comparison and
monitoring. These meetings involve the cross-sectional
sharing of information and include the participation of the
Human Resources, Health and Safety functions and Top
Management on several levels (local, regional and global),
including members of the Executive Board.
→ the work of the Central Safety Committee, set up at each
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Pirelli Annual Report 2022 site and composed of the heads of functions including
Human Resources, 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 established, which carry out continuous work in
relation to the characteristic themes of the site.
→ the involvement of workers’ representatives, at the intervals
provided for by legislation, collective bargaining and
specific requirements, in Health & Safety Committees at
each site with the aim of illustrating, on the basis of the
Health and Safety Management System, the activities
carried out and those planned and to provide the results
of workplace risk assessments.
Specific procedures for the identification, mitigation and
management of health and safety risks are developed
in accordance with international standards and reference
norms that are applied and translated at each site, integrating
compliance with local regulations. The procedures, also
developed with the cooperation 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. Preventive analysis
and release processes on new projects are implemented
to ensure risk management at all stages of development
and implementation of new machines and plants. Such
approaches allow the implementation of risk elimination and
reduction logics in priority to the mitigation and containment
strategies
in any case. Procedures are
reviewed and updated in the event of regulatory changes,
technological or process changes and following the analysis
of incidents.
implemented
Risk analysis allows the identification of priorities and leads
to the definition of risk reduction programmes, actions and
targets pursued at each site level, whose implementation and
effectiveness are monitored by the specific Central Safety
Committees set up at each site. Plans are also defined to
respond to emergency situations, which are periodically
the subject of specific drills involving all workers. The
Management Model also makes use of internal inspections.
Preventive analysis and release processes on new projects
are also implemented to ensure risk management at all
stages of development and implementation of new machines
and plants. Such approaches allow the implementation
of risk elimination and reduction logics in priority to the
mitigation and containment strategies implemented in any
case. Procedures are reviewed and updated in the event of
regulatory changes, technological or process changes and
following the analysis of incidents.
With reference to the supply chain, specific Health and
Safety in the Workplace management criteria are applied
to all suppliers and are detailed in Article 2.7 of the Pirelli
Suppliers’ Code of Conduct, which is published on the
company website and forms an integral part of purchasing
contract clauses, as extensively described in the section ‘Our
Suppliers’, to which please refer for more details.
including
With reference to the materials purchased, Pirelli applies
stringent safety and acceptability requirements to raw
materials, services and equipment,
these
requirements
in the contractual provisions. In turn, all
chemical substances and products used are subject to
prior HSE assessment (see section “ESG elements in the
procurement process” of this report) and all equipment is
subject to conformity analysis and risk assessment before
being put into production. The management of safety
in supplier activities on sites is governed by procedures
specifying requirements for coordination, prior risk analysis
and work authorisation.
MANAGEMENT SYSTEM
Pirelli has voluntarily adopted an occupational health and
safety management system, structured and certified
ISO 45001:2018 Standard, both at
according to the
headquarters and at all Group production sites. 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, has been developed in accordance with procedures
and guidelines drawn up centrally in order to consolidate a
“common language” that guarantees sharing, alignment and
management effectiveness across the Group.
improvement of the
The development and continuous
management system
is conducted 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,
on the basis of these, implementation of improvement. In
particular, in line with the provisions of the management
system, Pirelli carries out hazard and risk assessments in
order to identify what could cause damage to health and
safety in the workplace, with subsequent prioritisation and
related targets integrated into action plans. Similarly, actions
in preparation and response to emergencies are defined.
Progress in terms of prevention and reduction of health and
safety impacts against the actions and plans undertaken and
targets set is evaluated and measured. Internal inspections
are also performed.
201
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN In 2022, the coverage of the safety management system (certified according to ISO Standard 45001:2018) and
subject to internal and third-party audits is as follows:
COVERAGE OF THE MANAGEMENT SYSTEM
Employees
Agency workers
Number of workers covered by management system
Percentage of workers covered by management system compared to total number of workers
27,421
88%
63
90%
100% of the contractors working at Pirelli sites are covered by a management system (all production sites are
ISO 45001 certified).
SAFETY CULTURE AND TRAINING
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 the pursuit of this goal of zero accidents, through a path of continuous improvement and constant prevention,
all leaders are involved and given responsibility and a trend to improve the accident frequency index to pursue
through action plans within their sites.
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 is being
gradually extended to all Group production sites. In 2022, the programme was expanded by adding an in-depth
focus on risk assessment.
The most relevant areas of intervention of the “Excellence in Safety” programme are related to improving safety
governance, clarity of tasks and roles, empowerment of all workers, improving communication in the organisation,
sharing of objectives, motivation with respect to a common strategy: all of these are substantial issues for a work
environment that is appropriate and stimulating, where workers feel involved and valued in safety management.
Through information, communication and training, everyone is encouraged to report any anomaly and/or unsafe
condition in order to encourage participation in continuous improvement and the removal of any potential cause
of accidents. All reports as well as actual or potential incidents are handled according to specific procedures
aimed at analysing the causes and defining corrective and risk mitigation actions, involving all functions.
In turn, Training is an essential tool to support the Group’s culture of safety at work and its Zero Accidents
objective.
19% of the total training provided by Pirelli in 2022 concerned occupational health and safety issues. Each site
designs, plans and delivers safety training with regard to the specific risks present, particular needs for updating
and fulfilling regulatory obligations, trends in accident indicators and changes in site activities and processes.
The characteristic topics of this training covered general safety concepts including obligations, responsibilities
and protection concepts, the treatment of all work hazards present at the site, safety operating procedures, life-
saving rules (golden rules), emergency procedures, the aforementioned Excellence in Safety programme and
the application of its operating tools, accident reporting and management procedures, and safety procedures
and standards for emergency management from Covid-19 (which also covered the year 2022).
In addition to safety training offered locally at every Pirelli location, special mention should be made of 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 the Pirelli Professional Academy dedicated to the sphere of factories, where
health and safety issues are discussed in detail.
The dissemination of Safety Culture was also supported by the regular newsletters like the Safety Bulletin, and
the sharing of significant events through the traditional channels of internal communication.
The year 2022, in continuity with what has been set since the beginning of the Covid-19 pandemic, has seen
a particular focus of Health and Safety activities on the management of prevention measures, protecting the
health of personnel and ensuring the safety conditions of all Pirelli sites.
202
Pirelli Annual Report 2022 All Pirelli production sites are served by occupational medicine
units with free access by employees managed by specialised
medical and/or paramedical personnel with autonomous
management (guaranteeing privacy) of the doctor-patient
relationship. These services work in coordination with safety
management functions and company management to
provide the necessary support for general risk prevention
actions and ensure the necessary health surveillance to
protect workers. These garrisons do not only focus on
occupational medicine issues but also offer health care to all
personnel in compliance with local regulations. Also in 2022
in continuity with 2021, support was provided to employees
in the particular pandemic context due to Covid-19, both in
terms of medical support and assistance (also outside the
workplace).
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 performance relative
to accidents and illnesses and prepare numerous types of
reports as necessary for management or operating purposes.
The HSE-DM system collects all the information related to
accidents and to the particular situations that occurred in
factories, fitting units, sales centres and warehouses directly
managed by Pirelli, including the different categories of workers
(internal and external workers operating at Pirelli sites).
According to the Procedure, when an incident occurs, the
site where it occurred immediately carries out an “Incident
Investigation” to search for root causes and the immediate
to eliminate
implementation of countermeasures
the
element of risk and/or that caused the incident. At the same
time, all establishments have access to information on the
most significant accidents or near miss es and receive a
Safety Alert from the HSE-DM system, against which they
conduct an internal analysis to verify whether conditions
similar to those that led to the accident exist, so that, if
necessary, appropriate preventive and corrective actions
can be implemented.
The performances reported below are for the three-year
period 2020-2022 and cover the same perimeter of the
Group’s consolidation.
In March 2021 Pirelli presented the 2021-2022 Industrial
Plan with Vision 2025 indicating an accident frequency
index ≤ 0.10 referred to 100,000 hours worked for 2025 (or
IF ≤ 1.00 if referred to 1,000,000 hours worked103).
The Injury Frequency Index is calculated as the “Lost
Time Index Frequency Rate - LTIFR”, i.e. considering the
sum of injuries with at least one lost working day104.
In 2022, Pirelli recorded an LTIFR for accidents of 0.20 when
referring to 100,000 hours worked (0.21 rounded up from
0.207 in 2021 and 0.22 rounded up from 0.224 in 2020), or
2.00 when referring to 1,000,000 hours worked (2.07 in 2021
and 2.24 in 2020), a number that decreased substantially
in the three-year period. The most representative injuries
concern events related to contusions, cuts, fractures and
sprains.
The Frequency Index for accidents resulting in an absence
from work of more than 6 months in 2022 is 0.05 for Pirelli
employees (per 1,000,000 hours worked) and zero for
agency workers.
103 In accordance with GRI reporting standards, the frequency index and the resulting target value is
reported with reference to 1,000,000 hours worked.
104 Accidents without lost days are not considered in the LTIFR calculation.
203
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN For 2022, in line with previous years, the LTIFR value for women is confirmed to be decidedly lower than the
value relating to men, partly due 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
2.59
2.24
0.26
2020
3.00
2.50
2.00
1.50
1.00
0.50
0.00
Frequency Index (LTIFR)
LTIFR Men
LTIFR Women
2.38
2.07
0.24
2021
2.24
2.00
0.57
LTIFR = number of accidents with at least one day lost/number
of hours actually worked x 1,000,000
2022
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
2020
2021
2022
0.16
0.14
0.12
0.1
0.08
0.06
0.04
0.02
0
3.18
2.27
2.78
2.04
2.63
1.54
2.69
2.84
1.88
1.31
1.58
2.60
0.11
0.11
0.12
LTIFR = number of accidents with at least one day lost/number of hours actually worked x 1,000,000
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 mechanical risk, which was the main contributor in the
accidents that occurred during 2022. Actions are constantly underway to reduce mechanical risk at source,
through investment in machinery safety, and to manage residual risks through the definition of safety operating
procedures and continuous staff training.
The Injury Severity Index, or Lost Time Severity Rate (LTSR) is calculated by considering the number of days
of absence, starting from the first day after the accident / number of hours actually worked x 1,000.
The LTSR Index in the Group in 2022 was 0.12, down 14% from the previous year, with lower severity figures for
women than for men.
LTSR
0.16
0.15
0.04
2020
0.16
0.14
0.01
2021
0.14
0.12
0.02
2022
Severity Index (LTSR)
LTSR Men
LTSR Women
LTSR = number of days of absence, starting from the first day after
the accident/number of hours actually worked x 1,000
204
Pirelli Annual Report 2022 The table below summarises the distribution of the LTSR Severity Index by geographical area.
LTSR INDEX
Europe
North America
South America
Russia, Nordics, MEAI
Asia Pacific
2020
2021
2022
0.20
0.11
0.13
0.11
0.14
0.05
0.20
0.28
0.21
0.09
0.11
0.08
0.00
0.001
0.01
LTSR = number of days of absence, starting from the first day after the accident/number of hours actually 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
2020
2021
2022
52
59
129
COMMUTING ACCIDENTS
Europe
North America
South America
Russia, Nordics, MEAI
Asia Pacific
15
21
29
3
28
38
34
10
62
0
0
0
0
0
0
With reference to the Occupational Illness Frequency Index, it is calculated considering the number of
occupational illnesses / number of hours actually worked x 1,000,000.
The Occupational Illness Frequency Index in 2022 stands at a value of 0.29, down 44% from 2021.
OCCUPATIONAL DISEASES FREQUENCY INDEX
0.81
0.69
0.00
2020
0.61
0.52
0.00
2021
0.34
0.29
0.28
2022
Occupational Diseases Frequency Index (IF)
IF Men
IF Women
Occupational disease frequency index = number of occupational
diseases/number of hours actually worked x 1,000,000
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 the risk assessments conducted concern the manual
handling of loads, exposure to noise and the handling of chemicals. The main types of occupational diseases
recorded of Pirelli employees are 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
registered in external workers.
2020
2021
2022
1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
205
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN
The following table summarises the distribution by geographical area of the Occupational Disease Index.
OCCUPATIONAL DISEASE FREQUENCY INDEX
Europe
North America
South America
Russia, Nordics, MEAI
Asia Pacific
2020
2021
2022
0.26
0.04
0.17
0
0
0.46
2.23
1.85
0.63
0
0.20
0
0.11
0
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 risk at source are in any case complemented by training and organisational measures aimed at
encouraging safety and prevention behaviour.
With regard to accidents of 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 accidents105 registered in the last three years and the distribution of the index by
gender and then by geographical area.
INJURIES INVOLVING AGENCY WORKERS
2020
2021
2022
Number
LTIFR Agency - Men
LTIFR Agency - Women
3
2.96
0.00
5
7.75
0.00
3
2.28
0.00
LTIFR = number of accidents with at least one day lost/number of hours actually worked x 1,000,000
INJURIES INVOLVING AGENCY WORKERS
Europe
North America
South America Russia, Nordics, MEAI
Asia Pacific
2020
2021
2022
LTIFR Agency 2020
LTIFR Agency 2021
LTIFR Agency 2022
0
0
1
0.00
0.00
7.69
2
0
0
46.70
0.00
0.00
1
5
1
1.11
13.50
1.08
0
0
1
0.00
0.00
47.82
0
0
0
0.00
0.00
0.00
LTIFR = number of accidents with at least one day lost/number of hours actually worked x 1,000,000
The LTIFR accident index for contractors (employees of suppliers working at the Group’s production sites)
stands at 0.96 in 2022, slightly down from 2021. Below are the data for the last three years and the distribution
by geographical area of the cases.
LTIFR EXTERNAL WORKERS
2020
2021
2022
1.30
0.97
0.96
LTIFR = number of accidents with at least one day lost/number of hours actually worked x 1,000,000
105 Calculated on 1,000,000 hours worked; The Lost Time Index Frequency Rate - LTIFR considers the
sum of accidents with at least one lost working day.
206
Pirelli Annual Report 2022 LTIFR EXTERNAL WORKERS
Europe
North America
South America
Russia, Nordics, MEAI
Asia Pacific
2020
2021
2022
1.77
1.40
0.81
1.58
1.03
2.41
1.67
0.33
1.09
0.00
1.11
0.27
LTIFR = number of accidents with at least one day lost/number of hours actually worked x 1,000,000
Below are the figures for 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 DEATH RATE)
2020
2021
2022
PIRELLI EMPLOYEES
AGENCY WORKERS
EXTERNAL WORKERS
0 (0)
0 (0)
0 (0)
1 (0.017)
1 (1.420)
1 (0.088)
0.00
0.00
0.00
0 (0)
0 (0)
0 (0)
Death rate = number of deaths / total hours worked * 1,000,000.
The entire organisation is committed to ensuring that fatal accidents do not occur and reaction and improvement
plans are constantly implemented and pursued.
FOCUS: ZERO-ACCIDENT REALITY IN 2022
Unit
Factories
Fitting unit
Logistics - TLM
Other
Industrial sites
Jiaozuo, Bollate, Bicocca Next Mirs, Breuberg MIRS, Slatina Motorsport
Didcot, Sorocaba, Palomar, Ibirite, Sao Jose dos Pinhais
TLM Barueri, TLM Santo Andre, TLM Cabreuva, TLM Feira de Santana, TLM Campinas
Elias Fausto HQ
HEALTH AND SAFETY INVESTMENTS
In the three-year period 2020-2022, investments in health and safety by the Group exceeded €58 million, of
which over €38 million was invested in 2022.
The investments made targeted improvements on machines and plant 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, etc.).
207
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN 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 the 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
relationships with reference stakeholders in all the countries
in which Pirelli is present.
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
values and interests through a strategy based on a clear
perception of the industrial objectives 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, renewing their
activities and effectiveness, in particular the Italy-Mexico
Business Forum, the Italy-China Business Forum (BFIC),the
Italy-Thailand Business Forum, the Council for Relations
between Italy and the United States and the Italian-Russian
Business Committee (CIIR), currently frozen following the
Russian-Ukrainian conflict.
As proof of the Group’s continued commitment to
strengthening relations with the countries in which it
operates, Pirelli took part in official visits in 2022 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 Shandong Province and
Henan Province. During 2022, Pirelli maintained a dialogue
with key local institutions on the main 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. During 2022, Pirelli
also strengthened its dialogue with key local institutions on
multiple areas of interest and participated in the third Qingdao
International Summit, promoted by Shandong Province. In
addition, the Jiaozuo plant was awarded an “A” rating for
environmental performance, a major recognition that exempts
Pirelli from production restrictions during periods when the
province’s air quality falls below the alert threshold.
impacts on the production,
In the United States and Mexico, Pirelli is present with
industrial and commercial activities, and carries out
institutional relations by monitoring legislative and regulatory
developments with
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 Sustainability
Task Force of USTMA, the Corporate Responsibility Steering
Committee of AIAG, the Social Impact Committee of the
Public Affairs Council and the Technical Reference Group
of the International Sustainability Standards Board (ISSB).
In Mexico Pirelli is a member of the Camara Nacional De
La Industria Hulera, and in Canada of the Tire and Rubber
Association of Canada. 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. (In
the US, Pirelli is not registered for lobbying activities).
In October 2022, on the occasion of the 10th anniversary
of the Silao factory, Pirelli announced further investments
aimed at increasing High Value production at the Mexican
site, in the presence of the local authorities.
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 Brazil, Pirelli
is associated with and holds the chairmanship of the Board of
ANIP (National Tyre Industry Association) with the objective of
developing its identity and promoting the interests of the sector
in institutional dealings with local governments and the vice-
presidency of the Italian-Brazilian Chamber of Commerce,
208
Pirelli Annual Report 2022 Industry and Agriculture (ITALCAM). Furthermore, in 2022, in
concert with the local state and municipal authorities, Pirelli
contributed to the renewal of the road surface of the main
access to the Pan-American Circuit. Pirelli participated in
numerous events of institutional interest, including the Brazil
Investment Forum, the launch of the São Paulo State Economic
Development Agenda, and the Italian Film Festival, promoted
by the Italian Embassy in Brazil and ITALCAM.
the country’s
As part of its relations with Turkey, the Group promotes
a constant dialogue with
institutional
representatives to accompany
industrial activities and
keep the monitoring of the country’s economic and political
environment alive. In addition, Pirelli took part in the Italian
Republic Day celebrations at the Italian Embassy and
Consulate and in the Istanbul Economy Summit, attended by
leading Turkish national authorities.
In Russia, Pirelli promotes dialogue with
institutional
interlocutors in order to support the Group’s industrial
and commercial activities in the country and to guarantee
continuity in the payment of salaries to factory employees,
while discontinuing new investments in the country.
In Europe, Pirelli maintains a constant dialogue with the
main institutional interlocutors in the countries where it has
manufacturing and commercial operations. Of particular
note is the activity in Romania, where during 2022 Pirelli has
maintained a constant dialogue with the main institutional
interlocutors in order to accompany the additional phases
of industrial development at the Slatina plant.
Relations with European
Institutions are focused on
consolidating relations with institutional interlocutors and
reference stakeholders, legislative monitoring as well as
constant representation of the Group in associations. The
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 2022, the focus was on regulatory and policy
developments related to energy, climate, environmental and
digital transition, industrial policy, research and innovation,
sustainable and smart transport and mobility, technical
regulation, internal markets and consumers, international
trade and bilateral agreements. Of particular interest is the
implementation of policies related to the Green Deal, the
strategy for sustainable growth launched by the European
Commission at the end of 2019, and the proposals for the
circular economy presented by the European Commission
during 2022. 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, as well as the adoption of European
emergency measures in response to the energy crisis
209
and the consequent spike in energy prices. In the various
stages of drafting and defining European legislation, Pirelli
represents the Group’s interests to European stakeholders.
Pirelli is listed in the European Transparency Register,
established by an inter-institutional agreement between the
European Parliament, the European Commission and the
European Council.
In Italy, the Group continues to interact with a system of
relations that involve the main institutional bodies, at both
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, Piedmont and Apulia
are also highlighted.
As part of its 150th anniversary activities, Pirelli took part
in the celebratory event at the Piccolo Teatro in Milan in
the presence of leading local authorities. To mark this
anniversary, the Monza Grand Prix, attended by President
of the Republic Sergio Mattarella, was named after
Pirelli. Confirming the synergy between Pirelli and local
institutions, the Pirelli HangarBicocca hosted the Lombardy
2030 event, promoted by the Region, which was attended
by a large number of government representatives and
leading local authorities.
In 2022, in the presence of the local authorities, Pirelli also
inaugurated the new “Digital Solutions Centre” in Bari, the
centre for the development of software and digital solutions.
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.
In line with what is set forth 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 2022 to Trade
Associations, please refer to the Economic Dimension
Chapter, where this information is provided.
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN 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 main
commitments made by Pirelli worldwide are illustrated as
follows.
UN GLOBAL COMPACT
Pirelli has been an active member of the UN 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 2022, the Global Compact has 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.
Pirelli’s participation in the “Sustainable Finance” action
platform is part of this context: 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 mobilising finance
targeted at 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, and in 2022, the “CFOs
Coalition for the SDGs”, in which Pirelli participates, was
launched with the aim of further accelerating progress in
aligning corporate investments with the SDGs and linking
corporate finance to relevant and credible targets.
Together with the UN Global Compact Italy Network and with
the participation of numerous large companies in the Italian
market, in 2022 Pirelli also participated in the drawing up of
the Position Paper “Sustainable Supply Chain Management:
Between Responsibility and Opportunities for Businesses”,
a document that enhances the commitment of companies
in the management of supply chains from a sustainable
perspective, with in-depth studies on the reduction of
Scope 3 emissions; the promotion and protection of human
rights and decent work; and the management of negative
externalities through circular solutions.
In 2022, Pirelli participated in Target Gender Equality, a
9-month international journey involving UNGCI member
company networks in more than 45 countries around the
world, during which participating companies deepen their
understanding of the importance of promoting gender
equality, not only for society as a whole, but also for the
enrichment of companies themselves. The process began
with a performance assessment of the participating
companies, after which capacity-building and peer-learning
workshops were held to share effective methodologies
for measuring results, setting ambitious goals for women’s
leadership and building holistic action plans to achieve them.
The output of the journey was the drafting of a plan to be
implemented to monitor company performance and improve
performance. For information on all Diversity, Equity and
Inclusion initiatives implemented by Pirelli, please refer to the
section “Diversity, Equity and Inclusion”.
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 2022
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, set out in the new EURO 7
legislative proposal, to mitigate the emission of particulate
matter into the environment.
From the outset of the Russian-Ukrainian war, ETRMA
has been closely monitoring the impact on the European
tyre and rubber industry and sharing those assessments
constantly with the European Commission to guide the
process of determining the waves of sanctions. The main
concern has been with regard to the availability of carbon
black, synthetic rubber, steel cord and bead wire. ETRMA
has also been monitoring the reduction or suspension of
production in Russia by its members, both in relation to tyres
and rubber goods in general. The association continued to
raise awareness among 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, a labelling system which was fully renewed in 2021;
also continuing was the strengthening of the partnership with
the national associations of the sector of which Pirelli is an
active member.
In 2022, the intensive work of the Digital Mobility Group
(DMG) continued to respond to the new technological
210
Pirelli Annual Report 2022 challenges affecting the mobility sector (e.g. digitalisation,
connectivity, autonomous driving, cyber security) and
their impact on tyres and the development of value-added
services for the consumer in the Tyre-as-a-Service (TaaS)
mode, which requires 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
supply chain and sustainable finance impact legislation, the
Taxonomy and Sustainable Supply Chain working groups
are active with the support of Pirelli. The latter assisted
the European Commission
in defining the proposed
requirements on deforestation and critical raw materials (e.g.
natural rubber).
The ETRMA association 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%106, 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.
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 that aims to share the State of
Scientific Knowledge (e.g. “Scientific Report on Tyre and
Road Wear Particles, TRWP, in the aquatic environment”)
and to involve the relevant Sectors and Organisations in the
definition of policy and of possible actions to mitigate the
impacts of TRWPs (e.g. “The Way Forward Report”); in this
regard, ETRMA recently launched a study with the objective
of mapping and assessing all the solutions available today,
in collaboration with the US Tire Manufacturers Association
(USTMA), of which Pirelli is an active member. A micro-site
was also created107 to provide information on TRWPs to the
general public ranging from root causes to the definition/
implementation of mitigation actions, highlighting the multi-
stakeholder nature of the phenomenon. The Platform’s
activities continued in 2022, with a series of 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
learnt” from other sectors involved (e.g. textiles) on the
106 Data reported for 2019.
107 https://www.tyreandroadwear.com/.
108 https://www.csreurope.org/european-sdg-summit-2021.
211
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 2022108, of which Pirelli was a sponsor, through its
contribution to the “European SDG Roundtable” Session on
“Action-Oriented Dialogue to Mitigate the Dispersion of Tyre
& Road Wear Particles in the Environment”.
A section in the Environmental Dimension paragraph of this
Report is also dedicated to TRWP, to which reference should
be made for further details.
USTMA - US TIRE MANUFACTURERS ASSOCIATION
USTMA
is the association of tyre manufacturers with
manufacturing facilities located in the United States. The
main USTMA committees deal with regulatory policies for
tyre safety and on the environmental impacts of tires in the
United States. USTMA also coordinates with ETRMA and TIP
(WBCSD) to exchange useful information.
USTMA maintains a proactive role in developing cognitive
studies with respect to environmental issues, e.g., Tyre and
Road Wear Particles (TRWP). USTMA sponsored a “State
of Knowledge” study at the University of Missouri collecting
and reviewing key scientific data regarding asphalt modified
with granulated filler material obtained from end-of-life tyres
(ELT), and made cryo-milled tyre tread (CMTT) samples
available to researchers. USTMA has an open dialogue
approach particularly with the states of California and
Washington regarding planned investigations of the 6PPD
substance in tyres and the impacts of the 6PPD-quinone
transformation product.
USTMA was active in 2022 with a strategy for end-of-life
tyre management. Every two years the association publishes
data from ELT markets. USTMA then proposes solutions for
the circular tyre economy and convenes stakeholders on the
subject.
The association is also active on issues of infrastructure and
connected and autonomous vehicles.
USTMA does not have a Political Action Committee (PAC)
and does not fund political candidates.
MEMA - MOTOR & EQUIPMENT
MANUFACTURERS ASSOCIATION
MEMA is the voice of the automotive and commercial
vehicle supplier industry in the United States of America. It
represents the largest manufacturing sector in the United
States. Across the spectrum of innovative new vehicles,
from autonomous technologies to zero emissions, vehicle
suppliers are leading the way. MEMA member companies
conceive, design and manufacture the original equipment
systems and technologies that make up two-thirds of a new
vehicle’s value. Member companies also supply the global
replacement service market with the technologies that keep
millions of vehicles on the road, driving sustainability and
supporting transportation.
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN During 2022, MEMA analyzed issues of free trade and tariffs,
research tax credits, environmental regulation proposals
and green incentive proposals, proposals to strengthen key
supply chains for the car industry, and many other topics.
Priorities for the association include policies governing
vehicle safety, policies on zero emissions and electrification,
sustainability, international trade flows, tax policies, supply
chain resilience, and workforce and training.
MEMA has a privately funded Political Action Committee
(PAC), with no contribution from Pirelli.
Pirelli is also a member of the Automotive Industry Action
Group (AIAG), a U.S. association with no lobbying activities,
where Pirelli is active in the Corporate Responsibility
Steering Committee.
WBCSD – WORLD BUSINESS COUNCIL
FOR SUSTAINABLE DEVELOPMENT
Pirelli for years has been a member of the WBCSD (World
Business Council for Sustainable Development)109. 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,
Future of Work and SOS 1.5.
The Tire Industry Project (TIP), whose members account
for approximately 65%110 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
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 raw materials, the sharing of knowledge and
collaboration with ETRMA and USTMA on 6PPD-Quinone
continued in 2022.
following
On the topic of nanomaterials, the TIP
initiated the
development of a method to simulate and analyse the
potential release of nanomaterials during the use phase
of tyres. TIP’s collaboration with the OECD (Organisation
for Economic Co-operation and Development)
is also
continuing,
the development of a sector-
specific guide111 containing best practices of reference
for the research, development and industrialisation of
new nanomaterials so as to ensure that the use of any
nanomaterial is safe for people and the environment.
Also on this issue, TIP supported the OECD by actively
supporting the preparation of the guide “Moving Towards
a Safe(r) Innovation Approach (SIA) for More Sustainable
109 Our members (wbcsd.org).
110 Tire Industry Project - World Business Council for Sustainable Development (WBCSD).
111 http://www.oecd.org/chemicalsafety/nanosafety/nanotechnology-and-tyres-9789264209152-en.htm.
112 https://one.oecd.org/document/env/jm/mono(2020)36/REV1/en/pdf
Nanomaterials and Nano-enabled Products”112 (published
on 22 December 2020) which includes extremely topical
elements, including those related to the emerging Safe and
Sustainable-by Design (SSbD) theme, of certain importance
for the debate launched in 2021 and carried on in 2022 at
the European Commission level.
through various publications
identification and quantification
On the subject of TRWPs, in 2022 TIP continued its activity
on the TRWP characterisation methodologies to support
their
in environmental
compartments (air, water, soil), whose results have been
shared, as traditionally happens for TIP studies, with the
in
scientific community
scientific journals with peer-reviewed editorial board and
presented at the international conference of the Society of
Environmental Toxicology and Chemistry (SETAC, EU May
and US November 2022), the Society of Toxicology (SOT,
March 2022) and the American Chemical Society (October
2022). In 2022, TIP, also in cooperation with USTMA,
went ahead with the definition of a method for the sample
generation of rubber particles from tyre treads to support the
scientific community with standard reference materials, very
similar to TRWPs, to be used for further scientific studies.
During 2022, TIP also finalised and published the update
of the “Product Category Rules” (PCR), published in 2018,
which are 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
can be comparable among the various manufacturers. With
reference to the aggregated sector environmental reports,
TIP published the report “Environmental Key Performance
Indicators for Tire Manufacturing 2009-2021” 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 2022, 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. These activities were also supported by
the “End-of-life tyre (ELT) management Toolkit” (2021), with
the specific objective of supporting the development and
improvement of end-of-life tyre management systems, a
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”, 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.
Following the publication in May 2021 of the “Sustainability
Driven - Accelerating Impact with the Tire Sector SDG
Roadmap”, which is a Sustainable Roadmap for the sector,
identifying how the value chain interacts with the UN
Sustainable Development Goals (SDGs), TIP is moving
forward with its activities taking into consideration the areas
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Pirelli Annual Report 2022 where the sector can contribute most.
This Sustainable Roadmap also led to highlighting the
need for TIP to evolve through the revision of its mission,
organisational and governance structure, The evolution of
TIP was guided by a Task Force that led to a broadening
of its mission, which now, in addition to reaffirming its
founding objectives, aims to anticipate, understand and
address global Environmental, Social and Governance
(SDG) issues relevant to the industry and its value chain. The
organisational structure was expanded with the creation of
a new “Action & Engagement” area, which complements the
“Research” area, with which TIP aims to target actions on
key ESG issues and coordinate interaction with TTAs and
stakeholders. Within this area, activities have already been
launched on two topics considered key for the sector: “TRWP
Impacts Mitigation”, which aims to map all possible TRWP
impact mitigation actions and their potential worldwide, and
“UN Treaty on Plastics Pollution” (Advocacy Strategy), which
aims to participate in the negotiations on the development of
the “UN Plastics Treaty”, preparing industry position papers
and identifying alternative circular economy solutions.
TIP’s dialogue with the leading Tire Trade Associations (TTAs)
ETRMA/USTMA/KOTMA/JATMA within the ad-hoc Global
Dialogue platform continued in 2022, with the aim of sharing
the progress and results of TIP’s activities and supporting
them in interacting with their stakeholders.
The Transforming Urban Mobility project, which brings
together
international companies from the automotive,
auto parts, transportation, oil & gas, utilities 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
in future mobility such as electrification and data sharing, as
well as a new workstream 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.
The Future of Work Project brings together
leading
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.
SOS 1.5 PROJECT
To maintain the world as a safe operating space, we need
to keep the temperature rise to a maximum of 1.5°C
above pre-industrial levels. Achieving this will require a
rapid transformation of systems, to decarbonise on an
unprecedented scale, and the private sector has a crucial
role to play in the process. Companies must match their
climate ambitions with sound implementation strategies to
accelerate the systems transformation we need.
The SOS 1.5 project is designed to support these companies
to develop the strategy to shift their corporate footprint to
net-zero carbon, to collectively identify and remove barriers
to a low-carbon economy and to mobilise their value chain
in the same direction. Climate risk exposure management
(adaptation) is the new project work stream for 2022. The
project includes expertise, co-developed orientation and
innovative tools and solutions tailored to the maturity level of
our members.
Main workflows:
→ accelerating the climate journey:
→ improving global standards and methods;
→ Scope 3 Carbon transparency (Incl. new automotive sector
deep dive);
→ Climate Value Accounting for Products, Technologies and
Services;
→ adapting to climate risk and building business resilience
(in scoping).
IRSG – INTERNATIONAL RUBBER STUDY GROUP
Pirelli is a member of the Industry Advisory Panel of
the International Rubber Study Group (IRSG) based in
Singapore, an intergovernmental organisation that brings
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.
IRSG, following the signing in 2019 of a Memorandum of
Understanding with the Global Platform for Sustainable
Natural Rubber (GPSNR), continued its collaboration to
achieve the common objectives with regard to the sustainable
production and consumption of natural rubber.
During 2022, IRSG decided to recalibrate the IRSG Model
to forecast the demand and supply of natural and synthetic
rubber by factoring in new determinants or changes in the
industry, as well as risk factors related to climate change.
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.
Moreover, as recommended by IAP members at the meeting
held in May 2022, IRSG launched a Scenario Analysis
Working Group to discuss the set of variables, which could
affect the global rubber supply and growth in demand and
any likely scenarios, as well as supporting a better-quality
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REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN global strategic dialogue on the future of the rubber economy.
risks,
Regarding climate change
IRSG promoted a
coordinated action with the main R&D organisations dealing
with natural rubber (IRRDB, CIFOR and CIRAD) in order
to establish a common understanding of the main actions
needed to safeguard and sustainably increase natural rubber
production, while contributing to climate mitigation goals.
A webinar on ‘Natural Rubber and Climate Change: Towards
COP27’ was organised by IRSG, IRRDB, CIFOR and CIRAD
in November 2022 to reinforce the message that including
natural rubber in the National Determined Contributions
(NDCs) and National Adaptation Plans (NAPs) of the
governments of producing and user countries represents an
opportunity to adopt an integrated approach.
IRSG participated as a member in the launch of the Forest,
Trees and Agroforestry Partnership FTAP held in Seoul as a
side event at the World Forestry Congress in Korea in May
2022. The FTAP will focus on enhancing the forests, trees
and agroforestry contributions to the SDGs. A foresight
workshop was held on 23 November 2022 to kick-start
a stream of work on foresight, emerging issues and new
responses and narratives on forests, trees and agroforestry
and more broadly on the world’s landscapes.
EU-OSHA – EUROPEAN OCCUPATIONAL
SAFETY AND HEALTH AGENCY
In 2022, for the fourteenth consecutive year, Pirelli continued
to be an official partner of the European Occupational Safety
and Health Agency (EU-OSHA), which addresses a different
problem every two years. In particular, in 2020 Pirelli
adhered to the 2020-2022 campaign “Healthy Workplaces
Lighten the Load” which is 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, the leading European network of companies for
sustainability and corporate responsibility. CSR Europe
supports companies and industries in their transformation
and collaboration towards practical solutions and sustainable
growth. The goal is systemic change both to achieve the
SDGs and to build with European leaders and stakeholders a
global strategy for a sustainable Europe 2030.
Pirelli has been supported by CSR Europe in the organisation
and moderation of its Stakeholder Dialogues, 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 Activity Roadmap, published
on Pirelli website.
For more information on CSR Europe’s many areas of activity,
see www.csreurope.org.
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 2022, Pirelli requested the Science Based Targets
initiative (SBTi) to upgrade its greenhouse gas emission
reduction targets in line with the level that science requires
to keep climate warming within 1.5°C, as recommended in
November 2021 by the Glasgow Climate Pact, signed after
the COP26 (United Nations Conference of the Parties). In
May 2022, the new 2025 absolute CO2 emission reduction
targets set by Pirelli for its production processes and supply
chain obtained formal validation by the SBTi, which judged
them to be consistent with the actions necessary to contain
the increase in the Planet’s temperature within 1.5°C. In
2020, Pirelli had already obtained validation by the SBTi
of its emission targets that envisaged actions to contain
temperatures “well below 2°C”, as indicated by the 2015
Paris Agreement, which were reached at the end of 2021, 4
years ahead of the original deadline.
In June 2022, Pirelli also expressed to SBTi its commitment
to the Net Zero standard for the formalisation, within two
years, of a long-term target to reduce value chain emissions
by around 90% by 2050 at the latest.
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 Decarbonisation:
a just and inclusive transition” with the aim of leveraging the
commitment of Italian companies adhering to the UN Global
Compact on the issue of decarbonisation.
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
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Pirelli Annual Report 2022 Marrakech (2016), the “Business for COP21 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 “2nd
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
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.
improving
Since its 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 inclusion through
sporting activities for young people.
Pirelli for some years now has 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.
215
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 sections “Planning of UN
Sustainability and Sustainable Development Goals” and “UN
Global Compact”.
The amount of the disbursements in support of the External
Community incurred by Pirelli in 2022 is shown in the section
“Contributions to the External Community”, of this report.
ROAD SAFETY
is synonymous worldwide not only with high
Pirelli
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,
reference is made to the section “WBCSD” of this report.
There are numerous road safety initiatives implemented in
the countries where the Group operates.
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN In Italy, in 2022, 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 in-depth
event on the subject of road safety on the occasion of the Day
of Remembrance for Road Victims in November. The issue of
road safety on mountain roads was explored in depth at the
Seminar, organised by the Universities of Brescia and Parma,
also sponsored by Pirelli and held in Ponte di Legno in March,
while attention to sustainable and safe mobility for children
was the focus of the initiative Siamo Nati per Camminare
(We are born to walk) promoted by the Genitori Antismog
association with the patronage of the Municipality of Milan
and aimed at children in Milan’s primary schools.
In the second part of 2022, two important regional and
national projects were launched, both with a particular
focus on sustainable mobility, understood here as safer,
environmentally-friendly, efficient and accessible mobility
that strengthens national competitiveness through practical
and scalable solutions: the MOST (National Centre for
Sustainable Mobility) and MUSA (Multilayered Urban
Sustainability Actions). Both are part of the actions envisaged
within the PNRR and have a multi-year horizon, but while the
MOST is totally focused on sustainable mobility at a national
level, the second has a broader scope on the theme of urban
regeneration, where mobility is in any case a fundamental
aspect but not the only one, and has a local perimeter focused
on the Lombardy region and more specifically on Milan.
Pirelli in these projects acts on the one hand by contributing
to the development of sustainable tyres in terms of rolling
resistance reduction, material sustainability and digital
integration, and on the other hand by foreshadowing the main
characteristics of the city of the future and identifying the
mobility services that will enable its increasingly sustainable
development. 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 UK, 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.
In 2022, Pirelli continued to invest in various initiatives in
favour of road safety education on two wheels. In particular,
the commitment focused on collaboration with driving
schools for the training and development of 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 and Scuola
Motociclismo, 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 long-standing 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 Politecnico of Milan, the Politecnico
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 in Romania, the
University of Qingdao in China, and the Technical University of
Darmstadt, the University of Applied Sciences in Darmstadt
and the DHBW of Mannheim, Germany, to name a few.
The Company supports educational and didactic programmes
that are able to give less fortunate young people the tools
to improve their condition; it contributes scholarships and
research projects, firmly believing in training as vital to
individual growth and the economic growth of a country.
In China, Pirelli sponsored 40 scholarships for Science and
Technology students of the University of Qingdao. Meanwhile
in Turkey, the company supported through the donation of 10
laptops, an institute that helps children in need, the Turkish
Education Foundation (TEV). In addition, the company has
organised a cafe-library space within the TEV premises
for scholarship students. In Brazil, Pirelli supported the
Educandario initiative, helping around 750 children and
young people.
In Romania, partnerships with the Universities of Craiova,
Pitesti and
the Polytechnic University of Bucharest
concerned the awarding of scholarships and continued
during 2022. 2022 was the fifth year of a project at Pirelli
in which 48
Slatina (Romania),
mechanical and electronics students received a monthly
scholarship and did practice sessions at the factory. 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.
involving dual studies
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 Indonesia, Pirelli has
worked with local schools to develop skills applicable to work.
The company donated funds for the renovation of a primary
school, and supported an organisation that promotes
entrepreneurship through capital and training.
Pirelli also organised visits for high school students and
engineers to the former factory and energy plant. In Russia,
the company also hosted student visits.
In Germany, with funds raised by employees and the company,
purchases were made of digital devices for kindergarten
children, books for the library of a primary school, and a
device to promote awareness for children with disability.
In Argentina, Pirelli’s experts gave lectures in local technical
216
Pirelli Annual Report 2022 schools on safety in the workplace and how to get a job,
with the participation of more than 250 students. Pirelli also
gave a training course on vocational training guidance for
the community. Finally, the company made a donation of 111
chairs to a local technical college.
sporting activity resumed with much enthusiasm on the part
of the participants.
In Russia, Pirelli organised sports activities for children from
three orphanages in the Voronezh area.
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 Italy, during 2022, the Percorsi per le Competenze
Trasversali e per l’Orientamento (PCTO) project continued
in Settimo Torinese. The project involves classes from
chemical and technological high schools in the area and
aims to accompany the students belonging to the classes
involved, 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 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.
Pirelli continued its collaboration with natural rubber supplier
Kirana Permata in Indonesia to train natural rubber farmers
on sustainable farming methods, preserving and prolonging
In addition, the collaboration
the
concerned the provision of scholarships for the children
of these farmers. The beneficiaries of the projects were
approximately 90 farmers and 80 students.
life of hevea trees.
SPORT AND INCLUSION
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 like isolation and solitude.
Since 1997, Inter Campus has developed social, flexible
cooperation and long-term actions, in 30 countries around
the world with the support of 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, involves
about 120 children from the area. Following the pandemic,
217
In France, Pirelli contributed to the Special Olympics in
support of activities for athletes with disabilities.
judo
In Brazil, Pirelli supported football, volleyball and
programmes, and sponsored karting
lessons for 80
youngsters. The Seci Social football programme in Santo
Andrè involves some 532 children in after-school activities.
As a matter of interest, music and dance activities are also
available. Meanwhile judo classes were held online due to the
pandemic involving more than 1400 children.
In the United States, Pirelli sponsors a football programme
at the YMCA in Rome, Georgia, while in Germany Pirelli
has supported a jump rope team for participation in the
European Championship in Bratislava. The company in
Germany also donated sports equipment to the primary
school in Sensbachtal.
SOCIAL SOLIDARITY
The responsible approach taken by Pirelli to involvement
and inclusion takes the form of social solidarity activities
worldwide. The pandemic has severely affected millions of
people around the world.
In Spain, Pirelli made a donation to the NGO Caritas Catalunya
to support about 18 families for about three months. In
addition, 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 since 2015 has contributed to the “Chance”
project, which provides private lessons to about 600 orphans
from various orphanages. In Kirov, Pirelli donated funds and
chairs to the Nadezhda orphanage, and in Voronezh Pirelli
gave gifts to the elderly, support to motherless children, and
support to the orphanage in Anna.
In Romania, Pirelli participated in a fundraising event for the
Parada Foundation to support homeless children. Social
and cultural activities for the Slatina community continued
in 2022, such as the street food festival and local charity
markets.
In China, Pirelli supported 32 orphaned and/or impoverished
children in Yanzhou. In Indonesia, Pirelli made a donation to
support 70 elderly people for a year. In Turkey, Pirelli donated
tyres for the service vehicle of the Association of the Disabled,
and supported an institute that fights discrimination against
people with Down syndrome.
Meanwhile, in Germany, Pirelli made a donation to “Aktion
behindertes Kind” to support the Finkennest youth home for
children with disability.
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN In Brazil, Pirelli supported several social solidarity activities:
“Aprender Brincando”, an after-school project with
activities for 200 children (run online during the pandemic);
“Servico de Convivencia Meninos e Meninas”, also an after-
school activity involving 50 children; and “Projeto Guri”, an
important musical activity involving more than 290 children
and young people.
In Mexico and the United States, donations were made to the
non-profit organisation United Way and the local government,
a new after-school project in Puerto Interior in Silao, near the
Pirelli factory. The initiative, called “Rodando Juntos por la
Niñez”, involves about 200 children from the disadvantaged
population, aged between 6 and 12. The children are
offered workshops divided into five areas: socio-emotional,
educational reinforcement (to resume the teaching lost in
the Covid-19 era), hygiene and health, environment, and life
projects (to stimulate the children to set short- and long-term
goals and learn discipline and decision-making).
Also in Mexico, Pirelli, facing an emergency following an
increase in stray dogs, created a kennel adoption service.
A team of Pirelli volunteers took care of collecting the dogs,
their hygiene and vaccinations, and an adoption programme
with local families. The project was a great success.
Pirelli also contributed to emergency response activities
with a donation to the Jiaozuo Red Cross in China, with the
Fucheng Sub District Office, Zhongzhan District. In Indonesia,
Pirelli donated funds for the rehabilitation of a road following
a landslide. Also in Germany the company supported a local
fire brigade initiative for aid to Ukraine, and in the UK Pirelli
supported the NGO Homes for Ukraine. In Romania, Pirelli
employees made a fundraiser and donation through the Red
Cross to support Ukrainian families affected by war.
In March 2022 Pirelli donated €500,000 to help Ukrainian
refugees affected by the war, supporting UNHCR and the
Italian Red Cross, as well as promoting a collection campaign
among its employees.
HEALTH
It should also be mentioned that in Brazil Pirelli supported
the Pequeno Principe paediatric hospital and the Casa da
Crianca Paralitica, an institute that offers free rehabilitation
treatment for children with physical and neurological
disabilities.
In Turkey, Pirelli employees ran a marathon to raise funds
and donate them LOSEV, a foundation for children with
leukaemia. In Indonesia Pirelli donated vitamins and kits to
fight malnutrition and support the growth of children. It also
helped with the collection of blood donations.
In the UK Pirelli has dedicated many donations to health
initiatives, such as Hospice at Home, Birmingham Children’s
Hospital, Cancer Research UK, Eden Valley Hospice Light
Up A Life, Prostate Cancer UK, Alzheimer’s Society, Derby
& Burton Hospitals’ Charity, Parkinsons UK, and Rainbow
Children’s Hospice.
ENVIRONMENTAL INITIATIVES
In line with the company’s vision of sustainability, Pirelli
supports various environmental projects around the world.
In Mexico, Pirelli coordinated a “llantaton” (a “tyre-a-thon”),
i.e. the collection of about 13,000 end-of-life tyres in the
municipality of Leon, to promote local hygiene. The collected
tyres were used as fuel for cement factories.
Reforestation is a core value for Pirelli. In Mexico, Pirelli
renewed the agreement with the Institute of Ecology of the
State of Guanajuato to care for an additional 10 hectares,
for a total of 50 hectares, in the “Cuenca de la Esperanza,” a
protected area. Over the years, Pirelli has been responsible
for planting more than 35,200 native trees in the area.
In the US, Pirelli partnered with The Nature Conservancy and
Berry College in Rome, Georgia, to restore the Longleaf Pine
species to the local mountains. Pirelli also made a donation to
the Coosa River Basin Initiative.
In Indonesia, Pirelli employees collaborated with the NGO
Massal and the Subang district government to replant
200 trees. Pirelli also collaborated with the Sea Turtle
Conservation Group in Sukabumi to adopt 400 sea turtles,
which were then released into the sea.
Furthermore, in 2022, Pirelli’s commitment, in partnership with
BMW, continued alongside Birdlife International for 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 improving the livelihood
of 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). For more information, please refer to the
chapter “Sustainability of the natural rubber supply chain”.
CULTURE AND SOCIAL VALUE
The internationality of Pirelli also emerges from a love for
culture, with initiatives that again in 2022 found a place
in a number of countries around the world. 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 cultural 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.
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Pirelli Annual Report 2022 In the field of music, Pirelli sponsors the Mozarteum
project in Brazil, in which major international classical
music orchestras participate. In 2022 the concerts were
also broadcast online. Also in Sao Paulo, Pirelli in 2022
sponsored the Museum of Modern Art, one of the most
important museums in Latin America, and the Pinacoteca
de Sao Paulo. Still in São Paulo, Pirelli will be sponsoring
plastic arts workshops for the elderly, social institutions,
students and teachers in 2023, courses aimed at restoring
manual skills and dignity following the pandemic. Pirelli
also supports the Em Busca da
Infancia Prometida
project, an arts education programme for teachers in
children’s schools. In 2022, Pirelli also sponsored a festival
for motorcyclists with music and art events, as well as
sponsoring the Italian Film Festival in São Paulo.
In Germany, Pirelli supported a musical night of the Verein
zur Forderung der Kirchenmusik in Michelstadt and in the
US, Pirelli supported the Rome Symphony Orchestra.
FONDAZIONE PIRELLI (PIRELLI FOUNDATION)
One of the missions of the Fondazione Pirelli, or Pirelli
Foundation, established in 2008, is the preservation of the
Group’s historic and cultural heritage and the enhancement
of its corporate culture through initiatives with a strong social
and cultural impact, exhibitions, as well as in collaboration
with other cultural institutions. During 2022, 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 in the first period
of the year only. The year 2022 was especially dedicated to
the company’s 150th anniversary celebrations. Among the
main ones, the following are worth mentioning:
Publishing project “Una storia al futuro. Pirelli, 150 anni
di industry, innovazione, culture” (A History Aimed at the
Future. Pirelli, 150 years of industry, innovation, culture”
Italian and English versions,
is a multi-voice account of Pirelli’s main
The book
innovations and the protagonists of the
technological
company’s research world. The book, published by Marsilio
in
includes contributions
from representatives of institutions, including the former
Minister of Universities and Research Maria Cristina Messa
and the rectors of the Polytechnic Universities of Milan
and Turin, Ferruccio Resta and Guido Saracco, from great
Italian authors, such as Bruno Arpaia and Ernesto Ferrero,
and international authors, such as Ian McEwan, Geoff
Mulgan and David Weinberger, as well as protagonists from
the worlds of architecture, music, culture and journalism
such as Renzo Piano, Salvatore Accardo, Giuseppe
Lupo and Monica Maggioni. The book is also enriched
by an iconographic and documentary apparatus from
the company’s Historical Archive and by an unpublished
reportage on innovative and sustainable raw materials and
materials in the Research & Development laboratories of
the Pirelli Headquarters in Milan Bicocca commissioned to
photographer Carlo Furgeri Gilbert.
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“Pirelli, When History Builds the Future” exhibition at the
Pirelli Foundation
The exhibition set up in the Pirelli Foundation documents the
company’s history of research and innovation: from technical
know-how, which has its roots in the tests conducted in
sporting competitions “from the track to the road”, to
the activities of heritage enhancement, passing through
the technical documentation relating to the design and
development of products and machinery displayed in a new
area of the Historical Archive. The multimedia installation
“Inner Future”, curated by NEO [Narrative Environments
Operas], and the report “Shapes, Patterns, Movements and
Colors” by Carlo Furgeri Gilbert complete the narrative by
offering a glimpse into the future. The exhibition also has a
digital development at pirellibuildsthefuture.org.
Triptych of coins and commemorative stamps
In January, the Poligrafico e Zecca dello Stato and the Ministry
of Economy and Finance presented the Stamp Collection
2022, which also includes a triptych of commemorative
gold and silver coins dedicated to the Pirelli Group in
the “Eccellenze Italiane” series of its catalogue. A stamp
dedicated to the company was also issued on 28 January
2022 as part of the thematic series “The Excellence of the
Production and Economic System”.
Travelling exhibition “Pirelli, tales of enterprise. 150 years of
history between passion and innovation”
In collaboration with the Communications Department,
the Pirelli Foundation created an exhibition itinerary, with
digital development, for corporate markets abroad. Among
the countries that have realised the exhibition route for
initiatives dedicated to the domestic, business, cultural
and institutional community, in company premises or at
museums, embassies, consulates, are Brazil, China, France,
Spain, Switzerland, USA and the UK. The exhibition was also
set up for the launch of the Pirelli Diablo 4 Corsa, organised
by the Moto BU at Mugello, and was also shown in the Pirelli
Pzero Experience Lounge (WW).
Digital projects for the leveraging of historical heritage and
corporate culture
The expansion of digital tools and the schedule of
communication activities continued, in order to reach
an increasing number of users. The graphic restyling of
the fondazionepirelli.org website has been designed and
completed, and new sections have been implemented
dedicated to the virtual tours of the Pirelli Foundation, the
Bicocca degli Arcimboldi and the “Storie del Grattacielo”
exhibition. The fondazionepirelli.org website, together
with the other digital projects, were visited a total of
102,208 times (+4.4% vs. 2021). The chatbot on the
website’s home page underwent a graphical overhaul.
The monthly issues of the newsletter “Fondazione Pirelli
e-news” reached an average of about 3,000 contacts. The
“Foundation Recommendations” section of the website was
implemented with the publication of 97 book reviews. In the
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN context of digital projects dedicated to the promotion of
reading, it is also worth mentioning the reviews and video
interviews published on social channels and Vimeo for the
“Premio Campiello 2022”, an initiative sponsored by Pirelli
(post coverage: 39,464). The social accounts of the Pirelli
Foundation (Facebook, Instagram, Twitter) have reached
14,777 followers (+ 4.5 vs 2021), with a total coverage of
21,714,978 (+ 389.2% vs 2021). What was produced was
1,173 pieces of content, including 145 stories. The published
videos reached a total of 655.7K views on the Facebook
platform and were also channelled through the Vimeo
channel, which totalled 4,584 views. Also in 2022, the Pirelli
Foundation contributed to the implementation of editorial
plans for the Pirelli Corporate channels.
Reading Promotion Initiatives
→ As part of the sponsorship of the Campiello Prize, the first
edition of the Campiello Junior Prize, an award for Italian
works of fiction and poetry for children, came to an end and
the second edition was launched, with the introduction
of two separate categories: children between the ages
of 7 and 10 and children between the ages of 11 and 14.
Between March and April, two events were organised to
promote the three finalist authors of the first edition of
the Prize and interviews were conducted and published
on the Foundation’s social channels. On 6 May at H-Farm,
in Roncade (TV), the winner of the Prize was announced:
Antonella Sbuelz with the novel “Questa notte non torno”,
published by Feltrinelli. On 16 December, the selection
of the two finalist trios for the second edition of the
Campiello Junior Prize took place live via streaming from
the Pirelli HQ Auditorium.
→ Pirelli corporate libraries: the combined library holdings
of the Bicocca and Bollate libraries now exceeds 9,000
catalogue titles; the Bicocca library recorded over 1,400
loans, more than 2,000 movements in total and about
600 users registered between the two libraries. The
Biblionews newsletter, with reviews and regular updates
on books and libraries, reaches around 330 subscribers.
PIRELLI EDUCATIONAL FOUNDATION: EDUCATIONAL
AND TRAINING PROJECTS FOR STUDENTS AND
TEACHERS
→ Educational workshops aimed at primary and secondary
schools: the courses for the second quarter of the
2021/2022 school year and the October-December 2022
period involved a total of over 3,320 students and over
220 teachers. In the first part of 2022, teaching activities
continued mainly in digital mode, while in-person visits to
the Pirelli Foundation headquarters also started again in
September. On 19 September, the 2022/2023 educational
programme “Quando la cultura fa il pneumatico” (“When
culture makes the tyre”) was presented and in-person
and virtual tours were organised for teachers, with a total
of around 70 people registering. Where requested and
subject to an agreement, training credits were recognised
under the PCTO - Percorsi per le Competenze Trasversali
e l’Orientament (Courses for Cross-Competencies and
Orientation). Co-operation with colleagues in the
Research and Development Department for visits to
experimental and chemical laboratories was reactivated.
In addition, more than 200 teachers attended the 10th
edition of the training and refresher course for entitled
“L’Italia tra declini e rinascite. Una storia economica” (“Italy
Between Decline and Rebirth. An Economic History”),
organised in collaboration with Fondazione Isec and
Cinema Beltrade.
→ Projects aimed at universities and graduate schools:
in 2022 about 130 students took part in workshops
organised by the Pirelli Foundation with specific focuses:
technological innovations related to tyre production,
business history, advertising graphics. The institutions
involved were: Politecnico of Milan (Architecture and
Design Faculty), University of Milan-Bicocca, Raffles
Milano-Istituto di Fashion e Design, Darmstadt Technical
University (Germany).
→ Other projects in the educational field: - support for the
National Chemistry Competition at the Molinari Institute
in Milan and guided tours of Pirelli’s chemistry laboratories,
the Pirelli Foundation and Headquarters for 36 teachers
from all over Italy; - participation in the 10th Festival of
Innovation and Science in Settimo Torinese with the talk
Pirelli e il nostro futuro sulle strade. Mobilità sostenibile,
pneumatici innovativi e sicurezza stradale (Pirelli and
Our Future on the Road. Sustainable mobility, innovative
tyres and road safety), meeting dedicated to secondary
schools (74 participants); - Parole in viaggio. Un gioco
che parte dalla scuola (Words on the road. A game that
starts at school): on the occasion of the 21st Corporate
Culture Week, an event dedicated to students aged 10 to
14 on the theme of reading was organised in the Pirelli HQ
Auditorium (155 participants).
Initiatives to promote corporate culture
More than 2,100 people took part in online and in-person
activities dedicated to promoting corporate culture in
2022, including: - Museocity with the online game “Back to
Bicocca. Pirelli and the places of industry”; - Trento 2022
Festival of Economics, with the presentation of the book
“Una storia al futuro” and the performance of the musical
piece Il Canto della Fabbrica by the Italian Chamber
Orchestra conducted by Maestro Salvatore Accardo; - 21st
Corporate Culture Week, with guided tours of the exhibition
Pirelli, When History Builds The Future; - Bookcity with the
event Una storia al futuro. Racconti d’impresa tra ricerca,
innovazione e cultura (History aimed at the future. Tales
of business between research, innovation and culture), at
the Corriere della Sera Foundation; - Archivi Aperti, with
guided tours and workshops for children. Also in 2022,
the Foundation supported the P Lunga training course,
organised by the HR Department.
Lending of materials to the external community, historical
and
iconographic research and production of editorial
content to support the brand
There were 145 requests relating to the setting up of plants,
fairs, events, Pirelli offices in Italy and abroad, loans of
220
Pirelli Annual Report 2022 materials for exhibitions and publications edited by other
institutions, historical videos and documentaries, interviews,
theses by scholars and researchers.
Among the main ones:
→ for trade fairs, events, offices and factories: new fitting
out of the Cycling factory in Bollate, fitting out of the
offices in the Campinas factory in Brazil, the Pirelli
offices in Atlanta, Yanzhou (China) and the new Digital
Solution headquarters in Bari; the Pirelli stand at MIMO
(Milan Monza Motor Show), Tyre Fair Cologne, Eurobike,
Autopromotec in Bologna.
→ for exhibitions: participation in the 27th Edition of the
ADI Compasso d’Oro Award and the related exhibition
at the ADI Museum in Milan with the project “Storie
del Grattacielo” (“Skycraper Stories”); “Motion. Autos,
Art, Architecture” at the Guggenheim Museum Bilbao;
“Italy and the International Graphic Alliance. 25
charts from the 1900s” at the Magazzino delle Idee in
Trieste; “Ovunque è Legnano. Da Legnano al mondo su
due ruote” (Everywhere is Legnano. From to the world
on two wheels” at the Fratelli Cozzi Museum; “Antonio
Bassanini Constructor from the 1900s at the ADI
Design Museum in Milan.
→ for publications: the catalogue of the exhibition “Donne
in equilibrio” (“Women in Balance”), produced by the
Salvatore Ferragamo Museum; an unpublished game-
book signed by Pino Tovaglia “Una storia lunga come”,
published by Lazy Dog, and the monograph “Alberto
Rosselli. Architettura, design e Stile Industria” (“Alberto
Rosselli. Architecture, Design and Style Industry”),
published by Quodlibet.
→ for films and documentaries: the documentary “Il tempio
della velocità” (“The Temple of Speed”), on the centenary
of the Monza circuit, and the film dedicated to the life
of Enzo Ferrari.
Also in 2022, participation in seminars and conferences
dedicated to Pirelli’s corporate culture.
PROCESSING OF PIRELLI GROUP HISTORICAL
ARCHIVE MATERIALS AND ASSET MANAGEMENT
→ Historical Archives: 3,592 documents catalogued,
25,673 digitalised, 1,463 restored (documentary,
iconographic, photographic - with focus on rallies - product
data sheets relating to the Research and Development
section).
→ Uploading of more than 8,600 digital assets (photographs,
videos, documents) for a total of 45,246 assets uploaded
onto the Digital Asset Management platform for the
long-term preservation of digital material.
In addition, the recovery and transfer of the historical
archive of the former Pirelli factory in Manresa (Spain),
containing photographs, advertisements, audiovisual items
on film and technical documentation related to products and
machinery, was carried out and started.
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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 reconversion of
a vast industrial facility into an arts centre. The vocation of
Pirelli HangarBicocca™ is that of a place open to the city and
its hinterland, of an institution that accompanies the normal
exhibition activity with a range of programmes intended to
bring contemporary art closer to an Italian and international
public, made up of art experts, representatives of the most
important museum institutions, trade journalists and the
general interest press, as well as an equally vast audience of
enthusiasts, students, families and non-specialist users.
In line with its mission, in 2022 Pirelli HangarBicocca™ held
solo exhibitions by the most important international artists
in the context of a programme distinguished by a character
of research and experimentation and special attention to
site-specific projects which are capable of maintaining
a dialogue with the unique characteristics of the space.
The 2022 artistic programme, curated by Artistic Director
Vicente Todolí, presented artists of great
international
profile, alternating exhibitions of very successful names with
exhibitions of emerging artists.
During the year there was a total attendance of about
165,703 visitors who visited the 4 major exhibition projects
international artists, and the
dedicated to Italian and
permanent installations I Sette Palazzi Celesti 2004-2015
by Anselm Kiefer and La Sequenza by Fausto Melotti, and
the Efêmero mural by OSGEMEOS: This number of visitors
was achieved while maintaining flow-restricting measures
during part of the year.
→ Anicka Yi, “Metaspore” (from 24 February 2022, closure
extended to 7 August 2022). The exhibition stimulated
visitors’ sensory and perceptual experience through
odours, mutant shapes and disorienting biological
elements. Examples of this are the multi-coloured microbial
ecosystems of the work Biologising the Machine (zoonotic
spillover), 2022 produced by Pirelli HangarBicocca™ in
collaboration with the University of Milan-Bicocca;
→ Steve McQueen, “Sunshine State” (31 March to 31 July
2022). The exhibition, organised in collaboration with Tate
Modern, brought together some of the most important
works from the career of the Turner Prize and Oscar-
winning artist and film-maker Steve McQueen. The
works on display also include the new video installation
Sunshine State commissioned by the International
Film Festival Rotterdam (IFFR) and premiered at Pirelli
HangarBicocca™;
→ Bruce Nauman’s “Neons Corridors Rooms” (15 September
2022 to 26 February 2023), organised in collaboration
with Tate Modern, London and Stedelijk Museum
Amsterdam, offered an in-depth look at the spatial and
architectural research of one of the most prominent living
artists in the history of contemporary art. The exhibition
project shed light on this specific, lesser-known and
lesser-studied area of Nauman’s expressive research,
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN which, throughout his career, investigated the human
condition and the deeper meaning of making art;
→ Dineo Seshee Bopape, “Born in the first light of the morning
[moswara’marapo]’ (6 October 2022 to 29 January 2023).
The anthological exhibition, which also included the new
production lerato laka le a phela le a phela / my love is
alive, is alive (2022) commissioned by TBA21-Academy
and co-produced with Pirelli HangarBicocca™, generated
a poetic visual landscape through materials such as soil,
water, clay, coal, bricks, ash, grasses, wood, and natural
light, offering the public a reflection on the concepts of
memory and reconciliation.
The presentation of the exhibitions was accompanied by the
publication of specific catalogues and texts. To accompany
Anicka Yi’s exhibition, the most extensive monograph ever
dedicated to the artist was produced (Marsilio Editori),
Metaspore (2022), which includes critical texts by art
historians and an unpublished interview of the artist with
biologist Merlin Sheldrake. In addition to a comprehensive
exhibition chronology of Anicka Yi, the volume includes a
previously-unpublished “cosmology” designed
in close
collaboration with the artist’s studio: a glossary with some
of her most significant literary, scientific and philosophical
references.
For the exhibition “Sunshine State” by Steve McQueen, the
catalogue of the same name (Marsilio Editori) presents an
in-depth look at the work that gives the exhibition its title,
presented in the spaces of Pirelli HangarBicocca™ in a world
premiere. The book brings together several essays and a
rich iconographic apparatus that focus on a new selection of
works conceived by the British artist and filmmaker over the
last twenty years. The monograph - the first to be published
in Italian - was conceived in close collaboration with the artist
and designed by designer Irma Boom, whose graphic design
is embellished by a series of papers that alternate to enhance
the different contents they support.
Dineo Seshee Bopape’s exhibition is accompanied by the
first monograph on the artist, “Born in the first light of the
morning [moswara’marapo]” (2022), which explores the
essential themes of his practice, including the relationship
between rituality, spirituality and nature and reflections
on healing practices and forms of political resistance.
The book, designed by the graphic studio bruno (Venice),
features three alternative covers that present drawings and
a poetic text by the artist together with a plurality of visions
and voices, including contributions from international art
historians and critics.
Finally, to coincide with Bruce Nauman’s solo exhibition
“Neons Corridors Rooms”, a volume was published
containing the most recent studies on the artist’s spatial
and architectural research, delving into the aspects of
corridors, rooms and neon works. In addition to an extensive
photographic documentation of the works, the publication
analyses the works in the exhibition through detailed
fact sheets containing a selection of images and archive
documents. In addition, the catalogue includes contributions
commissioned from international researchers, conservators
and art historians such as Francesca Esmay, Joan Simon
and Gloria Sutton.
Pirelli HangarBicocca™ produced the third edition of the
Annual Journal, which contains an account, through text
and images, of the institution’s activities in 2021. The new
edition emphasised the institution’s role in relation to the
communities it serves, for example with the creation of
a vaccination hub within the exhibition spaces during the
pandemic period, and the digital transformation plan with
the introduction of a Customer Relationship Management
system and the launch of the Bubbles project.
The Public Programme was inaugurated with an event
dedicated to Maurizio Cattelan’s exhibition: a walk through
the spaces of the “Breath Ghosts Blind” exhibition led by
Andrea Pinotti, lecturer in Aesthetics at the Università
Statale di Milano. In April, the symposium Sensory Ecologies
was held, dedicated to Anicka Yi’s exhibition, which involved
international scholars in a multidisciplinary meeting that
addressed issues related to art, science and technology.
A video made by the artist was also screened during the
evening. In connection with the Steve McQueen exhibition,
a conversation was organised in May between the artist and
Cora Gilroy-Ware, art historian and author of a contribution
to the exhibition catalogue. In June, a DJ set by musician
and producer Dennis Bovell took place in the museum’s
outdoor spaces.
On 13 June, Pirelli HangarBicocca™ hosted the opening
moment of the international conference Immersi nell’opera.
Dall’ambiente alla realtà virtuale (Immersed in the work. From
environment to virtual reality) dedicated to the interactions
immersive media and
images,
between environmental
contemporary artistic practices promoted by the University
of Milan within the ERC project AN-ICON “An-Iconology.
History, Theory, and Practices of Environmental Images”. The
opening day event, entitled Superfici e profondità. Cinema e
scultura nell’opera di Giorgio Andreotta Calò e Rosa Barba
(“Surfaces and Depths. Cinema and sculpture in the work of
Giorgio Andreotta Calò and Rosa Barba”), saw the artists in
dialogue with scholars Riccardo Venturi and Giuliana Bruno.
Pirelli HangarBicocca™ has also promoted the special
project Milano Re-Mapped, conducted
in collaboration
with the Milano-Bicocca University and with the support of
Fondazione Cariplo with the aim of promoting awareness of
the various independent situations existing in the Milanese
territory and fostering exchange between them and the city’s
cultural institutions. Following a research phase, which gave
rise to a series of workshops and meetings at the University,
the Re-Mapped Summer Festival took place on 11 and 12
July in the indoor and outdoor spaces of the Museo Milano.
The Re-Mapped Summer Festival is the multidisciplinary
to music, performing arts, video,
festival dedicated
publishing, graphics and other languages that presented
content produced by different curatorial projects active in
Milan selected by Pirelli HangarBicocca™.
Between November and December, events were organised in
connection with Bruce Nauman’s exhibition: a walk through
222
Pirelli Annual Report 2022 the “Neons Corridors Rooms” exhibition led by Stefano
Bartezzaghi, lecturer, semiotician and writer, who explored
the artist’s reflections on language, and a meeting with the
art critic and writer Teresa Macrì, who instead addressed the
themes related to the body in his work.
The Education Department presented new projects in the
field of training.
Between January and February, there was “Vedere significa
comprendere? Dalle opere d’arte ai meme” (“Does seeing
mean understanding? From works of art to memes”), a
training course for secondary school teachers, designed
together with the artistic duo The Cool Couple, with the
collaboration of the Degree Course in Primary Education,
“Riccardo Massa” Department of Human Sciences for
Education of the University of Milan-Bicocca. The course
participants were involved in a participatory design process
consisting of several meetings in blended mode.
May saw the presentation of “Something extraordinary - The
art of leadership”: an unprecedented and innovative training
course, designed for managers and entrepreneurs, born
out of the collaboration between Pirelli HangarBicocca™
and the employment agency Umana with the involvement
of the artist and performer Marcella Vanzo, which focused
on the transformative potential of contemporary art and the
innovative and complex thinking skills on which the practice
of today’s most interesting artists is based.
Also in May, a project was developed with the aim of providing
the broader and more diverse public with inclusive tools
for the enjoyment of the installations: with the patronage
of Pio Istituto dei Sordi and the collaboration of the LIS art
historian Carlo di Biase, an audio-visual guide in LIS (Italian
Sign Language) was produced, illustrating the permanent
installation The Seven Heavenly Palaces by Anselm Kiefer.
At the same time, as part of the No Barriers to Communication
service of the City of Milan, a collaboration was developed
with the Istituto dei Sordi di Torino for the production of LIS
videoguides illustrating the exhibition space, its history and
the works La Sequenza by Fausto Melotti and Efêmero by
OSGEMEOS.
All LIS audio-videoguides are available on the Pirelli
HangarBicocca™ website on a dedicated page.
Since the beginning of the year, all School and Kids activities
of the Education Department have been planned in presence,
intensifying the number of courses with the workshop
part taking place directly in the exhibition space. Despite
numerous difficulties on the part of the schools in organising
educational outings in the first half of the year due to the
outbreak of anti-coveting regulations, the School routes
were attended by students of all levels (from kindergarten to
secondary school).
Between June and July, the Education Department presented
“Edu Summer 2022”, a month-long project to explore Anicka
Yi’s exhibition in collaboration with science populariser
223
Agnese Sonato, didactics and experiential education expert
Roberto Sartor and the art duo The Cool Couple. Edu Summer
included workshops and summer camps in presence with
the involvement of participants aged between 6 and 12.
For the Kids programme,
in-presence activities were
conducted in relation to all hosted exhibitions involving
participants between 5 and 12 years old and their families.
December saw the presentation of the second edition
of the special programme “Winter is coming!”: in-person
workshops designed to explore Dineo Seshee Bopape’s
exhibition through experimentation with natural materials
and creative processes related to speech with poet Fedouà
El Attari and rhythm with musicians Magatte Dieng and Elena
Russo. These activities were dedicated to children between
6 and 10 years old with their families.
The production of Kids Guides for exhibitions continued,
integrating text and images with interactive and exploratory
activities for the whole family.
For adults, guided tours were offered with the involvement of
Pirelli HangarBicocca™ cultural mediators.
Pirelli HangarBicocca™ continued its usual communication
activities - through social planning, WEB content, ADV, SEO,
SEA - and press activities (through the training of international
journalists, the realisation of press strategies and press
conferences) to support the promotion and dissemination
of the institution, exhibitions, cultural events and activities
dedicated to members, children and families. Direct Email
Marketing was intensified following the launch of Pirelli
HangarBicocca™’s Customer Relationship Management
system. Through the activation of the proprietary system of
booking - on-site and online - the free ticket to the museum
and the integration of the sales system of paid products
and services provided by the institution - membership
programme, guided tours, Kids activities and e-shop - the
institution can acquire the data of visitors who access
the exhibition space and those who purchase a service,
constantly increasing its Customer Base to whom targeted
communications are addressed. The e-shop, which became
fully operational during the year, generated revenues of
10.2% of the total sales of products and services.
During 2022, 339 visitors joined the Pirelli HangarBicocca™
membership programme. The new season started on 1
October 2022 and had 340 active members at the end
of 2022. Members were granted preview access to the
exhibitions and guided tours by the curators. Reserved seats
at Public Programme events and discounts at the Bookshop
or affiliated institutions were also guaranteed. Since April, the
membership programme has been integrated into the CRM
system for managing the database and sending dedicated
communications to members.
Pirelli HangarBicocca™ has hosted several major events,
including the presentation of new car models by Ferrari,
Land Rover and Bentley. The annual Fideuram Sales Force
Convention,
Innovation Forum 2022,
Ideal Standard’s Dinner at the Salone del Mobile, Tod’s PE
the Mastercard
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN 2023 fashion show, the launch of the new Pirelli Calendar,
Quattroruote’s Ruote Classiche event and Progetto Itaca’s
Charity Dinner were all hosted. The year ended with
Christmas events at KPMG, Prysmian and Humangest as
well as the Pirelli Executive cocktail dinner. The foyer hosted
small events such as the presentation of sailor Ambrogio
Beccaria’s solo ocean navigation project in collaboration with
Pirelli and Mapei, the BCC annual convention and a training
day at Banca Generali.
the selection of exhibition publishing
During 2022,
and merchandising proposals available at
the Pirelli
HangarBicocca™ Bookshop was also expanded. On the
occasion of the Pirelli Group’s 150th anniversary, a selection
of dedicated merchandising was made available.
224
Pirelli Annual Report 2022 225
REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN Pirelli Annual Report 2022
226
ON
CORPORATE
REPORT
THE
GOVERNANCE
AND
OWNERSHIP
PIRELLI &
SHARE
OF
C. S.P.A.
PURSUANT TO ARTICLE 123-BIS TUF
227
REPORT ON CORPORATE GOVERNANCE
GLOSSARY
Annual General Meeting: the shareholders’ meeting called
to approve the financial statements as of 31 December 2022.
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.
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
Piazzetta Umberto Giordano 4, Milan-Monza Brianza-Lodi,
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.
Pirelli or the Company: 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 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.
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 Regulations: the Regulations, adopted by the Board
of Directors 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.
Corporate Governance Committee: the Italian Corporate
Governance Committee for listed companies, promoted by
Borsa Italiana S.p.A., as well as by ABI, Ania, Assogestioni,
Assonime and Confindustria.
Board of Directors: the Board of Directors of Pirelli & C. S.p.A..
Issuers’ Regulation: the Regulation approved by Consob
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.
Consob: the National Commission for Companies and the
Stock Exchange.
Report: this report on corporate governance and the ownership
structure prepared pursuant to art. 123-bis TUF.
Report Date: indicates 5 April 2023, 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 market - now Euronext Milan (EXM) - organised and
managed by Borsa Italiana S.p.A.
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.
Year: the financial year to which this Report relates, i.e. the
year ending 31 December 2022.
Group: collectively Pirelli and its subsidiaries, as defined in art.
2359 of the Civil Code and art. 93 TUF.
Shareholders’ Agreement Renewal: the agreement entered
into on 16 May 2022 by ChemChina, CNRC, SPV HK 1, SPV
Lux, MPI Italy, Camfin and MTP&C, valid for three years
from the date of publication of the notice convening the
Pirelli shareholders’ meeting for the approval of the financial
228
Pirelli Annual Report 2022 statements as at 31 December 2022. The essential content
of the Shareholders’ Agreement Renewal, to which reference
is made for further information, is available on the Website
(www.pirelli.com).
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.
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 Guillaume Kroll 5, L-1882,
Luxembourg (Grand Duchy of Luxembourg), with Luxembourg
Companies and Commerce Register number B-195473.
SRF: Silk Road Fund Co., Ltd., a company established under
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).
Bylaws: the Bylaws of Pirelli & C., available on the Website.
TUF: Legislative decree 58 of 24 February 1998, as
subsequently amended and integrated (the Consolidated Law
on Finance).
229
INTRODUCTION
The Report presents the corporate governance system
adopted by the Company. This system is consistent with
the principles and the recommendations 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.113
The information contained in the Report refers, where not
expressly indicated, to the Year.
1. COMPANY PROFILE
Pirelli, with its 31,300 employees and revenues of around
Euro 6,615 million in 2022, 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 and monitoring of their
implementation (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 in charge of sustainability issues (for
more details see paragraph 9.7 of the Report);
→ 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
113 Pirelli’s Bylaws (Art. 3.3) specifically rule that “Pirelli’s corporate government will be characterised by
the international best practice.”
REPORT ON CORPORATE GOVERNANCE Company operates (for further details see paragraph 14.1 of the Report);
→ 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 of the Report).
For the sake of completeness, it should be noted that, pursuant to the Corporate Governance Code, the Company
falls within the definition of “concentrated ownership company” and “large company”. The Company did not use
any flexibility options admitted by the Corporate Governance Code.
1.1. MODEL OF CORPORATE GOVERNANCE
The governance structure of Pirelli is based on the traditional model of administration and control. 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
BOARD
SECRETARY
SUPERVISORY
BODY
The Board of Directors has set up five internal board committees with advisory and investigatory functions and
with the task of making recommendations (see paragraph 6 of the Report for further details).
The external audit of the accounts is entrusted to PricewaterhouseCoopers S.p.A., a registered auditing firm (see
paragraph 9.9 of the Report for further details). The Company’s Governance Structure is completed by a Board of
Statutory Auditors (five standing and three alternate members) with the functions of supervising administration
and compliance with the law and Bylaws (see paragraph 11 of the Report for further details), and a Supervisory
Body with the functions of supervising the operation of and compliance with the organisation, management and
control model adopted pursuant to Italian Legislative Decree 231/2001 (see paragraph 9.8 of the Report for
further details).
Consistent with its tasks, the Board of Directors has defined the system and rules of corporate governance of
Group companies and the criteria and procedures for appointing members of the bodies of affiliate companies,
by means of a specific internal policy.
230
Pirelli Annual Report 2022 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.
It should be noted that 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 500,000,000.00 euros, 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 500,000,000.00 euros,
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 relevant bond regulations (the “Regulations”), 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.
As of 23 May 2022, the conversion price of the bonds is
6.1395 euros, calculated in accordance with the methods
provided for in the Regulations.114
Additionally, the Bylaws do not provide for the possibility of
increased voting rights or the issue of shares with multiple
voting rights.
subsidiaries of the latter, including MPI Italy, which directly
holds the shareholding.
Based on the communications received by the Company
until 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, annexed to this Report.
2.3. DIRECTION 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 direction 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.
2.2. SIGNIFICANT SHAREHOLDINGS OF CAPITAL
The Board of Directors has periodically reiterated these
assessments, most recently at its meeting of 5 April 2023.
The Company is indirectly controlled, pursuant to art. 93 of the
TUF, by Sinochem Holdings through ChemChina which, in turn,
indirectly holds the shareholding through CNRC and other
Conversely, Pirelli exercises direction and coordination of
numerous subsidiaries, having made the relevant publication
where necessary.
114 The conversion price stems from the adjustment made following the resolution of the Company’s
shareholders’ meeting of 18 May 2022 to distribute a dividend of 0.161 euros per ordinary share.
231
REPORT ON CORPORATE GOVERNANCE 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
For more information on the provisions contained in the
shareholders’ agreements referred to the relevant essential
information available on the Site, pursuant to Article 122 of the
TUF and Article 130 of the Issuers’ Regulation.
The Bylaws do not impose any restrictions on the transferability
of the shares issued by the Company.
2.6. CHANGE OF CONTROL CLAUSES
No securities have been issued that carry special rights of
control, nor the Company has adopted the option to increase
voting rights.
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
With reference to the shareholders’ agreements, of which the
Company is aware pursuant to art. 122 of the Consolidated
Law on Finance (TUF), please be informed of the Shareholders’
Agreement Renewal, aimed at regulating the governance of
Pirelli, among other things, in accordance with the terms and
conditions of the Shareholders’ Agreement entered into on 1
August 2019 by ChemChina, CNRC, SPV HK1, SPV HK2, SPV
LUX, MPI Italy, SRF, MTP&C and Camfin (the “Shareholders’
Agreement”). The Shareholders’ Agreement is currently in
force as of the Date of the Report and will remain effective
until the date of publication of the Notice convening the
Shareholders’ Meeting, on which date the Renewal of the
Shareholders’ Agreement will become effective.
An agreement is also in force between SRF and CNRC,
containing a number of stipulations pertaining in particular
to the exercise of the right to vote in the Pirelli Shareholders’
Meeting of SRF (l’“Amended and Restated Acting-in-
concert agreement”, as last amended on 29 March 2021).
In addition, the investment agreement signed between Camfin
and Longmarch Holding S.à.r.l. (“Longmarch”) on 13 May 2020,
subsequently amended on 30 June 2021 and tacitly renewed
for a further three years (and, therefore, until 13 May 2026) (the
“Investment Agreement”) is currently in force, pursuant to
which Longmarch, holder of an equity interest in Pirelli equal to
approximately 3.68%, undertook to manage the equity interest
in accordance with the agreements entered into with Camfin.
Lastly, on 28 February 2023, Brembo S.p.A. and Next
Investment S.r.l. with the parent company Nuova FourB
S.r.l., on the one hand, and Camfin, with the parent company
MTP&C., on the other hand, signed a shareholders’ agreement
concerning prior consultation both with respect to the exercise
of voting rights in shareholders’ meetings and with respect to
any purchases of Pirelli ordinary shares.
The most significant contracts containing clauses of this type
are summarised below.
2.6.1 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.
2.6.2 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.
2.6.3 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 an original total of Euro 525
million (as subsequently amended, the “Schuldschein”), divided
as follows: (i) 82 million euros maturing in 2021 (fully repaid in
advance in January 2021); (ii) 423 million euros maturing in
2023 (repaid in advance in several tranches, the last of which
in January 2023); and (iii) 20 million euros maturing in 2025.
The Schuldschein stipulates, inter alia, that Pirelli shall be required
to repay the loan in advance should certain events occur, including
a change in Pirelli’s control structure, as set out below.
In particular, the change of control clause may only be
invoked (except in specific cases permitted under the loan
agreement) if: (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 the voting shares
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
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Pirelli Annual Report 2022 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.
2.6.4 2019 BILATERAL LOAN WITH
INTESA SANPAOLO S.P.A.
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 EUR 600 million,
with Intesa Sanpaolo S.p.A. (“Intesa Sanpaolo”), 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
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, by virtue of contractual
agreement, directly or indirectly, individually or in concert with
one or more subjects, to designate the CEO of Pirelli.
2.6.5 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.
2.6.6 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”).
233
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.
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.
2.6.7 EUR 800 MILLION “SUSTAINABLE” CREDIT LINE
On 31 March 2020, Pirelli signed a new credit line in the amount
of EUR 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.
2.6.8 EQUITY-LINKED BOND CALLED “EUR 500
MILLION SENIOR 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
REPORT ON CORPORATE GOVERNANCE 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 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.
2.6.9 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, 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 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.
2.6.10 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 EUR 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 referred to in paragraph 2.6.11.
2.6.11 EMTN PROGRAMME AND NOTES
ISSUED IN 2023
On 23 February 2022, the Board of Directors, in the context
of the Company’s refinancing strategy, approved an EMTN
(Euro Medium Term Note) programme for the issue of non-
convertible, senior unsecured bonds for a maximum value
of 2 billion euros (“EMTN Programme”) to replace the
previous EMTN programme of 2 billion euros, approved on 21
December 2017 (“2017 EMTN Programme”). In the context
of the EMTN Programme, the Board of Directors authorised
the issue of one or more bonds - to be performed within 12
months of finalisation of the documentation - to be placed
with institutional investors by May 2023, for a maximum
total amount of up to 1 billion euros. As in the 2017 EMTN
Programme, newly issued securities may be listed on one
or more regulated markets and guaranteed by Pirelli Tyre.
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Pirelli Annual Report 2022 2.8. MANDATE TO INCREASE SHARE CAPITAL AND
AUTHORISATIONS TO PURCHASE OWN SHARES
With regard to the financial year ending 31 December 2022,
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.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.
The corporate governance system implemented by the
Company complies with the principles and recommendations
of the Corporate Governance Code. This was found to be the
case during the Year, in which the Company examined – with
the support of the Audit, Risks, Sustainability and Corporate
Governance Committee – the content of the Corporate
Governance Code, by assessing the potential impact on
Pirelli’s corporate governance system and pinpointing areas
of specific interest and possible adjustments to be made to
its corporate practices.
The Report has essentially been prepared using the Borsa
Italiana S.p.A. (“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.
On 11 January 2023, in the context of the EMTN Programme,
Pirelli started and successfully completed the placement of its
first sustainability-linked bond with international institutional
investors, for a total nominal amount of 600 million euros.
Pursuant to the EMTN Programme, bondholders will have
the right to request early repayment of securities (the so-
called “Put option”) in the event of a change of control under
the same terms and conditions provided for the bilateral loan
with Intesa Sanpaolo signed on 23 December 2021 and the
multicurrency term and revolving loan 2022 referred to in
paragraph 2.6.11 and 2.6.12.
2.6.12 EUR 400 MILLION “SUSTAINABILITY-LINKED”
CREDIT LINE
On 22 June 2022, Pirelli’s Board of Directors approved the
underwriting of a sustainability-linked credit line with a select
pool of international banks, for a total value of up to 400 million
euros, with a 19-month maturity, enabling further optimisation
of the Group’s financial structure.
The corresponding loan agreement - signed on 27 June
2022 - states, inter alia, that Pirelli is required to repay
the line should certain events occur, including a change in
Pirelli’s control structure under terms and conditions that
are the same as those provided for the bilateral loan with
Intesa Sanpaolo signed on 23 December 2021 and the
2022 multicurrency term and revolving loan referred to in
paragraph 2.6.11 and 2.6.12.
* * *
For the sake of completeness, it should be noted that, in
addition to the foregoing, as is customary, some companies in
the Pirelli Group have entered into contracts in the commercial
sector (i.e. contracts for the purchase of goods and services
and contracts for the sale of products) that provide for a
change of control clause concerning the interest held, directly
or indirectly, by Pirelli in them. This clause would therefore
only apply if the Pirelli Group company left the group. 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. With respect
to such scenarios, the Group maintains available committed
lines, in the amount of EUR 1 billion, sufficient to meet any
liability management needs.
2.7. CLAUSES IN THE BYLAWS ABOUT PUBLIC OFFERS
The Bylaws 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.
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REPORT ON CORPORATE GOVERNANCE 4. BOARD OF DIRECTORS
4.1. ROLE OF THE BOARD OF DIRECTORS
The Board of Directors plays a central role in the strategic guidance and management of the Company, and
the pursuit of its sustainability success. Pursuant to art. 11 of the Bylaws, the Board of Directors manages and
supervises the overall business of the company. To this end, it is vested with the broadest powers of administration,
with the exception of those reserved by law or the Bylaws 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 periodically 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);
→ plays a pivotal role in defining sustainability policies and strategies, identifying annual and long-term objectives
and monitoring their implementation and evolution (see the NFD for more details);
→ 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 - Related-
Parties Transactions Committee - Remuneration Committee - Audit, Risks,
Sustainability and Corporate Governance Committee
The provisions contained in the Bylaws, 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 Bylaws, 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 Bylaws 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.
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Pirelli Annual Report 2022 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 held on 18 June 2020. Its term of
office will end with the approval of the financial statements as at
31 December 2022. The composition of the Board of Directors
reflects the provisions of the Shareholders’ Agreement.
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 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;
the remaining directors are drawn from the other slates,
using the quotient method described in the Bylaws.
b)
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.
237
REPORT ON CORPORATE GOVERNANCE The Board of Directors is composed of 15 members. In
particular:
→ Marco Tronchetti Provera (Executive Vice Chairman
and Chief Executive Officer), 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, 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;
→ Director Yang Shihao was appointed by co-optation to
replace Director Yang Xingqiang;
→ Chairman Li Fanrong was appointed by co-optation to
replace Chairman Ning Gaoning;
→ Director Wang Feng was appointed by co-optation to
replace Director Bai Xingping.
At the Report Date, 20% of Board members were female and
the remaining 80% were male. Moreover, 27% are under the
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 52 years of age. The
Directors’ average time in office is about 4 years.
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.
238
Pirelli Annual Report 2022 The following charts illustrate (i) the composition of the Board of Directors 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
Committees during the Year.
Wei Yintao
Independent
Director
Li Fanrong
Chairman
Marco Tronchetti Provera
Executive Vice Chairman
and Chief Executive Officer
Yang Shihao
Director
Fan Xiaohua
Independent
Director
Giovanni
Tronchetti Provera
Director
Marisa Pappalardo
Independent
Director
Wang Feng
Director
Giorgio Luca Bruno
Deputy-CEO
Tao Haisu
Independent
Director
Giovanni Lo Storto
Independent
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
AVERAGE PERCENTAGE OF ATTENDANCE TO THE MEETINGS
OF THE BOARD OF DIRECTORS AND BOARD COMMITTEES
BoD
RPT Committee
Remuneration Committee
ARSCGC
83%
92%
100%
97%
75%
80%
85%
90%
95%
100%
239
REPORT ON CORPORATE GOVERNANCE AVERAGE LENGTH OF MEETINGS OF THE BOARD OF DIRECTORS AND BOARD COMMITTEES
BoD
57 min
RPT Committee
50 min
Remuneration Committee
77 min
ARSCGC
146 min
HOURS
1
2
3
NUMBER OF MEETINGS OF THE BOARD OF DIRECTORS AND BOARD COMMITTEES
BoD
RPT Committee
Remuneration Committee
ARSCGC
0
1
2
3
4
5
6
7
8
9
10
11
12
4.3.1. DIVERSITY POLICIES
Pirelli’s approach to diversity policies is based on the fundamental principles of non-discrimination, equal
opportunities and inclusion of all forms of diversity, and of integrating and balancing work with personal and
family-related needs, keeping a constant watch on the respect for and protection of human rights as enshrined
in the Company’s Code of Ethics.
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, available on the website, in relation to the composition of the
Board of Directors and Board of Statutory Auditors. The Company recommends that these values are respected
at each renewal and integration of its corporate bodies, in line with the stated diversity and independence criteria.
On 22 June 2020, when the administrative body was renewed, the Board of Directors adopted the Diversity and
Independence Statement, which was updated during the Year to take into account the entry into force of the
Corporate Governance Code.
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 (available on the Website),
subject to the favourable opinion of the Audit, Risks, Sustainability and Corporate Governance Committee
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Pirelli Annual Report 2022 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 4 (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 of the same Code) 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.
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 out in the policy adopted by the Company.
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 PROGRAM
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, aimed at providing
an explanation 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
241
framework and the specific procedures and rules adopted
by the Company.
Bearing in mind that the term of office of the Board of
Directors will end with the approval of the financial statements
as at 31 December 2022, the induction sessions - promoted
by the Company during the Year - focused on updating the
organisational structure and presenting the Company’s
production activities, including by means of a tour of the Pirelli
Research and Development centre.
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.
During the Year the Board of Directors in office at the Report
Date met eight times. The average duration of each meeting
was approximately 1 hour, with attendance by around 82%
of the Directors and 98% of the Independent Directors. In
accordance with the provisions of the Bylaws and regulations,
meetings were predominantly conducted in hybrid format,
using audio/video links.
For the 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 2023 financial year, the
Board is scheduled to meet at least 6 times (at the Date of
the Report two meetings had already been held).
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. In particular, during the Year, the documentation was,
as a rule, sent to the Board within 10 days prior to the meeting
date. In the exceptional cases in which documentation could
not be transmitted so far in advance (to also take into account
the work of the Committees), full information on the issue to
be considered was provided directly during the meeting, thus
ensuring that the Directors could make informed decisions.
REPORT ON CORPORATE GOVERNANCE Particular attention is paid to ensuring that information
remains confidential, by sending the documentation relating
to the activities of the board and its committees 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 into the
languages spoken by the participants.
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; should the latter also be absent or unavailable, another
director, appointed by the majority of the attendees, may
assume the Chair.
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 management at their meetings,
which allows them to explore the matters on the agenda in
appropriate depth.
All the Key Managers always attended all the meetings of
the Board of Directors during the Year, thus contributing to
periodic and up-to-date reporting to the Board of Directors.
The Key Managers do not attend any meetings in which
matters relating to them are discussed or that do not require
them to be present.
The Bylaws 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/or Chief Executive Officer 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 specifically that:
c)
a)
b)
the pre-meeting information is accurate, complete and
clear and the complementary information provided during
meetings allows directors to act in an informed manner;
the activities of the board committees are coordinated
with the activities of the Board of Directors;
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;
the board evaluation is adequate and transparent.
e)
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 Year. In proceeding
with its assessment process, the Board of Directors 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 the members of the Board of Directors
took part in the self-assessment process, with the exception
of Chairman Li Fanrong and Director Yang Shihao, given the
fact that they had only recently joined the Company’s Board
of Directors.
From the analysis it emerges that the financial year under
review closes a particularly intense and complex three-year
period marked by exogenous macro-phenomena that have
been reflected at a global level. In dealing with particularly
complex
issues and the extraordinary nature of the
circumstances, the Board of Directors showed involvement
and a constructive attitude throughout the entire three-year
term of office, which ensured a smooth course of work.
The Board of Directors was constantly updated and
continuously monitored the mitigation actions promptly
undertaken by the Company, outlining an effective crisis
contingency plan.
The Board of Directors confirms the Company’s absolute
focus on sustainability issues and hopes for an increasing
and systematic integration of sustainability in the company’s
development plans.
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
of Directors operates in compliance with the Corporate
Governance Code and with both Italian and international best
practice. Moreover, the areas of excellence that had emerged
242
Pirelli Annual Report 2022 during the previous financial year’s self-assessment activities
have been confirmed overall.
Board of Directors of the Company:
The areas for which the most appreciation was reported are
outlined below:
→ the effectiveness of the support provided by the Secretary
of the Board of Directors;
→ adequately prepared Agendas supporting the meetings of the
Board of Directors, found to be complete with all the items
that need to be brought to the Board of Directors’ attention;
→ high-quality documentation supporting the meetings of
the Board of Directors, deemed clear and complete;
→ high-quality minuting of the Board of Directors and
Committee meetings, which are confirmed as accurate
and complete with respect to the progress of the meetings;
→ guaranteed confidentiality of the topics discussed;
→ the effectiveness, continuity and transparency of
the exchange of information between Directors and
management on the corporate strategy;
The Board members expressed particular appreciation for
the decisiveness and commitment in guiding the Board’s work
by the Executive Vice Chairman and Chief Executive Officer.
The survey also revealed some indications for further
improving the functioning of the Board of Directors, including,
in particular, (i) with a view to the appointment of the Board of
Directors, the valorisation of what has been acquired during
the term of office with regard to skills experience and the way
the Board of Directors operates, (ii) in-person attendance
of the meetings to facilitate interaction between the new
members, (iii) the structuring of an onboarding and induction
plan and more opportunities for informal meetings, in order to
foster real mutual acquaintance and the further strengthening
of personal relations and team spirit.
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 16 March 2023, which were subsequently submitted to the
Board of Directors.
4.4.3. MATTERS FOR THE BOD
In accordance with the Bylaws, 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:
→ 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).
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
243
(i)
(ii)
assumption or concession of loans worth more than Euro
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 250,000,000, euros 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 Pirelli and the group;
(xiv) adoption of corporate governance rules for Pirelli and 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 Italiana115, as
amended from time to time.
REPORT ON CORPORATE GOVERNANCE 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 Code116, the Board
of Directors gave a positive assessment of the adequacy
of the organisational, administrative and accounting
systems and structure of the Company and the Group, 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
Bylaws 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 Executive Officer
Marco Tronchetti Provera was granted with:
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 direction and
coordination, with the following internal limitations, i.e. with
the attribution of the relevant competence to the Board
of Directors where:
(i)
the threshold amounts envisaged for each of the
matters indicated in section 4.4.3 are exceeded; or
115 Refer here to the Corporate Governance Code.
116 See Recommendation 33 (a).
b)
(ii)
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
(iii) 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
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”):
(i) 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;
(ii) 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.
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
244
Pirelli Annual Report 2022 the Company where present, or Directors who also hold office
as Chief Executive Officer or Executive Chairman of Pirelli’s
main subsidiaries117. A list of the Company’s Key Managers is
available on the Website.
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, disclosing the outcome
of the assessment through a press release and/or on the
occasion of the annual publication of the Report. 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 5 April 2023.
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 continued validity of independence
requirements for directors pursuant to the “Statement on
Independence”.
On 25 February 2021, in fact, 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
117 For the sake of completeness, it should be noted that Giovanni Tronchetti Provera is a senior manager
of the Group.
245
or financial relationships 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 Code,
including the notion of “significant additional 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) 300 thousand euros 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) 100 thousand euros
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.
At the Report Date, no consultancy relationships of any kind
were ongoing with directors qualified as independent.
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.
The independent and non-executive directors contribute to
the Board and committee discussions, bringing their specific
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.
REPORT ON CORPORATE GOVERNANCE 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.
Closely Related to Significant Parties” in financial instruments
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 time118, 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 evolution of the composition of committees during the
Year is detailed in Table 4. 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.
The Market Abuse Procedure also defines rules for
transactions carried out by “Significant Parties” or by “Persons
The Secretary of each Committee is the Secretary to the
Board.
118 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.
246
Pirelli Annual Report 2022 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.
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.
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
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.
247
REPORT ON CORPORATE GOVERNANCE STRATEGIES COMMITTEE
6.2. STRATEGIES COMMITTEE
NAME AND SURNAME
OFFICE
Li Fanrong
Chairman of the Board of Director
Marco Tronchetti Provera
Executive Vice Chairman and Chief Executive Officer
Yang Shihao
Wang Feng
Director
Director
Giorgio Luca Bruno
Deputy-CEO
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 (Committee Chairman), Li Fanrong, Yang Shihao, Giorgio Luca Bruno, Wang Feng,
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;
248
Pirelli Annual Report 2022 → 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-PARTY 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-Party Transactions Committee is made up of 3 independent directors: Marisa
Pappalardo (Chairman of the Committee), Domenico De Sole, and Giovanni Lo Storto.
The Related-Party Transactions Committee has consultative and advisory functions in relation to related-party
transactions in the terms laid down in the current regulations and the Procedure for Related-Party Transactions
(see section 10).
The committee members’ enhanced awareness of the Company and corporate and Group dynamics is also
fostered by the systematic attendance of management at the meetings of the Related-Party Transactions
Committee.
During the Year, it was noted that management assiduously attended the Related Party Transactions Committee
meetings in order to provide adequate information support for the adoption of resolutions.
249
REPORT ON CORPORATE GOVERNANCE 7. SUCCESSION OF DIRECTORS - APPOINTMENTS
AND SUCCESSION COMMITTEE
APPOINTMENTS AND SUCCESIONS COMMITTEE
NAME AND SURNAME
OFFICE
Li Fanrong
Chairman of the Board of Director
Marco Tronchetti Provera
Executive Vice Chairman and Chief Executive Officer
Wang Feng
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), Li Fanrong, Giovanni Tronchetti Provera and Wang Feng. As an exception
to the Corporate Governance Code, the majority of the 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 Renewal of 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, while the
Appointments and Succession Committee’s duties do not include assisting the outgoing Board of Directors in
the possible presentation of its own slate, since this is not envisaged by the Bylaws.
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Pirelli Annual Report 2022 7.1. SUCCESSION PLANS
Pursuant to the Shareholders’ Agreement Renewal, in order to ensure the continuity of Pirelli’s business culture,
Marco Tronchetti Provera, in his capacity as Executive Vice Chairman of Pirelli, was confirmed in the key role
of directing top management and ensuring the continuity of Pirelli’s business culture, including by playing a
leading role in the appointment of Giorgio Luca Bruno as the new Chief Executive Officer of Pirelli. Specifically,
it is envisaged that Marco Tronchetti Provera, as Executive Vice Chairman of Pirelli, will continue to be vested
with powers for the strategic direction of the Group and the power to supervise the implementation of the
Pirelli business plan. He will also be responsible for relations with shareholders, institutions, investors and the
media. Giorgio Luca Bruno, on the other hand, in his capacity as the Company’s Chief Executive Officer, shall be
responsible for the operational implementation of group strategies.
8. REMUNERATION COMMITTEE
AND DIRECTORS’ REMUNERATION
REMUNERATION COMMITTEE
NAME AND SURNAME
OFFICE
Tao Haisu
Independent Director
Wang Feng
Director
Paola Boromei
Independent Director
Fan Xiaohua
Independent Director
Marisa Pappalardo
Independent Director
Information about the 2023 remuneration policy and remuneration paid in 2022, 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.
The committee members’ enhanced awareness of the Company and corporate and Group dynamics is also
fostered by the systematic attendance of management at the meetings of the Remuneration Committee.
Management - and in particular the EVP & Chief Human Resources Officer, the Head of Compensation & Benefits
and the Head of International Mobility and HR Administration - regularly and diligently attended the meetings
of the Committee during the Year, thereby contributing to periodic and up-to-date reporting to the Committee.
251
REPORT ON CORPORATE GOVERNANCE 9. SYSTEM OF INTERNAL
CONTROL AND RISK
MANAGEMENTI - 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)
(ii)
(iii)
(iv)
analyses and approves the compliance and audit plans
scheduled for the following financial year;
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;
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;
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 MANAGING DIRECTOR 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.
252
Pirelli Annual Report 2022 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 (Committee Chair), 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;
→ assessing the suitability of the periodic, financial and non-financial information, correctly representing the
253
REPORT ON CORPORATE GOVERNANCE 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.
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
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
The committee members’ enhanced awareness of the
Company and corporate and Group dynamics is also
fostered by the systematic attendance of management at
the Committee’s meetings.
Management - and in particular the Head of Compliance, the
Manager responsible for the preparation of the corporate
financial documents report, the Head of Financial Statements,
the Head of Sustainability and Future Mobility, the Head of
Sustainability and Equal Opportunities, the Head of Internal
Audit, the SVP of Sustainability and Future Mobility, the Head
of Finance and Risk Management and the Risk Manager -
regularly and diligently attended the meetings of the Audit,
Risks, Sustainability and Corporate Governance Committee
during the Year, thereby contributing to periodic and up-to-
date reporting to the Committee.
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.
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 the systems safeguarding the Company’s
assets; (ii) the adequacy of the accounting, control and
reporting procedures for administrative operations.
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 the Internal Audit Department reports
hierarchically to the EVP of Corporate Affairs, Compliance,
Internal Audit, Corporate Security and Company Secretary
and functionally to the Audit, Risks, Sustainability and
Corporate Governance Committee and the Board of
Statutory Auditors.
254
Pirelli Annual Report 2022 9.4. COMPLIANCE DEPARTMENT
Operating within the Corporate Affairs, Compliance, Internal
Audit, Corporate Security 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 NFD Report titled “231 Compliance, Anti-Corruption,
Sanctions, Privacy and Antitrust Projects”.
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 the process to prepare
the 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 in Charge (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 allow certification by the Manager in charge, the
companies and the significant processes that feed into and
generate information of an economic and financial nature
have been mapped. These maps are updated on an annual
basis taking account of quantitative and qualitative criteria.
Quantitative criteria consist in identifying those Group
companies which, in relation to the selected processes,
represent an aggregate value above a certain materiality
threshold. Qualitative criteria, on the other hand, involve
reviewing those processes and companies that, according
to the Manager in charge’s final assessment, 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.
255
A half-yearly system for supervising the verification work
undertaken has been implemented through a chain-of-
certifications mechanism, which is traced all the way back to
the Chief Executive Officers of each company within the scope
of control; any problems emerging during the assessment
process are subject to action plans whose implementation is
monitored within the following half year.
Moreover, 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
in charge.
Finally, 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 practices 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.
REPORT ON CORPORATE GOVERNANCE 9.7. DIRECTOR RESPONSIBLE FOR
SUSTAINABILITY ISSUES
9.9. EXTERNAL AUDITOR
On 22 June 2020, the Board of Directors confirmed Executive
Vice Chairman and Chief Executive Officer Marco Tronchetti
Provera as the Director in Charge of sustainability issues.
In that role, he will be responsible for supervising sustainability
issues associated with the conduct of the activities of the
company, and its dynamics of interaction with all the
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) a special part
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, Internal Audit, Corporate Security 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,
managers and employees of the Group and, in general, all
those working in Italy and abroad on behalf or for the benefit
of the Group, or engaging in business relations with the Group,
each in the context of their own functions and responsibilities.
This includes any conduct with reference to the sustainability
issues as described in more detail in the NFD Report.
An extract of Model 231 and the Code of Ethics are available
on the Website.
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 3000 Revised119.
For the sake of completeness, it should be noted that the
Company has adopted Operating Rules to assign tasks to the
Auditing Firm120 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 537/2014121. 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 notes on the financial statements.
119 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.
120 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.
121 “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”.
256
Pirelli Annual Report 2022 9.10. MANAGER IN CHARGE
In the context of further implementation of the organisational
structure, in its meeting of 3 November 2022, the Board of
Directors appointed Fabio Bocchio, who is responsible for
the Administration, Budget and Control departments, as the
Manager responsible for the preparation of the corporate
financial documents pursuant to art. 154-bis of the TUF
(“Manager in charge”). Mr Bocchio succeeded Mr Giorgio
Luca Bruno in the role, who had been appointed on 15 June
2021. The term of office is aligned with that of the Board of
Directors, and the assignment was granted to the Manager in
charge following the positive assessment by the Audit, Risks,
Sustainability and Corporate Governance Committee and the
favourable opinion of the Board of Statutory Auditors. The
Board of Directors also verified that the Manager in charge
met the requirements of professionalism and integrity that are
necessary for the assignment.
The Board of Directors ensures that the Manager in
Charge avails of the proper means and powers to exercise
the duties conferred, and ensures effective compliance
with administrative and accounting procedures. The Chief
Reporting Officer 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
Chief Reporting Officer confirming that it corresponds to the
supporting documentation, records and accounting entries.
The term of office of the Chief Reporting Officer 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 Information 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 Board and the Board of Statutory Auditors.
For further information, please refer to the dedicated section
in the Directors’ Report on Operations.
257
10. INTERESTS
OF THE DIRECTORS
AND RELATED-PARTY
TRANSACTIONS
In compliance with the provisions of art. 2391-bis of the Italian
Civil Code and the Related-Party Regulations, on 15 June 2021
the Board of Directors – following the unanimous favourable
opinion expressed by the Related-Party Transactions
Committee – passed a resolution to adopt the procedure
for related-party transactions (the “RPT Procedure”)
with effect from 1 July 2021. The aforesaid procedure was
thereafter updated by the Board of Directors, only to take into
consideration the changes to the Company’s organisational
structure in late 2021.
The RPT Procedure establishes rules for the approval and
execution of the related-party 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-Party 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-Party 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 .
REPORT ON CORPORATE GOVERNANCE The Ordinary Shareholders’ Meeting appoints the Board of
Statutory Auditors and determines its remuneration.
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.
The slates of candidates, signed by those presenting them,
must be filed at the registered offices of the Company at least
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.
258
Pirelli Annual Report 2022 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,
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
check is carried out on an annual basis and was most recently
conducted in the meeting of the Board of Statutory Auditors
on 13 March 2023, during which the continued fulfilment of
independence requirements was assessed and verified within
the meaning of the TUF and Corporate Governance Code, while
also bearing in mind the “Independence and Diversity Statement”.
With reference to the Statutory Auditor Antonella Carù, first
appointed on 10 May 2012, holding office until 15 March
2016 (and therefore for 4 financial years) and subsequently
re-appointed on 1 August 2017, during the Year, the nine-year
limit set forth by the Corporate Governance Code for the
purposes of the permanence of independence requirements
was exceeded . The Board of Statutory Auditors, having
noted the high professional profile of Statutory Auditor Carù
(more than thirty years of academic teaching experience,
in addition to holding auditing positions in leading listed
companies)122 and the maintenance of all the additional
independence requirements provided for by the Corporate
Governance Code, assessed that the experience gained over
259
the years by Statutory Auditor Carù in relation to the office
does not constitute an obstacle to the maintenance of the
independence requirement, but, on the contrary, represents
a valuable asset for the Company, in particular, in terms of
continuity of corporate knowledge and contribution to the
collegial debate, also taking into account the recent renewal
of the Board of Statutory Auditors, the majority of which is
composed of newly appointed representatives; this without
compromising their ability to perform their duties in an
objective manner. During the Year, the Board of Statutory
Auditors of Pirelli met 11 times, with each meeting having an
average duration of about 2 hours.
The members of the Board of Statutory Auditors present such
characteristics as to ensure an adequate level of diversity
with regard to aspects such as age, gender composition and
educational and professional background. In particular, 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). 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
2022. Table 4, annexed, provides the significant information
about each member of the Board of Statutory Auditors in
office at the Report Date.
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, who is also given the title of key manager. The Board
conferred appropriate responsibilities and operational powers
to perform the assignment on the General Manager Operations.
122 For more details on the professional profile of Standing Auditor Carù, please refer to the curriculum
vitae available on Pirelli’s website.
REPORT ON CORPORATE GOVERNANCE 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
Executive Vice Chairman, assisted by the Secretary of the
Company’s Board of Directors for such purposes.
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.
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 Code123–
adopted a specific policy which, changing the existing
practices, governs the rules for managing the dialogue held by
the Board of Directors, through the VC 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.
Please see the Website for more information on the
Engagement Policy, including references to the criteria
and procedures used by the Board of Directors to promote
dialogue with shareholders and other stakeholders.
During the Year, the Company met the stakeholders, with
whom it addressed the following matters in particular:
the Company’s governance principles and shareholders’
independent
agreements, the existence and role of
directors, diversity policies within the Board of Directors, risk
management, sustainability, and the operating performance
and resilience of the business model adopted by Pirelli. In this
context, the shareholders particularly appreciated Pirelli’s
stance on environmental issues, with regard to which it sets
a benchmark for its peers.
15. SHAREHOLDERS’
MEETINGS
Pursuant to art. 7 of the Articles, ordinary and extraordinary
Shareholders’ Meetings of the Company are held in single call.
123 Recommendation 3 of the Corporate Governance Code.
260
Pirelli Annual Report 2022 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).
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
261
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
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
REPORT ON CORPORATE GOVERNANCE held on 1 August 2017 (available on the Website), as well as by
the law and the Articles of Association.
For the sake of completeness, it should be noted that, during
the Year, the Company124 used the option, inter alia, (i) to
conduct the Shareholders’ Meeting solely in remote form,
without the physical attendance of those entitled to attend, and
(ii) to allow those entitled to vote in the Shareholders’ Meeting
to attend solely through a representative appointed pursuant
to art. 135-undecies of the TUF. It did this in compliance with
the provisions of the Bylaws and the government guidelines
in force at the time.
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.
124 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. 228 of 30 December 2021 as
converted with amendments into Law no. 15 of 25 February 2022, extended the state of emergency
and therefore the adoption of extraordinary measures to contain the SARS-CoV-2 (COVID-19) health
emergency.
18. CONSIDERATIONS
ON THE LETTER
BY THE CHAIRMAN
OF THE CORPORATE
GOVERNANCE
COMMITTEE
With a letter of 25 January 2023 (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
ten recommendations (the “Committee Recommendations
for 2023”) listed below:
1. with regard to dialogue with shareholders: (i) to adopt a
policy for dialogue with shareholders that also provides
opportunities for such dialogue to be initiated by investors,
establishing graduated processes and procedures, based
on the principle of proportionality and depending on the
company’s characteristics in terms of size and ownership
structure; (ii) to assess the appropriateness of providing
information, in their own corporate governance reports, on
the most significant issues that were subject to dialogue
with shareholders and any initiatives adopted to take
account of the observations that emerged;
2. with regard to dialogue with significant stakeholders,
to provide, in their own corporate governance reports,
adequate information on the criteria and methods with
which the governing body promoted dialogue with other
significant stakeholders;
3. with regard to the granting of managerial powers to the
chairman, with reference to those companies in which
significant managerial duties are granted to the chairman,
to provide sufficient justification for this decision in their
corporate governance reports, even if the chairman is not
qualified as the CEO;
4. with regard to pre-meeting reporting, to require governing
bodies to establish procedures for the management of pre-
meeting reporting that do not entail generic exemptions
from providing such information in a timely manner for
reasons attributable to the confidentiality of data and
information, and to provide, in the corporate governance
report, detailed information on any failure to respect the
notice period indicated in the procedures for sending
documentation for board meetings, giving reasons for
such failure and explaining how adequate information was
guaranteed at the board meetings;
5. with regard to the attendance of managers at the board
and committee meetings, to define, in the regulations
adopted for the functioning of the governing bodies
and their committees, the manner in which said bodies
may access the relevant company functions depending
on the topic being discussed, under the coordination of
the chairman of the board of directors or committee,
262
Pirelli Annual Report 2022 respectively, in agreement with or informing the CEO.
As part of this recommendation, in particular, to provide,
in the corporate governance report, information on the
actual attendance of managers at board and committee
meetings, specifying the functions involved and the
frequency of their involvement;
6. with regard to the optimal composition of the board of
directors, in view of its renewal, to examine and publish
guidance on the optimal composition of that board,
providing a reasonable amount of time prior to the relative
meeting to allow those presenting lists of candidates to be
able to take said guidance into account for the purposes
drawing up their list;
7. with regard to criteria for assessing the significance
of relationships that could
influence a director’s
independence: (i) to define, ex ante, and specify in
the corporate governance report, the quantitative
parameters and qualitative criteria for assessing the
significance of any commercial, financial or professional
relationships or any additional remuneration for the
purposes of evaluating a director’s independence; (ii) to
assess the appropriateness of establishing quantitative
parameters, also defined in monetary terms or as a
percentage of the remuneration attributed to the role
and for participation in committees recommended by
the Corporate Governance Code;
8. with regard to the transparency of remuneration policies
with regard to the weighting of variable components, to
include, in their remuneration policies for the CEO and
other executive directors, an executive summary, in table
form, showing the composition of the remuneration
package, with an indication of the characteristics and
the weighting of the fixed components and short- and
long-term variable components in relation to overall
remuneration, at least in reference to the achievement of
the target objective of the variable components;
9. with regard to long-term outlooks in remuneration
policies, to provide, in their remuneration policies, a
variable component with a multi-year outlook, in line with
the company’s strategic objectives and the pursuit of
sustainable success;
10. with regard to ESG Parameters for director remuneration,
with reference to companies that have incentive
mechanisms in place for their CEO and other executive
directors, linked to sustainability objectives, to provide
a clear indication of the specific performance targets
to be met.
The Committee’s Recommendations for 2023 were, as usual,
brought to the attention of (i) the Audit, Risks, Sustainability
and Corporate Governance Committee and Board of
Statutory Auditors on 16 March 2023 and (ii) the Board of
Directors on 5 April 2023.
The Board of Directors of the Company – having also
obtained the favourable opinions of the members of the
relevant Committees and of the Board of Statutory Auditors
on this subject – believes that, as also accurately detailed 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 2023,
263
as they are already substantially aligned with the corporate
governance system adopted and implemented by Pirelli for
the following reasons:
→ in relation to dialogue with shareholders and other main
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 Code – adopted the Engagement Policy,
which, changing the existing practices, governs the rules
for managing the dialogue held by the Board of Directors,
through the Executive Vice Chairman and Chief Executive
Officer and with the assistance of the departments
concerned (primarily Investor Relations and Corporate
Affairs), with shareholders and the main stakeholders of
the financial market in which the Company operates. When
the dialogue is over, and in any case every six months, the
Executive Vice Chairman and Chief Executive Officer
reports to the Board of Directors on the development
and significant content of the dialogue. The possibility
for dialogue to be established at the initiative of investors
has already been provided for under paragraph 6.1 of the
Engagement Policy;
→ given Pirelli’s governance structure and the powers granted
to the Executive Vice Chairman and Chief Executive Officer,
no managerial powers are delegated to the Chairman of
Pirelli’s Board of Directors, as described in greater detail in
paragraph 14.1 of the Report, and the said Chairman must
not be deemed an executive director. The Chairman only
has the power to legally represent the Company, together
with any other powers attributed to the Chairman based
on the Bylaws in force, without prejudice to the powers and
prerogatives of the Board of Directors;
→ pre-meeting reporting (of an ongoing nature or relating
to specific topics) also took place during the Year in
compliance with the Board Regulations. In fact, the
documents to be examined by the Board of Directors and
the Committees were duly sent in good time in accordance
with the provisions of the Board of Directors Regulation.
That Regulation does not establish that those terms can
be derogated for “mere confidentiality needs”;
→ Regulations of the Board of Directors already stipulate,
under Article 2.5, that “The Chairman and/or Vice Chairman
may invite the top management of the Company to attend
the meetings in order to provide the appropriate in-depth
analyses of the items on the agenda”. In any case, the
Company provides for and promotes intensive coordination
between the main persons involved at the managerial level
and the Board of Directors and Committees, arranging for
constant involvement in board meetings and thus ensuring
that directors have the opportunity to freely access
information and follow up on it with the management of
the functions involved as further detailed in Section 4.4.
of the Report;
→ the Board of Directors has a number of independent
Directors who currently make up the absolute majority of
its members. For the periodical review of the independence
requirements of its members and statutory auditors, the
Company adopted a “Statement” on independence which
defines the qualitative/quantitative criteria to be used to
REPORT ON CORPORATE GOVERNANCE 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. These criteria
and parameters have also already been described in
paragraph 4.6 of the Report. 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”; it should also be noted that, at present,
directors qualified as “independent” have no commercial,
financial or professional relationships with non-board
members;
→ as regards the recommendations on remuneration, the
Company’s remuneration policy:
i.
provides an executive summary, in table form, detailing
the characteristics and weightings of the fixed, short-
term and medium/long-term components of overall
remuneration, with reference to the achievement of
performance at minimum, at target and at maximum
level; the information provided by the Company
therefore goes well beyond what is required by the
Code (which deems details of the target-based pay
mix to be sufficient) and by the Committee;
ii. establishes the use of medium/long-term variable
incentivisation plans (LTI Plans) for a performance
cycle of three years;
term
iii. establishes short and medium/long term variable
remuneration parameters, aligned with the Company’s
interests and
strategies, medium/long
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 linked to sustainability objectives, in line
with Group strategy.
264
Pirelli Annual Report 2022 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
MARCO POLO INTERNATIONAL ITALY S.R.L.
TRONCHETTI PROVERA MARCO
CAMFIN S.P.A.125
SILK ROAD FUND CO LTD
PFQY SRL
BOMBASSEI ALBERTO
NEXT INVESTMENT SRL
BREMBO SPA
TACTICUM INVESTMENTS S.A.
TACTICUM INVESTMENTS S.A.
NIU TENG
LONGMARCH HOLDING S.à.r.l
37.015
14.096
9.021
0.420
5.580
6.000
4.271
3.680
37.015
14.096
9.021
0.420
5.580
6.000
4.271
3.680
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 also taken from Consob’s website. In this regard, it is deemed useful to point out that the information reported herein is taken from the information published by Consob on its website,
pursuant to the notifications made by the entities required to comply with the obligations ex Article 120 of the TUF, and from the information published on the issuer’s website in relation to the
obligations ex Article 122 of the TUF and Article 130 of the Issuers’ Regulation. It should be noted that the information may 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 Bylaws do not provide for the possibility of increased voting rights or the issue of shares with multiple voting rights.
125 Camfin also announced that, as of the date of the Report, it held certain derivative financial
instruments called ‘call spreads’ maturing in September 2023 that, if exercised, would entitle it to acquire
an additional 4.6% of Pirelli’s capital.
265
REPORT ON CORPORATE GOVERNANCE TABLE 2: STRUCTURE OF THE BOARD OF DIRECTORS AT THE END OF THE FINANCIAL YEAR
OFFICE
MEMBERS
YEAR
OF
BIRTH
DATE FIRST
APPOINTED
(*)
IN OFFICE
SINCE
IN OFFICE UNTIL
SLATE
(**)
EXEC.
NON-
EXEC.
INDEP.
CODE
INDEP.
TUF
BOARD OF DIRECTORS
Chairman
Li Fanrong
1963
11 October
2022
11
October
2022
Next Shareholders’ meeting pur-
suant to art. 2386 c.c.
Executive Vice
Chairman and
Chief Executive
Officer
Marco
Tronchetti
Provera
1948
7 May
2003126
18 June
2020
Shareholders’ meeting to approve
financial statements at 31 Dec. 2022
Deputy-CEO
Director
Director
Director
Giorgio
Luca
Bruno
Yang
Shihao
Bai
Xinping
Zhang
Haitao
1960
1967
1968
1971
Director
Tao Haisu
1949
Director
Director
Director
Director
Director
Director
Director
Paola
Boromei
Domenico
De Sole
Roberto
Diacetti
Giovanni
Lo Storto
Marisa
Pappalardo
Giovanni
Tronchetti
Provera
Fan
Xiaohua
1976
1944
1973
1970
1960
1983
1974
15 March
2016
15 June
2021
Shareholders’ meeting to approve
financial statements at 31 Dec. 2022
10 May
2022
10 May
2022
Next Shareholders’ meeting pur-
suant to art. 2386 c.c.
02
September
2015
18 June
2020
22 February 2023127
18 June
2020128
18 June
2020
Shareholders’ meeting to approve
financial statements at 31 Dec. 2022
1 August
2017129
18 June
2020
Shareholders’ meeting to approve
financial statements at 31 Dec. 2022
18 June
2020
18 June
2020
Shareholders’ meeting to approve
financial statements at 31 Dec. 2022
01 August
2017
18 June
2020
Shareholders’ meeting to approve
financial statements at 31 Dec. 2022
18 June
2020
15 May
2018
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
01 August
2017
18 June
2020
Shareholders’ meeting to approve
financial statements at 31 Dec. 2022
01 August
2017
18 June
2020
Shareholders’ meeting to approve
financial statements at 31 Dec. 2022
01 August
2017
18 June
2020
Shareholders’ meeting to approve
financial statements at 31 Dec. 2022
Director
Wei Yintao
1971
01 August
2017
18 June
2020
Shareholders’ meeting to approve
financial statements at 31 Dec. 2022
DIRECTORS WHO CEASED TO HOLD OFFICE DURING THE YEAR
-
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
X
X
NO. OTHER
OFFICES
(***)
(****)
Cf. Annex
A
1/1
Cf. Annex
A
8/8
Cf. Annex
A
Cf. Annex
A
Cf. Annex
A
Cf. Annex
A
Cf. Annex
A
Cf. Annex
A
Cf. Annex
A
Cf. Annex
A
Cf. Annex
A
Cf. Annex
A
Cf. Annex
A
Cf. Annex
A
Cf. Annex
A
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
8/8
4/5
8/8
8/8
6/8
8/8
6/8
7/8
8/8
8/8
8/8
8/8
8/8
0/2
0/6
Il data 28 aprile 2022 il Consigliere Yang Xingqiang ha rassegnato le proprie dimissioni dalla carica di Consigliere della Società con efficacia 10 maggio 2022,
Director
Yang
Xingqiang
1967
20 October
2015
18 June
2020
10 May 2022
M
X
In data 8 ottobre 2022 Ning Gaoning è cessato dalla carica di Presidente del Consiglio di Ammnistrazione e Consigliere della Società,
Chairman
Ning Gao-
ning
1958
07 August
2018
18 June
2020
08 October 2022
M
X
-
-
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”). For Directors co-opted or appointed by the Shareholders’
Meeting without application of the slate voting mechanism, “-” is indicated.
(***) 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.).
126 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.
127 On the same date, to replace him, the Board of Directors co-opted Wang Feng as Company Director, qualified as a “non-executive” director,
with term of office ending at the Next Shareholders’ meeting pursuant to art. 2386 c.c.
128 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.
129 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.
266
Pirelli Annual Report 2022 TABLE 3: STRUCTURE OF THE BOARD COMMITTEES AT THE END OF THE FINANCIAL YEAR
BOD
STRATEGIES
COMMITTEE130
RPT
COMMITTEE
AUDIT, RISKS,
SUSTAINABILITY AND
CORPORATE
GOVERNANCE
COMMITTEE
REMUNERATION
COMMITTEE
APPOINTMENTS
AND SUCCESSIONS
COMMITTEE130
OFFICE/QUALIFICATION
MEMBERS
(*)
(**)
(*)
(**)
(*)
(**)
(*)
(**)
(*)
(**)
Chairman of the BoD
non-executive - non-independent
Li Fanrong
Executive Vice Chairman and Chief
Executive Officer
Deputy-CEO
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
Marco
Tronchetti
Provera
Giorgio
Luca Bruno
Yang Shihao
Bai
Xinping131
Zhang
Haitao
Tao Haisu
Non-executive Director – independent
as per the TUF and Code
Paola
Boromei
Non-executive Director – independent
as per the TUF and Code
Domenico
De Sole
Non-executive Director – independent
as per the TUF and Code
Roberto
Diacetti
Non-executive Director – independent
as per the TUF and Code
Giovanni
Lo Storto
Non-executive Director – independent
as per the TUF and Code
Marisa
Pappalardo
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
DIRECTORS LEAVING OFFICE DURING THE YEAR
Non-executive director
- non-independent
Yang
Xingqiang
Chairman of the BoD non-executive
- non-independent
Ning
Gaoning
-
-
-
-
-
-
-
-
-
-
M
C
M
M
M
-
-
-
M
C
M
6/6
M
3/3
M
3/3
3/3
C
M
M
3/4
M
M
4/4
4/4
M
C
5/6
5/6
6/6
M
M
M
3/3
M
-
M
6/6
C
3/3
M
M
M
M
-
M
No. of meetings held during the Year:
-
4
6
3
-
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.
130 No meetings of the Strategies Committee or the Appointments and Succession Committee were held during the financial year.
131 The Director Bai Xinping ceased to hold office on 22 February 2023 (on the same date, to replace him, the Board of Directors
co-opted Wang Feng as Company Director, qualified as a “non-executive” director, with term of office ending at Next Shareholders’
meeting pursuant to art. 2386 c.c.).
267
REPORT ON CORPORATE GOVERNANCE TABLE 4: STRUCTURE OF THE BOARD OF STATUTORY AUDITORS
BOARD OF STATUTORY AUDITORS
BOARD OF STATUTORY AUDITORS
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
MEETINGS
OF THE
MEETINGS
OF THE
REMUNERATION
APPOINTMENTS
COMMITTEE
COMMITTEE132
ATTENDANCE AT
ATTENDANCE AT
NO.
MEETINGS OF
MEETINGS OF
THE STRATEGIES
COMMITTEE133
THE RPT
COMMITTEE
OTHER
OFFICES
(****)
11/11
11/11
11/11
11/11
11/11
-
-
-
8/8
8/8
8/8
8/8
7/8
-
-
-
6/6
6/6
6/6
6/6
6/6
-
-
-
3/3
3/3
3/3
3/3
3/3
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4/4
4/4
4/4
2/4
3/4
-
-
-
Cf. Annex
Cf. Annex
Cf. Annex
Cf. Annex
Cf. Annex
Cf. Annex
Cf. Annex
Cf. Annex
A
A
A
A
A
A
A
A
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
05 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
Shareholders’ meeting
to approve financial
statements at
31 December 2023
Shareholders’ meeting
to approve financial
statements at
31 December 2023
Shareholders’ meeting
to approve financial
statements at
31 December 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 December 2023
Shareholders’ meeting to
approve
financial statements at
31 Dec. 2023
m
M
M
M
M
m
M
M
X
X21
X
X
X
X
X
X
Number of meetings of the Board of Statutory Auditors held during the year: 11
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. The Consob reporting obligation does not apply if the
statutory auditor is a member of the control body of only one issuer pursuant to Article 144-quaterdecies of the Consob Issuers’ Regulation.
132 No meetings of the Strategies Committee or the Appointments and Succession Committee were held
during the Year (the respective opinions were given directly during the meetings of the Board of Directors).
133 For further information, see paragraph 11.2 of the Report.
268
Pirelli Annual Report 2022 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
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
05 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
Shareholders’ meeting
to approve financial
statements at
31 December 2023
Shareholders’ meeting
to approve financial
statements at
31 December 2023
Shareholders’ meeting
to approve financial
statements at
31 December 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 December 2023
Shareholders’ meeting to
approve
financial statements at
31 Dec. 2023
m
M
M
M
M
m
M
M
X
X21
X
X
X
X
X
X
Number of meetings of the Board of Statutory Auditors held during the year: 11
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.
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
COMMITTEE132
ATTENDANCE AT
MEETINGS OF
THE STRATEGIES
COMMITTEE133
ATTENDANCE AT
MEETINGS OF
THE RPT
COMMITTEE
NO.
OTHER
OFFICES
(****)
11/11
11/11
11/11
11/11
11/11
-
-
-
8/8
8/8
8/8
8/8
7/8
-
-
-
6/6
6/6
6/6
6/6
6/6
-
-
-
3/3
3/3
3/3
3/3
3/3
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4/4
4/4
4/4
2/4
3/4
-
-
-
Cf. Annex
A
Cf. Annex
A
Cf. Annex
A
Cf. Annex
A
Cf. Annex
A
Cf. Annex
A
Cf. Annex
A
Cf. Annex
A
269
REPORT ON CORPORATE GOVERNANCE ANNEX A
SECTION I: LIST OF PRINCIPAL OFFICES HELD BY DIRECTORS, AT THE REPORT
DATE, IN OTHER COMPANIES THAT ARE NOT PART OF THE PIRELLI GROUP
FIRST AND LAST NAME
COMPANY
OFFICE HELD IN THE COMPANY
Sinochem Holdings Corporation Ltd:
• Sinochem Group Co., Ltd.
• Sinochem Corporation Ltd.
• Sinochem International Corporation Ltd.
• Sinochem Energy Co., Ltd.
• Syngenta AG
• Syngenta Group Co.
• Luxi Group Co., Ltd.
• China Jinmao Holdings Group Ltd.
Chairman of the Board of Directors
Chairman of the Board of Directors, Chief Executive Officer
Chairman of the Board of Directors, Chief Executive Officer
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
Li Fanrong
Commercial Aircraft Corporation of China Ltd.
Director
China World Trade Investment Co., Ltd.
China World Trade Center Co., Ltd.
Director
Director
Marco Tronchetti Provera
RCS MediaGroup S.p.A.
Director
Marco Tronchetti Provera & C. S.p.A.:
• Camfin S.p.A.
Chairman of the Board of Directors
Chairman of the Board of Directors, Chief Executive Officer
Yang Shihao
Wang Feng
Giorgio Luca Bruno
Paola Boromei
Domenico De Sole
Roberto Diacetti
Sinochem Holdings:
• Sinochem Holdings Corporation Ltd.
• China National Chemical Corporation Ltd.
• Sinochem Corporation Ltd
Sinochem Holdings:
• China National Tire & Rubber Company Ltd.
• Aeolus Tyre Co. Ltd.
• Prometeon Tyre Group S.r.l.
Camfin S.p.A.:
CAAM 1 S.r.l.
Vice Chairman of the Board of Directors
Chairman of the Board of Directors
Vice Chairman of the Board of Directors
Director
Chairman of the Board of Directors
Chairman of the Board of Directors
Director
Chairman of the Board of Directors
Istituto Europeo di Oncologia S.r.l.
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
270
Pirelli Annual Report 2022 FIRST AND LAST NAME
COMPANY
OFFICE HELD IN THE COMPANY
Giovanni Lo Storto
Banca Mediolanum S.p.A.
Luiss Business School S.p.A.
Tao Haisu
Mercuria Energy Group Asia
Zhang Haitao
Sinochem Holdings:
•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.
Director
Director
Director
Director
Director
Director
Director
Director
Giovanni Tronchetti Provera
Marco Tronchetti Provera & C. S.p.A.:
• Camfin S.p.A.
• Camfin Alternative Assets S.p.A.
Director
Director
Chairman of the Board of Directors and Chief Executive Officer
ALF S.r.l.
Amministratore Unico
Fan Xiaohua
Wei Yintao
-
-
-
-
271
REPORT ON 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
Riccardo Foglia Taverna
Arec Neprix S.p.A.
Standing Auditor
Banca Sella Holding S.p.A.
Alternate Auditor
B&C Speakers S.p.A.
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.
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
Guglielmi S.p.A.Rubinetterie
Alternate Auditor
Jakil S.p.A.
Industries S.p.A.
In-Pao S.r.l.
Standing Auditor
Alternate Auditor
Sole Auditor
Lampugnani Farmaceutici S.p.A.
Standing Auditor
MTW Holding S.p.A.
Mengoni e Nassini S.r.l.
Metalworks S.p.A.
Metalworks Bidco S.p.A.
Standing Auditor
Standing Auditor
Standing Auditor
Standing Auditor
Orso Blu onlus
Member of the Supervisory Body
Officine Rigamonti S.p.A.
Alternate Auditor
SI Collection S.p.A.
Chairman of the Board of Statutory Auditors
Prosino S.r.l.
Sole Auditor
Ruffini Partecipazioni Holding S.r.l.
Standing Auditor
Rubinetterie Ritmonio S.r.l.
Standing Auditor
Sella Fiduciaria 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
272
Pirelli Annual Report 2022 FIRST AND LAST NAME
COMPANY
OFFICE HELD IN THE COMPANY
Francesca Meneghel
Geox S.p.A.
Independent Director, Chairman of the Audit, Risk and
Sustainability Committee
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.
Dolcedrago S.p.A.
Standing Auditor
Standing Auditor
Elettronica Industriale S.p.A.
Standing Auditor
Citizen Watch Italy S.p.A.
Standing Auditor
Boing S.p.A.
Standing Auditor
Medusa Film S.p.A.
Chairman of the Board of Statutory Auditors
Flowe S.p.A.
Standing Auditor
Holding Italiana Prima S.p.A.
Standing Auditor
Holding Italiana Seconda S.p.A.
Standing Auditor
Holding Italiana Terza S.p.A.
Standing Auditor
Holding Italiana Ottava S.p.A.
Standing Auditor
Fascino S.r.l.
Standing Auditor
Publitalia ’80 S.p.A.
Chairman of the Board of Statutory Auditors
Immobiliare Idra S.p.A.
Chairman of the Board of Statutory Auditors
Mondadori Media S.p.A.
Mondadori Scuola S.p.A.
Standing Auditor
Standing Auditor
Mediamond S.p.A.
Chairman of the Board of Statutory Auditors
PBF S.r.l.
Videowall S.r.l.
RTI S.p.A.
Standing Auditor
Standing Auditor
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
Webuild S.p.A.
G&C S.r.l. (Family Company)
Director
Director
Vera Vita S.p.A.
Standing Auditor
Teresa Naddeo
BCC Assicurazioni S.p.A.
Alternate Auditor
Vera Vita Assicurazioni S.p.A.
Standing Auditor
Industrie De Nora S.p.A.
Director
Dufrital S.p.A.
Standing Auditor
273
REPORT ON CORPORATE GOVERNANCE FIRST AND LAST NAME
COMPANY
OFFICE HELD IN THE COMPANY
AGB Nielsen Media Research Holding S.p.A.
Chairman of the Board of Statutory Auditors
AREEF 2 PALIO SICAF
AREEF 2 SICAF
EDRA S.p.A.
Davide S.p.A.
Nuova GS S.p.A.
BBC Italia S.r.l.
Standing Auditor
Standing Auditor
Chairman of the Board of Statutory Auditors
Standing Auditor
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.
Standing Auditor
Selecta Digital S.p.A.
Standing Auditor
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.
Alberto Villani
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.
Standing Auditor
DE’ Longhi Appliances S.r.l.
Standing Auditor
Feltrinelli S.p.A.
EB NEURO S.p.A.
FINMEG S.r.l.
Standing Auditor
Chairman of the Board of Statutory Auditors
Standing Auditor
Gallerie Commerciali Bennet S.p.A.
Standing Auditor
S.r.l. Immobiliare Rimini
Director and Chief Executive Officer
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
Impresa Luigi Notari S.p.A.
Alternate Auditor
Plurima S.p.A.
Chairman of the Board of Statutory Auditors
Compagnia Padana per Investimenti S.p.A.
Alternate Auditor
274
Pirelli Annual Report 2022 FIRST AND LAST NAME
COMPANY
OFFICE HELD IN THE COMPANY
Plurima Bidco S.r.l.
Chairman of the Board of Statutory Auditors
Alberto Villani
Royal Immobiliare S.r.l.
Sole 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
Oroplac S.r.l.
Saint Andrews S.p.A.
Community SB S.r.l.
Standing Auditor
Standing Auditor
Standing Auditor
Commercio Prodotti Industriali S.r.l.
Standing Auditor
Relife Recycling
Stella S.r.l.
Centro Rettili S.r.l.
Alternate Auditor
Standing Auditor
Standing Auditor
Focus Investments S.p.A.
Alternate Auditor
Prometeon Tyre Group S.r.l.
Alternate Auditor
Motive S.r.l.
Standing Auditor
Gruppo Meccaniche Luciani
Standing Auditor
Marco Taglioretti
De Wave Srl
Luciani & Co S.r.l.
Standing Auditor
Standing Auditor
Marco Tronchetti Provera & C. S.p.A.
Standing Auditor
XPP SEVEN FIVE S.p.A.
Eurostazioni S.p.A.
Standing Auditor
Standing Auditor
Cattaneo Zanetto & Co S.p.A.
Standing Auditor
Microtest S.r.l.
Standing Auditor
Associazione Insieme Per I Bambini
Standing Auditor
Zeta Catena S.r.l.
Tecnopool S.p.A.
Standing Auditor
Standing Auditor
Excellera Advisory Group S.p.A.
Standing Auditor
Jato 1991 S.r.l.
Standing Auditor
Nichelcrome Finanziaria Immobiliare S.p.A.
Standing Auditor
Isoltema S.p.A.
Galvanica Formelli S.r.l.
Relife Spa
Standing Auditor
Standing Auditor
Standing Auditor
275
REPORT ON CORPORATE GOVERNANCE FIRST AND LAST NAME
COMPANY
OFFICE HELD IN THE COMPANY
Fondazione Silvio Tronchetti Provera
Standing Auditor
Fondazione “Centro Nazionale per la Mobilità Sostenibile”
Standing Auditor
Ems Group S.p.A.
Mimac Italia S.r.l.
Logiudice Forni S.r.l.
Xpn S.p.A.
SAB S.r.l.
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.
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.
Milano Lame S.r.l.
F2i Re S.p.A. hb
Standing Auditor
Standing Auditor
Standing Auditor
Standing Auditor
Alternate 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
Standing Auditor
Standing Auditor
Trabaldo Togna S.p.A.
Director
TP Industrial Holding S.p.A.
Alternate Auditor
Condorpelli S.p.A.
Camfin S.p.A.
Alternate Auditor
Alternate Auditor
Cartiera Di Bosco Marengo
Alternate Auditor
Banca Profilo S.p.A.
Standing auditor and Member of the Supervisory Body
Milano Serravalle – Milano Tangenziali S.p.A.
Director
Telepass S.p.A.
Infoblu S.p.A.
Boato International S.p.A.
Alternate Auditor
Alternate Auditor
Standing Auditor
Interporto Rivers Venezia
Member of the Supervisory Body
Intersistemi Italia S.p.A.
Member of the Supervisory Body
276
Marco Taglioretti
Maria Sardelli
Pirelli Annual Report 2022 FIRST AND LAST NAME
COMPANY
OFFICE HELD IN THE COMPANY
Pro Recco Waterpolo 1913 S.r.l.
Member of the Supervisory Body
Spezia Calcio S.r.l.
Member of the Supervisory Body
GSE Gestione Servizi Energetici S.p.A.
Member of the Supervisory Body
Maria Sardelli
Green Arrow SGR
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 Component S.p.A.
Chairman of the Supervisory Body
Donati S.r.l.
ENAV S.p.A.
Chairman of the Supervisory Body
Chairman of the Supervisory Body
Fondazione Musica per Roma
Chairman of the Association of Auditors
FS Sistemi Urbani S.r.l.
AIRRI
D-Flight S.p.A.
Director
Sole Auditor
Chairman of the Board of Statutory Auditors
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
Autorità del Museo Nazionale Galleria Borghese
Member of the Association of Auditors
Gruppo Garofalo Health Care S.p.A.
Independent Director
Franca Brusco
277
REPORT ON CORPORATE GOVERNANCE Pirelli Annual Report 2022
278
ON
REPORT
THE REMUNERATION
AND
POLICY
COMPENSATION PAID
279
REMUNERATION REPORT
INTRODUCTION
This Report on remuneration policy and compensation paid
(the “Report” or the “Remuneration Report”), approved by
the Board of Directors on April 5, 2023, on a proposal from the
Remuneration Committee, subject to the opinion of the Board
of Statutory Auditors, is divided into two sections:
→ Section I: “Remuneration Policy” for FY 2023 (the “2023
Policy” or the “Policy”) and
→ Section II: “Report on Compensation Paid” in FY 2022 (the
“2022 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, 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-Party Transactions Procedure.
The Policy also takes into account the circumstance that the
Board of Directors’ term of office is expiring and that, pursuant
to the provisions contained in the Renewal of the Shareholders’
Agreement134, there may be two different figures in Pirelli’s
governance structure.
The 2023 Policy submitted for the binding vote to the
Shareholders’ Meeting called to approve the financial
statements for the year ended 31 December 2022 pursuant
to art. 123-ter TUF, subsection 3-bis and 3-ter, defines the
principles and guidelines for the 2023 financial year:
→ for determining the remuneration of the Company
Directors, in particular Directors holding specific offices,
General Managers and KMs, 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 2023 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 2022 Report on Compensation Paid, submitted for the
advisory and non-binding vote of the Shareholders’ Meeting
in accordance with art. 123-ter, subsection 6, TUF, provides,
by name, for the Directors, Statutory Auditors and General
Managers and, in aggregate form, for the KMs:
→ 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 2022 financial year;
→ an analytical indication of the sums paid in the 2022
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 2022 (and also
highlighting the payments to be made in one or more
subsequent years for activity undertaken in the 2022
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 2022.
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.
134 For further information, see the Corporate Governance Report and the Company’s website at www.
pirelli.com.
280
Pirelli Annual Report 2022 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 stakeholders.
Fixed Remuneration
Annual variable
remuneration STI
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
KMs, Senior Managers and Executives: determined
according to the responsibility assigned and the skills
required by the role held.
Chairman: not one of the beneficiaries of the plan.
Executive Vice Chairman and CEO:
• Minimum: 80% of fixed remuneration
• Target: 125%
• Cap: 250%
Deputy-CEO:
• Minimum: 65%
• Target: 100%
• Cap: 200%
General Manager:
• Minimum: 50% of the GAR
• Target: 75%
• Cap: 150%
KMs:
• Minimum: 35%
• Target: 50%
• Cap: 100%
Senior Managers and Executives:
• Minimum: dal 10% to 25%
• Target: dal 15% to 40%
• Cap: dal 30% to 80%
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.
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 three ESG targets
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:
• Adjusted EBIT (Group/Region/BU)
• Net Cash Flow (before dividends) -
(Group/Region)
• Group Net Income
• Three 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, KMs 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
matching, is subject to the achievement of
the following year’s STI objectives.
281
REMUNERATION REPORT PURPOSE
HOW IT OPERATES
BENEFICIARIES IN OFFICE ON THE DATE
OF THE REPORT
“Access threshold”: 45%
“Access threshold”: 52.5% of fixed remuneration
Chairman: not one of the beneficiaries of the Plans.
Executive Vice Chairman and CEO (annual opportu-
nities):
•
• Target: 70%
• Cap: 200%
Deputy-CEO:
•
• Target: 60%
• Cap: 160%
General Manager:
•
• Target: 60%
• Cap: 160%
KMs:
•
• Target: 50%
• Cap: 130%
Senior Managers and Executives:
•
• Target: dal 15% to 50%
• Cap: dal 40% to 130%
“Access threshold”: from 11.25% to 37.5%
“Access threshold”: 45% of the GAR
“Access threshold”: 37.5%
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.
2023-2025 LTI Plan: an incentive
dependent on the 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. 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.
• 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 during
the hiring phase.
• Benefit: non-monetary benefits cur-
rently assigned on the basis of market
practices.
282
Pirelli Annual Report 2022 REMUNERATION POLICY
FOR THE 2023
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)135. As at the date of
this Report, the Company has no incentive plans based on
financial instruments in place.
In preparing the 2023 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 KMs, 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.
135 Note that the Board of Directors’ meeting of April 5, 2023 established the objectives of the 2022-
2025 LTI Plan, related to the objectives contained in the 2023/2025 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.
283
REMUNERATION REPORT Below is a list of the activities carried out by the parties involved in the process of devising, adopting and
implementing the policy:
BODY
ROLE AND COMPETENCE ACTIVITIES
Shareholders’ Meeting
Board of Director
-
-
-
-
-
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.
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.
284
Pirelli Annual Report 2022 As at the date of this Report, the Committee members are as follows:
REMUNERATION COMMITTE
NAME AND SURNAME
OFFICE
Tao Haisu
Independent Director
Wang Feng
Director
Paola Boromei
Independent Director
Fan Xiaohua
Independent Director
Marisa Pappalardo
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 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 KMs;
→ 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 the decisions adopted by the Board of Directors
and verifies the actual achievement of performance targets;
→ verifies compliance of the remuneration of executive Directors, other Directors with specific responsibilities,
General Managers and KMs with the remuneration policy and expresses an opinion on this, also in accordance
with the Related Party Transaction Procedure adopted by the Company in application of the Consob regulation
in force at the time;
285
REMUNERATION REPORT → 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 KMs:
→ 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-Party Transactions Committee with opinions if the responsibilities of said
Committee regarding related-party transactions do not cover issues pertaining to the remuneration of
executive Directors, including Directors with specific responsibilities, General Managers and KMs;
→ 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-Party Transactions Committee, on the basis of
the procedures adopted by the Company for related-party transactions, in implementation of the applicable
Consob regulation pro-tempore.
By resolution dated 15 June 2021, the Board of Directors also assigned to the Remuneration Committee the
functions of the RPT Committee regarding related-party transactions involving the remuneration and treatment
of Directors and other Key Managers and, in general, matters covered by the Report on Remuneration Policy
and Compensation Paid (including any waivers) within the limits and according to the criteria allowed by the
RPT Regulation and applicable legal or regulatory provisions, also taking into account the membership of the
Remuneration Committee (which may, therefore, exercise these duties for related-party transactions of lesser
significance and related-party transactions of greater significance where it consists of unrelated directors who
are, respectively, either mostly or exclusively independent Directors).
2023
SUBJECT
ACTIVITY
1Q
2023 Remuneration Policy and Variable Incentive Plans
-
-
-
Presentation of the timetable
Draft 2023 Remuneration Policy
Approval of the incentive plan by the Remuneration Committee:
• Review of the 2022 STI closure targets and definition of 2023 targets
• Review of the 2020-2022 LTI closure targets and definition of the 2023-2025 LTI
Plan targets
-
Analysis of market remuneration benchmarks
2Q
Shareholders’ Meeting and publication of the 2023
Remuneration Policy
-
Approval of the 2023 Remuneration Policy and 2022 Compensation Report
-
Shareholders’ vote on the 2023-2025 LTI plan
3Q
Analysis of votes received from Shareholders and review
of Governance
-
Analysis of 2023 Remuneration Policy and quality benchmark
-
Analysis of votes received from Shareholders
-
Analysis of 2023 Remuneration Policy and assessment of potential changes
The cycle of the Remuneration Committee’s main activities in 2023 is shown below.
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 2023 REMUNERATION POLICY
PURPOSES OF THE 2023 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 Directors holding specific offices to whom specific duties are also delegated, General Managers,
KMs, 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.
286
Pirelli Annual Report 2022 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 2023 Policy also in fact refers to the remuneration of the Senior Managers
and Executives of the Group. Moreover, Pirelli:
→ applies and respects any existing and applicable national collective bargaining agreements 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;
→ is attentive to pay equity, in the context of gender diversity, as highlighted in more detail in the Report on
Responsible Management.
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 2022 Remuneration
Policy and the Report on Compensation paid in FY 2021. The diagram below presents the result of the binding
vote expressed by the Shareholders’ Meeting on 15 June 2022 compared to the result of the voting in 2021.
85.2%
In favour
14.8%
Against
2021
87.5%
In favour
12.3%
Against
2022
0.0%
Abstaining/non voting
0.2%
Abstaining/non voting
Pirelli attaches great importance to analysing this voting result and the feedback received and, following the
analysis of the results of the 2022 voting and the main rationale for the votes against, in the course of 2022
and in the first months of 2023, took the action required to ensure the consistency of the 2023 Policy with the
shareholders’ expectations for the future.
DESCRIPTION OF THE CHANGES WITH RESPECT TO THE 2022 POLICY
With respect to the 2022 Remuneration Policy, the following aspects of the 2023 Policy were reviewed and/or
considered:
→ the composition of the reference panel for the purpose of comparing the Annual Total Direct Compensation
on Target of the Executive Vice Chairman and Chief Executive Officer was redefined by excluding Navistar
in view of its delisting and Volkswagen in view of the revision of the panel size;
→ introduction of the new positions of Executive Vice Chairman and Chief Executive Officer, as required by the
Renewal of the Shareholders’ Agreement;
→ establishment of the same reference panel for the purpose of setting the remuneration benchmark for the
Executive Vice Chairman and the Chief Executive Officer;
→ redefinition of the portion of the STI 2023 scorecard reserved for ESG KPIs which, while maintaining their
weight at 15 points, is divided into 3 different targets: “Green Performance Volumes” (replacing “Green
Performance Revenues” on the total range), “Women in Management positions” (replacing the objective
“Diversity and Inclusion (D&I): Women Hiring”) target, and the introduction of an HSE KPI: “Frequency Index”.
Each of these targets constitutes 5% of the incentives scorecard;
→ reduction of company matching multipliers intended for General Managers, KMs and selected Senior
Managers, which are replaced by a range of between 0.8 and 1.2. Previously the minimum had been 1 and
the maximum 1.5.
287
REMUNERATION REPORT The 2023 Policy takes into account the definition of the objectives of the rolling LTI Plan for the three-year period
2023-2025, in support of the objectives of the 2023-2025 Strategic Plan.
MARKET REFERENCES AND PEER GROUP
In relation to the Annual Total Direct Compensation on-Target, Pirelli defines and applies a policy which, in relation
to the reference market, targets the third quartile for the Executive Vice Chairman and Chief Executive Officer,
the Deputy-CEO and the Top and Senior Management; the median for the Chairman and Executives.
With regard to the newly introduced Executive Vice Chairman and Chief Executive Officer, it targets the third
quartile and the median respectively.
The analysis of the positioning, the make-up and more generally the competitiveness of the remuneration of
Directors with specific responsibilities 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, any specific duties assigned thereto and the individual’s
impact on the final business results.
In regard to the comparative market, in the definition of the panel of reference companies analysed 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 Euronext Milan companies, excluding financial companies.
The sample of reference companies used for the competitiveness analysis and any review of the remuneration
of the Executive Vice Chairman and Chief Executive Officer (and, once appointed, the Executive Vice Chairman
and the Chief Executive Office) of Pirelli & C. has been defined with the assistance of Willis Towers Watson, also
taking into account the main recommendations on pay for performance; the sample of reference companies
consists of the 12 companies shown in the table below, all belonging to the Vehicles, Auto Component & Tyre
industry and focuses the comparison on companies operating in the same sector as Pirelli.
Aston Martin
Ferrari
Michelin
BMW
Goodyear
Renault
Brembo
Continental
Harley-Davidson
Magna International
Stellantis
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 more
than 400 listed European companies included in the FTSE500 list, which includes the 500 biggest European
companies by capitalisation.
Finally, the remuneration structure for General Managers, KMs, 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 2023 POLICY
In keeping with previous remuneration policies, the 2023 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
288
Pirelli Annual Report 2022 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 specific
duties are also delegated, for General Managers and for KMs 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 2023, the targets assigned to the Directors holding specific offices and to whom specific responsibilities are
assigned, to General Managers and KMs in the context of the STI Plan are the following:
ON/OFF CONDITION
Group adjusted EBIT
Group Net Cash Flow (before dividends)
Net income
Eco & Safety Volumes
Women in Management positions
Frequency Index
GROUP NET CASH FLOW
(BEFORE DIVIDENDS)
WEIGHT OF OBJECTIVES
35%
30%
20%
5%
5%
5%
The STI objectives of Senior Managers and Executives are, on the other hand, defined by the hierarchical manager
in accordance with the Human Resources & Organisation and Strategic Planning, Administration, Planning &
Controlling and include, among others, objectives related to the economic performance of the business unit/
geography/function to which they belong (see section 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 Administration, Planning & Controlling 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.
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.
Starting with the 2023 STI Plan, for General Managers, KMs and selected Senior Managers, part of the
remuneration accrued as a 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
289
REMUNERATION REPORT a corporate matching component which can vary from a minimum of 0.8 time to a maximum of 1.2 times the
amount of the deferred STI (see the diagram below).
Year T
Year T+1
Year T+2
Year T+3
Year T+4
Year T+5
Year T+6
Year T+7
...
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
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
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):
→ 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;
→ promote Management retention.
The LTI plan is structured with a “rolling” mechanism which guarantees flexibility 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.
290
Pirelli Annual Report 2022 Below is an explanatory diagram showing how it works:
Assumption
GAR: € 100,000
LTI cycle incentive percentage: 30% target - maximum 80%
Performance objective: Cumulative Net Cash Flow
2021
2022
2023
2024
2025
2026
I
”
G
N
L
L
O
R
“
H
C
A
O
R
P
P
A
2021-2023
NCF: 103 mln €
2022-2024
NCF: 105 mln €
2023-2025
NCF: 110 mln €
Performance
at target level
Payout 30k €
Performance
at target level
Payout 30k €
2026
Total
disbursement
90k €
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 impact is “self-funded”
by achievement of the expected results.
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.
For 2023, the targets assigned to the Directors holding specific offices and to whom specific responsibilities are
assigned, to General Managers and KMs in the context of the 2022-2025 LTI Plan are the following:
2023-2025 LTI
WEIGHT OF OBJECTIVES
KPI
Group Net Cash Flow (before dividends)
Related TSR vs TIER 1 Panel
DJS Index
CO2 Emissions Reduction
* The period of comparison is the second half of 2025 vs the second half of 2022.
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
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 2023-2025 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.
291
REMUNERATION REPORT 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 and specialties focus
Competitiveness & Digitalization Plan
Cash Flow Generation
Sustainability
Net Result
EBIT
Net Cash Flow (before dividends)
Eco & Safety Volumes
DE&I: Women in Management
HSE: Frequency Index
Relative TSR
Cumulative Group Net Cash Flow (be-
fore dividends)
Dow Jones Sustainability Index
CO2 Emissions Reduction
NON-MONETARY BENEFITS
When a new General Manager or a KM is hired, the Company reserves the right to 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 specific duties are also delegated;
(ii) Directors holding no specific offices.
The attribution to Directors of powers for specific matters, that 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’ Meeting136 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-Party Transactions Committee
136 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 2 million euros 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.
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
292
Pirelli Annual Report 2022 In line with best practice, Directors holding 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.
The Shareholders’ Meeting of Pirelli & C. that will be convened to approve the financial statements as at 31
December 2022 will also be called to resolve on the renewal of the current Board of Directors, which will be expiring
due to having reached the end of the mandate. The Shareholders’ Meeting will therefore be called to resolve on
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; thereafter, the Board of Directors will be called to resolve on the allocation.
In the event that 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 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 KMs, 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
The Board of Directors, which will be appointed by the Shareholders’ Meeting of Pirelli & C. convened to approve
the financial statements at 31 December 2022, will be called upon to appoint a new Supervisory Body, the term
of which expired with that of the Board of Directors, and to resolve on the allocation of fees to the members of
the newly appointed Supervisory Body.
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 control 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.
Expenses incurred for official reasons are also reimbursed to the Statutory Auditors.
293
REMUNERATION REPORT 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 control bodies.
4. REMUNERATION OF DIRECTORS WITH SPECIFIC RESPONSIBILITIES
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 a specific office or offices, but no specific duties have been assigned to them
(at the date of the Report, this applies to Chairman Li Fanrong137) 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).
The Chairman Ning Gaoning received remuneration for his office of a gross annual amount of €400,000 for the
years 2020, 2021 and 2022. Ning Gaoning received this remuneration until 8 October 2022, when his resignation
became effective.
Li Fanrong, co-opted and appointed Chairman of the Board of Directors on 11 October 2022, stated his wish
not to receive any remuneration from the Company for the offices held. Consequently, the Board of Directors
resolved not to allocate any remuneration envisaged by the 2022 Remuneration Policy for the offices held by
the Chairman Li Fanrong.
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 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 SPECIFIC DUTIES ARE ALSO DELEGATED
The remuneration of Directors holding specific offices to whom specific duties are also delegated (as of the date
of this Report this applies to the Executive Vice Chairman and Chief Executive Officer Marco Tronchetti Provera
and to the Deputy-CEO Giorgio Luca Bruno; note that the Renewal of the Shareholders’ Agreement provides for
the appointment of an Executive Vice Chairman and a Chief Executive Officer in place of the previous Executive
Vice Chairman and Chief Executive Officer and Deputy-CEO) consists of the following elements:
Fixed compensation for the principal office for the Executive Vice Chairman and Chief Executive Officer and the
Deputy-CEO
Annual incentive plan (STI)
Deferred annual incentive quota/STI matching
Medium-long term incentive plan (LTI)
Remuneration for other offices different from the principal
Severance Indemnity
Benefits typical of the office and recognised according to
company practice
Insurance covers
NCA (for Deputy-CEO only)
FIXED REMUNERATION
SHORT TERM VARIABLE
REMUNERATION
LONG TERM VARIABLE
REMUNERATION
OTHER COMPONENTS
137 The Board of Directors of Pirelli & C., meeting on 11 October 2022, co-opted Li Fanrong to replace Ning
Gaoning, who resigned from the Board of Directors, until the next Shareholders’ Meeting; Li Fanrong was
also appointed Chairman of the Board of Directors
294
Pirelli Annual Report 2022 Directors holding specific offices to whom specific duties are also delegated, shall also be due the compensation
for the office of director and any participation in committees138.
With regard to the incidence of the various components, the structure of the compensation package of the current
Executive Vice Chairman and CEO and Deputy-CEO in the event of achievement of the minimum, target and
maximum STI 2023 and LTI 2023-2025 targets is shown below.
PAY MIX - EXECUTIVE VICE CHAIRMAN AND CEO
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
Minimum
Target
Maximum
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%
FIXED REMUNERATION
The gross annual base salary for the principal office of Directors holding specific offices to whom specific duties
are also delegated is determined at the time of appointment, taking into account the market benchmark in an
amount that ensures a balance between the fixed component and the variable component that is adequate and
consistent with the strategic objectives and the risk management policy of the Company, 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.
If the Board of Directors is called to resolve again on the gross annual fixed component of the Directors holding
specific offices to whom specific duties are also delegated, the Policy allows the allocation of a gross annual
fixed component, or a review of the same, which, taking into account the annual and medium/long-term incentive
percentages, determines an Annual Total Direct Compensation on-Target equal to a maximum (i) for the Executive
Vice Chairman and Chief Executive Officer and for the Executive Vice Chairman (if appointed) of +5% compared
to the value attributed in the previous term of office (in the event that the Executive Vice Chairman is the same
person who served as Executive Vice Chairman in the previous term of office) or compared to the market
benchmark - third quartile and (ii) for the Deputy-CEO and for the Chief Executive Officer (if appointed) at a +10%
compared to the value attributed in the previous term of office (in the event that the Chief Executive Officer is
the same person who held the office of Deputy-CEO in the previous term of office) or compared to the market
benchmark - not exceeding the third quartile for the Deputy-CEO and median for the Chief Executive Officer.
138 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).
295
REMUNERATION REPORT ANNUAL VARIABLE COMPONENT (STI)
The Directors holding specific offices to whom specific duties are also delegated receive an annual variable
remuneration (STI) equal to a percentage of the fixed remuneration determined at the time of appointment and
thereafter when the individual annual plans are launched.
If the Board of Directors is again called to resolve on the STI incentive percentages for Directors holding specific
offices to whom specific duties are also delegated, the Policy allows the allocation of an STI incentive percentage
of no more than 125% on target and 250% maximum.
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.
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
EXECUTIVE VICE CHAIRMAN AND 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).
In the event of termination of office, the STI Bonus is paid on a pro-quota basis for the effective months of
tenure in office.
MEDIUM-LONG TERM VARIABLE COMPONENT (LTI)
The Executive Vice Chairman and Chief Executive Officer and the Deputy-CEO will be assigned a medium/long-
296
Pirelli Annual Report 2022
term incentive plan so as to contribute to the Company’s strategy and sustainability, and the pursuit of its long-term
interests. For 2023, the Executive Vice Chairman and Chief Executive Officer is a beneficiary of the 2023-2025
LTI Plan related to the goals of the 2023/2025 Strategic Plan and the 2022-2024 and 2021-2023 LTI Plan. For
2023, the Deputy-CEO is a beneficiary of the 2023-2025 LTI Plan and the 2022-2024 and 2021-2023 LTI Plan.
Directors holding specific offices to whom specific duties are also delegated receive an annual variable medium-
long term (LTI) remuneration equal to a percentage of the fixed remuneration determined at the time of appointment
and thereafter when the individual annual plans are launched.
If the Board of Directors is again called to resolve on the LTI incentive percentages for Directors holding specific
offices to whom specific duties are also delegated, the Policy allows the allocation of an LTI incentive percentage
of no more than 70% on target, 200% maximum.
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.
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
EXECUTIVE VICE CHAIRMAN AND CEO
PERFORMANCE/PAYOUT CURVE
DEPUTY-CEO
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 2023-2025 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 2023-2025 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.
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
297
REMUNERATION REPORT
In the event of termination of office, the LTI Bonus is paid on a pro-quota basis.
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 specific duties have also been assigned, 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.
TFM, including the relevant value adjustment of such amounts, will be due as a lump sum to the beneficiary
at the end of each 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, KMs and
Executives (e.g. company car).
5. GENERAL MANAGERS AND KEY MANAGERS
The remuneration of the General Managers (at the date of the Report the General Manager Operations is Andrea
Casaluci) and the KMs has the following elements:
With regard to the incidence of the various components, the structure of the compensation package of the General
Gross Annual Remuneration (GAR)
determined according to the responsibility assigned and the skills required by the role held
Annual incentive plan (STI)
Deferral/STI matching
Medium-long term incentive plan (LTI)
Patto di non concorrenza
Benefit tipici riconosciuti per contratto/prassi aziendale
FIXED REMUNERATION
SHORT TERM VARIABLE
REMUNERATION
LONG TERM VARIABLE
REMUNERATION
OTHER COMPONENTS
Manager Operations and KMs in the event of achievement of the minimum, target and maximum STI 2023 and
LTI 2023-2025 targets is shown below.
PAY MIX - GENERAL MANAGER OPERATIONS
(IN THE EVENT OF DEFERRAL OF 25% OF THE STI ACCRUED)
FIXED
REMUNERATION
SHORT TERM VARIABLE
REMUNERATION
LONG TERM VARIABLE
REMUNERATION
48.8%
Fixed
51.2%
Variable
Minimum
Target
Maximum
32.9%
48.8%
18.3%
40.0%
Fixed
60.0%
Variable
37.5%
40.0%
22.5%
22.7%
Fixed
77.3%
Variable
51.7%
22.7%
25.6%
298
Pirelli Annual Report 2022 PAY MIX - KEY MANAGERS
(IN THE EVENT OF DEFERRAL OF 25% OF THE STI ACCRUED
FIXED
REMUNERATION
SHORT TERM VARIABLE
REMUNERATION
LONG TERM VARIABLE
REMUNERATION
55.7%
Fixed
44.3%
Variable
Minimum
Target
Maximum
29.7%
55.7%
14.6%
47.6%
Fixed
52.4%
Variable
34.5%
47.6%
17.9%
28.6%
Fixed
71.4%
Variable
50.0%
28.6%
21.4%
The analysis of the remuneration of the General Manager Operations and the KMs, reviewed once a year and
disclosed in the Compensation Report, 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 more than 400
listed European companies selected by Korn Ferry, included on the FTSE500 list - which includes the 500 highest
cap European companies.
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.
FIXED REMUNERATION OF THE GENERAL MANAGERS AND KMS
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 KMs is determined by top management, also 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.
For a new General Manager, the Policy allows 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 incentive percentages, does not exceed 80% of the Annual Total
Direct Compensation on-Target of the Executive Vice President and Chief Executive Officer or of the Chief
Executive Officer, if appointed.
If KMs are hired, the Policy allows 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).
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, in the event of non-compliance, the Procedure for Transactions with Related Parties is
applicable.
ANNUAL VARIABLE COMPONENT (STI)
The General Managers and KMs are beneficiaries of the STI plan defined according to the same targets as those
set for the Directors holding specific offices to whom specific duties are also delegated.
On the basis of the performance level achieved, the following shall be paid:
→ an incentive of 50% of the GAR for the General Manager Operations and an incentive of 35% of the GAR for
KMs if the minimum performance level is achieved;
→ an incentive of 75% of the GAR for the General Manager Operations and an incentive of 50% of the GAR for
299
REMUNERATION REPORT KMs if the on-target performance is achieved;
→ an incentive of 150% of the GAR for the General Manager
Operations and an incentive of 100% of the GAR for KMs
if the maximum performance is achieved (double the on-
target incentive).
If a new General Manager is hired, the Remuneration
Committee, bearing in mind the purpose of the Policy, which
is 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
or the Chief Executive Officer, if appointed. In such case the
Related-Party Transactions Procedure applies.
For General Managers and KMs 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 KMs are beneficiaries of medium/
long-term incentive plans and, in particular, of the 2021-2023,
2022-2024 and 2023-2025 LTI Plans. The LTI plans have
the same structure, mechanism and targets as those set for
Directors holding specific offices to whom specific duties are
also delegated.
is achieved (75% of the on-target incentive).
→ an annually based bonus opportunity of 60% of the GAR
for the General Manager Operations and 50% of the GAR
for KMs if the on-target performance is achieved;
→ an annually based bonus opportunity of 160% of the GAR
for the General Manager Operations and 130% of the GAR
for KMs if the maximum performance is achieved.
If a new General Manager is appointed, the Remuneration
Committee, bearing in mind the purpose of the Policy, which
is 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
or the Chief Executive Officer, if appointed. In such case the
Related-Party Transactions Procedure applies.
In the event of termination of the employee-employer
relationship for any reason before the end of the three-year
period, the General Managers and KMs will no longer form part
of the LTI plans and no award nor pro-quota award will be paid.
NON-MONETARY BENEFITS, CONVENTIONAL
SENIORITY AND WELCOME BONUS
Non-monetary elements of remuneration are benefits provided
to General Managers and KMs 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).
Within the scope of the LTI Plan for the period 2023-2025,
on the basis of the performance level achieved, the following
is paid:
→ an annually based bonus opportunity of 45% of the GAR
for the General Manager Operations and 37.5% of the
GAR for KMs if the “access threshold” performance level
Moreover, if a new General Manager or KM is hired, the
Remuneration Committee 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.
300
Pirelli Annual Report 2022 6. SENIOR MANAGERS AND EXECUTIVES
The remuneration of Senior Managers and Executives consists of the following elements:
Gross Annual Remuneration (GAR)
determined according to the responsibility assigned and the skills required by the role held
Annual incentive plan (STI)
Deferral/STI matching
Medium-long term incentive plan (LTI)
Non-competition 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 2023 STI and 2023-2025 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
59.7%
Fixed
40.3%
Variable
PAY MIX – EXECUTIVES
FIXED
REMUNERATION
SHORT TERM VARIABLE
REMUNERATION
LONG TERM VARIABLE
REMUNERATION
79.2%
Fixed
20.8%
Variable
Minimum
Target
Maximum
29.1%
59.7%
11.2%
50.5%
Fixed
49.5%
Variable
34.3%
50.5%
15.2%
30.7%
Fixed
69.3%
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
50.9%
30.7%
18.4%
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 KMs.
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 General Managers and the KMs.
For the year 2023, the objectives assigned to Senior Managers and Executives are as shown in the table below:
STI TABLE
SENIOR/EXECUTIVE HEADQUARTER
TARGET WEIGHT
STI TABLE
SENIOR/EXECUTIVE OF REGION/BU
Group Net Cash Flow (before dividends)
ON/OFF condition
Group Net Cash Flow (before dividends) / Region
Region DSO for Commercial Heads*
Group EBIT Adjusted
Group Net Cash Flow (before dividends)
Target/s functional to the Group scope
Sustainability targets**:
Eco & Safety Volumes
DE&I: Women in Management
HSE: Frequency Index
25%
20%
40%
15%
KPI with Group scope
Region / BU EBIT Adjusted
Region Net Cash Flow
Functional targets
Sustainability targets**:
Eco & Safety Volumes
DE&I: Women in Management
HSE: Frequency Index"
TARGET WEIGHT
ON/OFF condition
From 10% to 35%
25%
From 10% to 25%
Up to 25%
15%
* If the ON/OFF NCF Region or DSO condition is not met, the ON/OFF NCF Group condition will apply with a 25% reduction of the payout accrued.
** The Senior Managers and Region Heads all have the sustainability targets, each with a 5% weighting. The other Executives have a single target with a 15% weighting that varies according
to their professional sector.
301
REMUNERATION REPORT According to the performance level achieved, the Senior
Managers and Executives are assigned:
student grants for limited periods of time).
→ a bonus ranging between 10% and 25% of the GAR,
depending on the position held, if minimum performance
is achieved;
→ a bonus ranging between 15% and 40% of the GAR,
depending on the role held if on-target performance is
achieved;
→ a bonus ranging between 30% and 80% of the GAR,
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
KMs, 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
for 12 months and subject to achievement of the STI targets
for the following year, according to the same mechanism
envisaged for the Directors holding specific offices to whom
specific duties are also delegated.
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 2021-2023, 2022-2024 and 2023-2025 LTI Plans are
defined according to the same structure, mechanisms and
objectives as envisaged for the Directors holding specific
offices to whom specific duties are also delegated, General
Managers and KMs.
Within the scope of the LTI Plan for the period 2023-2025, 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 GAR, 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 GAR, depending on the position held if on-
target performance is achieved;
→ an annually based bonus opportunity ranging between
40% and 130% of the GAR, 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-quota 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
7. CLAWBACK CLAUSES
The annual STI and multi-year (LTI) incentive plans for
Directors holding specific offices to whom specific duties
are also delegated, General Managers and KMs 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, KMs, 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
specific duties are also delegated and who are not bound
by executive employment relationships, Pirelli does not pay
302
Pirelli Annual Report 2022 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 KMs, 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.
The closure amounts are determined with reference to the applicable category national collective bargaining
agreements. In particular, as regards General Managers and KMs, 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
ARBITRATION PANEL
YEARS OF SENIORITY
NOTICE
MIN
MAX
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 KMs:
→ an additional amount by way of general and novative transaction, within the limits of the low thresholds
established for related party 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 KMs 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 KMs 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 short term incentive (STI) and medium-long term (LTI) incentive system:
→ for Directors holding specific offices to whom specific duties are also delegated, in the event of termination
of office, the STI Bonus is paid pro-quota for the actual months of tenure of the office, in addition to a pro-
quota payment of the LTI Bonus.
→ for General Managers, KMs, Senior Managers and Executives, in the event of termination of their employment
contract for whatever reason, a pro-quota payment of the STI bonus is made for the actual months of work,
subject to a minimum period of 9 months. The LTI bonus will not be paid, not even on a pro-quota basis, if the
termination takes place before the end of the three-year period.
303
REMUNERATION REPORT 9. NON-COMPETITION AGREEMENT
10. EXCEPTIONS TO THE REMUNERATION POLICY
The Group enters into non-competition agreements providing
for a payment to General Managers, KMs, Senior Managers
and Executives139 for particularly crucial duties, in proportion
to the GAR in relation to the duration and extent of the
constraints arising from the agreement itself. The Group
also reserves the right, subject to authorisation by the Board
of Directors, to enter into non-competition agreements with
Directors holding specific offices to whom specific duties
are also delegated.
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 role held
when the agreement is finalised and may go as far, in certain
cases deemed particularly critical, such as in the case of
Directors holding specific offices to whom specific duties
are also delegated, General Managers and KMs, as to have
a geographical extension covering all the main countries in
which the Group operates.
The Executive Vice Chairman and Chief Executive Officer is
not subject to a non-competition agreement.
Note that the Deputy-CEO is subject to a non-competition
agreement to protect the Group’s strategic and operational
know-how.
In the case of Directors holding specific offices to whom
specific duties are also delegated, General Managers and
KMs, the non-competition agreement provides for the
following characteristics:
→ 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 contract of employment ends;
→ the fee: from a minimum of 30% to a maximum of 80%
of the GAR 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 GAR 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
GAR and in any case not above 100% and, in this case, the
annual payment during employment may be a maximum
of 20% of the GAR.
139 In particular, it refers to critical know-how in terms of technical skills in research and development and
manufacturing as well as in the commercial field.
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 KMs 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 party 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 2023 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 KMs, shall contain at least the
information set out in the scheme referred to above.
304
Pirelli Annual Report 2022 ANNEX 1 - GLOSSARY
Directors: members of the Board of Directors of Pirelli & C.
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 KMs.
Directors holding specific offices: the Directors of Pirelli &
C. holding the office of Chairman, Executive Vice Chairman,
Executive Vice Chairman and Chief Executive Officer,
Deputy-CEO and Chief Executive Officer. The Directors
holding special 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 KMs.
Directors with no specific offices: are the Directors of Pirelli
& C. other than those holding special offices. Directors not
holding special 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 KMs.
Directors holding specific offices to whom specific duties
are also delegated: the Directors of Pirelli & C. holding the
office of Executive Vice Chairman and Chief Executive Officer,
Executive Vice Chairman (if appointed), Deputy-CEO and
Chief Executive Officer (if appointed).
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..
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
305
KMs: 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 KMs: (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.
The Pirelli Group or Pirelli or the Group: means all the
companies included in the Pirelli & C. consolidation scope.
Management: means all Directors holding specific offices,
General Managers, KMs, Senior Managers and Executives.
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’
Meeting held on 18 June 2020, as subsequently amended by
the Board of Directors’ meeting of 31 March 2021 (amendment
approved by the Shareholders’ Meeting of June 15, 2021) and
amended by the Board of Directors’ meeting of March 17,
2022 (amendment approved by the Shareholders’ Meeting
of June 18, 2022).
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, subsequently,
by the Shareholders’ Meeting held on 15 June 2021, in
support of the achievement of the new objectives set by
the 2021-2022/2025 Strategic Plan, as subsequently
amended by the Board of Directors’ meeting of March 17,
2022 (amendment approved by the Shareholders’ Meeting
of June 18, 2022).
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 and,
subsequently, by the Shareholders’ Meeting held on 18 May
2022, to support the achievement of the objectives set by the
2021-2022/2025 Strategic Plan.
2023-2025 LTI Plan: means the Long-Term Incentive plan
relating to the three-year period 2023-2025, approved by
REMUNERATION REPORT the Board of Directors’ meeting of April 5, 2023, to support
the achievement of the objectives set by the 2023-2025
Strategic Plan.
2021-2022/2025 Strategic Plan: means the business
plan approved by the Pirelli & C. Board of Directors on 31
March 2021.
2023-2025 Strategic Plan: the business plan approved by
the Board of Directors of Pirelli & C. by the first half of 2023.
GAR: means the gross annual base remuneration of the
compensation for those employed by a Pirelli Group company.
Senior Managers: means the persons to whom the following
shall first report, except where they are KMs (i) Directors
holding special offices to whom specific duties have been
attributed; (ii) General Managers, where the work of the
Senior Manager significantly impacts business results.
Statutory Auditors: members of the Board of Statutory
Auditors of Pirelli & C.
The Company or Pirelli & C.: means Pirelli & C. S.p.A.
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 with specific
responsibilities, General Managers and KMs.
REPORT ON
COMPENSATION
PAID IN 2022
1. ILLUSTRATION OF REMUNERATION COMPONENTS
The Report on Compensation Paid sets out the Policy
implemented by the Pirelli Group during the 2022 financial
year with regard to remuneration and provides information
on the final remuneration of the various categories of people
concerned, without prejudice to the transparency obligations
contained by other applicable legal or regulatory provisions,
highlighting its compliance with the Policy on remuneration
approved the previous year (“2022 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.
306
Pirelli Annual Report 2022 In implementing the 2022 Policy, the Company took into account the vote cast by the Shareholders’ Meeting
held on 18 May 2022, which voted in favour of the Report on Compensation Paid in 2021. The chart below shows
the result of the advisory vote in 2022 on the compensation paid in 2021 and in 2021 on the compensation
paid in 2020.
84.5%
In favour
15.5%
Against
2021
89.2%
In favour
10.6%
Against
2022
0.0%
Abstaining/non voting
0.2%
Abstaining/non voting
1.1. TOTAL REMUNERATION
FIXED REMUNERATION The remuneration of the Directors not holding special offices for 2022 includes the
remuneration for the office and additional remuneration for participation in the board Committees, as resolved
by the Board of Directors on 22 June 2020.
Chairman Ning Gaoning, who resigned from his post on 8 October 2022, was paid remuneration pro-quota for
his main office of 308,767 euros gross and, again pro-quota, the remuneration for the office of Director and his
participation in the Strategies Committee, determined by the Board of Directors on 22 June 2020140.
Chairman Li Fanrong, co-opted by the Board of Directors on 11 October 2022 to replace Ning Gaoning, and
who will remain in office until the next Shareholders’ Meeting to be convened, has stated his intention not
to receive any remuneration from the Company for the offices held. Consequently, the Board of Directors
resolved not to allocate any remuneration envisaged by the 2022 Remuneration Policy for the offices held by
the Chairman Li Fanrong.
The Executive Vice Chairman and Chief Executive Officer was paid the gross annual fixed component for his main
office of 2,400,000 euros and 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 2022 includes the gross annual fixed component for the
main office, of 1,100,000 euros, 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 Operations was paid gross annual remuneration of 750,000 euros, in line with the resolution
of the Board of Directors, after consulting the Remuneration Committee.
The KMs received gross annual remuneration, in line with that determined by the Executive Vice Chairman and
Chief Executive Officer, amounting to an aggregate amount of 2,681,635 euros141.
The Statutory Auditors appointed by the Shareholders’ Meeting of 15 June 2021 were paid a remuneration of
90,000 euros for the Chairman and 75,000 for the Standing Auditors. The Statutory Auditor appointed to the
Supervisory Body also received gross annual remuneration of 40,000 euros, established by the Board of Directors
on 22 June 2020.
The fixed remuneration amounts are shown in the respective columns of Table 1.
For further details, see paragraphs 3, 4 and 5 of the 2022 Policy.
140 Remuneration transferred to employer company.
141 As of 31 December 2022, in addition to the General Manager Operations, 7 KMs were in office. The
aggregate amount of remuneration shown includes, pro-rata temporis, the remuneration received by 2
KMs qualified as such as of 23 February (Pierangelo Misani) and 14 November 2022 (Antonio Paccioretti)
respectively.
307
REMUNERATION REPORT
VARIABLE REMUNERATION Management remuneration obtained in 2022 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, including the company deferral/matching mechanism and the 2020-2022 LTI Plan.
ANNUAL VARIABLE REMUNERATION STI With reference to the 2022 STI Plan, the table below summarises
the final figures of the performance targets for the year in relation to the targets set.
ON/OFF condition
WEIGHT
Group Net Cash Flow (before dividends)
Group EBIT Adj.
Group Net Cash Flow (before dividends)
Group Net Result
Eco & Safety Rev.
Diversity and Inclusion Women Hirings*
450
Access condition
890
Minimum
(-2.9%)
917
Target
516
euro/mln
ON
978 euro/mln
970
Maximum
(+5.8%)
516 euro/mln
450
Minimum
(-3.2%)
465
Target
495
Maximum
(+6.5%)
443.2 euro/mln
407
Minimum
(-4.7%)
427
Target
63.5%
Minimum
(-1pp)
64.5%
Target
36.5%
36%
Target
35%
Minimum
(-1pp)
467
Maximum
(+9.4%)
66.9%
66.5%
Maximum
(+2pp)
38%
Maximum
(+2pp)
* Represents the percentage of female hires out of total hires during the year for the white collar population.
It should be noted that at the meeting held on 22 February 2023, on a proposal from the Remuneration Committee
and taking into account the favourable opinion of the Board of Statutory Auditors, the Board of Directors agreed to
adjust the Net Result objective alone to an extent that is less than proportional to the negative effects generated
by factors deriving from the escalation of the Russian-Ukrainian crisis.
The above took place applying the criteria for adjusting only the quantification of the objectives included in
the 2022 STI Plan, approved ex ante by the Board of Directors and included in the 2022 Policy, to protect the
objectives of the plans themselves and in order to ensure alignment between corporate objectives and the
objectives underlying the incentive systems.
35%
30%
20%
10%
5%
308
Pirelli Annual Report 2022 In light of the results achieved, the payout percentage accrued by each beneficiary in respect of the 2022 STI
plan stands at the values shown in the table below.
% ACHIEVED ON FIXED COMPONENT
Executive 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%
230%
184%
138%
92%
Note that the amounts accrued under the 2022 STI shall be paid in accordance with the following procedures
and mechanisms, in accordance with the 2022 Policy:
→ the Executive Vice Chairman and Chief Executive Officer and the Deputy-CEO shall be paid 75% of the
accrued incentive upfront while payment of the remaining 25% shall be deferred for 12 months and assigned
for risk/opportunity as it is subject to achievement of the 2023 STI targets as defined in the 2023 Policy.
For this reason, neither the deferral quota nor any company matching are shown in the “Bonuses and other
incentives” column of Table 1. Also note that, in accordance with the 2021 Remuneration Policy and based on
the level of achievement of the 2022 STI results, the 2021 STI portions that had been deferred together with
the company matching component (both components shown in the “Bonuses and other incentives” column
of Table 1) are also disbursed;
→ the General Manager Operations and the KMs are instead subject to the co-investment mechanism as
defined in the 2022 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 2026 subject to continued employment up to 31 December 2025, together with a
company matching component that can vary from a minimum of 1 to a maximum of 1.5 times the deferred
amount. Since the amount of the deferred portion and the company matching are already determined as
they are not subject to further performance conditions, both components are shown in the “Bonuses and
other incentives” column of Table 1.
For further details, see paragraphs 2, 4 and 5 of the 2022 Policy and paragraphs 2 and 4 of the 2021 Policy.
MEDIUM-LONG TERM VARIABLE REMUNERATION (LTI) With reference to the 2020-2022 LTI Plan, the
table below summarises the final figures of the performance targets for the three-year period in relation to the
targets set. Note that the Plan did not provide for an ON/OFF condition.
Relative TSR
Group Net Cash Flow (before dividends)
Dow Jones Index
CDP Ranking
309
- 4.0%
-5%
Minimum
-
Target
10%
Maximum
1,196 euro/mln
910
Minimum
(-5%)
960
Target
1,040
Maximum
(+8%)
3 YEARS MAX
5-10%
Minimum
1-5%
Target
Top Cluster
Maximum
3 YEARS MAX
B
Minimum
A-
Target
A
Maximum
WEIGHT
40%
40%
10%
10%
REMUNERATION REPORT In light of the results achieved, the payout percentage accrued by each beneficiary in respect of the 2020-2022
LTI plan stands at the values shown in the table below.
% ACHIEVED ON FIXED COMPONENT
Executive Vice Chairman and CEO
Deputy-CEO(1)
General Manager Operations
KM(1)
Minimum
Target
Maximum
Minimum
Target
Maximum
Minimum
Target
Maximum
Minimum
Target
Maximum
157,5%
210%
600%
135%
180%
480%
135%
180%
480%
112,5%
150%
390%
427%
230%
346%
267%
(1) It should be noted that the Deputy-CEO and 1 KM participate in the 2020 2022 LTI Plan pro rata temporis for the years 2021 and 2022 only.
Note that for the 2020-2022 LTI plan, the Board of Directors did not apply any of the criteria for adjusting the final
balance of the plan’s objectives, as the conditions were not met. Also note that these criteria had been approved
ex ante by the Board of Directors at its meeting held on 17 March 2022 in order to take into account any negative
impacts caused by the worsening of the reference geopolitical and macroeconomic scenario.
Note furthermore that, for the TSR objective, according to the resolution of the Shareholders’ Meeting held on 15
June 2021, on the basis of a proposal from the Remuneration Committee and taking into account the favourable
opinion of the Board of Statutory Auditors, the Board of Directors approved the methodology identified by the
Company (the suitability of which has been validated by an independent expert) to normalise the effects of the
acquisition of Cooper by Goodyear (a company included in the reference panel for the TSR target) which took
place at the beginning of 2021.
Note that the amounts accrued over three years under the 2020-2022 LTI plan are disbursed in a single payment
in accordance with the 2020 Policy.
The aforementioned amounts for the STI and LTI plans are shown under the respective items of Tables 1 and 2.
Finally, the following graph shows the proportion of fixed and variable remuneration142 achieved in relation to the
2022 results for STI and of 2020-2022 results for LTI for top management figures.
Executive Vice Chairman
and Chief Executive Officer
Deputy-CEO
General Manager Operations
KMs
13%
Fixed
19%
Fixed
16%
Fixed
21%
Fixed
87%
Variable
81%
Variable
84%
Variable
79%
Variable
OTHER REMUNERATION It should be noted that for the Deputy-CEO, the General Manager Operations, KMs
and more generally other selected Senior Managers and Executives, Pirelli has introduced non-competition
agreements 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 is not subject
to a non-competition agreement.
142 Corresponding for the fixed part to the items represented in the “Fixed remuneration” and
“Remuneration for participation in committees” columns and for the variable part in the “Bonuses
and other incentives” column of Table 1.
310
Pirelli Annual Report 2022 For further details, see paragraph 9 of the 2022 Policy and
Table 1 for further details of the other remuneration.
offices), General Managers, KMs and members of the Board
of Statutory Auditors.
1.2. INDEMNITY IN THE EVENT OF TERMINATION
OF OFFICE AND/OR TERMINATION
OF EMPLOYMENT DURING THE YEAR 2022
In 2022 there were no cases of termination of office of
directors or members of the Board of Statutory Auditors
and/or termination of employment of General Managers or
KMs leading to the allocation of indemnities and/or other
benefits.
1.3. EXCEPTIONS TO THE 2022 POLICY
It should be noted that there were no exceptions to the 2022
Policy for Directors (including Directors holding specific
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 the comparative information for the last
four years: (i) remuneration of each of the individuals for whom
the information in this section of the report is provided by
name, (ii) the Company’s results, (iii) the average remuneration
of the employees of Pirelli & C. S.p.A.
311
REMUNERATION REPORT ANNUAL VARIATION IN REMUNERATION AND PERFORMANCE
Values in €
2022
2022 VS 2021
2021 VS 2020
2020 VS 2019
2019 VS 2018
2018 VS 2017
Actual Total Cash[1]
Change
19,966,260
167%
234%
-47%
-11%
Actual Total Cash[1]
6,350,535
176%
-
Change
Change
-
-
General Manager Operations
Actual Total Cash[1]
Andrea Casaluci
4,721,343
69%
292%
-33%
23%
Executive Vice Chairman
and Chief Executive Officer
Marco Tronchetti Provera
Deputy-CEO
Giorgio Luca Bruno[2]
Board of Directors
Name
Ning Gaoning[3]
Li Fanrong[4]
Yang Xingqiang
Bai Xinping
Tao Haisu
Haitao Zhang
Paola Boromei
Domenico De Sole
Roberto Diacetti
Giovanni Lo Storto
Marisa Pappalardo
Office
Actual Total Cash[1]
Change
Chairman (outgoing)
405,258
Chairman
Director
Director
Director
Director
Director
Director
Director
Director
Director
0
34,305
155,000
100,000
95,000
95,000
145,000
95,000
175,000
200,000
886,376
130,000
95,000
60,695
Giovanni Tronchetti Provera
Director
Fan Xiaohua
Wei Yin Tao
Yang Shihao
Director
Director
Director
Board of Directors
Name
Office
Actual Total Cash[1]
Riccardo Foglia Taverna
Chairman
Antonella Carù
Alberto Villani
Standing auditor
Standing auditor
Francesca Meneghel
Standing auditor
Teresa Naddeo
Standing auditor
90,000
115,000
75,000
75,000
75,000
-23%
-
-64%
0%
0%
0%
0%
0%
0%
0%
0%
69%
0%
0%
-
85%
6%
18%
85%
85%
20%
-
20%
20%
22%
100%
100%
19%
100%
38%
58%
92%
34%
20%
-
-
8%
27%
-
-
Change
-11%
-
-12%
-11%
-9%
-
-
-19%
-
15%
27%
3%
8%
-12%
-
-
0%
0%
-
-
148%
-
0%
0%
0%
-
-
0%
-
58%
0%
23%
0%
0%
-
-
3%
0%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Results
Relative TSR[5]
Group Adjusted EBIT (mln euros)
Actual Result
Change
-
978
8.3 p.p.
2.3 p.p.
-12.1 p.p.
-8.3 p.p.
20%
62.8%
-45.4%
-4.0%
8,4%
9,0%
Average remuneration of employees
Actual Total Cash[1]
Change
Employees of Pirelli & C. S.p.A.
active at 31/12
151,836
40%
38.6%
-11%
-3%
-29,2%
(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) Co-opted on 11 October 2022
(5) Calculated as [(average share value 2nd half year n - average share value 2nd half year n-1 + dividends paid in year n) / average share value 2nd half year n-1].
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.
The values for previous years have been aligned with the above formula.
312
Pirelli Annual Report 2022
The graph below shows the changes to the Executive Vice Chairman and Chief Executive Officer remuneration,
to the average remuneration of Pirelli & C. S.p.A employees and the Group’s Relative TSR and Adjusted EBIT
performance. Please note that the values are not represented in scale.
2019
2020
2021
2022
CEO
Adj. EBIT
Average Employees
Relative TSR
2. THE “TABLE”: REMUNERATION PAID TO MEMBERS OF THE ADMINISTRATIVE
AND CONTROL BODIES, GENERAL MANAGERS AND KEY MANAGERS.
The following tables set out:
→ by name, the remuneration paid to Directors, Statutory Auditors and General Managers;
→ in aggregate form, that of KMs143. As of 31 December 2022, in addition to the General Manager Operations
(Andrea Casaluci), 7 KMs were in office.
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. S.p.A. or subsidiary and/or investee company thereof paying it (not for remuneration
waived or transferred to the Company).
The tables include all those individuals who held the aforementioned positions during all or even only part of the
2022 year144. Non-monetary benefits, where received, are also identified on an accruals basis, and reported
according to the “taxable income criterion” of the benefit assigned.
143 Point b) of Section II of Scheme 7-bis of Annex 3 A of the so-called Issuers’ Regulations provides that the
so-called Report on compensation paid is structured into two parts:
“a) the remuneration of members of the administrative and control bodies and the General Managers;
b) the remuneration of any other key managers who have received, in the reporting year, total remuneration
(obtained by adding their salary and any remuneration based on financial instruments) that exceeded the
highest total remuneration attributed to the persons indicated in point a).
For Key Managers with strategic responsibilities other than those indicated in point b) information is provided at
aggregate level in special tables, indicating the number of persons to whom it refers in place of names”.
144 In this case the remuneration is shown pro rata temporis.
313
REMUNERATION REPORT 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
01/01/2022 -
31/12/2022
AGM to approve the financial
statements for the year to 31
December 2022
2,465,000
100,000
670,490
0
20,636,750
Of which remuneration in Pirelli & C. S.p.A.
2,465,000(1)
100,000(2)
670,490(4)
20,636,750
17,401,260
17,401,260(3)
Of which remuneration by subsidiary and affiliated Companies
Ning Gaoning
Chairman
Of which remuneration in Pirelli & C. S.p.A.
Of which remuneration by subsidiary and affiliated Companies
Li Fanrong
Chairman
Of which remuneration in Pirelli & C. S.p.A.
Of which remuneration by subsidiary and affiliated Companies
Yang Xingqiang
Director
Of which remuneration in Pirelli & C. S.p.A.
Of which remuneration by subsidiary and affiliated Companies
Bai Xinping
Director
Of which remuneration in Pirelli & C. S.p.A.
Of which remuneration by subsidiary and affiliated Companies
Paola Boromei
Director
Of which remuneration in Pirelli & C. S.p.A.
Of which remuneration by subsidiary and affiliated Companies
Giorgio Luca Bruno
Deputy-CEO
01/01/2022 -
08/10/2022
AGM to approve the financial
statements for the year to 31
December 2022
11/10/2022 -
31/12/2022
AGM to approve the financial
statements for the year to 31
December 2022
01/01/2022 -
10/05/2022
AGM to approve the financial
statements for the year to 31
December 2022
01/01/2022 -
31/12/2022
AGM to approve the financial
statements for the year to 31
December 2022
01/01/2022 -
31/12/2022
AGM to approve the financial
statements for the year to 31
December 2022
01/01/2022 -
31/12/2022
AGM to approve the financial
statements for the year to 31
December 2022
358,942
46,316
358,942(5)
46,316(6)
0
0(8)
0
0
23,472
10,833
23,472(9)
10,833(10)
65,000
90,000
65,000(9)
90,000(11)
65,000
30,000
65,000(9)
30,000(12)
1,165,000
30,000
13,337
110,000
6,473,872
Of which remuneration in Pirelli & C. S.p.A.
1,165,000(13)
30,000(10)
13,337(15)
110,000(16)
6,473,872
Of which remuneration by subsidiary and affiliated Companies
Domenico De Sole
Director
Of which remuneration in Pirelli & C. S.p.A.
Of which remuneration by subsidiary and affiliated Companies
Roberto Diacetti
Director
Of which remuneration in Pirelli & C. S.p.A.
Of which remuneration by subsidiary and affiliated Companies
Fan Xiaohua
Director
Of which remuneration in Pirelli & C. S.p.A.
Of which remuneration by subsidiary and affiliated Companies
01/01/2022 -
31/12/2022
AGM to approve the financial
statements for the year to 31
December 2022
01/01/2022 -
31/12/2022
AGM to approve the financial
statements for the year to 31
December 2022
01/01/2022 -
31/12/2022
AGM to approve the financial
statements for the year to 31
December 2022
65,000
80,000
65,000(9)
80,000(17)
65,000
30,000
65,000(9)
30,000(18)
65,000
65,000
65,000(9)
65,000(19)
314
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
5,155,535
5,155,535(14)
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
405,258
405,258(7)
0
0
0
0(8)
34,305
34,305(7)
0
155,000
155,000(7)
0
95,000
95,000
0
145,000
145,000
0
95,000
95,000
0
130,000
130,000
Pirelli Annual Report 2022
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
Of which remuneration by subsidiary and affiliated Companies
Ning Gaoning
Chairman
358,942
46,316
01/01/2022 -
08/10/2022
AGM to approve the financial
statements for the year to 31
December 2022
Of which remuneration in Pirelli & C. S.p.A.
358,942(5)
46,316(6)
Of which remuneration by subsidiary and affiliated Companies
Li Fanrong
Chairman
Of which remuneration in Pirelli & C. S.p.A.
Of which remuneration by subsidiary and affiliated Companies
Yang Xingqiang
Director
Of which remuneration in Pirelli & C. S.p.A.
Of which remuneration by subsidiary and affiliated Companies
Bai Xinping
Director
Of which remuneration in Pirelli & C. S.p.A.
Of which remuneration by subsidiary and affiliated Companies
Paola Boromei
Director
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
Domenico De Sole
Director
Of which remuneration in Pirelli & C. S.p.A.
Of which remuneration by subsidiary and affiliated Companies
Roberto Diacetti
Director
Of which remuneration in Pirelli & C. S.p.A.
Of which remuneration by subsidiary and affiliated Companies
Fan Xiaohua
Director
Of which remuneration in Pirelli & C. S.p.A.
Of which remuneration by subsidiary and affiliated Companies
11/10/2022 -
31/12/2022
AGM to approve the financial
statements for the year to 31
December 2022
01/01/2022 -
10/05/2022
AGM to approve the financial
statements for the year to 31
December 2022
01/01/2022 -
31/12/2022
AGM to approve the financial
statements for the year to 31
December 2022
01/01/2022 -
31/12/2022
AGM to approve the financial
statements for the year to 31
December 2022
0
0(8)
0
0
23,472
10,833
23,472(9)
10,833(10)
65,000
90,000
65,000(9)
90,000(11)
65,000
30,000
65,000(9)
30,000(12)
01/01/2022 -
31/12/2022
AGM to approve the financial
statements for the year to 31
December 2022
01/01/2022 -
31/12/2022
AGM to approve the financial
statements for the year to 31
December 2022
01/01/2022 -
31/12/2022
AGM to approve the financial
statements for the year to 31
December 2022
65,000
80,000
65,000(9)
80,000(17)
65,000
30,000
65,000(9)
30,000(18)
65,000
65,000
65,000(9)
65,000(19)
Marco Tronchetti Provera
Executive Vice
Chairman and CEO
01/01/2022 -
31/12/2022
AGM to approve the financial
statements for the year to 31
December 2022
2,465,000
100,000
Of which remuneration in Pirelli & C. S.p.A.
2,465,000(1)
100,000(2)
17,401,260
17,401,260(3)
0
0
0
0
0
Giorgio Luca Bruno
Deputy-CEO
1,165,000
30,000
01/01/2022 -
31/12/2022
AGM to approve the financial
statements for the year to 31
December 2022
Of which remuneration in Pirelli & C. S.p.A.
1,165,000(13)
30,000(10)
5,155,535
5,155,535(14)
0
0
0
315
0
0
0
0
0
0
0
0
0
0
670,490
0
20,636,750
670,490(4)
20,636,750
0
0
0
0
0
0
405,258
405,258(7)
0
0
0
0(8)
34,305
34,305(7)
0
155,000
155,000(7)
0
95,000
95,000
13,337
110,000
6,473,872
13,337(15)
110,000(16)
6,473,872
0
0
0
0
145,000
145,000
0
95,000
95,000
0
130,000
130,000
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
REMUNERATION REPORT
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
Giovanni Lo Storto
Director
Of which remuneration in Pirelli & C. S.p.A.
Of which remuneration by subsidiary and affiliated Companies
Marisa Pappalardo
Director
Of which remuneration in Pirelli & C. S.p.A.
Of which remuneration by subsidiary and affiliated Companies
Tao Haisu
Director
Of which remuneration in Pirelli & C. S.p.A.
Of which remuneration by subsidiary and affiliated Companies
Giovanni Tronchetti Provera
Director
01/01/2022 -
31/12/2022
AGM to approve the financial
statements for the year to 31
December 2022
01/01/2022 -
31/12/2022
AGM to approve the financial
statements for the year to 31
December 2022
01/01/2022 -
31/12/2022
AGM to approve the financial
statements for the year to 31
December 2022
01/01/2022 -
31/12/2022
AGM to approve the financial
statements for the year to 31
December 2022
65,000
110,000
65,000(9)
110,000(20)
65,000
135,000
65,000(9)
135,000(21)
65,000
35,000
65,000(9)
35,000(22)
315,000
30,000
541,376
14,851
0.00
901,227
Of which remuneration in Pirelli & C. S.p.A.
65,000(9)
30,000(23)
Of which remuneration by subsidiary and affiliated Companies
250,000(24)
541,376(25)
14,851(26)
Wei Yin Tao
Director
Of which remuneration in Pirelli & C. S.p.A.
Of which remuneration by subsidiary and affiliated Companies
Haitao Zhang
Director
Of which remuneration in Pirelli & C. S.p.A.
Of which remuneration by subsidiary and affiliated Companies
Yang Shihao
Director
Of which remuneration in Pirelli & C. S.p.A.
Of which remuneration by subsidiary and affiliated Companies
Andrea Casaluci
General Manager
Operations
Of which remuneration in Pirelli & C. S.p.A.
01/01/2022 -
31/12/2022
AGM to approve the financial
statements for the year to 31
December 2022
01/01/2022 -
31/12/2022
AGM to approve the financial
statements for the year to 31
December 2022
10/05/2022 -
31/12/2022
AGM to approve the financial
statements for the year to 31
December 2022
65,000
30,000
65,000(9)
30,000(10)
65,000
30,000
65,000(9)
30,000(18)
41,528
19,167
41,528(9)
19,167(10)
750,000
0
3,971,343
0.00
16,933
75,000
4,813,276
Of which remuneration by subsidiary and affiliated Companies
750,000
3,971,343(27)
16,933(28)
75,000(29)
4,813,276
n, 7 Dirigenti con responsabilità
strategica
(30)
Of which remuneration in Pirelli & C. S.p.A.
Of which remuneration by subsidiary and affiliated Companies
Riccardo Foglia Taverna
Chairman of the Board
of Statutory Auditors
01/01/2022 -
31/12/2022
AGM to approve the financial
statements for the year to 31
December 2023
Of which remuneration in Pirelli & C. S.p.A.
Of which remuneration by subsidiary and affiliated Companies
Francesca Meneghel
Standing auditor
Of which remuneration in Pirelli & C. S.p.A.
Of which remuneration by subsidiary and affiliated Companies
01/01/2021 -
31/12/2022
AGM to approve the financial
statements for the year to 31
December 2023
2,681,635
40,000
10,394,500
0.00
94,820
575,313
13,786,268
1,826,250
40,000(31)
855,385
90,000
90,000
75,000
75,000
0
0
316
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
175,000
175,000
200,000
200,000
100,000
100,000
95,000
806,227
95,000
95,000
95,000
95,000(7)
60,695
60,695(7)
90,000
90,000
75,000
75,000
0
0
0
0
0
0
0
0
0
0
0
6,485,040(32)
3,909,460(35)
65,510(33)
446,563(34)
8,863,363
29,310(33)
128,750(34)
4,922,905
0
0
0
0
0
0
0
0
0
0
0
Pirelli Annual Report 2022
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
01/01/2022 -
31/12/2022
AGM to approve the financial
statements for the year to 31
December 2022
01/01/2022 -
31/12/2022
AGM to approve the financial
statements for the year to 31
December 2022
01/01/2022 -
31/12/2022
AGM to approve the financial
statements for the year to 31
December 2022
01/01/2022 -
31/12/2022
AGM to approve the financial
statements for the year to 31
December 2022
01/01/2022 -
31/12/2022
AGM to approve the financial
statements for the year to 31
December 2022
01/01/2022 -
31/12/2022
AGM to approve the financial
statements for the year to 31
December 2022
10/05/2022 -
31/12/2022
AGM to approve the financial
statements for the year to 31
December 2022
Giovanni Lo Storto
Director
Of which remuneration in Pirelli & C. S.p.A.
Of which remuneration by subsidiary and affiliated Companies
Marisa Pappalardo
Director
Of which remuneration in Pirelli & C. S.p.A.
Of which remuneration by subsidiary and affiliated Companies
Tao Haisu
Director
Of which remuneration in Pirelli & C. S.p.A.
Of which remuneration by subsidiary and affiliated Companies
Wei Yin Tao
Director
Of which remuneration in Pirelli & C. S.p.A.
Of which remuneration by subsidiary and affiliated Companies
Haitao Zhang
Director
Of which remuneration in Pirelli & C. S.p.A.
Of which remuneration by subsidiary and affiliated Companies
Yang Shihao
Director
Of which remuneration in Pirelli & C. S.p.A.
Of which remuneration by subsidiary and affiliated Companies
Andrea Casaluci
General Manager
Operations
Of which remuneration in Pirelli & C. S.p.A.
n, 7 Dirigenti con responsabilità
strategica
(30)
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
Francesca Meneghel
Standing auditor
Of which remuneration in Pirelli & C. S.p.A.
Of which remuneration by subsidiary and affiliated Companies
Riccardo Foglia Taverna
Chairman of the Board
of Statutory Auditors
01/01/2022 -
31/12/2022
AGM to approve the financial
statements for the year to 31
December 2023
01/01/2021 -
31/12/2022
AGM to approve the financial
statements for the year to 31
December 2023
65,000
110,000
65,000(9)
110,000(20)
65,000
135,000
65,000(9)
135,000(21)
65,000
35,000
65,000(9)
35,000(22)
65,000
30,000
65,000(9)
30,000(10)
65,000
30,000
65,000(9)
30,000(18)
41,528
19,167
41,528(9)
19,167(10)
855,385
90,000
90,000
75,000
75,000
0
0
0
0
0
Giovanni Tronchetti Provera
Director
315,000
30,000
541,376
Of which remuneration in Pirelli & C. S.p.A.
65,000(9)
30,000(23)
Of which remuneration by subsidiary and affiliated Companies
250,000(24)
541,376(25)
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
175,000
175,000
200,000
200,000
100,000
100,000
14,851
0.00
901,227
14,851(26)
0
0
0
0
0
0
95,000
806,227
95,000
95,000
95,000
95,000(7)
60,695
60,695(7)
Of which remuneration by subsidiary and affiliated Companies
750,000
3,971,343(27)
16,933(28)
75,000(29)
4,813,276
2,681,635
40,000
10,394,500
0.00
94,820
575,313
13,786,268
1,826,250
40,000(31)
6,485,040(32)
3,909,460(35)
65,510(33)
446,563(34)
8,863,363
29,310(33)
128,750(34)
4,922,905
750,000
0
3,971,343
0.00
16,933
75,000
4,813,276
0
0
0
0
0
0
0
0
90,000
90,000
75,000
75,000
317
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
REMUNERATION REPORT
FIRST AND LAST NAME
OFFICE
PERIOD OFFICE
HELD
EXPIRY OF TERM
OF OFFICE
FIXED
REMUNERATION
Teresa Naddeo
Standing auditor
Of which remuneration in Pirelli & C. S.p.A.
Of which remuneration by subsidiary and affiliated Companies
Antonella Carù
Standing auditor
Of which remuneration in Pirelli & C. S.p.A.
Of which remuneration by subsidiary and affiliated Companies
Alberto Villani
Standing auditor
Of which remuneration in Pirelli & C. S.p.A.
Of which remuneration by subsidiary and affiliated Companies
* * * * *
Total remuneration in Pirelli & C. S.p.A.
Total remuneration by subsidiary and affiliated Companies
Total
REMUNERATION
FOR MEMBERSHIP
OF COMMITTEES
0
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
01/01/2022 -
31/12/2022
AGM to approve the financial
statements for the year to 31
December 2023
75,000
75,000
01/01/2021 -
31/12/2021
AGM to approve the financial
statements for the year to 31
December 2023
01/01/2022 -
31/12/2022
AGM to approve the financial
statements for the year to 31
December 2023
75,000
40,000
75,000
40,000(31)
75,000
75,000
0
6,985,192
951,316
1,855,385
0
8,840,577
951,316
29,041,835
8,422,179
37,464,014
749,337
556,563
38,284,243
61,094
810,431
203,750
10,542,408
760,313
48,826,651
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
75,000
75,000
115,000
115,000
75,000
75,000
0
0
0
0
0
0
0
0
0
0
0
0
(1) Of which: euro 65,000 as a Director of Pirelli & C. S.p.A. and euro 2.4 million 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 2022 STI incentive paid out (upfront amount), 25% of the 2021 STI incentive deferred together with the company matching component due to the level of
achievement of the results of the 2022 STI and the total value of the 2020-2022 LTI Plan amounting to 10.25 million euros (see the table below for details of the amounts). Note that the 2020-
2022 LTI Plan is the last “closed” cycle that provides for disbursement of the whole three-year incentive in a single payment at the end of the performance period. As of the 2021-2023 LTI
cycle, the allocations will be annual (rolling) with an annualised incentive opportunity.
(4) Of which: euro 666,292 for insurance policies in line with the provisions of the 2022 Remuneration Policy, and euro 4,198 for a company car.
(5) Of which euro 308,767 as a Chairman of Pirelli & C. S.p.A. and euro 50,175 as a Director of Pirelli & C. S.p.A.
(6) Of which euro 23,158 as member of the Appointments and Successions Committee of Pirelli & C. S.p.A. and euro 23,158 as member of the Strategies Committee of Pirelli & C. S.p.A.
(7) Remuneration transferred to employer company.
(8) Chairman Li Farong, co-opted by the Board of Directors on 11 October 2022, stated his intention not to receive any remuneration for the offices held at Pirelli & C. S.p.A. For completeness,it
should be pointed out that Chairman Li Farong is a member of the Strategies Committee and the Appointments and Succession Committee.
(9) As a Director of Pirelli & C. S.p.A.
(10) As a member of the Strategies Committee of Pirelli & C. S.p.A.
(11) 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.
(12) As member of the Remuneration Committee of Pirelli & C. S.p.A.
(13) Of which euro 65,000 as a Director of Pirelli & C. S.p.A. and euro 1.1 million as Deputy-CEO of Pirelli & C. S.p.A.
(14) The amount includes: 75% of the 2022 STI incentive paid out (upfront amount), 25% of the 2021 STI incentive deferred together with the company matching component due to the level of
achievement of the results of 2022 STI and the total value of the LTI 2020-2022 Plan amounting to 2.53 million euros (see the table below for details of the amounts). Note that the 2020-2022
LTI Plan is the last “closed” cycle that provides for disbursement of the whole three-year incentive in a single payment at the end of the performance period (the amount accrued by Mr Bruno
relates pro-rata temporis to the two-year period 2021-2022, when he participated in the Plan). As of the 2021-2023 LTI cycle, the allocations will be annual (rolling) with an annualised incentive
opportunity.
(15) Of which: euro 3,131 for insurance policies, euro 6,870 for a company car and euro 3,336 for health insurance.
(16) The amount refers to the payment during the employment contract of part of the consideration for the non-competition agreement.
(17) 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-Party Transactions Committee of Pirelli & C. S.p.A. (“RPT
Committee”).
(18) As member of the Audit, Risks, Sustainability and Corporate Governance Committee of Pirelli & C. S.p.A. (“ARSCGC”).
(19) 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.
(20) 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.
318
Pirelli Annual Report 2022 Teresa Naddeo
Standing auditor
Of which remuneration in Pirelli & C. S.p.A.
Of which remuneration by subsidiary and affiliated Companies
Antonella Carù
Standing auditor
Of which remuneration in Pirelli & C. S.p.A.
Of which remuneration by subsidiary and affiliated Companies
Alberto Villani
Standing auditor
Of which remuneration in Pirelli & C. S.p.A.
Of which remuneration by subsidiary and affiliated Companies
* * * * *
01/01/2022 -
31/12/2022
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
75,000
40,000
75,000
40,000(31)
01/01/2022 -
31/12/2022
AGM to approve the financial
statements for the year to 31
December 2023
75,000
75,000
75,000
75,000
0
0
0
(1) Of which: euro 65,000 as a Director of Pirelli & C. S.p.A. and euro 2.4 million 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 2022 STI incentive paid out (upfront amount), 25% of the 2021 STI incentive deferred together with the company matching component due to the level of
achievement of the results of the 2022 STI and the total value of the 2020-2022 LTI Plan amounting to 10.25 million euros (see the table below for details of the amounts). Note that the 2020-
2022 LTI Plan is the last “closed” cycle that provides for disbursement of the whole three-year incentive in a single payment at the end of the performance period. As of the 2021-2023 LTI
cycle, the allocations will be annual (rolling) with an annualised incentive opportunity.
(4) Of which: euro 666,292 for insurance policies in line with the provisions of the 2022 Remuneration Policy, and euro 4,198 for a company car.
(5) Of which euro 308,767 as a Chairman of Pirelli & C. S.p.A. and euro 50,175 as a Director of Pirelli & C. S.p.A.
(6) Of which euro 23,158 as member of the Appointments and Successions Committee of Pirelli & C. S.p.A. and euro 23,158 as member of the Strategies Committee of Pirelli & C. S.p.A.
(7) Remuneration transferred to employer company.
(8) Chairman Li Farong, co-opted by the Board of Directors on 11 October 2022, stated his intention not to receive any remuneration for the offices held at Pirelli & C. S.p.A. For completeness,it
should be pointed out that Chairman Li Farong is a member of the Strategies Committee and the Appointments and Succession Committee.
(11) 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.,
(9) As a Director of Pirelli & C. S.p.A.
(10) As a member of the Strategies Committee of Pirelli & C. S.p.A.
and euro 30,000 as a member of the Strategies Committee of Pirelli & C. S.p.A.
(12) As member of the Remuneration Committee of Pirelli & C. S.p.A.
(13) Of which euro 65,000 as a Director of Pirelli & C. S.p.A. and euro 1.1 million as Deputy-CEO of Pirelli & C. S.p.A.
(14) The amount includes: 75% of the 2022 STI incentive paid out (upfront amount), 25% of the 2021 STI incentive deferred together with the company matching component due to the level of
achievement of the results of 2022 STI and the total value of the LTI 2020-2022 Plan amounting to 2.53 million euros (see the table below for details of the amounts). Note that the 2020-2022
LTI Plan is the last “closed” cycle that provides for disbursement of the whole three-year incentive in a single payment at the end of the performance period (the amount accrued by Mr Bruno
relates pro-rata temporis to the two-year period 2021-2022, when he participated in the Plan). As of the 2021-2023 LTI cycle, the allocations will be annual (rolling) with an annualised incentive
opportunity.
Committee”).
(15) Of which: euro 3,131 for insurance policies, euro 6,870 for a company car and euro 3,336 for health insurance.
(16) The amount refers to the payment during the employment contract of part of the consideration for the non-competition agreement.
(17) 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-Party Transactions Committee of Pirelli & C. S.p.A. (“RPT
(18) As member of the Audit, Risks, Sustainability and Corporate Governance Committee of Pirelli & C. S.p.A. (“ARSCGC”).
(19) 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.
(20) 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.
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
0
0
0
Total remuneration in Pirelli & C. S.p.A.
6,985,192
951,316
Total remuneration by subsidiary and affiliated Companies
1,855,385
Total
8,840,577
951,316
29,041,835
8,422,179
37,464,014
0
0
0
0
0
0
0
0
0
0
0
0
75,000
75,000
115,000
115,000
75,000
75,000
749,337
556,563
38,284,243
61,094
810,431
203,750
10,542,408
760,313
48,826,651
0
0
0
0
0
0
0
0
0
0
0
0
(21) 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.
(22) As Chairman of the Remuneration Committee of Pirelli & C. S.p.A.
(23) As a member of the Appointments and Successions Committee of Pirelli & C. S.p.A.
(24) As a Senior Manager of Pirelli Tyre S.p.A..
(25) The amount includes the full amount of the accrued 2022 STI incentive (including the deferred portion), the company matching component that will be paid at the end of the deferral period
(3 years) and the total value of the 2020-2022 LTI Plan of Euro 345,600 (see table below for details of the amounts). Note that the 2020-2022 LTI Plan is the last “closed” cycle that provides
for disbursement of the whole three-year incentive in a single payment at the end of the performance period. As of the 2021-2023 LTI cycle, the allocations will be annual (rolling) with an
annualised incentive opportunity.
(26) Of which: Euro 700 for insurance policies, Euro 3,615 for a company car, Euro 7,200 for supplementary pension contributions and Euro 3,336 for health insurance.
(27) The amount includes the full amount of the accrued 2022 STI incentive (including the deferred portion), the company matching component that will be paid at the end of the deferral period
(3 years) and the total value of the 2020-2022 LTI Plan of 2,59 million euros (see table below for details of the amounts). Note that the 2020-2022 LTI Plan is the last “closed” cycle that
provides for disbursement of the whole three-year incentive in a single payment at the end of the performance period. As of the 2021-2023 LTI cycle, the allocations will be annual (rolling) with
an annualised incentive opportunity.
(28) Of which: Euro 3,688 for a company car, Euro 7,200 for supplementary pension contributions, Euro 3,336 for health insurance and Euro 2,709 for insurance policies.
(29) The amount is for payment during the employment contract of a portion of the fee for the non-competition agreement.
(30) As of 31 December 2022, 7 KMs had been identified, including 2 represented pro-rata temporis as of 23 February 2022 and 14 November 2022 respectively. 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.
(31) As a member of the Supervisory Body.
(32) The amount includes, for the respective holders, the full amount of the accrued 2022 STI incentive (including the deferred portion), the company matching component that will be paid out at
the end of the deferral period (3 years) and the total value of the 2020-2022 LTI Plan of 4.41 million euros (see table below for details of the amounts). Note that the 2020-2022 LTI Plan is the
last “closed” cycle that provides for disbursement of the whole three-year incentive in a single payment at the end of the performance period. As of the 2021-2023 LTI cycle, the allocations will
be annual (rolling) with an annualised incentive opportunity.
(33) The amounts, for the respective holders, are for a company car, supplementary pension contributions, health insurance and insurance policies.
(34) The amounts refer, for the respective holders, to payment during the employment contract of a portion of the consideration for the non-competition agreement, a retention bonus agreed
before the qualification as KM, a welcome bonus, a one-off bonus and a reimbursement for school fees.
(35) The amount includes, for the respective holders, the full amount of the accrued 2022 STI incentive (including the deferred portion) and the company matching component that will be paid
out at the end of the deferral period (3 years) and the total value of the 2020-2022 LTI Plan of 2.43 million euros (see table below for details of the amounts). Note that the 2020-2022 LTI
Plan is the last “closed” cycle that provides for disbursement of the whole three-year incentive in a single payment at the end of the performance period. As of the 2021-2023 LTI cycle, the
allocations will be annual (rolling) with an annualised incentive opportunity.
319
REMUNERATION REPORT 3. MONETARY INCENTIVE PLANS FOR MEMBERS OF THE BOARD OF
DIRECTORS, GENERAL MANAGERS AND KEY MANAGERS
For a description of Pirelli’s monetary incentive plans, please refer to the Remuneration Policy for 2022.
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
2021 STI
-
-
-
-
3,000,000(1)
Marco
Tronchetti
Provera
Executive Vice
Chairman and
CEO
Giorgio Luca
Bruno
Deputy-CEO
Giovanni
Tronchetti
Provera
Director (6)
Andrea
Casaluci
General
Manager
Operations
No. 7 Key
Managers
(12)
2022 STI
4,148,460(2)
1,382,820(3)
1 year
2020-2022
LTI Plan
2021-2023
LTI Plan
2022-2024
LTI Plan
2021 STI
10,252,800(4)
-
-
-
-
-
-
-
-
-
-
-
2022 STI
1,521,135(2)
507,045(3)
1 year
2020-2022
LTI Plan
2021-2023
LTI Plan
2022-2024
LTI Plan
2021 STI
2,534,400(5)
-
-
-
-
-
-
-
-
-
-
-
2022 STI
103,040(8)
92,736(9)
3 years
2020-2022
LTI Plan
2021-2023
LTI Plan
2022-2024
LTI Plan
2021 STI
345,600(4)
-
-
-
-
-
-
-
-
-
-
-
2022 STI
725,970(8)
653.373(9)
3 years
2020-2022
LTI Plan
2021-2023
LTI Plan
2022-2024
LTI Plan
2021 STI
2,592,000(4)
-
-
-
-
-
-
-
-
-
-
-
2022 STI
1,592,582(8)
1,963,418(9)
3 years
2020-2022
LTI Plan
2021-2023
LTI Plan
2022-2024
LTI Plan
6,838,500(11)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,100,000(1)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
94,500(7)
-
-
-
-
1,406,250(7)
-
-
-
-
2,135,060(10)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
165,750(13)
320
Pirelli Annual Report 2022 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
(I) Remuneration in the Company
that has prepared the financial
statements
2021 STI
-
-
2022 STI
6,838,103
2,793,097
-
1 year
3 years
2020-2022
LTI Plan
2021-2023
LTI Plan
2022-2024
LTI Plan
2021 STI
17,200,500
-
-
-
-
-
-
-
-
-
-
-
2022 STI
1,253,084
1,806,295
3 years
(II) Remuneration from Subsidiary
and Affiliated Companies
2020-2022
LTI Plan
2021-2023
LTI Plan
2022-2024
LTI Plan
5,362,800
-
-
-
-
-
(III) Total
30,654,487
4,599,392
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
OTHER
BONUSES
150,000
15,750
4,100,000
1,510,060
-
-
-
-
-
-
-
-
-
-
-
-
-
2,125,750
-
-
-
-
4,100,000
3,635,810
165,750
(1) The amount refers to the sum of the deferred portion of the 2021 STI (25%) and the respective company matching component paid out for achievement of the 2022 STI objectives as defined
in the 2021 Policy. This amount is shown in the “Bonuses and other incentives” column of Table 1.
(2) The amount in the “Payable/Paid out Year Bonus” column refers to the 75% of the 2022 STI paid out immediately (upfront amount). This amount is shown in the “Bonuses and other
incentives” column of Table 1.
(3) The amount in the “Deferred Year Bonus” column refers to 25% of the 2022 STI deferred and assigned to risk/opportunity subject to the results of the 2023 STI. This amount is not shown in
the “Bonuses and other incentives” column of Table 1.
(4) The amount in the “Payable/Paid out Year Bonus” column refers to the 2020-2022 LTI Plan, which is the last “closed”“ incentive plan and therefore corresponds to the whole three-year
incentive. This amount is shown in the ““Bonuses and other incentives” column of Table 1. Note that as of the 2021-2023 LTI cycle, the allocations will be annual (rolling) with an annualised
incentive opportunity.
(5) The amount in the “Payable/Paid out Year Bonus” column refers to the 2020-2022 LTI Plan, which is the last “closed” incentive plan and therefore corresponds to the whole three-year
incentive (in particular, the amount accrued by Mr Bruno refers pro-rata temporis to the two-year period 2021-2022, when he participated in the Plan). This amount is shown in the “Bonuses
and other incentives” column of Table 1. Note that as of the 2021-2023 LTI cycle, the allocations will be annual (rolling) with an annualised incentive opportunity.
(6) Giovanni Tronchetti Provera is included in the LTI and STI variable incentive plans as Senior Manager of Pirelli Tyre S.p.A..
(7) The amount in the “Previous Years Bonuses Still Deferred” 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 not shown in the “Bonuses and other incentives” column of Table 1.
(8) The amount in the “Payable/Paid out Year Bonus” column refers to the portion of the 2022 STI paid out immediately (upfront amount) based on personal choice. This amount is shown in the
““Bonuses and other incentives” column of Table 1.
(9) The amount in the “Deferred Year Bonus” column refers to the sum of the deferred 2022 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.
(10) The amount in the “Previous Years Bonuses Still Deferred” 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) to all KMs included in the Report on Compensation Paid for the 2021 financial year. This amount is not shown in the “Bonuses and other incentives” column of Table 1.
(11) The amount in the “Payable/Paid out Year Bonus” column refers to the 2020-2022 LTI Plan, which is the last “closed” incentive plan and therefore corresponds to the whole three-year
incentive (the amount accrued by a single KM refers pro-rata temporis to the two-year period 2021-2022, when he participated in the Plan). This amount is shown in the “Bonuses and other
incentives” column of Table 1. Note that as of the 2021-2023 LTI cycle, the allocations will be annual (rolling) with an annualised incentive opportunity.
(12) As of 31 December 2022, 7 KMs had been identified, including 1 who joined the Group as of 14 November 2022 and is not therefore a holder of the 2021 STI, 2022 STI and 2020-2022 LTI
Plans. 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.
(13) The amount refers, for the respective holders, to a retention bonus agreed before the qualification as KM, a welcome bonus and a one-off bonus. This amount is shown in the “Other
remuneration” column in Table 1.
321
REMUNERATION REPORT 4. TABLE OF EQUITY INVESTMENTS OF THE MEMBERS OF THE ADMINISTRATIVE
AND CONTROL BODIES, GENERAL MANAGERS AND KEY MANAGERS.
The table below provides disclosures on any equity investments held in Pirelli & C. S.p.A. 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 KMs, 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.
It includes all the persons who, during the reporting year, held positions as members of the administrative and
control bodies, General Manager or as KM, even for a fraction of the year.
1) EQUITY INVESTMENTS OF THE MEMBERS OF THE ADMINISTRATIVE
AND CONTROL BODIES AND GENERAL MANAGERS
FIRST AND LAST NAME
OFFICE
INVESTEE
COMPANY
NO. OF SHARES
OWNED AT
31.12.2021
NO. OF SHARES
PURCHASED/SUBSCRIBED
NO. OF
SHARES
SOLD
NO. OF SHARES OWNED
AT 31.12.2022
Marco Tronchetti Provera(i)
Executive Vice
Chairman and
Chief Executive
Officer
Giorgio Luca Bruno
Director
Pirelli & C.
S.p.A.
Pirelli & C.
S.p.A.
100,959,399
40,000,000(ii)
500(iv)
-
-
-
140,959,399(iii)
500(iv)
(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 when the Company was listed on 4 October 2017.
2) EQUITY INVESTMENTS OF OTHER KEY MANAGERS
NUMBER OF KEY
MANAGERS
INVESTEE
COMPANY
NO. OF SHARES
OWNED AT
31.12.2021
NO. OF SHARES
PURCHASED/SUBSCRIBED
NO. OF SHARES
SOLD
NO. OF SHARES OWNED
AT 31.12.2022
-
-
-
-
-
-
322
Pirelli Annual Report 2022 323
REMUNERATION REPORT Pirelli Annual Report 2022
324
CONSOLIDATED
FINANCIAL
STATEMENTS
AT DECEMBER 31, 2022
325
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(in thousands of euro)
12/31/2022
12/31/2021
Note
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
6,664
19,474
105,942
13,210
212
22,028
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
9
10
11
12
13
15
16
22
27
17
14
15
18
19
16
27
3,399,628
5,382,837
80,227
48,419
176,969
231,151
9,055
120,481
26,430
9,475,197
1,457,711
636,446
741,238
246,884
1,289,744
27,649
22,681
4,422,353
13,897,550
Equity attributable to the owners of the Parent Company:
20.1
5,323,794
6,926
11,029
111,272
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
Tax payables
Derivative financial instruments
Current liabilities
Total Liabilities and Equity
20
23
25
21
13
22
26
27
23
24
25
21
26
27
1,904,375
3,001,659
417,760
130,034
111,894
18,140
5,453,828
74,574
101,676
1,041,848
180,558
12,780
-
5,101,547
800,389
1,973,296
405,578
41,250
102,104
19,558
3,342,175
13,897,550
3,690,111
10,444
3,789,369
212
21,843
76,485
81,170
1,033,892
6,735
220,598
7,157
11,512
3,519
5,216,545
2,979
1,489,249
166,372
37,386
1,626,367
314,203
43,594
134,388
16,188
3,623,989
13,883,173
2,751
144,122
13,376
326
Pirelli Annual Report 2022 CONSOLIDATED INCOME STATEMENT
(in thousands of euro)
Revenues from sales and services
Other income
Note
29
30
2022
2021
of which
related parties
(note 43)
of which
related parties
(note 43)
6,615,727
44,972
5,331,450
23,659
330,913
63,602
303,868
56,294
Changes in inventories of unfinished, semi-finished and finished
products
212,222
157,813
Raw materials and consumables used (net of change in inventories)
(2,419,274)
(17,603)
(1,820,615)
(3,577)
Personnel expenses
31
(1,178,609)
(15,244)
(1,101,913)
(23,085)
- of which non-recurring events
Amortisation, depreciation and impairment
Other costs
Net impairment of 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
-
(566,689)
(2,537)
(517,192)
(2,208,788)
(340,884)
(1,770,518)
(312,465)
4,075
1,905
791,482
5,848
2,920
-
(123)
3,051
2,920
(7,950)
2,111
577,054
3,978
1,697
27
(20)
2,274
1,697
101,987
3,480
35,000
3,651
(303,683)
(1,825)
(179,281)
(1,505)
32
33
34
35
36
37
Net income / (loss) before taxes
595,634
Taxes
38
(159,734)
- 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
-
435,900
417,760
18,140
0.418
436,751
(115,158)
23,223
321,593
302,796
18,797
0.303
327
CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(in thousands of euro)
A
Total Net income / (loss)
435,900
321,593
- Remeasurement of employee benefits
22
(27,546)
91,168
- Tax effect
7,329
(30,173)
- Fair value adjustment of other financial assets at fair value through Other Comprehensive Income
12
(8,477)
13,764
B
Total items that may not be reclassified to Income Statement
(28,694)
74,759
Note
2022
2021
Exchange rate 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
58,713
119,201
-
-
-
-
56,510
95,523
951
(72,380)
(13,301)
(4,638)
(119)
1,175
(1,477)
(6,870)
136
(2,183)
878
6,694
Total items reclassified / that may be reclassified to Income Statement
99,230
139,583
C
D
Total other Comprehensive Income (B+C)
A+D
Total Comprehensive Income / (loss)
Attributable to:
- Owners of the Parent Company
- Non-controlling interests
70,536
214,342
506,436
535,935
486,523
505,837
19,913
30,098
328
Pirelli Annual Report 2022 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY AT 12/31/2022
(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 12/31/2021
1,904,375
(565,143)
(1,408)
3,570,288
4,908,112
134,527
5,042,639
Other components of Comprehensive Income
Net income / (loss)
Total comprehensive income / (loss)
Dividends approved
Effects of hyperinflation accounting in Turkey
Effects of hyperinflation accounting in
Argentina
Other
-
-
-
-
-
-
-
54,757
14,006
-
68,763
1,773
70,536
-
-
417,760
417,760
18,140
435,900
54,757
14,006
417,760
486,523
19,913
506,436
-
-
-
-
-
-
-
(161,000)
(161,000)
(24,396)
(185,396)
16,868
16,868
72,149
72,149
-
-
16,868
72,149
170
972
1,142
(10)
1,132
Total at 12/31/2022
1,904,375
(510,386)
12,768
3,917,037
5,323,794
130,034
5,453,828
BREAKDOWN OF OTHER O.C.I. RESERVES*
(in thousands of euro)
Reserve for
fair value
adjustment of
financial assets
at fair value
through other
Comprehensive
Income
Reserve
for cost of
hedging
Reserve for
cash flow
hedge
Remeasurement
of employee
benefits
Tax effect
Other O.C.I.
reserves
Total at 12/31/2021
(2,597)
1,595
(3,085)
66,107
(63,428)
(1,408)
Other components of Comprehensive Income
(8,477)
(1,595)
57,461
(27,546)
(5,837)
14,006
Other changes
Total at 12/31/2022
-
(11,074)
-
-
-
142
28
170
54,376
38,703
(69,237)
12,768
329
CONSOLIDATED FINANCIAL STATEMENTS
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
Net income / (loss)
Total comprehensive income / (loss)
Dividends approved
Effects of hyperinflation accounting in
Argentina
Other
-
-
-
-
-
-
114,594
88,447
-
203,041
11,301
214,342
-
-
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
BREAKDOWN OF OTHER O.C.I. RESERVES*
(in thousands of euro)
Reserve for
fair value
adjustment of
financial assets
at fair value
through Other
Comprehensive
Income
Reserve
for cost of
hedging
Reserve for
cash flow
hedge
Remeasurement
of employee
benefits
Tax effect
Other O.C.I.
reserves
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
(4)
-
-
43
(1)
38
Total at 12/31/2021
(2,597)
1,595
(3,085)
66,107
(63,428)
(1,408)
330
Pirelli Annual Report 2022 CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands of euro)
Note
2022
2021
of which
related parties
(note 43)
of which
related parties
(note 43)
Net income / (loss) before taxes
595,634
Reversal of amortisation, depreciation, impairment losses and
restatement of property, plant and equipment and intangible assets
32
566,689
436,751
517,192
144,281
(2,274)
(7)
(2,920)
(1,697)
(1,697)
(6,359)
19,478
(1,197)
(5,158)
(3,017)
15,272
8,858
16,317
(7,391)
(2,559)
-
(287)
30
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
1,883,544
1,884,649
(1,105)
(114,513)
(948)
(105,355)
(3,830)
Reversal of Financial (income) / expenses
36/37
Reversal of Dividends
Reversal of gains / (losses) on equity investments
Reversal of share of net result from associates and joint
ventures
Reversal of accruals to provisions and other accruals
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 Provisions for liabilities and charges
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
Disposals of equity investments in associates and J.V.
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 downs
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
201,696
(3,051)
123
(2,920)
141,283
(205,455)
(342,322)
37,376
272,842
(50,502)
27,900
(89,471)
(18,176)
1,131,646
(303,491)
4,098
(31,912)
277
-
-
1,330
(150)
3,230
(326,618)
1,324,067
(2,113,830)
(141,761)
(173,261)
(185,395)
(1,404,693)
(599,665)
1,883,544
(491)
Cash and cash equivalents at the end of the period (D+E+F) (°)
19
1,283,388
(°)
of which:
cash and cash equivalents
bank overdrafts
1,289,744
(6,356)
331
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 automobiles, motorcycles
and bicycles), with a particular focus on the High Value tyre
market, that is, products created to reach the highest levels of
performance, safety, quietness and road adherence.
The registered Head Office of the Company is located in
Milan, Italy at Viale Piero e Alberto Pirelli n. 25.
These Consolidated 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 Consolidated Financial Statements has been
entrusted to PricewaterhouseCoopers S.p.A. pursuant to
Legislative Decree No. 39 of January 27, 2010, and pursuant
to the resolution of 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 the 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
Administration Commission of the State Council (SASAC) of
the People’s Republic of China.
As of the date of the commencement of trading on the
stock exchange (October 4, 2017), there are no entities that
exercise management and coordination activities over the
Company.
The Board of Directors approved these Consolidated
Financial Statements on April 5, 2023 and authorised their
publication on April 12, 2023.
2. BASIS OF PRESENTATION
INFORMATION ON THE MACROECONOMIC ENVIRONMENT
The year 2022 was characterised by a highly volatile
macroeconomic environment due to the difficult geo-
political scenario (Russian-Ukrainian conflict), high inflation,
difficulties along the supply chain and lockdowns in China. The
restrictive interventions by the central banks, in an attempt to
curb inflationary effects, led to a generalised increase in the
cost of money with an impact on the Group’s cost of debt.
The Group has worked to ensure business continuity and
to guarantee its level of service to its customers, and has
countered the increases in the costs of raw material and
inflation in the costs of production factors resulting from
the aforesaid macroeconomic environment, thanks to the
internal levers: improvement in the price/mix and in the
internal efficiency plan, in addition to measures to contain
energy costs through price negotiations with the Group’s
suppliers.
With specific reference to the Chinese market, it should be
noted that the effects of lockdowns in the country to counter
COVID-19, led to a drop in volumes in China, particularly during
the second and fourth quarters, as a result of a contraction in
demand. With regard to activities in Russia, reference should
be made to the section “Activities in Russia” in this document.
For further details on the performance in 2022, reference
should be made to the section “Group Performance and
Results” in the Directors’ Report on Operations, while for
information on the management of risks arising from the
external environment, reference should be made to the
section “Risk Factors and Uncertainty” in the same aforesaid
document.
The macroeconomic scenario is expected to be uncertain
and volatile in 2023 as well. The most updated forecasts
available at the beginning of the year were taken into account
in the formulation of the forecast results for 2023 presented
to the market on February 22, 2023. The same results were
taken into account in the estimations and assumptions,
particularly when assessing the recoverability of goodwill and
of other intangible assets with an indefinite useful life, and the
recoverability of tangible assets in Russia.
These impacts are described in the Explanatory Notes to
which reference should be made for further details.
FINANCIAL STATEMENTS
The Consolidated Financial Statements at December 31,
2022 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 the EU
Delegated Regulation 2019/815 (ESEF Regulation), which
was adopted with the implementation of the Transparency
Directive. This document which has been prepared pursuant
to the ESEF Regulation, is available (in Italian only) on the
website of the authorised eMarket Storage mechanism
(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
332
Pirelli Annual Report 2022 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. The Group does not currently have any
agreements in place for joint operations.
Changes which occurred in the scope of consolidation are
summarised as follows:
→ the exit from the Focus Investment S.p.A. shareholding
structure on March 9, 2022;
→ the disposal, approved by the Board of Directors on
November 11, 2021, of the 20% stake held in the Joint
Stock Company, the Kirov Tyre Plant which took place on
May 23, 2022;
→ incorporation on October 10, 2022 of Pirelli Tyre MEAI
DMCC which is wholly owned by Pirelli Asia Pte Ltd.;
→ incorporation on October 19, 2022 of E-VOLUTION Tyre
South Africa (Pty) Ltd. which is wholly owned by Pirelli
Tyre (Pty) Ltd.;
→ incorporation on October 27, 2022 of NewCo
Micromobility S.r.l., which is wholly owned by Pirelli Tyre
S.p.A.;
→ incorporation on December 15, 2022 of Latam Servicios
Industriales S.A., which is 95% owned by Pirelli Neumaticos
S.A.I.C., and 5% owned by Pirelli Pneus Ltda.
It should also be noted that effective as of December 17,
2022, the Dutch companies Pirelli Tyres Nederland B.V.
and E-VOLUTION Tyre B.V. were merged by incorporation
into Pirelli China Tyre N.V. Lastly, effective as of January 1,
2022, the Spanish company Tyre & Fleet S.L. was merged by
incorporation into the company Pirelli Neumaticos S.A..
gains/losses for the financial year in a separate Income
Statement, rather than include these components directly
in the Statement of Comprehensive Income. The Income
Statement format adopted provides for the classification of
costs by nature.
The Group has opted to present the tax effects and the
reclassifications to the Income Statement of the gains/losses
which had been recognised under Other Comprehensive
Income in previous financial years, directly in the Statement
of Comprehensive Income and not in the Explanatory Notes.
The Statement of Changes in Equity includes, in addition
to the total gains/losses for the period, the amounts from
transactions with equity holders and the movements which
occurred in the reserves during the financial year.
In the Statement of Cash Flow, the financial flows from
operating activities are reported using the indirect method,
whereby the gains or losses for the financial year are adjusted
for the effects of non-monetary transactions, any deferrals or
accruals of past or future operating collections or payments
and any income or expense items related to financial flows
arising from investing or financing activities.
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 capacity to direct
the relevant activities of the subsidiary, that is activities
that have a significant influence on the results of the
subsidiary;
→ exposure or 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, the Statement
of Comprehensive Income and in Equity, respectively.
Associates are all companies over which the Group is able
to exercise significant influence as defined by IAS 28 –
Investments in Associates and Joint Ventures. This influence is
legally presumed to exist when the Group holds a percentage
333
CONSOLIDATED FINANCIAL STATEMENTS INFORMATION ON SUBSIDIARIES
The Consolidated Financial Statements include the assets and liabilities of 89 legal entities. The following is a list
of the significant subsidiaries:
Headquarters
12/31/2022
12/31/2021
% 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.
Santo Andrè (Brazil)
Pirelli Comercial de Pneus Brasil Ltda
Sao Paulo (Brazil)
Pirelli UK Tyres Ltd.
Burton-on-Trent (United Kingdom)
Pirelli Tire LLC
Rome (USA)
Pirelli Neumaticos S.A.I.C.
Buenos Aires (Argentina)
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%
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 by applying 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 opening equity at period-end exchange rates are recorded in
the translation reserve, together with the difference arising from the translation of the results for the period at
period-end exchange rates, compared to 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 using the line-by-line method on the basis of 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 relative equity shares;
→ 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
334
Pirelli Annual Report 2022 or losses attributable to non-controlling interests is
reported separately in the Income Statement;
→ 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 investment stake acquired after the
assumption of control, any difference between the
acquisition cost and the corresponding fraction of
equity acquired, is recognised in equity. Similarly, the
effects arising from the disposal of non-controlling
interests without the 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:
→ the investor’s share of the post-acquisition results of
the associate or joint venture;
→ the pertinent share of gains and losses which are
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 share in the losses, if any, of the
associate/joint venture exceeds the carrying amount
of the investment in the Financial Statements, and
the carrying amount of the investment is reset to
zero, and the Group’s share of any further losses, if
any, is then 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, 2022, as
well as the provisions emanated in the implementation of Article
9 of Legislative Decree no. 38/2005. The terms 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,
2022 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 fair value:
→ derivative financial instruments;
335
→ pension fund assets;
→ other financial assets at fair value through Other
Comprehensive Income;
→ 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 fair value of the assets acquired and the liabilities
assumed.
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 (acquisition in
phases - 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 acquirer’s obligations
to transfer additional assets or shares to the seller if certain
future events occur, or specific conditions are fulfilled, are
recognised at fair value at the acquisition date as part of the
consideration transferred in exchange for the acquisition. Any
subsequent changes in the fair value of these agreements are
recognised in the Income Statement.
INTANGIBLE ASSETS
Intangible assets refer to assets without an identifiable
physical form, which are controlled by the Group and are
capable of producing future economic benefits.
Intangible assets with finite useful lives are measured at cost,
net of amortisation and net of any accumulated impairment
and include costs for services provided by third parties.
Amortisation is calculated on a straight-line basis and begins
when the asset becomes available for use or is 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 arising 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.
CONSOLIDATED FINANCIAL STATEMENTS GOODWILL
Goodwill is an intangible asset with an indefinite useful life and
is therefore not subject to amortisation. Goodwill is subject
to an evaluation aimed at identifying any impairment, at least
annually or whenever there are indicators of impairment.
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 measured at cost, net of amortisation
and net of any accumulated impairment. This cost is amortised
for whichever period is shorter between, the duration of
the contract and the useful life of the asset. Instead, 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 recorded in the Financial Statements net
of amortisation and net of any accumulated impairment.
Software is amortised on the basis of its useful life.
Software as a service (“SaaS”), for which the Group does not
control the underlying software, but only holds the right to
access the software on a third-party cloud infrastructure, is
not capitalised.
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
and any cost for replacing any parts or portions of the assets
recognised in this category, are capitalised only if they increase
the future financial benefits inherent to the respective asset.
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 measured at cost, net of
depreciation and net of any accumulated impairment, except
for land which is not depreciated but is valued 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 straight-line basis
at rates that allow assets to be depreciated until the end
of their useful life or, in the case of disposals, until the last
month of use.
336
Pirelli Annual Report 2022 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.
Leasehold improvements are classified as 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.
Spare parts of significant value are capitalised and depreciated on the basis of the useful life of the respective asset.
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 de-recognised 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.
Any capital gains or capital losses arising from the 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.
Property, plant and equipment in progress are recognised at cost, net of any impairment. When property, plant
and equipment in progress are ready for use, they are reclassified to the relevant category, and begin to be
depreciated based on the basis of their useful Group lives.
RIGHT OF USE
As of 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 its components as a financial expense which is recognised in the
Income Statement for the period of the duration of the contract and as the repayment of the principal which is
recorded as a reduction of the financial liability.
The right of use is depreciated on a monthly straight-line basis, for whichever period is shorter, between the
useful life of the asset and the duration of the contract.
Right of use and financial liabilities are initially measured at the present value of future payments.
The present value of financial liabilities for lease contracts includes the following payments:
→ 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.
337
CONSOLIDATED FINANCIAL STATEMENTS 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 is use is valuated at cost, and is 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, according to changes in the facts
or circumstances (not based on an index or a rate), that
were not foreseeable at the start 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, INTANGIBLE
ASSETS AND RIGHT OF USE In the presence of specific
indicators of impairment, and 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 subject to an impairment test.
The test consists of an estimate of the recoverable amount
for the asset compared to its carrying amount.
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
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 the period of 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
acquiring 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.
For the purpose of assessing any impairment, assets are
aggregated at the lowest level at which their independent
cash flows are separately identifiable (cash generating units).
With specific reference to goodwill, for the purpose of
the impairment test, the allocation is made at “Consumer
Activities” CGU Group
latter represents the
level. The
minimum level at which goodwill is monitored for internal
management control purposes.
In the presence of indications that any 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 the recoverable amount.
The restatement of a value must not exceed the carrying
amount that would have been determined (net of impairment,
impairment been
depreciation or amortisation) had no
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
338
Pirelli Annual Report 2022 on an active share market, is always equal to its market value.
In the case of investments in unlisted companies, the fair
value is determined by resorting to estimates based on the
best available information.
The value in use of an associate or joint venture is determined
by estimating the discounted future net operating cash flows,
net of the net financial position of the company in question at
the date of the estimate (the so-called Discounted Cash Flow
- Asset Side method).
If there are indications that an impairment loss recognised in
previous years may no longer exist or may have decreased,
the recoverable amount of the investment is re-estimated
and, if it is higher than the value of the investment, the latter is
increased up to 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 arising 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 are classified as non-current assets under
the item “Other financial assets at fair value through Other
Comprehensive Income”.
They are initially recognised at fair value, including the
transaction costs directly attributable to the acquisition.
They are subsequently measured at their fair value, and any
gains and losses arising 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 from these financial assets are recognised
in the Income Statement when the right to collect is established.
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 arising from the
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
the Group’s asset
management business model provides, that the sale of the
for which
339
debt instruments and the cash flows associated with the
financial asset, represent the payment of the outstanding
principal. 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 arising 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: their purchase cost is calculated by using
the FIFO method;
→ finished and semi-finished products: are calculated on
the basis of direct costs of materials, labour and indirect
costs.
The cost of inventories includes the transfer, from Other
Comprehensive Income, of gains and losses arising from
qualified cash flow hedging transactions related to the
purchase of raw materials, typically natural rubber.
The cost is increased by incremental expenses in the same
way as described for property, plant and equipment.
Their realisable value represents the estimated selling price,
net of all costs estimated for the completion of the asset and
any sales and distribution costs that will be incurred.
Provisions for the impairment of inventories considered to
be obsolete or slow-moving 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 carrying amount 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 period-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 benefits
connected with holding the receivable have essentially been
CONSOLIDATED FINANCIAL STATEMENTS transferred, or in cases when the receivable is considered
definitively irrecoverable after all the necessary recovery
procedures have been completed.
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 measured at the amortised cost. The 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 their initial fair value. Payables, in currencies
other than the functional currency, of the individual companies
are adjusted to the period-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 de-recognition, 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 cost
until its extinguishment, at the time of conversion or until the
maturity of the bonds. The residual portion, up to the value
equal to the amount collected, is recognised as a component
of equity. Issuance costs are allocated proportionally to the
debt component and to the equity component.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include bank deposits, postal
deposits, cash and cash equivalents and other forms of short-
term investment with an original maturity of three months or
less that are readily convertible into a given amount of money,
and are subject to an insignificant risk of change in value.
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, cash and cash equivalents are represented
by the liquid equivalents as defined above, net of current
account overdrafts.
CONTINGENT ASSETS
Any contingent assets, which arise as a result of past
events and whose realisation depends on the occurrence
or non-occurrence of unforeseeable future events, are not
recognised in the financial statements unless the realisation
of revenue is virtually certain.
liabilities,
CONTINGENT LIABILITIES
is, contingent or present
that
Contingent
obligations that are not probable or cannot be reliably
measured, are not recognised in the Financial Statements
but are disclosed, unless the possibility of an outflow of
economic resources is remote.
PROVISIONS FOR LIABILITIES AND CHARGES
Provisions for liabilities and charges include the accruals
for current obligations (legal or implicit) arising from a past
event, the fulfilment of which will probably require the use of
resources, whose amounts can be reliably estimated. 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. An accrual to a provision for restructuring
is recognised only if, in addition to meeting the requisite
conditions for the 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.
is
The
representative of the present value of the Group’s obligation,
net of the fair value of any plan assets. For defined benefit
in the Financial Statements
liability recognised
340
Pirelli Annual Report 2022 plans, the actuarial gains and losses arising from adjustments
based on past experience and from any changes in the
actuarial assumptions are
in Other
Comprehensive Income. For other long-term benefits, the
actuarial gains and losses are immediately recognised in the
Income Statement.
fully recognised
The provision for employees’ leaving indemnities (TFR) for
Italian companies with at least 50 employees, is considered
a defined benefit plan only for the amounts accrued prior
to January 1, 2007 (and not yet paid at the reporting date),
while amounts accrued after that date qualify as a defined
benefit plan.
The net interest calculated on net liabilities is classified under
financial expenses.
Costs relative to the 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 Other
Comprehensive Income.
Insurance policies are recognised in the Financial Statements
as plan assets, and are measured on the same basis as the
liabilities to which they refer.
STRUMENTI FINANZIARI DERIVATI DESIGNATI COME
STRUMENTI DI COPERTURA
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.
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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 arising from any subsequent
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;
is
→ Cash flow hedge – if a derivative financial instrument is
designated as a hedge against exposure to the variability
of 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 Other Comprehensive Income, while the ineffective
portion
Income
Statement. The amounts recognised directly in Other
Comprehensive Income are reclassified to the Income
Statement for the financial year in which the hedged item
produces an effect on the Income Statement. If the hedge
of a highly probable future transaction subsequently
results in the recognition of a non-financial asset or non-
financial liability, the amounts that are suspended in Other
Comprehensive Income are included in the initial value of
the non-financial asset or non-financial liability.
immediately recognised
the
in
When future transactions are hedged by forward contracts,
the Group may designate to hedge accounting;
→ the full fair value
(including forward points): the
effective portion of the changes in the fair value of the
entire derivative instrument is recognised under Other
Comprehensive Income (cash flow hedge reserve);
→ the single spot component (excluding forward points):
the effective portion of the changes in the fair value of
the single spot component, is recognised under Other
Comprehensive Income in the cash flow hedge reserve,
while change in the forward points relative to the hedged
item is recorded in the cost of hedging reserve, always
under Other Comprehensive Income.
When a hedging instrument matures or is sold, terminated
early, exercised, or no longer meets the conditions to be
designated as a hedge, hedge accounting is discontinued.
The fair value adjustments accumulated under Other
Comprehensive Income (either in the cash flow hedge reserve
or in the cost of hedging reserve) remain suspended under
Other Comprehensive Income until the hedged item manifests
its effects in the Income Statement. They are subsequently
reclassified to the Income Statement, for the financial years
during which the acquired asset or the assumed liability
manifests an effect on the Income Statement. If it is expected
that the hedged item will not generate any effect on the
Income Statement, the fair value adjustments accumulated
CONSOLIDATED FINANCIAL STATEMENTS under Other Comprehensive Income (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 paragraph “Financial assets
at fair value through the Income Statement”. The acquisitions
and sales of derivative financial instruments are recorded at
the settlement date.
The hedging of net investments in foreign assets (net
investment hedges) is accounted for in a similar manner to
cash flow hedges.
Gains or losses on the hedging instrument relative to the
effective portion of the hedge are recognised in Other
Comprehensive Income, while those relative to the ineffective
portion are immediately recognised in the Income Statement.
Gains and losses accumulated in Other Comprehensive
Income are reclassified to the Income Statement when the
foreign operation is disposed of in whole or in part.
DETERMINING THE FAIR VALUE OF FINANCIAL
INSTRUMENTS
Financial instruments measured at fair value are classified
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.
The fair value of financial instruments that are traded on
active markets is based on prices published at the reporting
date. The market prices used for financial assets are the bid
price, while for financial liabilities they are the ask price.
The fair value of financial instruments that are not traded on
active markets is determined by using evaluation techniques
that are widespread in the financial sector, and that maximise
the use of available and observable 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.
INCOME 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 Other Comprehensive Income if they refer to items
that were credited or debited directly to under Other
Comprehensive Income during the financial year or during
previous financial years.
INDIRECT TAXES
Costs, revenues, assets and liabilities are recognised net of
indirect taxes, such as value added tax, with the following
exceptions:
→ the tax is non-deductible: in such cases, it is recognised
as part of the purchase cost of the asset or part of the
cost is recognised in the Income Statement;
→ the trade receivables and trade payables, which include
the applicable indirect tax.
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Pirelli Annual Report 2022 The net amount of indirect taxes to be recovered or paid
is recognised under other receivables or other payables,
respectively.
EQUITY
TREASURY SHARES Treasury shares are classified as a re-
duction 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)
Additional cash settled benefits granted to some of the Group’s
executives are recognised under Provisions for employee
benefit obligations as a counter-entry to “Personnel expenses”.
This cost is estimated to be equal to the fair value and is
accounted for over 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 in the 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
considers to be payable to direct or indirect customers are
recognised as a reduction to revenues.
The Group generally acts as the principal for most 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 rec-
ognised when the performance obligations towards customers
have been satisfied. A performance obligation is deemed to
have been fulfilled when the control of goods has been trans-
ferred 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;
→ it is not possible for the Group to use the product or to
deliver it to other customers.
343
Retrospective discounts are applied to product sales
based on the achievement of the objectives defined within
commercial agreements. Sales revenues are recognised
net of these discounts, which are estimated on the basis of
historical experience using the expected value 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 rendered
are recognised when the rendered service has been complet-
ed, or based on the stage of completion of the service, at the
reporting date.
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 right of
access to the 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.
FINANCIAL INCOME AND EXPENSES
Financial income and expenses are recognised on an accrual
basis.
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.
GOVERNMENT GRANTS
Government grants are recognised on an accrual basis in
relation to costs incurred when there is a formal resolution
which approves the grant, and when the right to the grant is
assured, as it is reasonably certain that the Group will comply
with the conditions for obtaining the grant, and that the grant
will be received.
Government capital grants are recognised as deferred income
under “other payables”, and classified as current or non-
current for the long-term and short-term portion of these
grants, respectively. Deferred income is then recognised under
“other income” in the Income Statement on a straight-line
basis over the useful life of the asset to which the grant relates.
Government operating grants are recognised in the Income
Statement under “other income”.
EARNINGS/(LOSSES) PER SHARE
Earnings/(losses) per share - basic: basic earnings/(losses)
per share are calculated by dividing the net income/(loss)
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/(losses)
per share are calculated by dividing the net income/(loss)
CONSOLIDATED FINANCIAL STATEMENTS 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
diluted earnings/(losses) per share, the weighted average
number of shares outstanding is adjusted by assuming the
exercise by all assignees of the rights, 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
The operating segment is one part of the Group that
in business activities that generate revenues
engages
and costs, the operating results of which 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
segment, and the evaluation of the results for which financial
information is made available.
The activity carried out by the Group is identifiable as a single
operating “Consumer Activities” segment.
TRANSACTIONS IN FOREIGN CURRENCY
Transactions in a foreign currency 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 of monetary
items or their translation at exchange rates which are different
than those of their initial recognition for the financial year, or
different to those at the end of the previous financial year, are
recognised in the Income Statement.
inter-company
If the conditions for the designation of
monetary
in Foreign
items such as “Net
Operations” are met, the translation differences from foreign
exchange rates, starting from the date of the designation,
are recognised directly in the Consolidated Statement of
Comprehensive Income.
Investment
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 hyperinflationary countries,
restate the values for the non-monetary assets and liabilities
present in their respective original Financial Statements, in
order to eliminate the distorting effects caused by the loss of
purchasing power of the currency, with a counter-entry under
Financial income/(expenses).
The inflation rate used to implement inflation accounting
corresponds to the consumer price index.
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 preceding three year period
in Argentina exceeded 100%. This, together with other
characteristics of the country’s economy, prompted the
Group to adopt, as of July 1, 2018, the accounting standard
IAS 29 - Financial Reporting in Hyperinflationary Economies
for the Argentine subsidiary Pirelli Neumaticos S.A.I.C. The
same accounting principle has been applied, as of December
15, 2022, to the newly incorporated Argentine subsidiary
Latam Servicios Industriales S.A.
During the course of the second quarter of 2022, the
inflation rate accumulated over the preceding three year
period in Turkey exceeded 100%. This, together with other
characteristics of the country’s economy, prompted the
Group to adopt, as of June 30, 2022, the accounting standard
IAS 29 - Financial Reporting in Hyperinflationary Economies
for the Turkish subsidiaries Pirelli Otomobil Lastikleri A.S. and
Pirelli Lastikleri Dis Ticaret A.S.
ENVIRONMENTAL CERTIFICATES AND CONTRACTS
FOR THE SUPPLY OF ENERGY
In some European countries, the Group receives greenhouse
gas emission allowances free of charge, consistent with
the provisions of the European Emission Trading Schemes.
These allowances are received on an annual basis and must
be delivered to the relevant national authority on the basis of
the actual emissions produced in the country.
If the allowances received free of charge are not sufficient to
cover the actual emissions produced in the country, the Group
purchases the shortfall in allowances which are recognised at
cost among prepaid expenses.
Costs associated with greenhouse gas emissions are
recognised on an accrual basis, in proportion to the emissions
produced in the relevant country during the financial year,
and are recognised under other costs with a balancing entry
in a provision for risks and charges.
Prepaid expenses, corresponding to the purchase of
certificates, are eliminated, as a contra-entry to the reduction
of the provision for risks and charges, when the Group’s
certificates are delivered to the competent authority.
The Group also purchases renewable energy certificates of
differing types depending on the regulations applicable in the
country of consumption, (for example, Guarantees of Origin
– GO in the European Union, Renewable Energy Certificates
– REC in the United States, Renewable Energy Guarantee
of Origin - REGO in the United Kingdom, International
Renewable Energy Certificates - IREC in the remaining
countries where Pirelli operates), which are instruments
that certify the renewable origin of the electrical energy
sources, to offset the electricity consumption of the Group’s
344
Pirelli Annual Report 2022 companies. The relative associated cost is recognised under
other costs.
With reference to electrical energy supply contracts, the
Group holds the option to fix the purchase price for predefined
periods (monthly, quarterly, yearly). The purpose of these
contracts is to meet the Group’s own energy purchase needs,
and therefore these contracts do not fall within the scope
of IFRS 9. The purchase cost of energy is recognised in the
Income Statement on an accrual basis, including the cost for
the certificate of origin for the energy purchased.
3.1 APPROVED ACCOUNTING STANDARDS AND INTER-
PRETATIONS IN FORCE AS OF JANUARY 1, 2022
IAS 8 - Accounting Policies, Changes
Pursuant to
in
Accounting Estimates and Errors, the IFRS standards which
entered into force as of January 1, 2022 were as follows:
→ Amendments to IFRS 3 - Business Combinations
These amendments are designed to: (i) complete the
update to the references to the Conceptual Framework
for Financial Reporting contained in the accounting
standard; (ii) provide clarification on the assumptions for
the recognition, at the acquisition date, of the provisions,
contingent liabilities and tax liabilities assumed as part
of a Business Combination transaction; (iii) clarify that
contingent assets cannot be recognised as part of a
Business Combination transaction.
There were no
Statements as a result of these amendments.
impacts on the Group’s Financial
→ Amendments to IAS 16 – Property, Plant and Equipment -
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. Revenue from the sale
of products and the relative production cost must be
recognised in the Income Statement.
There were no
Statements as a result of these amendments.
impacts on the Group’s Financial
→ 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 for the performance of the
contract (for example, direct labour and materials)
and the portion of other costs that relate directly the
performance of the contract (for example, an allocation
of the portion of the depreciation of the assets used for
the performance of the contract).
There were no
Statements as a result of these amendments.
impacts on the Group’s Financial
→ Annual Improvements (2018 - 2020 cycle) issued in May 2020
These amendments are
limited to some standards
(IFRS 1 – First-time Adoption of International Financial
Reporting Standards, IFRS 9 - Financial Instruments, IAS
41 – Agriculture, and explanatory examples for IFRS 16 -
345
Leases) which clarify the wording or correct omissions or
conflicts between the requirements of the IFRS standards.
There were no
impacts on the Group’s Financial
Statements as a result of these amendments.
3.2 INTERNATIONAL ACCOUNTING STANDARDS AND/
OR INTERPRETATIONS ISSUED BUT NOT YET IN
FORCE IN 2022
in
Pursuant to IAS 8 – Accounting Policies, Changes
Accounting Estimates and Errors - the new standards and
interpretations that were issued but had not yet entered into
force, or had not yet been approved by the European Union at
December 31, 2022 and which therefore were not applicable,
along with any expected
impacts on the Consolidated
Financial Statements.
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
classifying
liabilities as current or non-current and
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, which were expected to enter into
force 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 1 - Presentation of Financial
Statements and IFRS Practice Statement 2: Disclosure of
Accounting Policies
These amendments provide guidance on the application
of materiality
to accounting standard
disclosures in a way that is more useful; particularly:
→ the requirement to disclose “significant” accounting
standards has been replaced with the requirement to
disclose “material” accounting standards;
judgements
→ guidance has been added on how to apply the concept
of materiality to accounting standard disclosures.
In assessing the materiality of accounting policy disclosures,
an entity must also take into account, the size of the
transactions, other events or conditions and their nature.
These amendments, approved by the European Union,
entered into force on January 1, 2023. No impacts on the
disclosures in the Group’s Financial Statements are expected
as a result of these amendments.
→ Amendments to IAS 8 – Accounting Policies, Changes in
Accounting Estimates and Errors
These amendments
introduce a new definition for
“accounting estimates”, by distinguishing them more
clearly from accounting policies, and provide guidance
for determining whether changes should be treated as
CONSOLIDATED FINANCIAL STATEMENTS changes in estimates, changes in accounting standards
or errors.
These amendments, approved by the European Union,
entered into force on January 1, 2023. No impacts on the
Group’s Financial Statements are expected as a result of
these amendments.
→ 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 temporary
taxable and deductible 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 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 temporary taxable
and deductible 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, approved by the European Union,
entered into force on January 1, 2023. No impacts on the
Group’s Financial Statements are expected as a result of
these amendments.
→ IFRS 17 - Insurance Contracts
The IFRS 17, which replaces IFRS 4 - Insurance Contracts,
provides a definition of the accounting for insurance
contracts issued and reinsurance contracts held.
The provisions of IFRS 17, approved by the European
Union, entered into force on January 1, 2023. No impacts
on the Group’s Financial Statements are expected as a
result of these amendments.
complied with after the reporting date do not affect the
classification of debt as current or non-current at the
reporting date. Instead, the amendments require the
company to disclose information about such covenants in
the Financial Statements.
These amendments, which will enter into force on January
1, 2024, have not yet been approved by the European
Union. No impacts on the classification of financial
liabilities and in terms of disclosure are expected as a
result of these amendments.
→ Amendments to FRS 16 Leases - Lease Liability in a Sale
and Leaseback
These amendments specify
the requirements for
accounting for a sale and leaseback after the transaction
date.
In particular, in the subsequent valuation of the liability
arising from the
leasing contract, the seller-lessee
determines the “lease payments” and “revised lease
payments” in such a way that no gain or loss is recognised
that relates to the retained right of use
These amendments, which will enter into force on January
1, 2024, 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.
4. FINANCIAL RISK MANAGEMENT POLICIES
The financial risks to which the Group is exposed are mainly
related to foreign exchange rate fluctuations, interest rates
fluctuations, the price of financial assets held in portfolio, the
ability of its customers to meet their obligations to the Group
(credit risk), and the procurement of financial resources on
the market (liquidity risk).
is an
Financial risk management
integral part of the
management of the Group’s activities, and is performed
centrally in accordance with the guidelines issued by the
Finance Department, as part of the risk management
strategies which more generally defined by the Risk
Management Committee.
→ Amendments to IFRS 17 - Initial Application of IFRS 17
4.1 TYPES OF FINANCIAL RISKS
in comparative
and IFRS 9 Comparative Information
These amendments allow for the elimination of one-off
classification differences
information
from the previous financial year, at the time of the
initial application of the IFRS 17 and IFRS 9 financial
instruments. The optional classification overlay introduced
by this amendment allows the comparative information
presented at the initial application of IFRS 17 and IFRS 9,
to be more useful.
These amendments, approved by the European Union,
entered into force on January 1, 2023. No impacts on the
Group’s Financial Statements are expected as a result of
these amendments.
→ Amendments to IAS 1 — Presentation of Financial
Statements - Non-current Liabilities with Covenants
These amendments specify that the covenants to be
EXCHANGE RATE RISK
The different geographical distribution of the Group’s
production and commercial activities entails an exposure to
exchange rate risk, both transactional and translational.
A) TRANSACTIONAL EXCHANGE RATE RISK This risk is
generated by the commercial and financial transactions exe-
cuted by the individual companies in currencies other than the
functional currency of the company executing the transaction.
Fluctuations in the exchange rate between the time when the
commercial/financial relationship originates and the time when
the transaction is finalised (collection/payment), can result in
exchange rate gains or losses.
The Group aims to minimise the impact of transactional risk
associated with volatility. In order to achieve this objective,
346
Pirelli Annual Report 2022 the Group’s procedures provide that the Operating Units
are responsible for the collection of all information inherent
to positions subject to transactional risk, for which hedging
in the form of forward contracts is entered into with the
Group Treasury.
carry out hedging transactions on future transactions, for
which it typically makes use of either forward buy or sell
transactions or optional risk reversal transactions, (e.g., zero
cost collars). If the requirements, as provided for by IFRS 9
are met, hedge accounting is activated.
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 positions for each currency and, in accordance with the
pre-established guidelines and restrictions, it in turn closes
out all risk positions by negotiating hedging derivative
contracts, typically forward contracts, on the market.
For these contracts, the Group did not consider it necessary
to activate the hedge accounting option as provided for by
IFRS 9, in that the recognition of the effects, on the Income
Statement and on the Statement of Financial Position, of the
hedging strategy for transactional exchange rate risk is in
any case substantially guaranteed, even without the Group
availing itself of the aforementioned option.
loans denominated
in foreign
With reference to some
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.
It should also be noted that, as part of the annual and three-
year planning process, the Group formulates exchange rate
forecasts for these time periods 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 originates,
represents the transactional risk for future transactions.
From time to time the Group evaluates the opportunity to
The impacts on the Group’s equity and Income Statement,
arising from changes in the exchange rates calculated on
outstanding hedging instruments at December 31, 2022, are
described in Note 27, “Derivative Financial Instruments”.
B) TRANSLATIONAL EXCHANGE RATE RISK The Group
holds controlling interests in companies that prepare their Fi-
nancial 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, which arises from the conversion into euro of the
assets and liabilities of these subsidiaries. The main exposures
to translational exchange rate risk are constantly monitored.
At present, in order to mitigate the exposure to the risk gener-
ated by changes in the fair value of a net investment in a for-
eign operation (or rather, an equity investment in the Brazilian
company, Pirelli Comercial de Pneus Brasil Ltda.), which is
recognised in the Financial Statements at historical cost and
denominated in Brazilian real (BRL), a portion of the Brazilian
subsidiary’s equity has been hedged.
At December 31, 2022 approximately 36.5% of the total
consolidated equity was expressed in euro (approximately
36.3% at December 31, 2021). The most significant
currencies for the Group other than the euro were the
Brazilian real (10.6%; 8.5% at December 31, 2021), the
Turkish lira (0.7%; 0.4%; at December 31, 2021), the Chinese
renminbi (13.4%; 17.7% at December 31, 2021), the Romanian
leu (11.8%; 12.5% at December 31, 2021), the Russian rouble
(2.9%; 2.2% at December 31, 2021); the British pound
sterling (3.4%; 4.0% at December 31, 2021), the Argentine
peso (3.6%; 2.5% at December 31, 2021); the US dollar
(5.0%; 4.4% at December 31, 2021) and the Mexican peso
(10.8%; 10.1% at December 31, 2021).
347
CONSOLIDATED FINANCIAL STATEMENTS The effects on consolidated equity which derive from a hypothetical appreciation / depreciation of the euro
against the above listed currencies - 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%
12/31/2022
12/31/2021
12/31/2022
12/31/2021
64,084
47,609
(52,432)
(38,953)
4,344
81,367
71,367
17,385
2,013
(3,554)
(1,647)
98,871
(66,573)
(80,894)
70,086
(58,392)
(57,343)
12,061
(14,224)
(9,868)
British Pound Sterling
20,533
22,528
(16,800)
(18,432)
Argentinian Peso
US Dollar
Mexican Peso
21,569
30,158
13,767
(17,647)
(11,264)
24,675
(24,675)
(20,189)
65,604
56,501
(53,676)
(46,228)
Total on consolidated equity
376,411
348,111
(307,973)
(284,818)
It should be noted that, during the course of 2022, the Turkish lira and the Argentine 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:
Impact on Net income/(loss)
(8,573)
(5,986)
8,573
5,986
(in thousands of euro)
+0.50%
-0.50%
12/31/2022
12/31/2021
12/31/2022
12/31/2021
The effects on the Group’s equity resulting from changes in the EURIBOR rates, calculated on the hedging
instruments for interest rates which were outstanding at December 31, 2022, are described in Note 27, “Derivative
Financial Instruments”.
PRICE RISK ASSOCIATED WITH FINANCIAL ASSETS
The Group’s exposure to price risk is limited to the volatility of financial assets such as listed equity securities and
bonds or financial assets indirectly associated with listed equity securities, which amounted to approximately
1.47% of the total consolidated assets at December 31, 2022 (0.74% at December 31, 2021). 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.
348
Pirelli Annual Report 2022
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
Other
risk
management is the taking out of insurance policies. For over
10 years a master agreement has been in place, which was
recently renewed for the 2023-2024 two-year period, with a
leading insurance company with an AA credit rating according
to Standard & Poors, for the worldwide coverage of credit
risk mainly related to sales in the Replacement channel (the
coverage ratio at December 31, 2022 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.
The customer rating considers, among other things, the
effects of exogenous risks that could
include, should
customers be exposed to them in the specific markets in
which they operate, risks related to Covid 19 and climate
change, determining the probability of default used in the
calculation and impacting the ceiling levels granted by the
insurance company to each counterparty.
Financial assets are subdivided as follows:
→ financial assets at fair value through Other Comprehensive
Income which consisted of
listed equity securities
which amounted to euro 16,570 thousand (euro 21,855
thousand at December 31, 2021), and securities indirectly
associated with listed equity securities (Fin. Priv. S.r.l.),
which amounted to euro 18,865 thousand (euro 21,171
thousand at December 31, 2021);
→ financial assets at fair value through the
Income
Statement which amounted to euro 169,328 thousand
and consisted of Argentine dollar-linked bonds (euro
85,912 thousand at December 31, 2021).
Financial assets at fair value through other Comprehensive
Income constituted 12.0% of the total financial assets subject
to price risk (25.2% at December 31, 2021). A change of
+5% in the price of the aforesaid listed securities, all other
conditions being equal, would result in a positive change
to the Company’s equity of euro 828 thousand (a positive
change of euro 1,093 thousand at December 31, 2021 while
a change of -5% in the price of the aforesaid listed equities,
all other conditions being equal, would result in a negative
change to the Company’s equity of euro 828 thousand (a
negative change of euro 1,093 thousand to the Group’s
equity at December 31, 2021).
Financial assets at fair value through the Income Statement
constituted 59.0% of the total financial assets subject
to price risk (50.3% at December 31, 2021). A change of
+5% in the price of the aforesaid listed securities, all other
conditions being equal, would result in a positive change to
the Group’s net income of euro 9,366 thousand (euro 4,041
thousand at December 31, 2021), while a change of -5% in
the price of the aforesaid listed equities, all other conditions
being equal, would result in a negative change to the Group’s
net income of euro 6,172 thousand (euro 3,882 thousand at
December 31, 2021).
CREDIT RISK
Credit risk represents the Group’s exposure to potential
losses arising 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
349
CONSOLIDATED FINANCIAL STATEMENTS The bad debt provision at December 31, 2022 was calculated according to the method described above, and was
composed as follows:
Current
Past due
> 30 days
Past due
> 90 days
Past due
> 180 days
Total
(in thousands of euro)
Expected loss rate
2.3%
11.4%
11.9%
60.3%
10.7%
Exposure net of credit enhancements
514,616
35,547
18,454
85,649
654,267
Bad debt provision
(11,949)
(4,038)
(2,203)
(51,687)
(69,877)
The position at December 31, 2021 was as follows:
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)
At December 31, 2022, the exposure gross of credit enhancements amounted to euro 998,424 thousand. The
bad debt provision, which was calculated without taking into account the presence of any collateral securities
and other credit enhancement instruments, amounted to euro 73,327 thousand.
The difference between the exposure gross of credit enhancements amounting to euro 998,424 thousand
and the value of the trade receivables amounting to euro 706,323 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 bad debt provision.
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 and within the due time.
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.
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Pirelli Annual Report 2022
At December 31, 2022 the Group had, a liquidity margin of euro 2,536,628 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 1,536,628 thousand (euro 1,998,550 thousand at December 31, 2021) and unused credit
facilities to the amount of euro 1,000,000 thousand (euro 700,000 thousand at December 31, 2021). The above-
mentioned liquidity margin is sufficient to cover financial debt maturities until the end of the first quarter of 2025.
Maturities for Financial Liabilities at December 31, 2022 were composed as follows:
Trade payables
Other payables
(in thousands of euro)
within 1 year
1 to 2 years
2 to 5 years
over 5 years
Total
1,973,296
-
-
-
1,973,296
405,578
13,403
19,808
41,363
480,152
Derivative financial instruments
19,558
-
-
-
19,558
Borrowings from banks and other financial institutions
928,676
1,593,769
2,180,563
193,316
4,896,324
of which lease liabilities
108,469
93,235
196,159
193,316
591,179
3,327,108
1,607,172
2,200,371
234,679
7,369,330
Maturities for Financial Liabilities at December 31, 2021 were composed as follows:
Trade payables
Other payables
(in thousands of euro)
within 1 year
1 to 2 years
2 to 5 years
over 5 years
Total
1,626,367
-
-
-
1,626,367
314,203
11,509
26,310
38,666
390,688
Derivative financial instruments
18,936
1,769
148
-
20,853
Borrowings from banks and other financial institutions
1,543,592
1,220,559
2,535,452
226,980
5,526,585
of which lease liabilities
98,638
86,353
193,246
226,980
605,218
3,503,098
1,233,838
2,561,910
265,646
7,564,493
351
CONSOLIDATED FINANCIAL STATEMENTS
5. INFORMATION ON FAIR VALUE
5.1 FAIR VALUE MEASUREMENT
The following table shows assets and liabilities measured at fair value at December 31, 2022, subdivided into
three levels:
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
TOTAL ASSETS
FINANCIAL LIABILITIES:
Note
Carrying amount
at 12/31/2022
Level 1
Level 2
Level 3
(in thousands of euro)
18
27
27
27
246,884
169,328
15,313
7,368
26,430
-
-
-
77,556
15,313
7,368
26,430
-
-
-
-
46,644
16,570
18,865
11,209
1,775
-
1,775
12
48,419
16,570
20,640
344,414
185,898
147,307
Financial assets at fair value through Income Statement:
Current derivative financial instruments
27
(19,558)
TOTAL LIABILITIES
(19,558)
-
-
(19,558)
(19,558)
-
11,209
11,209
-
-
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Pirelli Annual Report 2022
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
TOTAL ASSETS
FINANCIAL LIABILITIES:
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
221,982
107,767
103,159
Financial assets at fair value through Income Statement:
Current derivative financial instruments
27
(15,209)
-
(15,209)
Derivative hedging instruments:
Current derivative financial instruments
Non-current derivative financial instruments
TOTAL LIABILITIES
27
27
(979)
(3,519)
(19,707)
(77)
-
(77)
(902)
(3,519)
(19,630)
The following table shows changes in the financial assets classified as level 3, that occurred during 2022:
(in thousands of euro)
Opening balance 01/01/2022
Translation differences
Fair value adjustments through Other Comprehensive Income
Closing balance 12/31/2022
-
-
-
-
11,056
-
11,056
11,056
-
-
-
-
11,056
(11)
164
11,209
These financial assets are mainly represented by equity investments in the Istituto Europeo di Oncologia
(European Institute of Oncology) (euro 8,139 thousand), Telco S.r.l (euro 450 thousand), Genextra (euro 629
thousand) and Tlcom I LP (euro 186 thousand).
353
CONSOLIDATED FINANCIAL STATEMENTS
The fair value adjustments through Other Comprehensive Income equalled a positive amount of euro 164
thousand, and mainly refers to the fair value adjustment of the investment in the Istituto Europeo di Oncologia
(European Institute of Oncology).
During the course of 2022 there were no transfers from level 1 to level 2 or vice versa, nor from level 3 to other
levels and vice versa.
The financial instruments included in level 1, are mainly comprised of equity investments classified as financial
assets at fair value through Other Comprehensive Income.
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
(in thousands of euro)
Note
Carrying amount
at 12/31/2022
Carrying amount
at 12/31/2021
18
27
15
14
15
19
12
27
27
246,884
113,901
15,313
17,345
262,197
131,246
276,645
362,944
636,446
659,209
695,744
470,577
1,289,744
1,884,649
2,898,579
3,377,379
48,419
56,907
7,368
26,430
29,217
4,612
3,242,993
3,599,361
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Pirelli Annual Report 2022
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
(in thousands of euro)
Note
Carrying amount
at 12/31/2022
Carrying amount
at 12/31/2021
27
23
25
23
24
25
23
23
27
27
19,558
15,209
3,293,614
3,376,573
74,574
76,485
711,401
1,397,638
1,973,296
1,626,367
405,578
314,203
6,458,463
6,791,266
396,497
412,796
88,988
91,611
485,485
504,407
-
-
-
3,519
979
4,498
TOTAL FINANCIAL LIABILITIES
6,963,506
7,315,380
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 2023” 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 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”.
R.O.I.C. for the 2022 financial year equalled 20.3%, compared to 17.6% for 2021, thanks to the improved operating
performance.
355
CONSOLIDATED FINANCIAL STATEMENTS
7. ESTIMATES AND ASSUMPTIONS
frequently, if specific events or circumstances arise that
may indicate an impairment.
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. 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.
The value configuration used to determine the recoverable
amount for Consumer Activities at December 31, 2022
is the value in use, which corresponds to the present value
of the future financial cash flows which are expected to
be generated by the group of CGUs, using a discount rate
that reflects the specific risks of the group of CGUs at the
valuation date.
The key assumptions used by management were the
estimated future increases in sales, operating cash flows
and growth rate of operating cash flows beyond the explicit
forecast period for the purposes of estimating the terminal
value and the weighted average cost of capital (discount rate).
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
The configuration of the recoverable amount for impairment
testing purposes at December 31, 2022, 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
estimated future increases in sales and operating cash flows
and the relative growth rates beyond the explicit forecast
period for the purposes of estimating the terminal value 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.
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 ones are summarised as follows:
→ contract renewal clauses are taken into account 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 is considered;
→ automatic renewal clauses in contracts, in which both
parties have the right to terminate the contract, are not
taken into account for the purposes of determining
the duration of the contract, as the ability to extend the
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
356
Pirelli Annual Report 2022 if the Group considers it probable (greater 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. If this is
not the case, the effect of any uncertainty is reflected in
the determination of the net income/(loss) before tax. The
probability refers to the likelihood that the tax authority
will not accept the tax treatment adopted, and not to the
likelihood of the assessment.
PENSION FUNDS
Some of the companies of the Group have put 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 were closed
to new participants, and therefore the actuarial risk refers
only to past obligations. Management, through the use of a
leading actuarial services firm, utilises 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 for these risks represents the best
estimate made by Management, for potential legal and tax
disputes concerning a wide range of issues that are subject
to the jurisdiction of various countries.
inclusion of the renewal option in the determination of the
duration of the contract. This assessment is also made by
taking into account the degree of customisation of the
leased asset. If customisation is high, the lessor may incur
a significant penalty if it opposes renewal;
→ early termination clauses: such clauses are 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
on a contract by contract basis, (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 to which
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. With regard to situations in which the
applicable tax legislation in force lends itself to interpretation,
357
CONSOLIDATED FINANCIAL STATEMENTS IFRS 8 - Operating segments, defines an operating segment as a component:
8. OPERATING SEGMENTS
→ which involves entrepreneurial activities which generate revenues and costs;
→ whose operating results are periodically reviewed by the Chief Executive Officer, in his role as Chief Operating
Decision Maker (CODM);
→ for which separate Income Statement, Statement of Financial Position and Financial Statements data is available.
For the purposes of IFRS 8, the activities performed by Consumer Activities are identifiable in a single operating
sector.
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)
2022
2021
2,441,632
2,058,539
1,592,083
1,145,656
1,093,058
1,018,817
902,247
667,567
586,707
440,871
6,615,727
5,331,450
Non-current assets by geographic region 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)
12/31/2022
12/31/2021
5,211,800
59.34%
5,352,217
61.00%
510,105
515,141
463,592
197,198
5.81%
5.87%
5.28%
2.25%
416,304
539,778
384,362
198,153
4.74%
6.15%
4.38%
2.26%
Non-current unallocated assets
1,884,629
21.45%
1,883,765
21.47%
Total
8,782,465
100.00%
8,774,579
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.
358
Pirelli Annual Report 2022
9. PROPERTY, PLANT AND EQUIPMENT
Their composition was as follows:
Total Net Value:
- Owned tangible assets
- Right of use
9.1 OWNED TANGIBLE ASSETS
Their composition and changes were as follows:
(in thousands of euro)
12/31/2022
12/31/2021
3,399,628
3,288,914
2,952,780
2,823,765
446,848
465,149
Gross Value
12/31/2022
Accumulated
Depreciation
Net Value
Gross Value
(in thousands of euro)
12/31/2021
Accumulated
Depreciation
Net Value
Land
Buildings
147,977
-
147,977
144,121
-
144,121
909,178
(234,420)
674,758
848,138
(196,180)
651,958
Plants and machinery
2,979,444
(1,149,033)
1,830,411
2,704,531
(949,926)
1,754,605
Industrial and trade equipment
667,978
(438,739)
229,239
574,926
(361,250)
213,676
Other assets
Total
141,941
(71,546)
70,395
124,286
(64,881)
59,405
4,846,518
(1,893,738)
2,952,780
4,396,002
(1,572,237)
2,823,765
NET VALUE
(in thousands of euro)
12/31/2021
Hyperinflation
Argentina and
Turkey
Currency
translation
differences
Increases
Decreases
Depreciation
Devaluation Recl./Other
12/31/2022
Land
144,121
1,498
1,585
145
-
-
-
628
147,977
Buildings
Plants and
machinery
Industrial and trade
equipment
651,958
6,156
18,566
34,907
(54)
(36,392)
(414)
31
674,758
1,754,605
25,685
33,634
230,810
(1,680)
(193,564)
(19,679)
600
1,830,411
213,676
7,464
6,368
77,918
(1,124)
(74,876)
(582)
395
229,239
Other assets
59,405
3,711
(1,602)
22,033
(318)
(9,830)
(7)
(2,997)
70,395
Total
2,823,765
44,514
58,551
365,813
(3,176)
(314,662)
(20,682)
(1,343)
2,952,780
359
CONSOLIDATED FINANCIAL STATEMENTS
NET VALUE
(in thousands of euro)
12/31/2020
Hyperinflation
Argentina and
Turkey
Currency
translation
differences
Increases
Decreases
Depreciation
Devaluation Recl./Other
12/31/2021
Land
147,406
(831)
(2,412)
-
(39)
-
-
636,696
3,777
20,956
26,456
(287)
(33,798)
(1,882)
(3)
40
144,121
651,958
1,695,154
7,023
45,514
188,405
(1,924)
(176,971)
(2,505)
(91)
1,754,605
197,246
4,835
4,176
79,239
(1,789)
(70,229)
(1,278)
1,476
213,676
Buildings
Plants and
machinery
Industrial and trade
equipment
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
The item Hyperinflation Argentina and Turkey refers to the revaluation of the assets held by the Argentine and
Turkish subsidiaries as a consequence of the application of the IAS 29 accounting standard - Financial Reporting
in Hyperinflationary Economies, (euro 30,003 thousand for Argentina and euro 14,511 thousand for Turkey). This
effect was partially offset by negative currency translation differences (euro 20,365 thousand for Argentina
and euro 2,915 thousand for Turkey).
Increases, totalling euro 365,813 thousand, were primarily aimed at the High Value segment, at the continuous
improvement in the mix and quality in all manufacturing plants, and at increasing production capacity in Mexico,
and Romania.
The ratio of investments to depreciation for 2022 was equal to 1.16, (1.08 for the financial year 2021).
The item devaluation refers mainly to plants and machinery in operation in the subsidiary in Russia. It should
also be noted that the protracted direct effects of the Russia-Ukraine crisis on the operating activities located in
Russia, represented an impairment indicator, and therefore the relative tangible fixed assets belonging to the Kirov
and Voronezh factories, which represent two separate cash generating units, were subjected to an impairment
test. The value configuration used to determine the recoverable amount at December 31, 2022 was the value in
use, which corresponds to the present value of the future cash flows which are expected to be associated with
the two CGUs, using a rate, equal to 25%, that reflects the risks specific to the assets at the valuation date.
The recoverable amount for the Kirov CGU was found to be euro 14 million lower than the carrying amount, and
therefore the impairment was recognised in the Income Statement.
Property, plant and equipment in progress at December 31, 2022 included in the individual fixed asset
categories amounted to euro 240,255 thousand, (euro 183,468 thousand at December 31, 2021). 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 the manufacturing plants and machinery, which
is also aimed at increasing their safety from an EHS (Environmental, Health and Safety) perspective, and the
investments in machinery for the development of new product lines and the improvement of existing products.
These investments were concentrated in Mexico, Romania, China and Italy.
It should be noted that the companies of the Group did not pledge any property, plant and equipment as collateral.
360
Pirelli Annual Report 2022 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)
12/31/2022
12/31/2021
17,992
17,312
349,257
366,512
23,179
27,382
56,420
53,943
446,848
465,149
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 2022 financial year, also including remeasurements, amounted to euro
79,746 thousand (euro 122,416 thousand for 2021). These increases refer mainly to new contracts for logistics
warehouses in the USA and Australia and to industrial equipment in Mexico and Romania.
In reference to remeasurements, the following impacts are indicated for 2022:
→ contracts for the lease of several sales outlets in Germany were extended and the relative rental fees were
revised, with a corresponding increase in the right of use of euro 4,265 thousand;
→ contracts for the lease of offices and warehouses in Germany were extended for 5 and 1.5 years respectively,
with a corresponding increase in the right of use of euro 2,981 thousand;
→ rental rates for an office building in Italy were adjusted for inflation, with a corresponding increase in the right
of use of euro 2,301 thousand.
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
(in thousands of euro)
2022
2021
1,320
67,955
6,789
19,748
1,154
61,014
7,374
18,866
Total depreciation of right of use
95,812
88,408
For interest on lease liabilities, reference should be made to Note 37, “Financial Expenses”.
Information on costs relative to 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”.
361
CONSOLIDATED FINANCIAL STATEMENTS
Their composition and changes were as follows:
10. INTANGIBLE ASSETS
NET VALUE
(in thousands of euro)
12/31/2021
Currency
translation
differences
Increase
Decrease
Amortisation
Impairment
Recl./Other
12/31/2022
Concessions, licenses and trademarks
- finite useful life
72,588
(66)
880
Pirelli Brand - indefinite useful life
2,270,000
Goodwill
1,883,765
-
864
Customer relationships
239,639
(773)
Technology
968,617
-
-
-
-
-
-
-
-
-
-
(3,689)
-
-
(34,577)
(76,850)
-
-
-
-
-
(2)
69,711
-
-
-
-
2,270,000
1,884,629
204,289
891,767
Software applications
39,568
239
27,311
(132)
(16,946)
(697)
277
49,620
Patents and design patent rights
Other intangible assets
10,194
1,294
-
34
3,676
-
(1,413)
-
-
12,457
45
(145)
(318)
(462)
(84)
364
Total
5,485,665
298
31,912
(277)
(133,793)
(1,159)
191
5,382,837
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
Goodwill
Customer relationships
Technology
Software applications
Patents and design patent rights
Other intangible assets
2,270,000
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
(1,043)
-
10,194
-
(5)
(352)
475
1,294
Total
5,582,033
2,601
30,579
(242)
(129,393)
87
5,485,665
Intangible assets were composed as follows:
→ the Pirelli Brand (indefinite useful life) to the amount of 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) to the amount of euro 44,220 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
for both the Original Equipment and 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
362
Pirelli Annual Report 2022 S.p.A.) amounted to euro 846,767 thousand and euro
45,000 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 1,884,629 thousand,
of which euro 1,877,363 thousand was recorded at the
time of acquisition of the Group in September 2015. The
remainder refers to the goodwill determined as part of
the acquisition of the company JMC Pneus Comercio
Importação e Exportação Ltda. which occurred in 2018.
During the course of 2022, investments were also made
in application software (a total increase of euro 27,311
thousand) as part of the Digitalisation Programme to
transform the Group’s key processes. For more information
on the Programme, reference should be made to the
section Group Performance and Results in the Directors’
Report on Operations.
IMPAIRMENT TESTING OF GOODWILL Pursuant to IAS
36, goodwill is not subject to amortisation, but is tested for
impairment annually, or more frequently if specific events or
circumstances arise that may suggest an impairment.
Goodwill, which amounted to euro 1,884,629 thousand
was allocated to the “Consumer Activities” CGU group,
which represents the sole business segment in which the
Group operates and considers to be the minimum level
at which goodwill is monitored, for internal management
control purposes.
The impairment test consists of comparing the recoverable
amount for Consumer Assets with their carrying amount,
including its operating assets and goodwill.
The value configuration used to determine the recoverable
amount for Consumer Activities at December 31, 2022 is
the value in use, which corresponds to the present value of
the future financial flows which are expected to be generated
by the group of CGUs, using a discount rate that reflects the
risks specific to the group of CGUs at the valuation date.
The forecasts are based on the flows of the EBITDA adjusted
of the 2023 Management Plan approved on February 22,
2023 by the Board of Directors of Pirelli & C. S.p.A. which
was prepared on the basis of the new market environment
and, in particular, including the indirect effects of the Russia-
Ukraine conflict (mainly attributable to inflation in sales
prices and in the costs of production factors). The figures for
2023 have been adjusted downwards to take into account,
the consensus estimates of analysts, which were updated
following the presentation of the Plan, as externally sourced
evidence, and for the years 2024 – 2025, the consensus
estimates of analysts were used.
With reference to the impact on flows attributable to climate-
change issues, it should be noted that:
→ thanks to its technological leadership, the Group expects
positive results in the short-term from the marketing
of tyres that include technological solutions capable
363
of minimising the environmental impact. Instead, with
reference to the risks deriving from climate change
(physical and transitional), no material impact is expected
in the short and medium-term, while there are elements
long-term (>2030). For more
of uncertainty
information, reference should be made to the “Information
on Climate Change” section of this document;
in the
→ the estimates of equity analysts, on which the flows used
in the impairment test are based, do not forecast long-
term negative effects from climate change and include a
positive growth rate beyond the explicit forecast period;
→ in estimating the terminal value, a higher
level of
investments than that forecast by analysts was prudently
used to take into account any acceleration in investments
related
the
decarbonisation strategy adopted by the Group;
to energy efficiency, consistent with
→ the capitalisation rate (WACC - g) is consistent with the
consensus estimates of analysts, and therefore captures
consensus market expectations with regard to risks of
a systematic nature and not related to flows projected
beyond the explicit forecast period.
Pursuant to IAS 36.44, the flows used are sterilised of
cash flows relative to expansion investments, restructuring
expenses and correlated benefits, which at December 31,
2022, the Company had not yet done so.
The flows used for the purpose of determining the recoverable
amount, which are based on the consensus estimates of
analysts, assume, for the explicit forecast period, an average
compound annual growth rate (CAGR) for revenues of 2.1%,
which is calculated against the revenues recorded for 2022,
and an average EBITDA margin adjusted of 21.3%, with a
CAGR for the EBITDA adjusted of 3%, compared to the
absolute value recorded for 2022.
The impairment test at December 31, 2022 was performed
third-party
using
professional.
the assistance of an
independent
The discount rates, defined as the weighted average
cost of capital (WACC) net of taxes, which were applied
to the prospective cash flows equalled 8.34%, while the
growth rate of operating cash flows, for the purpose of
estimating the terminal value (g) was equal to 0.50%.
The capitalisation rate for operating cash flows (WACC
- g) was therefore equal to 7.84%, consistent with the
long-term projections of analysts.
Based on the results of the impairments tests carried out, no
impairment emerged.
The recoverable amount is greater than the carrying amount
for Consumer Activities (12%), while, in order for the value in
use to be equal to the carrying amount, a downward change
in the key parameters is necessary, specifically:
→ an increase in the discount rate of 92 basis points for the
explicit forecast period and in the terminal value;
→ a negative annual growth rate beyond the explicit “g”
forecast period of -111 basis points;
CONSOLIDATED FINANCIAL STATEMENTS → a decrease in the average EBITDA margin adjusted of
152 basis points for the explicit forecast period and in the
terminal value.
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, 2022 was performed
using
third-party
professional.
the assistance of an
independent
The configuration of the recoverable amount for impairment
testing purposes at December 31, 2022 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 fair value estimate is therefore based on:
→ the same flows used for goodwill impairment testing
purposes, that is, the forecasts made by management,
which with reference to 2023 are based on the 2023
Management Plan, adjusted downwards to take into
account, the consensus estimates of analysts as
externally sourced evidence, and for the years 2024 -
2025, the consensus estimates of analysts were used,
but without the sterilisation of the effects of expansion
investments. The average compound annual growth rate
(CAGR), for revenues for the explicit forecast period,
used in the determination of the recoverable amount,
which is calculated against the revenues recorded for
2022, was equal to 3% while the average EBITDA margin
adjusted for the period used in the determination of the
recoverable amount was equal to 21.4%, with a CAGR for
the EBITDA adjusted of 4.2%, compared to the absolute
value recorded for 2022;
→ 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 (as in the existing contracts);
→ the excess earnings attributable to the Pirelli Brand
which are derived by deducting the notional rent or
royalty rate of the Group’s operating assets other than
the Brand, expressed at fair value, from the prospective
operating income;
→ a discount rate of 10.30%, which includes a premium
compared to the WACC, which is determined according
to the riskiness of the specific asset and the growth rate
“g” in the terminal value which is equal to 0.5%;
→ 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 (17%), while, in order for the fair value to be
equal to the carrying amount, a downward change in the key
parameters is necessary, in particular:
→ a decrease in revenues of 410 basis points for the explicit
forecast period and in the terminal value;
→ a decrease in the EBITDA margin adjusted of 67 basis points
for the explicit forecast period and in the terminal value;
→ an increase in the discount rate of 142 basis points in the
explicit forecast period and in the terminal value;
→ a decrease in the growth rate “g” of 203 basis points for
beyond the explicit forecast period.
364
Pirelli Annual Report 2022 11. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES
The changes in investments in associates and joint ventures were as follows:
(in thousands of euro)
12/31/2022
12/31/2021
Associates
JV
Total
Associates
JV
Total
9,018
71,868
80,886
8,395
64,193
72,588
(1,451)
(178)
190
-
-
(1,451)
-
(178)
(186)
2,730
2,920
-
-
981
-
(186)
1,697
6,694
6,694
-
93
716
-
93
233
-
233
7,812
72,415
80,227
9,018
71,868
80,886
Share of other components recognised in Equity
-
(2,183)
(2,183)
Opening balance
Decrease
Distribution of dividends
Share of net income / (loss)
Other
Closing balance
11.1 INVESTMENTS IN ASSOCIATES
The details were as follows:
12/31/2021
Decrease
Distribution
of dividends
Share of net
income /
(loss)
Other
12/31/2022
(in thousands of euro)
Eurostazioni S.p.A.
6,575
-
Joint Stock Company Kirov Tyre Plant
1,339
(1,451)
Investments in other associates
Total
1,104
-
9,018
(1,451)
-
-
(178)
(178)
46
(124)
268
190
-
6,621
236
(3)
233
-
1,191
7,812
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:
12/31/2021
Share of net
income / (loss)
(in thousands of euro)
Share of other
components
recognised in
Equity
12/31/2022
57,676
14,192
71,868
2,308
422
2,730
(1,717)
(466)
58,267
14,148
(2,183)
72,415
Xushen Tyre (Shanghai) Co., Ltd.
PT Evoluzione Tyres
Total
The Group holds:
→ 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
365
CONSOLIDATED FINANCIAL STATEMENTS
expected developments in the electric car segment and the increasing share of homologations obtained for
the Original Equipment channel in China, Japan and Korea. 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 from January 1, 2021 until March 31, 2026, which - if exercised - would allow Pirelli Tyre
S.p.A. to increase its stake in the company to up to 70%. Pirelli Tyre S.p.A. has notified the shareholders of
Xushen Tyre (Shanghai) Co., Ltd. of its intention to not exercise the option until December 31, 2023, without
prejudice to the right to exercise the option thereafter, and in any case, by March 31, 2026;
→ 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 the contractual
agreements between Shareholders, it falls under the definition of a joint venture in that the governance
regulations explicitly provide for the unanimous approval of significant business decisions.
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
48,419 thousand at December 31, 2022 (euro 56,907 thousand at December 31, 2021, and were as follows:
Opening balance at 01/01/2022
Translation differences
Fair Value adjustment through Other Comprehensive income
Closing balance 12/31/2022
The composition of the item by individual security 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.
Tlcom I LP
Telco S.r.l.
Other companies
Total
(in thousands of euro)
56,907
(11)
(8,477)
48,419
(in thousands of euro)
12/31/2022
12/31/2021
16,570
21,855
16,570
21,855
18,865
1,775
8,139
186
450
21,171
2,825
8,006
193
450
2,434
2,407
31,849
35,052
Total other financial assets at Fair Value through Other Comprehensive Income
48,419
56,907
366
Pirelli Annual Report 2022
The fair value adjustments through Other Comprehensive Income amounted to a net loss of euro 8,477
thousand, and mainly refers to the RCS MediaGroup S.p.A. (negative to the amount of euro 5,285 thousand), to
Fin. Priv. S.r.l. (negative to the amount of euro 2,306 thousand) and to Fondo Comune di Investimento Anastasia
(negative to the amount of euro 1,050 thousand). For listed securities, the fair value corresponds to the stock
market price at December 31, 2022. 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)
12/31/2022
12/31/2021
176,969
137,643
(1,041,848)
(1,033,892)
(864,879)
(896,249)
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.
Their composition, gross of the offsets carried out, was as follows:
(in thousands of euro)
12/31/2022
12/31/2021
343,197
330,936
208,657
210,568
134,540
120,368
(1,208,076)
(1,227,185)
(187,805)
(111,378)
(1,020,271)
(1,115,807)
(864,879)
(896,249)
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
367
CONSOLIDATED FINANCIAL STATEMENTS
The composition of deferred taxes, relative 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
Provision 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
Provision for employee benefit obligations
Derivatives
Other
Total
(in thousands of euro)
12/31/2022
12/31/2021
80,189
15,018
-
54,262
9,825
2,129
38,281
43,869
44,236
37,902
85,085
53,647
43,725
38,866
3,949
32,714
5,071
85,365
343,197
330,936
(939,366)
(975,326)
(159,001)
(157,851)
(717)
-
(32,371)
(37,605)
(12,343)
-
(64,278)
(56,403)
(1,208,076)
(1,227,185)
The item “Other” relative to deferred tax assets, mainly includes deferred tax assets recognised on surplus
non-deducted interest expenses (euro 5,417 thousand) and on the ACE benefit, (Allowance for Corporate Equity)
(euro 23,237 thousand).
The item “Other” relative to deferred tax liabilities, mainly includes deferred tax liabilities recognised on
the undistributed gains of the subsidiaries for which distribution in future financial years is probable (euro
48,515 thousand).
The tax effect of gains and losses recognised directly in equity was negative to the amount of euro 5,836 thousand
(negative to the amount of euro 33,933 thousand for 2021), 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.
At December 31, 2022 the value of deferred tax assets not recognised on tax losses amounted to euro 81,908
thousand, while those related to temporary differences amounted to euro 31,126 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.
368
Pirelli Annual Report 2022
The amounts for tax losses according to their expiry date, against which deferred tax assets have not been not
recognised, is shown below:
Year of expiry
2022
2023
2024
2025
2026
2027
2028
2029
2030
With no expiry date
Total
(in thousands of euro)
12/31/2022
12/31/2021
-
5,121
1,280
2,540
5,073
3,736
809
28
5
2,295
5,121
1,280
2,563
5,073
3,731
779
26
5
292,587
276,211
311,179
297,084
Of the total tax losses with no expiry date, euro 287,293 thousand refers to losses attributable to subsidiaries in
the UK, Spain and Brazil.
Trade receivables were analysed as follows:
14. TRADE RECEIVABLES
Trade receivables
Bad debt provision
Total
(in thousands of euro)
12/31/2022
12/31/2021
Total
Non-current
Current
Total
Non-current
Current
706,323
(69,877)
636,446
-
-
-
706,323
732,188
(69,877)
(72,979)
636,446
659,209
-
-
-
732,188
(72,979)
659,209
The gross value of trade receivables amounted to euro 706,323 thousand (euro 732,188 thousand at December 31,
2021). 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 21% of the total exposure (22% at December 31, 2021).
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. The customer rating considers, among other things, the effects of
exogenous risks that include, should customers be exposed to them in the specific markets in which they operate,
risks related to Covid 19 and climate change, determining the probability of default used in the calculation and
impacting the ceiling levels granted by the insurance company to each counterparty.
369
CONSOLIDATED FINANCIAL STATEMENTS
The changes in the bad debt provision were as follows:
Opening balance
Translation differences
Accruals
Decreases
Releases
Closing balance
(in thousands of euro)
12/31/2022
12/31/2021
72,979
66,345
3,889
8,982
(1,806)
(14,167)
917
14,089
(1,212)
(7,160)
69,877
72,979
Accruals to the bad debt provision 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.
Of 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.
Other receivables were analysed as follows:
15. OTHER RECEIVABLES
12/31/2022
12/31/2021
Total
Non-current
Current
Total
Non-current
Current
(in thousands of euro)
Financial receivables
386,229
114,000
272,229
352,658
269,658
83,000
Trade accruals and deferrals
42,303
7,195
35,108
39,633
6,709
32,924
Receivables from employees
4,994
436
4,558
3,977
708
3,269
Receivables from social security and welfare institutions
689
-
689
781
-
781
Receivables from tax authorities not related to income taxes
436,647
83,278
353,369
356,936
64,851
292,085
Other receivables
113,367
35,475
77,892
89,366
29,152
60,214
Bad debt provision for other receivables and financial
receivables
(11,840)
(9,233)
(2,607)
(9,830)
(8,134)
(1,696)
Total
972,389
231,151
741,238
833,521
362,944
470,577
984,229
240,384
743,845
843,351
371,078
472,273
Financial receivables non-current (euro 114,000 thousand) refers mainly to euro 63,087 thousand, the sum as
guarantees for tax and legal disputes in relation to the subsidiary Pirelli Pneus Ltda. (Brazil) and remunerated at market
rates, to euro 13,228 thousand, the sum deposited into escrow accounts in favour of the pension funds of Pirelli
UK Ltd., to euro 14,464 thousand in contributions paid in cash at the time of signing an association in participation
contract and to euro 6,926 thousand in loans, disbursed in favour of the Indonesian joint venture PT Evoluzione Tyres.
Financial receivables current (euro 272,229 thousand) refers mainly to euro 170,826 thousand the sum
deposited in escrow accounts in favour of the pension funds of Pirelli UK Ltd. and Pirelli UK Tyres Ltd., and to
euro 79,024 thousand for the short-term portion of loans granted to the Jining Shenzhou Tyre Co., Ltd. joint
370
Pirelli Annual Report 2022
venture, for which there was no significant increase in credit
risk compared to the date of disbursement.
16. TAX RECEIVABLES
Tax receivables refers to income taxes which amounted
to euro 36,704 thousand (of which euro 9,055 thousand
was non-current) compared to euro 45,337 thousand at
December 31, 2021 (of which euro 27,564 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.
For the previous financial year, non-current tax receivables
included tax credits for Pirelli Pneus Ltda., which had
amounted to euro 23,223 thousand for income taxes
unduly incurred in previous years by the Brazilian affiliate,
and recognised 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”).
The change in non-current tax receivables compared to the
previous financial year, is essentially due to the adjustment
carried out in 2022 of the tax returns of previous years,
which led to the restatement of other tax receivables from
the tax authorities for indirect taxes (“PIS COFIN”) which had
originally been used to offset the unduly incurred income
taxes as specified above. As a result of this adjustment, the
previously recognised receivable was reclassified to tax
receivables not related to income taxes.
The item bad debt provision for other receivables and
financial receivables (euro 11,840 thousand) mainly
includes euro 10,545 thousand relative to the impairment of
financial receivables.
The item receivables from tax authorities not related
to income taxes (euro 436.647 thousand compared to
euro 356,936 thousand for 2021) is mainly comprised of
receivables for IVA (value added tax) and other indirect taxes
whose recovery is expected in future financial years.
Other receivables non-current (euro 35,475 thousand)
refers mainly to amounts deposited as guarantees for legal
and tax disputes for the Brazilian companies (euro 32,048
thousand).
Other receivables current (euro 77.892 thousand) includes:
→ advances to suppliers amounting to euro 28,824
thousand;
→ receivables from associates and joint ventures to the
amount of euro 7,930 thousand, mainly for royalties and
the sale of materials and moulds;
→ receivables from the Prometeon Group to the amount of
euro 19,023 thousand mainly for royalties;
→ receivables to the amount of euro 4,875 thousand in yet
to be collected state grants.
For other receivables - current and non-current the carrying
amount is considered to approximate their fair value.
371
CONSOLIDATED FINANCIAL STATEMENTS The following is an inventories analysis:
17. INVENTORIES
Raw and auxiliary materials and consumables
Sundry materials
Unfinished and semi-finished products
Finished products
Advances to suppliers
Total
(in thousands of euro)
12/31/2022
12/31/2021
302,609
176,795
10,854
85,542
6,354
69,413
1,056,359
838,186
2,347
1,414
1,457,711
1,092,162
The restatement of the value of inventories, which was recognised net of impairments, amounted to euro 788
thousand (a restatement of euro 1,549 thousand for 2021).
The increase in the value of inventories compared to December 31, 2021 was attributable to an increase in both
finished products, whose percentage of sales remained stable compared to the previous financial year, and in
raw materials which were impacted by the effects of inflation and the measures implemented during the first
nine months of the year, to mitigate supply chain risks.
Inventories were not subject to any guarantee restrictions.
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 246,884 thousand
at December 31, 2022 compared to euro 113,901 thousand at December 31, 2021.
The amount at December 31, 2022 included euro 169,328 thousand relative to investments made by the
Argentine affiliate in listed dollar-linked bond instruments, to mitigate the effects of the devaluation of the local
currency. For unlisted securities, the fair value was determined by using estimates based on the best available
information.
This increase, compared to the previous financial year, mainly refers to the combined effect of higher cash
investments in bond instruments made by the Argentine subsidiary, and the positive change in the market value
of the same securities, during the course of 2022.
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 1,884,649 thousand at December 31, 2021 to euro 1,289,744
thousand at December 31, 2022, and refer to bank current account balances and short-term bank deposits.
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 deployed, 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.
372
Pirelli Annual Report 2022
For the Statement of Cash Flow, the balance of cash and cash equivalents was recorded net of bank overdrafts,
to the amount of euro 6,356 thousand at December 31, 2022 (euro 1,105 thousand at December 31, 2021).
20. EQUITY
20.1 ATTRIBUTABLE TO THE OWNERS OF THE PARENT COMPANY
Equity attributable to the Owners of the Parent Company went from euro 4,908,112 thousand at December
31, 2021 to euro 5,323,794 thousand at December 31, 2022.
The subscribed and paid up share capital at December 31, 2022 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, generated by the conversion into euro of the financial statements of subsidiaries that
use a currency other than the euro as their functional currency, was negative to the amount of euro 510,386
thousand at December 31, 2022. Movements for the financial year included a positive change of euro 54,757
thousand mainly, related to the subsidiaries in Mexico, Brazil and the USA, which was partly offset by a negative
change in China, the UK and Argentina.
Changes in other reserves through Other Comprehensive Income went from a negative euro 1,408 thousand
at December 31, 2021 to a positive euro 12,768 thousand at December 31, 2022, mainly due to the positive
effect of the cash flow hedge reserve (euro 57,461 thousand), which was partially offset by actuarial losses on
pension funds (negative to the amount of euro 27,404 thousand), by financial assets at fair value through Other
Comprehensive Income (negative to the amount of euro 8,477 thousand) and by the tax effect, (negative to the
amount of euro 5,809 thousand).
Other reserves/retained earnings went from euro 3,570,288 thousand at December 31, 2021 to euro 3,917,037
thousand at December 31, 2022, essentially due to the net result for the financial year (positive to the amount
of euro 417,760 thousand), to hyperinflation in Argentina and Turkey (positive to the amount of euro 72,149
thousand and euro 16,868 thousand, respectively, partially offset by a negative translation reserve of euro 47,531
thousand and euro 5,365 thousand, respectively) and to approved dividends (negative to the amount of euro
161,000 thousand).
20.2 ATTRIBUTABLE TO NON-CONTROLLING INTERESTS
Equity attributable to Non-Controlling Interests went from euro 134,527 thousand at December 31, 2021
to euro 130,034 thousand at December 31, 2022, a slight decrease in that dividends paid out to minority
shareholders (euro 24,396 thousand) exceeded the positive change mainly due to the results for the financial
year which amounted to euro 18,140 thousand, and to exchange rate gains to the amount of euro 1,773 thousand.
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)
12/31/2021
Currency
translation
differences
Increases
Uses
Releases
Reclass.
12/31/2022
Provision for labour disputes
12,858
1,071
7,221
(3,042)
(1,193)
Provision for tax risks not related to income taxes
Provision for environmental risks
Provision for restructuring and reorganisation
4,137
9,672
1,359
130
64
-
570
26
-
-
-
16,915
4,863
21,716
(183)
(289)
583
31,563
10
(1,336)
(33)
-
-
Provision for other risks and expenses
53,144
(199)
10,749
(1,373)
(135)
(13,851)
48,335
81,170
1,066
40,266
(5,908)
(1,650)
(13,268)
101,676
Total
373
CONSOLIDATED FINANCIAL STATEMENTS Increases mainly refers to accruals to the provisions for labour disputes particularly for the Brazilian subsidiaries
to the amount of euro 6,039 thousand, and to accruals to the provisions for expenses relative to the environmental
remediation of disused areas in Italy and Brazil. With regard to other risks, the increase for the financial year
mainly refers to the STI (Short Term Incentive) and LTI (2021-2023 and 2022-2024 Long Term Incentive) Plans
for Directors, and reflects the improved performances in the underlying parameters of the plans.
Uses were mainly attributable to labour disputes, rationalisation measures in Italy and occupational diseases.
Reclassifications refers mainly to the reclassification from non-current provisions to other payables, of the
portion of the 2020-2022 LTI Plan accrued in previous years, which will be paid out during the first half-year of
2023, and the reclassification to the current portion of provisions related to insurance risks.
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)
Provision for labour disputes
Provision for tax risks not related to income taxes
Provision for environmental risks
Provision for restructuring and reorganisation
Provisions for product claims and warranties
12/31/2021
Currency
translation
differences
223
3,490
3,110
3,531
11,594
(35)
444
-
513
820
Increases
Uses
Releases
Reclass.
12/31/2022
-
-
(79)
(1,711)
(144)
(600)
100
599
-
-
(2,268)
967
(227)
(20)
(411)
-
-
-
-
-
209
2,822
2,366
1,756
12,743
Provision for other risks and expenses
21,646
(112)
10,985
(12,485)
(2,057)
3,377
21,354
Total
43,594
1,630
12,651
(15,124)
(4,878)
3,377
41,250
Increases relative to the provisions for other risks were mainly attributable to the purchase of greenhouse gas
emission allowances, consistent with the provisions of the European Emission Trading Schemes to the amount
of euro 5,813 thousand, and to commercial risks.
Uses refers to greenhouse gas emission allowances, consistent with the provisions of the European Emission
Trading Schemes to the amount of euro 5,547 thousand, to insurance risks and to rationalisation measures in
Brazil.
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
Employees' leaving indemnities (TFR - Italian companies)
Healthcare plans
Other benefits
Total provisions for employee benefit obligations
(in thousands of euro)
12/31/2022
12/31/2021
120,481
153,205
120,481
153,205
70,171
85,493
20,064
13,075
26,123
15,597
77,248
93,385
180,558
220,598
374
Pirelli Annual Report 2022
PENSION FUNDS
The following table shows the composition of pension funds at December 31, 2022:
Germany
Sweden
Total
unfunded
pension
funds
12/31/2022
USA
UK
Switzerland
(in thousands of euro)
Total
funded
pension
funds
Total
Present value of liabilities
63,611
2,108
65,719
86,967
722,365
32,191
841,523
907,242
Fair value of plan assets
Total Assets in surplus
(83,436)
(842,846)
(31,270)
(957,552)
(957,552)
(120,481)
(120,481)
(120,481)
Total Liabilities in deficit
63,611
2,108
65,719
3,531
921
4,452
70,171
Total pension funds
(50,310)
The following table shows the composition of pension funds at December 31, 2021:
Germany
Sweden
Total
unfunded
pension
funds
12/31/2021
USA
UK
Switzerland
(in thousands of euro)
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)
The characteristics of the main pension funds in place at December 31, 2022 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. This fund 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. The surplus recognised at December
31, 2022 relative to provisions still outstanding was equal to the recoverable amount, assuming the gradual
extinguishment of the plan liabilities over time. All the participants of the plan are non-active;
→ 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. All the participants of the plan are non-active;
→ 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.
375
CONSOLIDATED FINANCIAL STATEMENTS
Movements for 2022 in the defined benefits pension funds (refers to funded and unfunded pension funds),
were as follows:
Present value of
gross liabilities
Fair value of plan
assets
(in thousands of euro)
Impact of
minimum funding
requirement/
asset ceiling
Total
Opening balance at January 1, 2022
1,420,930
(1,488,642)
(67,712)
Currency translation differences
(38,305)
45,564
4
7,263
Movements through Income Statement:
- current service costs
- past service costs
1,244
94
-
-
- interest expense / (income)
24,549
(26,529)
25,887
(26,529)
-
Remeasurements recognised in equity:
- actuarial (gains) / losses from change in demographic assumptions
- actuarial (gains) / losses from change in financial assumptions
- experience adjustment (gains) / losses
(2,933)
(484,721)
50,329
-
-
-
- return on plan assets, net of interest income
-
469,181
- change in asset ceiling
Employer contributions
Employee contributions
Benefits paid
Employer settlement payment
Other
224
224
(437,325)
469,181
-
567
(20,196)
(567)
(64,824)
59,415
-
84
-
4,222
1,244
94
(1,980)
(642)
(2,933)
(484,721)
50,329
469,181
224
32,080
(20,196)
-
(5,409)
-
4,306
Closing balance at December 31, 2022
907,014
(957,552)
228
(50,310)
376
Pirelli Annual Report 2022
Movements for 2021 in the 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 costs
- past service costs
- 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)
Current and past service costs are included under “Personnel Expenses” (Note 31), and net interest payables are
included under “Financial Expenses” (Note 37).
377
CONSOLIDATED FINANCIAL STATEMENTS
The following table shows the composition of funded pension fund assets:
12/31/2022
12/31/2021
listed
unlisted
total
%
listed
unlisted
total
%
(in thousands of euro)
Shares
Bonds
36,903
138,495
175,398
18.3%
50,045
320,610
370,655
24.9%
388,683
45,547
434,230
45.3%
426,173
101,428
527,601
35.4%
Insurance policies
2,190
2,967
5,157
0.5%
3,101
4,914
8,015
0.5%
Deposits
194,809
54,340
249,149
26.0%
275,109
34,433
309.542
20.8%
Balanced funds
10,063
43,140
53,203
489
192,147
192,636
12.9%
5.6%
6.0%
6,498
51,374
57,872
-
53,199
53,199
(6,990)
(10,468)
(17,458)
-1.7%
(9,640)
32,246
22.606
-
-
-
0.0%
4,388
-
4,388
3.6%
1.6%
0.3%
Real Estate
Derivatives
Other
Total
632,156
325,395
957,551
100.0%
749,665
738,977
1,488,642
100.0%
The main risks to which the Group is exposed in relation to the pension funds are detailed as follows:
→ 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
investment classes, through different investment managers, through different investment styles and with
exposures to multiple factors which are not perfectly correlated to each other. Moreover, the investments are
continuously revised in response to market conditions, and adjusted in order to maintain the overall risk at
acceptable levels;
→ changes in bond yields and expected inflation: expectations of falling bond yields and/or rising inflation which
leads to 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 expectancies: an increase in life expectancies leads to an increase in the value of the plan liabilities. The
UK plans completed a process during the course of 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 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.
378
Pirelli Annual Report 2022
The contributions which are expected to be paid into unfunded pension funds during the 2023 financial year
amount to euro 5,345 thousand, while for funded pension funds the amount expected is euro 21,511 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)
12/31/2022
12/31/2021
26,123
31,486
53
279
52
204
(5,179)
336
-
(1,365)
(619)
(593)
(4,248)
(342)
20,064
26,123
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 12/31/2022
Liabilities recognised in the Financial Statements at 12/31/2021
(in thousands of euro)
USA
13,075
15,597
379
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)
12/31/2022
12/31/2021
15,597
16,026
1,010
1,262
1
405
(2,299)
-
(680)
(959)
1
340
(415)
57
(735)
(939)
13,075
15,597
The service cost is included under “Personnel Expenses” (Note 31), and interest payables are included under
“Financial Expenses” (Note 37).
The contributions which are expected to be paid into the healthcare plan during the 2023 financial year amount
to euro 1,429 thousand.
ADDITIONAL INFORMATION ON POST-EMPLOYMENT BENEFITS
Net actuarial losses accrued during 2022 and recorded directly in Other Comprehensive Income amounted to
euro 27,546 thousand, (net actuarial gains at December 31, 2021 had amounted to euro 91,168 thousand).
The main actuarial assumptions used at December 31, 2022 were the following:
Italy
Germany
Sweden
UK
USA
Switzerland
Discount rate
Inflation rate
4.05%
2.50%
4.10%
2.25%
3.90%
1.90%
4.95%
3.39%
5.20%
N/A
2.30%
1.75%
The main actuarial assumptions used at December 31, 2021 were the following:
Italy
Germany
Sweden
UK
USA
Switzerland
Discount rate
Inflation rate
0.90%
1.70%
1.00%
1.50%
1.55%
2.25%
1.80%
3.56%
2.55%
N/A
0.40%
0.50%
380
Pirelli Annual Report 2022
The following table presents an analysis of the payment deadlines relative to post-employment benefits:
within 1 year
1 to 2 years
3 to 5 years
6 to 10 years
Total
(in thousands of euro)
Pension funds
61,496
62,139
187,420
319,354
630,409
Employees' leaving indemnities (TFR)
Healthcare plans
Total
2,067
1,429
1,937
1,394
5,943
3,935
8,594
5,366
18,541
12,124
64,992
65,470
197,298
333,314
661,074
The weighted average duration of post-employment benefit obligations equalled 11.30 years for pension funds
(15.23 years at December 31, 2021), 7.38 years for employees’ leaving indemnities (8.44 years at December 31,
2021) and 6.84 years for medical assistance plans (8.22 years at December 31, 2021).
The following table shows a sensitivity analysis for the actuarial assumptions of significance at the end of the
financial year:
Impact on post employment benefits
Change in
assumptions
Increase in assumptions
Decrease in assumptions
(in %)
Discount rate
0.25%
decrease of
2.72%
increase of
2.86%
Inflation rate (only UK plans)
0.25%
increase of
2.17%
decrease of
2.19%
At the end of 2021 the situation was as follows:
Impact on post employment benefits
Change in
assumptions
Incremento dell’ipotesi
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%
The sole purpose of the above analysis is to estimate the change in the liability, as the discount rate and the UK
inflation rate change in respect of the central assumption for the rates themselves, instead of referring to an
alternative set of assumptions.
This sensitivity analysis on the liability for post-employment benefits is based on the same methodology used to
calculate the liability recognised in the Financial Statements.
381
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)
12/31/2022
12/31/2021
27,976
16,495
14,075
18,702
52,571
18,650
9,513
12,651
77,248
93,385
The item “Long-Term Incentive Plans” refers to the amount earmarked for the 2021-2023 and 2022-2024
three-year monetary Long-Term Incentive Plans intended for the Group’s management. This decrease in the
Long Term Incentive Plans compared to the previous year, was mainly due to the reclassification of the provisions
for employee benefit obligations to payables to employees under “Other payables” (Note 24) for the portion
related to the LTI 2020 - 2022 which will be paid out during the first half-year of 2023.
23. BORROWINGS FROM BANKS AND OTHER FINANCIAL INSTITUTIONS
Borrowings from banks and other financial institutions were as follows:
12/31/2022
12/31/2021
Total
Non-current
Current
Total
Non-current
Current
(in thousands of euro)
Bonds
713,097
490,452
222,645
1,453,762
1,453,762
-
Borrowings from banks
3,239,972
2,803,122
436,850
3,269,732
1,922,771
1,346,961
Borrowings from other financial
institutions
41,382
-
41,382
34,390
-
34,390
Lease liabilities
485,485
396,497
88,988
504,407
412,796
Accrued financial expenses and
deferred financial income
Other financial payables
9,384
1,180
-
40
9,384
1,140
13,787
2,540
-
40
91,611
13,787
2,500
Total
4,490,500
3,690,111
800,389
5,278,618
3,789,369
1,489,249
The item bonds refers to:
→ the senior unsecured guaranteed equity-linked non-interest-bearing bond loan (“convertible bond loan”)
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 the price of euro 6.1395 per share (originally euro 6.235 per share), subject to further anti-
dilutive adjustments as provided for in the loan regulations. At December 31, 2022, the component recorded
under financial payables non-current amounted to euro 470.5 million. The difference in the nominal value
refers to the fair value of the option held by the subscribers of the loan and their option to convert the bond
loan into new ordinary shares of the Company at a predefined price. This value was recognised at inception
under equity reserves to the amount of euro 41.2 million;
→ the “Schuldschein” loan with a floating interest rate (EURIBOR + spread) for a total nominal amount of euro
243 million, classified in the amount of euro 20 million as non-current financial payables (maturing July
382
Pirelli Annual Report 2022
2025), and in the amount of euro 223 million as current financial payables (maturing July 2023). The loan,
signed by leading market players, was composed of a euro 423 million tranche with a five-year maturity and a
euro 20 million tranche with a seven year maturity. Of the euro 423 million tranche, a portion to the amount of
euro 200 million was repaid in advance in January 2022. In December 2022, the Company sent out a notice
to the subscribers of Schuldschein loan for the early redemption of the remaining euro 223 million of the
five-year tranche, which was fully repaid in January 2023. For the purpose of providing complete information,
it should be noted that the loan, placed on July 26, 2018, also included a tranche of euro 82 million with an
original maturity date of July 31, 2021, that was repaid in advance in January 2021.
On October 25, 2022, the unrated bond loan for the nominal amount of euro 553 million was repaid in advance
at par, as contractually provided for by the Issuer Call Option regulations. This bond loan (originally for euro 600
million which was partially repurchased for the total amount of euro 47 million during the last quarter of 2018),
with original maturity in January 2023, was placed on January 22, 2018 with a fixed coupon of 1.375% and a
maturity of five years. The loan, placed with international institutional investors, had been 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 carrying amount for the item bonds was determined 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)
12/31/2022
12/31/2021
743,000
1,496,000
(41,791)
(41,791)
(14,957)
(14,957)
(2,988)
(2,988)
13,433
16,400
9,282
8,216
713,097
1,453,762
The item borrowings from banks, which amounted to euro 3,239,972 thousand, is subdivided as follows:
(in thousands of euro)
12/31/2022
Due Date
Interest rate
Notional
Balance
Non- current
Current
Club Deal EUR 1.6bn ESG 2022 5y
02/22/2027
Euribor + spread
600,000
597,635
597,635
Club Deal EUR 800m ESG 2020 5y
04/02/2025
Euribor + spread
800,000
797,212
797,212
Club Deal EUR 400m ESG 2022 19m
01/29/2024
Euribor + spread
400,000
399,696
399,696
Bilateral 600m 2019 5y facility
02/14/2024
Euribor + spread
600,000
598,893
598,893
-
-
-
-
Bilateral 125m 2019 4y facility
08/07/2023
Euribor + spread
125,000
124,925
-
124,925
Bilateral ESG 400m 2021 3y facility
12/27/2024
Euribor + spread
400,000
399,205
399,205
-
Payables to local banks
Total
It mainly refers to:
322,406
10,481
311,925
3,239,972
2,803,122
436,850
→ the use of the unsecured “Club Deal EUR 1.6bn ESG 2022 5y” financing by Pirelli & C. S.p.A. to the amount
383
CONSOLIDATED FINANCIAL STATEMENTS
of euro 597,635 thousand, classified under non-current
financial payables. This financing facility, with a floating
interest rate (EURIBOR + spread), signed on February 21,
2022, with a pool of leading Italian and international banks
and maturing in five years, is composed of three tranches,
for a total of euro 1.6 billion distributed as follows:
→ a Pirelli & C. S.p.A. term loan with a nominal value
of euro 600,000 thousand which was fully drawn,
and a revolving cash credit facility for euro 100,000
thousand, which was unused at December 31, 2022;
→ a Pirelli International Treasury S.p.A. revolving cash
credit facility to the amount of euro 900,000 thousand,
which was unused at December 31, 2022.
The financing is guaranteed by Pirelli Tyre S.p.A. This
facility, which is geared to the Group’s ESG objectives,
contributed to the early repayment of the debt, in February
2022 relative to the unsecured financing (“Facilities”), to
the amount of euro 949,182 thousand as of December 31,
2021 (USD 1,079 million), which had a contractual maturity
date of June 2022. The new financing also increased the
revolving credit capacity from euro 700,000 thousand for
the previous facility, to euro 1 billion for the new revolving
credit facility;
→ the “Club Deal EUR 800m ESG 2020 5y” financing for
euro 797,212 thousand relative to the euro 800 million
credit facility with a floating interest rate (EURIBOR +
spread), guaranteed by Pirelli Tyre S.p:A., signed on March
31, 2020 with a pool of leading Italian and international
banks, with a 5 year maturity (classified under non-current
financial payables). This bank credit facility consists of a
so-called “sustainable” tranche of euro 600 million, which
is geared towards the Group’s financial and environmental
sustainability objectives (sustainable KPIs), as well as
a so-called “circular economy” tranche, which is geared
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 credit facility for the “sustainable” tranche.
Accounting for the circular economy tranche is instead
expected to occur only in 2023;
→ euro 399,696 thousand relative to the euro 400 million
“Club Deal EUR 400m ESG 2022 19m” financing at
a floating rate (EURIBOR + spread), signed on June 27,
2022 with a pool of leading international banks and
maturing in 19 months (classified under non-current
financial payables). The facility is geared to the objective
of reducing absolute greenhouse gas emissions from
purchased raw materials (Scope 3) which was validated by
the Science Based Target initiative (SBTi) and contained
in the first “Sustainability Linked Financing Framework”
published by Pirelli in May 2022;
→ euro 723,818 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 600m 2019
5y facility” financing maturing in February 2024 with
a floating rate (EURIBOR + spread), was guaranteed by
Pirelli Tyre S.p.A. (classified under non-current financial
payables), and euro 125 million (the “Bilateral 125m
2019 4y facility” financing) maturing in August 2023 at
a floating rate (EURIBOR + spread) was classified under
current financial payables. It should be noted that the
euro 100 million bilateral loan with original maturity in
December 2022, was repaid on December 29, 2022;
→ euro 399,205 thousand related to the bilateral financing
for a nominal amount of euro 400 million granted in
December 2021 to Pirelli & C. S.p.A. by a leading bank
(the “Bilateral ESG 400m 2021 3y facility” financing),
maturing in three years and guaranteed by Pirelli Tyre
S.p.A. The loan, which bears a floating rate (EURIBOR +
spread), is geared to certain Group sustainability targets
and is classified among non-current financial payables;
→ euro 219,765 thousand (euro 180,362 thousand at
December 31, 2021) relative to loans disbursed in Brazil
by local and international banking institutions and entirely
classified under borrowings from banks current;
→ borrowings from banks and the use of credit facilities in
local currency at local level in Russia, (equivalent to euro
42,204 thousand, of which euro 10,481 thousand was
classified under borrowings from banks non-current),
in China (equivalent to euro 42,505 thousand classified
under borrowings from banks current) and in Turkey,
(equivalent to euro 7,038 thousand and classified under
borrowings from banks current).
At December 31, 2022 the Group had a liquidity margin
equal to euro 2,536,628 thousand, composed of euro
1,000,000 thousand in the form of non-utilised committed
credit facilities and of euro 1,289,744 thousand in cash
and cash equivalents, in addition to financial assets at fair
value through the Income Statement to the amount of euro
246,884 thousand. The liquidity margin guarantees coverage
for maturities for borrowings from banks and other financial
institutions, until the end of the first quarter of 2025.
The item lease liabilities represents the financial liabilities
relative to leasing contracts. This change compared to the
previous financial year, refers to increases in the right of
use during the financial year arising from the signing of new
contracts and from the remeasurement of existing contracts,
which were more than compensated by lease payments.
Non-discounted future payments for lease contracts, for
which the exercise of extension options is not considered to
be reasonably certain, and which were therefore not included
in the item lease liabilities, amounted to euro 126,170
thousand at December 31, 2022 (euro 115,473 thousand at
December 31, 2021).
Accrued financial expenses and deferred financial
income (euro 9,384 thousand) mainly refers to the accrual
of interest matured on bond loans to the amount of euro
2,002 thousand (euro 8,510 thousand at December 31,
2021), and to accrued interest on borrowings from banks to
the amount of euro 6,640 thousand (euro 3,618 thousand at
December 31, 2021).
384
Pirelli Annual Report 2022 The change in total borrowings from banks and other financial institutions for 2022 is composed as follows:
(in thousands of euro)
Borrowings from banks and other financial institutions at December 31, 2021
Bond repayment "EMTN program"
Bond repayment "Schuldschein"
Repayment of unsecured financing (Facilities)
Repayment of bilateral facilities
Transaction cost
Issuance of unsecured "Club Deal EUR 1.6bn ESG 2022 5y" financing.
Issuance of “Club Deal EUR 400m ESG 2022 19m” financing
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, 2022
5,278,618
(553,000)
(200,000)
(960,280)
(100,000)
(4,477)
600,000
400,000
327,369
(296,052)
(114,513)
(900,953)
16,350
2,250
75,953
18,282
112,835
4,490,500
385
CONSOLIDATED FINANCIAL STATEMENTS
The change in total borrowings from banks and other financial institutions for 2021 is shown below:
(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)
Issuance of bilateral facilities
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
5,854,553
(82,000)
368,549
(1,337,656)
500,000
30,501
(229,791)
(105,355)
(855,752)
26,289
112,728
108,702
32,098
279,817
5,278,618
At December 31, 2022 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)
12/31/2022
12/31/2021
Carrying amount
Fair value
Carrying amount
Fair value
490,452
462,098
1,453,762
1,469,529
2,803,122
2,817,306
1,922,771
1,926,002
396,537
396,537
412,836
412,836
Total non-current financial payables
3,690,111
3,675,941
3,789,369
3,808,367
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 relevant maturity date, increased by the Group’s credit rating 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.
386
Pirelli Annual Report 2022
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)
12/31/2022
12/31/2021
4,020,618
3,884,307
256,445
1,159,808
63,167
75,408
45,305
68,354
3,112
929
34,554
31,690
25,467
23,823
21,879
25,091
8,533
640
3,067
7,713
950
1,168
465
6,625
4,490,500
5,278,618
At December 31, 2022 interest rate derivatives were outstanding for floating rate debt.
Considering the effects of 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 between:
→ floating rate payables to the amount of euro 2,941,800 thousand, whose interest rate is subject to a reset
during the course of 2023;
→ fixed rate payables to the amount of euro 1,487,243 thousand, whose interest rate is not subject to any reset
until the natural maturity of the debt to which it refers (euro 589,813 thousand with maturity in the next twelve
months and euro 897,430 thousand euro with maturity beyond twelve months).
At December 31, 2022, the cost of year-on-year debt (calculated as the average over the last twelve months)
stood at 4.04%, compared to 2.38% at December 31, 2021. This increase reflected in particular the rise in interest
rates and costs, which reflected the scarceness of liquidity in the financial markets, for hedging risk in Brazil and
Russia. Net of this effect, the average cost of debt would have stood at 3.49%. This increase was partially offset
by the reduction in the Parent Company’s financial expenses, thanks to the improvement of the contractually
provided financial conditions in order to reduce the Group’s financial leverage.
In reference to the existence of financial covenants, it should be noted that
(i)
(ii)
(iii)
(iv)
the “Schuldschein” loan,
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 600m 2019 5y facility”),
the bilateral euro 125 million facility granted to Pirelli & C. S.p.A. during the course of the third quarter of
2019, (the “Bilateral 125m 2019 4y facility”) and,
the “Club Deal EUR 800m ESG 2020 5y” financing signed on March 31, 2020,
require the compliance with a maximum ratio between net indebtedness and the gross operating margin (“Total
Net Leverage”), as reported in the Consolidated Financial Statements of Pirelli & C. S.p.A. The obligation to comply
387
CONSOLIDATED FINANCIAL STATEMENTS
with these financial covenants will cease upon reaching the specified levels of Total Net Leverage identified in the
relevant contracts.
For the sake of completeness, it should be noted that the obligation to comply with the financial covenants imposed
for the “Club Deal EUR 1.6bn ESG 2022 5y” financing and the “Bilateral ESG 400m 2021 3y facility” financing, was
ceased due to Pirelli & C. being awarded a BBB- credit rating by S&P Global Ratings and Fitch Ratings.
For all of the loans indicated above, any failure to comply with the financial covenant is identified as a default or
non-fulfilment event.
Specifically, any such default or non-fulfilment event will have the following consequences, if the lending banks
exercise their remedies: (i) for the “Schuldschein” loan, individually and independently if requested by each
lending bank for its own portion, in the early repayment of the loan only for such portion; (ii) for both the “Bilateral
600m 2019 5y facility” financing and the “Bilateral 125m 2019 4y facility” financing, if requested by the sole
lending bank that granted the financing, the termination of the agreement and early repayment for the full
amount disbursed; and (iii) for the “Club Deal EUR 800m ESG 2020 5y” financing, 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.
It should be noted that at December 31, 2022 no default or non-fulfilment event had occurred.
The “Club Deal EUR 1.6 bn ESG 2022 5y” financing, the “Schuldschein” loan, the “Bilateral 600m 2019 5y
facility” financing, the “Bilateral 125m 2019 4 facility” financing, the “Club Deal EUR 800m ESG 2020 5y”
financing and the “Bilateral ESG 400m 2021 3y facility” also provide for Negative Pledge clauses and/or other
customary provisions whose terms are consistent with market standards for each of the above mentioned
types of credit facility.
The other outstanding financial payables at December 31, 2022 were not subject to financial covenants.
Trade payables were composed as follows:
24. TRADE PAYABLES
12/31/2022
12/31/2021
Total
Non-current
Current
Total
Non-current
Current
(in thousands of euro)
Trade payables
Bill and notes payable
Total
1,867,567
105,729
1,973,296
-
-
-
1,867,567
1,516,488
105,729
109,879
1,973,296
1,626,367
-
-
-
1,516,488
109,879
1,626,367
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 consistent with the growth of the
business. Trade payables represented 29.8% of sales, a slight decrease compared to the previous financial year,
due to the combined effect of the high level of investments during the fourth quarter of 2022, and the reduction
in raw material inventories during the same period.
388
Pirelli Annual Report 2022
Other payables were as follows:
25. OTHER PAYABLES
Accrued expenses and deferred
income
Tax payables not related to income
taxes
Payables to employees
Payables to social security and
welfare intitutions
Dividends approved
Contract liabilities
(in thousands of euro)
12/31/2022
12/31/2021
Total
Non-current
Current
Total
Non-current
Current
67,870
42,125
25,745
75,142
45,877
29,265
93,431
191,312
6,539
3,588
86,892
82,449
187,724
128,810
5,410
3,927
77,039
124,883
68,203
21,276
46,927
61,345
20,368
40,977
Other payables
51,212
1,034
50,178
38,356
147
7,977
-
12
147
7,965
152
4,434
-
12
891
152
4,422
37,465
Total Other payables
480,152
74,574
405,578
390,688
76,485
314,203
Accrued expenses and deferred income non-current refers to euro 39,566 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 5,812 thousand for various trade initiatives
realised in Germany and Brazil, euro 11,614 thousand in government grants and tax incentives received mainly in
Italy and Romania and euro 1,116 thousand for insurance costs coverage in some European countries.
The item tax payables not related to income taxes is mainly comprised of IVA payables (value added tax) and
other indirect taxes, withholding taxes for employees and other taxes not related to income.
The item payables to employees mainly includes amounts matured during the period but not yet paid. The
increase compared to the previous financial year mainly refers to the STI (Short Term Incentive) and LTI (2020–
2022 Long Term Incentive) Plans.
The item liabilities from contracts with customers refers to advanced payments received from customers for
which the performance obligation has not yet been completed, pursuant to the provisions of IFRS 15.
The item other payables (euro 51,212 thousand) mainly includes:
→ euro 24,723 thousand in payables to Directors, Auditors and supervisory bodies;
→ euro 6,343 thousand for payables for customs duties, import and transport costs;
→ euro 5,171 thousand in payables to representatives, agents, professionals and consultants.
26. TAX PAYABLES
Tax payables were for the most part for national and regional income taxes in different countries and amounted
to euro 114,884 thousand, (of which euro 12,780 thousand was for non-current payables), compared to euro
145,900 thousand at December 31, 2021, (of which euro 11,512 thousand was for non-current payables). Income
tax payables included the assessments made by Management with respect to the possible effects of uncertainty
regarding the treatment of income taxes.
389
CONSOLIDATED FINANCIAL STATEMENTS
27. DERIVATIVE FINANCIAL INSTRUMENTS
The item includes the fair value measurement of derivative instruments. The details are as follows:
12/31/2022
12/31/2021
Non-
current
assets
Current
assets
Non-
current
liabilities
Current
liabilities
Non-
current
assets
Current
assets
Non-
current
liabilities
Current
liabilities
(in thousands of euro)
Derivative Financial Instruments not in
Hedge Accounting
Foreign exchange derivatives -
commercial positions
Foreign exchange derivatives - included
in net financial position
Derivative Financial Instruments in
Hedge Accounting
- cash flow hedge:
-
-
4,390
10,923
Interest rate derivatives - included in net
financial position
26,430
3,300
Other derivatives - included in net
financial position
- net investment hedge
Foreign exchange derivatives -
investment in a foreing operation
Total derivatives included in net financial
position
-
-
-
4,068
26,430
22,681
26,430
14,223
-
-
-
-
-
-
-
(4,512)
(15,046)
-
-
7,713
9,633
-
-
(5,856)
(9,353)
-
-
-
4,612
-
(3,519)
(979)
-
-
29,216
-
-
-
-
-
(19,558)
4,612
46,562
(3,519)
(16,188)
(15,046)
4,612
38,849
(3,519)
(10,332)
390
Pirelli Annual Report 2022
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
Interest rate swaps - cash flow hedge
Cross currency interest rate swaps - cash flow hedge
Forward foreign exchange contracts - net investment hedge
Total current assets
Non-current assets
Interest rate swaps - cash flow hedge
Total non-current assets
Current liabilities
(in thousands of euro)
12/31/2022
12/31/2021
15,312
3,300
17,346
-
-
29,216
4,068
-
22,681
46,562
26,430
26,430
4,612
4,612
Forward foreign exchange contracts - fair value recognised in the Income Statement
(19,558)
(15,209)
Interest rate swaps - cash flow hedge
Total current liabilities
Non-current liabilities
Interest rate swaps - cash flow hedge
Total non-current liabilities
-
(979)
(19,558)
(16,188)
-
-
(3,519)
(3,519)
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 the 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 26,430 thousand and under current assets to the
amount of euro 3,300 thousand, refers to the fair value of 11 interest rate swaps:
Derivative
Hedged element
Notional amount
(Euro million)
Start date
Maturity
IRS
IRS
IRS
Term loan in EUR
Schuldschein
Schuldschein
62.5
180.0
20.0
August 2019
August 2023
receive floating / pay fixed
July 2020
July 2023
receive floating / pay fixed
July 2020
July 2025
receive floating / pay fixed
IRS fwd start
Term loan in EUR
500.0
February 2023
February 2026
receive floating / pay fixed
Total
762.5
For these derivatives, cash flow hedge accounting was adopted. Hedged items are:
→ future interest flows on floating rate liabilities in EUR;
→ future interest flows for the “Schuldschein” loan (refer to Note 23).
391
CONSOLIDATED FINANCIAL STATEMENTS
During the first quarter of 2022, the IRS forward start pre-
hedge receive floating EURIBOR / pay fixed EURIBOR were
closed early. The accumulated positive reserve at the date,
amounting to euro 22,079 thousand was not reversed to the
Income Statement, in that the hedged future transaction was
considered highly probable.
It should be noted that in January 2023, the future transaction
took the form of a sustainability-linked bond for a total
nominal amount of euro 600 million (reference should be
made to the section “Significant Events Subsequent to the
End of the Financial Year”).
The change in the fair value for the period was positive
to the amount of euro 49,827 thousand (euro 17,732
thousand relative to the Interest Rate Swaps in pre-hedge
and euro 32,095 thousand relative to other Interest Rate
Swaps). This change was entirely suspended in Other
Comprehensive Income, while net interest expenses to
the amount of euro 2,084 thousand were reversed to
the Income Statement under “Financial Expenses” (Note
37), correcting the financial expenses recognised on the
hedged liability.
A change of +0.5% in the EURIBOR curve, all other conditions
being equal, would result in a positive change of euro 5,662
thousand in the equity of the Group, while a change of -0.5%
in the same EURIBOR curve, all other conditions being equal,
would result in a negative change of euro 5,689 thousand in
the equity of the Group. Both amounts are reported net of
the tax effect.
Hedging relationships relative to any IRS 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 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
financial
counterparties with an elevated credit standing, and the
credit quality of the outstanding derivatives portfolio is
constantly monitored;
traded only with
→ 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 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.
With reference to other derivatives in hedge accounting,
following the early repayment of the unsecured loan
(“Facilities”) for USD 1,079 million (refer to Note 23), the
pay floating EURIBOR / receive floating LIBOR CCIRS
were in part extinguished early, and in part discontinued
(current assets to the amount of euro 29,216 thousand at
December 31, 2021).
The positive fair value reserve which amounted to euro 4,178
thousand (positive cash flow hedge reserve of euro 2,702
thousand and positive cost of hedging reserve of euro 1,477
thousand) was entirely reversed to the Income Statement:
→ gains of euro 7,302 thousand which offset the net losses
on exchange rates recognised on the hedged liability;
→ net interest income to the amount of euro 82 thousand
to correct financial expenses recognised on the hedged
liability;
→ costs due to ineffectiveness to the amount of euro 3,206
thousand.
For the CCIRS held in the portfolio until their natural maturity
(June 2022), hedge accounting was discontinued at the same
time as the financing was repaid, and the positive change in
their fair value of euro 48,130 million was entirely reversed to
the Income Statement. This positive change was offset by a
negative change in the fair value of the FX contracts entered
into to hedge the CCIRS, for which hedge accounting was not
adopted. These effects are included in “Fair value measurement
of exchange rate derivatives” under “Financial Expenses.
For further details reference should be made to Note 37,
“Financial Expenses”.
The value of exchange rate derivatives included under current
assets in the amount of euro 4,068 thousand includes the fair
value measurement of forward currency sells outstanding at
the closing date of the period, entered into in order to mitigate
the exposure to risk generated by changes in the fair value
of a net investment in a foreign operation (i.e., an equity
investment in a Brazilian company, Pirelli Comercial de Pneus
Brasil Ltda.) recognised at historical cost and denominated
in Brazilian real (BRL). The hedged item is represented by a
portion of the equity of the Brazilian subsidiary to the amount
of reais 372,556 thousand. The hedging instrument is
represented by four FX forward contracts, designated in their
entirety as hedging instruments.
The amount recognised in Other Comprehensive Income for
the period was a positive euro 4,068 thousand.
The hedging relationship is considered perfectly effective,
in that the exposure arising from the foreign currency
392
Pirelli Annual Report 2022 investment (hedged item) is greater than the notional amount
for the derivative instruments (hedging instruments).
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 to euro 166,992 thousand
and euro 5,842 thousand respectively and refer mainly to
subsidiaries in Romania, Mexico, Italy, Germany, Brazil and
China.
COMMITMENTS FOR LEASE CONTRACTS
At December 31, 2022, 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 9,954 thousand, and mainly refers to a rental contract
for a warehouse in Germany.
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 countervalue of up
to euro 2,158 thousand maximum.
OTHER RISKS
LITIGATION AGAINST THE COMPANIES OF THE
PRYSMIAN GROUP BEFORE THE COURT OF MILAN A
case is currently pending before the Court of Milan (resulting
from the joining of two separate proceedings - see below) as a
result of 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 commenced in
relation to alleged conduct of 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 to be
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 infraction, 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 outcome 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.
393
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 indemnify and also 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)
relative 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
and accordingly, that they be ordered to pay compensation
for all damages suffered and to be suffered by Pirelli.
Lastly, Pirelli 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 counter-claim, 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, 2022.
OTHER DISPUTES SUBSEQUENT TO THE EUROPEAN
COMMISSION DECISION In November, 2015, a number of
companies of Prysmian Group served Pirelli with a summons
in the action for the compensation of 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
CONSOLIDATED FINANCIAL STATEMENTS 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 dismissed from the proceedings,
the portion of the litigation consisting of the indemnity cross-
claims between Pirelli, on one side, and Prysmian CS and
Prysmian S.p.A., on the other, ordering their joinder with the
proceedings pending between the two parties 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, 2022.
TAX DISPUTES
BRAZIL
The subsidiaries Pirelli Pneus Ltda. and Pirelli Comercial de
Pneus Brasil Ltda. are involved in certain disputes and tax
proceedings. The most significant are described below:
LITIGATION CONCERNING THE
IPI TAX RATE
APPLICABLE TO SPECIFIC 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 tax commissions.
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 38 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 16 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.
394
Pirelli Annual Report 2022 LITIGATION CONCERNING THE IPI TAX 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 19 million,
inclusive of tax, interests and penalties.
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.
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 an important tax dispute 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.
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.
Proceedings are underway before the competent jurisdictions
with the risk estimated as being up to a maximum euro 17
million, inclusive of taxes, interest and sanctions.
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.
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 “ICMS SUBSTITUICÃO
TRIBUTÁRIA” (TAX SUBSTITUTION) Pirelli Comercial
de Pneus Brasil Ltda. has become involved in a new dispute
concerning ICMS (Imposto sobre Circulaçao de Mercadorias
e Serviços) tax credits. According to the claims made in a
notice of assessment issued during 2022 by the Brazilian tax
authorities for the 2018 and 2019 tax periods, Pirelli Comercial
de Pneus Brasil Ltda. used ICMS credits without prior formal
approval from the Brazilian tax authorities.
the competent
Proceedings are under way before
administrative bodies and the risk is estimated at approximately
euro 24 million, inclusive of tax, 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.
395
CONSOLIDATED FINANCIAL STATEMENTS 29. REVENUES FROM SALES AND SERVICES
Revenues from sales and services were as follows:
Revenues from the sales of goods
Revenues from services
Total
(in thousands of euro)
2022
2021
6,426,636
5,192,948
189,091
138,502
6,615,727
5,331,450
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.
The item is composed as follows:
30. OTHER INCOME
Sales of Industrial products
Other income from the Prometeon Group
Recoveries and reimbursements
Government grants
Gains on disposal of property, plant and equipment
Rent income
Income from subleases of right of use assets
Other income
Total
(in thousands of euro)
2022
2021
151,373
145,247
42,259
40,836
22,488
21,557
15,554
13,578
2,892
3,501
1,042
1,794
3,307
867
91,804
76,682
330,913
303,868
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 other income from the Prometeon Group includes:
→ euro 24,023 thousand for the license agreement for the use of the Pirelli trademark;
→ euro 10,406 thousand for the license agreement for know-how;
→ euro 7,139 thousand for services rendered;
→ euro 692 thousand for the sales of raw materials, semi-finished and finished products.
The item recoveries and reimbursements includes, in particular:
→ tax refunds and customs duty refunds totalling euro 2,381 thousand, received mainly by the Brazilian
subsidiary;
→ tax refunds totalling euro 6,321 thousand arising from tax concessions obtained in Germany on excise duties
on electricity and gas, to the amount of euro 3,003 thousand and customs duty refunds obtained in the
396
Pirelli Annual Report 2022
United States, to the amount of euro 2,314 thousand;
→ income from the sale of tyres and scrap materials carried out in the United Kingdom for a total of euro 1,246
thousand;
→ income from the sale of tyres for testing and the recovery of transport expenses in Germany to the amount
of euro 1,744 thousand.
The item other includes income related to the sale of goods and services in connection with sports events linked
to sponsorship agreements, to the amount of euro 35,382 thousand and royalties from third parties, excluding
the Prometeon Group, to the amount of euro 17,539 thousand.
The item is composed as follows:
31. PERSONNEL EXPENSES
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
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)
2022
2021
918,164
861,638
177,112
165,302
11,709
8,627
24,602
23,461
1,187
2,299
10,285
10,495
2,838
2,847
32,712
27,244
1,178,609
1,101,913
(in thousands of euro)
2022
2021
133,793
129,393
314,662
290,877
95,812
88,408
21,841
581
5,711
2,803
566,689
517,192
For the composition of the depreciation of the right of use, reference should be made to Note 9.2, “Right of Use”.
397
CONSOLIDATED FINANCIAL STATEMENTS
The item is subdivided as follows:
33. OTHER COSTS
Selling costs
Purchases of goods for resale
Advertising
Fluids and energy
Warehouse operating costs
IT expenses
Consultants
Maintenance
Insurance
Leases and rentals
Outsourcing
Stamp duties, levies and local taxes
Other provisions accruals for liabilities and charges
Travel expenses
Remuneration for Key Managers
Cleaning expenses
Canteen
Security expenses
Waste disposal
Telephone expenses
Other
Total
(in thousands of euro)
2022
2021
485,619
323,545
455,936
395,301
225,032
207,794
278,485
180,815
72,592
61,112
57,884
66,067
34,604
37,271
38,148
69,281
55,752
49,076
57,278
32,471
31,073
41,495
40,475
28,944
47,103
40,675
30,857
29,068
18,009
20,994
11,837
11,263
5,397
20,721
28,194
16,174
18,228
10,950
9,887
5,232
181,035
147,632
2,208,788
1,770,518
The total increase in this item is broadly consistent with that of revenues, as well as with the general increase in
prices, 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 17,357 thousand for lease contracts with a duration of less than twelve months (euro 13,935
thousand for 2021);
→ euro 12,911 thousand for lease contracts with variable payments not based on an index or a rate (euro 10,411
thousand at December 31, 2021);
→ euro 7,003 thousand for lease contracts for assets with a low unit value (euro 6,727 thousand at December
31, 2021).
398
Pirelli Annual Report 2022
The item other also includes, labour provided by third parties to the amount of euro 28,453 thousand, (euro
25,648 thousand for 2021), expenses for the testing of technology to the amount of euro 18,039 thousand
(euro 17,780 thousand for 2021), and transport costs for materials to the amount of euro 19,623 thousand (euro
16,816 thousand in 2021).
34. NET IMPAIRMENT OF FINANCIAL ASSETS
This item which was positive to the amount of euro 4,075 thousand, compared to a loss of euro 7,950 thousand
for 2021, mainly includes the restatement, net of impairment for the year, of impairment losses recognised in
previous financial years for trade receivables to the amount of euro 5,185 thousand (a net impairment of euro
7,906 thousand for 2021).
35. RESULT FROM INVESTMENTS
35.1 NET INCOME/(LOSS) FROM EQUITY INVESTMENTS
The share of the net income/(loss) from equity investments in associates and joint ventures, which is evaluated
using the equity method, was positive to the amount of euro 2,920 thousand and mainly refers to the investment
in the joint venture Xushen Tyre (Shanghai) Co., Ltd. which was positive to the amount of euro 2,308 thousand (a
loss of euro 68 thousand for 2021), and in the joint venture PT Evoluzione Tyres in Indonesia, which was positive
to the amount of euro 422 thousand (a net income of euro 1,049 thousand for 2021).
35.2 DIVIDENDS
For 2022, dividends amounted to euro 3,051 thousand, and mainly included dividends received from the RCS
MediaGroup S.p.A. (euro 1,482 thousand) and from Fin. Priv. S.r.l. (euro 1,471 thousand). For 2021, dividends had
amounted to euro 2,274 thousand.
The item is composed as follows:
36. FINANCIAL INCOME
Interest income
Other financial income
Net interest on provision for employee benefit obligations
Fair value measurement of other financial assets
Fair value measurement of other derivatives
Total
(in thousands of euro)
2022
2021
38,686
21,453
3,725
848
1,767
-
58,728
11,499
-
281
101,987
35,000
Interest income which totalled euro 38,686 thousand, mainly included:
→ euro 17,400 thousand in interest receivables from financial institutions, associates and joint ventures;
→ euro 9,334 thousand in interest on fixed-income securities;
→ euro 3,496 thousand in interest on other types of securities;
→ euro 4,659 thousand in interest on CCIRS for which hedge accounting was discontinued;
→ euro 2,926 thousand in interest accrued on security deposits provided by the Brazilian subsidiaries as a
guarantee for legal and tax disputes.
The item other financial income amounted to euro 3,725 thousand and includes interest matured on tax credits
by the Brazilian subsidiaries.
399
CONSOLIDATED FINANCIAL STATEMENTS
The fair value measurement of other financial assets was positive to the amount of euro 58,728 thousand
and refers to the fair value measurement of dollar-linked bond instruments in which the Argentine subsidiary has
invested in order to mitigate the effects of depreciation on the local currency. The exchange rate component of
the fair value valuation of dollar-linked bond instruments amounted to euro 43,472 thousand, and partially offset
the combined effect of euro 47,179 thousand comprised on the one hand, of the Argentine net monetary loss of
euro 24,819 thousand and on the other hand, of the effect of the Argentine subsidiary’s net losses on exchange
rates which amounted to euro 22,360 thousand. Reference should be made to Note 37, “Financial Expenses” for
further details.
The item is composed as follows:
37. FINANCIAL EXPENSES
Interest expenses
Commissions
Net monetary loss
Other financial expenses
Interest expenses on lease liabilities
Net losses on exchange rates
Net interest on provisions for employee benefit obligations
Fair value measurement of exchange rate derivatives
Fair value measurements of other derivatives
Total
(in thousands of euro)
2022
2021
103,671
102,764
18,304
22,250
12,202
21,461
15,834
-
12,601
15,024
6,297
19,529
2,339
1,241
109,515
19,486
446
-
303,683
179,281
Interest expenses which totalled euro 103,671 thousand included:
→ euro 36,662 thousand for bank credit facilities held by Pirelli & C. S.p.A.;
→ euro 21,707 thousand in financial expenses relative to bond loans, of which euro 8,381 thousand is relative to
non-monetary interest on the convertible bond loan, euro 9,510 thousand is relative to the unrated bond loan,
and euro 3,816 thousand is relative to the “Schuldschein” loans, all of which were issued by Pirelli & C. S.p.A.;
→ euro 2,002 thousand in net interest payables which includes 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 in the preceding points. For further details
reference should be made to Note 27, “Derivative Financial Instruments”;
→ euro 3,117 thousand in net interest payables on Cross Currency Interest Rate Swaps for which hedge
accounting has been discontinued;
→ euro 23,698 thousand in financial expenses related to bank loans held by foreign subsidiaries.
The item commissions includes, in particular, euro 5,203 thousand in costs for the assignment of receivables
with non-recourse clauses, mainly in South America, Italy and Germany and euro 13,101 thousand relative to
expenses for sureties and other bank commissions.
The item net monetary loss refers to the effect on monetary items deriving from the application of IAS 29
- Financial Reporting in Hyperinflationary Economies, by the Argentine subsidiary Pirelli Neumaticos SAIC to
the amount of euro 24,819 thousand and by the Turkish subsidiaries Pirelli Otomobil Lastikleri A.S. and Pirelli
Lastikleri Dis Ticaret A.S., to the positive amount of euro 2,569 thousand (reference should be made to Note 41
for further details).
400
Pirelli Annual Report 2022
The item net losses on exchange rates which amounted to euro 15,834 thousand (gains amounted to euro
770,793 thousand and losses amounted to euro 786,627 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 gains realised on items closed during
the course of the period. It also includes income to the amount of euro 7,302 thousand relative to the exchange
rate component of the fair value valuation of the cross currency interest rate swaps, for which cash flow hedge
accounting was adopted, to offset the losses on exchange rates recorded on the hedged liability.
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. The measurement at fair value is composed of two elements: the interest
component, which is tied to the interest rate differential between the currencies covered by the individual hedges,
equal to a net cost of euro 88,167 thousand (an increase of euro 69,788 thousand compared to previous year,
mainly due to the increased interest rate differential in Russia and Brazil), and the exchange rate component,
equal to a net loss of euro 21,348 thousand.
When comparing the net losses on exchange rates of euro 15,834 thousand, recognised on receivables and
payables in currencies other than the functional currency in the various subsidiaries, with the fair value
measurement of the exchange rate component of exchange rate derivatives used for hedging, which amounted
to a net cost of euro 21,348 thousand, the result is a negative difference of euro 37,182 thousand. This imbalance
was partially offset by the positive measurement at fair value of the other financial assets of the Argentine
subsidiary Pirelli Neumaticos SAIC, to the amount of euro 22,360 thousand. Reference should be made to Note
36, “Financial Income” for further details. Net of the aforementioned Argentine effect, therefore, the imbalance
would be a negative euro 14,822 thousand.
The exchange rate component of the fair value measurement of the cross currency interest rate swaps, for which
cash flow hedge accounting was adopted, was positive to the amount of euro 7,302 thousand, and was classified
under the item net gains on exchange rates, to offset the losses on exchange rates recorded on the hedged
liability (refer to Note 36, “Financial Income”‘).
Taxes were composed as follows:
38. TAXES
Current taxes
Deferred taxes
Total
(in thousands of euro)
2022
2021
182,193
143,910
(22,459)
(28,752)
159,734
115,158
Taxes in 2022 amounted to euro 159.734 thousand against a net income before tax of euro 595,634 thousand,
compared to the amount of euro 115,158 thousand in 2021 against a net income before tax of euro 436,751
thousand. The tax rate for 2022 stood at 26.8% compared to 26.4% for 2021.
401
CONSOLIDATED FINANCIAL STATEMENTS
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)
2022
2021
595,634
436,751
159,463
112,279
(21,035)
(18,008)
16,082
15,913
(569)
5,793
2,282
2,692
159,734
115,158
26.8%
26.8%
25.7%
26.4%
The negative impact on the tax rate resulting from non-deductible costs and from other items, was substantially
offset by tax incentives.
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
2022
2021
27.90%
27.90%
30.00%
30.00%
16.00%
16.00%
19.00%
19.00%
23.00%
25.00%
20.00%
20.00%
25.00%
25.00%
30.00%
30.00%
35.00%
35.00%
34.00%
34.00%
25.00%
25.00%
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Pirelli Annual Report 2022
The following table shows the incidence of taxes paid during the financial year, which amounted to euro 205,455
thousand (euro 125,633 thousand in 2021), by geographic region:
→ 36% Europe and Turkey (29% in 2021);
→ 24% APAC (30% in 2021);
→ 14% Russia , Nordics and MEAI (7% in 2021)
→ 13% South America (22% in 2021);
→ 13% North America (12% in 2021).
Taxes paid refers to the total amount of income taxes effectively paid during the tax period by the companies
of the Group in their respective jurisdictions of tax residence, to income tax advances paid in 2022, to income
taxes paid during the course of 2022 but relative to previous financial years (e.g.; income tax balances relative to
2021), 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 percipient’s tax residence.
39. EARNINGS/(LOSSES) PER SHARE
Basic earnings/(loss) 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.
Net income/(loss) attributable to the Parent Company
(in thousands of euro)
2022
2021
417,760
302,796
Weighted average number of ordinary shares outstanding (in thousands)
1,000,000
1,000,000
Earnings /(losses) per ordinary share (in euro per share)
0.418
0.303
It should be noted that basic and diluted earnings/(losses) per share are the same. It should also be noted that
the option to convert the shares of 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 2022.
40. DIVIDENDS PER SHARE
During the course of 2022, Pirelli & C. S.p.A. distributed to its shareholders, from the 2021 results, a unit dividend
of euro 0.161 per ordinary share equal to a total dividend pay-out of euro 161 million before withholding taxes.
41. HYPERINFLATION
Based on the provisions of the Group’s accounting standards, hyperinflation accounting was adopted by the
Argentine subsidiaries, Pirelli Neumaticos SAIC and Latam Servicios Industriales SA as of July 1, 2018 and
December 15, 2022 respectively and by the Turkish subsidiaries Pirelli Otomobil Lastikleri A.S. and Pirelli
Lastikleri Dis Ticaret A.S., as of June 30, 2022.
For the Argentine companies, the price index used for the application of hyperinflation accounting was the
National Consumer Price Index (CPI) published by the National Institute of Statistics and Census (INDEC), equal
to an official annual value of 94.75%.
For the Turkish companies, the price index used was the National Consumer Price Index (TUFE) published by the
Turkish Statistical Institute (TUIK), equal to an official annual value of 64.27%.
Net losses on the net monetary position were recorded in the Income Statement as “Financial Expenses” (Note
37), to the amount of euro 22,250 thousand.
403
CONSOLIDATED FINANCIAL STATEMENTS
42. NON-RECURRING EVENTS
During the course of 2002, there were no non-recurring events and transactions pursuant to CONSOB Notice
No. DEM/6064293 of 28 July 2006. Information on the impact on the financial results for the 2021 financial
year is show below:
Personnel expenses:
- UK pension fund buy-out
Impact on operating income
Impact on net income/(loss) before taxes
Taxes:
- Tax receivables Brazil
Impact on net income/(loss)
(in millions of euro)
2022
2021
-
-
-
-
-
(2.5)
(2.5)
(2.5)
23.2
20.7
404
Pirelli Annual Report 2022
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 settled
under standard conditions, or dictated 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 contained in 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
12/31/2022
of which
related
parties
% incidence
12/31/2021
(in millions of euro)
of which
related
parties
% incidence
Non current assets
Other receivables
Current assets
Trade receivables
Other receivables
Non-current liabilities
Borrowings from banks and other financial institutions
3,690.1
Other payables
Provisions for liabilities and charges
Provisions for employee benefit obligations
Current liabilities
74.6
101.7
180.6
231.2
6.9
3.0%
362.9
6.7
1.8%
636.4
741.2
1.7%
659.2
19.5
3.0%
15.0%
470.6
105.9
22.5%
11.0
111.3
10.4
0.2
21.8
6.7
0.3%
3,789.4
0.3%
21.5%
76.5
81.2
3.7%
220.6
13.2
0.2
22.0
7.2
2.8
144.1
13.4
0.3%
0.3%
27.1%
3.2%
0.2%
8.9%
4.3%
Borrowings from banks and other financial institutions
800.4
3.0
0.4%
1,489.2
Trade payables
Other payables
1,973.3
166.4
8.4%
1,626.4
405.6
37.4
9.2%
314.2
of which
related
parties
% incidence
2021
(in millions of euro)
of which
related
parties
% incidence
45.0
63.6
(17.6)
(15.2)
0.7%
5,331.5
19.2%
303.9
0.7%
(1,820.6)
23.7
56.3
(3.6)
1.3%
(1,101.9)
(23.1)
2022
6,615.7
330.9
(2,419.3)
(1,178.6)
(2,208.8)
(340.9)
15.4%
(1,770.5)
(312.5)
102.0
(303.7)
5.8
3.5
(1.8)
2.9
3.4%
0.6%
n.a.
35.0
(179.3)
4.0
3.7
(1.5)
1.7
0.4%
18.5%
0.2%
2.1%
17.6%
10.4%
0.8%
n.a.
INCOME STATEMENT
Revenue from sales and services
Other income
Raw materials and consumables used (net of changes in
inventories)
Personnel expenses
Other costs
Financial income
Financial expenses
Net income / (loss) from equity investments
405
CONSOLIDATED FINANCIAL STATEMENTS 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:
2022
of which
related
parties
% incidence
2021
(in millions of euro)
of which
related
parties
% incidence
37.4
272.8
(50.5)
27.9
(89.5)
8.9
16.3
(7.4)
(2.6)
-
n.a.
n.a.
n.a.
n.a.
n.a.
(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.
Change in Financial receivables from associates and J.V.
(0.2)
(0.3)
n.a.
15.3
15.3
n.a.
Net cash flow financing activities:
Repayment of principal and payment of interest for lease
obligations
(114.5)
(0.9)
n.a.,
(105.4)
(3.8)
n.a.
The types of Related Party Transactions are detailed below:
STATEMENT OF FINANCIAL POSITION
(in millions of euro)
12/31/2022
12/31/2021
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
6.9
6.9
9.2
87.0
79.0
10.4
-
-
-
2.3
34.0
-
-
-
1.8
24.3
-
-
-
-
-
0.7
132.4
-
-
-
-
-
-
0.2
21.8
6.7
-
-
0.8
36.6
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
406
Pirelli Annual Report 2022 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
2022
2021
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
42.2
14.3
(2.4)
-
2.8
49.3
(15.2)
-
-
-
-
(15.2)
20.9
8.4
(1.1)
-
2.8
47.9
(2.5)
-
-
-
-
(23.1)
(163.0)
(148.7)
(29.1)
(137.5)
(146.8)
(28.2)
3.4
(0.3)
2.9
0.1
(1.5)
-
-
-
-
3.7
(0.4)
1.7
-
(1.1)
-
-
-
-
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 1.4 million and euro 1.9 million each respectively;
→ receivables for the sale of raw materials from Jining Shenzhou Tyre Co., Ltd. to the amount of euro 2.6 million;
→ service fee receivables of the Pirelli Tyre Co., Ltd. from the Jining Shenzhou Tyre Co., Ltd. to the amount of
euro 1.2 million.
The financial portion refers to a loan granted by Pirelli Tyre Co., Ltd. to the Jining Shenzhou Tyre Co., Ltd.
The item borrowings from banks and other financial institutions non-current 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.
The item borrowings from banks and other financial institutions current 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 to the amount of euro 25.9 million and payables to the Jining Shenzhou Tyre Co., Ltd. to the amount of
euro 4.6 million.
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 41.5 million.
The item other income refers to royalties to the amount of euro 7.1 million and the charge-back of expenses to
the amount of euro 5.8 million.
407
CONSOLIDATED FINANCIAL STATEMENTS The item other costs mainly refers to costs for:
→ the purchase of tyres from Jining Shenzhou Tyre Co., Ltd.
to the amount of euro 65.6 million;
→ the purchase of Motorcycle products from PT Evoluzione
Tyres to the amount of euro 52.6 million;
→ the purchase of energy and the hiring of machines from
Industriekraftwerk Breuberg GmbH to the amount of
euro 27,7 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 19 million and from the Aeolus Tyre Co., Ltd. to the
amount of euro 6.2 million mainly for royalties.
item borrowings from banks and other financial
The
institutions current refers to payable of Pirelli Otomobil
Lastikleri A.S. for machine hire from Prometeon Turkey
Endüstriyel ve Ticari Lastikler A.S.
The item trade payables mainly refers to payables to
companies of the Prometeon Group.
TRANSACTIONS - INCOME STATEMENT The item other
income includes royalties charged to the Aeolus Tyre Co.,
Ltd. to the amount of euro 7 million per year. The item also
includes income from companies of the Prometeon Group
mainly relative to:
→ royalties recorded in respect of the license agreement for
the use of the Pirelli trademark to the amount of euro 24
million;
→ the sales of raw materials, finished and semi-finished
products for a total amount of euro 0.7 million;
→ the licence agreement for know-how charged by Pirelli
Tyre S.p.A. to the amount of euro 10.4 million;
→ the Long Term Service Agreement to the amount of euro
2.6 million of which euro 2.1 million was earned by Pirelli
Sistemi Informativi;
→ logistics services for a total amount of euro 2.9 million of
which euro 0.8 million was carried out by Pirelli Sistemi
Informativi S.r.l. and 0.7 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 2 million were costs of the Brazilian company
Pirelli Pneus Ltda.
The item other costs includes contributions to the Hangar
Bicocca Foundation and the Pirelli Foundation to the amount
of euro 0.7 million, and costs payable to companies of the
Prometeon Group mainly for:
→ the purchase of truck products for a total amount of euro
95.5 million of which euro 88.8 million was carried out by
the Brazilian company Comercial e Importadora de Pneus
Ltda. and subsequently resold to retail customers, and
euro 5 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 40.3 million of which euro 40.1
million was carried out by the Turkish company, Pirelli
Otomobil Latikleri A.S. in respect of the Off-Take contract;
→ costs incurred by Pirelli Otomobil Lastikleri A.S. for the
purchase of energy amounting to euro 3.5 million.
The item financial expenses refers to the aforesaid interest
relative to machine hire.
REMUNERATION FOR DIRECTORS AND KEY MANAGERS
Remuneration for Directors and Key Managers can be
summarised as follows:
→ the Statement of Financial Position items provisions
for liabilities and charges non-current and provisions
for employee benefit obligations non-current, include
provisions for the monetary three-year 2021-2023 and
2022-2024 Long Term Incentive Plans to the amount of
euro 8.6 million (euro 18.9 million at December 31, 2021),
provisions for the Short Term Incentive Plan to the amount
of euro 5.9 million (euro 3.1 million at December 31, 2021),
as well as severance indemnities to the amount of euro
14.2 million (euro 7.2 million at December 31, 2021);
→ the Statement of Financial Position item other current
payables includes the short-term portion relative to the
Short Term Incentive Plan and payables for the 2020-
2022 Long Term Incentive Plan;
→ the items personnel expenses and other costs include
euro 6.1 million relative to employees’ leaving indemnities
(TFR) and severance indemnities (euro 5.9 million for
2021), as well as provisions for short-term benefits to the
amount of euro 14.2 million (euro 14.6 million for 2021)
and for long-term benefits, to the amount of euro 12.5
million (euro 14.7 million for 2021).
44. SIGNIFICANT EVENTS SUBSEQUENT
TO THE END OF THE YEAR
On January 11, 2023, Pirelli placed its first sustainability-linked
bond with investors for a total nominal amount of euro 600
million, with demand equal to almost six times the offer, which
amounted to approximately euro 3.5 billion. The issue of the first
benchmark-size sustainability-linked bond of this type placed
by a global tyre company, as well as the first carried out since
408
Pirelli Annual Report 2022 Pirelli obtained its investment grade rating from S&P Global
and Fitch Ratings, testifies to the Company’s commitment to
further integrate sustainability into its business strategy, and
is linked to the 2025 targets of reducing absolute greenhouse
gas emissions (Scopes 1 and 2) and emissions from purchased
raw materials (Scope 3). The transaction, which took place
within the framework of the EMTN Programme (Euro Medium
Term Note Programme) which was approved by the Board of
Directors on February 23, 2022, offers an effective yield at
maturity of 4.317% (145 basis points above the mid swap), and
allows for the optimisation of the debt structure, by extending
maturities and diversifying sources. These securities are listed
on the Luxembourg Stock Exchange.
On February 7, 2023 Pirelli was confirmed as amongst the
best companies at global level for sustainability obtaining “Top
1%” ranking, the highest recognition in the 2023 Sustainability
Yearbook published by S&P Global, after examining the
sustainability profile of more than 13,000 companies. This
result follows the score recorded by Pirelli in the 2022
Corporate Sustainability Assessment for the Dow Jones
Sustainability Index of S&P Global, where the Company had
obtained the Top Score of 86 points (revised from the initial
85), the highest in the ATX Auto Components sector of the
Dow Jones Sustainability World and European Index.
On February 14, 2023, Pirelli announced that Bai Xinping
had resigned as a Director of the Company, effective as
of February 22, 2023, following the assumption of new
professional responsibilities within the Sinochem Group.
Bai Xinping has received Pirelli’s sincere thanks for his
contribution during more than seven years in office. On
February 22, 2023, the Board of Directors co-opted Wang
Feng to replace Bai Xinping, and also proceeded to appoint
him as a member of the Remuneration Committee, the
Nominations and Successions Committee and the Strategies
Committee, roles previously held by Bai Xinping.
Wang Feng – who was qualified by the Board as a non-
executive Director – and will remain in office until the next
Shareholders’ Meeting, does not possess the requisites to
qualify as independent pursuant to the Corporate Governance
Code, and at the date of the appointment did not hold shares
and/or other financial instruments issued by Pirelli.
On February 22, 2023, Pirelli announced that the shareholder
CNRC had announced that it will submit the notification required
by Legislative Decree 21/2012 (the Golden Power Regulation)
regarding the renewal of the Shareholders’ Agreement signed
on May 16, 2022 by and between, amongst others, the CNRC,
Marco Polo International S.r.l., Camfin S.p.A. and Marco
Tronchetti Provera & C. S.p.A., which will become effective with
the convening of the Shareholders’ Meeting for the approval of
the Financial Statements at December 31, 2022.
45. OTHER INFORMATION
INFORMATION ON CLIMATE CHANGE
The Sustainability Plan at 2025 and at 2030 is fully integrated
into the Company’s Industrial Plan. The targets of the Plan are
409
designed to be aligned with the materiality of the Company’s
impacts on the economy, the environment, society and human
rights and in support of the United Nations 2030 agenda for
Sustainable Development Goals.
The Plan addresses the risks relative to climate change, by
forecasting targets and performances at the level of:
→ production processes, in terms of reducing absolute
CO2 emissions, by increasing the share of electricity from
renewable sources and increasing efficiency in the use of
natural resources;
→ products, through the evolution of the ranges of products,
with a lower environmental impact throughout their
respective life cycles, which at the same time ensure
greater driving safety;
→ raw materials, in terms of increasing the proportion 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:
→ the purchase of certificates of origin for electrical energy,
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 for increased
energy efficiency, which had already begun in 2021, and
which were therefore included in the increases to property,
plant and equipment. With reference to investments for
new products, it should be noted that the assets currently
in use for tyre production do not need to be replaced but
will be subject to improvements. With regard to projects
to achieve energy efficiency, mainly improvements and
the purchase of additional components to existing assets
are planned. Therefore, 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,
2022;
→ research and development costs for the development of
new products and operating costs for improving energy
efficiency. During 2022 the new IP Code labelled tyres
placed on the market by Pirelli worldwide, with parameters
consistent with the highest ratings (A or B) in European
labelling for rolling resistance, (an environmental aspect
with an
impact on vehicle CO2 emissions),
equalled 50% of the total.
indirect
With regard to the impact on the financial structure, it
should be noted that at December 31, 2022, financing
geared to sustainability indexes accounted for almost 55%
of the Group’s total gross debt (excluding lease liabilities).
Specifically, “sustainable” bank facilities amounted to euro 3.2
billion, of which euro 2.2 billion resulted as used at December
31, 2022, and euro 1.0 billion was available in the form of a
committed revolving credit facility. For further information,
CONSOLIDATED FINANCIAL STATEMENTS reference should be made to Note 23, “Borrowings from
Banks and Other Financial Institutions”.
With regard to risks linked to climate change, Pirelli monitors
these elements of uncertainty along its value chain through
sensitivity analyses and risk assessments, to assess and
quantify the financial impacts (risks and opportunities)
linked to climate change and water stress, and to put in
place appropriate prevention and mitigation measures
to protect its business. One instrument to support these
analyses is the Group’s Climate Change and Water Stress
Risk Assessment, which is updated bi-annually to integrate
these analyses with forecasts for the medium to long-term
time frame, with respect to the Intergovernmental Panel on
Climate Change (IPPC) climate scenarios, which represent
a projection of global temperature increases at the end of
the century of between 1.5°C (RCP2. 6) and >4°C (RCP8.5)
and International Energy Agency (IEA) projections for energy
transition (Stated Policies Scenario (STEPS), Announced
Pledges Scenario (APS) and Net Zero by 2050 (NZE)).
Pirelli carries out, on a regular basis, a risk analysis on climate
change and water stress, assessing both physical (acute and
chronic) and transitional elements of uncertainty.
As regards the physical risks, the potential impacts are
projected over a time frame up to 2050, with respect to the
different climate scenarios of the Intergovernmental Panel on
Climate Change, by assessing the potential number of business
interruption days both for the Pirelli production plants and along
the supply chain. In terms of potential criticalities, assessed
according to the Enterprise Risk Management scale, there
were no significant impacts in the short-medium term (2023-
2030), while elements of uncertainty persist on the 2050
timescale. Instead, as far as transition risks are concerned, the
Group assessed, amongst other things, the introduction and/
or tightening of current CO2 emission pricing schemes in the
countries in which it operates. The possible impacts, linked to
an increase in production costs, were estimated based on the
different CO2 emissions price developments arising from both
the forecasts published by the IEA for the STEPS, APS, NZE
scenarios and the three possible carbon intensity pathways
of the Group. No material impact emerged with regard to the
short (2023) and medium-term, while there were elements of
uncertainty with regard to the long-term (>2030), especially if
the NZE and APS scenarios were to occur.
At December 31, 2022, no risks of probable losses had
emerged that would require specific provisions to be accrued
in the Financial Statements.
With reference to the impact of climate-change on the
impairment testing of goodwill and of assets with an indefinite
useful life (Brand), reference should be made to Note 10,
“Intangible Assets”.
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 to 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,
particularly the section “Adherence to the Task Force on
Climate-related Financial Disclosure (TCFD)” in this Annual
Report, and to Pirelli’s public responses to the CDP Climate
Change 2022 questionnaire.
ACTIVITIES IN RUSSIA
As already announced with the publication of the results of the
first quarter of 2022 on May 10, 2022, Pirelli has suspended
investments in its factories in Russia, with the exception of
those intended for the safety of carrying out operations. In
2022, Russia accounted for 4% of turnover and for 11% of
total capacity.
In compliance with international sanctions imposed by
the EU, which include a ban on imports of Russian finished
products into the EU and a ban on the export of some raw
materials to Russia, starting from the second half-year of
2022 Pirelli has:
→ geared production towards the domestic market;
→ identified alternative sources for import/export streams,
with the gradual activation of sourcing supplies of finished
products from Turkey and Romania, to replace Russian
exports to European markets and the use of mainly local
suppliers of raw materials to replace European suppliers;
→ diversified its logistics service providers in order to
ensure the continuity of supplies of finished products and
raw materials;
→ guaranteed its financial support through local banks.
At December 31, 2022, the Statement of Financial Position of
the sub-consolidated entity which aggregates the subsidiaries
situated in Russia was mainly composed of:
→ non-current assets to the amount of euro 186.0 million
(euro 178.0 million at December 31, 2021), of which euro
174.1 million was related to property, plant and equipment
and intangible assets (euro 169.3 million at December 31,
2021);
→ inventories to the amount of euro 54.0 million;
→ trade receivables and other receivables to the amount
of euro 65.1 million, of which euro 2.9 million were from
other Group companies;
→ tax receivables to the amount of euro 11.2 million;
→ cash and cash equivalents to the amount of euro 11.1
million;
→ borrowings from banks and other financial institutions to
the amount of euro 98.3 million which included payables
to the Group to the amount of euro 52.8 million;
→ trade payables and other payables to the amount of
euro 68.9 million, of which euro 8.5 million was to other
companies of the Group.
At the date of this document, guarantees had been issued by
Pirelli Tyre S.p.A. for the financial and trade payables of the
Russian subsidiaries to third parties and other companies of
the Group.
Total equity amounted to euro 144.5 million, of which euro
93.9 million was attributable to the Parent Company and euro
50.6 million attributable to non-controlling interests.
410
Pirelli Annual Report 2022 Revenues for 2022 from net sales on the Russian market amounted to euro 262.4 million, with an operating
income adjusted to the amount of euro 59.3 million.
RESEARCH AND DEVELOPMENT EXPENSES
Research & Development expenses for 2022 amounted to euro 264 million and represented 4% of sales, and
refer to expenses for product and process innovation, as well as for the development of new materials. The portion
allocated to research and development for High Value activities amounted to euro 247 million and equalled 5.3%
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)
2022
2021
29,068
28,194
390
377
29,458
28,571
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
2022
2021
6,025
5,934
23,465
23,221
1,724
1,488
31,214
30,643
411
CONSOLIDATED FINANCIAL STATEMENTS
REMUNERATION FOR INDEPENDENT AUDITING FIRMS
Pursuant to the applicable regulations, total fees for the 2022 financial year for auditing and non-audit services
rendered by the company PricewaterhouseCoopers S.p.A. and by entities belonging to its network, are shown
below:
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.
PricewaterhouseCoopers S.p.A.
Subsidiaries
Network PricewaterhouseCoopers
Subsidiaries
Independent services other
than auditing
PricewaterhouseCoopers S.p.A.
Pirelli & C. S.p.A.
PricewaterhouseCoopers S.p.A.
Subsidiaries
Network PricewaterhouseCoopers
Subsidiaries
89
1,500
1,457
212
152
33
140
-
-
3,046
85%
397
11%
140
3,583
4%
100%
(1) the item “Independent 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 ART. 1 PARAGRAPHS 125-129
It should be noted that during the course of the financial year, that the company Pirelli Tyre S.p.A. has:
→ received approximately euro 1.5 million for the agreement signed during the 2019 financial year with MiSE
(the Ministry of Economic Development, now the Ministry for Enterprises and Made in Italy), to subsidise
three Research and Development projects, for up to a maximum of euro 6.3 million in total;
→ obtained a concession decree from MiSE granting a subsidy for a Research and Development project in the
field of Digital Solutions for up to a maximum of euro 2.6 million;
→ obtained, within the framework of the PNRR (National Recovery and Resilience Plan), a concession decree
from the MUR (Ministry of Universities and Research), granting a subsidy for Research and Development
activities in connection to the “National Centre for Sustainable Mobility – MOST” initiative, for up to a
maximum of euro 1.2 million;
→ obtained eligibility, under the Framework for State Aid – COVID-19 (Artt. 54 - 61 of the Relaunch Decree, as
amended by Art. 62 of Legislative Decree 104/2020), for subsidies for 14 applications, for an overall total of
approximately euro 102 thousand in non-repayable grants.
For the purpose of providing complete information, it should be noted that during the 2018 financial year,
Pirelli Tyre S.p.A. received from M.I.U.R. - Ministero dell’Istruzione, dell’Università e della Ricerca (the Ministry
of Education, Universities and Research) - a subsidised loan to the amount of euro 5,305 thousand with a
duration of 5 years and an interest rate of 0.50% per annum, granted as an incentive to carry out a Research and
Development project for the advancement of innovative materials in the tyre manufacturing process.
Pirelli & C. S.p.A. instead obtained, again within the PNRR framework, a concession decree from MUR (the
Ministry of Universities and Research), granting a subsidy for Research and Development activities as part of the
Innovation Ecosystem, “MUSA - Multilayered Urban Sustainability Action” initiative for up to a maximum of euro
0.4 million.
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
2022 financial year, that no atypical and/or unusual transactions as defined in the aforesaid Notice, were carried
out by the Company.
412
Pirelli Annual Report 2022
EXCHANGE RATES
The main exchange rates used for consolidation were as follows:
Period-end Exchanges Rates
Average Exchange Rates
Change in %
Change in %
12/31/2022
12/31/2021
2022
2021
(local currency vs euro)
Swedish Krona
Australian Dollar
Canadian Dollar
Singaporean Dollar
US Dollar
Taiwan Dollar
Swiss Franc
11.1283
10.2269
1.5615
1.4393
8.81%
0.50%
0.33%
10.6326
10.1449
4.81%
1.5167
1.5749
(3.70%)
1.3695
1.4826
(7.63%)
1.5279
(6.41%)
1.1326
(5.83%)
1.4512
1.0531
1.5891
(8.68%)
1.1827
(10.97%)
1.5693
1.4440
1.4300
1.0666
32.7766
31.3436
4.57%
31.4352
33.0389
(4.85%)
0.9847
1.0331
(4.68%)
1.0047
1.0812
(7.07%)
Egyptian Pound
26.4357
17.8708
47.93%
20.3224
18.6428
9.01%
Turkish Lira
Romanian Leu
19.9349
14.6823
35.78%
19.9349
10.4698
90.40%
4.9474
4.9481
(0.01%)
4.9313
4.9208
0.21%
Argentinian Peso
188.9589
116.3407
62.42%
188.9589
116.3407
62.42%
Mexican Peso
20.7073
23.3129
(11.18%)
21.1915
23.9812
(11.63%)
South African Rand
18.0986
18.0625
0.20%
17.2086
17.4766
(1.53%)
Brazilian Real
5.5694
6.3210
(11.89%)
5.4468
6.3782
(14.60%)
Chinese Renminbi
7.4284
7.2211
2.87%
7.0829
7.6305
(7.18%)
Russian Rouble
75.6553
84.0695
(10.01%)
71.4929
87.0941
(17.91%)
British Pound Sterling
0.8869
0.8403
5.55%
0.8528
0.8596
(0.80%)
Japanese Yen
140.6600
130.3800
7.88%
138.0274
129.8767
6.28%
413
CONSOLIDATED FINANCIAL STATEMENTS
NET FINANCIAL POSITION
(Alternative Performance Indicator 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)
12/31/2022
12/31/2021
of which
related parties
(note 43)
of which
related parties
(note 43)
800,389
2,979
1,489,249
2,751
15,046
10,331
3,690,111
10,444
3,789,369
13,210
-
4,505,546
(1,289,744)
(246,884)
3,519
5,292,468
(1,884,649)
(113,901)
(270,916)
(79,024)
(81,819)
(81,402)
(14,223)
2,683,779
(26,430)
(38,849)
3,173,250
(4,612)
(104,767)
(6,926)
(261,522)
(6,664)
Note
23
27
23
27
19
18
15
27
27
15
Total net financial (liquidity) / debt position
2,552,582
2,907,116
* 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” is reported net of the relative provisions for impairment which amounted to euro 10,545 thousand at December 31, 2022 (euro 9,315 thousand at
December 31, 2021).
414
Pirelli Annual Report 2022
Net financial debt is summarised below based on the format provided by the ESMA guidelines:
Cash and cash equivalents
Other current financial assets
of which Current financial receivables
of which Current derivative financial instruments (assets)
of which Other financial assets at fair value through Income Statement
Liquidity
Current borrowings from banks and other financial institutions
Current derivative financial instruments (liabilities)
Current financial debt
Current net financial debt
Non-current borrowings from banks and other financial institutions
Non-current derivative financial instruments (liabilities)
Non current financial debt
Net financial debt *
(in thousands of euro)
12/31/2022
12/31/2021
(1,289,744)
(1,884,649)
(532,023)
(234,569)
(270,916)
(81,819)
(14,223)
(38,849)
(246,884)
(113,901)
(1,821,767)
(2,119,218)
800,389
1,489,249
15,046
10,331
815,435
1,499,580
(1,006,332)
(619,638)
3,690,111
3,789,369
-
3,519
3,690,111
3,792,888
2,683,779
3,173,250
* 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.
415
CONSOLIDATED FINANCIAL STATEMENTS
SCOPE OF CONSOLIDATION
COMPANIES CONSOLIDATED LINE-BY-LINE
Business
Headquarters
Currency
Share Capital
% holding
Held by
Company
Europe
Austria
Pirelli GmbH
Belgium
Agent
Wien
Euro
726,728
100.00%
Pirelli Tyre
(Suisse) S.A.
Pirelli Tyre
(Suisse) S.A.
Pneus Pirelli
S.A.S.
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 Tyres Belux S.A.
Agent
Brussels
Euro
700,000
99.996%
0.004%
France
Pneus Pirelli S.A.S.
Distributor
Villepinte
Euro
1,515,858
100.00% Pirelli Tyre S.p.A.
Germany
Deutsche Pirelli Reifen Holding GmbH
Holding
Driver Handelssysteme GmbH
Service provider
Breuberg /
Odenwald
Breuberg /
Odenwald
Euro
7,694,943
100.00% Pirelli Tyre S.p.A.
Euro
26,000
100.00%
Pirelli Deutschland GmbH
Manufacturer
and distributor
Breuberg /
Odenwald
Euro
23,959,100
100.00%
Pirelli Personal Service GmbH
Service provider
PK Grundstuecksverwaltungs GmbH
Dormant
Breuberg /
Odenwald
Hoechst /
Odenwald
Euro
25,000
100.00%
Euro
26,000
100.00%
Driver Reifen und KFZ-Technik GmbH (ex
Pneumobil Reifen und KFZ-Technik GmbH)
Distribution
chain
Breuberg /
Odenwald
Euro
259,225
100.00%
Greece
Elastika Pirelli C.S.A.
Distributor
Elliniko-
Argyroupoli
Euro
11,630,000
99.90% Pirelli Tyre S.p.A.
0.10%
Pirelli Tyre
(Suisse) S.A.
Pirelli Hellas S.A. (in liquidation)
Under
liquidation
Athens
US $
22,050,000
79.86% Pirelli Tyre S.p.A.
The Experts in Wheels - Driver Hellas C. S.A.
Service provider
Elliniko-
Argyroupoli
Euro
100,000
73.20%
Elastika Pirelli
C.S.A.
416
Pirelli Annual Report 2022 COMPANIES CONSOLIDATED LINE-BY-LINE
Company
Italy
Business
Headquarters
Currency
Share Capital
% holding
Held by
Driver Italia S.p.A.
Service provider
Driver Servizi Retail S.p.A.
Service provider
HB Servizi S.r.l.
Maristel S.r.l.
Service provider
Service provider
NewCo Micromobility S.r.l.
Service provider
Pirelli Digital Solutions S.r.l.
Service provider
Milan
Milan
Milan
Milan
Milan
Milan
Euro
Euro
Euro
Euro
Euro
Euro
350,000
71.21% Pirelli Tyre S.p.A.
120,000
100.00% Pirelli Tyre S.p.A.
10,000
100.00% Pirelli & C. S.p.A.
50,000
100.00% Pirelli & C. S.p.A.
10,000
100.00% Pirelli Tyre S.p.A.
500,000
100.00% Pirelli Tyre S.p.A.
Pirelli Industrie Pneumatici S.r.l.
Manufacturer
Settimo
Torinese (To)
Euro
40,000,000
100.00% Pirelli Tyre S.p.A.
Pirelli International Treasury S.p.A.
Financial
Milan
Euro
125,000,000
70.00% Pirelli Tyre S.p.A.
Pirelli Servizi Amministrazione e Tesoreria S.p.A.
Service provider
Pirelli Sistemi Informativi S.r.l.
Service provider
Pirelli Tyre S.p.A.
Principal
Poliambulatorio Bicocca S.r.l.
Service provider
Servizi Aziendali Pirelli S.C.p.A.
Service provider
Milan
Milan
Milan
Milan
Milan
30.00% Pirelli & C. S.p.A.
Euro
2,047,000
100.00% Pirelli & C. S.p.A.
Euro
1,010,000
100.00% Pirelli & C. S.p.A.
Euro
558,154,000
100.00% Pirelli & C. S.p.A.
Euro
Euro
10,000
100.00% Pirelli Tyre S.p.A.
104,000
90.35% Pirelli & C. S.p.A.
2.95% Pirelli Tyre S.p.A.
0.95%
Poliambulatorio
Bicocca S.r.l.
0.98%
0.95%
0.98%
0.95%
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
Pirelli China Tyre N.V.
Poland
Holding
Rotterdam
Euro
38,045,000
100.00% Pirelli Tyre S.p.A.
Driver Polska Sp. z o.o.
Service provider
Warsaw
Pol. Zloty
100,000
68.50%
Pirelli Polska Sp.
z o.o.
Pirelli Polska Sp. z o.o.
Distributor
Warsaw
Pol. Zloty
625,771
100.00% Pirelli Tyre S.p.A.
417
CONSOLIDATED FINANCIAL STATEMENTS COMPANIES CONSOLIDATED LINE-BY-LINE
Company
United Kingdom
CTC 2008 Ltd.
Pirelli Cif Trustees Ltd.
Trustees Burton-on-Trent
Dormant Burton-on-Trent
Business
Headquarters
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 International Limited (ex Pirelli International
plc)
Dormant Burton-on-Trent
Euro
5,000,000
100.00% Pirelli Tyre S.p.A.
Pirelli Motorsport Services Ltd.
Service provider Burton-on-Trent
Pirelli General Executive Pension Trustees Ltd.
Trustees Burton-on-Trent
Pirelli General & Overseas Pension Trustees Ltd.
Trustees Burton-on-Trent
Pirelli Tyres Executive Pension Trustees Ltd.
Trustees Burton-on-Trent
Pirelli Tyres Ltd.
Dormant Burton-on-Trent
Pirelli Tyres Pension Trustees Ltd.
Trustees Burton-on-Trent
Pirelli UK Ltd.
Pirelli UK Tyres Ltd.
Slovakia
Holding Burton-on-Trent
Manufacturer
and distributor
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% Pirelli & C. S.p.A.
85,000,000
100.00% Pirelli Tyre S.p.A.
Pirelli Slovakia S.R.O.
Distributor
Bratislava
Euro
6,639
100.00% Pirelli Tyre S.p.A.
Romania
Pirelli & C. Eco Technology RO S.r.l.
Service provider
Slatina
Rom. Leu
20,002,000
99.995% Pirelli Tyre S.p.A.
Pirelli Tyres Romania S.r.l.
Russia
Manufacturer
and distributor
Slatina
Rom. Leu
2,189,797,300
100.00% Pirelli Tyre S.p.A.
0.005%
Pirelli Tyres
Romania S.r.l.
Closed Joint Stock Company “Voronezh Tyre Plant”
Manufacturer
Voronezh
Russian Rouble
1,520,000,000
100.00%
Limited Liability Company Pirelli Tyre Services
Service provider
Moscow
Russian Rouble
54,685,259
95.00%
Limited Liability
Company Pirelli
Tyre Russia
Pirelli Tyre
(Suisse) S.A.
5.00% Pirelli Tyre S.p.A.
Limited Liability Company “Industrial Complex “Kirov
Tyre”
Manufacturer
Kirov
Russian Rouble
348,423,221
100.00%
Limited Liability Company Pirelli Tyre Russia
Manufacturer
and distributor
Moscow
Russian Rouble
6,153,846
65.00%
Limited Liability
Company Pirelli
Tyre Russia
Pirelli Tyre (Pty)
Ltd.
418
Pirelli Annual Report 2022 COMPANIES CONSOLIDATED LINE-BY-LINE
Company
Spain
Business
Headquarters
Currency
Share Capital
% holding
Held by
Euro Driver Car S.L.
Service provider
Valencia
Euro
960,000
58.44%
Neumaticos Arco Iris, S.A.
Service provider
Valencia
Euro
302,303
66.20%
Pirelli
Neumaticos
S.A. - Sociedad
Unipersonal
Pirelli
Neumaticos
S.A. - Sociedad
Unipersonal
Pirelli Neumaticos S.A. - Sociedad Unipersonal
Distributor
Valencia
Euro
25,075,907
100.00% Pirelli Tyre S.p.A.
Sweden
Dackia Aktiebolag
Distribution
chain
Stockholm
Swed. Krona
31,000,000
100.00% Pirelli Tyre S.p.A.
Pirelli Tyre Nordic Aktiebolag
Distributor
Stockholm
Swed. Krona
950,000
100.00% Pirelli Tyre S.p.A.
Switzerland
Driver (Suisse) S.A.
Service provider
Bioggio
Swiss Franc
100,000
100.00%
Pirelli Tyre
(Suisse) S.A.
Pirelli Group Reinsurance Company S.A.
Pirelli Tyre (Suisse) S.A.
Turkey
Group
reinsurance
Distributor /
Distribution
chain
Basel
Swiss Franc
3,000,000
100.00% Pirelli & C. S.p.A.
Basel
Swiss Franc
1,000,000
100.00% Pirelli Tyre S.p.A.
Pirelli Lastikleri Dis Ticaret A.S.
Service provider
Istanbul
Turkish Lira
50,000
100.00%
Pirelli Otomobil
Lastikleri A.S.
Pirelli Otomobil Lastikleri A.S.
Hungary
Manufacturer
and distributor
Istanbul
Turkish Lira
190,000,000
100.00% Pirelli Tyre S.p.A.
Pirelli Hungary Tyre Trading and Services Ltd.
Distributor
Budapest
Hun. Forint
3,000,000
100.00% Pirelli Tyre S.p.A.
Agent
St-Laurent
(Quebec)
Can. $
6,000,000
100.00%
Pirelli Tyre
(Suisse) S.A.
Holding
New York (New
York)
Manufacturer
and distributor
Rome (Georgia)
Dormant
Los Angeles
(California)
US $
US $
US $
10
1
10
100.00% Pirelli Tyre S.p.A.
100.00%
Pirelli North
America Inc.
100.00%
Pirelli Tire LLC
North America
Canada
Pirelli Tire Inc.
U.S.A.
Pirelli North America Inc.
Pirelli Tire LLC
Prestige Stores LLC
419
CONSOLIDATED FINANCIAL STATEMENTS COMPANIES CONSOLIDATED LINE-BY-LINE
Company
Central/South America
Argentina
Pirelli Neumaticos S.A.I.C.
Business
Headquarters
Currency
Share Capital
% holding
Held by
Manufacturer
and distributor
Buenos Aires
Arg. Peso
2,948,055,176
99.83%
Pirelli Tyre S.p.A.
Latam Servicios Industriales S.A.
Service provider
Buenos Aires
Arg. Peso
100,000
95.00%
Brazil
Comercial e Importadora de Pneus Ltda..
Distribution
chain
Sao Paulo
Bra. Real
381,473,982
100.00%
5.00%
0.17%
Pirelli Pneus
Ltda.
Pirelli
Neumaticos
S.A.I.C.
Pirelli Pneus
Ltda.
Pirelli Comercial
de Pneus Brasil
Ltda.
Pirelli Comercial de Pneus Brasil Ltda.
Distributor
Sao Paulo
Bra. Real
1,149,296,303
85.00%
Pirelli Tyre S.p.A.
15.00%
Pirelli Latam
Participaçoes
Ltda.
Pirelli Latam Participaçoes Ltda.
Holding
Sao Paulo
Bra. Real
470,635,252
100.00%
Pirelli Tyre S.p.A.
Pirelli Ltda.
Pirelli Pneus Ltda.
Service provider
Santo Andrè
Bra. Real
14,000,000
100.00%
Pirelli & C. S.p.A.
Manufacturer
and distributor
Campinas (Sao
Paulo)
Bra. Real
1,983,585,394
85.03%
Pirelli Tyre S.p.A.
14.97%
Pirelli Latam
Participaçoes
Ltda.
Comércio e Importação Multimarcas de Pneus Ltda.
Dormant
Sao Paulo
Bra. Real
3,691,500
85.00%
Pirelli Tyre S.p.A.
C.P.Complexo Automotivo de Testes, Eventos e
Entretenimento Ltda.
Service provider
Elias Fausto (Sao
Paulo)
Bra. Real
89,812,000
60.00%
TLM - Total Logistic Management Serviços de Logistica
Ltda.
Service provider
Santo Andrè
Bra. Real
3,074,417
99.99%
40.00%
15.00%
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.
Distributor
Santiago
US $
3,520,000
85.25%
14.73%
Pirelli Comercial
de Pneus Brasil
Ltda.
Pirelli Latam
Participaçoes
Ltda.
Colombia
Pirelli Tyre Colombia S.A.S.
Mexico
Pirelli Neumaticos S.A. de C.V.
0.02%
Pirelli Ltda.
Distributor
Santa Fe De
Bogota
Col. Peso/000
1,863,222,000
85.00%
15.00%
Pirelli Comercial
de Pneus Brasil
Ltda.
Pirelli Latam
Participaçoes
Ltda.
Manufacturer
and distributor
Silao
Mex. Peso
11,595,773,848
99.83%
Pirelli Tyre S.p.A.
0.17%
Pirelli Latam
Participaçoes
Ltda.
420
Pirelli Annual Report 2022 COMPANIES CONSOLIDATED LINE-BY-LINE
Business
Headquarters
Currency
Share Capital
% holding
Held by
Company
Africa
Egypt
Pirelli Egypt Tyre Trading S.A.E.
Holding
Giza
Egy. Pound
84,250,000
100.00% Pirelli Tyre S.p.A.
Pirelli Egypt Consumer Tyre Distribution S.A.E.
Distributor
Giza
Egy. Pound
89,000,000
99.89%
Pirelli Egypt
Tyre Trading
S.A.E.
0.06% Pirelli Tyre S.p.A.
0.06%
Pirelli Tyre
(Suisse) S.A.
South Africa
Pirelli Tyre (Pty) Ltd.
Distributor
Gauteng 2090
S.A. Rand
9
100.00% Pirelli Tyre S.p.A.
E-VOLUTION Tyre South Africa (PTY) Ltd.
Holding
Gauteng 2090
S.A. Rand
100
100.00%
Oceania
Australia
Pirelli Tyres Australia Pty Ltd.
Distributor Pyrmont (NSW)
Aus. $
150,000
100.00%
Asia
China
Pirelli Logistics (Yanzhou) Co., Ltd.
Service provider
Jining
Chinese
Yuan
5,000,000
100.00%
Pirelli Taiwan Co., Ltd. (in liquidation)
Agent
New Taipei City
N.T. $
10,000,000
100.00%
Pirelli Tyre (Pty)
Ltd.
Pirelli Tyre
(Suisse) S.A.
Pirelli Tyre Co.,
Ltd.
Pirelli Tyre
(Suisse) S.A.
Pirelli Trading (Beijing) Co., Ltd.
Service provider
Beijing
Pirelli Tyre (Jiaozuo) Co., Ltd.
Manufacturer
Jiaozuo
Pirelli Tyre Co., Ltd.
Manufacturer
and distributor
Yanzhou
Chinese
Yuan
Chinese
Yuan
Chinese
Yuan
4,200,000
100.00% Pirelli Tyre S.p.A.
350,000,000
80.00% Pirelli Tyre S.p.A.
2,471,150,000
90.00%
Pirelli Tyre Trading (Shanghai) Co., Ltd.
Service provider
Shanghai
US $
700,000
100.00%
Korea
Pirelli Korea Ltd.
United Arab Emirates
Distributor
Seoul
Korean Won
100,000,000
100.00%
Pirelli Tyre MEAI DMCC
Distributor
Dubai
AED
50,000
100.00%
Japan
Pirelli China
Tyre N.V.
Pirelli China
Tyre N.V.
Pirelli Asia Pte
Ltd.
Pirelli Asia Pte
Ltd.
Pirelli Japan Kabushiki Kaisha
Distributor
Tokyo
Jap. Yen
2,200,000,000
100.00% Pirelli Tyre S.p.A.
Singapore
Pirelli Asia Pte Ltd.
Distributor
Singapore
Sing. $
2
100.00%
Pirelli Tyre
(Suisse) S.A.
421
CONSOLIDATED FINANCIAL STATEMENTS Pirelli
Deutschland
GmbH
Elastika Pirelli
C.S.A.
Pirelli Polska Sp.
z o.o.
Pirelli Slovakia
S.R.O.
S.C. Pirelli Tyres
Romania S.r.l.
Pirelli
Neumaticos
S.A. - Sociedad
Unipersonal
INVESTMENTS ACCOUNTED FOR BY THE EQUITY METHOD
Business
Headquarters
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
Consorzio per la Ricerca di Materiali Avanzati
(CORIMAV)
Eurostazioni S.p.A.
Poland
Centrum Utylizacji Opon Organizacja Odzysku
S.A.
Slovakia
Tyre
Athens
Euro
60,000
20.00%
Financial
Financial
Milan
Rome
Euro
103,500
100.00% Pirelli & C. S.p.A.
Euro
160,000,000
32.71% Pirelli & C. S.p.A.
Tyre
Warsaw
Pln
1,008,000,00
20.00%
ELT Management Company Slovakia S.R.O.
Tyre
Bratislava
Euro
132,000,00
20.00%
Romania
S.C. Eco Anvelope S.A.
Tyre
Bucarest
Rom. Leu
160,000
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
Yuan
Chinese
Yuan
1,050,000,000
49.00% Pirelli Tyre S.p.A.
1,050,000,000
100.00%
Xushen Tyre
(Shanghai) Co,
Ltd
Indonesia
PT Evoluzione Tyres
Tyre
Subang
Rupees
1,313,238,780,000
63.04% Pirelli Tyre S.p.A.
422
Pirelli Annual Report 2022 423
CONSOLIDATED FINANCIAL STATEMENTS Pirelli Annual Report 2022
424
PIRELLI & C.
SEPARATE
S.P.A.
FINANCIAL
STATEMENTS
AT DECEMBER 31, 2022
425
FINANCIAL STATEMENTS AT DECEMBER 31, 2022
STATEMENT OF FINANCIAL POSITION
(in euro)
Note
12/31/2022
12/31/2021
of which related
parties (Note 39)
of which related
parties (Note 39)
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
Tax payables
Derivative financial instruments
Current liabilities
Total Liabilities and Equity
8
9
10
11
12
13
17
14
13
15
16
17
18
19
23
20
24
21
17
19
22
23
20
25
17
66,257,632
2,279,105,345
4,624,548,537
6,374,500
46,339,548
69,988,482
2,276,388,200
4,632,419,637
6,374,501
54,817,356
611,841
-
2,000,566,023
2,000,000,000
26,069,768
26,069,768
4,382,882
4,382,882
7,049,307,171
9,044,937,082
43,998,674
42,901,414
40,115,549
39,313,992
2,215,171,633
2,200,674,916
792,729,529
781,788,854
36,115
40,217
97,981,425
97,445,841
65,074,474
64,524,862
3,297,794
3,297,794
5,132,143
5,132,143
2,360,485,641
9,409,792,812
1,904,374,936
2,221,332,158
559,833,511
252,485,607
4,938,026,212
3,318,862,779
903,091,911
9,948,028,993
1,904,374,936
2,187,923,539
504,214,886
216,618,625
4,813,131,985
3,410,178,031
354,820
211,511
821,950
211,512
39,061,812
21,842,562
30,604,390
22,028,088
592,549,059
526,016,984
13,104,639
3,016,050
21,442,451
3,707,657
-
-
3,554,179
3,554,179
3,963,933,109
3,992,617,984
363,155,814
-
1,070,540,924
1,186,589
25,548,576
4,557,210
18,386,788
2,854,236
73,608,589
36,536,630
38,602,730
15,310,925
25,135,738
509,463
20,353,208
20,124,321
13,565,489
13,336,607
31,566
31,566
673,630
673,630
507,833,491
9,409,792,812
1,142,279,024
9,948,028,993
426
Pirelli Annual Report 2022 INCOME STATEMENT
(in euro)
Note
2022
2021
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)
68,321,749
68,282,024
69,600,631
69,476,717
111,838,735
105,847,048
107,345,247
104,371,766
(385,916)
(21,200)
(213,962)
(62,086,223)
(7,420,158)
(72,790,903)
(14,395,169)
(9,696,166)
(9,362,065)
(111,636,220)
(42,336,246)
(114,063,118)
(41,247,192)
(48,137)
(3,692,178)
(91,749)
(19,575,918)
230,262,609
-
Net income (loss) from equity investments
34
277,295,790
- gains on equity investments
-
- losses on equity investments
(32,471,101)
(32,471,101)
(1,246,000)
(1,246,000)
- dividends
Financial income
Financial expenses
309,766,891
306,814,396
231,508,609
229,311,733
30,773,281
30,336,630
33,642,838
31,957,128
(68,690,826)
(8,736,753)
(79,622,905)
(2,826,774)
35
36
Net income (loss) before taxes
235,686,067
Taxes
37
16,799,540
Total net income of the year
252,485,607
164,706,624
51,912,001
216,618,625
427
FINANCIAL STATEMENTS AT DECEMBER 31, 2022 STATEMENT OF COMPREHENSIVE INCOME
(in euro)
A
Net income of the year
252,485,607
216,618,625
- Remeasurement of employee benefits
21
320,681
(80,709)
- Tax effect
(123,881)
19,370
- Fair value adjustment of other financial assets at fair value through other comprehensive income
12
(8,477,808)
13,763,515
B
Total items that may not be reclassified to income statement
(8,281,008)
13,702,176
Note
2022
2021
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
57,732,239
95,022,233
(2,310,568)
(76,129,810)
(13,301,201)
(4,534,181)
(120,571)
1,149,212
(446,326)
(4,801,545)
136,055
876,560
C
D
Total items reclassified / that may be reclassified to income statement
41,689,628
11,582,469
Total other components of comprehensive income (B+C)
33,408,620
25,284,645
A+D Total comprehensive income / (loss) for the financial year
285,894,227
241,903,270
428
Pirelli Annual Report 2022 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
Net result
carried
forward
of the year
Total
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
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(36,043,946)
(43,956,054)
(80,000,000)
25,284,645
-
25,284,645
(1,764)
-
-
-
-
-
-
-
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
Dividend distribution as
per resolution of May 18,
2022
Result carried forward
Other components of
comprehensive income
Result for the year
Total comprehensive
income/(loss) for the year
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
33,408,620
-
-
33,408,620
-
-
-
-
-
(161,000,000)
(161,000,000)
55,618,625
(55,618,625)
-
-
-
-
33,408,620
252,485,607
252,485,607
-
252,485,607
285,894,227
Total at 12/31/2022
1,904,374,936
380,874,988
630,380,599
12,466,897
133,734,599
40,947,360
1,022,927,715
559,833,511
252,485,607
4,938,026,212
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
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
Other changes
13,763,515
(3,652,333)
18,892,424
(80,709)
(3,638,251)
25,284,645
(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
Other components of
comprehensive income
(8,477,808)
(566,898)
55,421,671
320,681
(13,289,027)
33,408,620
Balance at 12/31/2022
(207,901)
-
51,430,207
2,145,272
(12,420,218)
40,947,360
429
FINANCIAL STATEMENTS AT DECEMBER 31, 2022 CASH FLOW STATEMENT
(in euro)
Note
2022
of which
related parties
(Note 39)
2021
of which
related parties
(Note 39)
Net income (loss) before taxes
235,686,067
164,706,624
Reversals of amortisation, depreciation, impairment losses
Reversal of accruals
Reversal of (Financial income)/financial expenses
31
32
36
9,696,166
27,456,296
9,362,065
35,195,093
37,917,544
(21,599,877)
45,980,067
(29,130,354)
Reversal of Dividends
34
(309,766,891)
(306,814,396)
(231,508,609)
(229,311,733)
Reversal of (gain)/losses on investments
Reversal of (Gains)/losses from sales of property,plant and equipment
Change in Trade receivables
Change in Trade payables
Change in Other receivables
Change in Other payables
Change in Tax receivables/Tax payables
Use of Provisions for employee benefit obligations
Use of Other provisions
A Net cash flows provided by/(used in) operating activities
Investments in property, plant and equipment
Disposal of property, plant and equipment
Investments in intangible assets
Reimbursement of other non current financial assets at fair value through
other comprehensive income
34
28
14
22
13
23
16
21
20
8
8
9
12
32,471,101
32,471,101
1,246,000
1,246,000
(742)
(395)
(3,931,262)
(3,587,422)
40,360,358
37,340,862
6,569,732
1,702,975
(11,702,230)
(225,819)
(1,806,201)
403,000
(3,050,692)
923,721
8,824,839
21,225,705
13,574,345
8,735,075
43,923,433
(26,133,265)
19,133,970
(31,575,870)
(105,872)
-
(2,981,095)
(1,697,946)
(1,117,641)
(1,663,189)
85,816,570
78,652,311
(649,416)
742
(252,277)
5,000,395
(4,196,832)
(2,015,819)
-
5,142
Dividends received
34
309,766,891
306,814,396
231,508,609
229,311,733
B Net cash provided/(used) by investment activities
304,921,385
234,246,050
Change in Financial receivables
Financial income
13
35
579,297,000
580,705,000
372,070,333
372,109,827
30,665,824
30,326,528
27,131,633
28,107,646
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
Repayment of principal and payment of interest for lease liabilities
19
1,000,000,000
868,549,294
19
(1,817,761,540)
(1,419,656,199)
18
(161,004,188)
(79,929,783)
36
19
(14,360,605)
20,683,970
(75,385,176)
(3,724,512)
(7,578,547)
(7,380,095)
C Net cash provided/(used) by financing activities
(390,742,057)
(314,599,994)
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)
(4,102)
40,217
36,115
(1,701,632)
1,741,849
40,217
430
Pirelli Annual Report 2022 EXPLANATORY NOTES
replace the previous euro 2 billion EMTN program, approved
on December 21, 2017.
As part of this program, the BoD authorized on the same date,
the issue of one or more bonds, to be placed with institutional
investors, for a total maximum amount of up to euro one
billion. In light of the changed market conditions, on June
22, 2022, Pirelli updated this authorization, revoking the
resolution and simultaneously approving a new one for the
issue, again as part of the EMTN program, of non-convertible
bonds to be placed with institutional investors up to to euro 1
billion to be completed by May 2023.
On May 18, 2022, the Pirelli Shareholders’ Meeting
(convened on April 13, 2022), which was attended by
83.68% of the capital with voting rights, approved - with
over 99.9% of the capital represented - the 2021 financial
statements, resolving the distribution of a dividend of
euro 0.161 per ordinary share equal to total dividends of
euro 161 million gross of withholding taxes. The dividend
was paid on May 25, 2022 (ex-dividend date May 23 and
record date May 24).
On May 23, 2022, with reference to the non-interest
bearing senior unsecured guaranteed equity - linked bond
called “EUR 500 million Senior Unsecured Guaranteed
Equity-linked Bonds due 2025”, Pirelli & C. SpA announced
that - following the resolution of the Shareholders’ Meeting of
May 18, 2022 for the distribution of a dividend of euro 0.161
per ordinary share - the conversion price of the bonds was
changed from euro 6.235 to euro 6.1395, in accordance with
the regulation of the bond, with effect from May 23, 2022.
On June 22, 2022, the Board of Pirelli approved the
subscription with a selected pool of international banks of a
sustainability-linked credit line for an amount of up to euro
400 million with a 19-month maturity to further optimize the
financial structure of the Group. The line is parametrized to
the Pirelli objective of reducing absolute greenhouse gas
emissions from raw materials purchased (Scope 3), validated
by the Science Based Targets initiative (SBTi). This KPI is
among those identified within the first Pirelli “Sustainability-
linked financing Framework” (the document that contains
the company’s guidelines and commitments towards its
stakeholders in the field of sustainable finance).
On October 25, 2022, Pirelli repaid in advance and in full
the bond “Euro 600,000,000 1.375 per cent. Guaranteed
Notes due 25 January 2023” (ISIN: XS1757843146) listed
on the Luxembourg Stock Exchange, the residual amount
of which was equal to euro 553 million. As envisaged by the
Issuer Call option of the regulation, the repayment - carried
out using the Company’s available cash - was at par plus the
interest accrued up to the early repayment date.
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.
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
in turn, through China
International Italy S.r.l. which
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.
Since the start date of trading on the Stock Exchange
(October 4, 2017), there have been no entities that exercise
management and coordination activities over the Company.
On April 5, 2023, the Board of Directors authorized
publication of these Annual Financial Statements (“Annual
Financial Statements or Separate Financial Statements”).
SIGNIFICANT EVENTS 2022
On February 21, 2022, Pirelli finalized the signing of a
5-year multicurrency banking line of euro 1.6 billion with a
pool of leading national and international banks.
The line, based on the Group’s ESG objectives, has made it
possible to optimize the debt profile by lengthening its maturity.
On February 23, 2022, the BoD of Pirelli approved, as
part of the refinancing and optimization strategy of the
company’s financial structure, a new EMTN (Euro Medium
Term Note) program for the issue of senior unsecured non-
convertible bonds for a maximum value of euro 2 billion to
431
FINANCIAL STATEMENTS AT DECEMBER 31, 2022 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
5 of regulation (EC) no. 1606/2002 on
international
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:
→ 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
statement.
FINANCIAL STATEMENTS
The separate Financial Statements at December 31, 2022
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.
The Company opted for the presentation of the tax effects
and reclassifications to the income statement of profits/
losses recorded as Other Comprehensive Income 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 year 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
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.
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 main 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;
→ the operating result achieved by the investee company
is significantly lower than the amount envisaged in the
management plan;
432
Pirelli Annual Report 2022 → there are expectations of significantly decreasing operating
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 loss attributable to the Company exceeds the carrying
amount of the investment and the investor is obliged to fulfill
legal or implicit obligations of the investee company, or in
any case, to cover the losses, any excess with respect to the
carrying amount is recognized in a specific liability provision
under provisions for risks and charges.
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 impairment loss
recorded in the Income Statement.
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 or associate 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 entity specific, factors that may not
be applicable to any entity.
If the reason for impairment ceases to exist, the carrying
amount of the
in the Income
Statement, up to the original cost.
is recorded
investment
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.
433
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 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.
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, 2022
In accordance with IAS 8 “Accounting standards, changes
in accounting estimates and errors”, the IFRS effective from
January 1, 2022 are indicated below:
→ Amendments to IFRS 3 - Business Combinations
These amendments are aimed at: (i) completing the
update of the references to the Conceptual Framework
for Financial Reporting present
in the accounting
standard; (ii) providing clarifications on the conditions
for the recognition, at the acquisition date, of provisions,
contingent liabilities and tax liabilities assumed in the
context of a business combination transaction; (iii)
specifying that contingent assets cannot be recognized
as part of a business combination transaction.
There are no
statements as a result of these amendments.
impacts on the Company’s financial
→ 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.
There were no impacts on the Company’s financial
statements 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).
There were no impacts on the Company’s financial
statements as a result of these amendments.
FINANCIAL STATEMENTS AT DECEMBER 31, 2022 → Annual Improvements (cycle 2018 – 2020) issued in
→ Amendments to IAS 8 - Accounting standards, changes 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.
There were no impacts on the Company’s financial
statements as a result of these amendments.
3.2 INTERNATIONAL ACCOUNTING STANDARDS
AND/OR INTERPRETATIONS ISSUED
BUT NOT YET IN FORCE IN 2022
Pursuant to IAS 8 “Accounting standards, changes
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, 2022, and which are
therefore not applicable, and the foreseeable impacts on the
Separate Financial Statements.
None of these Standards and Interpretations have been
adopted by the Group, and thus by the Company in advance.
→ 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. These amendments, which are
expected to come into force January 1, 2023. No impacts
are expected on the classification of financial liabilities
following 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.
Said amendments have been endorsed by the European
Union and will be applicable from January 1, 2023. No
impacts on the disclosures of the Company’s Financial
Statements are foreseen as a result of these amendments.
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.
Said amendments have been endorsed by the European
Union and will be applicable from January 1, 2023. 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 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, endorsed by the European Union,
will be applicable from January 1, 2023. No impacts on
the Company’s financial statements are foreseen as a
result of these amendments.
→ IFRS 17 – Insurance contracts
IFRS 17, which replaces IFRS 4 “Insurance contracts”,
defines the accounting of insurance contracts issued and
reinsurance contracts held.
The provisions of IFRS 17, endorsed by the European
Union, will enter into force on January 1, 2023. No impacts
on the Company’s financial statements are expected
from the entry into force of this standard.
→ Amendments to IFRS 17 – First-time application of IFRS
17 and IFRS 9 Comparative information
These amendments make it possible to overcome the
one-off classification differences of the comparative
information of the previous year at the time of the first
application of IFRS 17 and IFRS 9 Financial Instruments.
The optional classification overlay introduced by this
amendment makes it possible to make the comparative
information presented at the time of first-time adoption
of IFRS 17 and IFRS 9 more useful.
434
Pirelli Annual Report 2022 These amendments, endorsed by the European Union,
will enter into force on January 1, 2023. No impacts are
expected on the Company’s financial statements as a
result of these amendments.
→ Amendments to IAS 1 - Presentation of financial statements
- non-current liabilities with covenants
These amendments specify that the covenants to be
respected after the reporting date do not affect the
classification of the debt as current or non-current at
the reporting date. The amendments instead require the
company to provide information on these covenants in
the notes to the financial statements.
These amendments, which will come into force on January
1, 2024, have not yet been approved by the European
Union. No impacts are expected on the classification of
financial liabilities and in terms of disclosure following
these amendments.
→ Amendments to IFRS 16 Leases: Lease liabilities in a sale
the requirements
and leaseback transaction
These amendments specify
for
accounting for a sale and a leaseback after the date of
the transaction.
In particular, in the subsequent measurement of the
liability deriving from the leasing contract, the seller-
lessee determines the “lease payments” and the “revised
lease payments” in such a way as not to record gains or
losses that refer to the right of use maintained.
These amendments, which will come into force on January
1, 2024, have not yet been approved by the European
Union. No impacts on the Company’s financial statements
are foreseen as a result of these amendments.
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:
435
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 minimize 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.
items subject to exchange rate risk are mainly
The
represented by receivables and payables denominated in
foreign currency.
The Group Treasury is responsible for hedging the net position
for each currency and, 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
statement of the Company deriving from changes
in
exchange rates calculated on the hedging instruments
in place at December 31, 2022 are described in note 17
“Derivative financial instruments”.
FINANCIAL STATEMENTS AT DECEMBER 31, 2022 INTEREST RATE RISK
Interest rate risk is represented by the exposure to variability of the fair value or future cash flows of financial
assets or liabilities due to changes 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 the Company’s net result 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%
12/31/2022
12/31/2021
12/31/2022
12/31/2021
(in thousands of euro)
Impact on Net income (loss)
(10,292)
(7,020)
10,292
7,020
The effects on the Company shareholders’ equity resulting from changes in the EURIBOR rate calculated on
the interest rate hedging instruments outstanding at December 31, 2022 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 16,570 thousand (euro 21,855 thousand at December 31, 2021) and those
represented by securities indirectly associated with listed shares (Fin. Priv. S.r.l.) amounted to euro 18,864
thousand (euro 21,172 thousand at December 31, 2021); these financial assets represent 76% 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 828 thousand of the Company’s shareholders’ equity (positive for euro 1,093
thousand at December 31, 2021), while a -5% negative change of these listed securities, other things being
equal, would result in a negative change of euro 828 thousand of the Company’s shareholders’ equity (negative
for euro 1,093 thousand at December 31, 2021).
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.
436
Pirelli Annual Report 2022 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 centralized 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 centralized
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 shut-downs.
At December 31, 2022, the Company had, aside from cash equal to euro 36 thousand (euro 40 thousand
at December 31, 2021), unused credit facilities equal to euro 100,000 thousand (euro 700,000 thousand at
December 31, 2021).
The maturities of financial liabilities at December 31, 2022 may be broken down as follows:
(in thousands of euro)
12/31/2022
up to 1 year
from 1 to 2 years
from 2 to 5 years
over 5 years
Total
Payables to banks and other lenders
473,269
1,497,226
2,005,024
11,231
3,986,750
of which lease liabilities:
7,469
7,173
20,720
11,231
46,593
Trade payables
Other payables
Derivative financial instruments
25,549
73,609
32
-
355
-
-
-
-
-
-
-
25,549
73,963
31
Total
572,458
1,497,581
2,005,024
11,231
4,086,293
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
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
50,214
Trade payables
Other payables
18,387
38,603
-
822
-
-
Derivative financial instruments
3,196
1,908
300
-
-
-
18,387
39,425
5,404
Total
437
1,151,774
1,141,673
2,358,658
18,819
4,670,923
FINANCIAL STATEMENTS AT DECEMBER 31, 2022
5. INFORMATION ON FAIR VALUE
FAIR VALUE MEASUREMENT
5.1
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 as at December 31, 2022, divided into the three
levels defined above:
Note
12/31/2022
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
16
-
16
-
44,564
16,570
18,864
9,130
1,776
26,070
3,281
-
-
-
1,776
26,070
3,281
-
-
-
75,707
16,570
50,007
9,130
(32)
-
-
(32)
-
-
-
-
(32)
-
-
(32)
-
-
-
-
438
Pirelli Annual Report 2022
The breakdown at December 31, 2021 was as follows:
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)
-
-
-
-
439
FINANCIAL STATEMENTS AT DECEMBER 31, 2022
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)
12/31/2022
12/31/2021
8,966
164
9,130
8,309
657
8,966
These financial assets mainly consist of the equity investment in Istituto Europeo di Oncologia (European
Institute of Oncology) (euro 8,140 thousand).
In the year ended December 31, 2022, 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 maximize the utilization 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.
440
Pirelli Annual Report 2022
5.2
The following are the carrying amounts for each class of financial asset and liability identified by IFRS 9:
CATEGORIES OF FINANCIAL ASSETS AND LIABILITIES
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
(in thousands of euro)
Note
12/31/2022
12/31/2021
17
13
14
13
15
12
17
17
17
19
19
22
23
23
19
19
17
17
16
14
612
2,000,566
43,999
40,116
2,215,172
792,730
36
40
2,259,819
2,833,451
46,340
54,817
3,281
26,070
29,351
5,118
4,383
9,501
2,335,526
2,897,783
32
4
3,283,092
3,371,179
357,015
1,064,767
25,549
18,387
355
822
73,609
38,603
3,739,620
4,493,757
35,770
38,999
6,141
5,774
41,911
44,773
-
-
-
670
3,554
4,224
TOTAL FINANCIAL LIABILITIES
3,781,563
4,542,758
441
FINANCIAL STATEMENTS AT DECEMBER 31, 2022
6. CAPITAL MANAGEMENT POLICY
The Company’s objective is to maximize 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
in 2023” 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 annually or more frequently, if specific events or
circumstances occur which may lead to the presumption of
impairment.
The recoverable value configuration for the purposes of the
impairment test at December 31, 2022 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 and operating cash flows and
related growth rates beyond the explicit forecast period, in
order to estimate the terminal value 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, to the definition of the incremental
borrowing rate. The main ones 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);
→ the incremental borrowing 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 on the basis of the Group’s credit spread and
local credit spread.
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).
442
Pirelli Annual Report 2022 PROVISIONS FOR LIABILITIES AND CHARGES
Provisions representing the risk of losing are recognized against the legal and tax risks associated with indirect
taxes. The value of the provisions recorded in the Financial Statements relating to these risks represents the best
estimate at the date made by the management in the face of legal and tax disputes concerning a wide range of
issues that are subject to the jurisdiction of various states. This estimate involves the adoption of assumptions
that depend on factors that may change over time and that could therefore, have significant effects 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 pre-tax result 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 pre-tax result. 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.
The composition was as follows:
8. PROPERTY, PLANT AND EQUIPMENT
- Tangible assets
- Rights of use
Net Value
8.1
The breakdown and changes are as follows:
PROPERTY, PLANT AND EQUIPMENT
(in thousands of euro)
12/31/2022
12/31/2021
31,283
34,975
32,433
37,555
66,258
69,988
Gross Value
12/31/2022
Accumulated
Depreciation
Net Value
Gross Value
(in thousands of euro)
12/31/2021
Accumulated
Depreciation
Net Value
Land
Buildings
5,245
-
5,245
5,245
-
5,245
44,313
(24,484)
19,829
44,273
(23,180)
21,093
Plant and machinery
3,208
(2,020)
Industrial and trade equipment
1,893
(1,489)
1,187
404
2,848
(1,916)
1,891
(1,250)
931
641
14,799
(10,182)
4,618
14,653
(10,130)
4,523
69,457
(38,174)
31,283
68,909
(36,476)
32,433
Other assets
Total
443
FINANCIAL STATEMENTS AT DECEMBER 31, 2022
NET VALUE
12/31/2021
Increases
Decreases
Reclassif.
Depreciation
12/31/2022
(in thousands of euro)
Land
Buildings
Plant and machinery
Industrial and trade equipment
Other assets
Total
5,245
21,092
931
641
4,524
32,433
-
41
360
2
244
647
-
-
-
-
-
-
-
-
-
-
-
-
-
5,245
(1,304)
19,829
(104)
(239)
(150)
1,187
404
4,618
(1,797)
31,283
(in thousands of euro)
NET VALUE
12/31/2020
Increases
Decreases
Reclassif.
Depreciation
12/31/2021
Land
Buildings
Plant and machinery
Industrial and trade equipment
Other assets
Total
5,245
22,313
967
880
4,583
-
93
60
-
54
33,988
207
-
-
-
-
-
-
-
-
-
-
-
-
-
5,245
(1,314)
21,092
(96)
(239)
(113)
931
641
4,524
(1,762)
32,433
There were no significant increases and divestments in 2022.
Financial expenses were not capitalized on property, plant and equipment.
8.2
The net value of the assets for which the Company has stipulated a lease contract is as follows:
RIGHTS OF USE
Rights of use Buildings
Rights of use Other assets
Net value
(in thousands of euro)
12/31/2022
12/31/2021
33,913
1,062
36,384
1,171
34,975
37,555
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 2022, also including remeasurement, amounted to euro 3,497 thousand (euro
1,034 thousand in 2021) and refer to vehicle and property lease contracts.
There were no reassessments or changes to significant contracts in 2022.
444
Pirelli Annual Report 2022
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)
2022
2021
5,052
776
5,828
4,928
772
5,700
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 payables, refer to note 19 “Borrowings from banks and other lenders”.
The items in question and the related changes are detailed as follows:
9. INTANGIBLE ASSETS
12/31/2021
Increase
Transfers
Amortisation
12/31/2022
(in thousands of euro)
Pirelli Brand - indefinite life
2,270,000
Software licenses
Other intangible assets
Assets under construction
608
5,193
587
Total
2,276,388
-
526
833
3,430
4,789
12/31/2020
Increase
Transfers
Amortisation
12/31/2021
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
Total
2,273,754
4,534
-
(1,900)
2,276,388
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 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.
445
-
2,270,000
-
-
(279)
587
(1,793)
(587)
-
-
(2,072)
2,279,105
(in thousands of euro)
855
4,820
3,430
608
5,193
587
FINANCIAL STATEMENTS AT DECEMBER 31, 2022
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 2022.
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, but, pursuant to IAS 36, to
impairment annually or more frequently, if specific events
or circumstances occur which may lead to the presumption
of impairment.
The impairment test at December 31, 2022 was performed
independent third-party
using the assistance of an
professional.
The configuration of the recoverable amount for impairment
testing purposes at December 31, 2022 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 fair value estimate considers future cash flows
based on management forecasts which, with reference to
2023, move from the adjusted EBITDA flows of the 2023
management plan approved on February 22, 2023 by the
Board of Directors of Pirelli & C. S.p.A., drafted on basis
of the new market context and in particular including the
indirect effects of the Russia-Ukraine conflict (mainly
attributable to the inflation of sales prices and the cost of
production factors). The data for 2023 have been adjusted
downwards to take into account the analysts’ consensus
estimates updated after the presentation of the plan, as
evidence coming from outside and with reference to the
years 2024 - 2025 was used.
With reference to the impacts on flows attributable to
climate-change issues, it should be noted that:
→ thanks to its technological leadership, the Group expects
positive results in the short term from the marketing of
tyres that include technological solutions capable of
minimizing the environmental impact. On the other hand,
with reference to the risks deriving from climate change
(physical and transitional), no material impacts are expected
in the short and medium term, while there are elements
of uncertainty in the long term (>2030). For further
information, please refer to the paragraph “Information
relating to climate change” contained in the explanatory
notes of the Consolidated Financial Statements;
→ the estimates of the equity analysts, on which the flows
used in the impairment test are based, do not envisage
negative long-term effects deriving from climate change
and include, beyond the explicit forecast period used, a
positive growth rate;
→ in the estimate of the terminal value, prudential use was
made of a higher level of investments than that expected
by analysts to consider any acceleration of investments
relating to energy efficiency in line with the decarbonization
strategy adopted by the Group;
→ the capitalization rate (WACC - g) is in line with the
consensus of analysts and therefore captures market
consensus expectations with regard to risks of a systematic
nature and not connected to flows projected beyond the
explicit forecast period.
The flows used to determine the recoverable value, which
are based on consensus estimates by analysts, consider,
for the explicit forecast period, a cumulative average annual
growth rate (CAGR) of revenues, calculated with respect to
the revenues recorded in 2022, equal to 2.1% and an average
adjusted Ebitda margin for the period equal to 21.3% with a
CAGR of the adjusted Ebitda of 3% compared to the absolute
value recorded in 2022.
Furthermore, the estimate of the fair value is based on:
→ 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 (as in the existing contracts);
→ the excess earnings attributable to the Pirelli Brand which
are derived by deducting the notional rent or royalty rate
of the Group’s operating assets other than the Brand,
expressed at fair value, from the prospective operating
income;
→ a discount rate of 10.30%, which includes a premium
compared to the WACC, which is determined according
to the riskiness of the specific asset and the growth rate
“g” in the terminal value which is equal to 0.5%;
→ 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 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 (17%) while, in order for the Fair Value to be
equal to the carrying amount, a downward change of the key
parameters is necessary and in particular:
→ a decrease in revenues of 410 basis points for the explicit
forecast period and in the terminal value;
→ a decrease in the EBITDA margin adjusted of 67 basis points
for the explicit forecast period and in the terminal value;
→ an increase in the discount rate of 142 basis points in the
explicit forecast period and in the terminal value;
→ a decrease in the growth rate “g” of 203 basis points for
beyond the explicit forecast period.
446
Pirelli Annual Report 2022 10. INVESTMENTS IN SUBSIDIARIES
At December 31, 2022, this item amounted to euro 4,624,549 thousand compared to euro 4,632,420 thousand
at December 31, 2011, 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)
12/31/2022
12/31/2021
230
1,315
6,346
8,420
3,238
1,655
230
1,315
6,346
8,420
3,238
1,655
4,528,245
4,528,245
-
7,871
75,000
75,000
100
100
4,624,549
4,632,420
(in thousands of euro)
12/31/2022
12/31/2021
4,632,420
4,633,666
(7,871)
(1,246)
4,624,549
4,632,420
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 subsidiaries on which it was necessary to carry out the test were
Pirelli UK Ltd and Pirelli Ltda.
With specific reference to the investment in the subsidiary Pirelli UK Ltd, the cost of the investment was deemed
to be entirely unrecoverable and consequently the company recorded an impairment of euro 7,871 thousand
equal to the net book value of the entire investment.
The impairment test of the investment in the subsidiary Pirelli Ltda did not give rise to any impairment.
Further details are set out in the Annexes to the Explanatory Notes.
447
FINANCIAL STATEMENTS AT DECEMBER 31, 2022
11. INVESTMENTS IN ASSOCIATED COMPANIES
At December 31, 2022, this item amounted to euro 6,375 thousand of euro, unchanged compared to December
31, 2021, 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)
12/31/2022
12/31/2021
104
6,271
6,375
104
6,271
6,375
On March 9, 2022, the company exited the shareholding structure of Focus Investments S.p.A.. The change did
not generate any impact, as the value of the equity investment was almost zero.
No additional 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 46,339 thousand at December 31, 2022 (euro 54,817 thousand at December 31, 2021). 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)
12/31/2022
12/31/2021
16,570
21,855
18,864
1,776
8,140
989
21,171
2,825
8,006
960
Total financial assets at fair value through other comprehensive income
46,339
54,817
The changes in the year are shown below:
Opening balance
Adjustment to fair value recognized in other comprehensive income
Closing balance
(in thousands of euro)
54,817
(8,478)
46,339
448
Pirelli Annual Report 2022
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. (negative for euro 5,285 thousand), in Fin.Priv. S.r.l. (negative
for euro 2,307 thousand), in Genextra S.p.A. (negative for euro 6 thousand), in Istituto Europeo di Oncologia
(positive for euro 133 thousand), in Fondo Comune di investimento Anastasia (negative for euro 1,049 thousand)
and in Nomisma - Società di Studi Economici S.p.A. (positive for euro 37 thousand).
For listed securities, the fair value corresponds to the Stock Exchange listing at December 31, 2022. For unlisted
securities and real estate funds, the fair value was estimated according to available information.
The breakdown of other receivables is as follows:
13. OTHER RECEIVABLES
12/31/2022
12/31/2021
Total
Non-current
Current
Total
Non-current
Current
(in thousands of euro)
Other receivables from subsidiaries
Financial receivables from subsidiaries
Guarantee deposits
Other receivables from third parties
977
2,199,401
340
6,999
Receivables from tax authorities for taxes not related to income
6,771
Financial accrued interest income
Financial prepaid expenses
271
1,025
-
-
340
272
-
-
-
977
1,380
-
1,380
2,199,401
2,780,305
2,000,000
780,305
-
281
6,727
6,489
6,771
4,583
271
1,025
72
186
281
285
-
-
-
-
6,204
4,583
72
186
Total other receivables
2,215,784
612
2,215,172
2,793,296
2,000,566
792,730
Financial receivables from subsidiaries include a loan of euro 2,000 million with Pirelli International Treasury
S.p.A. accessed on January 31, 2020 with maturity January 31, 2023, the short-term use of a long-term credit
line (with maturity January 31, 2023) disbursed in favor of Pirelli International Treasury S.p.A. for an amount of
euro 189 million, the receivable for interest accrued not yet paid on the same lines for euro 9,911 thousand and
the relation with Pirelli International Treasury S.p.A. relating to the interest-bearing current account, regulated at
interest rates market for euro 489 thousand (at December 31, 2021 equal to euro 384 thousand). On the renewals
of the credit lines granted to Pirelli International Treasury S.p.A. please refer to paragraph 42 - Significant events
subsequent to the end of the year.
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, 2022.
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 6,771 thousand mainly refer to
receivables for VAT, which increased compared to the previous year.
Accrued financial assets mainly refer to portions of interest accrued but not yet collected, on interest rate
swap derivative contracts.
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.
449
FINANCIAL STATEMENTS AT DECEMBER 31, 2022
14. TRADE RECEIVABLES
Trade receivables amounted to euro 43,999 thousand compared to euro 40,116 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)
12/31/2022
12/31/2021
42,782
3
1,421
39,115
3
1,732
44,206
40,850
(207)
43,999
(734)
40,116
Below is the breakdown of trade receivables, gross of the provision for bad debts based on the currency in which
they are expressed:
EUR
USD (Dollar USA)
RUB (Ruble Russia)
CHF
Total
12/31/2022
% of total trade
receivables
12/31/2021
% of total trade
receivables
(in thousands of euro)
40,355
325
610
2,916
91%
1%
1%
7%
33,760
906
650
5,534
82%
2%
2%
14%
44,206
100%
40,850
100%
Receivables from subsidiaries at December 31, 2022 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 1,421 thousand (euro 1,732 thousand at December 31, 2021),
shown gross of the provision for bad debts of euro 207 thousand, are past due for euro 566 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
Utilizations/reversals
Closing balance
(in thousands of euro)
12/31/2022
12/31/2021
734
48
(575)
207
643
91
-
734
450
Pirelli Annual Report 2022
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, 2022, they amounted to euro 36 thousand, against euro 40 thousand at December 31, 2021
and 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.
The value of cash and cash equivalents is considered to be aligned with the respective fair value.
16. TAX RECEIVABLES
At December 31, 2022, they amount to euro 97,981 thousand (euro 65,074 thousand at December 31, 2021).
The amount mainly includes receivables from Group companies participating in the tax consolidation for euro
97,450 thousand (euro 64,525 thousand at December 31, 2021). 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..
17. DERIVATIVE FINANCIAL INSTRUMENTS
The item includes the fair value of derivative instruments. The breakdown is as follows:
12/31/2022
12/31/2021
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:
-
-
-
16
-
-
Derivatives for interest rate - included in
net financial position
Other derivatives instruments - included
in net financial position
26,070
3,281
-
-
Total derivative instruments
26,070
3,298
-
-
-
-
-
-
(32)
-
-
-
-
-
-
-
9
5
-
-
-
-
(4)
-
-
4,383
-
(3,554)
(670)
-
5,118
-
-
(32)
4,383
5,132
(3,554)
(674)
The above derivatives are intercompany derivatives stipulated mainly with the Group’s treasury company, Pirelli
International Treasury S.p.A..
451
FINANCIAL STATEMENTS AT DECEMBER 31, 2022
DERIVATIVE FINANCIAL INSTRUMENTS IN HEDGE ACCOUNTING
The value of derivatives on interest rates, recorded as non-current assets for euro 26,070 thousand and
current assets for euro 3,281 thousand, refers to the fair value measurement of 8 interest rate swaps with the
following characteristics:
Derivative
Hedged element
Notional amount
Start date
Maturity
IRS
IRS
IRS
Term loan in EUR
62.5
August 2019
August 2023
receive floating / pay fix
Schuldschein
Schuldschein
180.0
20.0
July 2020
July 2023
receive floating / pay fix
July 2020
July 2025
receive floating / pay fix
IRS forward start
Term loan in EUR
500.0
February 2023
February 2026
receive floating / pay fix
Total
762.5
For these derivatives, cash flow hedge accounting was adopted. Items subjected to hedge accounting are:
1) future interest flows on liabilities in euro at floating rate;
2) future interest flows on the Schuldschein loan (see note 19).
In the first quarter of 2022, the IRS forward start pre hedge receive floating EURIBOR / pay fix EURIBOR
were closed early. The positive reserve accumulated at the date, amounting to euro 22,079 thousand, was not
reversed in the income statement as the future transaction being hedged was considered highly probable.
It should be noted that in January 2023, the future transaction took the form of a sustainability-linked bond
for a total nominal amount of euro 600 million (see the paragraph “significant events subsequent to the end
of the year”).
The change in fair value for the period is positive for euro 49,479 thousand (euro 17,732 thousand relating
to pre-hedged IRS and euro 31,747 thousand relating to other IRS). This change was entirely suspended as
Other Comprehensive Income, while net interest expense of euro 1,792 thousand was reversed to the income
statement under the item “Financial expenses” (note 36), correcting the financial expenses recognized on the
liability hedged.
A +0.5% change in the EURIBOR curve, other things being equal, would result in a positive change net of the tax
effect of euro 5,621 thousand in the Company’s shareholders’ equity, while a -0.5% change in the same curve
would result in a negative change net of the tax effect of euro 5,649 thousand in the Company’s shareholders’
equity.
Hedging relationships relating to IRS are considered effective prospectively as the following conditions are met:
→ 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 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.
452
Pirelli Annual Report 2022 SHARE CAPITAL
The share capital at December 31, 2022, fully subscribed
and paid-in, amounts to euro 1,904,374,935.66 divided into
1,000,000,000 ordinary shares without nominal value and
unchanged compared to December 31, 2021.
LEGAL RESERVE
The legal reserve at December 31, 2022 amounted to euro
380,875 thousand, unchanged compared to December
31, 2021, having already reached the limit set by art. 2430
Civil Code.
SHARE PREMIUM RESERVE
At December 31, 2022, the share premium reserve amounted
to euro 630,381 thousand and unchanged compared to
December 31, 2021.
CONCENTRATION RESERVE
At December 31, 2022, concentration reserves amounted
to euro 12,467 thousand and unchanged compared to
December 31, 2021.
OTHER RESERVES
At December 31, 2022, other reserves amounted to euro
133,735 thousand and unchanged compared to December
31, 2021. Other reserves include the reserve of euro 41,200
thousand created in 2020 to include in equity the component
relating to the fair value of the option sold to the subscribers
of the convertible bond.
OTHER O.C.I. RESERVES
At December 31, 2022, Other O.C.I. reserves were positive
for euro 40,947 thousand and refer to the cash flow hedge
reserve, net of the tax effect (positive for euro 39,087
thousand), to the employee benefit remeasurement reserve
(positive for euro 2,068 thousand) and to the reserve for the
fair value adjustment of financial assets at fair value through
comprehensive income (negative for euro 208 thousand).
MERGER RESERVE
At December 31, 2022, the merger reserve amounted to euro
1,022,928 thousand, unchanged compared to December 31,
2021. 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
559,834 thousand compared to a 504,215 at December
31, 2021. The increase is attributable in part to the residual
result carried forward from the previous year, as per meeting
resolution of May 18, 2022.
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.
With reference to other derivatives, following the early
repayment of the unsecured loan (“Facilities”) for USD 1,079
million (see note 19), the CCIRS pay floating EURIBOR /
receive floating LIBOR were partially repaid early and partially
discontinued (current assets of euro 5,118 thousand at
December 31, 2021).
The positive fair value reserve of euro 4,549 thousand
(positive cash flow hedge reserve of euro 4,103 thousand
and positive cost of hedging reserve of euro 466 thousand)
was entirely reversed to the income statement:
→ profits of euro 7,302 thousand to offset net realized
exchange rate losses recorded on the hedged liability;
→ net interest income of euro 231 thousand to correct the
financial expenses recorded on the hedged liability;
→ ineffectiveness costs for euro 2,984 thousand.
For the CCIRS held in the portfolio until natural maturity
(June 2022), hedge accounting was discontinued at the
same time as loan repayment and the positive change in
fair value of euro 48,130 thousand was entirely reversed to
the income statement. This positive change was offset by a
negative change in the fair value of FX contracts negotiated
to hedge the CCIRS, for which hedge accounting was not
adopted. These effects are included in “financial expenses –
fair value measurement of derivatives”.
For further details, see note 36 “Financial expenses”.
18. SHAREHOLDERS’ EQUITY
Equity amounted to euro 4,938,026 thousand (euro
4,813,132 thousand at December 31, 2021).
The statement of changes in equity is shown in the main
financial statements.
The change is essentially due to the net result for the year
(positive for euro 252,486 thousand), the adjustment
to the fair value of derivatives designated as cash flow
hedges net of the tax effect (positive for 41,690 thousand),
the adjustment to the fair value of financial assets at fair
value recorded as other components of the statement of
comprehensive income (negative for euro 8,478 thousand)
and the distribution of dividends for euro 161,000 thousand.
453
FINANCIAL STATEMENTS AT DECEMBER 31, 2022 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
Share capital
1,904,375
Share premium reserve
630,381
A, B, C
Legal reserve
Other reserves
380,875
B
- Concentration reserve
12,467
A, B, C
- Convertible bond loan reserve
41,200
A
630,381
380,875
12,467
41,200
92,535
-
-
-
-
-
-
-
-
92,535
A, B
40,947
-
1,022,928
A, B, C
1,022,928
559,834
A, B, C
559,834
(36,044)
4,685,542
2,740,219
(36,044)
514,610
2,225,610
- 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
19. BORROWINGS FROM BANKS AND OTHER LENDERS
The breakdown of the item borrowings from banks and other lenders is as follows:
12/31/2022
12/31/2021
Total
Not currents
Currents
Total
Not currents
Currents
(in thousands of euro)
Bonds
713,098
490,452
222,646
1,453,762
1,453,762
-
Borrowings from banks
2,917,566
2,792,641
124,925
2,967,539
1,917,417
1,050,122
Lease liabilities
41,911
35,770
44,773
38,999
780
8,664
-
-
1,984
8,664
12,661
-
-
6,141
780
5,774
1,984
12,661
3,682,019
3,318,863
363,156
4,480,719
3,410,178
1,070,541
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 (“convertible 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
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Pirelli Annual Report 2022
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 6.1395 per
share (originally euro 6.235 per share), subject to additional anti-dilutive adjustments envisaged by the loan
regulations. At December 31, 2022, the component recorded under non-current financial payables was equal
to euro 470.5 million. The difference with the nominal value refers to the fair value of the option, determined
on the placement date, held by the subscribers of the loan and of their option to convert the bond into new
ordinary shares of the Company at a pre-set price. This value was accounted for at inception under equity
reserves for euro 41.2 million;
→ floating rate “Schuldschein” loan (Euribor + spread) for a total nominal value of euro 243 million, euro 20
million classified under non-current financial payables (maturity July 2025) and euro 223 million under
current financial payables (maturity July 2023). The loan, subscribed 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.
Of the tranche of euro 423 million, a portion of euro 200 million was repaid in advance in January 2022. In
December 2022, the Company sent the subscribers of the Schuldschein a notice for the early repayment
of the remaining euro 223 million of the 5-year tranche, fully repaid in January 2023. For completeness, it is
recalled that 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;
→ On October 25, 2022, the unrated bond was repaid in advance at par, as contractually envisaged by the Issuer
Call clause, for a nominal amount of euro 553 million. This bond (originally equal to euro 600 million partially
repurchased for a total amount of euro 47 million during the last quarter of 2018) with original maturity
January 2023, was placed on January 22, 2018 with fixed coupon of 1.375% and maturity of 5 years. The
loan, placed with international institutional investors, was issued under the EMTN program approved by the
Board of Directors at the end of 2017, subscribed on January 10, 2018 and updated on December 19, 2018.
The carrying amount of 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
Below are the changes of the item bonds:
Bonds as at 12/31/2021
Bond repayment "EMTN program"
Bond repayment "Schuldschein"
Non-cash interest convertible bond
Amortised cost of the year
Bonds as at 12/31/2022
455
(in thousands of euro)
12/31/2022
12/31/2021
743,000
1,496,000
(41,791)
(41,791)
(14,957)
(14,957)
(2,988)
(2,988)
13,433
16,400
9,282
8,216
713,097
1,453,762
(in thousands of euro)
1,453,762
(553,000)
(200,000)
8,185
4,150
713,097
FINANCIAL STATEMENTS AT DECEMBER 31, 2022
The change in the item bonds relating to the previous year is shown below:
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
(in thousands of euro)
1,524,500
(262)
(82,000)
8,020
3,504
1,453,762
The breakdown of the item borrowings from banks, which amounted to Euro 2,917,566 thousand, is as follows:
(in thousands of euro)
12/31/2022
Due Date
Interest rate
Notional
Balance
Non- current
Current
Club Deal EUR 1,6 bln. ESG 2022 5y
2/22/2027 Euribor + spread
600,000
597,635
597,635
Club Deal EUR 800 mln. ESG 2020 5y
4/2/2025 Euribor + spread
800,000
797,212
797,212
Club Deal EUR 400 mln. ESG 2022 19m
1/29/2024 Euribor + spread
400,000
399,696
399,696
Bilateral 600m 2019 5y borrowing
2/14/2024 Euribor + spread
600,000
598,893
598,893
-
-
-
-
Bilateral 125m 2019 4y borrowing
8/7/2023 Euribor + spread
125,000
124,925
-
124,925
Bilateral ESG 400m 2021 3y borrowing
12/27/2024 Euribor + spread
400,000
399,205
399,205
-
Total borrowings from banks
2,917,566
2,792,641
124,925
and they mainly refer to:
→ Use of the unsecured loan “Club Deal EUR 1.6 bln ESG 2022 5y” by Pirelli & C. S.p.A. for euro 597,635 thousand
and classified under non-current financial payables. The floating rate credit line (Euribor + spread), subscribed
on February 21, 2022, with a pool of leading Italian and international banks and with a 5-year maturity consists
of three tranches for a total of euro 1.6 billion, distributed as follows:
→ Pirelli & C. S.p.A. term loan with nominal value of euro 600,000 thousand fully used and revolving cash
credit facility of euro 100,000 thousand, unused at December 31, 2022;
→ Pirelli International Treasury S.p.A. revolving cash credit facility of euro 900,000 thousand, unused at
December 31, 2022.
→ The loan is guaranteed by Pirelli Tyre S.p.A.. This line, parametrized to the Group’s ESG objectives, contributed
to the early repayment in February 2022 of the debt relating to the unsecured loan (“Facilities”) for a value
of euro 949,182 thousand at December 31, 2021 (USD 1,079 million), with contract expiry in June 2022. The
new loan also made it possible to increase the capacity in terms of the revolving credit line, which rose from
euro 700,000 thousand for the previous credit line to euro 1 billion for the new revolving credit line;
→ “Club Deal EUR 800m ESG 2020 5y” for euro 797,212 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 (classified as non-current financial
payables). 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
456
Pirelli Annual Report 2022
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 399,696 thousand relating to the “Club Deal EUR 400m ESG 2022 19m” credit line of euro 400 million
at floating rate (Euribor + spread), subscribed on June 27, 2022 with a pool of leading international banks
and maturing in 19 months (classified as non-current financial payables). The bank line is parametrized to the
objective of reducing absolute greenhouse gas emissions from raw materials purchased (Scope 3) validated
by the Science Based Target initiative (SBTi) and contained in the first “Sustainability Linked Financing
Framework” published by Pirelli in May 2022;
→ euro 723,818 thousand relating to two bilateral loans disbursed in favor of Pirelli & C. S.p.A. by leading banks,
of which a nominal value of euro 600 million (the loan “Linea bilaterale 600m 2019 5y”) maturing February
2024 at floating rate (Euribor + spread) and guaranteed by Pirelli Tyre S.p.A. (classified as non-current financial
payables), and euro 125 million (the loan “Linea bilaterale 125m 2019 4y”) maturing August 2023 at floating
rate (Euribor + spread) and classified as current financial payables. It is noted that on December 29, 2022,
the bilateral loan of euro 100 million with original maturity December 2022 was repaid;
→ euro 399,205 thousand relating to the bilateral loan for a nominal amount of euro 400 million disbursed in
December 2021 in favor of Pirelli & C. S.p.A. by a leading bank (the loan “Linea bilaterale ESG 400m 2021
3y”), with 3-year maturity and guaranteed by Pirelli Tyre S.p.A.. The loan, at variable rate (Euribor + spread),
is parametrized to certain Group sustainability targets and is classified as non-current financial payables.
At December 31, 2022, the Company had a liquidity margin equal to euro 100,036 thousand composed of euro
100,000 thousand of unused committed credit lines, and euro 36 thousand in cash.
Below are the changes in payables to banks:
(in thousands of euro)
Borrowings from banks at 12/31/2021
Reimbursements of unsecured financing (Facilities)
Reimbursements of bilateral borrowings
Issuance of the unsecured “Club Deal EUR 1.6 bn ESG 2022 5y” financing
Issuance of the unsecured “Club Deal EUR 400m ESG 2022 19m” financing
Transactions costs
Amortised cost of the year
Translation differences
Borrowings from banks at 12/31/2022
2,967,539
(960,280)
(100,000)
600,000
400,000
(3,277)
6,277
7,307
2,917,566
457
FINANCIAL STATEMENTS AT DECEMBER 31, 2022
The change in total payables to banks for the previous year is shown below:
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
(in thousands of euro)
3,336,716
368,549
(1,337,656)
500,000
(1,275)
14,243
86,962
2,967,539
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 12/31/2021
Increase of lease obligations
Remeasurement and early termination
Cash outflow for lease obligations - principal amount
Lease liabilities as at 12/31/2022
The change in total lease payables for the previous year is shown below:
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
(in thousands of euro)
(in thousands of euro)
Non-discounted future payments for lease contracts for which the exercise of extension options is not
considered reasonably certain amounted to euro 54,623 thousand at December 31, 2022 and are not included
in this item (euro 50,936 thousand at December 31, 2021).
The item other financial payables includes the payable to shareholders for euro 780 thousand following the
squeeze out operation.
Accrued financial expenses (euro 8,664 thousand) mainly refers to the accrual of interest on loans from banks
for euro 6,640 thousand (euro 3,618 thousand at December 31, 2021), and to the accrued interest matured on
bonds for euro 2,002 thousand (euro 8,510 thousand at December 31, 2021).
At December 31, 2022, there are no financial payables secured by collateral (pledges and mortgages).
44,773
1,079
2,165
(6,106)
41,911
49,708
667
205
(5,807)
44,773
458
Pirelli Annual Report 2022
For current financial payables, it is maintained that the book value is approximately the 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)
12/31/2022
12/31/2021
Carrying amount
Fair value
Carrying amount
Fair value
490,452
462,098
1,453,762
1,469,529
2,792,641
2,806,825
1,917,417
1,925,000
35,770
35,770
38,999
38,999
Total borrowings from banks and other financial
institutions - non current
3,318,863
3,304,693
3,410,178
3,433,528
The fair value of the debt component of the convertible bond, of the Schuldschein loan and of payables to banks
was calculated by discounting each expected borrowings cash 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 lenders by currency of origin of the payable at December
31, 2022 and December 31, 2021 is as follows:
EUR
USD (Dollar USA)
Total
(in thousands of euro)
12/31/2022
12/31/2021
3,682,019
3,529,236
-
951,483
3,682,019
4,480,719
At December 31, 2022 there are interest rate hedging derivatives in place.
Considering the effects of the hedging derivatives, the Group’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 2,898,035 thousand, the interest rate of which is subject to redetermination
in 2023;
→ fixed-rate payables for euro 732,628 thousand, the interest rate of which is not subject to redetermination
until the natural maturity of the reference debt (euro 242,177 thousand maturity in the next twelve months
and euro 490,452 thousand maturity beyond twelve months).
With reference to the presence of financial covenants, it is noted that
(i) the “Schuldschein” loan,
(ii) the euro 600 million bilateral line granted to Pirelli & C. S.p.A. during the first quarter of 2019 (the loan “Linea
bilaterale 600m 2019 5y”),
(iii) the bilateral line of euro 125 million granted to Pirelli & C. S.p.A. during the third quarter of 2019 (the loan
“Linea bilaterale 125m 2019 4y”) and
(iv) the “Club Deal EUR 800m ESG 2020 5y” subscribed on March 31, 2020,
provide for compliance with a maximum ratio between net debt and gross operating margin (“Total Net
Leverage”), as resulting from the consolidated financial statements of Pirelli & C. S.p.A. The obligation to comply
with these financial covenants will cease upon reaching certain levels of Total Net Leverage identified in the
relevant contracts.
459
FINANCIAL STATEMENTS AT DECEMBER 31, 2022
For the sake of completeness, it is noted that the obligation to comply with the financial covenants envisaged by
the Club Deal EUR 1.6 bln ESG 2022 5y and by the loan Linea bilaterale ESG 400m 2021 3y has ceased due to
the attribution to Pirelli & C. S.p.A. of the public credit rating of BBB- by S&P Global Ratings and Fitch Ratings.
In all the loans indicated above, failure to comply with the financial covenant is identified as an event of default.
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 Schuldschein loan, individually and independently if requested by each lending
bank for its portion, the early repayment of the loan only for said portion; (ii) as part of both the loan “Linea
bilaterale 600m 2019 5y”, and the loan “Linea bilaterale 125m 2019 4y”, 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
(iii) as part of the “Club Deal EUR 800m ESG 2020 5y”, 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.
It is noted that at December 31, 2022, no event of default or non-fulfilment has occurred.
The “Club Deal EUR 1.6 bln ESG 2022 5y”, the “Schuldschein” loan, the loan “Linea bilaterale 600m 2019 5y”,
the loan “Linea bilaterale 125m 2019 4y”, the “Club Deal EUR 800m ESG 2020 5y” and the “Linea bilaterale ESG
400m 2021 3y” also envisage Negative Pledge clauses and/or other usual provisions the terms of which are in
line with market standards for each of the above types of credit facility.
The other outstanding financial payables at December 31, 2022 did not contain financial covenants.
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,
2022 and December 31, 2021, 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
12/31/2022
of which related parties
(note 39)
12/31/2021
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
363,156
-
3,318,863
-
3,682,019
(36)
-
-
-
-
-
1,070,541
670
3,410,178
1,187
670
-
3,554
3,554
4,484,943
(40)
-
(2,200,697)
(2,199,672)
(780,563)
(780,378)
(3,281)
(3,281)
(5,123)
(5,123)
1,478,005
(340)
(26,070)
3,699,215
(2,000,280)
(2,000,000)
(26,070)
(4,383)
(4,383)
Total net financial (liquidity)/debt position
1,451,595
1,694,552
* 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.
460
Pirelli Annual Report 2022
Net financial debt is restated below based on the outline provided by the ESMA guidelines:
Cash and cash equivalents
Other current financial asset
of which current financial receivables
(in thousands of euro)
12/31/2022
12/31/2021
(36)
(40)
(2,203,978)
(785,686)
(2,200,697)
(780,563)
of which Current derivative financial instruments (assets)
(3,281)
(5,123)
Liquidity
(2,204,014)
(785,726)
Current borrowings from banks and other financial institutions
363,156
1,070,541
Current derivative financial instruments (liabilities)
Current financial debt
Current net financial debt
-
670
363,156
1,071,211
(1,840,858)
285,485
Non-current borrowings from banks and other financial institutions
3,318,863
3,410,178
Non-current derivative financial instruments (liabilities)
Non current financial debt
Net financial debt*
-
3,554
3,318,863
3,413,732
1,478,005
3,699,217
* 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:
12/31/2021
Increases
Uses
Reversals
Reclass
12/31/2022
(in thousands of euro)
Provision for employees controversies
Provision for tax risks
1,702
1,141
-
-
Provision for environmental risks
5,382
10,000
(609)
(596)
-
(16)
-
-
-
-
-
497
1,141
15,366
Provision for other risks and charges
22,379
10,288
-
(135)
(10,474)
22,058
Provision for liabilities and charges -
non current portion
30,604
20,288
(625)
(731)
(10,474)
39,062
Provision for losses of subsidiaries
-
24,600
-
Provision for other risks and charges
509
518
(491)
Provision for liabilities and charges -
current portion
509
25,118
(491)
-
-
-
-
-
-
24,600
536
25,136
Total Provisions for risks and charges
31,113
45,406
(1,116)
(731)
(10,474)
64,198
461
FINANCIAL STATEMENTS AT DECEMBER 31, 2022
The increases of provision for liabilities and charges mainly refer to:
→ provisions of euro 10,000 thousand for charges related to environmental remediation of brownfield sites;
→ provisions totalling euro 10,288 thousand for STI (Short term Incentive) and LTI (Long term Incentive 2021-
2023 and 2022-2024) incentive plans of the Directors;
→ provision to cover the losses of investee companies of euro 24,600 thousand, which refers to the subsidiary
Pirelli UK Ltd.
Uses are mainly attributable to labor disputes.
The reclassifications mainly concern the reclassification from non-current provisions to payables to directors
of the portion of the 2020-2022 LTI plan set aside in previous years, which will be paid in the first half of 2023.
21. EMPLOYEE BENEFIT OBLIGATIONS
Employee benefit obligations amounted to euro 13,105 thousand (euro 21,442 thousand at December 31, 2021),
and the breakdown is as follows:
12/31/2022
12/31/2021
Total
Non current
Current
Total
Non current
Current
(in thousands of euro)
Employee leaving indemnities (TFR)
1,562
1,562
Other benefits
11,543
11,543
Total employees' benefit obligation
13,105
13,105
-
-
-
1,997
1,997
19,445
19,445
21,442
21,442
-
-
-
EMPLOYEES’ LEAVING INDEMNITIES (TFR)
The changes in the year 2022 for Employees’ leaving indemnities are the following:
Opening balance
Movements through income statement:
- 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)
Net actuarial gains accrued in 2022, recognized directly in Other Comprehensive Income, amount to euro 321
thousand and are related to the change in the economic parameters of reference (discount rate and inflation
rate) and to the adjustments based on past 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
(in thousands of euro)
12/31/2022
12/31/2021
1,997
2,518
18
(321)
-
(132)
1,562
15
21
60
(617)
1,997
462
Pirelli Annual Report 2022
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 be 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.
The main actuarial assumptions used at December 31, 2022 are as follows:
Discount rate
Inflation rate
The main actuarial assumptions used at December 31, 2021 were as follows:
Discount rate
Inflation rate
2022
2021
4.1%
2.5%
0.9%
1.7%
Hired employees at December 31, 2022 amounted to 387 units (357 units at December 31, 2021).
In other conditions being equal, a hypothetical change of 0.25% in the discount rate would result in a decrease
in liabilities equal to 1.56%, in the case of an increase (1.80% at December 31, 2021), and an increase in liabilities
of 1.59%, in the case of a decrease (1.86% at December 31, 2021).
OTHER EMPLOYEE BENEFITS
The breakdown of other benefits is as follows:
12/31/2022
12/31/2021
Total
Non current
Current
Total
Non current
Current
(in thousands of euro)
Long-term incentive plans
Jubilee awards
Other benefits
Total
6,315
1,436
6,315
1,436
3,792
3,792
11,543
11,543
-
-
-
-
15,672
15,672
1,761
1,761
2,013
2,013
19,445
19,445
-
-
-
-
The item “Long-term incentive plans” relates to the amount set aside for the three-year monetary incentive
plans Long Term Incentive 2021-2023 and 2022-2024 intended for Group management. The decrease
compared to the previous year is attributable to the reclassification from non-current provisions to payables to
employees of the portion of the LTI 2020-2022 plan set aside in previous years, which will be paid in the first
half of 2023.
The item “Other benefits – non-current portion” refers to the short-term incentive plan for employees.
463
FINANCIAL STATEMENTS AT DECEMBER 31, 2022
The breakdown of trade payables is as follows:
22. TRADE PAYABLES
Payables to subsidiaries
Payables to associates
Payables to other companies
Total trade payables
(in thousands of euro)
12/31/2022
12/31/2021
4,433
105
21,011
25,549
2,783
72
15,532
18,387
The carrying amount of trade payables is considered to approximate their fair value.
The breakdown of other payables is as follows:
23. OTHER PAYABLES
12/31/2022
12/31/2021
Total
Non-current
Current
Total
Non-current
Current
(in thousands of euro)
Payables to subsidiaries
Payables to social security
and welfare institutions
Payables to employees
6,382
4,899
30,923
-
-
-
6,382
4,718
4,899
5,323
30,923
13,415
-
-
-
4,718
5,323
13,415
Other payables
31,745
355
31,390
15,927
822
15,105
Accrued liabilities
Deferred income
-
15
-
-
-
15
27
15
-
-
27
15
Total other payable
73,964
355
73,609
39,425
822
38,603
Payables to subsidiaries mainly refer to receivables related to VAT consolidation.
Payables to pension and social security 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 compared to the
previous year mainly refers to the reclassification from non-current employee benefit obligations to payables to
employees of the portion of the LI 2020-2022 plan set aside in previous years and of the deferred portion of the
STI incentive plan (Short term incentive), which will be paid in the first half of 2023.
Other payables mainly include payables for compensation to be paid to directors and auditors, for withholding
taxes on income from self-employed and employed work. The increase compared to the previous year mainly
refers to the reclassification from non-current risk provisions to payables to directors of the portion of the LI
2020-2022 plan set aside in previous years and of the deferred portion of the STI incentive plan (Short term
incentive), which will be paid in the first half of 2023.
For other current payables it is considered that the carrying amount approximates their fair value.
464
Pirelli Annual Report 2022
24. DEFERRED TAX LIABILITIES
Deferred tax liabilities amounted to euro 592,549 thousand at December 31, 2022 (euro 526,017 thousand at
December 31, 2021).
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)
12/31/2022
12/31/2021
53,201
107,313
37,356
15,845
87,405
19,908
(645,750)
(633,330)
(12,420)
-
(633,330)
(633,330)
(592,549)
(526,017)
The breakdown of deferred taxes, relating to temporary differences and tax losses carried forward is shown in
the following table:
(in thousands of euro)
12/31/2022
12/31/2021
8,503
2,961
38
9,209
5,695
4,775
126
13,153
23,846
69,985
5,138
-
3,506
11,282
822
1,476
53,201
107,313
(633,330)
(633,330)
(12,343)
(77)
-
-
(645,750)
(633,330)
(592,549)
(526,017)
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
Employees provision
Total provision for deferred tax liabilities
Total
465
At December 31, 2022, the value of unrecognized deferred tax assets relating to temporary differences
amounted to euro 25,856 thousand (unchanged compared to December 31, 2021).
FINANCIAL STATEMENTS AT DECEMBER 31, 2022
The tax effect of gains and losses recorded directly as Other
Comprehensive Income was negative for euro 13,289 thousand
(negative for euro 3,638 thousand in 2021), and 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 20,353 thousand (euro 13,565
include
thousand at December 31, 2021) and mainly
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, 2022, the total of future non-discounted
payments for lease contracts not yet in force and for which
no financial payable was recorded amounted to euro 408
thousand.
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 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, of which 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, 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
aforementioned sanction
the European
in
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-
indemnified by Pirelli
claim, to be
in relation to the
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
in 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 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, 2022.
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
466
Pirelli Annual Report 2022 Power. As the aforementioned legal action 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, jointly agreeing 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, 2022.
INCOME STATEMENT
27. REVENUES FROM SALES AND SERVICES
Revenues from sales and services amounted to euro 68,322 thousand for 2022 compared to euro 69,601
thousand in 2021 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)
2022
2021
67,900
422
69,141
460
68,322
69,601
467
FINANCIAL STATEMENTS AT DECEMBER 31, 2022
Other income amounted to euro 111,839 thousand in 2022 (euro 107,345 thousand in 2021), and the breakdown
is as follows:
28. OTHER INCOME
Other income from subsidiaries
Other revenues from third parties
Other income from other companies
(in thousands of euro)
2022
2021
105,828
104,328
6,011
3,017
111,839
107,345
Other revenues from subsidiaries mainly include royalties accrued with Group companies for the use of the
brand (euro 96,137 thousand in 2022 compared to euro 77,474 thousand in 2021). The increase in royalties
compared to the previous year is offset by the reduction in 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 3,003 thousand in 2022 compared to euro 2,029 thousand in 2021).
29. RAW MATERIALS AND CONSUMABLES USED
They amounted to euro 386 thousand in 2022 (euro 214 thousand in 2021) and include purchases of advertising
material, fuels and various materials.
Personnel costs amounted to euro 62,086 thousand (euro 72,791 thousand in 2021), and the breakdown is
as follows:
30. PERSONNEL COSTS
Wages and salaries
Social security and welfare contributions
Employee leaving indemnities
Retirement and similar obbligations
Other costs
Total
The average staff headcount is the following:
→ Executives
→ White collars
→ Workers
83
285
4
(in thousands of euro)
2022
2021
49,338
9,789
1,597
614
748
57,229
10,809
1,963
602
2,188
62,086
72,791
468
Pirelli Annual Report 2022
31. AMORTIZATION, DEPRECIATION AND WRITE-DOWNS
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 8.2 - Rights of use.
The breakdown of other costs is the following:
32. OTHER COSTS
Remuneration of Directors and supervisory bodies
Advertising and sponsorship
Consultancy and collaboration services
Accruals to provisions
IT expenses
Membership fees and contributions
Insurance premiums
Travel expenses
Security service
Property maintenance
Energy, gas and water expenses
Patents and trademarks expenses
Rental and lease instalments
Cleaning and property ordinary maintenance expenses
Legal and notarial expenses
Other
Total other costs
469
(in thousands of euro)
2022
2021
2,072
1,796
5,828
9,696
1,900
1,762
5,700
9,362
(in thousands of euro)
2022
2021
29,598
24,929
16,114
10,000
8,773
3,372
3,129
2,721
1,895
1,836
1,627
888
833
512
283
28,671
38,690
13,560
5,017
7,409
2,953
3,103
1,928
1,712
1,809
1,217
803
359
817
776
5,126
5,239
111,636
114,063
FINANCIAL STATEMENTS AT DECEMBER 31, 2022
The item Leases and rentals includes costs relating to the application of the accounting standard IFRS 16,
in particular:
→ euro 55 thousand for lease contracts with a duration of less than twelve months (euro 113 thousand at
December 31, 2021);
→ euro 199 thousand for lease contracts for low unit value assets (euro 132 thousand in 2021).
33. NET IMPAIRMENT OF FINANCIAL ASSETS
The item, negative for euro 48 thousand, mainly includes the net impairment of trade receivables. In 2021, the
net impairment of trade receivables amounted to euro 92 thousand.
34. RESULT FROM INVESTMENTS
34.1
No gains from equity investments were recorded in the year 2022, in line with the previous year.
GAINS ON EQUITY INVESTMENTS
LOSSES ON EQUITY INVESTMENTS
34.2
In 2022, a write-down of 7,871 thousand was recognized on the equity investment in Pirelli UK Ltd and a provision
was made to the loss coverage provision of the aforementioned investee for euro 24,600 thousand.
In 2021, impairment of 1,246 thousand of the investment in the subsidiary Pirelli Ltda was recorded.
DIVIDENDS
34.3
They amounted to euro 309,767 thousand in 2022 compared to euro 231,509 thousand in 2021, and the
breakdown is as follows:
From subsidiaries:
- Pirelli Tyre S.p.A. - Italy
- Pirelli Group Reinsurance Company SA - Switzerland
- 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)
2022
2021
300,000
220,000
979
200
5,635
1,482
1,471
-
-
2,290
500
6,522
741
1,292
154
10
309,767
231,509
The higher amount of dividends from subsidiaries received in 2022 compared to 2021 is essentially attributable
to the higher dividends distributed by the subsidiary Pirelli Tyre S.p.A..
470
Pirelli Annual Report 2022
The breakdown of the item is as follows:
35. FINANCIAL INCOME
Interest and other financial income
Valuation at fair value of derivatives
Net gains on exchange rates
Total financial income
(in thousands of euro)
2022
2021
30,560
-
213
28,874
4,769
-
30,773
33,643
The item interest and other financial income includes euro 25,678 thousand of interest accrued on loans
disbursed in 2022 to subsidiaries and euro 4,659 thousand relating to interest on CCIRS for which hedge
accounting has been discontinued.
Net exchange rate gains amounted to euro 213 thousand in 2022 and 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.
They also include gains for euro 7,302 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 exchange rate losses recorded on the hedged liability.
The breakdown of the item is as follows:
36. FINANCIAL EXPENSES
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 derivatives
Total financial expenses
Interest and other financial expenses for a total of euro 61,902 thousand include:
(in thousands of euro)
2022
2021
61,902
71,989
868
1,472
32
-
4,417
2,988
1,572
24
3,050
-
68,691
79,623
→ euro 35,647 thousand for the bank loan lines held;
→ euro 21,707 thousand of financial expenses related to bonds, of which euro 8,381 thousand related to unrated
bonds, euro 3,816 thousand related to the Schuldschein loan and euro 9,510 thousand related to the senior
unsecured guaranteed equity-linked bond;
→ euro 1,480 thousand for net interest expense, including 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”;
→ euro 2,817 thousand relating to interest expense on Cross Currency Interest Rate Swaps for which hedge
accounting was discontinued.
471
FINANCIAL STATEMENTS AT DECEMBER 31, 2022
The item valuation at fair value of derivatives mainly refers to the purchase/sale of the forward exchange
rate hedge contracts to cover commercial and financial transactions in accordance with the exchange rate risk
management policy of the Group. For transactions still open at the end of the financial year, the fair value was
determined using the forward exchange rate at the closing date of the Company’s financial statements.
The breakdown of taxes is as follows:
37. TAXES
Current taxes
Deferred taxes
Total income taxes
(in thousands of euro)
2022
2021
(70,043)
(49,953)
53,243
(1,959)
(16,800)
(51,912)
Current taxes for the year 2022 were positive for euro 70,043 thousand compared to euro 49,953 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/liabilities were negative for 53,243 (positive for euro 1,959 thousand in the previous year)
and mainly refer to the use of deferred assets.
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)
2022
2021
235,686
164,707
56,565
39,530
Dividends and gains from investments not subject to taxation
(70,627)
(52,784)
Tax incentives
Loss on investments
Non-deductible costs
(16)
7,793
1,298
-
299
(2,830)
Uses losses previous years - deferred assets not activated
-
(11,282)
Deferred tax assets on previous tax losses and other temporary differences
(11,813)
(24,845)
C) Effective taxes
Theoretical tax rate (B/A)
Effective tax rate (C/A)
(16,800)
(51,912)
24%
-7.1%
24%
-31.5%
472
Pirelli Annual Report 2022
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, 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 2022.
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.
473
FINANCIAL STATEMENTS AT DECEMBER 31, 2022 The statement below shows a summary of the Balance Sheet and the Income Statement that include transactions
with related parties and their impact:
12/31/2022
of which related
parties
% share
12/31/2021
of which related
parties
% share
(in thousands of euro)
BALANCE SHEET
Non current assets
Other receivables
612
-
0.0%
2,000,566
2,000,000
100.0%
Derivative financial instruments
26,070
26,070
100.0%
4,383
4,383
0.0%
Current assets
Trade receivables
Other receivables
Tax receivables
43,999
42,901
2,215,172
2,200,675
97,981
97,446
97.5%
99.3%
99.5%
40,116
39,314
792,730
781,789
65,074
64,525
98.0%
98.6%
99.2%
Derivative financial instruments
3,298
3,298
100.0%
5,132
5,132
100.0%
Non-current liabilities
Other payables
355
212
Provision for liabilities and charges
39,062
21,843
Employee benefit obligations
13,105
3,016
Derivative financial instruments
-
-
-
363,156
Current liabilities
Payables to banks and other
financial lenders
Trade payables
Other payables
Tax payables
59.6%
55.9%
23.0%
0.0%
822
212
30,604
22,028
21,442
3,554
3,708
3,554
0.0%
1,070,541
1,187
25.7%
72.0%
17.3%
100.0%
0.1%
15.5%
39.7%
98.3%
25,549
4,557
73,609
36,537
20,353
20,124
17.8%
49.6%
98.9%
18,387
38,603
2,854
15,311
13,565
13,337
Derivative financial instruments
32
32
100.0%
674
674
100.0%
2022
of which related
parties
% share
2021
of which related
parties
% share
(in thousands of euro)
INCOME STATEMENT
Revenues from sales and services
68,322
68,282
Other income
111,839
105,847
Raw materials and consumables
used
(386)
(21)
Personnel expenses
(62,086)
(7,420)
Other costs
(111,636)
(42,336)
99.9%
94.6%
5.5%
12.0%
37.9%
69,601
69,477
107,345
104,372
(214)
-
(72,791)
(14,395)
(114,063)
(41,247)
99.8%
97.2%
0.0%
19.8%
36.2%
Losses on equity investments
(32,471)
(32,471)
100.0%
(1,246)
(1,246)
100.0%
Dividends
309,767
306,814
Financial income
30,773
30,337
Financial expenses
(68,691)
(8,737)
99.0%
98.6%
12.7%
231,509
229,312
33,643
31,957
(79,623)
(2,827)
99.1%
95.0%
3.6%
474
Pirelli Annual Report 2022
The equity and economic effects of transactions with related parties for the year ended December 31, 2022 are
detailed below.
Subsidiaries
Associates
Other related
parties
Directors and
Key Managers
Total 12/31/2022
(in thousands of euro)
Derivative financial instruments
(non current assets)
Trade receivables
26,070
42,782
Other current receivables
2,200,675
-
3
-
-
-
-
-
-
105
-
-
-
-
-
-
-
-
116
-
-
-
-
-
-
18
1
-
-
-
-
-
-
-
212
26,070
42,901
2,200,675
97,446
3,298
212
21,843
21,843
3,016
-
30,154
-
-
3,016
4,557
36,537
20,124
32
(in thousands of euro)
Other related
parties
Directors and
Key Managers
Total
2022
382
19
-
-
-
-
-
68,282
105,847
(21)
(7,420)
(7,420)
97,446
3,298
-
-
-
4,434
6,382
20,124
32
Subsidiaries
Associates
67,900
105,828
(21)
-
(12,875)
(339)
(54)
(29,068)
(42,336)
(32,471)
306,814
30,337
(8,737)
-
-
-
-
-
-
-
-
-
-
-
-
(32,471)
306,814
30,337
(8,737)
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)
Trade payables
Other payables (current liabilities)
Tax payables
Derivative financial instruments (current
liabilities)
Revenues from sales and services
Other income
Raw materials and other consumables used
Personnel expenses
Other costs
Losses from investments
Dividends
Financial income
Financial expenses
475
FINANCIAL STATEMENTS AT DECEMBER 31, 2022
Below is a breakdown of the equity and economic effects of transactions with related parties for the
previous year:
Subsidiaries
Associates
Other related
parties
Directors and
Key Managers
Total 12/31/2021
(in thousands of euro)
Other non current receivables
2,000,000
Derivative financial instruments
(non current assets)
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)
Tax payables
Derivative financial instruments
(current liabilities)
Revenues from sales and services
Other income
Personnel expenses
Other costs
Losses from investments
Dividends
Financial income
Financial expenses
4,383
39,115
781,789
64,525
5,132
-
-
-
3,554
1,187
2,783
4,718
13,337
674
Subsidiaries
Associates
69,141
104,328
-
-
-
3
-
-
-
-
-
-
-
-
72
-
-
-
-
-
-
-
-
195
-
-
-
-
-
-
-
-
-
1
-
-
-
-
-
-
-
-
212
2,000,000
4,383
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)
(12,651)
(252)
(150)
(28,194)
(41,247)
(1,246)
229,312
31,957
(2,827)
-
-
-
-
-
-
-
-
-
-
-
-
(1,246)
229,312
31,957
(2,827)
476
Pirelli Annual Report 2022
TRANSACTIONS WITH SUBSIDIARIES
TRANSACTIONS – BALANCE SHEET Other non-current
receivables were nil at December 31, 2022 (euro 2,000,000
thousand at December 31, 2021). The amount for 2021
refers to credit lines granted to Pirelli International Treasury
S.p.A. with maturity in 2023. The decrease compared to the
previous year is due to the reclassification in the item other
current receivables.
Derivative financial instruments (non-current assets) for
euro 26,070 thousand refer to hedging transactions with
Pirelli International Treasury S.p.A..
Trade receivables from subsidiaries amounted to euro
42,782 thousand (euro 39,115 thousand at December 31,
2021) and mainly refer to receivables for services/provisions
provided to Group companies (euro 37,519 thousand from
Pirelli Tyre S.p.A., euro 2,926 thousand from Pirelli Group
Reinsurance Company SA, euro 742 thousand from Limited
Liability Company Pirelli Tyre Russia, euro 286 thousand
from Pirelli Sistemi Informativi S.r.l..
Other current receivables amounted to euro 2,200,675
thousand (euro 781,789 thousand at December 31, 2021)
and refer for euro 2,199,183 thousand to the loan and related
interest accrued but not yet paid with Pirelli International
Treasury S.p.A., for euro 1,001 thousand to VAT receivables
transferred from subsidiaries (of which euro 412 thousand
from Pirelli Sistemi Informativi S.r.l., euro 317 thousand from
Pirelli Industrie Pneumatici S.r.l. and euro 225 thousand
from Pirelli Servizi Amministrazione e Tesoreria S.p.A.), euro
489 thousand to the intragroup current account with Pirelli
International Treasury S.p.A..
Tax receivables amounted to euro 97,446 thousand
(euro 64,525 thousand at December 31, 2021) and refer
to receivables from Group companies that adhere to tax
consolidation (mainly euro 93,858 thousand from Pirelli
Tyre S.p.A., euro 2,982 thousand from Pirelli International
Treasury S.p.A., euro 459 thousand from Pirelli Industrie
Pneumatici S.r.l., euro 82 thousand from Pirelli Sistemi
Informativi S.r.l.).
Derivative financial instruments (current assets) for euro
3,298 thousand (euro 5,132 thousand at December 31,
2021) refer to hedging transactions with Pirelli International
Treasury S.p.A..
Derivative financial instruments (non-current liabilities)
were nil at December 31, 2022 (euro 3,554 thousand at
December 31, 2021). The amount at the end of 2021 refers
to the valuation of the existing IRS with Pirelli International
Treasury S.p.A..
Borrowings banks and other lenders (current) were nil
at December 31, 2022 (euro 1,187 thousand at December
31, 2021). The amount at the end of 2021 mainly refers to
the accrued liability with Pirelli International Treasury S.p.A.
on the interest rate swap hedging transactions existing at
December 31, 2021.
477
Trade payables amounted to euro 4,434 thousand (euro
2,783 thousand at December 31, 2021) and mainly refer to
payables for the provision of services. These payables mainly
refer for euro 1,946 thousand to Pirelli Tyre S.p.A. and for
euro 1,268 thousand to HB Servizi S.r.l..
liabilities)
to subsidiaries
Other payables (current
amounted to euro 6,382 thousand (euro 4,718 thousand at
December 31, 2021) and mainly refer to payables with Group
companies that adhere to the VAT consolidation. The main
ones are: euro 6,277 thousand to Pirelli Tyre S.p.A., euro 45
thousand to Driver Servizi Retail S.p.A..
Tax payables amounted to euro 20,124 thousand (euro
13,337 thousand at December 31, 2021) and refer to payables
to subsidiaries that adhere to tax consolidation (euro 14,730
thousand to Pirelli Tyre S.p.A., euro 5,490 thousand to Pirelli
International Treasury S.p.A.).
The amount of euro 32 thousand (euro 674 thousand at
December 31, 2021) 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 67,900 thousand in 2022 (euro 69,141 thousand in
2021) and mainly refer to service contracts. The main
transactions with subsidiaries are: euro 65,686 thousand
with Pirelli Tyre S.p.A., euro 886 thousand with Pirelli Servizi
Amministrazione e Tesoreria S.p.A., euro 449 thousand
with Pirelli Sistemi Informativi S.r.l., euro 390 thousand with
Pirelli International Treasury S.p.A..
Other income from subsidiaries amounting to euro 105,828
thousand in 2022 (euro 104,328 thousand in 2021) mainly
refer to: royalties (euro 86,759 thousand from Pirelli Tyre
S.p.A., euro 5,218 thousand from Pirelli Group Reinsurance
Company SA, euro 4,151 thousands from Limited Liability
Company Pirelli Tyre Russia); other recoveries (euro 7,285
thousand from Pirelli Tyre S.p.A., euro 690 thousand from
Pirelli Tire LLC., euro 339 thousand from Pirelli Latam
Participaçoes Ltda).
Other costs to subsidiaries for euro 12,875 thousand in 2022
(euro 12,651 thousand in 2021) mainly refer to charges for
services and miscellaneous costs (euro 5,020 thousand HB
Servizi S.r.l., euro 2,966 thousand Pirelli Sistemi Informativi
S.r.l., euro 2,465 thousand Pirelli Tyre S.p.A., euro 1,168
thousand Pirelli Servizi Amministrazione e Tesoreria S.p.A.).
The item losses from investments shows the impairment of
the investment in Pirelli UK Ltd.
Dividends for euro 306,814 thousand in 2022 (euro 229,312
thousand in 2021) refer to dividends collected during the year
(euro 300,000 thousand from Pirelli Tyre S.p.A., euro 5,636
thousand from Pirelli International Treasury S.p.A., euro 979
thousand from Pirelli Group Reinsurance Company SA and
euro 200 thousand from Pirelli Sistemi Informativi S.r.l.).
FINANCIAL STATEMENTS AT DECEMBER 31, 2022 Financial income for euro 30,337 thousand in 2022 (euro
31,957 thousand in 2021) mainly refers to interest income on
receivables from Pirelli International Treasury S.p.A..
The balance sheet item other current payables includes the
short-term portion relating to the Long Term Incentive and
Short term Incentive plans.
Financial expenses for euro 8,737 thousand in 2021 (euro
2,827 thousand in 2021) mainly refer to net expenses on
derivatives with Pirelli International Treasury S.p.A..
TRANSACTIONS WITH ASSOCIATED COMPANIES
TRANSACTIONS – BALANCE SHEET Trade payables to
associated companies amounted to euro 105 thousand in
2022 (euro 72 thousand in 2021) and refer to payables to
the Consortium for the Research on Advanced Materials
(CORIMAV).
TRANSACTIONS – INCOME STATEMENT Other costs to
associated companies amounted to euro 339 thousand in
2022 (euro 252 thousand in 2021) 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 116 thousand in 2022
(euro 195 thousand in 2021) include commercial relations
with the Prometeon Group.
Trade payables amounted to euro 18 thousand (nil at
December 31, 2021) and mainly refer to payables for
consultancy from related parties.
TRANSACTIONS – INCOME STATEMENT Revenues
from sales and services from other related parties for
euro 382 thousand in 2022 (euro 336 thousand in 2021)
refer to the service/performance contract with Prometeon
Tyre Group S.r.l..
Other income with other related parties for euro 19 thousand
refers to service contracts with Marco Tronchetti Provera & C.
S.p.A..
Other costs with other related parties for euro 54 thousand
in 2022 refer to consultancy from related parties.
TRANSACTIONS WITH DIRECTORS
AND KEY MANAGERS
Equity and economic transactions regarding Directors and
Key Managers can be detailed as follows.
The balance sheet items provisions for risks and liabilities
and employee benefit obligations (non-current liabilities)
include the long-term benefits relating to the three-year
monetary incentive plans Long Term Incentive 2021-2023
and 2022-2024 for euro 6,989 thousand, the short-term
benefits terms relating to the Short Term Incentive plan for
euro 3,842 thousand, as well as end-of-term indemnity for
euro 14,028 thousand.
The income statement items personnel costs and other
costs include euro 5,932 thousand relating to employees’
severance indemnities and end-of-term indemnity (euro
5,749 thousand in 2021), as well as short-term benefits for
euro 11,866 thousand (euro 11,143 thousand in 2021) and
long-term benefits for euro 9,609 thousand (euro 11,725
thousand in 2021).
40. OTHER INFORMATION
DIRECTORS AND AUDITORS’ FEES
The fees due to Directors of Pirelli & C. S.p.A. amounted
to euro 29,068 thousand in 2022 (euro 28,194 thousand
in 2021). The fees due to the Statutory Auditors for the
function performed at Pirelli & C. S.p.A. amounted to euro
430 thousand in 2022 (euro 377 thousand in 2021).
INDEPENDENT AUDITORS’ FEES
For the fees for the 2022 financial year for the auditing
activities and other services rendered by the independent
auditors PricewaterhouseCoopers S.p.A., references
is
made to the information contained in the explanatory notes
to the Consolidated Financial Statements.
DISCLOSURE REQUESTED BY LAW
NO. 124/2017 ARTICLE 1 PARAGRAPHS 125-129
Pirelli & C. S.p.A. obtained, within the PNRR framework,
a decree granting the subsidy from the MUR (Ministry of
Universities and Research) for the facilitation of Research
and Development activities as part of the Ecosystem for
Innovation “MUSA - Multilayered Urban Sustainability
Action” of up to a maximum of euro 0.4 million.
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 2022.
42. SIGNIFICANT EVENTS SUBSEQUENT
TO THE END OF THE YEAR
On January 11, 2023, Pirelli placed its first sustainability-
linked bond with investors for a total nominal amount of
euro 600 million, with demand equal to almost six times the
offer, which amounted to approximately euro 3.5 billion. The
issue of the first benchmark-size sustainability-linked bond
of this type placed by a global tyre company, as well as the
478
Pirelli Annual Report 2022 first carried out since Pirelli obtained its investment grade
rating from S&P Global and Fitch Ratings, testifies to the
Company’s commitment to further integrate sustainability
into its business strategy, and is linked to the 2025 targets of
reducing absolute greenhouse gas emissions (Scopes 1 and
2) and emissions from purchased raw materials (Scope 3).
The transaction, which took place within the framework of the
EMTN Programme (Euro Medium Term Note Programme)
which was approved by the Board of Directors on February
23, 2022, offers an effective yield at maturity of 4.317%
(145 basis points above the mid swap), and allows for the
optimisation of the debt structure, by extending maturities
and diversifying sources. These securities are listed on the
Luxembourg Stock Exchange.
On January 31, 2023, Pirelli International Treasury S.p.A.
was granted new uncommitted facility credit lines: a euro 1.7
billion term loan maturing on January 31, 2025 and a euro 1
billion revolving credit facility maturing on January 31, 2024.
On February 7, 2023 Pirelli was confirmed as amongst the
best companies at global level for sustainability obtaining
“Top 1%” ranking, the highest recognition in the 2023
Sustainability Yearbook published by S&P Global, after
examining the sustainability profile of more than 13,000
companies. This result follows the score recorded by Pirelli
in the 2022 Corporate Sustainability Assessment for the
Dow Jones Sustainability Index of S&P Global, where
the Company had obtained the Top Score of 86 points
(revised from the initial 85), the highest in the ATX Auto
Components sector of the Dow Jones Sustainability World
and European Index.
On February 22, 2023, Pirelli announced that the
shareholder CNRC had announced that it will submit the
notification required by Legislative Decree 21/2012 (the
Golden Power Regulation) regarding the renewal of the
Shareholders’ Agreement signed on May 16, 2022 by
and between, amongst others, the CNRC, Marco Polo
International S.r.l., Camfin S.p.A. and Marco Tronchetti
Provera & C. S.p.A., which will become effective with the
convening of the Shareholders’ Meeting for the approval of
the Financial Statements at December 31, 2022.
479
FINANCIAL STATEMENTS AT DECEMBER 31, 2022 ANNEXES TO THE NOTES
MOVEMENTS OF INVESTMENTS IN SUBSIDIARIES
FROM 12/31/2021 TO 12/31/2022
(in thousands of euro)
12/31/2021
CHANGES
12/31/2022
Number
of shares
Carrying
amount
(€/thousand)
% of total
investments
of
which
direct
Number
of shares
(€/
thousand)
Number
of shares
Carrying
amount
(€/thousand)
% of total
investments
of
which
direct
INVESTMENTS
IN SUBSIDIARIES
ITALY
Unlisted:
Pirelli Servizi
Amministrazione 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
93,964
HB Servizi Srl - Milan
1 share
100
230
100
90
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
-
-
-
93,964
1 share
100
230
100
90
100
100
4,609,783
12/31/2021
CHANGES
12/31/2022
Number
of shares
Carrying
amount
(€/thousand)
% of total
investments
of
which
direct
Number
of shares
(€/
thousand)
Number
of shares
Carrying
amount
(€/thousand)
% of total
investments
of
which
direct
FOREIGN COMPANIES
Brazil
Pirelli Ltda - Sao Paulo
13,999,991
8,420
100
100
1
-
-
-
1
13,999,991
8,420
100
100
-
-
-
-
163,991,278
7,871
100
100
-
(7,871)
163,991,278
-
-
-
-
100
100
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
300,000
6,346
100
100
-
-
300,000
6,346
100
100
22,637
4,632,420
(7,871)
(7,871)
14,766
4,624,549
480
Pirelli Annual Report 2022
MOVEMENTS OF INVESTMENTS IN ASSOCIATES
FROM 12/31/2021 TO 12/31/2022
(in thousands of euro)
12/31/2021
CHANGES
12/31/2022
Number
of shares
Carrying
amount
(€/thousand)
% of total
investments
of
which
direct
Number
of shares
(€/
thousand)
Number
of shares
Carrying
amount
(€/thousand)
% of total
investments
of
which
direct
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
33
33
-
-
111,111
-
8
8
(111,111)
6,375
6,375
6,375
-
1 share
104
100
100
- 52,333,333
6,271
33
33
-
-
-
-
-
-
-
-
6,375
6,375
6,375
481
FINANCIAL STATEMENTS AT DECEMBER 31, 2022 MOVEMENTS OF OTHER FINANCIAL ASSETS AT FAIR VALUE
THROUGH OTHER COMPRENSIVE INCOME
FROM 12/31/2021 TO 12/31/2022 (Continue)
(in thousands of euro)
12/31/2021
CHANGES
12/31/2022
Number
of shares
Carrying
amount
(€/
thousand)
% of total
investments
of
which
direct
Number
of shares
(€/
thousand)
Number
of shares
Carrying
amount
(€/
thousand)
% of total
investments
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
21,855
4.7
4.7
-
(5,285)
24,694,918
16,570
4.7
4.7
21,855
21,855
(5,285)
(5,285)
16,570
16,570
12/31/2021
CHANGES
12/31/2022
Number
of shares
Carrying
amount
(€/
thousand)
% of total
investments
of
which
direct
Number
of shares
(€/
thousand)
Number
of shares
Carrying
amount
(€/
thousand)
% of total
investments
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
F.C. Internazionale Milano
S.p.A. - Milan
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
Fin. Priv. S.r.l. - Milan
1 share
21,171
14.3
14.3
Istituto Europeo di
Oncologia S.r.l. - Milan
Nomisma - Società di Studi
Economici S.p.A. - Bologna
1 share
8,006
6.1
6.1
959,429
323
3.3
3.3
Tiglio I S.r.l. - Milan
1 share
2
0.6
0.6
Genextra S.p.A.
592,450
635
0.6
0.6
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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
(2,307)
1 share
18,864
14.3
14.3
134
1 share
8,140
6.1
6.1
37
(1)
(6)
959,429
360
3.3
3.3
1 share
1
0.6
0.6
592,450
629
0.6
0.6
Total other Italian
unlisted companies
30,138
(2,144)
27,994
482
Pirelli Annual Report 2022
MOVEMENTS OF OTHER FINANCIAL ASSETS AT FAIR VALUE
THROUGH OTHER COMPRENSIVE INCOME
FROM 12/31/2021 TO 12/31/2022
(in thousands of euro)
12/31/2021
CHANGES
12/31/2022
Number
of shares
Carrying
amount
(€/thousand)
% of total
investments
of
which
direct
Number
of shares
(€/
thousand)
Number
of shares
Carrying
amount
(€/thousand)
% of total
investments
of
which
direct
FOREIGN COMPANIES
Libia
Libyan-Italian Joint Company
- ordinary shares B
300
UK
Eca International
100
1.0
1.0
2.8
2.8
-
-
-
-
-
300
100
-
-
-
-
-
-
1.0
1.0
2.8
2.8
53 shares
2,825
-
-
-
(1,049)
53 shares
1,776
-
-
2,824
54,817
(1,049)
1,776
(8,478)
46,339
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
483
FINANCIAL STATEMENTS AT DECEMBER 31, 2022 LIST OF INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES
(PURSUANT TO ART. 2427 OF THE CIVIL CODE)
Legal
address
Carrying
amount
Share %
Share capital
(in thousands of euro)
Attributable
equity
Attributable
net income
(loss)
INVESTMENTS IN SUBSIDIARIES - ITALY
Pirelli Servizi Amministrazioni e Tesoreria S.p.A.
Maristel S.p.A.
Pirelli Sistemi Informativi S.r.l.
Milan
Milan
Milan
3,237
100%
2,047
3,178
1,315
100%
50
3,260
1,656
100%
1,010
2,830
193
56
468
Pirelli Tyre S.p.A.
Milan
4,528,245
100%
558,154
2,011,350
564,134
Servizi Aziendali Pirelli S.c.p.a.
HB Servizi S.r.l
Milan
Milan
100
230
91.3%
100%
104
10
470
578
31
186
Pirelli International Treasury S.p.A.
Milan
75,000
30%
125,000
73,802
(1,966)
Total investments in subsidiaries - Italy
4,609,783
INVESTMENTS IN FOREIGN SUBSIDIARIES
Switzerland
Pirelli Group Reinsurance Company S.A.
Lugano
6,346
100%
3,047
16,352
2,770
Brasil
Pirelli Ltda
UK
Pirelli UK Ltd.
Total investments in foreign subsidiaries
Total investments in subsidiaries
INVESTMENTS IN ASSOCIATES - ITALY
Consortium for the Research into Advanced Materials
(CORIMAV)
Sao Paulo
8,420
100%
2,514
(7,036)
(6,381)
London
0
100%
184,897
(24,572)
(3,624)
14,766
4,624,549
Milan
104
100%
104
104
Eurostazioni S.p.A. *
Rome
6,271
32.7%
16,000
6,621
Total investments in associates - Italy
Total investments in associates
* balance sheet at July 31, 2022
6,375
6,375
-
46
484
Pirelli Annual Report 2022
Report of the Board of Statutory Auditors to the
Shareholders’ Meeting
pursuant to art. 153 of the Consolidated Law on Finance
(TUF) and art. 2429 of the Italian Civil Code
1
485
FINANCIAL STATEMENTS AT DECEMBER 31, 2022 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, as well as the applicable reference legislation, is
called on to report to the Shareholders' Meeting convened to approve the financial statements of the
Company for the year ending on 31 December 2022 (“Financial Statements”), 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 and Consolidated Financial
Statements of Pirelli (“Consolidated Financial Statements”, jointly with the Financial Statements
“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. The Board of Statutory Auditors confirms that the Company has put in place all the functional
safeguards to comply with the restrictive measures, as required by Consob's Warning Notice 3/2022.
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 its subsidiaries
(“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 the Directors' Report on Operations.
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.
2
486
Pirelli Annual Report 2022 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 for the year ending 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
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 2022 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 Bylaws and corporate governance practices followed by the Company are adequate to achieve
the Company's interest.
COMMENTS ON THE 2022 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 2022 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 specifically checked that: (i) the data and information contained
-
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.
3
487
FINANCIAL STATEMENTS AT DECEMBER 31, 2022 in the integrated financial statements2 of Pirelli (“Integrated Financial Statements”) are coded
based on the provisions of the ESEF XBRL 2021 taxonomy in force and that (ii) the directors, based
on the assessments carried out on compliance or non-compliance of the Integrated Financial
Statements with Delegated Regulation (EU) 2019/815, implementing the delegation contained in
Directive 2004/109/CE, as amended by Directive 2013/50/EU, and with the provisions of article 2423
of the Civil Code, have made the declarations required by law.
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 the
Integrated Financial Statements include the Report on the Corporate Governance and Share
Ownership, prepared pursuant to article 123-bis of the Consolidated Law on Finance, as well as the
Report on Responsible Management of the Value Chain (which constitutes the Consolidated Non-
Financial Disclosure pursuant to Legislative Decree 254 of 30 December 2016) drawn up by the
Company in accordance with the Global Reporting Initiative (GRI) Sustainability Reporting
Standards 2021, "In accordance with" option, SASB Auto Parts Sustainability Accounting Standard,
following the process suggested by the principles of the AA1000 APS (materiality, inclusivity and
responsiveness), and considering the integrated reporting principles contained in the Framework of
the International Integrated Reporting Council (IIRC). Furthermore, this report considers the priorities
highlighted by the European Securities and Markets Authority (ESMA) in circular ESMA32-63-1186
and includes 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). The third-party certifications appear at the end of the 2022 Annual
Report. 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 Integrated Financial Statements also include the Report on the remuneration policy
and the compensation paid, comprising the 2023 remuneration policy (“2023 Policy”) and the report
on compensation paid in 2022.
Pirelli’s 2022 Financial Statements include statements of compliance by the CEO and by the
Manager responsible for the preparation of the corporate financial documents (“Manager
Responsible”).
2 Integrated Financial Statements is understood to mean a document including the Directors' Report on Operations, the Report on
Responsible Management of the Value Chain, the Report on the Corporate Governance and Share Ownership, the Report on the
remuneration policy and the compensation paid, the Consolidated Financial Statements, the Financial Statements, Resolutions and
Certifications.
4
488
Pirelli Annual Report 2022 Pirelli’s 2022 Consolidated Financial Statements present the following summary data:
Revenues
Operating income (EBIT)
Adjusted EBIT
Consolidated net profit
€ 6,615.7 million
€ 791.5 million
€ 977.8 million
€ 435.9 million
Net financial debt was equivalent to 2,552.6 million euros, compared to 2,907.1 million euros at 31
December 2021.
Parent company Pirelli closed the financial year with positive net income to the amount of 252.5
million euros (216.6 million euros in 2021).
Events of major importance are accounted for in detail in the Directors' Report on Operations. The
following events, in particular, should be noted:
- On 28 January 2022, Pirelli celebrated the 150th anniversary of its foundation on 28 January
1872 with an event held at the Piccolo Teatro di Milano.
- On 1 February 2022, Pirelli was confirmed as "Gold Class" in the Sustainability Yearbook 2022
published by S&P Global.
- On 21 February 2022 Pirelli finalised the signing of a 1.6 billion euros 5-year multicurrency bank
credit line with a pool of leading Italian and international banks. The credit line, which is
parametrised to the Group's ESG objectives, has allowed the debt profile to be optimised by
delaying 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 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.
5
489
FINANCIAL STATEMENTS AT DECEMBER 31, 2022 - On 23 February 2022, in the context of the Company’s refinancing and financial structure
optimisation strategy, the Board of Directors of Pirelli approved a new EMTN (Euro Medium Term
Note) programme for the issue of non-convertible, senior unsecured bonds for a maximum value
of 2 billion euros to replace the previous EMTN programme of 2 billion euros, approved on 21
December 2017. In the context of this programme, on the same date the Board of Directors
authorised one or more bond issues to be placed with institutional investors for a maximum total
amount of up to 1 billion euros. In light of the changed market conditions, on 22 June 2022 Pirelli
updated this authorisation, revoking the resolution and simultaneously approving a new one for
the issue, again as part of the EMTN programme, of non-convertible bond loans to be placed with
institutional investors by May 2023 for up to 1 billion euros.
- On 4 March 2022, Pirelli announced the donation of 500 thousand euros to Ukrainian
refugees affected by the war, while also making a bank account available to employees to collect
their donations.
- On 9 May 2022, Pirelli announced that the Science Based Targets initiative (SBTi) had validated
the upgrade of Pirelli's greenhouse gas emission reduction targets. By the end of 2021, the
Company had achieved the previous targets validated by the SBTi for Scopes 1 and 2 four years
early. The new targets envisage actions consistent with maintaining global warming "within
1.5°C", compared to the previous scenario which envisaged remaining "well below 2°C". In
particular, SBTi validated the Pirelli targets of a 42% reduction in absolute greenhouse gas
emissions (Scope 1 and 2) by 2025 compared to 2015 and a 9% decrease in those from
purchased raw materials by 2025 compared to 2018 (Scope 3).
- On 10 May 2022, the Board of Directors of Pirelli co-opted Yang Shihao to replace Yang
Xingqiang, who had resigned on 28 April 2022. The Board of Directors also appointed Yang
Shihao (qualified by the Board as a non-executive, non independent director) as a member of the
Strategies Committee. Yang Shihao will remain in office until the next shareholders' meeting.
- On 18 May 2022, the Shareholders' Meeting of Pirelli (convened on 13 April 2022) approved the
2021 financial statements, resolving to distribute a dividend of 0.161 euros per ordinary share,
equal to a total dividend payout of 161 million euros before withholding taxes. The dividend was
paid on 25 May 2022 (with a coupon date of 23 May and a record date of 24 May). The
Shareholders’ Meeting also approved the Remuneration Policy for 2022 and voted in favour of
the Report on Compensation Paid in the financial year 2021. The Shareholders’ Meeting also
approved the adoption of the Monetary Incentive Plan for the three-year period 2022-2024 for all
Group management. Lastly, the Shareholders’ Meeting approved the possible adjustment
mechanisms of the sole quantification of objectives included in the three-year monetary incentive
plans for 2020-2022 and 2021-2023, in line with what had previously been set out in the 2022
remuneration policy.
- On 23 May 2022, with reference to the interest-free senior unsecured guaranteed equity-linked
bond loan called "EUR 500 million Senior Unsecured Guaranteed Equity-linked Bonds due 2025",
Pirelli announced that - following the resolution of the Shareholders' Meeting of 18 May 2022 to
6
490
Pirelli Annual Report 2022 distribute a dividend of 0.161 euros per ordinary share - the conversion price of the bonds was
changed from 6.235 euros to 6.1395 euros, in accordance with the regulation of the bond loan
itself, with effect from 23 May 2022.
- On 22 June 2022, Pirelli’s Board of Directors approved the underwriting of a sustainability-linked
credit line with a select pool of international banks, for a total value of up to 400 million euros, with
a 19-month maturity, to further optimisation of the Group’s financial structure. The credit line is
parametrised to the Pirelli objective of reducing absolute greenhouse gas emissions from
purchased raw materials (Scope 3), validated by the Science Based Targets initiative (SBTi). This
KPI is among those identified in Pirelli's first "Sustainability-linked financing Framework" (the
document that contains the company's guidelines and commitments towards its stakeholders in
the field of sustainable finance).
- On 11 October 2022, the Board of Directors of Pirelli co-opted Li Fanrong to replace Ning
Gaoning who - as announced on 8 October 2022 - resigned from the Board of Directors following
the termination of his office as Chairman of Sinochem Holdings Corporation Ltd. The Board of
Directors also appointed the non-executive director Li Fanrong as Chairman, assigning him the
legal representation of the company as well as all other powers assigned according to the current
Bylaws, without prejudice to the powers and prerogatives of the Board of Directors. Li Fanrong's
appointment as a member of the Strategies Committee and the Appointments and Succession
Committee was also approved. Li Fanrong, who will remain in office until the next shareholders'
meeting, does not meet the independence requirements established by law and by the Corporate
Governance Code.
- On 25 October 2022, Pirelli repaid early and in full the “Euro 600,000,000 1.375 per cent.
Guaranteed Notes due 25 January 2023” (ISIN: XS1757843146) bond loan listed on the
Luxembourg Stock Exchange, the residual amount of which was 553 million euros. As envisaged
by the Issuer Call option of the regulation, the repayment - made using the Company's available
cash - was at par plus the interest accrued up to the early repayment date.
- On 29 October 2022, Pirelli announced the start of the 114 million euro investment – envisaged
in the 2021-2022|2025 business plan to be implemented in the two-year period 2022/2023 –
aimed at further increasing the High Value production of the Mexican production site. Once fully
operational, the investment will allow production capacity to be increased by over one million
pieces to a total of 8.5 million tyres by 2025 (from 7.2 million at the end of 2022), with an expansion
of the production area from 16,000 to over 220,000 square metres. Increased production and
further improvement of the mix will create 400 new jobs to reach a total of 3,200 people once fully
operational.
- On 10 December 2022, Pirelli was again officially included in the Dow Jones Sustainability
Indexes, both World and Europe, as part of the index review conducted annually by S&P Global.
The confirmation follows the announcement of the global industry Top Score achieved by Pirelli
on 21 October 2022 for the ATX Auto Components segment in the context of the S&P Global
Corporate Sustainability Assessment 2022.
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FINANCIAL STATEMENTS AT DECEMBER 31, 2022 -
In December 2022, Pirelli was confirmed, for the fifth consecutive year, as a global leader in the
fight against climate change, achieving a place in the 2022 Climate A list drawn up by CDP, the
international non-profit organisation that collects, disseminates and promotes information on
environmental issues.
SIGNIFICANT EVENTS THAT OCCURRED AFTER THE CLOSURE OF THE FINANCIAL YEAR
The most significant events that occurred after the close of the financial year are detailed in the
Directors' Report on Operations and the Financial Statements.
Note in particular that:
- On 11 January 2023, Pirelli placed its first sustainability-linked bond with institutional
investors for a total nominal amount of 600 million euros. The transaction, which took place
under the EMTN (Euro Medium Term Note) Programme approved by the Board of Directors
on 23 February 2022, offers an actual yield to maturity of 4.317% (145 basis points above
the mid swap) and allows the debt structure to be optimised, extending maturities and
diversifying sources. The securities are listed on the Luxembourg Stock Exchange.
- On 7 February 2023, Pirelli was confirmed among the best companies globally in terms of
sustainability, achieving the "Top 1%" title, the highest recognition in the 2023 Sustainability
Yearbook published by S&P Global.
- On 14 February 2023, Pirelli announced that it had received the resignation of Bai Xinping
from the position of Director of the Company, effective 22 February 2023. On 22 February
2023, the Board of Directors co-opted Wang Feng and appointed him as a member of the
Remuneration Committee, the Appointments and Succession Committee and the Strategies
Committee. Wang Feng - named by the Board of Directors as a non-executive director - will
remain in office until the next shareholders' meeting; he does not meet the independence
requirements established by law and by the Corporate Governance Code.
- On 22 February 2023, Pirelli announced that the shareholder CNRC would submit the
notification required pursuant to Decree Law 21/2012 (Golden Power Regulation) in relation
to the renewal of the shareholders' agreement signed on 16 May 2022 by, among others,
CNRC, Marco Polo International S.r.l., Camfin S.p.A. and Marco Tronchetti Provera & C.
S.p.A., which will come into force when the Shareholders' Meeting is convened for the
approval of the financial statements at 31 December 2022.
UNUSUAL OR EXCEPTIONAL TRANSACTIONS
We are unaware of any atypical or unusual transactions during the year, as defined by Consob in
Decision DEM/6064293 of 28 July 2006.
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Pirelli Annual Report 2022 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 new organisational structure which provides for the
role of the Chief Financial Officer to be superseded.
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 financial year 2022, transactions were carried out with related parties, both companies
within the Pirelli Group and outside the Pirelli Group.
The transactions with Group companies, 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 of royalties
charged 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.
The Board of Statutory 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 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 2022 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
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FINANCIAL STATEMENTS AT DECEMBER 31, 2022 qualification of related parties and we have nothing to report.
The transactions with related parties are detailed in the notes to the Company's 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
The Board of Directors, as provided for in the joint Banca d’Italia/Consob/ISVAP document of 3
March 2010, independently, and before the approval of the related periodic financial report by 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; this
occurred, in particular, in the meetings:
(i)
of 22 July 2022, therefore autonomously and prior to the meeting of 4 August 2022 for
the approval of the half-yearly financial report at 30 June 2022, due to the new post-war
context in Ukraine and the decrease in the stock market capitalisation at 30 June 2022
to below shareholders' equity;
(ii)
of 22 February 2023, therefore, independently and prior to the meeting of 5 April 2023 for
the approval of the draft Financial Statements at 31 December 2022.
In both cases, 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 with the assistance of a highly
qualified independent expert.
Information on the assessment process conducted with the assistance of the aforesaid expert, and
on its outcomes, is provided in the explanatory notes to the Financial Statements.
The Board of Statutory Auditors deems the procedure adopted by the Company for the preparation
of the Financial Statements as at 31 December 2022 adequate and the related 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
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;
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Pirelli Annual Report 2022
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 Integrated Financial Statements as at 31 December 2022 have been
prepared in accordance with the ESEF format.
In compliance with the provisions of the regulatory legislation, the Company has drawn up the
Integrated Financial Statements in XHTML format (European Single Electronic Format - ESEF). The
items of the consolidated financial statements and the notes to the consolidated financial statements
have been tagged in accordance with the taxonomy provided by Delegated Regulation (EU)
2019/815. The Company has used the ESEF XBRL 2021 taxonomy as a reference taxonomy for
these Integrated Financial Statements, which are therefore to be considered ESEF compliant.
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
procedure 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)
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FINANCIAL STATEMENTS AT DECEMBER 31, 2022 checks of the data of a non-financial nature in the NFD, after appropriate highlighting and 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 NFD.
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,
therefore expressing its favourable opinion, after assessing that the requirements of the Bylaws were
met, on the appointment of Mr Fabio Bocchio 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.
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Pirelli Annual Report 2022 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 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 manage any cyber security risks.
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 letters 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 6 April 2023 PWC issued its Reports on the separate and consolidated financial
statements as at 31 December 2022. 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.
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
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FINANCIAL STATEMENTS AT DECEMBER 31, 2022 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 6 April 2023, 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 2022 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:
2022 EXTERNAL AUDITOR FEES
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.
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
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Pirelli Annual Report 2022 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 2022 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 2019-2021.
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 the Corporate Governance and Share Ownership 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 5 April 2023 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 of Statutory Auditors deems adequate.
REMUNERATION OF THE DIRECTORS, GENERAL MANAGER AND KEY MANAGERS WITH
STRATEGIC RESPONSIBILITIES
During 2022, the Board of Statutory Auditors has expressed the opinions required by law regarding
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FINANCIAL STATEMENTS AT DECEMBER 31, 2022 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 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
related Directors’ Reports to the Shareholders’ Meeting on compensation.
In addition, following the close of the 2022 financial year, the Board of Statutory Auditors:
- at the Board of Directors’ meeting of 22 February 2023, expressed its favourable opinion on
the approval of the 2023 STI Plan;
- at the Board of Directors’ meeting of 5 April 2023, expressed its favourable opinion on the
approval of the 2022-2024 LTI Plan and the approval of the 2023 remuneration report (made
up of the 2023 Policy and the Report on Compensation Paid in 2022), as well as the related
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;
- 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 2022 financial year, drafted its annual Report on the 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
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Pirelli Annual Report 2022 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
significant 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 items of the Financial Statements and in the value adjustments, and that the
Financial Statements 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;
- 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 Bylaws, 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;
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FINANCIAL STATEMENTS AT DECEMBER 31, 2022 - received from the Supervisory Body, of which Standing 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
significant 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 significant 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);
- expressed a favourable opinion on the appointment - to replace Mr Giorgio Luca Bruno - of Mr
Fabio Bocchio as the Manager Responsible following the organisational structure streamlining
process, as resolved by the Board of Directors on 3 November 2022;
- issued a favourable opinion pursuant to article 2386 of the Italian Civil Code on the
appointment by co-optation (i) of Director Yang Shihao, which took place on 10 May 2022; (ii)
of the Chairman of the Board of Directors Li Fanrong, which took place on 11 October 2022
and most recently (iii) of Director Wang Feng, which took place on 22 February 2023;
- received the annual report from the Company’s Data Protection Officer which showed the
Company is fully compliant with privacy legislation;
- 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;
- approved the content of the amendments to the RPT Procedure, approved by the Board of
Directors to take into account the changes made to the organisational structure.
During the 2022 financial year the Board of Statutory Auditors did not receive any complaints or
reports pursuant to article 2408 of the Italian Civil Code.
The Board of Statutory Auditors acknowledges that two requests for information were received from
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Pirelli Annual Report 2022 Consob pursuant to article 115, paragraph 1, letter a) of Legislative Decree No. 58/98, addressed,
respectively, to the Company and to the Board of Statutory Auditors, which were answered within
the required terms. No further requests for clarification and/or additional documents were received
from Consob.
With regard to the external auditor, the Board of Statutory Auditors noted that PWC:
- issued its report pursuant to article 14 of legislative decree no. 39/ of 27 January 2010 and
article no. 10 of Regulation (EU) 537/2014 on 6 April 2023. 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 2022, 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;
- issued a coherence opinion indicating that the Report on Operations accompanying the
Financial Statements as at 31 December 2022, and some specific information contained in the
Report on the 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;
- issued a judgement on compliance with the provisions of Delegated Regulation (EU) 815/2019,
which shows that the Financial Statements were prepared in XHTML format and that the
Consolidated Financial Statements were tagged in compliance with the provisions of the
Regulation;
- on 6 April 2023, 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 6 April 2023, pursuant to article 3, paragraph 10 of legislative decree no. 254 of 30
December 2016, issued the Report on responsible management of the value chain
(consolidated non-financial disclosure 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 2022 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,
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FINANCIAL STATEMENTS AT DECEMBER 31, 2022 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 – 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 in 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 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 (the Chairman is an independent Director).
During 2022, it met six times;
- the Remuneration Committee is composed of five Directors, the majority of whom are
independent (the Chairman is an independent Director). During 2022, it met three times;
- the Related-Party Transactions Committee is composed of three Directors, all independent.
During 2022, it met four times;
- the Appointments and Succession Committee is composed of four Directors, one of whom is
the executive Director. It did not meet during 2022;
- the Strategies Committee is composed of eight Directors, including the Executive Director, the
Deputy-CEO and three independent Directors. It did not meet during 2022.
The Board of Statutory Auditors attended eight 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,
the Board of Statutory Auditors attended six meetings of the Risk and Corporate Governance
Committee, three meetings of the Remuneration Committee, four meetings of the Related-Party
Transactions Committee and one Shareholders' Meeting.
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504
Pirelli Annual Report 2022 In addition, the Board of Statutory Auditors attended the 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 the 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, from their appointment and most recently in their meeting
on 16 March 2023, as recommended by the Corporate Governance Code, that members fulfil
the same independence requirements - where applicable - as those required of directors in the
aforementioned Codes of Conduct. The composition of the Board of Statutory Auditors is
adequate to ensure the independence and professionalism of its function in every respect - as
also emerged from the outcome of the last self-assessment undergone by the Board of
Statutory Auditors;
- 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 Directors' 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 2022, are of significant importance under article 15 of Consob Market
Regulation are listed in detail by the Company in the Report on Operations.
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.
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505
FINANCIAL STATEMENTS AT DECEMBER 31, 2022 The activities described above, conducted both collectively and individually, have been documented
in the minutes of the 11 meetings of the Board of Statutory Auditors held during 2022.
BOARD OF STATUTORY AUDITORS SELF-ASSESSMENT PROCESS
In 2022, 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 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 16 March 2023.
The Board of Statutory Auditors reports that the self-assessment for 2022 confirmed the broadly
positive picture seen in the previous financial year and previous terms on the composition and
operation of the Board of Statutory Auditors. It is acknowledged that the Company has put the Board
of Statutory Auditors in a position to keep abreast of the business and dynamics of the Group,
guaranteeing the efficient performance of its work.
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 2022
financial year.
PROPOSALS TO THE SHAREHOLDERS' MEETING
Financial Statements at 31 December 2022
The Board of Statutory Auditors expresses its favourable opinion on the approval of the Financial
Statements for the year ending on 31 December 2022 and has no objections to raise regarding the
proposal made
a) to approve the Company's Financial Statements for the year ended 31 December 2022, as
presented by the Board of Directors as a whole, in the individual entries and with the
proposed provisions, showing a profit of 252,485,607.00 euros;
b) to distribute to shareholders a dividend, gross of withholding taxes, of 0.218 euros for each
of the 1,000,000,000 outstanding ordinary shares, for a total of 218,000,000 euros;
c) to carry forward the remaining profits, amounting to 34,485,607.00 euros;
d) 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;
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506
Pirelli Annual Report 2022 e) 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 2023 financial year subject to the binding vote of the Shareholders’ Meeting and the
Report on Compensation Paid in the 2022 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 2023-2025 LTI plan and has no objections.
Other issues submitted to the shareholders’ meeting for approval
Regarding the other issues submitted to you for approval (appointment of the Board of Directors and
“Directors and Officers Liability Insurance” Policy), the Board of Statutory Auditors has no comments
to make.
****
Pursuant to article 144-quinquiesdecies of the Issuers’ Regulation, 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) of the Issuers’
Regulation 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 the 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, 6 April 2023
23
507
FINANCIAL STATEMENTS AT DECEMBER 31, 2022 For the Board of Statutory Auditors
The Chairman, Mr Riccardo Foglia Taverna
24
508
Pirelli Annual Report 2022 509
FINANCIAL STATEMENTS AT DECEMBER 31, 2022 Pirelli Annual Report 2022
510
RESOLUTIONS
511
RESOLUTIONS
PROPOSAL FOR
APPROVAL OF
THE FINANCIAL
STATEMENTS
AND ALLOCATION
OF THE RESULT
FOR THE YEAR
Shareholders,
The year ended December 31, 2022 closed with a profit of
euro 252,485,607.00.
Considering that following the shareholders’ meeting
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 euro 0.218 for each
of the 1,000,000,000 outstanding ordinary shares and the
carry-forward of the remaining profit of euro 34,485,607.00.
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
may vary following any requests for conversion of the “EUR
500 million Senior Unsecured Guaranteed Equity-linked
Bonds due 2025”. In this case, the Board proposes to
withdraw any necessary amounts from the item “Retained
earnings reserve”.
If you agree with our proposal, we request that you adopt
the following
RESOLUTIONS
“The Shareholders’ Meeting,
→ having examined the annual report at December 31, 2022;
→ having acknowledged the report of the Board of Statutory
Auditors;
→ having acknowledged the report of the Independent
Auditors;
RESOLVES
a) to approve the Company’s financial statements for the
year ended December 31, 2022, as presented by the
Board of Directors as a whole, in the individual entries
and with the proposed provisions, showing a profit of euro
252,485,607.00;
b) to distribute to shareholders a dividend, gross of
withholding taxes, of euro 0.218 for each of the
1,000,000,000 outstanding ordinary shares, for a total of
euro 218,000,000;
c) to carry
forward
the
remaining profit of euro
34,485,607.00;
d) 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;
e) 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 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 2022 will be paid as from July 26,
2023, with ex dividend date on July 24, 2023 (record date
July 25, 2023).
512
Pirelli Annual Report 2022 513
RESOLUTIONS Pirelli Annual Report 2022
514
CERTIFICATIONS
515
CERTIFICATIONS
516
Pirelli Annual Report 2022 517
CERTIFICATIONS 518
Pirelli Annual Report 20221 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 2022 519
CERTIFICATIONS1 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 2022, 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 2022, 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. 520
Pirelli Annual Report 2022 2 of 7 Key audit matter Audit procedures to address the key audit matter Recoverability of brands with indefinite useful life and goodwill Note 10 “Intangible assets” As of 31 December 2022 the indefinite-lived intangible assets Pirelli brand and goodwill amount to € 2,270 million and € 1,885 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 of future earnings attributable to the brand, net of the contribution assigned to the other operating assets (multi-period excess earnings method) 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 value in use, calculated based on the expected future cash flows of the Consumer segment. 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 the carrying amounts 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 future earnings attributable to the brand, net of the contribution assigned to the other operating assets (multi-period excess earnings method) and discount rate, including benchmarking and sensitivity analysis; • assessment of the allocation of goodwill to CGUs; • assessment of the key assumptions used when determining the value in use of the Consumer segment, to which the goodwill is allocated, with focus to expected cash flow projections and discount rate, including benchmarking e sensitivity analysis; • 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. 521
CERTIFICATIONS 3 of 7 Key audit matter Audit procedures to address the key audit matter Revenue recognition Note 3 “ Adopted Accounting Standards” The recognition of revenues, amounting to € 6,616 million in 2022, represented a key matter in the audit of the consolidated financial statements, also considering the magnitude and the high volume of sales transactions carried out through a global distribution network, different sales channels and logistic platforms. 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. 522
Pirelli Annual Report 20224 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; 523
CERTIFICATIONS 5 of 7 • 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 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. 524
Pirelli Annual Report 2022 6 of 7 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. 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. Due to certain technical limitations, some information included in the notes to the consolidated financial statements when extracted from the XHTML format to an XBRL instance may not be reproduced in an identical manner with respect to the corresponding information presented in the consolidated financial statements in XHTML format. 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 2022, 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 525
CERTIFICATIONS 7 of 7 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 2022 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 2022 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. 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, 6 April 2023 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 526
Pirelli Annual Report 2022 527
CERTIFICATIONS 528
Pirelli Annual Report 2022 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 2022 529
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 2022, 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 2022, 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. 530
Pirelli Annual Report 2022 2 of 6 Key audit matter Audit procedures to address the key audit matter Recoverability of brands with indefinite useful life Note 9 “Intangible assets” As of 31 December 2022 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 of future earnings attributable to the brand, net of the contribution assigned to the other operating assets (multi-period excess earnings method) 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 to future earnings attributable to the brand, net of the contribution assigned to the other operating assets (multi-period excess earnings method) 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. 531
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; 532
Pirelli Annual Report 2022 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. 533
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 2022, 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 2022 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 2022 and are prepared in compliance with the law. 534
Pirelli Annual Report 2022 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, 6 April 2023 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 535
CERTIFICATIONS GRI CONTENT INDEX
STATEMENT OF USE
GRI 1 USED
Pirelli has reported in accordance with the GRI Standards for the period
01/01/2022 - 31/12/2022.
GRI 1: Foundation 2021
APPLICABLE GRI SECTOR STANDARD(S)
NA
GRI STANDARD/
OTHER SOURCE
DISCLOSURE
LOCATION
PAGE
OMISSION
REQUIREMENT(S)
OMITTED
REASON
EXPLANATION
2-1 Organizational
details
GENERAL DISCLOSURES
Corporate website (www.pirelli.com)
Pirelli and its Management Model
Report on the Corporate
Governance and Share Ownership
of Pirelli & C SpA - Glossary
Company Profile
Significant shareholdings of capital
Scope of consolidation - Companies
consolidated line-by-line
Corporate website
(www.pirelli.com)
99-100,
228-229,
229-230,
231,
416-421
2-2 Entities included
in the organization’s
sustainability
reporting
Methodological note
Scope of Reporting
Scope of consolidation - Companies
consolidated line-by-line
98-99,
154,
416-421
A gray cell indicates that reasons for omission are
not permitted for the disclosure or that a GRI Sector
Standard reference number is not available.
GRI 2:
GENERAL
DISCLOSURES
2021
2-3 Reporting period,
frequency and contact
point
2-4 Restatements of
information
2-5 External
assurance
2-6 Activities, value
chain and other
business relationships
Methodological note
98-99
Methodological note
98-99
Methodological note
Independent auditor’s report on
the consolidated non-financial
disclosure
98-99,
553-557
Corporate website (www.pirelli.com)
Company Profile
Pirelli and its Management Model
Our customer
Trend of Purchases
Corporate website
(www.pirelli.com)
229-230,
99-100,
121-127,
137-139
2-7 Employees
2-8 Workers who are
not employees
Pirelli employees around the world
Diversity, equity and inclusion
179-185,
185-190
Pirelli employees around the world
179-185
2-9 Governance
structure and
composition
Model of Corporate Governance
Role of the Board of Directors
Functioning of Committees
Pirelli and its Management Model
Diversity Policies
Diversity, equity and inclusion
230,
236,
246-247,
99-100,
240,
185-190
2-10 Nomination
and selection of the
highest governance
body
Corporate website (www.pirelli.com)
Pirelli and its Management Model
Appointment and Replacement
Induction Program
Corporate website
(www.pirelli.com)
99-100,
236-237,
241
2-11 Chair of the
highest governance
body
2-12 Role of the
highest governance
body in overseeing
the management of
impacts
2-13 Delegation of
responsibility for
managing impacts
Composition
Pirelli and its Management Model
Stakeholder Engagement
Impact Materiality
Sustainability of the Natural
Rubber Supply Chain
Policy on Conflict Minerals
237-239
99-100,
110,
101-108,
132-133,
134-136
Pirelli and its Management Model
Impact Materiality
99-100,
101-108
536
Pirelli Annual Report 2022 GRI STANDARD/
OTHER SOURCE
DISCLOSURE
LOCATION
PAGE
OMISSION
REQUIREMENT(S)
OMITTED
REASON
EXPLANATION
2-14 Role of the
highest governance
body in sustainability
reporting
Pirelli and its Management Model
Impact Materiality
Role of the Board of Directors
99-100,
101-108,
236
2-15 Conflicts of
interest
Interests of the Directors and
related-party transactions
System of Internal Control And
Risk Management - Audit, Risks,
Sustainability And Corporate
Governance Committee
257
252
Confidentiality
constraints
Pirelli do not
disclose this
information for
Business related
constraints
2-16 Communication
of critical concerns
2-17 Collective
knowledge of the
highest governance
body
2-18 Evaluation of the
performance of the
highest governance
body
2-19 Remuneration
policies
2-20 Process
to determine
remuneration
Corporate website (www.pirelli.com)
Pirelli and its Management Model
Induction Program
Corporate website
(www.pirelli.com)
99-100,
241
Board of Directors Self-Assessment
Process
242-243
Remuneration Policy For The 2023
Financial Year
Elements of the 2023 Policy
Compensation in the event
of resignation, dismissal or
termination of relations
Clawback Clauses
Office Termination Payment and
non-monetary benefits
Diversity, equity and inclusion
Remuneration and Sustainability
Report on the Remuneration Policy
and Compensation Paid
Remuneration Policy For The 2023
Financial Year
283-286,
288,
302-303,
302,
298,
185-190,
190-191
279-282,
283-286
GRI 2:
GENERAL
DISCLOSURES
2021
2-21 Annual total
compensation ratio
NA
a;b;c
Confidentiality
constraints
Pirelli do not
disclose this
information
for Business
related
constraints
2-22 Statement
on sustainable
development strategy
Corporate website
(www.pirelli.com)
Sustainability Area/
Pirelli’s Model
Corporate website
(www.pirelli.com)
2-23 Policy
commitments
2-24 Embedding
policy commitments
2-25 Processes to
remediate negative
impacts
Main Policies
Compliance Programmes,
Anti-Corruption, Privacy, Trade
Compliance, Antitrust, Compliance
with Laws And Regulations
Supply Chain Sustainable
Management System
Policy on Conflict Minerals
Respect for Human Rights
Diversity, equity and inclusion
Training on Sustainability and
Corporate Governance
Sustainability of the Natural
Rubber Supply Chain
The “Green Sourcing” Policy
Supplier award
Respect for Human Rights
Grievance Mechanism - Natural
Rubber
Materiality of ESG Impacts on the
Supply Chain
Sustainability of the Natural
Rubber Supply Chain
Focus: Reporting Procedure -
Whistleblowing Policy
Diversity, equity and inclusion
110-111,
111-112,
127-128,
134-136,
176-177,
185-190,
194
132-133,
134,
137,
176-177
115,
131,
132-133,
113-115,
185-190
2-26 Mechanisms for
seeking advice and
raising concerns
Focus: Reporting Procedure -
Whistleblowing Policy
113-115
537
CERTIFICATIONS GRI STANDARD/
OTHER SOURCE
DISCLOSURE
LOCATION
PAGE
OMISSION
REQUIREMENT(S)
OMITTED
REASON
EXPLANATION
GRI 2:
GENERAL
DISCLOSURES
2021
2-27 Compliance with
laws and regulations
2-28 Membership
associations
2-29 Approach
to stakeholder
engagement
2-30 Collective
bargaining
agreements
GRI 3:
MATERIAL TOPICS
2021
3-1 Process to
determine material
topics
3-2 List of material
topics
GRI 3:
MATERIAL TOPICS
2021
3-3 Management of
material topics
GRI 201:
ECONOMIC
PERFORMANCE
2016
201-1 Direct economic
value generated and
distributed
201-2 Financial
implications and other
risks and opportunities
due to climate change
201-3 Defined benefit
plan obligations and
other retirement plans
201-4 Financial
assistance received
from government
Compliance
Focus: ESG On-Site Audits
Energy Management
European Works Council (EWC)
Main International Commitments
for Sustainability
Contributions for the benefit of the
External Community
Respect for Human Rights
Tyre Wear and TRWP
127,
129-131,
154-156,
198
210-219,
116-117,
176-177,
152-153
Stakeholder engagement
Policy for managing dialogue
with Shareholders and the main
Financial Market Stakeholders
110,
260
Industrial Relations
Unionisation Levels and Industrial
Action
198-200,
199
MATERIAL TOPICS
Methodological note
98-99
Methodological note
98-99
FINANCIAL HEALTH
Presentation of 2022 integrated
Annual Report
Sharing of Added Value
Relations with Investors and the
Financial Market
Consolidated Financial Statements
at December 31, 2022
Sharing of Added Value
Relations with Investors and the
Financial Market
Consolidated Financial Statements
at December 31, 2022
Risk factors and uncertainty
Emerging risks related to Climate
Change and Water Stress
Joining the Task Force on Climate-
Related Financial Disclosures
(TCFD)
Management of Greenhouse Gas
Emissions and Carbon Action Plan
Supplementary Pension Plans,
Supplementary Health Plans and
other Social Benefits
Employee Benefit Obligations
Personnel Costs
56-57,
116-117,
118-119,
325-424
116-117,
118-119,
325-424
83-90,
89,
141-143,
156-158
199-200,
462-463,
468
Loans and Contributions received
from the Public Administration
118
DIVERSITY, EQUITY AND INCLUSION
GRI 3:
MATERIAL TOPICS
2021
3-3 Management of
material topics
Diversity, equity and inclusion
Focus: The Figures on Diversity
185-190,
186-187
GRI 202:
MARKET
PRESENCE 2016
202-1 Ratios of
standard entry level
wage by gender
compared to local
minimum wage
202-2 Proportion of
senior management
hired from the local
community
Diversity, equity and inclusion
185-190
Diversity, equity and inclusion
Focus: The Figures on Diversity
185-190,
186-187
A gray cell indicates that reasons for omission are
not permitted for the disclosure or that a GRI Sector
Standard reference number is not available.
538
Pirelli Annual Report 2022 GRI STANDARD/
OTHER SOURCE
DISCLOSURE
LOCATION
PAGE
OMISSION
REQUIREMENT(S)
OMITTED
REASON
EXPLANATION
GRI 3:
MATERIAL TOPICS
2021
3-3 Management of
material topics
Sharing of Added Value
Company initiatives for the external
community
116-117,
215-219
CORPORATE CITIZENSHIP
GRI 203: INDIRECT
ECONOMIC
IMPACTS 2016
203-1 Infrastructure
investments and
services supported
203-2 Significant
indirect economic
impacts
Sharing of Added Value
Company initiatives for the external
community
Fondazione Pirelli
Pirelli Hangar Bicocca
Sharing of Added Value
Company initiatives for the external
community
Fondazione Pirelli
Pirelli Hangar Bicocca
116-117,
215-219,
219-220,
221-224
116-117,
215-219,
219-220,
221-224
RESPONSIBLE MANAGEMENT OF THE SUPPLY CHAIN
GRI 3:
MATERIAL TOPICS
2021
3-3 Management of
material topics
GRI 204:
PROCUREMENT
PRACTICES 2016
204-1 Proportion
of spending on local
suppliers
GRI 3:
MATERIAL TOPICS
2021
3-3 Management of
material topics
GRI 205:
ANTI-CORRUPTION
2016
205-1 Operations
assessed for risks
related to corruption
205-2
Communication and
training about anti-
corruption policies
and procedures
205-3 Confirmed
incidents of corruption
and actions taken
GRI 3:
MATERIAL TOPICS
2021
3-3 Management of
material topics
GRI 206:
ANTI-COMPETITIVE
BEHAVIOR 2016
206-1 Legal actions
for anti-competitive
behavior, anti-trust,
and monopoly
practices
Our Suppliers
127-139
Trend of Purchases
137-139
BUSINESS ETHICS & INTEGRITY
Pirelli and its Management Model
Main Policies
Compliance Programmes,
Anti-Corruption, Privacy, Trade
Compliance, Antitrust, Compliance
with Laws And Regulations
Focus: Reporting Procedure -
Whistleblowing Policy
Respect for Human Rights
99-100,
110-111,
111-112,
113-115,
176-177
Focus: Reporting Procedure -
Whistleblowing Policy
113-115
Main Policies
Compliance Programmes,
Anti-Corruption, Privacy, Trade
Compliance, Antitrust, Compliance
with Laws And Regulations
Induction Program
Compliance Programmes,
Anti-Corruption, Privacy, Trade
Compliance, Antitrust, Compliance
with Laws And Regulations
Focus: Reporting Procedure -
Whistleblowing Policy
110-111,
111-112,
241
111-112,
114-115
BUSINESS ETHICS & INTEGRITY
Pirelli and its Management Model
Main Policies
Compliance Programmes,
Anti-Corruption, Privacy, Trade
Compliance, Antitrust, Compliance
with Laws And Regulations
Focus: Reporting Procedure -
Whistleblowing Policy
Respect for Human Rights
99-100,
110-111,
111-112,
114-115,
176-177
Compliance Programmes,
Anti-Corruption, Privacy, Trade
Compliance, Antitrust, Compliance
with Laws And Regulations
111-112
539
Information
unavailable/
incomplete
% of employees
trained on
anti-corruption
currently not
disclosed by
category and
region
CERTIFICATIONS GRI STANDARD/
OTHER SOURCE
DISCLOSURE
LOCATION
PAGE
OMISSION
REQUIREMENT(S)
OMITTED
REASON
EXPLANATION
BUSINESS ETHICS & INTEGRITY & FINANCIAL HEALTH
GRI 3:
MATERIAL TOPICS
2021
3-3 Management of
material topics
Taxes
Presentation of 2022 integrated
Annual Report
Sharing of Added Value
Consolidated Financial Statements
at December 31, 2022
207-1 Approach to tax
Taxes
207-2 Tax governance,
control, and risk
management
Taxes
401-403,
56-57,
116-117,
325-424
401-403
401-403
GRI 207:
TAX 2019
207-3 Stakeholder
engagement and
management of
concerns related to tax
207-4 Country-by-
country reporting
Taxes
401-403
Information
unavailable/
incomplete
information
provided by
Region
CIRCULAR ECONOMY & PRODUCT ENVIRONMENTAL SUSTAINABILITY
GRI 3:
MATERIAL TOPICS
2021
3-3 Management of
material topics
Product Safety, Performance and
Eco-Sustainability
Product: Research and
Development of Raw Materials
Product: Eco & Safety
Performance Targets
Tyre Wear and TRWP
Management of End-of-Life Tyres
Pirelli’s approach to the Circular
Economy: the 5 Rs
GRI 301:
MATERIALS 2016
301-1 Materials used
by weight or volume
Product: Research and
Development of Raw Materials
301-2 Recycled input
materials used
Product: Research and
Development of Raw Materials
301-3 Reclaimed
products and their
packaging materials
Waste Management
Other Emissions and
Environmental Aspects
Product: Eco & Safety
Performance Targets
Management of End-of-Life Tyres
123-125,
148-149,
149-152,
152-153,
153,
148
148-149
148-149
163-165,
166,
149-152,
153
RESPONSIBLE MANAGEMENT OF NATURAL RESOURCES & PRODUCT ENVIRONMENTAL SUSTAINABILITY
GRI 3:
MATERIAL TOPICS
2021
3-3 Management of
material topics
302-1 Energy
consumption within
the organization
302-2 Energy
consumption outside
of the organization
Sustainability of the Natural
Rubber Supply Chain
Biodiversity
Product: Research and
Development of Raw Materials
Energy Management
132-133,
143-144,
148-149,
154-156
Energy Management
154-156
The Pirelli Group Environmental
Strategy and Footprint
144-147
GRI 302:
ENERGY 2016
302-3 Energy
intensity
Energy Management
154-156
302-4 Reduction of
energy consumption
302-5 Reductions in
energy requirements
of products and
services
Energy Management
154-156
Product: Eco & Safety
Performance Targets
149-152
540
Pirelli Annual Report 2022 GRI STANDARD/
OTHER SOURCE
DISCLOSURE
LOCATION
PAGE
OMISSION
REQUIREMENT(S)
OMITTED
REASON
EXPLANATION
RESPONSIBLE MANAGEMENT OF NATURAL RESOURCES
GRI 3:
MATERIAL TOPICS
2021
3-3 Management of
material topics
GRI 303:
WATER AND
EFFLUENTS 2018
303-1 Interactions
with water as a shared
resource
303-2 Management
of water discharge-
related impacts
303-3 Water
withdrawal
303-4 Water
discharge
303-5 Water
consumption
GRI 3:
MATERIAL TOPICS
2021
3-3 Management of
material topics
GRI 304:
BIODIVERSITY
2016
304-1 Operational
sites owned, leased,
managed in, or
adjacent to, protected
areas and areas of
high biodiversity value
outside protected
areas
304-2 Significant
impacts of activities,
products and services
on biodiversity
304-3 Habitats
protected or restored
304-4 IUCN Red List
species and national
conservation list
species with habitats
in areas affected by
operations
Sustainability of the Natural
Rubber Supply Chain
Biodiversity
Pirelli’s approach to the Circular
Economy: the 5 Rs
Product: Research and
Development of Raw Materials
Water Management
132-133,
143-144,
148,
148-149,
161-163
Water Management
161-163
Water Management
161-163
Water Management
Water Management
Water Management
161-163
161-163
161-163
BIODIVERSITY PROTECTION
Biodiversity
Sustainability of the Natural
Rubber Supply Chain
Energy Management
Water Management
Waste Management
143-144,
132-133,
154-156,
161-163,
163-165
Biodiversity
143-144
Biodiversity
Water Management
143-144,
161-163
Management of Greenhouse Gas
Emissions and Carbon Action Plan
Biodiversity
156-158,
143-144
Biodiversity
143-144
541
CERTIFICATIONS GRI STANDARD/
OTHER SOURCE
DISCLOSURE
LOCATION
PAGE
OMISSION
REQUIREMENT(S)
OMITTED
REASON
EXPLANATION
CLIMATE CHANGE AND GREENHOUSE GAS EMISSIONS REDUCTION
GRI 3:
MATERIAL TOPICS
2021
3-3 Management of
material topics
305-1 Direct (Scope 1)
GHG emissions
Joining the Task Force on Climate-
Related Financial Disclosures
(TCFD)
The Pirelli Group Environmental
Strategy and Footprint
Energy Management
Management of Greenhouse Gas
Emissions and Carbon Action Plan
Scope of Reporting
Management of Greenhouse Gas
Emissions and Carbon Action Plan
GRI 305:
EMISSIONS 2016
305-2 Energy indirect
(Scope 2) GHG
emissions
Scope of Reporting
Management of Greenhouse Gas
Emissions and Carbon Action Plan
305-3 Other indirect
(Scope 3) GHG
emissions
CDP supply chain
Environmental Dimension
The Pirelli Group Environmental
Strategy and Footprint
Management of Greenhouse Gas
Emissions and Carbon Action Plan
305-4 GHG emissions
intensity
Management of Greenhouse Gas
Emissions and Carbon Action Plan
305-5 Reduction of
GHG emissions
Management of Greenhouse Gas
Emissions and Carbon Action Plan
305-6 Emissions
of ozone-depleting
substances (ODS)
305-7 Nitrogen
oxides (NOX), sulfur
oxides (SOX), and
other significant air
emissions
Other Emissions and
Environmental Aspects
Solvents
NOX Emissions
Other Emissions and
Environmental Aspects
141-143,
144-147,
154-156,
156-158
154,
156-158
154,
156-158
136,
140-175,
144-147,
156-158
156-158
156-158
166
165,
165-166,
166
RESPONSIBLE MANAGEMENT OF NATURAL RESOURCES, & CIRCULAR ECONOMY
GRI 3:
MATERIAL TOPICS
2021
3-3 Management of
material topics
306-1 Waste
generation and
significant waste-
related impacts
306-2 Management
of significant waste-
related impacts
GRI 306:
WASTE 2020
Sustainability of the Natural
Rubber Supply Chain
Biodiversity
Pirelli’s approach to the Circular
Economy: the 5 Rs
Product: Research and
Development of Raw Materials
Waste Management
Management of End-of-Life Tyres
132-133,
143-144,
148,
148-149,
163-165,
153
The Pirelli Group Environmental
Strategy and Footprint
Waste Management
144-147,
163-165
Pirelli’s approach to the Circular
Economy: the 5 Rs
Waste Management
Other Emissions and
Environmental Aspects
306-3 Waste
generated
306-4 Waste diverted
from disposal
306-5 Waste directed
to disposal
Waste Management
Waste Management
Waste Management
148,
163-165,
166
163-165
163-165
163-165
RESPONSIBLE MANAGEMENT OF THE SUPPLY CHAIN
Our Suppliers
127-139
GRI 3:
MATERIAL TOPICS
2021
GRI 308: SUPPLIER
ENVIRONMENTAL
ASSESSMENT
2016
3-3 Management of
material topics
308-1 New suppliers
that were screened
using environmental
criteria
The ESG Elements in the
Procurement Process
Focus: ESG On-Site Audits
308-2 Negative
environmental impacts
in the supply chain and
actions taken
Risk factors and uncertainty
Focus: ESG On-Site Audits
Policy on Conflict Minerals
CDP supply chain
128-129,
129-131
83-90,
129-131,
134-136,
136
542
Pirelli Annual Report 2022 GRI STANDARD/
OTHER SOURCE
DISCLOSURE
LOCATION
PAGE
OMISSION
REQUIREMENT(S)
OMITTED
REASON
EXPLANATION
TALENT ACQUISITION, DEVELOPMENT AND RETENTION
GRI 3:
MATERIAL TOPICS
2021
3-3 Management of
material topics
Employer Branding
Development
Employee flows by geographic
area, gender and age bracket
191,
191-192
183-185
GRI 401:
EMPLOYMENT
2016
401-1 New employee
hires and employee
turnover
401-2 Benefits
provided to full-time
employees that
are not provided to
temporary or part-
time employees
Supplementary Pension Plans,
Supplementary Health Plans and
other Social Benefits
199-200
401-3 Parental leave
Diversity, equity and inclusion
185-190
GRI 402:
LABOR/
MANAGEMENT
RELATIONS 2016
402-1 Minimum notice
periods regarding
operational changes
Industrial Relations
198-200
GRI 3:
MATERIAL TOPICS
2021
3-3 Management of
material topics
Occupational health, safety and
hygiene
200-207
OCCUPATIONAL HEALTH AND SAFETY
403-1 Occupational
health and safety
management system
403-2 Hazard
identification, risk
assessment, and
incident investigation
403-3 Occupational
health services
403-4 Worker
participation,
consultation, and
communication on
occupational health
and safety
403-5 Worker training
on occupational health
and safety
403-6 Promotion of
worker health
403-7 Prevention
and mitigation of
occupational health
and safety impacts
directly linked by
business relationships
403-8 Workers
covered by an
occupational
health and safety
management system
Model
Management System
Safety Culture and Training
Monitoring of Health and Safety
Performance and Main Indicators
Safety Culture and Training
Monitoring of Health and Safety
Performance and Main Indicators
200,
201-202
202-203,
203-207
202-203,
203-207
Model
Management System
200,
201-202
Safety Culture and Training
202-203
Welfare and initiatives for the
internal community
Safety Culture and Training
The ESG Elements in the
Procurement Process
Product: Eco & Safety
Performance Targets
Safety Culture and Training
197-198,
202-203
128-129,
149-152,
202-203
Model
Management System
200,
201-202
a. iii
Information
unavailable/
incomplete
number of
contractors not
available
403-9 Work-related
injuries
Monitoring of Health and Safety
Performance and Main Indicators
203-207
a. v, b. v
Confidentiality
Constraints
403-10 Work-related
ill health
Monitoring of Health and Safety
Performance and Main Indicators
203-207
Pirelli do not
disclose this
information
for Business
related
constraints
GRI 403:
OCCUPATIONAL
HEALTH AND
SAFETY 2018
543
CERTIFICATIONS GRI STANDARD/
OTHER SOURCE
DISCLOSURE
LOCATION
PAGE
OMISSION
REQUIREMENT(S)
OMITTED
REASON
EXPLANATION
GRI 3:
MATERIAL TOPICS
2021
3-3 Management of
material topics
Development
Training
Training on Sustainability and
Corporate Governance
191-192,
192-195,
194
TRAINING AND DEVELOPMENT
GRI 404:
TRAINING AND
EDUCATION
2016
404-1 Average hours
of training per year per
employee
404-2 Programs for
upgrading employee
skills and transition
assistance programs
404-3 Percentage of
employees receiving
regular performance
and career
development reviews
Statistics on Pirelli Training
195
Talent Development
Training
192,
195
Performance Management
191-192
GRI 3:
MATERIAL TOPICS
2021
3-3 Management of
material topics
DIVERSITY, EQUITY AND INCLUSION & HUMAN RIGHTS
Impact Materiality
Main Policies
Respect for Human Rights
Diversity, equity and inclusion
Our Suppliers
Compliance with Legislative-
Contractual Requirements
on Overtime, Rest Periods,
Association and Bargaining,
Equal Opportunities and Non-
Discrimination, Prohibition of Child
and Forced Labour
101-108,
110-111,
176-177,
185-190,
127-139,
198-199
GRI 405:
DIVERSITY
AND EQUAL
OPPORTUNITY
2016
405-1 Diversity of
governance bodies
and employees
Pirelli employees around the world
Diversity Policies
Composition
179-185,
240,
237-240
405-2 Ratio of
basic salary and
remuneration of
women to men
Diversity, equity and inclusion
185-190
GRI 3:
MATERIAL TOPICS
2021
3-3 Management of
material topics
DIVERSITY, EQUITY AND INCLUSION & HUMAN RIGHTS
Impact Materiality
Diversity, equity and inclusion
Main Policies
Respect for Human Rights
Our Suppliers
Compliance with Legislative-
Contractual Requirements
on Overtime, Rest Periods,
Association and Bargaining,
Equal Opportunities and Non-
Discrimination, Prohibition of Child
and Forced Labour
101-108,
185-190,
110-111,
176-177,
127-139,
198-199
GRI 406:
NON-
DISCRIMINATION
2016
406-1 Incidents of
discrimination and
corrective actions
taken
Diversity, equity and inclusion
Focus: Reporting Procedure -
Whistleblowing Policy
185-190,
113-115
544
Pirelli Annual Report 2022 GRI STANDARD/
OTHER SOURCE
DISCLOSURE
LOCATION
PAGE
OMISSION
REQUIREMENT(S)
OMITTED
REASON
EXPLANATION
HUMAN RIGHTS & RESPONSIBLE MANAGEMENT OF THE SUPPLY CHAIN
GRI 3:
MATERIAL TOPICS
2021
3-3 Management of
material topics
GRI 407:
FREEDOM OF
ASSOCIATION
AND COLLECTIVE
BARGAINING 2016
407-1 Operations and
suppliers in which
the right to freedom
of association and
collective bargaining
may be at risk
Main Policies
Respect for Human Rights
Diversity, equity and inclusion
Our Suppliers
Compliance with Legislative-
Contractual Requirements
on Overtime, Rest Periods,
Association and Bargaining,
Equal Opportunities and Non-
Discrimination, Prohibition of Child
and Forced Labour
The ESG Elements in the
Procurement Process
Focus: ESG On-Site Audits
Respect for Human Rights
Compliance with Legislative-
Contractual Requirements
on Overtime, Rest Periods,
Association and Bargaining,
Equal Opportunities and Non-
Discrimination, Prohibition of Child
and Forced Labour
110-111,
176-177,
185-190,
127-139,
198-199
128-129,
129-131,
176-177,
198-199
HUMAN RIGHTS & RESPONSIBLE MANAGEMENT OF THE SUPPLY CHAIN
GRI 3:
MATERIAL TOPICS
2021
3-3 Management of
material topics
GRI 408:
CHILD LABOR 2016
408-1 Operations and
suppliers at significant
risk for incidents of
child labor
Main Policies
Respect for Human Rights
Diversity, equity and inclusion
Our Suppliers
Compliance with Legislative-
Contractual Requirements
on Overtime, Rest Periods,
Association and Bargaining,
Equal Opportunities and Non-
Discrimination, Prohibition of Child
and Forced Labour
The ESG Elements in the
Procurement Process
Focus: ESG On-Site Audits
Respect for Human Rights
Compliance with Legislative-
Contractual Requirements
on Overtime, Rest Periods,
Association and Bargaining,
Equal Opportunities and Non-
Discrimination, Prohibition of Child
and Forced Labour
110-111,
176-177,
185-190,
127-139,
198-199
128-129,
129-131,
176-177,
198-199
HUMAN RIGHTS & RESPONSIBLE MANAGEMENT OF THE SUPPLY CHAIN
Main Policies
Respect for Human Rights
Diversity, equity and inclusion
Our Suppliers
Compliance with Legislative-
Contractual Requirements
on Overtime, Rest Periods,
Association and Bargaining,
Equal Opportunities and Non-
Discrimination, Prohibition of Child
and Forced Labour
The ESG Elements in the
Procurement Process
Focus: ESG On-Site Audits
Respect for Human Rights
Compliance with Legislative-
Contractual Requirements
on Overtime, Rest Periods,
Association and Bargaining,
Equal Opportunities and Non-
Discrimination, Prohibition of Child
and Forced Labour
110-111,
176-177,
185-190,
127-139,
198-199
128-129,
129-131,
176-177,
198-199
GRI 3:
MATERIAL TOPICS
2021
3-3 Management of
material topics
GRI 409:
FORCED OR
COMPULSORY
LABOR 2016
409-1 Operations and
suppliers at significant
risk for incidents of
forced or compulsory
labor
GRI 410: SECURITY
PRACTICES 2016
410-1 Security
personnel trained in
human rights policies
or procedures
545
Information
unavailable/
incomplete
% of security
personnel
trained on
human rights
currently not
available
CERTIFICATIONS GRI STANDARD/
OTHER SOURCE
DISCLOSURE
LOCATION
PAGE
OMISSION
REQUIREMENT(S)
OMITTED
REASON
EXPLANATION
GRI 3:
MATERIAL TOPICS
2021
3-3 Management of
material topics
GRI 411:
RIGHTS OF
INDIGENOUS
PEOPLES 2016
411-1 Incidents of
violations involving
rights of indigenous
peoples
HUMAN RIGHTS
Main Policies
Respect for Human Rights
Diversity, equity and inclusion
Our Suppliers
Compliance with Legislative-
Contractual Requirements
on Overtime, Rest Periods,
Association and Bargaining,
Equal Opportunities and Non-
Discrimination, Prohibition of Child
and Forced Labour
110-111,
176-177,
185-190,
127-139,
198-199
Focus: Reporting Procedure -
Whistleblowing Policy
113-115
CORPORATE CITIZENSHIP
GRI 3:
MATERIAL TOPICS
2021
3-3 Management of
material topics
Sharing of Added Value
Company initiatives for the external
community
116-117,
215-219
GRI 413:
LOCAL
COMMUNITIES
2016
Stakeholder engagement
Respect for Human Rights
Sustainability of the Natural
Rubber Supply Chain
Water Management
Compliance with Legislative-
Contractual Requirements
on Overtime, Rest Periods,
Association and Bargaining,
Equal Opportunities and Non-
Discrimination, Prohibition of Child
and Forced Labour
Biodiversity,
The Pirelli Group Environmental
Strategy and Footprint
External Community,
Company initiatives for the external
community
Respect for Human Rights
Sustainability of the Natural
Rubber Supply Chain,
Biodiversity,
The Pirelli Group Environmental
Strategy and Footprint,
Water Management,
External Community,
Company initiatives for the external
community
110,
176-177,
132-133,
161-163,
198-199,
143-144,
144-147,
208-215,
215-219
176-177,
132-133,
143-144,
144-147,
161-163,
208-215,
215-219
413-1 Operations
with local community
engagement, impact
assessments,
and development
programs
413-2 Operations with
significant actual and
potential negative
impacts on local
communities
RESPONSIBLE MANAGEMENT OF THE SUPPLY CHAIN
GRI 3:
MATERIAL TOPICS
2021
3-3 Management of
material topics
Our Suppliers
Respect for Human Rights
Policy on Conflict Minerals
GRI 414:
SUPPLIER SOCIAL
ASSESSMENT
2016
GRI 415:
PUBLIC POLICY
2016
414-1 New suppliers
that were screened
using social criteria
The ESG Elements in the
Procurement Process
Focus: ESG On-Site Audits
414-2 Negative social
impacts in the supply
chain and actions
taken
Risk factors and uncertainty
Focus: ESG On-Site Audits
83-90,
129-131
415-1 Political
contributions
Contributions for the benefit of the
External Community
116-117
127-139,
176-177,
134-136
128-129,
129-131
Information
unavailable/
incomplete
information
currently
unavailable
546
Pirelli Annual Report 2022 GRI STANDARD/
OTHER SOURCE
DISCLOSURE
LOCATION
PAGE
OMISSION
REQUIREMENT(S)
OMITTED
REASON
EXPLANATION
BUSINESS ETHICS AND INTEGRITY & PRODUCT QUALITY AND SAFETY
GRI 3:
MATERIAL TOPICS
2021
3-3 Management of
material topics
Product Safety, Performance and
Eco-Sustainability
Product: Research and
Development of Raw Materials
Product: Eco & Safety
Performance Targets
Tyre Wear and TRWP
Management of End-of-Life Tyres
Pirelli and its Management Model
Main Policies
Compliance Programmes,
Anti-Corruption, Privacy, Trade
Compliance, Antitrust, Compliance
with Laws And Regulations
Compliance
Focus: Reporting Procedure -
Whistleblowing Policy
123-125,
148-149,
149-152,
152-153,
153,
99-100,
110-111,
111-112,
127,
113-115
GRI 416:
CUSTOMER
HEALTH AND
SAFETY 2016
GRI 417:
MARKETING AND
LABELING 2016
416-1 Assessment of
the health and safety
impacts of product
and service categories
Product Safety, Performance and
Eco-Sustainability
The ESG Elements in the
Procurement Process
123-125,
128-129
416-2 Incidents of
non-compliance
concerning the health
and safety impacts of
products and services
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
Compliance
127
Transparency, Information and
Customer Training
Quality and Product Certification
Product: Eco & Safety
Performance Targets
Management of End-of-Life Tyres
Product: Research and
Development of Raw Materials
121-122,
126-127,
149-152,
153,
148-149
Compliance
Compliance
127
127
CYBERSECURITY
GRI 3:
MATERIAL TOPICS
2021
3-3 Management of
material topics
Information and Cyber Security
112-113
GRI 418:
CUSTOMER
PRIVACY 2016
418-1 Substantiated
complaints concerning
breaches of customer
privacy and losses of
customer data
Compliance Programmes,
Anti-Corruption, Privacy, Trade
Compliance, Antitrust, Compliance
with Laws And Regulations
111-112
547
CERTIFICATIONS SASB CONTENT INDEX
SUSTAINABILITY ACCOUNTING STANDARDS BOARD (SASB) - AUTO PARTS
ACCOUNTING METRIC
PAGE NUMBER
SASB CODE
(1) Total energy consumed, (2) percentage grid electricity, (3) percentage
renewable
154-156
(1) Total amount of waste from manufacturing, (2) percentage hazardous,
(3) percentage recycled
163-165
TR-AP-130a.1
TR-AP-150a.1
TR-AP-250a.1.
TR-AP-410a.1.
127
56
134-136
TR-AP-440a.1.
Product Safety
Number of recalls issued, total units recalled
Revenue from products designed to increase fuel efficiency
and/or reduce emissions
Description of the management of risks associated with the use
of critical materials
TOPIC
Energy Management
Waste Management
Design for Fuel Efficiency
Materials Sourcing
Materials Efficiency
Percentage of products sold that are recyclable
153
TR-AP-440b.1.
Percentage of input materials from recycled or remanufactured content
158
TR-AP-440b.2.
Competitive Behavior
Total amount of monetary losses as a result of legal proceedings
associated with anti-competitive behavior regulations
112
TR-AP-520a.1.
ACTIVITY METRICS
Number of parts produced
Weight of parts produced
Area of manufacturing plants
PAGE NUMBER
SASB CODE
NA
154
56
TR-AP-000.A
TR-AP-000.B
TR-AP-000.C
548
Pirelli Annual Report 2022 UNGC PRINCIPLES SUMMARY TABLE
AREAS OF THE
GLOBAL COMPACT
GLOBAL COMPACT
PRINCIPLES
DIRECTLY RELEVANT
GRI INDICATORS
INDIRECTLY RELEVANT
GRI INDICATORS
HUMAN RIGHTS
LABOUR
STANDARDS
Principle 1 – Business
should promote and
respect internationally
proclaimed human rights in
their respective spheres of
influence.
Principle 2 – Business should
ensure that they are not, albeit
indirectly, complicit in human
rights abuses.
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 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 414: Supplier Social Assessment
Disclosure 2-25: Processes to remediate negative
impacts
Disclosure 410: Security Practices
Disclosure 414: Supplier Social Assessment
Disclosure 402: Labour/Management Relations
Disclosure 403: Occupational Health and Safety
Disclosure 407: Freedom of Association and
Collective Bargaining
Disclosure 410: Security Practices
Disclosure 2-23: Policy commitments
Disclosure 2-30: Collective Bargaining Agreements
Disclosure 409: Forced or Compulsory Labor
Disclosure 410: Security Practices
Disclosure 408: Child Labor
Disclosure 410: Security Practices
Disclosure 401: Employment
Disclosure 404: Training and Education
Disclosure 405: Diversity and Equal Opportunity
Disclosure 406: Non-Discrimination
Disclosure 410: Security Practices
Disclosure 2-7: Employees
Principle 7 – Businesses
should support a
precautionary approach to
environmental challenges.
Disclosure 2-23: Policy commitments
Disclosure 201: Economic Performance
ENVIRONMENT
Principle 8 – Business should
undertake initiatives
to promote greater
environmental responsibility.
Disclosure 301: Materials
Disclosure 302: Energy
Disclosure 303: Water and Effluents
Disclosure 304: Biodiversity
Disclosure 305: Emissions
Disclosure 306: Effluents and Waste
Disclosure 308: Supplier Environmental Assessment
Disclosure 2-25: Processes to remediate negative
impacts
Principle 9 – Businesses
should encourage the
development and diffusion of
environmentally friendly
technologies.
Disclosure 301: Materials
Disclosure 302: Energy
Disclosure 303: Water and Effluents
Disclosure 305: Emissions
Disclosure 413: Local Communities
Disclosure 202: Market Presence
Disclosure 401: Employment
Disclosure 414: Supplier Social Assessment
Disclosure 2-30: 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
ANTI-CORRUPTION
Principle 10 – Businesses
should work against corruption
in all its forms, including
extortion and bribery.
Disclosure 205: Anti-Corruption
Disclosure 2-23: Policy Commitments
Disclosure 2-26: Mechanism for seeking Advice and
raising Concerns
Disclosure 205: Anti-Corruption
Disclosure 2-23: Policy Commitments
Disclosure 2-26: Mechanism for seeking Advice
and raising Concerns
549
CERTIFICATIONS 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 (Social Solidarity pp. 217-218)
2 - ZERO HUNGER
Company Initiatives for the External Community (Social Solidarity pp. 217-218)
3 - GOOD HEALTH AND WELL-BEING
Welfare and Initiatives for the Internal Community (pp. 197-198)
Occupational Health, Safety and Hygiene (pp. 200-207)
Company Initiatives for the External Community (Road Safety pp. 215-216, Sport and Inclusion pp. 217, Health p. 218)
Target:
→ Accident Frequency Index: ≤ 0.1 by 2025
Training (pp. 192-195)
Company Initiatives for the External Community (Training pp. 216-217, Culture and Social Value pp. 218-219)
4 - QUALITY EDUCATION
Target:
→ Training: training on Diversity, Equity and Inclusion and Human Rights
5 - GENDER EQUALITY
Diversity, Equity and Inclusion (pp. 185-190)
6 - CLEAN WATER AND SANITATION
7 - AFFORDABLE AND CLEAN ENERGY
8 - DECENT WORK AND ECONOMIC
GROWTH
9 - INDUSTRY, INNOVATION AND
INFRASTRUCTURE
Water Management (pp. 161-163)
Target:
→ Specific water withdrawal: -43% by 2025 compared to 2015
Joining the Task Force on Climate-Related Financial Disclosures (TCFD) (pp. 141-143)
Energy Management (pp. 154-156)
Management of Greenhouse Gas Emissions and Carbon Action Plan (pp. 156-158)
Targets:
→ Specific Energy Consumption: -10% by 2025 compared to 2019
→ Renewable Electricity purchased at Group level: 100% by 2025
→ Group Carbon Neutrality by 2030
Our Suppliers (pp. 127-139)
Internal Community (pp. 179-207)
Company Initiatives for the External Community (Training pp. 216-217)
Target:
→ For new product segments, by 2025: > 40% renewable materials, > 8% recycled materials and < 40% fossil-based
materials; by 2030: > 60% renewable materials, > 12% recycled materials and < 30% fossil-based materials
10 - REDUCED INEQUALITIES
Diversity, Equity and Inclusion (pp. 185-190)
11 - SUSTAINABLE CITIES AND
COMMUNITIES
Main International Commitments for Sustainability (WBCSD pp. 212-213)
Company Initiatives for the External Community (Road Safety pp. 215-216, Social Solidarity pp. 217-218)
Targets:
→ Absolute CO2 Emissions: -42% 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 2025
→ 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.
12 - RESPONSIBLE CONSUMPTION
AND PRODUCTION
Joining the Task Force on Climate-Related Financial Disclosures (TCFD) (pp. 141-143)
Energy Management (pp. 154-156)
Management of Greenhouse Gas Emissions and Carbon Action Plan (pp. 156-158)
Water Management (pp. 161-163)
Waste Management (pp. 163-165)
Company Initiatives for the External Community (Environmental Initiatives p. 218)
Targets:
→ Specific Energy Consumption: -10% by 2025 compared to 2019
→ Absolute CO2 Emissions: -42% 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
550
Pirelli Annual Report 2022 SUSTAINABLE DEVELOPMENT GOALS
(SDGs)
PARAGRAPHS DESCRIBING THE GROUP’S ACTIVITIES IN SUPPORT OF THE SDGs AND RELEVANT TARGETS
(FROM SUSTAINABILITY PLAN 2025-2030)
13 - CLIMATE ACTION
CDP Supply Chain (pp. 136)
Joining the Task Force on Climate-Related Financial Disclosures (TCFD) (pp. 141-143)
Management of Greenhouse Gas Emissions and Carbon Action Plan (pp. 156-158)
Main International Commitments for Sustainability (International Commitments against Climate Change pp. 214-215)
Targets:
→ Specific Energy Consumption: -10% by 2025 compared to 2019
→ Absolute CO2 Emissions: -42% 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. 161-163)
15- LIFE ON LAND
Sustainability of the Natural Rubber Supply Chain (pp. 132-133)
Company Initiatives for the External Community (Environmental Initiatives p. 218)
16- PEACE, JUSTICE AND
STRONG INSTITUTIONS
Compliance Programmes, Anti-Corruption, Privacy, Trade Compliance, Antitrust, Compliance with Laws
And Regulations (pp. 111-112)
17 - PARTNERSHIPS FOR THE GOALS
Sustainability of the Natural Rubber Supply Chain (pp. 132-133)
Main International Commitments for Sustainability (WBCSD pp. 212-213)
Company Initiatives for the External Community (Road Safety pp. 215-216)
551
CERTIFICATIONS CORRELATION TABLE WITH TOPICS LISTED IN ART. 2, D. LGS 254/2016
TOPICS FROM D. LGS 254/2016
REFERENCE PARAGRAPH
PAGE NUMBER
ENVIRONMENTAL
ASPECTS
Use of Energy Resources (from
renewables and non-renewables)
• Risks Related To Environmental Issues
• Energy Management
Use of Water Resources
• Risks Related To Environmental Issues
• Emerging risks related to climate change and water stress
• Water Management
Greenhouse Gas Emissions
and Air-Polluting Emissions
•
• Emerging risks related to climate change and water stress
•
Joining the Task Force on Climate-Related Financial
Disclosures (TCFD)
Management Of Greenhouse Gas Emissions and Carbon
Action Plan
Health and Safety
Training and Development
• Solvents
• NOX Emissions
• Other Emissions and Environmental Aspects
• Employee Health and Safety Risks
• Occupational Health, Safety and Hygiene
• Risks associated with Human Resources
• Development
• Training
Welfare
• Welfare and Initiatives for the Internal Community
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
• Litigation Risks
• Listening & Engagement
• Industrial Relations
• Diversity, Equity and Inclusion
• Diversity Policies
•
Risks relative to Corporate Social and Environmental
Responsibility, and Business Ethics
• Respect for Human Rights
• Diversity, Equity and Inclusion
•
•
Risks Relative to Social and Environmental Responsibility
and Business Ethics
Compliance Programmes, Anti-Corruption, Privacy,
Trade Compliance, Antitrust, Compliance with Laws And
Regulations
87,
154-156
87,
89,
161-163
89,
141-143,
156-158,
165,
165-166,
166
87,
200-207
86-87,
191-192,
192-195
197-198
87,
195-197,
198-200
185-190,
240
88-89,
176-177,
185-190
88-89,
111-112
552
Pirelli Annual Report 2022 553
CERTIFICATIONS 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 20267/2018 CONSOLIDATED NON-FINANCIAL DISCLOSURE FOR THE YEAR ENDED 31 DECEMBER 2022 554
Pirelli Annual Report 2022 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 2022 prepared in accordance with article 4 of the Decree, and included in section “Report on Responsible Management of the Value Chain” of the Pirelli annual report 2022 (NFD). The NFD was approved by the board of directors on 5 April 2023. Our review does not extend to the information set out in the 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, with the “Global Reporting Initiative Sustainability Reporting Standards” defined in 2021 by the GRI - Global Reporting Initiative (GRI Standards) and with the SASB indicators (Sustainability Accounting Standards), international standards issued by the International Sustainability Standards Board, with reference to the “Auto-parts” industry, identified by them as the reporting standards, and with the process suggested by 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 contained 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’s activities, its performance, its results and related impacts. 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, the compliance with the Decree. 555
CERTIFICATIONS 3 of 5 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 by 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 perform procedures to obtain limited assurance that the NFD is free from material misstatement. 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, to assess the reasonableness of the selection process used, in accordance with article 3 of the Decree and with the reporting standard adopted and considering AA1000SES (Stakeholder Engagement Standard); 2. analysis and assessment of the criteria used to identify the consolidation area, to assess the compliance with the Decree; 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: a. business and organisational model of the group with reference to the management of the matters specified by article 3 of the Decree; b. policies adopted by the group with reference to the matters specified in article 3 of the Decree, actual results and related key performance indicators; c. key risks generated and/or faced with reference to the matters specified in article 3 of the Decree. 556
Pirelli Annual Report 2022 4 of 5 With reference to these 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 Deutschland GmbH and Pirelli Neumáticos SA de CV 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 the business model, the policies adopted and the 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 consolidation of the information. • for the industrial sites located in Breuberg (Germany) and Silao (Mexico), 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. 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 2022 is not prepared, in all material respects, in accordance with articles 3 and 4 of the Decree, with the GRI Standards and with the SASB selected 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”. 557
CERTIFICATIONS 5 of 5 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, 6 April 2023 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. A project by
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