The Economics of Circular Supply Chains: Transformative Implications for Businesses and Stakeholders

Abstract

The increasing adoption of the circular economy (CE) model in businesses highlights its potential for sustainability, yet its financial implications within supply chain dynamics remain underexplored. This study aims to bridge this gap by analyzing how firms' CE initiatives influence their financial performance and that of their supply chain collaborators. Using a robust supply chain framework and stakeholder theory, we employ regression analysis on data from the China Stock Market and Accounting Research database and the Chinese Research Data Services Platform, covering the period from 2006 to 2021. Our findings indicate that CE initiatives positively impact firms' financial performance while also generating spillover benefits for supply chain partners, including suppliers and customers. Additionally, the financial benefits of CE practices are amplified in industries with higher competition and greater supply chain concentration. We also observe that companies engaging in CE practices experience stronger supply chain relationships, leading to enhanced operational efficiency and cost reductions. Furthermore, firms that adopt centralised purchasing strategies within CE frameworks gain a competitive edge. These insights suggest that businesses should not only implement CE initiatives internally but also encourage their supply chain partners to do the same, ensuring a collective financial and environmental advantage.