Environmental impact of Pirelli's production system

Environmental management system and environmental performance monitoring

In 2014 all industrial facilities of Pirelli Tyre with a production system and the tyre testing field in Vizzola Ticino (Varese) pursued continuous improvement of their environmental performance by adopting Environmental Management Systems certified in accordance with the International Standard ISO 14001.

The International Standard ISO 14001 was adopted by Pirelli as a reference in 1997, and since 2014 all the certificates have been issued with international accreditation ANAB (ANSI-ASQ National Accreditation Board: accrediting entity of the United States). Group policy mandates implementationand certification in accordance with ISO 14001. As such, it is also applied to new facilities. 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.

The environmental, health and safety performance of every tyre production 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 (CSR Data Management) IT system for managing Group sustainability information, which is used to consolidate the economic, environmental and social performance of all Group business units worldwide. Both systems support consolidation of the performance accounted for in this report.

Scope of reporting

The performances described concern the three years 2012-2013-2014 and consolidate the entire perimeter of the Group.

The amount of finished product in 2014 was approximately 1,060,000 tonnes. This value also includes production by the steel cord business unit for the part sold to customers outside the Pirelli Group. Since the beginning of 2014 the scope of reporting has seen the inclusion of the steel cord production facility in Yanzhou (China), which was reclassified, from the end of the year 2013, from shareholding in "associated" company to shareholding in "subsidiary" company, as also described in the Notes to the Annual Financial Report as at 31 December 2013. In line with the principles set by GRI, the historical value of the environmental indicators accounted below was recalculated integrating the data of Yanzhou in the years 2013 and 2012. In light of the foregoing, the following figures comprise the impact of all Pirelli units, from industrial units to commercial and administrative sites.

Trends in environmental performance indices

2014 saw an increase in production volumes: the number of tonnes of finished product increased by approximately 2.5% compared to 2013 (increase calculated on a comparable basis). This had a positive impact on specific environmental performance indices, while also allowing adequate return of value from investments made with a view to energy efficiency. Nevertheless, the production focus is on Premium products, which are characterised by high energy intensity due to the very restrictive quality specifications, more complex processing and smaller production lots than products for the medium-low end market. The year 2014 therefore saw a general improvement of all environmental indices, including those normalized on the operating margin.

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, which indicates the energy used to produce a tonne of finished product;
  • specific consumption, as measured in GJ per euro of Operating Income.

The Sustainability Plan 2013-2017 with Vision and Target at 2020, fully integrated in the Industrial  Plan presented to the Financial Community in November 2013, provides for a reduction of the specific energy consumption of 18% by 2020 compared to 2009 values.

In the course of 2014, the energy efficiency plan continued at all Group plants, having already been initiated in recent years and characterised by actions aimed at:

  • improving energy management systems, by exactly measuring consumption and focusing daily on technical indicators;
  • improving the quality of energy transformation by streamlining resource and plant use;
  • improving the efficiency of distribution plants;
  • improving the efficiency of production plants;
  • recovering energy for other uses;
  • applying targeted maintenance plans in order to reduce energy waste.

Actions and investments for energy efficiency meet the criteria of economic sustainability normally applied to Pirelli's industrial projects, accompanied by the assessment of environmental impacts. 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, and special projects assessed according to the needs of each manufacturing site.

In the course of 2014 there have been several interventions. In Russia, the completion of the new natural gas thermal power plant in Voronezh and the revamping of the compressed air plant in Kirov. In Settimo Torinese, Italy, the new production area has been initiated, includingall of the best practices of thermal efficiency already implemented at other Pirelli plants, with particular attention to the heating and the recovery of condensate. At the same time the transformation of vulcanisation plants is ongoing with the use of technical gases in all facilities, with particularly positive results in Germany, the UK and Argentina.

As explained in the paragraph “Trends in environmental performance indices”, 2014 generated a lowering of the specific energy index (weighed on tonnes of finished product), recording -3% compared to 2013. The index weighed on the operating margin also decreased by 6% compared to 2013. Also in 2014, albeit in the face of an increase in production, absolute consumption also decreased by about half a percentage point.

The energy efficiency plan applied to factories in 2014 allowed saving about 423,600 GJ. This value was calculated on the basis of the production volumes of the reporting year and the change in efficiencies achieved in 2014 from the previous year.

The reported data were calculated by using direct measurements according to procedure and were subsequently converted into GJ by using heating values from official IPCC sources.

  201220132014
Absolute consumptionsGJ 14,662,864 14,923,482 14,867,697
Specific consumptions GJ/tonPF 14.86 14.45 14.05
GJ/k€ 18.50 18.87 17.74
   

Energy Management

Distribution of energy sources

DISTRIBUtion of energy sources

As illustrated in the graph "distribution of energy sources".Among the direct sources, all of fossil source, natural gas can be found and in smaller quantities other liquid fuels such as oil, LPG and diesel (classified as "other"). These direct sources account for 33% of the total; the remaining 67% is formed from indirect sources such as purchased electricity and steam. As for electricity, it is estimated based on IEA (International Energy Agency) data that, taking into account the geographical distribution of Pirelli, about 37% comes from renewable sources.

Every industrial facility follows the indications of local law regarding energy consumption and management. Compared to 2013, there were no substantial changes.

Regulatory obligations in terms of energy consumption and management in countries in which Pirelli operates did not experience any significant amendments in 2014. The legislative situation affecting the Company includes the introduction of periodic audit mechanisms regarding energy management and use, as well as possible tariff incentives.

In Europe, the Energy Efficiency Directive 2012/27/EU, enacted to accelerate the achievement of the 20-20-20 objectives, introduces the obligation for all large businesses and all major consumers of energy to conduct an energy audit. At Pirelli that requirement is carried out with the optimisation of management systems already existing at the factories, ISO 14001 and ISO 50001 if necessary, with the aim of exploiting any opportunities that are offered in the various countries of the EU.   

Management of greenhouse gas emissions and Carbon Action Plan

Pirelli monitors and reports its emissions of greenhouse gases through the calculation of CO2eq which takes into account the contribution of carbon dioxide as well as methane (CH4) and nitrous oxide (N2O). Greenhouse gases are generated by the combustion of hydrocarbons at production sites, mainly 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 first are called “direct emissions” or Scope 1 emissions insofar as they are produced at company production sites, while the emissions resulting from electrical power or thermal energy consumption are defined as “indirect emissions”, or Scope 2 emissions insofar as they are not produced within the perimeter of company production sites but at the plants that generate the energy and steam purchased and consumed. Performance as measured by energy and greenhouse gas emissions is calculated on the basis of coefficients obtained from the following official sources:

  • IPCC: Guidelines for National Greenhouse Gas Inventories (2006);
  • IEA: CO2 Emissions from Fuel Combustion;

and reported according to the scheme proposed by:

  • GHG Protocol: A Corporate Accounting and Reporting Standard.

Regarding Scope 2 CO2eq emissions, the national average coefficients are defined with respect to the last year available on the above reports and updated annually. It should be noted that the tyre production industry is not a carbon-intensive industry; in fact it falls in 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.

As in the case of energy, Pirelli monitors and accounts for its direct (Scope 1) and indirect (Scope 2) CO2 emissions using two principal indicators:

  • absolute emissions, as measured in tons;
  • specific emissions, as measured in tons per ton of finished product;
  • specific emissions, as measured in tons per euro of Operating Income.

The Pirelli Industrial Plan set a reduction target of specific emissions of CO2 equal to -15% by 2020 compared to 2009 values. The strong link between the trend of energy consumption and CO2 emissions is also confirmed for 2014, recording a decrease of specific emissions weighed on tons of finished product of -2% over the previous year and -5.5% compared with the index weighed on the operating income. As regards biogenic CO2 generated from the small production facility of silica from rice husk, Pirelli emitted in 2014 about 6,700 tonnes of CO2eq.

This quantity is not counted in absolute emissions of the Group mentioned above. The Pirelli management, calculation and reporting model of emissions of greenhouse gases was certified by an independent third party according to the ISO 14064-1 Standard. The verification meets the criteria of relevance, competence, independence, terminology and methodology.

All energy efficiency actions described in the preceding paragraph contribute to reducing the environmental indicators related to greenhouse gas emissions. Parallel to this, Pirelli has developed a more specific “Carbon Action Plan”, with which the Group is seeking to include the renewable energy technology in its energy structure. Among the various projects, the photovoltaic power plant with 500 kW power installed at the plant in Rome, in the USA, is noted. This project will make it possible to reduce emissions at the affected manufacturing plant by 5%. At the plant in Settimo Torinese, a cogeneration plant was initiated for the production of electricity, steam and hot water. There are two cogeneration modules, for a total of 6 MW of electricity: a 4.8 MW turbine unit powered by natural gas, and a 1 MW internal combustion engine powered by vegetable oil, which will therefore ensure 20% of energy from renewable sources. The generated electricity is used for the internal power needs of the plant. The plant is completed with a photovoltaic plant of approximately 1.2 MWe, thereby complementing the generation of renewable energy at the facility.

The benefits expected from the hitherto listed actions will have an impact on the trend in the indices in coming years. Actions completed in the past few years, in particular those related to energy efficiency, allowed the avoidance of about 25,000 tonnes of CO2eq in 2014. This value was calculated on the basis of the production volumes of the reporting year and the change in efficiencies achieved in 2014 from the previous year.

At the end of 2014, two new projects on the supply of energy from renewable sources, one in Brazil and the other in Mexico, were close to implementation. The effects of these investments will be seen as of 2015.

  201220132014
Absolute emissions ton 1,092,555 1,128,313 1,131,166
 of which SCOPE 1 ton 261,180
 of which SCOPE 2 ton 869,986
Specific emissions  ton/tonFP 1.107 1.093 1.069
ton/k€ 1.38 1.43 1.35
 

Distribution of greenhouse gas emissions according to scope   

 distribution of greenhouse gas emissions according to scope

Gas emission    

Water management

Efficient and conscious water use is one of the principal components of the Pirelli environmental strategy, which has undergone numerous improvements over the last several years. These activities have involved and still involve both the overall efficiency of production processes, from design of machinery to facility management, and the contribution which every employee can make towards reducing consumption of this precious resource. The Pirelli Industrial Plan set a reduction target of specific water withdrawal equal to -58% by 2020 compared to 2009 value.

From 2009 to today, thanks to the efforts of all production facilities, more than 21 million cubic metres of water were saved, an amount slightly less than the total withdrawal in two years by the entire Pirelli Group.This figure might be the one that best expresses the commitment of the Company to protection of water sources in the communities where it operates. In fact, aside from the quantitative and global aspect, Pirelli dedicates great attention to the local context of water resources, aware that any water savings or improvement in discharges immediately and directly benefits the local community.

In quantitative terms, 2014 recorded complete withdrawal of slightly under 13 million cubic metres, with a reduction of 19% compared to 2013. To provide an overview of water withdrawal, Pirelli monitors and reports the following three indicators:

  • absolute withdrawal, measured in cubic metres, which comprises 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.

 

  201220132014
Absolute withdrawal(m3) 16,272,000 15,381,000 12,840,000
Specific withdrawal (m3/tonFP) 16.5 14.9 12.1
(m3/k€) 20.5 19.4 15.3
   

Water management

   

All the figures reported in this section have been collected by taking direct or indirect measurements, and are communicated by the local units.

The two graphs below show the weight of the water procurement per type of source and the distribution of absolute withdrawals per type of production business.

Distribution of water withdrawal by use

Water

Type of water sources

Water

57% of the water withdrawn is pumped from wells inside the facilities and authorised by the competent authorities. Furthermore, Pirelli obtains about one fourth of its requirements from surface water, while dedicating special care to guaranteeing that this volume is marginal in relation to the volume of the affected water bodies (always less than 5%). In particular, about 10% is withdrawn from water bodies located in Brazil and protected by national laws and regulations. Finally, about 500,000 cubic meters of water used, or approximately 4% of total withdrawal, are obtained from the waste water treatment of its production processes.

Altogether about 9.2 million cubic meters of water were discharged, of which 69% in surface water bodies, in marginal quantities compared to the receptor volumes (always less than 5%) and with no significant impacts on biodiversity. The remaining amount was discharged into sewer networks. Before being discharged into the final recipient, industrial waste water – adequately treated as necessary – is periodically subjected to analytical tests that certify compliance with locally applicable statutory limits. In particular, as regards the quality of industrial effluents of the Tyre facilities, indicative average values are: 9 mg/l of BOD5 (Biochemical Oxygen Demand), 42 mg/l of COD (Chemical Oxygen Demand) and 21 mg/l of Total Suspended Solids.   

Waste management

The improvement of environmental performances deriving from the production and management of waste is achieved through:

  • innovation of production processes, with the aim of preventing the production of waste at the source, progressively reducing processing rejects and replacing current raw materials with other new materials that have a lower environmental impact;
  • operating management of generated waste, aimed at identifying and ensuring the selection of waste treatment channels 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.

Pirelli monitors and reports on its own waste production, as measured and communicated by all operating units, using three key 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.

The Industrial Plan provides for more than 95% of waste produced to be sent for recovery by 2020, with a Zero Waste to Landfill vision, extending to all operating affiliates the approach already adopted successfully by the factories in Breuberg (Germany) and Rome (United States).

As anticipated in the section “Performance Index Trend”, 83% of the waste was recovered in 2014, with an increase of 3% from the previous year.

The performance of specific waste production was also positive which reduced by 11% compared to 2013. Hazardous wastes represent just under 20% of total production and are sent in their entirety to plants located in the same country where they are produced.

  201220132014
Absolute production(ton) 150,000 165,000 150,000
Specific production (kg/tonFP) 152 160 142
(kg/k€) 189 209 179
     

Waste management

Distribution of waste by type of treatment 

Waste

Waste by type

Waste    

Handling of packaging

Different procedures for handling packaging materials exist for different types of products.

The tyre, which accounts for over 99% of the Group's total sales in 2014, is a product that is generally sold without packaging. Steelcord (the steelcord business was sold during 2014) is instead characterised by specific packaging, on which the Steelcord Business Unit has worked with a view to reuse and replacement of components with more resistant models, less prone to wear and tear and therefore a longer useful life, such as plastic or metal instead of wood. The benefits in terms of reducing waste produced and recycling, are evident. 100% of the pallets placed in reverse logistics circuits in plastic or metal covers 95% of sales volumes. For the remaining 5% wooden pallets are used, where they are more easy to reuse and recover in the areas where they are dispatched.   

Other environmental aspects

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 optimizing the use of solvents, and by spreading solvent-free technologies for operations that may be performed even without the use of these substances. This resulted in a reduction in the specific consumption of solvents, as well as the related emission of volatile organic compounds, of more than 30% at the end of 2014 compared to an expected target of -15% compared to 2009, with related emissions overall slightly lower than total consumption. 

  201220132014
Absolute consumption ton 3,435 2,826 2,416
Specific consumption kg/tonFP 3.5 2.7 2.3
   

Other Environmental aspects

Biodiversity

Pirelli places the utmost attention to ensure that company activities do not interfere with the biodiversity characteristic of the contexts in which the Company operates. Currently, there are two Pirelli facilities located within protected and high value areas for biodiversity: the facility in Vizzola Ticino (Varese, Italy) and the facility in Gravataì (Brazil).

The Vizzola Ticino site, which has an area of 0.26 km2, is part of the Parco del Ticino in Lombardy, a UNESCO MAB (Man and Biosphere, a collection of 425 biosphere reserves located in 95 countries around the world) area. It features 21 species included on the IUCN Red List, including: 15 classified as “of least concern (LC)”, one as “near threatened (NT)”, 3 as “vulnerable (V)”, 1 as “endangered (EN)” and one as “critically endangered (CR)”.

To ensure the utmost protection of the natural environment in which the Vizzola test track is located, Pirelli has implemented, in accordance with the Ticino Park, an ISO 14001 certified Environmental Management System. Environmental impacts on biodiversity of the area are not significant, however, several interventions were made, either directly by the Company or by the Park Authority, to mitigate and improve the interaction of Pirelli activity with the natural environment, as stipulated in the agreement signed in 2001. 

The Gravataì site in Brazil has an area of 0.57 km2, including 0.16 km2 of land ecosystem protected under federal law. Here again, Pirelli has implemented an ISO 14001 certified environmental management system to guarantee that all potential impact on the environment and on biodiversity, while deemed relatively insignificant, be duly considered and managed in every case to reduce all possible interference to a minimum.

At the beginning of 2014 Pirelli intervened restoring two habitats, one in Italy and one in Brazil, as an action to offset the 2013 emissions of the Italian car fleet. The Italian project is called Forcredit and consists of a management plan for the wooded property of the Municipality of Lemie (Torino), 50 kilometres away from the Pirelli production site at Settimo Torinese. It is aimed at the promotion of sustainable forest management as a means of enhancing biodiversity and encouraging the storage of higher quantities of carbon in forest ecosystems. The planned work covers an area of 670 hectares and is part of a management plan aimed at reducing wood cutting and uptake of wood material, so that tall trees may grow. Regardless of whether these woods consist of maple and ash trees, birch or beech trees, the activities are aimed at improving the structural quality of the plants. 

The Brazilian project is called Climate Protection and Acacia and as a whole is aimed at reforestation with Acacia mangium of 3,507 hectares of land in the far north of the South American country, in the region of Boa Vista. The project, aimed at the sustainable production of timber and sequestration of CO2, involves many benefits for local communities, such as the creation of more than 200 permanent jobs, the construction of a new school and the implementation of professional courses. It also respects the rights of indigenous peoples to collect non-timber materials from the forests, improve water and soil quality and ensure safety for more than 15,000 hectares of bordering forests with strong benefits for local biodiversity. The plantings are carried out in accordance with the principles and criteria set out in the Forest Stewardship Council (FSC) certification, which guarantees appropriate environmental management of forests, social benefits and economic feasibility.

NOX Emissions

NOX emissions are derived directly from the energy generation processes used, and for this reason are affected, both in absolute terms and according to unit of finished product, by the trends in energy consumption, thus recording a decrease of -4% in the specific index.

The following graphic shows the 2014 weight of direct and indirect NOX emissions out of total NOX emissions. The emissions have been calculated by using the emission factors defined BUWAL 250 and IDEMAT 2001.

  201220132014
Absolute emissions ton 2,164 2,290 2,245
Specific emissions kg/tonFP 2.19 2.22 2.12
  

Distribution of NOx emission

NOx emissions

NOx emissions

Other emissions and environmental aspects

The production process does not directly use substances that are harmful to the ozone layer. These are 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 to Pirelli manufacturing activities.

In 2014 direct emissions of SOx, caused by the combustion of diesel and fuel oil, was estimated to be about 32 tonnes (U.S. EPA emissions standards).

The environmental management systems implemented at the production units have assured constant and prompt monitoring and intervention in any potential emergency situations that may arise, as well as the reports received from stakeholders.

In the course of 2014, there were no significant environmental spills and no complaints related to significant environmental reasons or related penalties. The only exception is the facility in Voronezh, Russia, where during a visit by the local authorities some non-compliances were reported, the resolution of which was agreed with the authority itself and is to be formally completed in early 2015.

Expenses and investments

In 2014, environmental expense and investments relating to the production process amounted to more than €22.7 million: about 84% covered the activities of normal management and administration of the factories, while the remaining 16% was dedicated to the preventive and improvement actions of the environmental management.

To complete the picture 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 undoubtedly those relating to product research and development: in 2014 the Company invested €205.5 million in research and innovation of its products, with a constant focus on safety performance and reduction of environmental impacts and, at the same time, on production efficiency.