The twins paradox. Digitalisation, sustainability and the growth of European SMEs

This paper investigates the impact of digitalization and sustainability strategies on firm performance, focusing on European SMEs. While digital and green transitions are increasingly promoted as mutually reinforcing paths to competitiveness and resilience, evidence on their actual synergies at the firm level remains mixed. Using data from the European Commission’s Flash Eurobarometer 486 survey, we assess the extent to which digital and sustainability strategies—individually and jointly—contribute to turnover growth. Our results show that digitalization is consistently associated with improved firm performance, confirming its enabling role for growth and innovation. In contrast, we do not find a link between sustainability efforts and growth, and we find no evidence of complementarities between the two strategies: firms pursuing both do not achieve superior growth outcomes compared to those focusing solely on digitalization. These findings suggest that SMEs often treat digitalization and sustainability as distinct, rather than integrated, strategic domains—thus missing potential synergies.