The Italian multinational Pirelli is known for its high-end, luxury-brand performance tires. The company is the world’s fifth-largest tire manufacturer with a presence in over 160 countries, including 19 manufacturing sites, and a network of approximately 10,000 distributors and retailers.
Customers, particularly those in the luxury market, have been slow to embrace the benefits of sustainability features in the product. Yet the company forecasts that its market will increasingly be shaped by:
• Macroeconomic uncertainty: “downside risks will dominate the world economic outlook”
• Regulatory constraints: “strong move to low-carbon economies”
• Changes in social behavior: “Demographic changes, aging population, virtual mobility, continued urbanization”
In this context the company has defined a year 2020 vision to be a sustainable company meaning it will be “smart, efficient, profitable, innovation-driven accountable and engaged to its stakeholders.” To meet this vision Pirelli has designed a 2013-17 integrated “industrial and sustainability plan.” Sustainability is viewed as a driver of core business outcomes and vice-versa.
The sustainability approach needs to demonstrate a return on capital invested across the three core pillars of Pirelli’s strategy:
• Governance & risk management; • Growth; and • Productivity.
With regard to sustainability’s support for governance and risk management, the company took several steps in its planning process. First, the sustainability team linked to the company’s Enterprise Risk Management (ERM) process. Second, they reviewed priority enterprise risks. Third, they assessed the sustainability topics with the greatest potential to affect enterprise risks.
Finally, they defined sustainability goals that would help support ERM. Examples include:
• A rolling resistance reduction that in the Car segment will reach -40% in 2020 as compared with 2007.
• A reduction by 90% in the workplace accident frequency rate by 2020 compared to 2009 figure.
• Keeping research and development spending for premium products at 7% of net premium products sales, with the aim to further develop and increase premium products safety while lowering environmental impact.
• Growing investment in risk mitigation and prevention of business interruption
• Adoption of increasingly advanced models for management of economic, social, and environmental responsibility in the supply chain, in view of shared development.
Sources for the Pirelli example come from the “Pirelli 2013 – 2017 Industrial Plan: Sustainability Plan 2013-2017 with Selected Targets for 2020” found at http://pid2013.iwebcasting.it/assets/files/sustainability.pdf; and the Pirelli 2013 Sus- tainability Report.