The point of departure for this thesis is how a traditional service sector shifts towards becoming more energy efficient and the processes that enable environmental action. Traditional services are generally considered to be poorly innovative and inclined towards routine activity; this leaves a gap in understanding how these adapt to the challenge of taking environmental action. The study argues that service firms adapt by deploying capabilities to multitask or to carry out innovative activity alongside routine activities related to service delivery. The research problem is addressed through three objectives: i) explicating how dynamic capabilities enable environmental action in traditional services with a focus on energy efficiency; ii) investigating the interface between the service firm and a type of intermediary, the knowledge intensive business service firm (KIBS), and how this acts as a locus for intermediation activity, or the exchange of knowledge about energy efficient technologies and measures; and iii) exploring how developments in the external context may influence the firm's capabilities to adapt.The key contributions are two-fold. Firstly, the research links different combinations of capabilities with particular innovative behaviours in service firms; this underscores the presence of a differential multitasking potential across firms in the same sector. Secondly, it demonstrates a link between the service firm's internal capabilities and the extent to which it mobilizes absorptive capacity to obtain knowledge about energy efficiency measures from its relation with KIBS.A qualitative study is designed with the hotel sector in Malta as the empirical setting. The fieldwork was undertaken through interviews with 26 hotel managers, 14 engineering consulting firms and 16 actors in the broader institutional environment. The data from the hotels were clustered to derive different adaptation modes characterized by particular capabilities and patterns of environmental action. Then, pairs of hotels and engineering consulting firms were identified in order to investigate the relational dynamics that may be influencing intermediation activity. The findings distinguish between hotels with a low multitasking potential that adopt a narrow range of energy efficient measures and those with a higher multitasking potential that modify activities and make deeper structural changes to shift towards improved energy efficiency. Accounting for the range of multitasking potential are different combinations of capabilities to sense signals in the external environment and interpret these in the firm and the capability for problem-solving for energy efficiency. The findings demonstrate a different pattern of KIBS use by hotels that is suggestive of a cluster differentiation. This is linked to different levels of absorptive capacity in hotels that determines whether intermediation activity and therefore the exchange of knowledge and learning about energy efficient measures is constrained or otherwise enhanced at the KIBS-client interface. The conclusion provides policy implications and areas for future research.