Turning Pressure into Capabilities : How Swedish SMEs Sense, Seize, and Transform in Response to International Sustainability Demands

Sammanfattning

Background: Swedish SMEs are not directly covered by the Corporate Sustainability Reporting Directive (CSRD), yet sustainability expectations diffuse through international value chains. As a result, SMEs operating across borders face institutional pressures from regulators, industry norms, supply-chain partners, and customers. This raises the question of how these pressures are interpreted by SME decision-makers and which capabilities enable effective responses. Purpose: The study examines how Swedish SME decision-makers interpret and navigate sustainability demands in international contexts, and how dynamic capabilities shape their ability to respond under resource constraints. Theoretical Framework: Institutional Theory and Dynamic Capabilities are combined to analyse how external pressures are interpreted and translated into organisational responses. Method: This qualitative, abductive study is based on semi-structured interviews with internationally active SMEs, enabling insights into decision-makers’ interpretations and capability development. Findings: International customers and supply-chain partners exert sustainability pressures by requesting documentation on environmental impacts, materials, and chemical safety, as well as adherence to reporting practices that often exceed SMEs’ regulatory obligations. Decisionmakers view sustainability as important for credibility and market access, but responses are shaped by resource constraints and uneven reporting standards. Firms with internal sustainability competence conduct more systematic sensing and integrate sustainability more consistently into routines, while others rely on consultants and external networks. Conclusion: Institutional pressures are interpreted by decision-makers and translated into sensing, seizing, and transforming activities that shape how SMEs adjust practices across markets. The study identifies conditions that support capability development in resourceconstrained firms, such as strategic prioritisation, internal competence, and external expertise. Keywords: institutional pressures, CSRD, dynamic capabilities, sustainability-related capabilities, SMEs, international markets, global value chains