Charting Resource Efficiency Practices Across European Firms: A Multilevel Analysis

Abstract

The circular economy (CE) is a key sustainability paradigm, prompting European Union (EU) organizations and policymakersto move beyond linear production and consumption models. The study aimed to assess the implementation patterns of nineCE activities among EU companies and to explore how the implementation of these CE activities relates to certain firm-levelcharacteristics. A multilevel latent class model was employed in a sample of 13,084 companies across the 27 EU Member States.The study reveals significant variation in the implementation of CE activities across countries and companies, identifying fivedistinct company classes ranging from those with no CE adoption to those that are advanced adopters, with all nine activities.It also identifies six geographically dispersed country groups, each with a unique composition of companies based on their CEengagement. Furthermore, companies with higher CE implementation are typically larger, despite the sample being predomi-nantly comprised of micro and small enterprises, older (having been established for over 7 years), and reporting higher annualturnover. These firms also tend to invest a smaller proportion of their turnover in resource efficiency measures. This studyadvances circular economy research by integrating the resource-based view and dynamic capabilities theory, demonstratingthat sustained CE implementation requires both valuable resources and the dynamic ability to reconfigure them in responseto changing contexts. It also reveals significant variations in CE adoption across EU regions and firms, advocating for tailored,sector-specific policies and practical measures, such as financial incentives for SMEs and enhanced managerial training, todrive sustainable transitions.