This study investigates the impact of SMEs and digitalization on sustainable development in China from 1998 to 2020 using the ARDL model. The findings reveal that SMEs and digitalization have significant positive effects on sustainable development in both the short and long run. Institutional quality and R&D also contribute positively to sustainable development, though only R&D is significant in the short run. The study highlights the importance of SMEs and digitalization in achieving environmental sustainability and reducing climate change impacts in China. It also emphasizes the need for policies that support the digital transformation of SMEs, including investments in digital infrastructure, digital literacy programs, and regulatory frameworks. The study provides short and long-run estimates, showing that SMEs are a fundamental determinant of sustainable development. The results suggest that digitalization enhances sustainable development by improving resource efficiency, reducing emissions, and promoting eco-friendly practices. The study also underscores the role of institutional quality and R&D in fostering sustainable development. The findings have important implications for policymakers, highlighting the need for targeted policies that support the digital transformation of SMEs and promote sustainable development. The study also notes the importance of digital inclusion and the need to address the digital divide to ensure equitable access to digital technologies. Overall, the study provides valuable insights into the relationship between SMEs, digitalization, and sustainable development, emphasizing the need for a balanced approach that considers economic, social, and environmental dimensions.This study investigates the impact of SMEs and digitalization on sustainable development in China from 1998 to 2020 using the ARDL model. The findings reveal that SMEs and digitalization have significant positive effects on sustainable development in both the short and long run. Institutional quality and R&D also contribute positively to sustainable development, though only R&D is significant in the short run. The study highlights the importance of SMEs and digitalization in achieving environmental sustainability and reducing climate change impacts in China. It also emphasizes the need for policies that support the digital transformation of SMEs, including investments in digital infrastructure, digital literacy programs, and regulatory frameworks. The study provides short and long-run estimates, showing that SMEs are a fundamental determinant of sustainable development. The results suggest that digitalization enhances sustainable development by improving resource efficiency, reducing emissions, and promoting eco-friendly practices. The study also underscores the role of institutional quality and R&D in fostering sustainable development. The findings have important implications for policymakers, highlighting the need for targeted policies that support the digital transformation of SMEs and promote sustainable development. The study also notes the importance of digital inclusion and the need to address the digital divide to ensure equitable access to digital technologies. Overall, the study provides valuable insights into the relationship between SMEs, digitalization, and sustainable development, emphasizing the need for a balanced approach that considers economic, social, and environmental dimensions.