Digital Transformation and Sustainable Development Goals Disclosure: The Mediating Role of Public Sector Transparency in Europe

Abstract

This study examines the association between national digital transformation and corporate Sustainable Development Goals (SDGs) disclosure and investigates the mediating role of public sector transparency in this relationship. Using an unbalanced panel of 420 EU-listed firms from 20 European Union countries over the period 2019–2024, the study measures SDGs disclosure through a manually constructed content-analysis index based on firms’ reported activities, policies, targets, key performance indicators, and measurable outcomes related to the 17 United Nations SDGs. The empirical analysis employs two-way fixed-effects regressions and country-clustered bootstrap mediation analysis, complemented by System Generalized Method of Moments (System GMM), two-stage least squares (2SLS), and heterogeneity analyses. The findings show that digital transformation is positively associated with public sector transparency and that greater public sector transparency is associated with higher levels of corporate SDGs disclosure. The mediation analysis further reveals a positive and statistically significant implied mediating association between digital transformation and SDGs disclosure through public sector transparency, accounting for approximately 51.4% of the estimated total association. The findings remain robust across alternative specifications and endogeneity tests. This study contributes to the digital governance and sustainability-reporting literature by identifying public sector transparency as an important institutional pathway linking country-level digital transformation with firm-level SDGs disclosure. By integrating digital governance and institutional perspectives, the study demonstrates that the sustainability-reporting implications of digital transformation extend beyond firms’ technological capabilities to the broader institutional information environment in which firms operate.