Circular Economy Practices and Sustainable Performance: An Empirical Study

ABSTRACT

This study examines the extent to which basic and advanced circular economy practices are associated in different ways with the environmental, economic and social dimensions of sustainable performance at the firm level. Starting from the premise that the circular economy should not be treated as a homogeneous construct, the study distinguishes between more operational practices, geared towards efficiency and waste reduction, and more transformational practices, associated with redesign, value retention and the reconfiguration of value creation and capture models. Empirically, a quantitative, cross‐sectional, organisation‐level design is adopted, based on 255 companies operating in Portugal. The data were analysed using descriptive statistics, reliability tests, bivariate correlations and hierarchical ordinary least squares regressions. The results show that basic circular economy practices exhibit positive, robust and consistent associations with environmental performance and economic performance, emerging as the empirically strongest core of circular value creation. The environmental dimension proves to be the aspect of sustainable performance most directly sensitive to the adoption of these practices. In contrast, although advanced practices show positive associations in intermediate models, they do not demonstrate a robust incremental contribution to economic and social performance in the full models. The study contributes to the literature by emphasising the need to distinguish between different types of circular practices, by linking the debate on the circular economy to the literature on strategy and sustainability and by offering a more nuanced understanding of multidimensional sustainable performance. In practical terms, the findings suggest that organisations should not assume that more advanced circular practices automatically generate stronger performance outcomes and that the contribution of different forms of circularity should be assessed in relation to their specific organisational and performance context.