The Transition from Linear Sourcing to Circular Economy Business Models: The Role of Circular Procurement, Reverse Logistics, Resource Efficiency, and Firm Performance

Abstract

The shift from linear sourcing to circular economy business models is a major shift in how organizations obtain, use, recover and generate value from resources. In the traditional linear sourcing model, the organizations rely extensively on virgin materials and one-way supply chains, short product life cycles, and disposal-oriented waste management processes. Business models in the circular economy are different, and are centered around conserving resources, product durability and longevity, reuse, repair, refurbishment, remanufacturing, recycling, reverse logistics, industrial symbiosis, product-service systems, and regenerative sourcing. The link between circular sourcing practices and the performance of the business models for circular economy was explored, specifically focusing on four key circular economy dimensions: circular procurement, collaboration with suppliers, reverse logistics, and resource efficiency, as well as organizational capabilities. Organizations involved in manufacturing, retail, logistics and other supply-chain related activities were the sources of the data. A semi-structured questionnaire was used to assess circular sourcing practices and their impact on the performance of circular business-models. Data were analyzed using reliability analysis, descriptive statistics, correlation analysis, exploratory factor analysis and multiple regression analysis. The results showed that the four aforementioned factors (circular procurement, supplier cooperation, reverse logistics, and resource efficiency) were positively related to circular business-model performance. The two most significant predictors were reverse logistics and supplier collaboration, showing that circularity was not only about internal operational shifts, but also about organizations' capacity to build the collaboration within their value chain. The results also showed that resource efficiency will enhance the economic benefits of circular practices by minimizing resources used, waste and inefficiencies. The study advances the topic of circular economy and supply-chain literature by including sourcing decision, supplier relationships, reverse flows and business-model transformation in a single empirical framework. The results confirm this to be more than an environmental action, but a strategic change that can enhance resource productivity, resource resilience, innovation, and long-term organizational performance.