Green logistic and absorptive capacity on business sustainability: The mediating role of circular economy implementation

Purpose: This study tests and analyzes whether: (a) Green logistics has positive effect on circular economy implementation, (b) Absorptive capacity has positive effect on circular economy implementation, (c) CE implementation has positive effect on Business Sustainability, (d) the role of CE implementation in mediating the effect of Green logistics on Business Sustainability, and (e) the role of CE Implementation in mediating the effect of Absorptive capacity on Business SustainabilityDesign/methodology: Researchers use a quantitative approach, the population is all natural-colored batik SMEs in the Provinces of Central Java and West Java. Respondents are owners/managers of batik SMEs with a target sample of 250 SMEs. Meanwhile, based on purposive sampling of data collection, it turns out that 228 SMEs are returned and deserved to be processed. The statistical technique uses Structural Equation Modeling with Partial Least Square.Findings: This study finds that there is a significant positive effect of; (a) Green logistics for circular economy implementation, (b) Absorptive capacity for circular economy implementation, (c) CE implementation for Business Sustainability. Furthermore, CE implementation mediates Green logistics for Business Sustainability, and (e) CE implementation mediates Absorptive capacity on Business Sustainability.Research limitations/implications: The implementation of the circular economy in the SMEs studied is practiced in a simple way. The role of mediation can consider other variables that are no less important in the context of batik SMEs that use natural colors. Respondents are only represented by SME groups in associations in the Klaten (Central Java) and Ciwaringin (West Java) regions, so it is feared that they would not be able to generalize the natural color batik SME population in Indonesia. It is recommended that in the future research considers longitudinal studies using the perspective of multiple respondents so that they are not subjective. Managerial Implication: Business processes in SMEs based on natural colors should consider green logistics aspects because it will have positive impact in the long term, especially on Business Sustainability. In improving SME Business Sustainability, it is necessary to conduct Absorptive capacity consistently, continue, and has consistent commitment. This is important in order to increase the competence of SMEs. When all resources are good, CE implementation practices can be more practiced by integrating with existing business processes.Theoretical Implication: This study provides enrichment to the literature on circular economy implementation in SMEs that are influenced by green logistics and absorptive capacity. The impact can make a significant contribution to increase business sustainability (business, social, and environmental performance).Originality/value: This study has its originality due to the lack of study examining circular economy implementation in the context of SMEs which is influenced by green logistics and absorptive capacity. Moreover, this study also offers a significant contribution to improving business sustainability (business, social, and environmental performance). Likewise, it also examines the mediating role of CE implementation between Green Logistics and Business Sustainability, as well as the mediating role of CE Implementation between Absorptive Capacity and Business Sustainability.