Toward Circular Economy: Digital‐Enabled Circular Economy Practices Enhancing the European Enterprise's Performance

Qiuzhen Ren

Sustainable Development, 2025, vol. 33, issue 5, 7294-7313

Abstract: As the dual transition toward a circular economy (CE) and digitalization becomes a global megatrend, the intersection between CE practices and digital technologies (DTs) has attracted significant attention. A key unresolved question is whether and how digital‐enabled CE practices lead to greater financial benefits for firms. To answer this question, this study investigates 7235 European firms to assess how the joint implementation of CE practices and DTs enhances firms' financial performance, drawing on resource orchestration theory. Our findings reveal that while CE practices and DTs each boost firms' financial performance individually, their combination leads to significantly greater gains. Using a quantile regression model, we found that DTs amplify the impact of CE practices, particularly for firms with superior financial performance. Moreover, when firms pursue multiple circularity objectives, the interaction between CE practices and DTs becomes even more pronounced in elevating firms' financial performance. In conclusion, the findings indicate that firms that strategically integrate CE practices with digitalization could achieve better environmental and financial outcomes, thereby enhancing their competitiveness and sustainability.

Date: 2025
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https://doi.org/10.1002/sd.3517

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Persistent link: https://EconPapers.repec.org/RePEc:wly:sustdv:v:33:y:2025:i:5:p:7294-7313

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