Twin transitions across enterprises: Do digital technologies and sustainability go together?

Highlights

• This paper examines linkages between digitalisation and sustainability measures
• The adoption of sustainability measures is uneven across firms, sectors and regions
• Digitalisation is positively linked to the adoption of sustainability measures
• Larger firms are more likely to adopt sustainability measures
• Firms employing ICT specialists are more likely to adopt sustainability measures

Abstract

This paper examines linkages between digitalisation and information and communication technology (ICT)-related environmental sustainability business practices. Using a unified modelling framework and firm-level data from Ireland over 2020–2022, it provides novel evidence on complementarities between the use of digital technologies such as Artificial Intelligence (AI) and Internet of Things (IoT) and the propensity of firms to adopt ICT-related environmental sustainability measures. The results indicate that the adoption of ICT-related sustainability measures has been uneven across groups of firms, sectors, and regions. The descriptive evidence shows that the most adopted measures are disposing of or recycling ICT equipment while the least adopted measures are measures to reduce the energy consumption of ICT equipment. The estimation results indicate that digitalisation is associated with a higher propensity of firms to adopt ICT-related sustainability practices over and above other firm characteristics such as firm size, employing ICT specialists, and investing in intangible assets. Firms using AI are more likely to adopt ICT-related sustainability practices. Taken together, the results of this paper suggest that targeted policy measures to incentivize more firms, in particular small and medium-sized, to adopt digital technologies and ICT-related environmental sustainability measures, could foster the twin digital and green transitions.