Decarbonizing the Core vs. Diversifying to Renewables: A Capability-Based Framework of How Oil and Gas Multinationals Adapt Supply Chains During the Clean Energy Transition

• Abey Litty

  Texas University

  Author

The oil and gas industry faces a critical strategic juncture as global pressure intensifies to align with net-zero emissions targets by 2050. While two distinct pathways have emerged—decarbonizing existing hydrocarbon operations and diversifying into renewable energy portfolios—the supply chain adaptation mechanisms underlying these strategic choices remain undertheorized. This study addresses this gap by developing and empirically validating a capability-based framework explaining how oil and gas multinationals reconfigure their supply chains in response to energy transition pressures. Drawing on dynamic capabilities theory and prospect theory, the research analyzes panel data from 302 publicly listed oil and gas companies observed annually from 2019 to 2024, encompassing 1,812 firm-years. Using fixed-effects regression modeling, the study finds that firms pursuing decarbonization-focused strategies achieve 89.4% higher supply chain emissions reduction efficiency compared to diversified firms, while diversified firms demonstrate 23.7% greater revenue resilience during periods of hydrocarbon price volatility. The framework identifies three distinct supply chain adaptation archetypes—core optimizers, portfolio diversifiers, and hybrid transformers—each associated with specific capability configurations and performance outcomes. These findings contribute to supply chain management theory by integrating energy transition dynamics with capability-based adaptation models and offer practical guidance for industry practitioners navigating strategic trade-offs during the clean energy transition.

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