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 policy makers to move beyond linear production and consumption models. The study aimed to assess the implementation patterns of nine CE activities among EU companies and to explore how the implementation of these CE activities relates to certain firm-level characteristics. 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 five distinct 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 CE engagement. Furthermore, companies with higher CE implementation are typically larger, despite the sample being predominantly comprised of micro and small enterprises, older (having been established for over 7 years), and reporting higher annual turnover. These firms also tend to invest a smaller proportion of their turnover in resource efficiency measures. This study advances circular economy research by integrating the resource-based view and dynamic capabilities theory, demonstrating that sustained CE implementation requires both valuable resources and the dynamic ability to reconfigure them in response to 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, to drive sustainable transitions.