When digital becomes green: Reconfiguring dynamic capabilities for circular futures

Achieving sustainable outcomes has become a critical strategic priority for firms, particularly in emerging economies that are increasingly exposed to environmental pressures. In this context, the transition toward a circular economy and the pursuit of Net-zero-based green performance have gained prominence as complementary pathways for decoupling economic growth from environmental degradation. These sustainability goals increasingly depend on firms' capacity for eco-innovation and their ability to harness digital capabilities. Drawing on data from 310 Vietnamese enterprises, this study employs polynomial regression combined with response surface analysis to examine how the congruence and incongruence among digital sensing, capturing, and transforming capabilities influence firms' green transition and, in turn, their eco-innovation performance, circular economy practices, and net-zero outcomes. The findings reveal that a higher degree of coherence among digital capabilities substantially enhances green transition performance, which subsequently drives stronger eco-innovation and sustainable outcomes. The results provide novel insights into how digital capability alignment shapes firms’ sustainability trajectories. They also offer practical implications for managers and policymakers by demonstrating how the strategic integration of digital transformation initiatives can accelerate green transitions and advance circular and net-zero objectives in developing economies.