Does the Circular Economy Transition Support Carbon Neutrality? Examining Net-Zero Policy and Stakeholder Impact from the Environmental Justice Viewpoint

Abstract

The circular economy is crucial in promoting environmental justice by reducing the uneven burden of environmental hazards on marginalized communities and low-income individuals. The circular economy transition is increasingly a pivotal strategy for achieving carbon neutrality. Recent shifts in stakeholder focus towards carbon neutrality have made net-zero and environmental social and governance (ESG) hot topics to study, as they can lead to environmental justice. This research delves into the significance of net-zero policies and stakeholder pressure in integrating circular economy concepts into supply chains, aiming to establish a carbon-neutral supply chain within the environmental justice framework. Even though there is a lot of literature about the circular economy, not much is known about how it affects the adoption of the circular economy, the involvement of stakeholders, and net zero policy. Specifically, the role of innovation capability in this context has not been fully explored. This research aims to clarify the role of stakeholders in promoting circular economic practices in supply chains and their impact on carbon neutrality. It also examines how net-zero policies and innovation capabilities affect each other. To achieve this, we used structural equation modeling on data from 217 manufacturing firms from October 2023 to January 2024. Findings highlight a positive relationship between stakeholder pressure and circular economy integration, contributing to carbon-neutral supply chain outcomes. Results show net-zero policies moderate the stakeholder and circular economy relationship, with innovative capabilities acting as a partial mediator. This study adds to the literature by explaining the complex relationships between stakeholder pressures, circular economy practices, and the role of net zero policies and innovation capabilities in advancing carbon-neutral supply chains. This research makes a unique contribution to theory by examining the impact of circular economy practices on social well-being and environmental benefits, particularly regarding environmental justice.