Twin Transition: Digital Transformation Pathways for Sustainable Innovation

This paper explores the integration of digital transformation and sustainability, known as the "twin transition," emphasizing how firms and regions simultaneously leverage digital innovation and environmental sustainability to drive comprehensive innovative outcomes. The research identifies five critical findings, which are drawn from the analysis of 43 semi-structured expert interviews conducted across 24 countries. The twin transition is fundamentally driven by interconnected digital enablers, such as Artificial Intelligence (AI) and the Internet of Things (IoT), and growing sustainability imperatives, including regulatory pressures and stakeholder expectations. The successful implementation of these strategies is contingent upon the presence of internal organizational capabilities, particularly the clarity of leadership and the competencies of the workforce. Additionally, the presence of supportive regional innovation ecosystems is essential for the implementation process. The integration of digitalization and sustainability can be achieved through deliberate strategic alignment, leveraging technologies such as digital twins (DT) and blockchain to foster environmental gains and operational efficiencies. The twin transition has been shown to engender substantial innovation outcomes at both the firm and regional levels, thereby enhancing eco-innovation, competitive advantage, resource efficiency, and regional innovation capacities. Notwithstanding these advantages, considerable challenges persist, including internal organizational silos, rebound effects from resource-intensive digital technologies, and regional disparities in innovation capabilities. By underscoring these dynamics, the study offers actionable insights into overcoming barriers and maximizing the synergistic potential of the twin transition. This contributes to theoretical advancement and practical guidance in the integration of digital and sustainable innovation.