This study examines how sustainability pressures and market shifts have prompted a reconfiguration of the business model in Taiwan’s traditional laundry industry. ESG requirements, carbon accounting, net-zero policies, and the emergence of self-service and platform-based models have created additional challenges for traditional stores, including market contraction, technological gaps, and governance demands. As a localized, labor-intensive sector dominated by small- and medium-sized enterprises (SMEs), the industry exhibits a gap between external pressures and limited internal capacity. Grounded in the Business Model Canvas, the Triple-Layered Business Model Canvas, the Triple Bottom Line, value co-creation, and innovation theories, this study explores how traditional laundries adapt their value propositions, customer relationships, key resources, and collaborative mechanisms in response to ESG pressures and new service models. Using a qualitative approach, this study combines document analysis with in-depth interviews. The document analysis covers government statistics, sustainability policy guidelines, and industry reports. The interviewees include traditional laundry operators, self-service laundry operators, a platform-based service provider, an industry association representative, and a policy-related representative, for a total of eight participants. The findings show that: (1) Sustainability practices focus on energy-efficient equipment and eco-friendly detergents, but they are constrained by financial, technological, and governance capabilities. (2) Customer participation is mostly word-of-mouth and relationship-based, lacking a systematic co-creation mechanism. (3) Innovation has shifted from service upgrades to platform-based collaboration, reflecting open and disruptive innovation. (4) Business model reconfiguration focuses on redesigning value propositions, key resources, and customer relationships, all while aligning with sustainability dimensions. The study suggests simplifying sustainability disclosure, supporting technology upgrades, strengthening cross-sector collaboration, and institutionalizing customer participation. The study proposes a sustainable business model framework and offers implications for service industries.