Digital Business and Environmental, Social, and Governance (ESG) Integration: A Dynamic Capability Model for Sustainable Corporate Performance

Abstract

The convergence of digital transformation and Environmental, Social, and Governance (ESG) sustainability agendas represents an indispensable strategic imperative in the contemporary corporate arena. This study investigates the impact of digital business capabilities on corporate sustainable performance, analyzing the dual mediating roles of digital business model innovation (DBMI) and ESG integration. Utilizing an explanatory quantitative survey, empirical data were gathered from 210 senior executives and sustainability directors across technology-driven corporations in Indonesia. Data were evaluated via Partial Least Squares Structural Equation Modeling (PLS-SEM) in SmartPLS 4.0. Empirical results indicate that: (1) digital business capabilities positively and significantly enhance digital business model innovation (β = 0.522; p < 0.001), ESG integration (β = 0.458; p < 0.001), and sustainable corporate performance (β = 0.205; p < 0.001); (2) digital business model innovation (β = 0.412; p < 0.001) and ESG integration (β = 0.385; p < 0.001) substantially boost sustainable performance; and (3) both digital business model innovation (indirect effect β = 0.215; p < 0.001) and ESG integration (indirect effect β = 0.176; p < 0.001) significantly mediate the influence of digital capabilities on sustainable performance. The framework accounts for 67.2% of the variance in corporate sustainable performance (R² = 0.672). These findings demonstrate that harmonizing technological capabilities with rigorous ESG stewardship builds superior stakeholder value and enduring resilience.