Industry 4.0, Green Lean Six Sigma and Digital Supply Chain Capabilities Enable the Circular Economy

The Fourth Industrial Revolution, also known as ‘Industry 4.0’ (I4.0), is widely recognised as an important enabler of circular economy ( CE ) practices, with a focus on digitalisation to enable product traceability and extend product life cycles. However, existing studies have primarily examined the relationships between I4.0 and CE and have often failed to identify the key data‐driven mechanism underpinning this transformation. In the rush to adopt digitalisation to boost productivity, organisations often overlook the opportunity to integrate digitalisation with continuous improvement and sustainability‐related practices (DCSP), such as I4.0, Green Lean Six Sigma (GLSS) and Digital Supply Chain Capability (DSCC). Grounded in the dynamic capability view theory (DCVT), this study investigates how DCSP enables CE in small and medium‐sized enterprises (SMEs) in Pakistan. Data from 298 managerial staff were analysed using a multimethod approach comprising SmartPLS 4.0 for structural equation modelling, Jamovi for confirmatory factor analysis and SPSS for artificial neural networks. Results indicate that GLSS and DSCC partially and sequentially mediate the relationship between I4.0 and CE . Theoretically, this study contributes to the DCVT literature by framing I4.0 as a sensing capability and GLSS and DSCC as internal and external seizing capabilities, respectively. The findings demonstrate how SMEs can reconfigure sensing and seizing capabilities to enable CE as a transformation outcome. In practice, this study provides a structured roadmap for managers to invest in DCSP to achieve CE objectives.