How does the circular economy achieve social change? Assessment in terms of sustainable development goals

The study addresses how sustainability-oriented social and environmental changes, particularly within Social Economy (SE) enterprises, can be advanced through the Circular Economy (CE) and aligned with Sustainable Development Goals (SDGs). CE and SDGs are complementary, sharing environmental, social, and economic aims. Prior literature has often treated CE and SDGs separately, with few works exploring their linkage and the social dimension. Gaps noted include social/economic orientation, use of ICTs, pro-CE policy frameworks, measuring monetary vs. sustainable value, and a need for a conceptual framework integrating CE with sustainability. Focusing on Extremadura (Spain) and its “Green and circular economy strategy. Extremadura 2030,” the paper develops and tests a CE-SDGs framework positioning CE as a precedent and SDGs as a consequence, with emphasis on people- and planet-oriented activities. Research questions: - RQ1: Is it possible to achieve the SDGs through involvement in CE and related activities? - RQ2: Does information on sustainability and CE enable the achievement of SDGs? - RQ3: Do professional profiles and training in CE enable the achievement of SDGs? - RQ4: Do barriers and incentives to CE condition the achievement of SDGs?

The theoretical framing combines the resource-based view (RBV) and dynamic capabilities (DC) theories. Firms’ heterogeneously distributed resources and capabilities (valuable, rare, inimitable, non-substitutable) drive competitive advantage and sustainable value creation; dynamic capabilities enable sensing/seizing/reconfiguring to achieve sustainable outcomes and societal co-benefits. SE enterprises prioritize people and social purposes, democratic governance, internal solidarity, and community development, aligning with CE’s goals of closing material loops, reducing waste, and improving efficiency. Policy context in the EU and Spain recognizes SE’s role in reuse, recycling, responsible consumption, and training. CE-SE complementarities include cooperation, local/regional networks, labor intensity (repair/remanufacture/recycling), systemic transition, and shifts to servitization and collaborative models. Regarding SDGs, SE contributes notably to SDG 1 (No poverty), SDG 7 (Affordable and clean energy), SDG 8 (Decent work and economic growth), SDG 10 (Reduced inequalities), SDG 11 (Sustainable cities and communities), SDG 12 (Responsible consumption and production), and SDG 13 (Climate action). Prior research highlights SE’s roles in inclusive development, green finance, social inclusion, and responsible consumption/production. Human resources are critical in CE transitions: defining professional profiles, continuous training, and HRM aligned with CE objectives enhance productivity and technology adoption. Sustainability information and environmental accounting underpin measurement and reporting for CE and SDGs, yet CE-specific indicators are seldom used, especially in nonprofits. Reporting aligned with SDGs remains fragmented without a universal model. Hypotheses proposed: - H1: CE involvement positively impacts professional profiles and training (PPT). - H2: CE involvement positively impacts information on sustainability and CE (ISCE). - H3: PPT positively affects people-oriented activities (POA). - H4: PPT positively affects planet-oriented activities (EOA). - H5: ISCE positively affects POA. - H6: ISCE positively affects EOA. - H7: Barriers and incentives (BI) positively influence observed results and benefits (ORB).

Design: Quantitative, cross-sectional survey of Social Economy (SE) enterprises in Extremadura (Spain), followed by PLS-SEM analysis of two complementary models positioning CE as antecedent and SDGs as consequence. Sample and data collection: Targeted 250 SE enterprises via email questionnaire; 90 valid responses (36% response rate) collected November 4–20, 2022. The questionnaire included: (1) Entity characteristics (type, sector, size) and (2) actions/items related to SDGs and CE measured on 1–7 Likert scales (1 = low knowledge; 7 = very high knowledge). Sample composition: main types included cooperative societies (48.9%), associations (21.1%), special employment centers (11.1%), employment companies (8.9%); sectors: tertiary/services 52.2%, primary 25.6%, secondary 22.2%; size: <5 employees 51.1%, 6–10 and 11–25 each 13.3%, 26–50 and 51–100 each 7.8%, >100 6.7%. Measures and models: Model 1 constructs (Composite LOC Mode A) included Involvement in Circular Activities (ICA; 5 indicators), Professional Profiles and Training (PPT; 3), Information on Sustainability and CE (ISCE; 2), People-Oriented Activities (POA; 3), Planet-Oriented Activities (EOA; 2). Model 2 constructs included Barriers and Incentives (BI; 2) and Observed Results and Benefits (ORB; 4). Scales adapted from Aranda-Usón et al. (2020), Scarpellini (2022), Scarpellini et al. (2019), Ogunmakinde et al. (2022), Elavarasan et al. (2022), and UN SDG indicators (2022). Analysis: PLS-SEM using SmartPLS (v4). Three-step procedure: assess measurement model (reliability and validity), assess structural model (path significance/effect sizes), and evaluate model fit/predictive capability (R2, Q2 via PLS-Predict). Bootstrapping with 5,000 subsamples; significance based on one-tailed t-tests. Measurement quality: Indicator loadings ranged 0.766–0.946 (Model 1) and 0.840–0.937 (Model 2). Cronbach’s alpha: 0.693–0.915 (Model 1), 0.667–0.926 (Model 2). Composite reliability: 0.867–0.947 (Model 1), 0.857–0.947 (Model 2). AVE: 0.747–0.856 (Model 1), 0.750–0.819 (Model 2). Discriminant validity supported by Fornell-Larcker; HTMT ratios mostly below 0.90 and close to thresholds when higher. Predictive assessment: Q2_predict > 0 for all dependent constructs. Predictive power was strong for ORB, limited for PPT and ISCE, and mixed/low-to-moderate for POA and EOA by indicator-level RMSE/MAE comparisons.

- Hypothesis testing (Model 1): - H1 (ICA → PPT): β = 0.864, p < 0.001, f2 = 2.938 — Accepted. - H2 (ICA → ISCE): β = 0.860, p < 0.001, f2 = 2.845 — Accepted. - H3 (PPT → POA): β = 0.414, p = 0.006, f2 = 0.117 — Accepted. - H4 (PPT → EOA): β = 0.140, p = 0.423, f2 = 0.012 — Not accepted. - H5 (ISCE → POA): β = 0.401, p = 0.011, f2 = 0.110 — Accepted. - H6 (ISCE → EOA): β = 0.623, p = 0.001, f2 = 0.229 — Accepted. - Hypothesis testing (Model 2): - H7 (BI → ORB): β = 0.628, p < 0.001, f2 = 0.653 — Accepted. - Explained variance (R2): PPT = 0.746; ISCE = 0.740; POA = 0.618; EOA = 0.558 (Model 1). ORB = 0.395 (Model 2). - Confidence intervals: All significant paths had percentile and bias-corrected 5–95% CIs excluding zero; H4 intervals straddled zero. - Substantive results: - Involvement in CE strongly predicts development of professional profiles/training and improved sustainability/CE information practices. - Professional profiles and training enhance people-oriented activities (e.g., decent work, inclusion) but do not show a significant direct effect on planet-oriented activities. - Sustainability and CE information/reporting practices are crucial for both people- and planet-oriented activities. - Barriers and incentives meaningfully condition observed results/benefits, with lack of specialized training highlighted as a persistent barrier. - Predictive performance: Strong predictive validity for ORB; mixed for POA/EOA; weak for PPT and ISCE by RMSE/MAE differentials, though Q2_predict remained positive.

The findings substantiate the proposed CE-SDGs framework, demonstrating that CE practices act as antecedents enabling progress on SDGs in SE enterprises. RQ1 is affirmed: engagement in CE activities influences organizational capabilities and practices that translate into SDG-oriented actions. RQ2 is supported: the presence of sustainability and CE information systems/reporting is pivotal for achieving both people- and planet-oriented activities, aligning with calls for integrated environmental accounting and transparent reporting. RQ3 is partially supported: professional profiles and training significantly drive people-oriented activities (e.g., decent work, inclusion, reduced inequalities) but do not directly affect planet-oriented activities, suggesting environmental outcomes may require technical investments, environmental management systems, or process innovations beyond HR development alone. RQ4 is supported: barriers and incentives shape observed outcomes; insufficient specialized training and limited financial resources are salient constraints, while targeted public funding and supportive policies can improve results. Theoretically, the results align with RBV/DC perspectives: CE-related resources and capabilities (skills, data/reporting systems) underpin sustainable value creation and enable dynamic reconfiguration toward SDG outcomes. Practically, the study highlights the importance of investing in human capital for social outcomes, strengthening environmental accounting/CE indicators, and leveraging policy incentives to overcome financial/training barriers. The SE context underscores the value of local, collaborative, and labor-intensive circular models for micro/regional transitions and social innovation.

The study develops and empirically tests an initial CE-SDGs framework using two complementary PLS-SEM models with SE enterprises in Extremadura (Spain). Model 1 validates five of six hypothesized links, showing that CE involvement enhances professional profiles/training and sustainability/CE information; these, in turn, foster SDG-oriented actions, especially for people-oriented outcomes, with information also significantly driving planet-oriented actions. Model 2 confirms that barriers and incentives materially influence observed results and benefits. Collectively, the results affirm CE as a practical antecedent to SDG achievements and provide the first quantitative evidence of several causal linkages within SE contexts. Managerial implications include prioritizing CE practices, embedding sustainability/CE reporting, investing in human capital for social outcomes, and deploying incentives to address financial and training barriers. The work expands CE-SDGs scholarship by integrating RBV/DC theory and centering the SE. Future research should: (i) test alternative theoretical lenses; (ii) broaden constructs for CE and SDGs; (iii) expand samples across regions and include traditional firms for comparison; and (iv) explore moderators (e.g., firm type) to refine the framework’s boundary conditions.

- Self-reported survey data entail subjectivity risks (interpretation variability, cognitive biases, response styles). - The study focuses on Spanish SE enterprises; findings may not generalize to traditional for-profit firms or other regions. - Potential sample bias due to sectoral/type composition; absence of a comparison group (traditional companies) limits benchmarking. - CE/SDG indicator coverage, especially for CE-specific metrics in nonprofits, may be incomplete; reporting heterogeneity persists.