<p>Disruptive technologies like IoT, cyber-physical systems, blockchain, additive manufacturing, simulation, and robotics are transforming traditional factories into smart factories, considered an ‘Industry 4.0’ revolution. Industry 4.0 (I4.0) technologies positively impact the organizations at different level of sustainability. Organizations must understand I4.0 technologies and be prepared to adopt physical and digital technologies to make appropriate decisions to improve their market competitiveness. In this regard, I4.0 readiness and maturity models can support organizations to assess their current maturity status and set up a roadmap for further actions for digital transformation. Integrating sustainability principles with I4.0 can enable socially responsible and environmentally conscious manufacturing in organizations. Also, leveraging I4.0 technologies can optimize resource consumption and reduce waste, which helps manufacturing organizations to achieve market competitiveness and sustainable innovation. In the literature, most of maturity models are developed for or by large enterprises with limited applicability in small and medium enterprises (SMEs). Also, maturity items considered in these models are not empirically validated. To fill this research gap, this study proposes a maturity model for SMEs, which is empirically tested in Indian manufacturing organizations and includes 40 maturity items in eight major dimensions that impact sustainability and can help to transform the manufacturing sector towards more resource-efficient and sustainable. A large survey is conducted in the Indian manufacturing organizations to validate these maturity items in the Indian context. Then, a model based on Exploratory factor analysis is proposed in 8 dimensions. The proposed model is validated in four case organizations from pharmaceutical and automobile sectors. The results indicated that base technologies and legal maturity items have higher maturity scores. Based on the study’s findings, implications for practitioners and policymakers are provided to improve maturity levels in manufacturing organizations. The study’s contribution is important and unique for manufacturing organizations as validation of maturity items and maturity model for SMEs with sustainability benefits is non-existent.</p>