Exploring barriers to digital sustainability integration among SMEs using a PESTLE-guided interpretative phenomenological approach

As global attention increasingly focuses on responsible digital transformation, integrating sustainability into digitalisation has become a critical yet underexplored issue, particularly for SMEs in emerging economies. Despite growing policy and academic interest in digital sustainability, SMEs remain underrepresented due to structural, institutional, and resource constraints. This study investigates barriers to the integration of digital sustainability among Indian SMEs, employing a qualitative design guided by reflexive thematic analysis and the PESTLE framework as a sensitising lens. Drawing on 40 in-depth interviews with SME owners, managers, and compliance officers, the research explores how digital transformation unfolds amid infrastructural limitations, regulatory ambiguity, economic vulnerability, and institutional fragmentation. Findings show that barriers extend beyond technological and financial challenges and are systemically produced through interacting political, economic, social, technological, environmental, and legal constraints. Key barriers include fear of digital surveillance, limited sustainability literacy, infrastructural exclusion, regulatory mistrust, and the perception that green innovation is primarily for large firms. These dynamics create institutional and capability constraints that hinder SME engagement in digital sustainability transitions. The study contributes theoretically by reframing digital sustainability adoption as a socio-institutional transformation rather than a purely technological upgrade, highlighting the role of institutional environments in shaping enterprise capability development. In practice, the study identifies context-sensitive pathways to support SME digital sustainability, including localised governance platforms, adaptive regulatory frameworks, ecosystem-based learning systems, and shared digital infrastructure. By situating digital sustainability within broader institutional and capability contexts, the research offers actionable insights for sustainability scholars, digital governance researchers, and SME policymakers seeking inclusive and scalable digital sustainability transitions in emerging economies.