Green Digital Capability and Sustainability Performance in Pakistan's Textile Sector: The Mediating Role of Circular Production Practices and the Moderating Role of Environmental Regulatory Pressure

Abstract

Pakistan's textile sector faces mounting pressure from regulators, international buyers, and export markets to reduce resource intensity and demonstrate credible environmental performance. It remains unclear whether digital capability alone translates into measurable sustainability gains. Grounded in the natural-resource-based view, dynamic capabilities theory, and institutional theory, this study develops and tests a model in which green digital capability (GDC) improves sustainability performance (SP) through circular production practices (CPP), with environmental regulatory pressure (ERP) moderation of the conversion of digital capability into circular practices. A structured questionnaire was distributed to 340 managers holding production, operations, sustainability, environmental-health-and-safety, supply-chain, quality, and digital-transformation roles across textile firms in Faisalabad, Lahore, Karachi, Multan, and Sialkot, selected through a convenience sampling procedure; after data screening, 298 usable responses were retained (response rate = 87.6%). Data were analyzed in IBM SPSS using exploratory factor analysis, hierarchical regression, bootstrapped mediation, and moderated regression. Measurement checks supported the six-factor structure of the instrument (KMO = 0.937; Bartlett's χ²(1378) = 8674.21, p < .001; Cronbach's α = 0.878–0.920), and Harman's single-factor test indicated no dominant common-method factor (30.2% of variance). Green digital capability significantly predicted circular production practices (β = 0.505, p < .001) and sustainability performance (β = 0.614, p < .001); circular production practices in turn predicted sustainability performance (β = 0.722, p < .001). Circular production practices partially mediated the relationship between green digital capability and sustainability performance (indirect effect = 0.227; 95% bootstrap CI [0.172, 0.288]), accounting for 45.4% of the total effect. Environmental regulatory pressure significantly strengthened the relationship between green digital capability and circular production practices (B = 0.394, p < .001; ΔR² = 0.066), with the simple slope for green digital capability rising from 0.244 under low regulatory pressure to 0.728 under high regulatory pressure. All five hypotheses were supported. The findings show that digital capability generates sustainability value mainly by enabling circular production, and that this conversion is contingent on the strength of the regulatory and buyer-driven institutional environment. The study contributes an integrated account of how digitalization drives sustainability performance in an emerging-economy, resource-intensive manufacturing context and offers guidance to textile managers, regulators, and export policymakers seeking to strengthen circularity and environmental compliance.

Keywords- green digital capability; circular production practices; environmental regulatory pressure; sustainability performance; textile industry; Pakistan; natural-resource-based view; institutional theory; convenience sampling.