Towards Sustainable Development in Bangladesh: A Synergistic Approach to Circular Economy and Natural Capital Management

ABSTRACT This study investigates the dynamic relationships between circular economy practices, natural capital management, and sustainable development in Bangladesh. Environmental sustainability (ENS) and renewable energy consumption (REC) are considered as proxies for sustainable development. Applying the ARDL bounds testing approach, supported by FMOLS, DOLS, and CCR robustness estimators, the study explores both long‐ and short‐run effects, including structural adjustments introduced through natural disaster and environmental policy dummies. Long‐run results show that emissions significantly suppress REC, while energy efficiency (ENE), fund diversification (FND), land utilization (LUR), natural capital stock (NCS), and natural gas production (NGP) positively influence renewable energy transition. For ENS, FND strengthens sustainability, whereas renewable‐adjusted savings (RAS) and NCS substantially reduce it. After including policy and natural disaster dummies, natural disaster events show a moderate positive adjustment effect on ENS, while environmental policy shifts remain statistically insignificant. Short‐run dynamics reveal mixed effects. ENE, FND, and NGP reduce ENS in the short term while LUR enhances it; for REC, however, FND and NGP exert negative short‐run effects. Robustness tests confirm the consistency of ARDL estimates. Granger causality results identify selective causal linkages, including unidirectional causality from emissions to NGP, and from REC to ENE. Overall, the findings emphasize that sustainable development in Bangladesh depends on integrated governance, renewable transition strategies, and strengthened institutional and economic frameworks. The study contributes new empirical and theoretical insights for emerging economies navigating resource dependency, climate pressures, and green growth transitions.