Nearly 1,000 companies including major fossil fuel producers around the world have pledged to achieve net-zero emissions by 2050. Achieving these targets would require companies to diversify their businesses rapidly. Historically, many companies have diversified by venturing into related sectors or expanding into completely new sectors. In this study, we reviewed the historical diversification of 23 global companies – from fast-moving consumer goods, trading, and entertainment to mining companies – in order to understand key elements of corporate diversification in a net-zero world.
Overall, we find that corporate diversification constitutes focusing on five key elements:
1. Mobilizing finance
2. Making strategic investments and divestments;
3. Leveraging government policies;
4. Board of Directors providing oversight; and,
5. Investing in research and development.
Our short review report provides a first-order understanding of each of these elements of diversification. When combined, these elements create a conducive environment for successful business diversification. Overall, this work shows the need for a more holistic understanding of the business diversification strategies for fossil fuel companies in a net-zero world.