Circularity in processes and reduction of production costs in European SMEs: the moderating effects of eco-innovativeness and green jobs

Objectives: This study investigates whether achieving a higher level of circularity in processes has positive effects on firms' production costs. It further explores the role of two moderators in this relation, namely eco-innovativeness in processes and green jobs. • Theoretical background: The study draws on the framework of the Natural-Resource-Based View of the firm, as well as on more recent literature on process-related circular economy practices and eco-innovations. Methodology: In the first stage, a cluster analysis distinguished four groups among 13,117 SMEs based on their circular practices as stated in the Flash Eurobarometer 2017. In the second stage, we tested our hypotheses with four ordered probit models. Results/Implications: There is a gradual path towards Circular Economy among European SMEs, with the implementation of increasingly more circular practices. A higher level of circularity in processes achieved by European SMEs is related to a larger reduction in their production costs. Moreover, eco-innovativeness in processes positively moderates this relation. In contrast, the relative share of green jobs in SMEs' workforce negatively moderates the impacts of circularity on production costs. In practice, by engaging in circularity and eco-innovating, SMEs can contribute to the United Nations goals for Sustainable Development.