Scaling Up the Transition: The Role of Corporate Governance Mechanisms in Promoting Circular Economy Strategies

Abstract

The concept of the circular economy (CE) has gained increasing attention as a means to achieve environmental sustainability and economic growth at the same time. This study examines the role of corporate governance (CG) mechanisms in promoting CE strategies among non-financial listed companies, which is still a relatively unexplored topic in the CE literature. Our findings indicate that the presence of stakeholder engagement practices, sustainability reporting, and environment management teams have a direct impact on the adoption of CE strategies, while the presence of a CSR committee, adherence to the United Nations' Global Compact, and executives' compensation linked to ESG performance do not have a direct effect but support CE strategies through other mechanisms. Overall, this study provides valuable insights for policymakers and managers as it shows that CG mechanisms can be used to promote the adoption of CE business models, thus contributing to climate risk mitigation objectives.

Keywords: Circular Economy, Corporate Governance, Circular Strategies, Sustainability, ESG