Despite MSMEs’ critical contribution to the economy, their integration of sustainable practices is often hindered by challenges such as limited awareness, resources, and incentives. By synthesizing stakeholder theory with theories of the entrepreneurial ecosystem and organizational capability, this research examines the factors that influence MSMEs’ sustainability initiatives. This paper investigates the role of stakeholder involvement in enhancing sustainable business practices among MSMEs in Indonesia. Utilizing a mixed-method approach, the study analyzes survey data from MSMEs across West Java, Indonesia, and further validates it using stakeholder interviews. The findings highlight those internal capacities, including digitalization and innovation, are more critical for MSME sustainability than external factors. While external stakeholders are vital for fostering a supportive business environment, internal capacities directly enhance MSME competitiveness and operational efficiency. The paper advocates for prioritizing these internal capacities and calls for reforms in external stakeholder engagement to support MSME growth better. This research contributes to the literature by empirically demonstrating the importance of internal over external factors in advancing MSME sustainability. These insights aim to guide MSMEs and policymakers in promoting the holistic development of the sector.