The circular economy, environmental performance and environmental management systems: the role of absorptive capacity

Despite the general interest in the circular economy, organisations have difficulties in implementing circular practices. Developing absorptive capacity (ACAP) may foster circularity among organisations. The paper aims to shed light on relationship between ACAP and organisational performance. To empirically investigate the contribution of ACAP in circular economy implementation, the authors analysed a European sample of more than 800 Eco-Management and Audit Scheme-registered organisations through partial least squares structural equation modelling. The analysis demonstrates that ACAP and the underlying organisational activities of a firm significantly facilitate the implementation of a circular economy and the internalisation of an environmental management system (EMS), which consequently improve the overall performance of organisations. The authors found that the diffusion of the circular economy in the organisations’ environment does not affect their commitment to implement a circular economy.The study expands the academic literature by framing the concept of the circular economy with ACAP theory, thereby highlighting the contribution of acquisition, assimilation, transformation and exploitation. The results also provide useful insights for practitioners highlighting how organisations with an environmental certification can identify and pursue opportunities deriving from a circular economy. Finally, the research contributes to the debate on the effect of internalising EMSs and how ACAP improves economic performance, environmental performance and reputation.