Do dynamic capabilities matter? A study on environmental performance and the circular economy in European certified organisations

Organisations face barriers in the transition towards a circular economy. Environmental management systems have often been adopted to tackle environmental challenges, but, more recently, scholars have proposed dynamic capabilities as a strategy to foster circular economy initiatives. Considering the level of internalisation of the environmental management system, we investigated the contribution of dynamic capabilities to organisation performance and circular economy implementation. Using partial least squares structural equation modelling, we analysed more than 800 European organisations registered with the Eco-Management and Audit Scheme. Our results proved that dynamic capabilities contribute to the internalisation of the environmental management system, which consequently improves the overall organisation performance and circular economy adoption. In addition, while dynamic capabilities directly influence the circular economy and environmental performance of an organisation, EMAS internalisation is crucial for a better economic performance and environmental reputation. Lastly, we assessed the contribution of sensing, seizing and reconfiguring capabilities to the internalisation of the environmental management standard proving their crucial role in the integration of the standard's requirements. Our study highlights the scarce linkages between the Eco-Management and Audit Scheme and the circular economy by suggesting how organisations can identify and pursue circular economy opportunities through dynamic capabilities.