The Leaderful Strategy Model: How Digital Tools Translate Relational Leadership into ESG and SDG Outcomes

Small and medium-sized enterprises (SMEs) possess strong relational strengths—such as trust, teamwork, and shared leadership—yet often struggle to translate these capabilities into formal Environmental, Social, and Governance (ESG) disclosures. This study integrates Relational Leadership Theory with Leaderful Practice (LAP) to propose the Leaderful Strategy Model (LSM), examining how collective, concurrent, collaborative, and compassionate practices interact with digital transformation through a proposed process of ‘digital translation’—the process through which informal relational governance may be codified into formal ESG disclosures supporting Perceived ESG Reporting Effectiveness (PER). Using an explanatory sequential mixed-methods design, we examined 97 listed SMEs in Italy (n = 43) and Pakistan (n = 54). Multiple regression analysis reveals context-dependent patterns: leadership-driven digital transformation is a significant, uniform predictor of PER across both contexts (beta Italy = 0.608, beta Pakistan = 0.595, p < 0.001). However, relational leadership directly predicts PER in Italy (beta = 0.375, p < 0.001) but shows no significant direct association in Pakistan (beta = 0.177, p = 0.177). Qualitative interviews contextualize these findings by identifying two distinct, institutionally situated pathways of digital translation: a structured Cautious-Facilitation model in the Italian cases and a Pragmatic-Integration model in the Pakistani cases, where accessible tools such as WhatsApp and Google Sheets enable the capture and coordination of informal sustainability practices. Overall, the findings suggest that digital translation may operate as a complementary process in highly structured institutional contexts, while playing a more central enabling role in environments with weaker formal reporting systems. By comparing two contrasting institutional contexts, this study advances context-sensitive theories of digitalized relational leadership and offers practical implications for SMEs and policymakers designing proportionate sustainability frameworks aligned with the Sustainable Development Goals (SDGs).