Independent audits of vendor sustainability

The Company commissions independent audits from leading specialised firms to review compliance by Pirelli vendors with their ethical, social and environmental responsibilities, as provided inter alia in the sustainability clauses that they sign.

Seventy-two audits were carried bout between the end of 2009 and the beginning of 2010, and another 56 were carried out between the end of 2010 and the beginning of 2011. In most cases they involved vendors of Pirelli Tyre, operating in Countries of Concern (as defined by the EIRIS classification) where the Company operates, i.e. Brazil, Argentina, Egypt, China, Romania, Turkey and Venezuela, or from which Pirelli purchases raw materials, such as Indonesia, India, Malaysia and Thailand. Among the western countries where Pirelli operates, audits were conducted of Pirelli Tyre vendors in Italy, England and Germany.

The independent audits were carried out both at the Pirelli sites, where the suppliers provide services with their own personnel, and at their administrative facilities. Workers, supervising managers and union representatives are interviewed on specific issues as part of these audits.

The auditors use a checklist of sustainability parameters based on the SA8000® standard, the Pirelli Health, Occupational Safety, Environment and Social Responsibility Policy and the Pirelli Ethical Code, and thus in compliance with the provisions of the Group’s sustainability clauses signed by the vendors.

At the central level, a team comprised by the Group Sustainability and Purchasing Departments defines the guidelines for selection of the vendors to be audited, while supporting the corresponding local departments that will manage the process, training and informing them about the purpose and procedures of the audit.

The instances of non-compliance that were most frequently encountered at suppliers and in countries of concern involved the adequacy and level of implementation of safety and environment management systems, in response to which were agreed compliance plans setting out the necessary remedial measures, precise responsibilities and deadlines by which the agreed actions have to be carried out.

In certain cases the plans resulting from the last audits (end of 2010 / beginning 2011) have already been carried out, while in other cases they will be fully implemented by spring 2012.

The Internal Audit function will be directly involved in the process of monitoring compliance plans following audits – both at Pirelli sites and by suppliers – beginning in 2012. The Pirelli Internal Audit function is exquisitely independent insofar as it reports to the Pirelli Internal Control, Risks and Corporate Governance Committee, which is comprised solely of independent directors.

The adopted management system is proving to be unequivocally “win-win” both for Pirelli and for its vendors, effectively in view of mutual substantial growth, where everyone benefits from collaboration.