Are circular economy practices drivers of carbon neutrality? Cross‑industry insights from European firms’ perspective

Abstract

Although carbon neutrality has become a strategic imperative, it is often implemented from a technical perspective, without considering the organization’s strategic vision. This study therefore employs a management perspective to analyze Circular Economy (CE) practices—reduction, recycling, and redesign—as differential drivers of the adoption of corporate carbon neutrality (CCN) strategies. To offer comprehensive picture, we are also focusing on the moderating roles of different sectors of activities. Drawing on the (Natural) Resource-Based View and using binary logistic regression, we analyzed a sample of 6393 companies from 27 EU countries, extracted from Flash Eurobarometer 498. The results confirm the significance of redesigning and recycling in driving CCN adoption. By contrast, we show that reduction is only effective for companies in the service industry, where it exercises a pure moderating effect. Moreover, we show that service companies are more likely to adopt CCN than manufacturing ones. This study makes a threefold contribution. First, it transcends the technical approach to frame carbon neutrality as a strategic management challenge. Second, it disaggregates the CE construct, providing empirical evidence of the differential impact of CE practices. Third, it provides a decision-making framework for managers by demonstrating that the effectiveness of CE strategies for achieving carbon neutrality is not universal but depends fundamentally on sectoral context.