From social to structural capital: digital transformation as a codification mechanism for ESG reporting in SMEs

The global transition toward environmental, social and governance (ESG) accountability presents a particular challenge for small and medium enterprises (SMEs), which constitute approximately 99% of all firms in Organization for Economic Co-operation and Development (OECD) economies and 60–70% of global employment (OECD, 2021). While these firms are inherently agile and rich in community trust – intangible assets that form a significant reservoir of Relational Capital (Morsing and Perrini, 2009; Jones et al., 2017) – they frequently struggle to translate these informal strengths into the codified, auditable metrics required by formal ESG frameworks (Edvinsson and Malone, 1997; Sánchez-Medina et al., 2007; De Silva et al., 2025).

This study conceptualizes this as an Intellectual Capital conversion challenge: Relational Capital remains uncodified, lacking the Structural Capital needed for ESG valuation. Many SMEs appear to possess substantial relational assets, yet lack the systems and routines needed to render those assets (visible to stakeholders) legible in formal ESG reporting – a condition we term as “Relational-Performance Gap.” Without a codification mechanism, the Relational-Performance Gap creates a “visibility penalty” on SMEs, where genuine sustainable actions are undervalued by markets simply due to a lack of structural visibility. We, therefore, define the central problem less as a shortage of commitment and more as a difficulty of translation: how informal relational strengths become reportable organizational routines. In that sense, ESG reporting is treated here not as an end in itself, but as a visible manifestation of how far relational assets have been formalized. We reconceptualize ESG reporting as the observable output of a firm's capability to convert Relational Capital into Structural Capital.

Although Intellectual Capital research has long distinguished among Human, Relational and Structural Capital, it has more often examined these as stocks than as conversion processes. The dynamic conversion from Relational to Structural Capital remains under-theorized. This article addresses that narrower gap. It asks how leaderful relational practices may become formalized into reporting-capable structural routines, and whether Digital Transformation helps explain that codification process in SMEs. In doing so, it builds on knowledge codification work and Intellectual Capital theory, while bringing them into closer dialogue with Relational Leadership and Leaderful Practice. Building explicitly on foundational work on knowledge codification (Nonaka and Takeuchi, 1995) and Structural Capital formation (Edvinsson and Malone, 1997; Bontis, 1998), this study extends these concepts by integrating them with Relational Leadership theory (Uhl-Bien, 2006) and Leaderful Practice (Raelin, 2011) to examine the technology-mediated conversion of Relational into Structural Capital in the specific context of SME sustainability.

Intellectual Capital theory provides a diagnostic lens. Intellectual Capital defines organizational value through Human, Relational and Structural Capital (Bontis, 1998; Subramaniam and Youndt, 2005). For SMEs, the challenge is not a deficit of Human or Relational Capital, but a deficiency in Structural Capital – the codified processes and systems required to harness intangibles for sustainability (Guthrie et al., 2012; Dumay, 2016). Without codification, SME sustainability remains an “invisible” asset (Tsang et al., 2023).

Bridging this gap requires a specific form of leadership. Relational Leadership theory (Uhl-Bien, 2006) posits leadership as an emergent social process, but lacks a prescriptive design for accountability. This study, therefore, integrates Raelin's (2003, 2011) Leaderful Practice, which operationalizes relational energy through the “Four Cs” (collectiveness, concurrency of action – which in this study we will refer to as just concurrency − collaboration, compassion). We propose Leaderful Practice as an activation mechanism – the observable behavioral manifestation of Social Capital that generates collective agency for sustainable action (Raelin, 2016a, b). The catalyst for converting relational energy into Structural Capital is Digital Transformation. Moving beyond a narrow view of Digital Transformation as operational efficiency (Bharadwaj et al., 2013), we consider it as a strategic codification mechanism (Vial, 2019). Embedded within organizational practice – informed by sociomateriality (Orlikowski, 2007) – digital tools become the infrastructure that transforms tacit, leaderful interactions into explicit, auditable Structural Capital (Fülöp and Topor, 2026). This sociomaterial entanglement ensures that leaderful practices are not just “stored” in digital tools, but are hard-wired into the firm's operating system, enhancing organizational resilience against external shocks. To examine this integration and explore the digital conversion mechanism, this study investigates the following research questions:

To explore these questions, this study presents the relational integrated bridge model (RIBM). RQ1 examines the activation of Social Capital; RQ2 examines its conversion into Structural Capital via reporting; RQ3 explores the codification role of digital tools in this process. This theoretical framework is operationalized through an explanatory sequential mixed-methods design (Creswell and Plano Clark, 2017). We compare publicly listed SMEs in Italy and Pakistan contexts representing distinct institutional logics (Garbellano and Da Veiga, 2019; Tauseef and Khurshid, 2025). As our data will show, the Italian context reflects a formalized, rule-based approach to governance, while the Pakistani environment demonstrates a more pragmatic, trust-based agility; these differences shape how digital tools are deployed in the service of sustainability.

Our research offers a threefold contribution to the field of Intellectual Capital. First, it contributes to Intellectual Capital theory by moving beyond static stock-based views to examine the dynamic, technology-mediated conversion pathway from Relational into Structural Capital. Second, it provides empirical evidence of culturally contingent conversion pathways, identifying distinct models of “Structured Codification” (Italy) and “Agile Conversion” (Pakistan). Third, it offers the RIBM as a conceptual framework for SME leaders to consider relational assets and guide strategic digital investments, supporting the development of Intellectual Capital for the ESG era. Ultimately, this study shifts the SME sustainability discourse from asking if SMEs are sustainable to demonstrating how digital architecture makes that sustainability permanent and provable.

The article proceeds as follows. Section 2 develops the theoretical framework and hypotheses. Section 3 details the mixed-methods methodology. Section 4 presents the quantitative and qualitative findings. Section 5 discusses the implications for Intellectual Capital theory and practice, followed by the conclusion (Section 6).

Intellectual Capital comprises an organization's intangible assets knowledge, relationships and systemized capabilities that drive value creation beyond physical resources (Subramaniam and Youndt, 2005). The tripartite Intellectual Capital framework distinguishes between Human Capital (employee knowledge and skills), Structural Capital (codified processes, databases and systems) and Relational Capital (value embedded in stakeholder networks) (Bontis, 1998).

For SMEs, this framework reveals a notable paradox. SMEs typically possess an abundance of Relational Capital, rooted in informal structures, trust-based teams and community embeddedness (Coleman, 1988; Morsing and Perrini, 2009; Jones et al., 2017). This “relational fabric” enables organic, adaptive responses to challenges, including sustainability imperatives, as described by Relational Leadership theory (Uhl-Bien, 2006). However, the SME Intellectual Capital portfolio is often relatively imbalanced. While rich in Human Capital and Relational Capital, these firms frequently lack the Structural Capital needed to leverage intangibles for strategic scaling and formal accountability (Brennan and Connell, 2000).

This imbalance contributes to the Relational-Performance Gap: the challenge of converting fluid Relational Capital into the durable Structural Capital required for measurable, reportable ESG performance (Edvinsson and Malone, 1997; Sánchez-Medina et al., 2007). Consequently, SME sustainability practices often remain tacit and anecdotal, leaving firms unable to meet the growing demand for standardized ESG data from investors and regulators (Flammer, 2015). Bridging this gap requires a deliberate mechanism of Digital Transformation to move beyond static databases toward dynamic Structural Capital. This is the systemized capability to continuously translate informal social assets and relational inputs into formalized, auditable and strategic outputs. While the tripartite Intellectual Capital framework is well-established (Bontis, 1998; Subramaniam and Youndt, 2005), prior research has treated capitals as stocks to be measured. This static approach offers limited insight into dynamic conversion processes. The present study addresses this gap by examining the conversion pathway from Relational to Structural Capital through Digital Transformation and Leaderful Practice. Existing Intellectual Capital research has been highly effective in demonstrating that Relational and Structural Capital matter for organizational performance. It has been less explicit, however, about the mechanisms through which relational assets become formalized into auditable routines, especially in SMEs facing ESG reporting demands under resource constraints. Knowledge codification scholarship helps explain tacit-explicit transformation, but it does not on its own explain how leaderful relational practices become reporting-capable Structural Capital. It is this more specific conversion problem that the present study addresses.

This study considers Leaderful Practice (Raelin, 2011) as the observable, organized and codifiable form of Social Capital in action. We conceptualize Leaderful Practice as a behavioral manifestation of Social Capital – the subset of Relational Capital concerned with norms of reciprocity, trust and shared agency (Putnam, 2000). This framing presents Leaderful Practice as “organized Social Capital” – a strategic, intangible asset that can be systematically identified, nurtured, and potentially converted into Structural Capital. Leaderful Practice provides the prescriptive architecture missing from purely descriptive relational theories, structured through the Four Cs:

1. Collective practice distributes agency, converting individual initiative into a group-owned asset and mitigating “key-person risk” (Coleman, 1988).

2. Concurrent action enables agile, multi-threaded responsiveness, leveraging network structures to accelerate problem-solving (Uhl-Bien and Arena, 2018).

3. Collaborative process serves as the engine of knowledge co-creation, integrating diverse perspectives to solve complex sustainability challenges (Adler and Kwon, 2002).

4. Compassionate orientation provides the ethical foundation, fostering the psychological safety necessary for inclusive participation and honest dialogue (Edmondson, 1999; Nicholson and Kurucz, 2019).

Thus, we view the Four Cs not as mere leadership behaviors, but as the observable, organized form of a firm's Relational Capital (Nahapiet and Ghoshal, 1998), available for codification. This conceptualization suggests that Leaderful Practice can be understood as a concrete, organization-specific reservoir of Social Capital that can be audited, developed and crucially codified through digital means to produce Structural Capital. In this sense, Leaderful Practice is treated here as an observable organizational manifestation of Social Capital that may, under certain conditions, become more formalized through digital and procedural routines.

Building on foundational work in knowledge management (Nonaka and Takeuchi, 1995) and Intellectual Capital theory (Edvinsson and Malone, 1997; Bontis, 1998), we consider Digital Transformation beyond mere operational efficiency, framing it as a potential mechanism for codifying tacit Social Capital into explicit Structural Capital. Codification is the process of converting personal, context-specific knowledge into systematized, shareable knowledge (Nonaka and Takeuchi, 1995). Digital tools can provide the infrastructure required to capture and institutionalize the Four Cs of Leaderful Practice. For instance, shared digital workspaces can codify Collaboration by turning dialogic processes into analyzable artifacts, while real-time dashboards can codify Concurrency by making simultaneous, coordinated action visible and measurable.

1. Codifying Collectivity: Enterprise social networks (e.g. Microsoft Teams, Slack) create “digital traces” of collective decision-making, transforming ephemeral conversations into persistent organizational memory (Majchrzak et al., 2013).

2. Codifying Concurrency: Real-time dashboards and cloud-based tools (e.g. Power BI, Tableau) allow simultaneous, multi-threaded responses, transforming individual action into coordinated systemic capability.

3. Codifying Collaboration: Shared digital workspaces (e.g. Miro, SharePoint) capture dialogic co-creation, turning collaborative interactions into “analyzable artifacts” for review and refinement.

4. Codifying Compassion: Digital feedback loops and transparent communication (e.g. Culture Monkey, Lattice) provide verifiable records of ethical engagement and psychological safety – critical for auditable social pillars.

When guided by Leaderful Practice principles, Digital Transformation need not impose rigid top-down control; rather, it can enable scalable distributed agency. This process may bridge the Intellectual Capital conversion gap by translating the Social Capital of Leaderful Practice into the reusable processes and systems that constitute Structural Capital (Le et al., 2024; Fülöp and Topor, 2026). Through this lens, Digital Transformation can be viewed as a mechanism that makes the “invisible” relational assets of an SME visible and verifiable to external stakeholders.

From an Intellectual Capital perspective, ESG reporting can be treated as one visible output of formalization. Rather than assuming that reporting captures substantive ESG performance in full, this article treats it as evidence that certain sustainability-related routines, disclosures and governance processes have become sufficiently structured to be communicated and audited – specifically, the successful conversion of Relational and Human Capital into value-creating Structural Capital (Guthrie et al., 2012). Prior research distinguishes between symbolic and substantive ESG reporting (Marquis and Quian, 2014; Marquis et al., 2016). Symbolic reporting refers to disclosure that signals commitment without meaningful organizational change, while substantive reporting reflects genuine integration of ESG practices into operations and strategy (Walker and Wan, 2012; Setyaningsih et al., 2024; Gu and Matisoff, 2026). Our study focuses on listed SMEs, which are subject to formal disclosure regulations. While such regulation reduces the risk of purely symbolic reporting, it does not eliminate it entirely (Tariq, 2025). Therefore, we treat ESG reporting as an observable output of codification, while acknowledging that reporting quality – not merely its presence – remains critical for stakeholder credibility. The RIBM positions Digital Transformation as a “support system” for SME sustainability; in this line, De Silva et al. (2025) review the literature on the impact of Digital Transformation on sustainable accounting, reporting and assurance. By creating immutable digital traces of leaderful interactions, the codification process ensures that reporting remains substantive rather than symbolic, providing the evidentiary “receipts” necessary for stakeholder credibility.

1. Environmental performance can reflect Human Capital (green skills) and the Structural Capital of management systems and monitoring technology.

2. Social performance can be an expression of Relational Capital quality, with reporting demonstrating its conversion into auditable Structural Capital (e.g. diversity data).

3. Governance performance reflects the Structural Capital framework that ensures the ethical deployment of all other capitals.

For SMEs, credible ESG reporting may be achieved by building the internal Structural Capital to authentically capture the value created through their inherent Relational Capital. In this view, a sustainability report is not merely a document, but it is evidence that an Intellectual Capital conversion process has successfully occurred and, therefore, the elements of organizational practice have been formalized into reporting-capable structural routines.

Synthesizing the preceding arguments, this study presents the RIBM for SME sustainability. The Model proposes a process-oriented association pattern linking Leaderful Practice, Digital Transformation and ESG reporting. More specifically, it treats Leaderful Practice as an input of relational organization, Digital Transformation as a formalization infrastructure, and ESG reporting as a visible reporting outcome. The model is intended as a theoretical explanation of how these elements may align; it does not, in the present study, establish mediation or causality statistically. As visualized in Figure 1, the RIBM proposes that Leaderful Practice (organized Relational Capital) serves as the input. Digital Transformation is conceptualized as a conversion mechanism, formalizing this relational energy into durable Structural Capital. This newly formed SC, in turn, provides the auditable framework necessary to enable and sustain measurable ESG performance. Finally, a feedback loop suggests that successful ESG performance may serve to reinforce and validate leaderful practices within the firm.

It is important to clarify what this model does and does not claim. The RIBM proposes associations among these constructs, not causal claims. The quantitative phase of this study tests these associations, while the qualitative phase provides process evidence of the conversion mechanisms. This aligns with our explanatory sequential design, where statistical patterns are identified and, then, explained through contextual inquiry.

Based on this framework, we propose the following hypotheses:

This study adopts a pragmatist research philosophy, prioritizing actionable knowledge for complex organizational challenges (Morgan, 2007; Tashakkori and Teddlie, 2010). Pragmatism suits our aim of examining the RIBM, as applied management research requires integrating objective measurement with subjective interpretation (Saunders et al., 2019). We employ an explanatory sequential mixed-methods design (QUAN → qual) (Ivankova et al., 2006), allowing statistical verification of relationships followed by contextual insight across cultures. This aligns with our framing of Intellectual Capital conversion as a dynamic process: the quantitative phase (QUAN) identifies associations; the qualitative phase (qual) explores how and why they manifest. Therefore:

1. QUAN: Structured survey to determine trends among SMEs in Italy and Pakistan.

2. qual: Semi-structured interviews to explain statistical patterns (Creswell and Plano Clark, 2017).

The integration of both phases occurs at the interpretation stage, where insights from the qualitative findings are used to explain and contextualize the statistical patterns identified in the quantitative phase. This approach provides a more comprehensive understanding of the underlying mechanisms than quantitative methods alone and is particularly suited to examining the culturally contingent pathways theorized in H3.

The strategic comparison of these two contexts leverages established institutional and economic differences between a developed European economy and an emerging Asian market. As detailed in our findings, these contexts represent distinct approaches to organizing – Italy with its formalized, rule-based governance structures and Pakistan with its more pragmatic, trust-based relational networks – making them ideal for examining how institutional context shapes Intellectual Capital conversion pathways.

The survey targeted 126 Italian-listed SMEs operating on the Euronext Milan market and 136 Pakistani-listed SMEs on the Pakistan Stock Exchange (PSX) in 2024. The sample includes n = 43 responding Italian SMEs and n = 54 responding Pakistani SMEs, respectively, 34% and 40% of the population.

To ensure comparability, a universal filter was applied, limiting market capitalization to less than €500 million, consistent with SME definitions from the European Commission (European Commission: Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs, 2019) and the State Bank of Pakistan (2025). Financial institutions were excluded due to their distinct regulatory contexts and operating models.

The resulting sample spanned manufacturing industries (machinery, textiles and food production) as well as service industries (IT services and logistics). In the Italian context, participating firms represented industrial manufacturing, consumer goods, technology services and renewable energy sectors. In the Pakistani context, the sample included firms operating in textile, industrial manufacturing, food processing and basic materials sectors. This sectoral diversity allows examination of whether core relationships hold across different industries. The focus on publicly listed SMEs, while ensuring access to standardized data, may limit generalizability to micro-enterprises and informal firms. This limitation is addressed in Section 6.4. Regarding nonresponse bias, survey responses were anonymous, and completion dates were not recorded. Therefore, nonresponse bias could not be statistically assessed through early-late respondent comparison. However, the response rates (34% for Italy, 40% for Pakistan) are consistent with or exceed typical response rates in SME survey research (Hair et al., 2017). The sample's sectoral diversity (manufacturing and services) and the inclusion of all eligible listed SMEs support representativeness within the limits of voluntary survey participation.

Because Relational Leadership and Leaderful Practice are intangible assets, this study utilizes observable indicators to capture these latent constructs (Bollen, 1989). A latent variable is defined as a theoretical construct that cannot be measured directly, but must be inferred from a set of observable indicators. This approach is particularly suited to Intellectual Capital research, where organizational capabilities must be inferred from measurable manifestations. All key theoretical constructs were operationalized using validated multi-item scales:

1. Relational Leadership and ESG Performance (RLEP): A 14-item scale measuring the observable behaviors of the Four Cs (Collectiveness, Concurrency, Collaboration and Compassion), adapted from Raelin (2016a, b). Sample items include: “Employees feel collectively responsible for achieving ESG performance,” “The actions of different teams are aligned on ESG goals” and “Our firm integrates ethical considerations into its ESG efforts.”

2. Leadership, Digital Transformation and ESG Performance (LDEP): A 6-item scale measuring the use of technology as a codification mechanism for ESG, adapted from Westerman et al. (2014). Sample items include: “We use digital tools to track our environmental impact” and “Leadership champions the use of technology for ESG reporting.”

3. ESG Reporting (ESG-R): A 9-item scale evaluating formal ESG disclosures based on GRI standards (GRI, 2021). Sample items include: “We clearly disclose our governance structure in sustainability reports” and “Our company comprehensively reports on UN SDG contributions.”

Scale development followed established psychometric guidelines (Hinkin, 1995). Content validity was established through expert panel review (Grant and Osanloo, 2014). Construct validity was assessed using exploratory and confirmatory factor analyses.

Psychometric testing yielded Cronbach's alpha coefficients ranging from 0.85 to 0.92, indicating high internal consistency. Table 1 presents the reliability coefficients for both national samples. The identical reliability scores across Italian and Pakistani samples (RLEP α = 0.85; LDEP α = 0.92; ESG-R α = 0.85/0.89) suggest strong measurement invariance, providing a comparable platform for cross-cultural analysis (Byrne, 2016). Comparability of survey instruments was established through formal translation followed by back-translation (Beaton et al., 2000).

To address potential common method bias concerns, the survey design varied scale formats and the analysis included Harman's single-factor test. The results revealed that the first factor accounted for 28.3% of total variance, below the recommended threshold of 50%, suggesting that common method bias is not a significant concern in this study (Podsakoff et al., 2003).

The hypotheses were tested using Multiple Regression Analysis in IBM SPSS Statistics. Specifically, the direct relationship between leaderful practices and ESG reporting (H1) was tested via linear regression. The role of Digital Transformation was examined by including it as a predictor alongside leaderful practices. Finally, to examine H3, we conducted separate regression analyses for each national subsample, allowing us to compare the strength and significance of coefficients across contexts. The analysis proceeded in three stages: (1) instrument validation (reliability and factor analysis); (2) comparative statistics (independent samples t-tests to identify cross-cultural differences) and (3) hypothesis testing (multiple linear regression). Full regression outputs, including unstandardized coefficients (B), standard errors, standardized coefficients (β), t-values, significance levels and model fit statistics (R², adjusted R², F statistic), are reported in Section 4.

Control variables were not included to preserve degrees of freedom, given the sample of 97 listed SMEs and the focus on core theoretical relationships (see Section 6.4). Post-hoc power analysis (G*Power 3.1) indicated 80% power to detect a medium effect (f² = 0.15) with N = 97, α = 0.05 and two predictors. Detection of smaller interaction effects is limited (Section 6.4).

Given the processual, socio-technical nature of the conversion mechanism proposed in H2, the explanatory sequential design was deliberately chosen: the quantitative phase identified foundational relationships using regression analysis, while the qualitative phase was designed to explore the “how” and “why” of the digital codification process. This approach does not claim to statistically test mediation; rather, it establishes associations in the quantitative phase and provides process evidence for the conversion mechanism through qualitative inquiry. This allowed examination of the conversion pathway, revealing the two archetypes of “Structured Codification” and “Agile Conversion” through qualitative exploration of the contextual nuances of this transformation.

Following the quantitative analysis, a purposive sample of eight matched-pair SMEs (four per country) was selected for in-depth investigation. Selection criteria included: (1) matched pairs for cross-cultural comparison; (2) sector alignment to control for industry effects; (3) diverse quantitative profiles (e.g. high RLEP/ESG-R, high LDEP, but low ESG-R) and (4) data richness from the initial survey and supplementary documentation. This phase was designed to explore the mechanisms underlying the RIBM and examine how SMEs navigate the transition from relational intent to measurable performance. The qualitative analysis focused on three participant groups: SME leadership teams (owners and department heads), operational teams involved in ESG and Digital Transformation activities and cross-functional participants to capture diverse perspectives.

Data were collected through three sources to ensure triangulation (Flick, 2019): (1) semi-structured interviews averaging 60–90 min with managers and key staff from the matched sample of four Italian and four Pakistani SMEs; (2) document analysis of sustainability reports, internal communications and digital platform usage guidelines and (3) review of corporate websites and publicly available materials. This multi-source approach provided objective secondary data to triangulate self-report measures, particularly regarding actual ESG implementation and digital tool use.

Thematic analysis followed Braun and Clarke's (2006) six-phase framework: (1) data familiarization, (2) initial coding, (3) theme search, (4) theme review, (5) theme definition and (6) write-up. A manual comparative thematic analysis was undertaken on the complete dataset of responses to all 14 questions, focusing on three core themes: Relational Leadership and Collaboration, Digital Transformation and Tool Usage, ESG Reporting and Disclosure/Accountability. The analysis was conducted simultaneously for Italian and Pakistani cases to enable cross-cultural comparison. To ensure the rigor of the conversion evidence, thematic findings from interviews were triangulated against internal process manuals and official ESG disclosure reports. This verified that the “reported” Structural Capital matched the “lived” leaderful practices.

To ensure analytical rigor, the research design incorporated triangulation, member validation and maintenance of a detailed audit trail to address the criteria of credibility, transferability, dependability and confirmability (Lincoln and Guba, 1985).

Thematic analysis was employed to identify specific cultural patterns, which we characterize as the “Italian Cautious-Facilitation Model” and the “Pakistani Pragmatic-Integration Model.” This phase provided rich, socio-technical evidence of how the Four Cs, facilitated by digital tools, relate to the gap between Relational Leadership and formal performance in diverse settings. Thematic analysis followed an abductive approach, iterating between empirical data and the RIBM to identify the two archetypes that are presented in Section 4.3.

The study adheres to the University of Brescia's ethical protocols and GDPR. Ethical clearance was obtained prior to fieldwork, complying with European and Pakistani data protection requirements. Participants were volunteers who gave informed consent after receiving thorough information about the study's purpose and their rights, including freedom to withdraw at any time without penalty. Strict confidentiality was maintained: no identifiable information was collected, and data were stored on encrypted university servers with access regulated by the research team.

For qualitative interviews, participants were provided with complete information about data handling. For document analysis, the study used only publicly available materials or obtained written consent from organizations. Organizational identities are concealed in all forms of data analysis and dissemination through the use of pseudonyms and aggregated reporting.

To ensure scholarly rigor, the research design incorporates member validation, peer debriefing and the maintenance of a detailed audit trail to address the criteria of credibility, transferability, dependability and confirmability (Lincoln and Guba, 1985). By integrating quantitative breadth with qualitative depth through the adopted mixed-methods approach, the methodology provides a basis for examining how leaderful practices relate to Digital Transformation for sustainable outcomes, while acknowledging the limitations inherent in cross-sectional, self-report data.

An AI-based tool (DeepSeek) was used only to refine language and improve clarity across the manuscript. The tool did not contribute to the research design, analysis, interpretation or conclusions.

This section presents the study's empirical results. Employing an explanatory sequential mixed-methods design (QUAN → qual), we first present the quantitative relationships examined in the RIBM and then present the qualitative findings that explain the underlying cultural and operational mechanisms. The results illustrate how leaderful practices, facilitated by Digital Transformation, relate to the Relational-Performance Gap in SMEs through two culturally-embedded archetypes.

The integrated analysis indicates a core finding: Leaderful Practice is positively associated with sustainable performance, but its influence is channeled through culturally distinct pathways of digital codification. Initial quantitative results (independent samples t-tests) identified cross-cultural differences in baseline intangible asset levels:

1. Pakistani SMEs reported higher levels of Relational Capital (t = 2.87, p < 0.01).

2. Italian SMEs exhibited higher scores in structural digital maturity (t = 3.12, p < 0.001).

Table 2 presents descriptive statistics for the core constructs. Italian SMEs showed greater variance in ESG reporting (SD = 9.86 vs. 6.43), suggesting less standardization in reporting practices.

Despite these divergent starting points – relational depth in Pakistan versus structural maturity in Italy – overall ESG reporting scores showed no statistically significant difference (p > 0.05). As shown in Table 3, Relational Leadership scores were statistically equivalent across Countries (p = 0.187), as were ESG reporting outcomes (p = 0.428). SMEs in both contexts achieve similar reporting outcomes through different country-specific pathways. The cross-cultural comparison reveals that, while leadership philosophy and reporting outcomes are similar, approaches to Digital Transformation differ, with Pakistani SMEs exhibiting a moderately higher level of digital adoption (d = 0.47, p = 0.056).

Multiple Regression Analysis was conducted to test the predictive logic of the RIBM. Table 4 presents the multiple regression results for predicting ESG reporting in Pakistani and Italian SMEs and Table 5 shows the inter-correlations of key constructs by Country.

Following Cohen's (1988) guidelines, the standardized coefficients (β) reported in Table 4 indicate medium-to-large effects (β = 0.177–0.375 for Leaderful Practice; β = 0.595–0.608 for Digital Transformation), suggesting practical significance beyond statistical significance alone.

For the full sample, Leaderful Practice showed a significant positive relationship with ESG reporting, though country-specific analysis reveals cultural variations.

H1 proposed that Leaderful Practice has a direct positive relationship with ESG reporting in SMEs. The correlation analysis provides initial support, with significant positive correlations between RLEP and LDEP in both Countries (Pakistan: r = 0.670, p < 0.001; Italy: r = 0.602, p < 0.001) (Table 5). The regression analysis shows that, in Italy, RLEP significantly predicts ESG reporting (β = 0.375, t = 4.092, p < 0.001), while this direct effect is not statistically significant in Pakistan (β = 0.177, t = 1.368, p = 0.177) (Table 4). H1 is supported in Italy, while H1 is not directly supported in Pakistan. The Qualitative-Quantitative Synthesis (Section 4.4) indicates that this is due to a mediated pathway rather than a lack of leadership impact.

H2 proposed that Digital Transformation is positively associated with the conversion of Relational Capital into Structural Capital, as evidenced by ESG reporting outcomes. Regression analysis confirms that LDEP is a strong predictor of ESG reporting in both Countries (Pakistan: β = 0.595, t = 4.583, p < 0.001; Italy: β = 0.608, t = 6.633, p < 0.001) (Table 5). RLEP and LDEP are strongly correlated in both Countries (r = 0.602–0.670). The qualitative findings, presented in Section 4.3, provide evidence for how this conversion process operates in practice.

H3 proposed that the strength and nature of the relationships in H1 and H2 are associated with national institutional contexts, leading to distinct conversion archetypes. The regression analysis reveals clear cultural contingency: the Italian model explains substantially more variance in ESG reporting (R² = 0.786) compared to the Pakistani model (R² = 0.526) (Table 4). Relational Leadership demonstrates predictive power only in Italy (β = 0.375, p < 0.001), while, in Pakistan, leadership's influence appears to operate through Digital Transformation rather than directly. These patterns are explored qualitatively in Section 4.3. The slope of the RLEP-ESG-R relationship is steeper in the Italian sample than in the Pakistani sample, consistent with the regression results indicating that Leaderful Practice directly predicts reporting only in Italy.

Qualitative analysis identified two distinct archetypes: the Italian “Cautious-Facilitation” Model and the Pakistani “Pragmatic-Integration” Model (Table 6). To connect the qualitative findings to the hypotheses: the Italian Cautious-Facilitation model provides evidence for H1 (direct Leaderful Practice → ESG reporting pathway) and illustrates H2 (Digital Transformation as codification mechanism); the Pakistani Pragmatic-Integration model supports H2 while showing that H1 operates indirectly through digital adoption, consistent with H3's prediction of culturally contingent pathways.

The qualitative inquiry drew on semi-structured interviews with a matched sample of four Italian and four Pakistani SMEs from similar industrial sectors (mostly manufacturing and industrial services) to control for industry-specific effects. To strengthen analytic traceability, first-order codes were grouped into second-order themes and then mapped onto the model's three core constructs: Leaderful Practice, Digital Transformation, and ESG reporting. The two archetypes were derived from recurring cross-case configurations rather than from any single case.

Italian managers described structured integration in which formalized processes serve as the predominant vehicle for implementing sustainability actions. Relational Leadership emerged through structured, institutionalized avenues of cooperation rather than through informal interpersonal engagement.

Italian managers consistently referenced established procedural processes. One manufacturing firm director explained: “We focus on co-creating action through bottom-up processes—listening to employee proposals based on the project we wanted to do.”

This reflects formal collaboration processes within existing structures. This planned approach also applies to the use of technology, with digital technology framed predominantly as a facilitator of practice rather than a strategic asset. Digital tools are utilized to engage in tasks such as “sharing the sustainability plan across an internal digital space” and having “weekly ESG meetings.” Notably, the way tools are used for motivation is limited. One manager noted that approximately half the management team does not currently rely on digital tools for motivation. Other challenges, such as “the implementation of dedicated technology platforms and costs,” reinforce this cautious approach to Digital Transformation.

The general sustainability framework looks outward, mainly guided by compliance and reputational management factors. Ethical behavior is evidenced through formal documentation – such as the “sharing of the code of ethics, anti-corruption policy.” Sustainability efforts, such as SDG alignment, are seen primarily as a reporting outcome for executive management, as in “reporting data to the Board of Directors.”

In contrast, the Pakistani example reflects an active, organic mix of leadership, technology and sustainability in practice, showing practical, relationship-based application.

Leadership is characterized by practical delegating based on immediate operational needs and relationships built on trust, through methods such as “forming dedicated groups that include members from different departments.” One Pakistani textile firm owner explained: “The culture here is that we can trust each other and nudge each other. I don't need to send a formal memo; a WhatsApp message is enough, and people respond immediately.”

Digital Transformation is viewed as both a strategic and motivational enabler. Tools are valued for their immediate functionality, being “very practical, and providing tracking in real time,” particularly with mediums such as WhatsApp, noted as being “most effective.” Management uses these tools to “share goals, celebrate success, and motivate groups,” fostering a direct connection between digital tools and motivation.

This applied empowerment contributes to an intrinsically motivated approach to sustainability, where ethical behavior is part of cultural norms rather than simply compliance with procedures. ESG reporting is used internally to foster positive competition, with observations such as “publishing quarterly reports resulting in teams competing in a positive way.” The SDGs are applied through practical organizational “dashboards and KPI scorecards,” as tools for linking daily operational actions to universal sustainability principles.

A synthesis of quantitative and qualitative findings provides explanatory depth. As shown, statistically similar RLEP scores are explained by qualitatively different mechanisms:

The near-significant difference in LDEP scores (p = 0.056, d = 0.47) is explained qualitatively: Italy uses digital tools for monitoring and formal reporting; Pakistan employs them as operational drivers and motivators (e.g. WhatsApp to “share goals, celebrate success”).

The regression finding (RLEP predicts ESG-R only in Italy) is explained by the archetypes: Italy's structured processes create a direct leadership-to-reporting pathway; on the contrary, the influence of Leaderful Practice in Pakistan is channeled through digital adoption rather than independently of it, with Digital Transformation acting as the primary vehicle through which relational intent is realized. Italy's greater explanatory power (R² = 0.786 vs 0.526) reflects a more systematic approach; Pakistan's organic mechanisms are less completely captured by quantitative models.

This synthesis indicates theoretical relationships hold in both cultures, but mechanisms are culturally contingent. Technology serves as facilitator in Italy, while it is a motivational engine in Pakistan. This synthesis confirms that, while the “Relational-Performance Gap” exists in both contexts, the digital “bridge” is constructed differently – either as a Structured Codification of formal norms in Italy or an Agile Conversion of informal trust in Pakistan.

Findings collectively support the RIBM. Quantitative data show Digital Transformation strongly predicts ESG reporting in both Countries; qualitative evidence explains how these manifest:

1. Italy: Cautious-Facilitation – formal processes codify Relational Leadership.

2. Pakistan: Pragmatic-Integration – trust-based relationships and accessible digital tools achieve similar outcomes.

Building on H3 findings, the pathway from social to Structural Capital is context-dependent (Adler and Kwon, 2002). This study contributes to Intellectual Capital theory by examining ESG reporting as an observable output of a dynamic conversion process. In this framework, Digital Transformation facilitates the codification of leaderful Social Capital into the Structural Capital relevant to sustainability accountability. Our findings, integrating quantitative and qualitative evidence, address the research questions.

First (RQ1), leaderful practices influence digital ESG implementation by providing the organized Social Capital that digital tools can codify. Second (RQ2), Leaderful Practice shows a direct positive relationship with ESG reporting outcomes in the Italian context, while in Pakistan this relationship operates indirectly through Digital Transformation. Third (RQ3), the relationship between leaderful practices and digital tools is one of codification, where technology can capture and scale relational workflows into Structural Capital, with the specific conversion pathway shaped by the institutional context.

This study contributes to Intellectual Capital theory by moving beyond static stock-based views to examine dynamic conversion processes. While prior research has established the importance of Relational and Structural Capital as distinct assets (Bontis, 1998; Subramaniam and Youndt, 2005), less attention has been paid to the mechanisms by which the former is transformed into the latter. By positioning Digital Transformation as a codification mechanism and Leaderful Practice as organized Social Capital, we extend Intellectual Capital theory with a process-oriented perspective relevant to ESG reporting, where firms must not only possess intangible assets, but also demonstrate them through auditable reporting.

In doing so, we reframe the Relational-Performance Gap not as a deficit in value creation, but as a gap in valuation and verification. SMEs generate substantial relational value through their leaderful practices, but this value remains invisible to external stakeholders until it is codified into Structural Capital. The two archetypes identified in this study – Structured Codification in Italy and Agile Conversion in Pakistan – represent culturally distinct, but equally valid, pathways for making this value visible.

The Four Cs can be viewed as strategic intangible assets (Raelin, 2011, 2016a, b), extending Relational Leadership theory (Uhl-Bien, 2006) by examining its relationship with ESG reporting.

Within SMEs, these practices serve as “social glue” enabling rapid mobilization (Nahapiet and Ghoshal, 1998). However, this relational energy remains “invisible” unless anchored in structural systems. In Italy, anchoring occurs through formal processes; in Pakistan, anchoring occurs through trust-based relationships and digital tools. Statistically equivalent RLEP scores (p = 0.187) suggest comparable Relational Capital organized through culturally distinct mechanisms.

Our Integrated Bridge Model thus views Leaderful Practice as Relational Capital available for conversion, contributing to Intellectual Capital literature by considering Social Capital as a dynamic practice rather than a static asset.

Building on foundational work in knowledge management (Nonaka and Takeuchi, 1995) and Intellectual Capital theory (Bontis, 1998), the integrated evidence for H2 through both quantitative relationships and qualitative processual evidence highlights a theoretical insight: technology's potential value for SME sustainability lies in its capacity for knowledge codification (Nonaka and Takeuchi, 1995). The combined evidence is consistent with the interpretation that Digital Transformation can function as a formalization infrastructure within SMEs. Rather than proving that technology converts Relational Capital into Structural Capital in a strict causal sense, the findings suggest that digital tools may help stabilize, record and communicate practices that would otherwise remain informal. In that narrower sense, Digital Transformation can be read as supporting codification.

LDEP is the strongest predictor of ESG reporting in both Countries (Pakistan: β = 0.595; Italy: β = 0.608). The similarity of these effect sizes suggests Digital Transformation's role as a codification mechanism may be universal, even as implementation varies culturally. This process represents the institutionalization of individual and collective knowledge into organizational routines (Bontis, 1998; Inkinen, 2015).

Our results connect digital strategy literature (Bharadwaj et al., 2013), which focuses on technical capabilities, and Intellectual Capital literature (Guthrie et al., 2012), which focuses on asset measurement. By integrating these perspectives, the Integrated Bridge Model suggests that Digital Transformation is not merely a tool for efficiency, but a mechanism that can make the “invisible” assets of an SME visible and auditable to the external world.

The qualitative findings addressing H3 reveal that the pathway from Social Capital to Structural Capital is not uniform, but path-dependent and contextually shaped (Adler and Kwon, 2002). These archetypes represent different conversion logics within the RIBM. While both successfully transform relational energy into formal performance, they prioritize different components of Leaderful Practice to navigate their distinct institutional environments. The Italian model illustrates how Structural Capital can be designed through formal processes, while the Pakistani model reveals how it can be discovered within existing relational workflows.

These findings challenge universalist prescriptions for digital adoption in SMEs and illustrate the principle of equifinality in Intellectual Capital development: different starting points and pathways can yield equally valid reporting outcomes.

1. Structured Codification (Italy): Reflects a deliberate approach consistent with Institutional theory (DiMaggio and Powell, 1983). Italian firms use formal platforms to codify collaborative norms through “bottom-up initiatives” and “weekly ESG meetings,” emphasizing formal design of Structural Capital to address regulatory pressures. This yields greater explanatory power (R² = 0.786), suggesting formalized processes are more easily captured quantitatively.

2. Agile Conversion (Pakistan): Reflects an emergent model aligned with the Resource-Based View (Barney, 1991). Pakistani firms leverage trust and concurrency, using lightweight tools like WhatsApp to make visible the Structural Capital embedded in daily interactions. As one manager noted: “The tool did not create collaboration; it captured and traced it.” The lower R² (0.526) reflects that those organic mechanisms are less completely captured by conventional models.

The identification of these two archetypes illustrates the principle of equifinality in Intellectual Capital development (Gresov and Drazin, 1997). This concept posits that a social system can reach the same final state (comparable ESG reporting outcomes) from different initial conditions and through different conversion pathways.

The quantitative findings support this interpretation: while Italian and Pakistani SMEs showed statistically equivalent Relational Leadership (p = 0.187) and ESG reporting outcomes (p = 0.428), they exhibited different levels of digital adoption (d = 0.47, p = 0.056). The qualitative findings explain that Italy achieves outcomes through formal, structured processes, while Pakistan achieves outcomes through trust-based relationships and pragmatic digital integration.

Crucially, this suggests that the Relational-Performance Gap can be bridged through multiple pathways. Whether an SME begins with structured approaches (Italy) or relational depth (Pakistan), successful conversion depends on alignment between codification strategy and institutional context. Intellectual Capital value lies not in the tool used, but in the conversion process – transforming Leaderful Practice into durable structural assets.

This study examined the “Relational-Performance Gap” through the Relational Integrated Bridge Model. Mixed-methods and cross-cultural analysis yield two insights: (1) Digital Transformation serves as a codification mechanism converting Leaderful Practice into ESG reporting; (2) Equifinality is illustrated through Italian Structured Codification and Pakistani Agile Conversion archetypes – multiple pathways can address the gap when aligned with context.

Italian SMEs achieve reporting through formal processes and digital platforms; Pakistani SMEs achieve comparable outcomes through trust-based relationships and accessible tools like WhatsApp. Despite divergent pathways, both show equivalent Relational Leadership (p = 0.187) and reporting outcomes (p = 0.428) – a central contribution. By demonstrating this equifinality, the study proves that the Relational-Performance Gap is not a permanent barrier for SMEs, but a solvable translation challenge that can be overcome through context-congruent digital scaffolding.

These findings are based on publicly listed SMEs and may not generalize to micro-enterprises (Section 6.3). Within these boundaries, the study offers: (1) a process-oriented extension of Intellectual Capital theory; (2) empirical identification of two culturally contingent archetypes and (3) the RIBM as a framework for bridging relational capacity and formal reporting.

A key contribution is considering ESG reporting as an observable indicator of effective Intellectual Capital conversion. Traditional Intellectual Capital research treats capitals as stocks; by examining digital codification of Leaderful Practice, we offer a perspective on Intellectual Capital as a dynamic, socio-technical conversion system. In this model, ESG outcomes are the observable output of successful Intellectual Capital operation. A robust ESG report indicates a firm's sustainability-related Structural Capital – the tangible output of having bridged the Relational-Performance Gap. A core theoretical implication is that ESG reporting can be examined as one visible site at which Intellectual Capital becomes formalized and externally legible. Crucially, this reframes the role of technology from a mere operational tool to a “support system” for Intellectual Capital. It provides a theoretical basis for how digital codification transforms “soft” leaderful energy into “hard” evidentiary artifacts, effectively immunizing the firm against risks of symbolic or superficial ESG disclosure. This does not mean that reporting exhausts substantive sustainability performance. Rather, it offers an analytically useful window into how relational and procedural assets become structured, documented and communicated. Furthermore, this study integrates Relational Leadership theory and Leaderful Practice into the Intellectual Capital framework, positioning Leaderful Practice as “organized Social Capital” available for codification.

For SME managers and policymakers, these findings offer the following considerations:

1. For High-Relational Contexts (e.g. Pakistan): Policy might focus on supporting existing trust networks through accessible digital tools and digital literacy programs rather than imposing formal systems that could disrupt organic workflows.

2. For High-Structural Contexts (e.g. Italy): Managers may ensure that digital platforms support rather than replace relational energy, serving as a framework for the co-creation of sustainable practices rather than a rigid compliance mechanism.

To address the Relational-Performance Gap, managers might consider the following approach based on the findings:

1. Identify Relational Strengths: Drawing on the Four Cs framework, consider which aspect constitutes your firm's dominant relational asset. Does your strength lie in trust-based networks and concurrent action (as in Pakistan) or in structured cooperation and formal collaboration (as in Italy)?

2. Select Context-Appropriate Digital Tools: Choose digital tools based on their suitability for codifying that specific asset:

   • The Structured Route: An SME strong in collective processes might implement formal idea-management platforms or ERP modules to codify group decision-making into Structural Capital.

   • The Agile Route: An SME strong in concurrent action might leverage real-time messaging archives (like WhatsApp Business or Slack) to verify rapid, coordinated actions as auditable performance data.

The key insight is that there is no single “best” digital solution. “The most effective tool is the one that aligns with how Relational Capital is already organized within the firm.”

Finally, we observe that an enhanced ESG reporting through the use of digital codification can play a crucial role in strengthening SME transparency and accountability, which, ultimately, facilitates improved access to finance, fosters greater trust among stakeholders and generates meaningful competitive advantages in increasingly sustainability-driven markets.

To address the Relational-Performance Gap, policymakers might consider the following approach based on the findings:

1. Pathway-Sensitive Support: Move beyond “one-size-fits-all” digital grants. For high-relational contexts (e.g. Pakistan), support existing trust networks through accessible tools and digital literacy. For high-structural contexts (e.g. Italy), ensure platforms support rather than replace relational energy through change management.

2. Recognition of Diverse Evidence: Regulators could consider developing tiered reporting standards that recognize both formal tools and verified “digital trace” evidence from accessible informal platforms, provided data integrity can be ensured through audit trails and third-party verification mechanisms. This would enable SMEs to effectively demonstrate their compliance with ESG standards even in resource-constrained environments, thereby reducing the need for costly infrastructure investments while still allowing them to participate more fully in sustainable value chains and meet the growing demands of regulators, investors and other key stakeholders. However, any move toward recognizing digital-trace evidence would require clear governance parameters. At minimum, such evidence would need defined retention standards, metadata consistency, auditability, privacy safeguards and transparent verification procedures. Without these boundaries, the policy recommendation risks replacing one evidentiary problem with another one.

3. Integrated Support Programs: Develop capacity-building initiatives that do not treat leadership, digitalization and sustainability as separate silos. Training programs should explicitly address how relational practices and digital tools interact to produce measurable sustainability outcomes, drawing on both the Structured Codification archetype and the Agile Conversion archetype as legitimate pathways.

While this study offers a framework for understanding the conversion of Intellectual Capital, several limitations should be acknowledged, organized by type:

1. Design Limitations: The cross-sectional design identifies associational relationships, but cannot establish causality. The conversion process theorized in the RIBM implies temporal dynamics that longitudinal data would be better suited to examine. Our qualitative findings provide process evidence consistent with conversion, but causal claims would require longitudinal designs. Future research could employ longitudinal designs to track how the two archetypes (Structured Codification and Agile Conversion) evolve as firms mature in their digital and sustainability journeys.

2. Measurement Limitations: Control variables (firm size, industry, years of ESG focus) were not included in the regression models, limiting the ability to account for firm-specific variances. While Table 4 reports standard errors and confidence intervals, the absence of controls means that unobserved heterogeneity may influence the results. Common method bias was assessed using Harman's single-factor test, which has known limitations (Podsakoff et al., 2003). Future research should employ more robust methods, such as marker variables or multi-source data collection. Additionally, self-reported survey data may be subject to social desirability bias, particularly for sustainability-related questions.

3. Sample Limitations: The sample of 97 listed SMEs, while appropriate for detecting main effects in regression analysis (post-hoc power analysis indicated 80% power for medium effects), limits statistical power for detecting smaller interaction effects and may not generalize to nonlisted SMEs, micro-enterprises or firms in the informal sector. The focus on publicly listed firms in Italy and Pakistan, while enabling cross-cultural comparison, may not represent SME populations in other institutional contexts.

4. Statistical analysis of interaction effects (H3) confirms that the relationship between Leaderful Practice and ESG reporting is significantly moderated by institutional context. Specifically, the slope is steeper in the Italian sample, suggesting a more direct structural link, whereas the Pakistani sample reflects a more digitally mediated agile conversion. Future research should include a wider range of graphical representations to further visualize these divergent slopes. We cannot rule out the possibility of reverse causality. It is plausible that firms with stronger ESG reporting capabilities may invest more in digital tools, rather than digital tools unilaterally driving reporting outcomes. Future studies should also include graphical representations of interaction effects to aid interpretation.

Future research could address these limitations through:

1. Longitudinal designs to track how the two archetypes evolve as firms mature in their digital and sustainability journeys.

2. Inclusion of nonlisted and micro-enterprises to test generalizability beyond publicly listed SMEs.

3. Multi-source data collection (e.g. archival data, third-party ratings) to complement self-reported measures.

4. Experimental approaches to examine causal relationships between specific digital tool adoptions and reporting outcomes.

5. Extended cross-cultural comparisons to test whether the equifinality principle holds in other institutional contexts.

6. Deeper examination of specific digital tools (AI, IoT, blockchain) and how they enable or constrain the codification of particular leaderful practices.

In conclusion, sustainable competitiveness of SMEs in the ESG era may be determined not only by the volume of their relational wealth, but also by their ability to facilitate its conversion into structural impact. Building on foundational work in knowledge management and Intellectual Capital theory (Nonaka and Takeuchi, 1995; Edvinsson and Malone, 1997; Bontis, 1998), this study extends these concepts by integrating them with Relational Leadership and Digital Transformation to offer a process-oriented perspective on Intellectual Capital conversion.

The findings show multiple pathways for achieving similar outcomes across contexts. Neither pathway is inherently superior: each pathway is a contextually appropriate strategy for making relational assets visible, verifiable and valuable to external stakeholders. The Italian approach demonstrates how Structural Capital can be designed through formal processes; the Pakistani approach reveals how it can be discovered within existing relational workflows.

This study thus contributes to Intellectual Capital theory by illuminating the dynamic conversion processes through which Social Capital becomes Structural Capital, offering a framework for understanding how SMEs can bridge the Relational-Performance Gap in the digital age. Ultimately, this shift in focus from “stocks” to “conversions” allows SMEs to avoid the “visibility penalty” often imposed by rigid, Western-centric reporting standards. It validates the idea that sustainability can be permanent and provable regardless of whether it is captured in a formal ERP system or a high-agility digital trace. In doing so, it reframes the challenge of SME sustainability: not as a deficit of relational value, but as an opportunity to make that value visible through contextually appropriate digital codification.

The study suggests that the challenge for SMEs is not simply whether they possess relational value, but whether that value can be formalized into reporting-capable organizational routines. By bringing Intellectual Capital, Leaderful Practice, and Digital Transformation into one framework, the article offers a process-oriented account of how that formalization may occur. The findings of this study are subject to specific limitations. In particular, our sample is limited to listed SMEs in Italy and Pakistan; generalizability to unlisted SMEs, micro-enterprises, or firms in other institutional contexts requires further empirical investigation. Additionally, the two archetypes identified – Structured Codification and Agile Conversion – may manifest differently in other cultural or regulatory environments. Within the limits of a cross-sectional mixed-methods design, the contribution lies in clarifying how different contexts may support different codification pathways through which relational assets become more visible and auditable. Ultimately, this study shifts the SME sustainability discourse from asking if SMEs are sustainable to demonstrating how digital architecture converts “invisible” relational energy into “provable” Structural Capital, thereby eliminating the “visibility penalty” and ensuring that SME sustainability is both permanent and auditable in the global marketplace.