Digital transformation becomes engine of sustainable growth

The fusion of digital transformation and sustainability, known as the twin transition, is now the key force driving competitive, resilient, and environmentally responsible innovation across industries, according to a new international study published in Sustainability.

The paper, titled "Twin Transition: Digital Transformation Pathways for Sustainable Innovation," is based on 43 expert interviews spanning 27 countries. It offers one of the most detailed qualitative analyses to date of how organizations link technology adoption to long-term environmental goals.

How digital transformation becomes a driver of sustainability

The study examines how companies worldwide are integrating artificial intelligence, the Internet of Things (IoT), digital twins, blockchain, and data analytics to simultaneously achieve efficiency and sustainability. The author found that competitive pressure, regulatory shifts, and public expectations are now the main triggers pushing firms toward digital and green alignment. The COVID-19 pandemic accelerated this change, exposing how vulnerable traditional business models were to disruption and how digital tools could increase resilience while cutting environmental impact.

According to the research, the twin transition is not simply about digital adoption, it is about integrating sustainability as a performance driver in digital strategies. Firms that succeeded in this alignment recorded measurable progress in resource efficiency, waste reduction, and emissions tracking. AI algorithms are increasingly used to optimize energy consumption and logistics operations, while IoT systems enhance supply-chain transparency and reduce material loss. Digital twins, virtual replicas of production systems, allow real-time lifecycle management and precise measurement of carbon footprints, leading to smarter resource allocation and lower environmental costs.

At the same time, policy and ecosystem support emerged as critical enablers. Regions with strong innovation networks, clear sustainability mandates, and supportive infrastructure, especially for small and medium-sized enterprises, achieved faster and more consistent progress. The study concludes that the combination of public policy, leadership commitment, and skills development is essential for embedding sustainability into digital transformation strategies.

Mechanisms linking technology, innovation, and environmental impact

The research identifies three core mechanisms through which digital transformation supports sustainability: operational, managerial, and technological.

The operational mechanism involves automation, predictive maintenance, and data-driven optimization, all of which enhance efficiency and minimize waste. Digital tools like advanced analytics and sensor networks enable firms to anticipate energy demand and equipment needs before failures occur, reducing unnecessary resource use.

The managerial mechanism focuses on decision-making structures. The author found that leadership vision and workforce skills determine how effectively digital investments align with environmental objectives. Organizations that treat sustainability as part of corporate strategy, rather than as a compliance requirement, tend to integrate technology more effectively across departments. In these firms, performance metrics link digital performance indicators with environmental outcomes, creating accountability and measurable impact.

The technological mechanism underscores how AI, blockchain, IoT, and digital twins work together to enable traceability, circularity, and low-carbon innovation. AI assists in identifying energy-saving opportunities, while blockchain ensures the authenticity of carbon credits and supply-chain data. IoT sensors provide real-time emissions data, and additive manufacturing allows for material-efficient production. These synergies represent a systemic shift toward data-driven sustainability, where technology underpins every stage of the environmental performance cycle—from design to recycling.

The study also finds that the twin transition enhances competitiveness. Firms that embrace digital sustainability not only lower costs but also gain reputational advantages and regulatory compliance benefits. Their ability to adapt quickly to global standards and customer expectations helps secure long-term market resilience, making the twin transition an economic as well as environmental necessity.

Barriers, risks, and future pathways for the twin transition

The analysis identifies several barriers that continue to hinder the large-scale implementation of the twin transition. The most persistent internal challenge is the organizational divide between digital innovation teams and sustainability departments. Many firms still operate in silos, leading to fragmented strategies and inefficiencies. Misaligned key performance indicators (KPIs) often prioritize short-term financial metrics over long-term sustainability gains, reducing the incentive to invest in digital-green integration.

Externally, regional disparities in digital infrastructure and access to clean energy slow adoption, particularly in developing economies. Companies in these regions face higher costs and weaker institutional support, making it harder to replicate best practices from advanced economies. The research also highlights the rebound effect, where digital technologies themselves contribute to higher energy and material consumption if not powered by renewable sources. Without lifecycle management and recycling frameworks, even the most advanced digital tools can unintentionally increase carbon emissions.

To overcome these issues, the study proposes a KPI protocol that links digital and environmental metrics. This framework helps organizations quantify the sustainability impact of digital projects, allowing leaders to track progress and identify inefficiencies. It includes specific indicators for energy consumption, emissions, waste reduction, and circularity, creating a unified reporting structure that aligns digital innovation with climate objectives.

Future progress, the author stresses, depends on expanding access to data and knowledge-sharing platforms. Governments and institutions should promote transparent AI models, invest in low-carbon digital infrastructure, and create incentives for companies that demonstrate measurable sustainability outcomes. Cross-sector partnerships between technology developers, academia, and regulators will be crucial to building a globally coherent model of the twin transition.