The Group's sustainability tools

Corporate Governance

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In recent years Pirelli Group has set up a Corporate Governance system in line with Italian and international best practices.

Of particular note in this regard is the recent effort to appoint independent and minority representatives to the company’s Board of Directors. As at 26 March 2008, independent directors represented over 55 per cent of the total (11 out of twenty, four of whom were appointed by the ‘minorities’). In order to take full advantage of the role played by independent directors, the Group’s Board of Directors, starting from November 2005, decided to introduce the role of Lead Independent Director , who acts as a point of reference and coordination for all independent directors.

For further details and information on Corporate Governance please see the “ Directors’ Report ” that precedes this section.

The area dedicated to the Company’s Corporate Governance system may also be accessed through the homepage of the website www.pirelli.com .

Internal Control Systems

With regard to the systems adopted to further strengthen the company’s internal control, the review of the current Organisational Model continued in 2007, still with the aim of aligning it with the developments in Regulation No. 231.

To develop further opportunities for the improvement of the internal control system, other Group companies also adopted some of the control activities envisaged in the Italian companies’ Organisational Models, designed to reasonably prevent the risk of crime, by issuing specific policies and operational rules.

Of particular note is the “ Modelo de Governancia Corporativa ” implemented in Brazil in the second half of 2007.

The “Modelo” provides a regulatory platform designed to formalise, standardise and disseminate the following to employees, through specific communication and training:

  • Rules of behaviour to be adopted within the company, contained in the Ethical Code, Pirelli’s Group Values and the Group Code of Conduct.
  • Internal control principles, in terms of the safeguarding of assets, operational efficiency and effectiveness, management of information and communications, and compliance with local laws, agreements and regulations.
  • Internal control procedures (operative finance, selection and hiring of personnel, consultancies, complimentary offers, entertainment expenses, purchases of sales and services, sponsorships, management of agents and intermediaries, settlement agreements and legal proceedings, sales of goods and services, authorisations and concession, environment, relations with authorities, social security matters, and financial incentives), and the related implementation procedures in terms of company processes.
  • The obligations on Suppliers to comply with Pirelli’s social responsibility and environmental policies.
  • The disciplinary system.

The “Modelo” provides for a system of reporting to an “Internal Committee”, which is also responsible for monitoring the correct functioning of the Organisational Model.

In 2008, a plan will be developed for the implementation of the “Modelo” in the countries of South America, other than Brazil, where Pirelli operates (Argentina, Venezuela, Mexico, Colombia and Chile).

In 2007, the Corporate Internal Audit Department carried out 66 auditing interventions within the Group, including 10 performed following a mandate issued by the Italian Companies’ Supervisory Bodies. The audits were aimed at verifying the extent of compliance of company processes with the internal control guidelines set down by the Organisational Model adopted.

For further details and information on the Internal control systems see the specific subsections within the “ Directors’ Report ” that precedes this section.

The area dedicated to the Company’s Corporate Governance system may also be accessed through the homepage of the website www.pirelli.com .

Organisational Structure

Governance of Corporate Social Responsibility is centred around the Corporate Social Responsibility Steering Committee , a high-level body that was formed at the beginning of 2004 by the Chairman to guide and supervise the advancement of sustainability throughout the Group. The CSR organisational structure is made up of a Group HSE & CSR Director , a Group CSR Manager , Sector CSR Referents (one for each sector of the Group) and Company CSR Referents (one for each Group affiliate).

In 2005, the Chairman appointed an Equal Opportunities Steering Committee , a high-level body to guide and supervise programmes for equal opportunities in the company. At the same time, in order to steer the implementation of the Equal Opportunities Programme throughout the company, and also to achieve greater organisational balance and to monitor the advancement of equal opportunities within all the affiliates, a Group Equal Opportunities Manager was appointed. Finally, Country Equal Opportunities Managers are responsible for guiding and supervising the advancement of equal opportunities at a local level.

On 17 July 2007, all the Group’s CSR Referents and Equal Opportunity Managers met in Milan for a training seminar on sustainable management and on diversity in particular. The session also provided an update on future projects and objectives that Pirelli intends to pursue within its affiliates.

Group operating procedure “Corporate Social Responsibility”

The Operating Procedure on Corporate Social Responsibility (issued on 16 September 2006) sets out and regulates the methods for the internal management of activities associated with Corporate Social Responsibility, with particular attention to the roles and responsibilities of the departments involved. These regulations also govern the planning and control processes, the process of drawing up this Sustainability Report and the management of the dissemination of CSR information to the external community.

These rules specifically provide for the full integration of CSR into the Group’s financial reporting structure: “ …The cycle of planning and control of CSR follows the Group’s reporting and planning calendar”.

IT system for CSR Information Management

As announced in last year’s report, during 2007 Pirelli developed the “CSR-DM” (CSR Data Management) system. This is a new IT system for the management of CSR information, which improves the efficiency of the process of contribution, validation, consolidation, analysis and management of information relating to CSR.

The system, still in its start-up phase, has already been used to collect the data as at 31/12/2007 and will come into full operation during 2008.

Management Systems adopted and Reference Standards

To implement the first principle of the policy for Health, Safety, Environment and Social Responsibility , Pirelli devotes significant resources to management systems. The Group employs these tools to improve the quality, effectiveness and efficiency of its processes. This results in further reductions in the impacts on the health of its employees, on safety conditions in the workplace and on the environment. These systems are fully described in the relevant subsections in the sections below.

In 2004, the SA 8000 international standard was adopted as the point of reference for assessing the consistency of the Group’s conduct with the Sustainability principles set out in the standard.