DOES DIGITAL TRANSFORMATION REALLY MAKE SMEs MORE SUSTAINABLE?

 

We have just published a new article in Corporate Social Responsibility and Environmental Management exploring a question at the intersection of digital transformation, management, marketing and sustainability:

Digital Transformation and Environmental Sustainability in SMEs: A Contingency Analysis of Organisational Capabilities and Market Demand

📄 Published in: Corporate Social Responsibility and Environmental Management, 2026
✍️ Authors: Guillermo Bermúdez-González, Ana Isabel González-Fernández and Eva M. Sánchez-Teba
🔗 DOI: https://doi.org/10.1002/csr.70979

🔍 What problem did we address?

Digitalisation and sustainability are often presented as two transformations that should naturally reinforce each other.

Industry 4.0 technologies such as artificial intelligence, cloud computing, robotics, big data analytics, smart devices and blockchain can help firms optimise resources, reduce waste and improve production processes.

But this raises an important question:

👉 Does adopting more technology necessarily lead to greater environmental sustainability?

And an equally important second question:

👉 Does stronger customer demand for sustainable products necessarily make firms more sustainable?

Our starting point is that neither relationship should be taken for granted.

Technology and market pressures need internal organisational capabilities if they are to be translated into meaningful environmental outcomes.

⚙️ What did we do?

We analysed 1,307 manufacturing SMEs from the 27 European Union countries and the United Kingdom, using data from Flash Eurobarometer 486.

Our model combines two theoretical perspectives:

Resource-Based View (RBV)
+
Stakeholder Theory

We jointly examined:

1. Industry 4.0 adoption breadth
2. Managerial commitment to sustainability
3. Market demand for sustainable products
4. Social sustainability
5. Environmental sustainability

Most importantly, we examined whether social sustainability operates as an organisational capability that strengthens the relationships between managerial commitment, market demand and environmental sustainability.

We used a generalized ordered logit model (GOLOGIT), allowing us to examine whether these relationships change as SMEs move from basic environmental practices toward more advanced levels of sustainability.

📊 Key findings

The findings reveal a considerably more complex picture than the simple assumption that "more technology + more green demand = more sustainability."

💻 1. Industry 4.0 adoption is positively associated with environmental sustainability

SMEs adopting a broader portfolio of digital technologies are more likely to progress toward higher levels of environmental sustainability.

However, an important distinction is needed:

👉 Adopting technologies is not the same as achieving mature digital transformation.

What ultimately matters is how technologies are integrated with organisational processes and capabilities.

👥 2. Social sustainability plays a central role

SMEs with more developed social sustainability practices are more likely to reach higher levels of environmental sustainability.

These practices include:

• improving working conditions
• promoting diversity and equality
• assessing societal impact
• involving employees in company management

👉 Social sustainability is therefore more than a parallel dimension of sustainability.

It acts as an enabling organisational capability for environmental transition.

👔 3. Managerial commitment matters particularly at advanced stages

Managerial commitment does not have the same relevance at every stage of the sustainability journey.

Its importance becomes particularly evident when SMEs attempt to move from isolated environmental actions toward more advanced and systematic sustainability practices.

👉 Leadership seems to matter most when sustainability requires genuine organisational transformation.

🛒 4. The surprising finding: green demand does not automatically produce sustainability

This is perhaps one of the most interesting findings of the study.

Prior demand for sustainable products shows a negative association at low and intermediate environmental sustainability thresholds.

Why?

An SME experiencing increasing demand for green products may respond through selective commercial or product-related adjustments without necessarily transforming its underlying environmental practices.

Market pressure may even divert scarce resources toward short-term responses.

👉 Market demand alone does not guarantee greater environmental sustainability.

🔄 But this is where the story becomes particularly interesting

When firms have stronger social sustainability capabilities, the picture changes.

Social sustainability positively strengthens the relationships between:

Managerial commitment → Environmental sustainability

and

Market demand → Environmental sustainability

In particular, market demand becomes more beneficial when SMEs possess the internal organisational conditions required to respond effectively.

👉 Green demand therefore appears to operate as a contingent accelerator rather than an automatic driver of environmental sustainability.

🧩 What does our study contribute?

From a theoretical perspective:

1. We integrate organisational capabilities and external market pressures within a single explanatory framework.
2. We show that the relationship between digitalisation and sustainability should not be understood from a purely technological perspective.
3. We identify social sustainability as an enabling organisational capability.
4. We demonstrate that the factors associated with initiating environmental practices are not necessarily identical to those associated with reaching advanced sustainability levels.
5. We introduce a contingency perspective: the effect of market pressure depends on firms' internal capabilities.

⚠️ A critical reading

There is a widespread business narrative:

digitalise + respond to green consumers = become more sustainable.

Our findings suggest that this equation is too simple.

👉 Technology matters.

👉 The market matters.

👉 Leadership matters.

But none of them works in isolation.

Environmental transformation appears to depend on an organisation's ability to integrate technology, leadership, people and external demands.

This leads to a particularly important conclusion:

🌱 Social sustainability may constitute an invisible infrastructure for environmental sustainability.

A firm that improves working conditions, promotes equality, involves employees and considers its societal impact may be better equipped to transform market pressures and managerial decisions into substantive environmental improvements.

🚀 Implications

For SMEs

Buying technology is not enough.

Digital transformation needs to be accompanied by organisational capabilities, leadership and employee involvement.

For marketing managers

Growing demand for sustainable products represents an opportunity, but it may also become a difficult pressure to manage.

👉 Green demand requires organisational capability if it is to become real sustainability.

For policymakers

Digital and green transition policies should not be designed independently.

Supporting technology acquisition alone may be insufficient.

Policies should also strengthen SMEs' organisational, social and human capabilities.

For researchers

Our results encourage a move away from models based exclusively on direct effects toward more contingent and configurational approaches capable of explaining when and under what conditions digitalisation, leadership and market pressures contribute to stronger environmental outcomes.

💬 Central idea of the article

The main conclusion can be expressed simply:

Technology matters. Market demand matters. But neither is enough on its own.

The green transition of SMEs does not depend simply on adopting more technologies or having customers who demand sustainable products.

It depends on whether firms possess the organisational capabilities required to transform those opportunities and pressures into real environmental sustainability.