Is Innovation Oriented toward the Circular Economy? Empirical Estimations from European Companies

The growing focus on sustainability has prompted companies to implement circular economy strategies. Their adoption aims to ensure environmental preservation by minimising and managing waste. The concept of circular economy is widely discussed in literature, as public and private institutions have emphasised the need to adopt this paradigm to support sustainable development, as demonstrated by the United Nations’ SDGs. Despite the interest in circular economy adoption, there is a lack of empirical analyses that establish its determinants. The adoption of this paradigm requires several evolutions within the company’s context, as well as business model innovation. This article aims to fill this gap by analysing the role of innovation, measured by R&D expenses, on a company’s circular economy performance. To test the research hypothesis, a cross-sectional regression was applied using OLS estimators. The study was conducted on a sample of 200 European companies with large capitalisation during 2022, with data taken from the Refinitiv database. The results support the positive impact of innovations on the circular economy. This study extends the existing literature on this topic and closes the existing research gap between innovation and the circular economy by using empirical analysis. The study provides useful implications for policymakers, managers, customers, and governments.