Bridging Digital Technologies and Environmental Sustainability at Firm and Ecosystem Levels: The Mediating Role of Innovation

Frame of the research. Increasing concerns regarding environmental sustainability (ES) have positioned digital technologies (DTs) as critical enablers of sustainable practices. This study explores how digital technologies (DTs), including artificial intelligence (AI), the Internet of Things (IoT), blockchain, and big data analytics, enable sustainability initiatives at the firm and ecosystem levels. While existing literature acknowledges the role of DTs in enhancing ES, a structured approach to identifying key mechanisms and measurable indicators remains limited. Purpose of the paper. We propose a conceptual framework where innovation acts as a mediator, helping organizations in actualizing operational digital capabilities leading to operational environmental performance. Methodology. The study employs a conceptual approach, integrating findings from prior literature in digital transformation, innovation, and sustainability. It synthesizes these insights to develop a framework highlighting how DTs influence ES outcomes via innovation as a mediating mechanism. Results. The framework suggests that DTs enhance firm-level sustainability by improving resource efficiency, reducing carbon footprints, enabling sustainable production, and improving waste management. At the ecosystem level, DTs support urban sustainability, pollution control, and circular economy practices through data-driven decision-making and cross-sector collaboration. Research limitations. As a conceptual paper, empirical validation is not provided. Future research should test the proposed framework using case studies, surveys, or sectoral comparisons to assess its practical relevance. Managerial implications. The framework guides managers on how to align digital innovation with sustainability goals. It also informs strategic investment in DTs and highlights the importance of fostering innovation capabilities and cross-sector partnerships for long-term sustainability impact. Originality of the paper. This study uniquely integrates innovation as a mediating factor in the DT-ES relationship and extends the discussion beyond the firm to the ecosystem level, offering a structured framework for assessing DTs’ environmental contributions.