Determinants of the transition towards circular economy in SMEs: a sustainable supply chain management perspective

Small and medium-sized businesses (SMEs) increasingly know the benefits of improving resource efficiency and closing loops. These benefits include lowering material costs, establishing competitive advantages, and gaining access to new markets. As a consequence of implementing new regulations, manufacturing companies, particularly those in the automobile industry, are compelled to modify and change their business practices related to the circular economy (CE). More stringent the implementation of environmentally responsible policies and strengthening environmental regulations. CE is the most important factor in improving environmental conditions since it reduces waste and boosts output. This facet calls for the attention of fresh academics and policymakers with years of relevant expertise. Recent studies have investigated how green logistics management might improve a company’s overall performance in terms of environmental responsibility. However, we believe that the connection between environmentally responsible companies is not a direct one but rather one that is mediated by the practices of circular economies. We investigate the direct and indirect effects of the environmentally responsible impact of proper logistics management on organizations’ overall environmental performance via the application of circular economy practices. Our theoretical underpinnings are the resource-based viewpoint and the resource dependence theory. This research also investigates whether or not the traceability of the supply chain has a mitigating influence on the connections. We evaluated the hypotheses using the PLS-SEM method, drawing on the empirical data provided by 245 Chinese factories considered modest or medium size. The results demonstrate that the management of green logistics has a constructive effect on circular economy practices and businesses’ sustainability performance. In addition, although it greatly impacts circular economy practice among SMEs, supply chain traceability does not attenuate the connection between eco-friendly supply chain management and environmental impact. Green logistics management in SMEs is linked to improved sustainability performance via the circular economy practice. To further verify the efficacy of the mediation, we also ran the sober test. Our results strengthen knowledge of circular economy, environmentally friendly logistics management practices, and sustainability performance while advancing natural resource-based planning and the resource dependence theory, which are the two approaches. Given the scarcity of information research analyzing the interplay between these factors, our results are very significant.