AI-Driven Digital Transformation for Sustainable Manufacturing: Exploring the Impact of Carbon Intensity and ESG through Eco-Innovation Theory

Abstract

This study aims to examine the influence of carbon intensity and ESG performance on the adoption of digital transformation through the perspective of eco-innovation theory in supporting sustainable production and decarbonization goals. Quantitative methods were used by analyzing 91 samples of secondary data from manufacturing companies in Indonesia. The result shows that companies with scope 1 carbon intensity tend to adopt digital transformation because emissions can be clearly seen in direct operational activities and high ESG performance can maximize performance through digital transformation adoption. The significant negative relationship between scope 2 carbon intensity and digital transformation indicates that companies may have alternative non-digital solutions to reduce scope 2 carbon intensity. These results support eco-innovation theory which states that digital and non-digital-based innovations are essential for environmental sustainability and production efficiency, particularly in the manufacturing industry. This study has demonstrated a practical understanding of management and, of course, those who formulate policies on how to design digital strategies that go hand in hand with environmental conservation efforts, which can then encourage stronger sustainability in the manufacturing sector.