How does it pay to be circular in production processes? Eco‐innovativeness and green jobs as moderators of a cost‐efficiency advantage in European small and medium enterprises

Abstract

This study investigates whether circularity in production processes generates a reduction of firms' production costs and the conditions that determine the intensity of this reduction. It explores the role of two moderators for this cost-efficiency advantage to emerge, namely, eco-innovativeness (investments dedicated to the adequate implementation of circular practices in current production processes) and green jobs (human resources dedicated to circular practices). Using data on 13,117 small and medium enterprises (SMEs) from the Flash Eurobarometer 2017, a cluster analysis revealed that there is a gradual path towards Circular Economy among European SMEs, with the implementation of increasingly more circular practices. Four ordered probit models confirmed that a higher level of circularity in processes achieved by European SMEs is related to a reduction in their production costs. Moreover, eco-innovativeness positively moderates this relation. In contrast, the relative share of green jobs in SMEs' workforce mitigates the impact of circularity on production costs. In practice, by engaging in circularity, SMEs can contribute to the United Nations goals for Sustainable Development while reducing production costs; although the level of this reduction depends on how circularity is implemented.