Our governance model

CNH Industrial believes that a robust corporate governance model is essential to effectively manage the interests of all its stakeholders, as emerged from the materiality analysis. The Company’s governance model for sustainability issues originated in Fiat Industrial, which, in turn, inherited the governance model adopted by Fiat S.p.A. prior to the demerger, effective 1 January 2011, of automobile operations from the capital goods operations (Agricultural and Construction Equipment, Trucks and Commercial Vehicles, and Powertrain) that now form the scope of CNH Industrial.

Specifically, the governance aspects that emerged as significant were: sustainability governance, which monitors and manages the organization’s performance, particularly on social and environmental aspects; risk management of economic, environmental, and social issues; and the Code of Conduct and policy related to sustainability and monitoring (internally and for business partners).

Among stakeholders, Socially Responsible Investors (SRI) have a particular interest in this issue, followed by the sustainability rating agencies. For investors and analysts, a governance model that attaches sufficient importance to sustainability issues is a guarantee of a long-term outlook. A robust organizational model ensures that the Company’s performance is not due to chance or random behavior and that continuous improvement is possible, based on analysis and results achieved each year; above all, it ensures that effective risk management is in place to safeguard the value of investments.

CORPORATE GOVERNANCE

The central pillars of CNH Industrial’s governance model include: ongoing alignment with international best practice and the Dutch Corporate Governance Code; a clear and comprehensive Code of Conduct, with Guidelines for implementing the principles established within this Code; and an advanced risk management system.

The main elements of CNH Industrial’s governance model are described below. The aspect is discussed in full in the Annual Report, pages 92-112, as well as in the governance section of the website (www.cnhindustrial.com), where all updates throughout the year are reported. The Annual Report can be downloaded from the CNH Industrial website.

CNH Industrial’s Corporate Governance Model

The corporate governance system includes the Code of Conduct and its Guidelines:

  • CNH Industrial Health and Safety Guidelines
  • CNH Industrial Environmental Guidelines
  • CNH Industrial Sustainability Guidelines for Suppliers
  • CNH Industrial Human Rights Guidelines
  • CNH Industrial Human Capital Management Guidelines
  • CNH Industrial Business Ethics and Anti-Corruption Guidelines
  • CNH Industrial Conflict of Interest Guidelines
  • CNH Industrial Data Privacy Guidelines
  • CNH Industrial ICT Assets Guidelines
  • CNH Industrial Community Investment Guidelines
  • CNH Industrial Green Logistics Principles.

An overview of the corporate governance structure is included in the Annual Report.

Composition of the Board of Directors

The composition of the Board of Directors, voted by the shareholders at the General Meeting on 9 September 2013, reflects international best practice:

  • there are 11 directors, ensuring the effective functioning of the Board and its Committees 
  • the independence of directors is verified with reference to the criteria of the Dutch Corporate Governance Code, the Exchange Act, and the NYSE Listed Company Manual 
  • seven out of the 11 directors are independent, or 64% of the total 
  • the Board is composed of three women and eight men, women making up 27% of the total 
  • one Board member is in the thirty-to-fifty age group, and ten are in the over-fifty age group 
  • the roles of the Company Chairman and Chief Executive Officer are split; both are executive directors, with responsibility for the day-to-day management of the Company.

To improve the performance of the Board of Directors, regular updates are provided at meetings on CNH Industrial’s operations, as well as training on the activities of the Board’s subcommittees, including those relating to risk and sustainability.

The Board of Directors is supported by three Committees:

  • Governance and Sustainability Committee 
  • Audit Committee 
  • Compensation Committee.

For these Committees a minimum number of meetings per year is stipulated in the relevant charter: once for the Governance and Sustainability Committee, four to six times for the Audit Committee, and once for the Compensation Committee.

SUSTAINABILITY GOVERNANCE

At CNH Industrial, the integration of economic decisions with those of a social and environmental nature constitutes a fundamental commitment towards long-term value creation.

To meet this commitment, CNH Industrial has adopted a robust sustainability governance model. From the outset, the Company’s operational approach has been based on sustainability best practice, and on management methods and organizational structures already in place at Fiat Group prior to the demerger, adapting them to its own specific business and organizational requirements. Firmly rooted in the corporate culture of CNH Industrial, the model has evolved year after year, encompassing best practice benchmarking and implementing the recommendations of major rating agencies.

THE ORGANIZATIONAL MODEL

organizational model

Governance and Sustainability Committee

Sustainability is a core element of CNH Industrial’s system of governance, with senior management playing a direct and active role. The Governance and Sustainability Committee is a subcommittee of the Board of Directors, and is the highest decision-making body on sustainability. Among other things, the Governance and Sustainability Committee is responsible for assisting the Board of Directors in monitoring and evaluating reports on the Company’s sustainable development policies and practices, management standards, strategy, global performance and governance, and for reviewing, assessing and making recommendations on strategic guidelines for sustainability issues, as well as for reviewing the annual Sustainability Report.

The Committee has three members, two of whom are women; two are in the over-fifty age group, and one in the thirty-to-fifty age group.

Group Executive Council

The highest decision-making body after the Board of Directors is the Group Executive Council (GEC). The GEC is responsible for reviewing the operating performance of the Company and for making decisions on specific operational matters. It also advises the Board of Directors on certain key operational aspects. The activities of the GEC are subject to supervision, examination and, where necessary or appropriate, ratification or overruling by the Board.

The GEC reviews the strategic approach and evaluates the Sustainability Plan’s alignment with business objectives, and receives regular updates on the Company’s sustainability performance.

The GEC is headed by the Company Chairman and comprises four main groupings. The first of these is composed of four Regional Operating Groups (EMEA, NAFTA, LATAM, APAC) that oversee the production and sale of Agricultural Equipment, Construction Equipment, Trucks and Commercial Vehicles, and Powertrain (engines and transmissions). Each group is headed by a Chief Operating Officer (COO) that drives the organization via a regional management team, and reports to the CEO. The second grouping reflects the Company’s focus on its brands: each manager is tasked with enhancing and developing an appropriate product portfolio for each brand and with implementing commercial and marketing strategies tailored to each of the Company’s operating Regions. The third grouping is composed of industrial leaders that drive a rigorous and consistent business approach across the four operating Regions, optimizing Company decisions on capital allocation. The fourth grouping is made up of Company support functions, including the Chief Financial Officer and the Chief Human Resources Officer. In September 2013, after reviewing the operations and performance of each Region and brand, CNH Industrial announced a new position of COO for Trucks and Commercial Vehicles segment, providing a single point of full-time leadership for all operations within the segment.

The GEC has 19 members, including the Company Chairman; two members are women, representing 10.5% of the total. Nine members are in the thirty-to-fifty age group (47% of the total), ten members are in the overfifty age group (53% of the total), while no member is under thirty years of age.

The GEC was directly involved in defining the materiality matrix approved by the CEO.

Sustainability Unit

The Sustainability Unit has an operational role and reports to the Chief Financial Officer, who is a member of the GEC and is regularly invited to attend the meetings of the Board of Directors. The Unit is responsible for regularly updating the sustainability management system by monitoring developments regarding its various aspects, implementing the recommendations of sustainability experts, rating agencies and investors, benchmarking the competition and, together with CNH Industrial’s segments, making adjustments to Key Performance Indicators (KPI). The Sustainability Unit plays a key role in promoting a culture of sustainability across the Company: through an analysis of the Company’s operations it identifies opportunities and risks arising from environmental management, defines actions and targets for the Sustainability Plan aimed at improving the Company’s sustainability performance, and monitors the reaching of these targets. In addition, it prepares the Sustainability Report and manages the sustainability section on the Company’s website. Together with Investor Relations, it also completes questionnaires required by rating agencies, responds to queries raised by Socially Responsible Investors (SRIs), and supports Company segments in their dealings with stakeholders on environmental and social aspects.

The Sustainability Unit also has a dedicated email address and phone number where stakeholders can make requests or leave feedback. Both can be found under the Contacts section of the corporate website. Emails are checked daily and any requests that cannot be managed directly are forwarded to the appropriate office.

Emails or calls may concern social or environmental aspects or even violations. After assessing their importance and severity, they are submitted to the Governance and Sustainability Committee or to the Audit Committee of the Board of Directors.

Sustainability Representatives

The system also comprises company-level sustainability representatives who operate in the various business areas and are engaged in providing support. They play an operational role, bringing their expertise to specific aspects of the Company’s reporting process as well as outlining proposals for improvement. Sustainability representatives provide a direct link between the Sustainability Unit and the Company’s operations, acting as intermediaries from both a technical and an organizational point of view. Representatives for each operational Region were also appointed, tasked with coordinating and developing activities locally in support of communities and employee initiatives that go beyond legislative requirements.

In 2013, 145 social and environmental targets, also addressing climate change issues, were incorporated into the variable compensation system (see also page 47) for the majority of managers of projects included in the Sustainability Plan.

SUSTAINABILITY MANAGEMENT SYSTEM

The sustainability management system consists of the following tools:

  • the Code of Conduct and Guidelines, approved by the Board of Directors (see also page 25), which set out the Company’s approach to key issues 
  • a set of approximately 200 Key Performance Indicators (KPIs), designed to provide maximum coverage of all key environmental, social and governance aspects, in line with GRI G4 requirements and those of the major sustainability rating agencies 
  • the Sustainability Plan, which identifies action priorities and confirms commitments undertaken 
  • the annual Sustainability Report, which discloses the Company’s performance on sustainability aspects, expanding on and completing the information provided in the Annual Report 
  • a summary included in the Annual Report of material sustainability issues, supplementing the financial data
  • the CNH Industrial website, which includes a dedicated top-level sustainability area presenting the contents of the most recent Sustainability Report, along with regular updates throughout the various reporting cycles.

SUSTAINABILITY PLAN PROCESS

The commitments, actions and targets that make up the Sustainability Plan are initially defined on the basis of areas for improvement identified by the Sustainability Unit in collaboration with the segments and corporate functions (planning phase). To support this process, the Sustainability Unit performs continual benchmarking throughout the year with best competitors and with the assessments of the major sustainability rating agencies, international organizations and socially-responsible investors (SRIs) with whom CNH Industrial has established relations. The Sustainability Plan draft is then submitted for approval to the General Executive Council (GEC), which evaluates alignment with Company strategy and makes appropriate recommendations. Responsibility for individual projects and achievement of agreed targets in the Sustainability Plan rests with the various segments and corporate functions, which have the resources, tools and expertise required for their implementation (management phase). To further ensure adherence to commitments made, the Sustainability Unit is periodically updated on the progress of projects (control phase).

CODE OF CONDUCT

On 28 September 2013, the Board of Directors of CNH Industrial adopted the Code of Conduct issued in 2010 by Fiat Industrial (hereinafter referred to as the “Code of Conduct”), which forms an integral part of the internal control system and sets out the principles of business ethics to which CNH Industrial adheres, and that directors, employees, consultants and partners are required to observe. In particular, the Code of Conduct includes specific guidelines on issues relating to the environment, health and safety, business ethics and anti-corruption, suppliers, management of human resources, and the respect for human rights. The Code of Conduct is available in the Corporate Governance section of the Company’s website, at www.cnhindustrial.com.

The Code of Conduct is one of the pillars of the CNH Industrial Corporate Governance System, which regulates the decision-making processes and the approach used by the Company and its employees to interact with stakeholders. The Code encompasses the values that the Company recognizes, adheres to and fosters, in the belief that diligence, integrity and fairness are important drivers of social and economic development.

The Code of Conduct addresses the ethical aspects of economic, social and environmental issues, underscoring the importance of dialogue with stakeholders. Explicit reference is made to the UN’s Universal Declaration on Human Rights, the Conventions of the International Labour Organization (ILO), the OECD Guidelines for Multinational Enterprises, and the US Foreign Corrupt Practices Act (FCPA). The Code was amended to include the Guidelines on: Environment; Health and Safety; Business Ethics and Anti-Corruption; Sustainability for Suppliers; Human Capital Management; Human Rights; Conflicts of Interest; Community Investment; Data Privacy; and ICT Assets, Green Logistics Principles.

APPLICATION AND MONITORING

Available in Italian and in eight other languages (English, French, German, Spanish, Polish, Flemish, Portuguese, and Chinese), the contents of the Code of Conduct are communicated to all employees. The Code can be viewed and downloaded through both the Company’s website and intranet, and copies can also be obtained from Human Resources and the Legal and Compliance Department. The Code applies to the members of the CNH Industrial Board of Directors, to all employees of CNH Industrial companies, and to all other individuals or companies that act in the name and on behalf of one or more CNH Industrial companies.

The principles and values of good corporate governance established in the Code of Conduct are conveyed through periodic training and other information channels to all employees (including security personnel), irrespective of their level or role, who may also refer to Human Resources for any clarifications. The Company also advocates the Code as a best practice standard in business ethics among the partners, suppliers, consultants, agents, dealers, and other parties with whom it has long-term relationships. In fact, Company contracts worldwide include specific clauses relating to the recognition of, and adherence to, the fundamental principles of the Code of Conduct and related Guidelines, as well as compliance with local regulations, particularly those related to bribery, money laundering, terrorism, and other corporate criminal liabilities.

CNH Industrial manages complaints through a whistleblowing procedure, also referred to in the Code of Conduct, applied to all CNH Industrial companies across all countries.

Complaints concern suspected or alleged breaches of the Code of Conduct, fraud involving Company or financial assets, or harassment of employees or third parties. They also include those received from inside or outside the Company regarding accounting and internal or external accounting audits.

Complaints are generally submitted either to the senior management of the Company or segment; to the managers of the Human Resources, Legal or Internal Audit functions; or to a trusted manager of choice.

Following the merger of Fiat Industrial and CNH Global into CNH Industrial completed on 29 September 2013, a new whistleblowing procedure is currently under review, to be implemented in 2014 at all CNH Industrial companies. In this regard, the Legal and Compliance department is currently selecting a service provider to set up a dedicated helpline for employees worldwide, available in all languages spoken within the Company.

All employees will be provided with appropriate training and information as soon as the Company’s new whistleblowing procedure is finalized.

VIOLATIONS OF THE CODE OF CONDUCT

Violations of the code of conduct are essentially determined by means of:

  • checks carried out during standard operational checks 
  • periodic audits carried out by Internal Auditors for each Company segment 
  • complaints received through whistleblowing procedures.

Standard operational checks

In 2013, standard operational checks exposed violations of the Code involving 111 employees.

Code violations are also identified by the Internal Audit function, in collaboration with the Legal and Compliance and Human Resources departments, through standard procedures and specific compliance audits regarding business ethics, anti-bribery and corruption, and health and safety.

Cases of fraud at any level within the organization and actual violations of the Code of Conduct by senior managers are submitted to the Audit Committee, a subcommittee of the CNH Industrial Board of Directors.

For all code violations reported during the year, disciplinary measures were commensurate with the severity of each case and compliant with local legislation. Regardless of whether criminal charges were brought by prosecuting authorities, all violations were communicated to the relevant corporate functions.

As reported by the Human Resources department, the main types of violation verified in 2013 that resulted in dismissal were: 

BREACHES OF THE CODE OF CONDUCT

CNH INDUSTRIAL WORLDWIDE (no.)
2013
misconduct (i.e., insubordination, violence)27
unjustified absence22
provision of false or misleading information15
violation of alcohol or drug policy15
harassment14
misuse of company assets9
fake travel expenses / violation of travel policy4
dismissal following Whistleblowing verification3
violation of safety policy2
discrimination0
violation of environmental policy0
Total111

Periodic audits

The Company conducted and disclosed the results of 28 compliance audits in 2013, of which four regarded business ethics issues, 16 environmental and occupational health and safety issues, and eight specific issues related to bribery, money laundering, and other aspects included in the Code of Conduct. The audits revealed substantial compliance with the main standards, with the exception of one case of conflict of interest.

Whistleblowing activities

During the year, 53 reports of alleged violations were received as per whistleblowing procedures. Two of these cases were confirmed as actual Code violations, resulting in disciplinary action; two cases led to the implementation of measures to strengthen the internal control system; and 43 cases were unfounded or lacked sufficient corroborating evidence. Investigations are still underway for the remaining seven cases.

WHISTLEBLOWING ACTIVITIES

CNH INDUSTRIAL WORLDWIDE (no.)
RegionWhistleblowing
(Jan.-Dec. 2013)
of which:
HR  matter
Ongoing analysisClosedAction taken
     No actionDisciplinary measuresProcedural measures
EMEA1554111001
APAC5223300
LATAM2011011
NAFTA31310313010
Total53387464322

HUMAN AND LABOR RIGHTS

CNH Industrial is committed to the creation of long-term sustainable value for all its stakeholders, and is firmly convinced that the respect for fundamental human rights is a pre-requisite for achieving such results.

Respect for human rights is one of the Company’s most significant material issues.

Given that CNH Industrial operates in 190 countries, has over 71 thousand employees, and more than 6 thousand suppliers, and that 92% of procurement spending is in favor of local suppliers, it is essential to ensure respect for the fundamental rights of all employees and other stakeholders. The Company must guarantee its employees on premises a safe, healthy, and protected working environment, where diversity and workers’ rights are respected, and where there is freedom of thought and association. Fuorthermore, for those employed by suppliers and sub-suppliers, it is important that CNH Industrial to spread and foster a culture of respect for human rights among all its trading partners.

When drawing up the materiality matrix in 2013, the relevant functions carried out an assessment (see also pages 33-35) to identify key impacts of CNH Industrial’s business and operations on human rights. A further impact assessment of the Company’s operations on child labor and freedom of association was carried out by the Industrial Relations function, covering the entire scope of the Company through each Region’s Human Resources function.

In the second half of 2013, CNH Industrial’s Internal Audit function launched a pilot project to monitor respect for human rights within the Company, involving the Human Resources functions of Italy, Spain, Belgium, France, and Germany, and covering about thirty thousand employees, representing 42% of the total CNH Industrial workforce. The pilot included a questionnaire on child labor, non-discrimination, freedom of association, and employment and working conditions, and will be extended to some APAC countries in 2014. The assessments complied with the requirements of Art. 17 and 18 of the Guiding Principles on Business and Human Rights, 2011*

The following emerged as important factors:

  • non-discrimination 
  • freedom of association and collective bargaining
  • child labor
  • health and safety in the workplace.

The commitment to safeguarding these rights is stated in the CNH Industrial Code of Conduct, approved by the Board of Directors on 28 September 2013 together with the CNH Industrial Human Rights Guidelines.

Code of Conduct principles are consistent with the spirit and intent of the United Nations Universal Declaration of Human Rights, the OECD Guidelines for Multinational Companies and the relevant Declaration on Fundamental Principles and Rights at Work of the International Labour Organization (ILO).

CNH Industrial’s commitment to the respect for human rights along the supply chain is another key aspect, with supplier assessment on environmental and human rights emerging as particularly important in the materiality analysis. In its Code of Conduct, CNH Industrial is committed to encouraging its suppliers to introduce and implement the principles regarding human rights in their business operations. Specifically, the Company does not establish working relationships with suppliers that employ mandatory, forced or child labor, or that do not meet the requirements stated in the Guidelines.

See Supply Chain Management for aspects relating to non-discrimination, freedom of association and collective bargaining, child labor, and occupational health and safety along the supply chain.

Non-discrimination

CNH industrial does not tolerate any form of employee discrimination based on: race, gender, sexual orientation, social or personal status, health or physical condition, disability, age, nationality, religion or personal belief. CNH Industrial recruits employees because of their talents and skills, and is committed to providing equal opportunities to all employees, both in their work and career advancement.

Each Region’s head of Human Resources is responsible for ensuring that, in every aspect of the employment relationship, be it recruitment, training, compensation, promotion, transfer or termination, employees are treated according to their abilities to meet job requirements, and that all decisions are free from any form of discrimination.

In 2013, no cases of discrimination were revealed through standard operational checks.

For further information on corporate diversity, see also page 55.

Freedom of association and collective bargaining

According to the Code of Conduct, CNH Industrial employees are entitled to join a trade union in compliance with applicable regulations and local legislation. CNH Industrial recognizes and respects the right of its employees to be represented by trade unions or other elected representatives established in compliance with applicable local legislation and practice. When negotiating with such representatives, the actions and conduct of CNH Industrial aim at building a constructive approach and productive relations.

For further information on freedom of association and collective bargaining, see also pages 73-75.

Child labor

As stated by the Code of Conduct, CNH Industrial does not employ child labor. Specifically, it does not employ people younger than the minimum permissible age for employment established by law where the work is carried out and, in any case, younger than fifteen, unless an exception is expressly provided for by international conventions and by local legislation. CNH Industrial is also committed to not establishing or maintaining working relationships with suppliers that employ child labor, as defined above.

During 2013, CNH Industrial surveyed 100% of its total workforce * to determine the level of compliance with the Code of Conduct with regard to child labor, confirming that none of its companies employed individuals under the statutory minimum age for employment or apprenticeship set by local legislation.

The survey also showed that no minor under the age of 18 employed by a CNH Industrial company with a regular employment or apprenticeship contract was exposed to hazardous working conditions*

In addition, in order to verify supplier adherence to CNH Industrial sustainability standards, Fiat Group Purchasing *monitors the supply chain through a process based on two principal elements: self-assessment questionnaires and field audits conducted by Company personnel or external organizations (see also pages 151-153). To the Company’s knowledge, there is no use of child or forced labor at the plants of its suppliers.

Occupational health and safety

Within the context of the Code of Conduct, CNH Industrial recognizes occupational health and safety as a fundamental employee right and a key element for achieving sustainability. All decisions made by CNH Industrial must respect health and safety in the workplace. CNH Industrial has adopted, and continues to develop, an effective occupational health and safety policy based on preventive measures, both individual and collective, to minimize the risk of injury in the workplace.

For further information on occupational health and safety see also pages 58-62.

CONFLICT MINERALS

CNH Industrial recognizes the value in working with peers to address global challenges across its supply chain.

In particular, the Company is implementing measures designed to address disclosure obligations under the Dodd-Frank Act and regulations adopted by the US Securities & Exchange Commission regarding the source of certain materials that may originate from the Democratic Republic of Congo and surrounding countries (conflict minerals). Such measures include: extensive communication with the supply chain regarding their role in ensuring that the Company satisfies conflict minerals disclosure obligations; deployment of a Webbased data management tool through which suppliers can provide necessary data related to supply sources and potential conflict minerals; necessary due diligence and further communication with suppliers regarding information provided; conflict minerals training for employees; and adoption of a conflict minerals policy.

CNH Industrial’s conflict minerals policy was adopted in 2013 and is posted on the corporate website.

The policy is intended to promote sourcing from responsible resources in the Democratic Republic of Congo and surrounding region. The Company carries out its supply chain due diligence consistent with the Organization for Economic Cooperation and Development (OECD) guidelines. CNH Industrial is committed to making reasonable efforts to establish, and to require each supplier to disclose, whether tin, tantalum, tungsten or gold are used or contained in its products, and if such minerals are contained in the products purchased from suppliers; and to identify their sources and to eliminate procurement, as soon as commercially practicable, of products containing tin, tungsten, tantalum, and gold obtained from sources that fund or support inhumane treatment in the Democratic Republic of Congo or the surrounding region.

CNH Industrial expects its suppliers to meet their commitments under its conflict minerals policy. In particular, the Company expects that its suppliers will perform a reasonable inquiry into the existence of tin, tantalum, tungsten, and gold in their supply chains and provide written evidence of the due diligence documentation.

CNH Industrial will assess future business with suppliers who fail to comply with this policy.

ANTI-CORRUPTION

CNH Industrial’s global anti-corruption policy is implemented through a regional model that takes account of the specific corruption risk factors of each Region. The Corruption Perception Index published by Transparency International is generally used as a guide by the Company’s Regional Compliance and Ethics Committees in assessing and categorizing the specific risks and prevalence of corruption in each Region and the type of controls needed. In addition, the Company periodically conducts a risk assessment of factors such as the risks associated with the Company’s businesses, the likelihood of a violation, its potential consequences, and the effectiveness of applicable internal controls. The Company also provides corruption prevention training using both online and scenario-based classroom training. Company employees are encouraged to report compliance issues (including corruption) by any of multiple means (e.g. reporting to managers, or the Company compliance helpline). CNH Industrial regularly engages in benchmarking with competitors to assess its approach and ensure its continued adoption of best practice in preventing and detecting corruption.

CNH Industrial’s internal audit program verifies, among others things, processes and controls for corruption prevention. The results are submitted to both the Company’s Audit Committee and management so that any opportunities identified for strengthening controls may be implemented. The Company also investigates and tracks all allegations of corruption to evaluate the need for additional controls and training, and surveys all employees annually, reminding them of their obligation to report compliance issues. Senior employees are required to declare that they are unaware of any violations to the Company’s Code of Conduct.

The Company’s Legal & Compliance Department created a Global Anti-Corruption Practice Team comprising internal legal advisors for each geographic Region that represent each Company product segment. The Team meets regularly to provide updates on new developments in corruption prevention, regulation and enforcement and to share best practice across the Company’s segments. Additionally, it develops training materials, provides classroom training, and develops and distributes legal alerts and other information to all applicable Company employees. The Global Practice Team assesses various aspects of the Company’s compliance and ethics program, identifying opportunities for, and assisting in, program development and improvement.

FINAL RULINGS

The following is a summary of the final sentences, out-of-court settlements and court orders handed down in 2013, and considered of significant value, against CNH Industrial companies (referred to as “final rulings”).

There were no significant final rulings regarding violations of laws on environmental protection, unfair competition, antitrust, intellectual property, marketing and advertising, product and service information requirements, privacy, liability for defective goods, or liability for the violation of local community rights.

Of note, however, were final judgments in the following areas:

  • contractual liability for defective goods, for a total value of approximately €400 thousand
  • contractual liability (breach), for a total value of approximately €1.17 million.

Lastly, in 2013, final rulings against CNH Industrial companies for labor and social security disputes involved a total payment corresponding to 0.09% of labor costs for the year. The level of litigation was proportionately higher in Brazil, where final rulings, mainly relating to the interpretation of particularly controversial legislation, accounted for 96% of total final rulings, corresponding to approx. 88% of CNH Industrial’s total payout.

However, in the specific context of Brazil, these final rulings were not exceptional in nature or in number.

Moreover, none of the final rulings against the Company related to discrimination at work.

Only one pending judgment was reported for a case of alleged discrimination at work; however, the lower court rejected the claim of the employee, who filed an appeal.

RISK MANAGEMENT 

ENTERPRISE RISK MANAGEMENT MODEL

In accordance with the regulatory guidelines requiring companies to adopt appropriate corporate governance models, and in response to market demand for ever-increasing transparency and disclosure on the risks associated with company activities, CNH Industrial has implemented and adopted its own Enterprise Risk Management (ERM) system.

 risk management

The ERM process was also driven by the need for a systematic approach focusing on identifying the risk profile of business activities, and adopted to allow business performance to be managed from an integrated risk-return perspective. Furthermore, this process reflects the Company’s commitment to sustainability, as it provides for internal audits to incorporate regular assessments of potential risks deriving from the environmental and social impact of the Company’s business activities.

CNH Industrial continues to employ an ERM methodology in which a risk is defined as any event that could impact the Company’s ability to meet its objectives.

The model, developed internally in 2004 by Fiat Group prior to the demerger, and since adopted by all current CNH Industrial companies, enables the timely identification of risks and the evaluation of their significance, and allows action to be taken to mitigate and, where possible, eliminate these risks. Taking the framework established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) as a starting point, the model was then adapted to the Company’s specific requirements, and has been recently updated to incorporate the experience gained over the years and the best practice indicators which have emerged through comparison with other industrial groups. Specifically, risk driver mapping was redefined in response to new requirements and to better represent several significant issues (climate change, macro-economic developments, joint ventures, etc.).

The current catalogue consists of 52 risk drivers, further broken down into 85 possible events. The model continues to classify risks according to the probability of occurrence and potential impact on profitability, business continuity, and reputation (or on a combination of these elements), which, when analyzed as a whole, determine the significance of a risk. For events that exceed a predetermined significance threshold, existing measures are analyzed and future containment measures, action plans, and persons of reference are identified.

This process, supported by a dedicated information system, follows a bottom-up analysis starting at business unit level, and enables assessment and summary reports to be generated for different companies, including any containment measures to be implemented. The heads of the business segments involved in this process are required to approve these evaluations and reports, while Corporate Control is responsible for their coordination and consolidation within the Company.

Precautionary principle

CNH Industrial’s commitment to safeguarding the environment is based on a precautionary approach, aimed at anticipating potential risks that could impact the environment and human health. CNH Industrial applies the precautionary principle introduced by the Rio Declaration on Environment and Development, both in designing its products and in managing its manufacturing processes.

The process of product development (see also pages 133-135) identifies, within its various phases, appropriate deliverables designed to anticipate future regulations on environmental issues related to product use. Special focus is given to solutions that favor the use of recycled materials and exclude the use of hazardous substances that are monitored through the IMDS database, which is updated directly by suppliers (see also page 154).

Furthermore, innovation projects carried out in partnership with leading universities across the world ensure CNH Industrial privileged access to the latest scientific developments regarding product aspects (see also page 129).

Through a consolidated environmental management system and the implementation of World Class Manufacturing (WCM), CNH Industrial evaluates the magnitude and importance of all impacts, as well as governing processes systemically and managing its environmental and social aspects, aiming at continuous improvement.

Many voluntary initiatives are carried out within plants to mitigate the environmental impact of manufacturing processes. In 2013, over €37 million was spent on environmental protection (a 5% increase compared to 2012), of which €14 million was spent on prevention and environmental management.

This demonstrates CNH Industrial’s strong commitment to reducing its environmental footprint, involving all impact factors, including: the selection and use of raw materials and natural resources, their processing, the management of product end-of-life, component remanufacturing (see also page 204), and product disposal.

 

GRI-G4
DMA; G4-56; G4-34; G4-35; G4-36; G4-37; G4-38; G4-39; G4-42; G4-43; G4-46; G4-47; G4-48; G4-49; LA12; HR12; G4-15; G4-56; G4-57; G4-58; EN34; LA16; G4-50; G4-56; G4-57; G4-58; EN34; HR3; HR6; SO3; SO5; HR3; HR4; HR6; HR9; HR12; HR5; HR12; EN29; HR8; SO7;
Sustainability Plan

Our commitments on page Our Commitment to sustainability

Glossary
GRI, KPI, SRI, APAC, EMEA, LATAM, NAFTA, DMA, ILO, Stakeholders, Conflicts minerals, WCM,