From Potential to Practice: Contextual Limits of Circular Economy and Industry 4.0 for Sustainable Performance

This paper critically examines the relationship between the Circular Economy (CE), Industry 4.0 (I4.0), and sustainable performance (SP). While prior research commonly portrays CE and I4.0 as mutually reinforcing drivers of sustainability, emerging evidence suggests that their sustainability implications vary across organisational and institutional contexts. Challenging assumptions of universally positive effects, this paper advances a multilevel, capability-based perspective that reconceptualizes the CE–I4.0–SP relationship as conditional rather than inherently synergistic. The paper conceptualizes I4.0 as a set of differentiated capabilities comprising managerial dimensions linked to strategic alignment and resource orchestration, and operational dimensions associated with implementation and process efficiency. The paper argues that the sustainability implications of CE practices depend on how these capabilities are configured across organisational settings. It further introduces a multilevel framework demonstrating how the CE–SP relationship varies across micro (firm), meso (supply chain), and macro (institutional) levels. Based on this framework, the paper develops propositions explaining how capability configurations shape sustainability outcomes across different levels of analysis. By reframing the CE–I4.0–SP nexus through a multilevel capability lens, the paper provides a conceptual foundation for future sustainability research.