This study explores the intersection of Higher Education for Sustainable Development (HEfSD), sustainable-smart innovation and the significance of local context in digital technology design, as captured in student-led projects within a marginalised community in Cape Town. As the global imperative to achieve the Sustainable Development Goals (SDGs) intensifies, integrating sustainable practices and innovative technologies at the local and community scale becomes paramount. This research investigates the potential of collaborative educational approaches in addressing complex sustainability challenges through the lens of a specific Cape Town community. The paper provides findings from the third iteration of a longitudinal Design-Based Research (DBR) study. Data includes interviews, participatory observations, and project artefacts. This research seeks to identify the enablers and barriers to validate an additional design principle for the implementation of sustainable-smart student projects. It examines the collaborative design thinking process, interdisciplinary approaches, and community engagement employed by students and educators to co-create sustainable-smart innovations that respond to both local challenges and global sustainability goals. By doing so, this study sheds light on the potential of HEfSD to nurture sustainable-smart innovation within unique socio-economic and cultural contexts. The research underscores the need for higher education institutions to embrace localised, student-centred initiatives that harness the power of innovation to drive positive change in marginalised communities, thus advancing both sustainability and social equity agendas.