Digital Capabilities and Sustainability in Agri-SMEs: Green Skills and Digital Ecosystems in Emerging Economies

Abstract

Agro-processing SMEs face pressure to integrate digital transformation with environmental sustainability, yet limited evidence explains how digital capabilities and environmental pressures translate into sustainable performance. This study examines whether green digital skill strategy and digital ecosystem empowerment mediate these relationships. Using a quantitative explanatory cross-sectional design, data were collected from 30 agro-processing SMEs across 10 districts/cities in East Java through a 25-item, seven-point Likert questionnaire. Covariance-based structural equation modeling using IBM SPSS AMOS 26 and 5,000 bootstrap resamples tested nine hypotheses. All hypotheses were supported. Dynamic digital literacy strongly influenced green digital skill strategy (β = 0.712), while green environmental pressure also had a significant effect (β = 0.534). Green digital skill strategy affected digital ecosystem empowerment (β = 0.689) and sustainability business performance (β = 0.476), while ecosystem empowerment improved sustainability performance (β = 0.521), all at p < 0.001. Specific indirect effects were significant for dynamic digital literacy (β = 0.339, p = 0.002) and environmental pressure (β = 0.254, p = 0.004). Serial effects were also significant (β = 0.256; β = 0.192). The model explained 71.3% of sustainability performance. SMEs should strengthen green digital capabilities and ecosystem participation, supported by training, financing, technology, and collaborative networks.