Fossil fuel industries are confronted with climate-related transition risks, necessitating adjustments to their business to align with decarbonisation goals. Past studies have underscored how dynamic capabilities enable incumbent companies to mobilise internal resources and competencies to drive organisational change towards sustainability transitions. However, research examining dynamic capabilities in energy companies, particularly in the coal industry, is scant. Addressing this gap, our study examines how coal companies develop dynamic capabilities to respond to transition pressures and reorient business strategies, taking Indonesia, a major coal-reliant emerging economy, as a case. Using company-level data, we found that coal companies demonstrated varying degrees of dynamic capabilities. Most companies demonstrated basic sensing capabilities by responding to regulatory pressures through compliance-based environmental management and corporate social responsibility initiatives. Only leading coal companies displayed seizing capabilities, engaging in early-stage green business development, and began reconfiguring their capabilities through structural shifts, such as divesting coal assets and establishing new companies. Their strategies remained incremental and insufficient to drive industry transformations, as sustainable business model innovation has yet to generate sufficient revenue from the outset, particularly when no government support exists. This study highlights that capability gaps and a lack of systemic support further constrained transformative action. By revealing the strategic heterogeneity among incumbent coal companies, the study offers insights for other coal-dependent economies, showing how uneven capabilities, path dependency, and limited returns from alternative businesses limit progress towards industry transformation aligned with decarbonisation.
Firdaus et al. (Thu,) studied this question.