Conflict minerals

The concept of Conflict Minerals was introduced by Section 1502 of the Dodd-Frank Act, federal law of the United States in 2010. “Conflict minerals” include gold, columbite-tantalite (coltan), cassiterite, olframite and their derivatives such as tantalum, tin and tungsten that come (or are extracted) from the Democratic Republic of Congo and/or from neighbouring countries.

The objective of the Conflict Minerals Rules is to discourage the use of minerals whose trade might finance violent conflicts in Central Africa, where serious human rights violations have been reported for years. In accordance with the Conflict Minerals Rules, listed United States companies are asked to conduct reasonable due diligence to trace the origin of these materials, reporting the results to the SEC and publicly on their own websites, with the first report published by 31 May 2014 (for 2013), and subsequently updated every year. The European Commission on March 5th 2014 proposed a draft Regulation setting up an EU system of self-certification for importers of tin, tantalum, tungsten and gold who choose to import responsibly into the Union.

The proposed Regulation is accompanied by a “Communication” (a proposal), a paper that presents the overall comprehensive foreign policy approach on how to tackle the link between conflict and the trade of minerals extracted in affected areas. The focus of Pirelli on issues regarding human rights and at the same time its position of Supplier falling within the supply chain of active Customers in terms of due diligence, has led the Company to conduct a full investigation on its supply chain for the years 2013 and 2014, to identify the existence of any “conflict minerals”. To give an idea of the size of the phenomenon for Pirelli, it is useful to point out that its impact is decidedly limited: the volume of minerals (3T+G) used by Pirelli Tyre in a year weighs less than a ton, an amount that is approximately one millionth of the volume of raw materials used annually by the Company and which is equally distributed among the majority of tyres produced. By way of example, a tyre weighing 10kg contains the equivalent of about 10mg (milligrams) of tin, in the very low concentration of 1 ppm (one part per million).

With a view to sourcing that only involves "conflict free" minerals, Pirelli has asked its suppliers to complete the CFSI CMRT (Conflict-Free Sourcing Initiative Conflict Minerals Reporting Template) form, developed by EICC (Electronic Industry Citizenship Coalition) and GeSI (Global e-Sustainability Initiative), in order to have full visibility on the supply chain, all the way to the mines or foundries.

In 2014, only the second year after the entry into force of the US legislation, Pirelli already had excellent results. Suppliers involved cover 100% of the "conflict minerals" risk related to the Group's production. Over 90% of suppliers involved already provided indications of the source of the materials in question, listing the foundries as required by the procedure. The results of the investigation lead to the conclusion that these products are “Conflict-Free”. At the end of 2014, only a number of suppliers are undergoing assessment, accounting for 0.01% of Pirelli’s purchase spending, respecting in any case the transition period required by law.