"Theoretical Modeling of Fintech-Driven Sustainability Reporting: Balancing Profitability and Ethical Governance in SMEs"

Abstract

Sustainability reporting is a pressing issue for SMEs in emerging markets, where resource limitations interact with intensifying stakeholder pressures for credible ESG reporting in the absence of harmonized global standards (GRI, TCFD, CSRD cascades). Conventional accounting models are inadequate to integrate these conflicting forces, emphasizing short-term profitability at the expense of ethical governance and greenwashing risks and legitimacy gaps. The original contribution of this research combines the benefits of fintech (blockchain transparency and AI analytics) with stakeholder, legitimacy, and agency theories to develop the first comprehensive theoretical model to facilitate synergistic profitability-ethics outcomes for SMEs. Contrary to the descriptive nature of previous research, our abductive approach, validated through Delphi consensus methodology (n=15 experts), hypothesizes fintech as a mediator that can compensate for 30-50% of reporting costs, reduce information asymmetry, and establish scalable institutional legitimacy through immutable disclosure trails. The major hypotheses illustrate the existence of causal relationships not previously established in the literature: (H1) Real-time ESG analytics improve profit maximization; (H2) Blockchain technology resolves agency problems in governance; (H3) Legitimacy theory moderates the stronger effects of Global South institutional forces. This theoretical model fills important gaps in the literature while providing practical implications for SME managers, policymakers and future PLS-SEM.