A report published last week by Shell’s chair said it would not set targets to reduce emissions from customers’ use of its products in absolute terms.

End-user emissions (also called Scope 3) account for almost 95% of Shell’s greenhouse gas emissions. In view of this, several investors asked Shell to set targets to reduce them in absolute terms in the medium term. Shell, however, stated that the Board found that this would be detrimental to shareholders’ financial interests, as well as not contributing significantly to mitigating global warming.

Shell said these targets, if enforced, would hurt its sales of oil products and natural gas, forcing its customers to switch to competitors’ products.

After Shell’s new chief executive, Wael Sawan, signaled this month that the company was reviewing plans to gradually reduce oil output, the company rejected the tougher emission reduction targets. The activists of Follow This group have filed a resolution asking Shell to set 2030 emissions reduction goals consistent with the 2015 Paris climate accord. Shareholders will vote on this resolution on May 23.

Shell’s board has yet to officially comment on the matter but has already recommended that investors vote against similar resolutions. In last year’s vote, 20% of shareholders supported the resolution, while Shell’s energy transition strategy was approved by 80% of them.

Shell Cuts Emissions Intensity

Shell has set ambitious targets to decrease its carbon footprint by cutting planet-warming gases in its line – based on fuel quality – by 2030 and, by 2050, achieve neutrality of these emissions. As of 2016, it has also committed to reducing emissions by 50% by its absolute operations by 2030 and has already recorded a 30% reduction.

While measuring emissions by intensity could technically allow for an increase in fossil fuel output and overall emissions, Shell has committed to offsetting these increases by incorporating renewable energy and biofuels into its product mix.

Despite these, Shell has faced legal challenges. In 2021, a Dutch court ordered the company to reduce its emissions by 45% by 2030, a decision that Shell has appealed. Additionally, a group of European institutional investors is supporting a London lawsuit targeting Shell’s board over allegations of climate mismanagement. The outcome of this case could have significant implications on how companies approach emissions reduction.

In response to the lawsuit, Shell has maintained that its directors have acted in the best interests of the company and complied with their legal duties.

Scientists have emphasized the urgent need to reduce greenhouse gas emissions. To limit global warming to 1.5 Celsius (2.7 Fahrenheit) and avoid the most severe consequences, emissions must be reduced by 43% from 2019 levels by 2030.

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The luxury carmaker announced last year that it will launch 15 new models over the next four years. The first will be the Purosangue, a hybrid SUV that will debut later this year.

The engine hasn’t slowed down yet. Even Audi’s representatives, his employer at the time, advised Frederic Vasseur to accept the offer of leading a rival Formula 1 team. Ferrari is not a company you turn down when it comes calling. That’s what happens when one of the world’s most famous luxury brands calls you.

Besides racing, it offers consumer vehicles that are status symbols. Their vehicles range in power from 612 to over 1,000 horsepower and in price from about $225,000 to $2.3 million. After some research, it may be necessary to reverse the idea that a recession in the U.S. would stifle growth for the carmaker.

Global reach

Because Ferrari has such a global reach, even if the U.S. economy goes into recession, it can remain on top of things. In the chart, the majority of regions are the EMEA band (Europe, Middle East, and Africa). As an Italian company, it is not surprising that it does the majority of its business in Europe.

Although the company’s growth outside of EMEA has been more robust than within, it has been protected from a North American slowdown some. The European economy has been sluggish for years and Ferrari has grown sales almost three times faster than the GDP of the European Union (EU). This isn’t a perfect apples-to-apples comparison, but it shows that the company isn’t as dependent on economic output as it seems.

Recession-proof

The Great Recession also affected the world’s automotive industry between 2007 and 2009, with global sales falling 11% according to the International Energy Agency. However, few customers have given up on their Ferrari orders due to the usual waiting list of a year or more – some custom models take up to five years to produce.

In 2008, Ferrari’s shipments grew by 2% and dropped by only 5% in 2009. That was during the worst recession in history. In an interview at the time, a company executive pointed out the investment properties of the vehicles — older cars can sell for tens of millions of dollars — and implied that customers who relied on Wall Street bonuses for luxury purchases did not have “serious money” like its typical customers.

Stimulate demand, but never give in

In November, the company stopped accepting orders for the Purosangue because the SUV is sold out for the next two years. CEO Benedetto Vigna did not say how many of the white-hot SUVs would eventually be produced. In the meantime, Ferrari has promised to always build one car less than demand. That should protect Ferrari’s brand while keeping sales and profits predictable for the next few years.

Somewhat surprisingly for a company selling 12-cylinder, 1,000-horsepower vehicles, Ferrari also has embraced the EV trend, another potential headwind.

Ferrari says it will launch its first all-electric supercar by 2025 and 80% of its vehicles will be electrified by 2030 — pure electric or hybrid.

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