The Impact of Strategic Agility on Environmental Sustainability: The Mediating Role of Digital Transformation

The Impact of Strategic Agility on Environmental Sustainability: The Mediating Role of Digital Transformation

1. Introduction

Existing issues and challenges concerning the ecosystem and environmental sustainability, like global warming, environmental air and water pollution, and scarcity of resources, have placed business organizations under tremendous pressure to develop ecologically sound plans and strategies [1,2]. Environmental sustainability is a cornerstone of sustainability, requiring that initiatives designed to meet current needs must not damage the ecosystem, and environmental quality should be protected for the greater good and advantage of present and future generations [3]. Consequently, the stakeholders and the market are exerting additional pressure on businesses to initiate, develop, and adopt environmentally friendly and ecologically sustainable processes, practices, and activities [4,5].
Strategic agility describes the capacity of businesses to respond and adapt to the ever-changing, dynamic needs of customers and clients [6], which is usually achieved via developing skills and the development of abilities. Consequently, environmentally friendly practices are something that businesses should generally promote, adopt, and consider in conjunction with the notion of strategic agility. Organizations must constantly review, evaluate, and revise their strategies and operational plans to adapt to changes brought about by Industry 4.0 and the ongoing technological advancement in digital and information. Agility, as described in the literature, refers to a business’s capacity to modify and quickly adjust its tactics, procedures, operations, strategies, and activities as a reaction to external threats, challenges, changes, and environmental issues [7]. Particularly crucial to the notion of strategic agility is the theory of dynamic abilities and the capabilities concept, which is described as “the firm’s ability to integrate, build, and reconfigure internal and external competencies to address rapidly changing environments” [8].

Nowadays, business organizations in every sector and industry are compelled and mandated to continually review, evaluate, and revise their competitive advantage sources to adapt to dynamic, rapid advancements and the ever-evolving business environment.

Digital technology is advancing at a rapid pace, which is causing significant and substantial changes in the industrial ecosystems; these developments have several facets and affect society, the economy, and organizations, especially when developing new “products”, “services”, “innovation processes”, “business models”, and the “nature of business operations” [9,10,11]. As stated by Gong and Ribiere (2021), digital transformation is “a fundamental change process enabled by digital technologies that aim to bring radical improvement and innovation to an entity to create value for its stakeholders” [12].
The existing literature has provided limited evidence of the impact of strategic agility on environmental sustainability [13,14,15]. In addition, some prior research and studies have explored the influence of strategic agility on digital transformation [16,17,18,19]. However, the majority of these studies and investigations were conducted in developed countries. Furthermore, most previous studies in the manufacturing industry focused on large companies. To the best of our knowledge, no such studies have been conducted in Jordan. Additionally, prior studies have not examined the mediating effect of digital transformation on the impact of strategic agility in environmental sustainability.
The manufacturing industry is one of the significant and major business sectors in Jordan and contributes approximately 30% to the gross domestic product (GDP) [20]. However, since 2010, exports of manufacturing companies in Jordan have been declining by 0.5% annually [21]. One reason for this decline is that manufacturing companies in Jordan face several problems and challenges related to their environmental performance [22]. Many Jordanian manufacturers do not comply with the strict environmental requirements imposed by foreign countries and, therefore, do not qualify to export to those countries. Accordingly, achieving environmental sustainability is crucial for Jordanian manufacturing companies.

By addressing the gaps discussed above, the current study aims and attempts to add and contribute to the existing body of knowledge. It examines the impact of strategic agility on digital transformation and environmental sustainability in the manufacturing firms in Jordan. The majority of manufacturing firms in Jordan are classified within the small- and medium-sized businesses (SMEs) category. Therefore, this study adds valuable insights into the anticipated effects within the settings of SMEs in a developing nation that faces distinct economic and environmental challenges. Furthermore, the current investigation adds to the literature by investigating how digital transformation mediates the strategic agility relationship with environmental sustainability. In particular, the following specific research questions (RQ) are posed:

RQ1. What impact does strategic agility have on digital transformation and environmental sustainability?

RQ2. How does strategic agility affect environmental sustainability through the mediating effect of digital transformation?

The remaining portion of this research is structured as follows: A review of the research-related literature is presented in Section 2. The study’s theoretical background and the development of the research hypotheses are described in Section 3. The method used in this study is detailed in Section 4. Section 5 presents the statistical analysis and testing of the hypotheses, followed by a discussion of the study’s findings in Section 6. Lastly, Section 7 presents the study’s conclusions, managerial implications, and limitations.

6. Discussion

The study’s findings indicate a direct effect of strategic agility and positive impacts on environmental sustainability; therefore, strategic agility can play a substantial role in addressing environmental issues and concerns to minimize waste and negative environmental effects. This is because it fosters quick and ongoing adaptations and enables immediate and continuing changes that add value in novel ways, which concurs with the findings of other previous research. Additionally, addressing environmental issues and concerns has a substantial effect on the business’s reputation and its relationships with stakeholders. This result aligns with findings from prior studies (e.g., [13,14,15]). Notably, while the majority of past research has been conducted in developed nations, our study is situated in a small developing country. It is noteworthy to emphasize and highlight that the vast majority of Jordanian manufacturing companies fall into the SME category. This is evident from the demographic and organizational information table, with over 95% of participating companies having fewer than 200 employees. This is a distinctive feature of our study as previous research predominantly focused on larger companies. Our findings indicate that the advantages of strategic agility in achieving high levels of environmental sustainability extend beyond large manufacturing companies in developed countries. SMEs in developing countries can similarly reap these benefits through the successful implementation of strategic agility principles.
The findings also demonstrated that strategic agility positively affected digital transformation. This result can be reconciled by recognizing that organizations that adopt strategic agility grounded in developing achievable scenarios, based on spotting changes in their business environment caused by technological breakthroughs and advancements, have more opportunities to improve their digital transformation and achieve success. Businesses that are more strategically agile will be more capable of responding quickly and better equipped to react rapidly to alterations, modifications, changes, and shifts brought on by customer preferences, business practices of rivals, and advancements in technology that frequently occur in a volatile environment. Strategic agility is a business organization’s capacity to anticipate shifts in the environment and swiftly stimulate its resources to respond to these alterations; it allows the organization to explore possibilities with digital technology and change its business processes and is an essential strategy for managing unexpected alterations, changes, and threats as a means to execute and achieve a successful digital transformation. This is consistent with prior works [17,18,62,63].
Furthermore, the research findings revealed that digital transformation positively impacted environmental sustainability, which is the third finding. Digital transformation provides business organizations with the ability to analyze the data about the environment and forecast changes so that manufacturing companies may quickly alter their operations and respond to changing conditions, offer novel goods and services, and consider new ways to use existing products, thus leading business organizations to accomplish their environmental sustainability objectives and goals more effectively and efficiently. This result is consistent with data published by The Organization of German Engineers, which claimed that digitization can lead to a 25% increase in the efficiency and utilization of resources and a 20% reduction in emissions of carbon (Kopp and Lange, 2019) [72]. This is also in line with the findings of Oláh et al. (2020) and Song and Moon (2017), which showed that production systems are now equipped with a solid foundation for increased responsiveness due to the prevalence of the “Internet of Things (IoT)”, the “Cyber-Physical System (CPS)”, and “real-time process monitoring of resource” use [66,73], and findings of Ghobakhloo (2020), which revealed that intelligent robots increase the effectiveness of industrial production while maintaining product quality, which leads to improved resource utilization and reduced waste [74]. This result also aligns with the works of Chang et al. (2017) and Ford and Despeisse (2016), which stated that, through specialized “just-in-time production” systems that are closer to the consumer, additive manufacturing increases the utilization of resources and decreases waste [2,75].

Lastly, it has been observed that the relationship between strategic agility and environmental sustainability is partially mediated by digital transformation. To our knowledge, this study is the first to explore the indirect impact of strategic agility on environmental sustainability via digital transformation. Thus, it contributes to and adds to the body of existing knowledge by emphasizing the pivotal role that strategic agility plays in strengthening and accelerating digital transformation, which, in turn, further boosts environmental sustainability. This implies that strategic agility alone may not be sufficient to attain superior levels of environmental sustainability, and manufacturing companies have to direct the efforts of strategic agility to boost the levels of digital transformation so that environmental sustainability levels will be maximized. However, our result should be interpreted with caution as the partial mediating effect revealed implies that digital transformation may not be the sole supporting factor in the strategic agility/environmental sustainability relationship. Other factors, such as green practices, circular economy, and organizational culture, can also influence the extent to which strategic agility translates into improved environmental sustainability practices. All in all, our result points to the essential role of digital transformation as a mediator, indicating that organizations aiming to enhance their environmental sustainability should not solely focus on strategic agility but should also strategically invest in digital technologies and capabilities. These technologies facilitate real-time data collection, analysis, and decision making, enabling organizations to proactively identify and address environmental challenges.

7. Conclusions, Managerial Implications, and Limitations

7.1. Conclusions

This research aimed to examine and investigate the impact of strategic agility on digital transformation and environmental sustainability. It also addressed a notable gap in the literature by exploring the indirect impact of strategic agility on environmental sustainability via digital transformation. Importantly, the study’s unique value lies in its context of a developing country, where the majority of the manufacturing companies represented in the present study sample belonged to the SMEs category. Consequently, a theoretical model incorporating strategic agility, digital transformation, and environmental sustainability was developed to investigate the direct and indirect hypothesized relationships. As such, this research adds to the current body of knowledge by examining and exploring the proposed relationship and addressing the identified research gaps.

Our results revealed that strategic agility has a direct, positive, and significant impact on environmental sustainability. Additionally, it was found that strategic agility positively and significantly affected digital transformation. Furthermore, digital transformation had a positive and significant impact on environmental sustainability. A noteworthy finding was that the relationship between strategic agility and environmental sustainability was partially mediated by digital transformation. This implies that strategic agility influences environmental sustainability in two ways: directly and indirectly through digital transformation, which acts as a mechanism through which strategic agility partially affects environmental sustainability.

The results imply that manufacturing companies with higher levels of strategic agility are more inclined to invest in and harness digital technologies and capabilities to further enhance their environmental sustainability initiatives. The adoption and use of digital technology and related practices are expected to lead to more efficient resource utilization, waste reduction, and enhanced environmental management, aligning with sustainability objectives. In summary, the dynamic capability of strategic agility indirectly influences environmental sustainability, mediated by digital transformation. Our findings suggest and imply that in the context of industrial businesses in a small developing country, strategic agility serves as an effective dynamic capability that can instigate organizational changes, resulting in improved performance and technology-driven outcomes.

Business organizations can use strategic agility as a tool to help them reach their objectives. To put it another way, strategic agility may serve as a proactive facilitator and catalyst, allowing organizations to optimize most of their available resources, achieve the desired digital transformation, and accomplish the expected environmental sustainability objectives and results.

7.2. Managerial Implications

This research provides valuable insights and practical implications for managers and practitioners. Firstly, managers in manufacturing companies should recognize the advantages and benefits of embracing strategic agility as a dynamic capacity that strengthens and improves their company’s competitive advantage. By adopting a mindset focused on dynamic capabilities, managers can better understand the importance of strategic agility as a crucial ability necessary to navigate highly uncertain and evolving business environments while addressing concerns and challenges related to environmental sustainability. Secondly, the results underscore the critical role of strategic agility as one of the primary capabilities for manufacturing companies to initiate their journey toward achieving environmental sustainability goals and objectives. Cultivating and championing the principles of strategic agility, such as the capability to sense, identify, and seize opportunities, and integrating these principles with digital transformation strategies empower managers to enhance efficiency, drive innovation, develop new goods, services, and business models, reduce waste, effectively address environmental sustainability concerns, and have a positive effect and influence on the environment. Thirdly, managers in manufacturing companies must recognize that while strategic agility can enhance the implementation of environmental sustainability practices, it alone may not suffice to achieve exceptionally high sustainability standards. To attain superior levels of environmental sustainability, managers should channel the capabilities of strategic agility toward bolstering the implementation of digital transformation. This, in turn, will further elevate environmental sustainability to the desired levels. Leveraging digital technologies empowers managers to gain valuable insights and make informed decisions and enables them to identify emerging trends, enhance operational efficiency, and contribute to a more sustainable future.

7.3. Limitations and Suggestions for Future Research

Like other research papers, there are limitations to this study that can be addressed in future studies and investigations. First, only one mediating variable, digital transformation, was considered in the current study. Although this mediating variable proved to be essential and partially mediated the impact of strategic agility on environmental sustainability, other variables can further enhance this relationship. Therefore, future research and studies can examine and explore the mediating impacts of other variables such as green practices, circular economy principles, and environmental management systems. Second, due to Jordan’s limited number of industrial businesses within a single industry type, we targeted industrial firms from various types. However, different industry types have distinct characteristics in terms of agility levels, environmental impacts, and levels of digital technology adoption. Hence, future studies should focus and concentrate on one industry type to clarify industry-specific features and contexts, thereby enhancing the generalizability of the findings. Third, in this study, the survey questionnaire was intended to be completed by one manager from each manufacturing company. While this technique is frequently and commonly employed in the manufacturing literature, it has the potential to introduce informant bias. Future studies are recommended to employ a multiple-informant approach to mitigate possible informant bias.

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