Empirical evidence of organizational transformation: The subsequent consequence of the causal relationship between the adoption of circular economy strategies and their performance

Abstract

The adoption of circular economy (CE) strategies by companies—such as reduction, substitution, reuse, and others—is more necessary than ever to face recent challenges that have caused a rise in the price of raw materials, among other effects. However, incorporating CE strategies into the production process is not trivial because it can imply significant organizational transformation. To understand this transformation, this work analyses how the adoption of CE strategies impacts company performance and, consequently, the subsequent transformation of the company in adapting to this strategy. Based on a sample of 213 senior managers from companies in the manufacturing and service sectors, structural equation modelling is performed to contribute empirical evidence to the literature. The findings reveal that the adoption of CE strategies by companies can be more profitable than solely pursuing financial outcomes, as such adoption also impacts external stakeholders, society in general, and customers in particular. However, in return, the company must be open to deploying a certain degree of organizational transformation.

Keywords

• Circular economy
• Performance
• Organizational transformation
• Strategy
• Production