Enhancing Business Performance through Circular Economy: A Comprehensive Mathematical Model and Statistical Analysis

Abstract

In today’s dynamic and competitive free market, businesses strive to gain a distinct competitive advantage, enabling them to seize opportunities and overcome potential threats. Achieving and sustaining superior performance has become a fundamental objective for companies. Accordingly, the main objective and contribution of this research is to delve into the profound impact of circular economy practices, which are known to foster sustainability and resource efficiency, on financial performance—an essential metric for evaluating a company’s success. Through the development of a proposed mathematical model, we simulate and quantify the influence of circular economy practices on financial outcomes, capturing the intricate relationship between the two. Employing state-of-the-art optimization methods and statistical analysis, our analysis reveals that the implementation of circular economy principles significantly impacts financial performance, contributing to 15.7% of its variance. Interestingly, production diversity, while critical for corporate governance, does not exert a statistically significant influence on financial performance. Notably, although production diversity remains a pivotal aspect of effective corporate governance, our analysis indicates that it does not wield a statistically significant impact on financial performance. Moreover, the combined synergy of circular economy practices and financial performance unveils a noteworthy 24.8% variance in overall company performance, underscoring the intricate interdependence of these pivotal elements. By harnessing state-of-the-art modeling techniques and meticulous analysis, this research yields profound insights into the intricate interplay between circular economy practices and financial performance. This illumination empowers businesses to discern potential pathways for harnessing competitive advantages and nurturing sustainable growth in the dynamic tapestry of today’s business landscape.