In our study, we highlight the interplay of the digital and the sustainability transformation. The fundamental change processes induced by digitalization have been shown to strain employees in organizations. We argue that digitalization does not unconditionally increase firms’ financial performance. Rather, effects of digitalization depend on firms’ internal CSR activities, i.e., the extent to which they care for their employees’ wellbeing. Using state-of-the-art textual analysis, we calculate and introduce a new sophisticated measure to capture firms’ digitalization efforts in terms of their implementation of different digital technologies. We use this new measure to theorize and show that digitalization only enhances firm performance if the introduction of new digital technologies is accompanied by internal CSR activities as an organizational factor creating a supportive, trustworthy, and psychologically safe environment. Low levels of internal CSR even tend to harm firm performance and the effect of digitalization on firm performance grows more positive with increasing levels of internal CSR. We back up practical suggestions with data from 1,059 firms over a period from 2015 to 2020, thereby adding a theoretical and research perspective to the topic which we want to make available at the conference. Our results are relevant for a broad set of stakeholders: larger companies, start-ups but also politics when they look at how to navigate the digital transformation. Managers need to think holistically about the digital transformation, and a simultaneous cultural transformation to promote the idea that digitalization and employee well-being are irrevocably intertwined.