Drivers of Sustainability Strategy Adoption in European SMEs : The Role of Digitalisation, Innovation and Organisational Barriers

ABSTRACT Sustainability has become a core concern to be embedded in firms' strategic orientations. This study investigates how digitalisation, innovation, and internal organisational barriers contribute to or constrain the development of formal sustainability‐oriented strategies in SMEs. In addition, it examines whether internal barriers to innovation moderate the relationship between different innovation types and the adoption of formal sustainability strategies. The paper applies a binary logistic regression model to microdata from Flash Eurobarometer 486, using a final analytical sample of 11,861 SMEs across 35 European countries. The research reveals that product, organisational, and marketing innovation, as well as factors associated with digitalisation, are positively and significantly associated with the probability of SMEs adopting a formal sustainability strategy. Previous participation in sustainability practices shows a positive and statistically significant relationship as well. Although the coefficient for internal barriers is not statistically significant among firms reporting none of the three innovation types, barriers weaken the positive association between marketing innovation and sustainability strategy adoption. This finding is supported by both the log‐odds and probability‐scale analyses. These findings highlight how innovation, digitalisation, and organisational constraints are associated with the formalisation of sustainability strategies in SMEs. The primary contribution of this study is to integrate the themes of digital transformation, innovation, and sustainability within a strategic management framework. By empirically analysing European SME behaviour across the EU, this research addresses an underexplored intersection in the literature, offering robust evidence on how internal drivers and barriers affect the formalisation of sustainability strategies. The results offer a theoretical understanding and practical application for managers and policymakers seeking to promote sustainable change among SMEs.