This study examines how Circular Economy (CE) practices and Industry 4.0 (I4.0) capabilities influence Sustainable Performance (SP) at the firm-level amid increasing environmental, social, and regulatory pressures. Although prior research suggests that digital technologies can support circular strategies, limited empirical evidence explains how I4.0 capabilities shape the CE–SP relationship at the firm-level across industries. To address this gap, the study investigates the direct, mediating, and moderating roles of operational and managerial I4.0 capabilities within the CE–SP nexus. A sequential mixed-methods design was employed, combining survey data from 138 firms analyzed using partial least squares structural equation modelling (PLS-SEM) with 10 semi-structured expert interviews for contextual validation. The findings show that CE practices positively influence economic, social, and environmental performance. Managerial I4.0 capabilities partially mediate the relationship between CE practices and social and environmental performance, whereas operational capabilities show no significant mediating effects. Although CE practices support the development of both operational and managerial digital capabilities, the moderating effects of I4.0 capabilities were limited and only marginally significant across selected sustainability dimensions. The study advances understanding of the CE–I4.0–SP relationship by showing that sustainability outcomes depend primarily on CE practices and managerial rather than purely operational digital capabilities. It also provides practical insights for managers and policymakers seeking to align digital transformation initiatives with CE objectives.
Alsaoudi et al. (Mon,) studied this question.
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