Technology readiness for socially sustainable SMEs: a study of AI and ethics in the Indian context

Purpose This study aims to assess the AI preparedness of Indian small and medium enterprises (SMEs) and its impact on social sustainability. This study used a technology–organization–environment-based proposed framework; it explores how technical, organizational and environmental readiness influences ethical practices and social goals. This research investigates whether ethical AI mediates AI readiness and SS in Indian SMEs. Design/methodology/approach The data, using a structure survey, collected from 739 respondents serving SMEs in eight Indian states was used. A five-point Likert scale was used to collect data on all the constructs. Structural equation modeling (SEM) was used to test the theoretical model. Descriptive statistics, reliability and discriminant validity were performed to ensure an effective measurement model. This provided a basis for analysis of direct effects and mediating effects of AI-driven ethical and sustainable business practices. Findings The research revealed positive relationships between AI readiness and social sustainability (β = 0.43) and AI readiness and business ethics (β = 0.51). In addition, business ethics had a strong positive direct effect on social sustainability (β = 0.47). Importantly, business ethics is also an important mediator between AI readiness and social sustainability (indirect effect β = 0.24). Furthermore, it is reflected that ethical integration is important for AI to achieve socially sustainable outcomes. The SMEs are much better prepared to use AI responsibly and inclusively to benefit the stakeholders if they are more digitally and culturally prepared. Research limitations/implications This study is a cross-sectional design that limits the causal inference. Though the responses were taken from the executives of SMEs in eight Indian states, they may have sectoral and regional imbalances. Also, the responses could have personal biases, as respondents may have been influenced by social desirability. Despite these constraints, the research adds to the literature on AI readiness, social sustainability, and the mediating role of ethics. It also highlights avenues for future research, including a longitudinal study on the SMEs and their AI readiness, regional comparisons of SMEs and integration of governing regulations with ethical AI policies in SMEs. Practical implications This research suggests that the SME management must invest in digital tools and promote ethical culture for successful AI use. Ethical auditing may be done by SMEs alongside people analytics to use ethical AI for enterprise social causes. Policymakers can complement initiatives such as IndiaAI and the Business Responsibility and Sustainability Report requirements by including ethical AI training in the SMEs. The responsible adoption of AI can enhance both trust and employee engagement and can potentially improve CSR outcomes. Originality/value The research articulates an “AI-readiness-ethics-sustainability framework” to study AI preparedness and social sustainability in Indian SMEs. Majorly, the literature review reflects the work of researchers on the technical or economic impacts of AI. This study not only explores the technological, organizational and environmental preparedness but also records the mediating effect of ethics on AI readiness of SMEs on social sustainability and advocates that ethically engaged AI can foster efficiency and influence inclusive and sustainable development.