Conflict minerals

The concept of “conflict minerals” was introduced in Section 1502 of the Dodd-Frank Act, the 2010 United States federal statute. “Conflict minerals” means gold, columbite-tantalite (coltan), cassiterite, wolframite and their derivatives, such as tantalum, tin and tungsten that originate (or are extracted) in the Democratic Republic of Congo (DRC) and/or bordering 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 its own website. The first report must be published by May 31, 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 devoted by Pirelli to human rights issues and, at the same time, its own position as a supplier in the supply chain of customers that actively perform due diligence, have led the Company to conduct a thorough investigation of its own supply chain during 2013, to identify the existence of any conflict minerals.

It is worth indicating, however, the substantially very limited impact of the issue within Pirelli: the volume of minerals (3T+G) used by Pirelli Tyre on a yearly basis is less than 1 ton. This quantity corresponds approximately to one millionth of the raw material volume used annually by the Company and is equally distributed among the large majority of the tyres produced; as an example, a 10 kg passenger tire contains 10 mg (milligram) of tin equivalent, in the very low concentration of 1 ppm (one part per million).

With the ambition to source only conflict-free minerals, Pirelli has asked its own suppliers to fill out form EICC GeSI (EICC/GeSI Conflict Minerals Reporting Template), developed by EICC (Electronic Industry Citizenship Coalition) and GeSI (Global e-Sustainability Initiative), in an attempt to obtain full visibility of the supply chain, all the way to the mines. This process of reasonable due diligence will be completed in 2014 and then will continue with continuous monitoring. The results as of December 31, 2013 were positive, with a significant portion of due diligence already completed and no suspicion of conflict minerals in the supply chain.