Environmental collaboration with suppliers and cost performance: exploring the contingency role of digital orientation from a circular economy perspective

Purpose To examine the interplay between sustainable supply chain management (SSCM) and circular economy, this research conceptualises and empirically tests an integrative framework of environmental information exchange with suppliers (ES), environmental product design (EPD) and cost performance (CP) with the contingency effect of digital orientation (DO). The associations proposed in the integrative framework provide a configuration of SSCM practices that support circular economy's restorative processes in the digital age. Design/methodology/approach The resource orchestration theory and contingency theory are used to investigate the mediation and moderating effects, which were tested by a moderated mediation analysis of survey data of 100 firms in Australia. Findings The results show that EPD fully mediates the relationship between ES and CP. Further, DO was found to moderate the relationship between EPD and CP, but not the relationship between ES and EPD. Practical implications The empirical findings of this study offer an effective SSCM practice configuration for firms seeking to target advanced circular business models and economic benefits. Managers should be aware that ES may not be enough to improve CP; EPD is a required mechanism to translate the ES benefits into cost superiority. Managers should also stimulate a DO culture to develop effective EPD capabilities, which leads to improved CP and a foundation for companies seeking to target circularity. Originality/value This study advances prior theoretical and practical knowledge. The authors propose and empirically test an integrated SSCM and circular economy model that incorporates mediation and moderation effects to clarify inconsistent findings in prior work, which provides a more holistic and practical understanding of SSCM practices in the digital context. Furthermore, the SSCM literature recommends the adoption of circular economy principles. The integrated model in this study provides a bridge between SSCM and circular economy.