A Conceptual Framework for Integrating ESG Profiling with Circular Economy Practices to Enhance Dual Dimensions of Firm Performance

Firms are struggling to adopt Circular economy (CE) practices because of fragmented frameworks, inconsistent policy guidance, and the absence of standardized performance measures. This conceptual study addresses these critical gaps by developing a comprehensive CE framework that systematically categorizes the 9Rs (Refuse, Rethink, Reduce, Reuse, Repair, Refurbish, Remanufacture, Repurpose, Recycle, Recover) into three strategic dimensions: material management, product management, and waste management. This tri-dimensional CE model provides firms with a practical framework to guide circular strategies throughout the product life cycle. The study examines how Environmental, Social, and Governance (ESG) profiling moderates the relationship between CE dimensions and firm performance, defined in terms of both financial and sustainable outcomes. This study proposes a quantitative approach using secondary data from sustainability reports of Malaysian manufacturing firms. A Circular Economy Index (CEI) is constructed to measure CE adoption, and ESG performance can be assessed using Bloomberg’s ESG metrics. The proposed conceptual model serves as a foundational blueprint for future empirical validation and offers actionable insights for practitioners and policymakers seeking to align CE adoption with ESG imperatives in the transition toward a sustainability-oriented economy.