This study explores how university-industry-government (U-I-G) cooperation fosters sustainable innovation in the context of Estonia’s post-industrial Ida-Viru region—a historically oil shale–dependent area undergoing a complex sustainability transition. Drawing on the multi-actor collaboration frameworks, which integrates both innovation and sustainability perspectives, this we study how collaborative efforts across institutional boundaries can enhance socio-technical change in peripheral European regions. Using a qualitative methodology 46 stakeholders from educational institutions, companies, municipalities, and umbrella organisations were interviewed to understand the dynamics of regional innovation system. The findings highlight the dual role universities and other educational institutions play—as knowledge producers and civic institutions—bridging technological advancement with societal values. The study reveals how knowledge spillovers, academic-industry exchanges, and boundary-spanning organizations enable sustainable innovation practices, even despite of significant structural challenges such as brain drain, low trust, weak entrepreneurship, and demographic decline. The analysis identifies enabling mechanisms, such as state support via the Just Transition measure, localized collaboration platforms like clusters, industrial parks, joint events and increased trust among actors—as pivotal to overcoming barriers. Companies in the region are adopting sustainable practices, ranging from incremental efficiency improvements to radical innovations such as resource valorization and bio-based production models. The findings also underscore the tensions between short-term economic goals and long-term sustainability. The research advances theoretical understanding of the multi-actor collaboration frameworks, including Triple Helix Twins model and its practical relevance in navigating the complex interdependencies between technological and social innovation. It concludes that reconfiguring regional innovation systems around sustainability goals requires not only institutional collaboration, but also the cultivation of shared values and systemic reflexivity.