Social Dimensions in Circular Economy: The Role of Dynamic Capabilities and <scp>SA8000</scp>

ABSTRACT Circular economy (CE) represents a framework within a regenerative economic system. However, its social dimension remains insufficiently explored, creating considerable challenges in evaluating the social aspects of CE practices. Research in industrial ecology and supply chain management has shown limitations in systematically incorporating social assessments, even in contexts where evaluations are not explicitly linked to CE practices. To address this knowledge gap, this study employs a multiple‐case approach to investigate the micro‐foundations of dynamic capabilities that support the effective integration of the social dimension in the circular economy. The paper seeks to offer a comprehensive understanding of how industries perceive the relevance of the social dimension in assessing CE practices, focusing on micro‐foundations as integral components of dynamic capability. This research examines SA8000, a widely recognized CSR standard, particularly Clause 9 of compliance management for senior leadership, as a critical micro‐foundation. Our findings suggest that dynamic capabilities significantly advance the social dimension of the circular economy. The case studies demonstrate that the firms analyzed identified social opportunities by leveraging three micro‐foundations of sensing capability. Additionally, these firms responded to the identified opportunities by concurrently utilizing four micro‐foundations of seizing capability and four of reconfiguring capability. This study contributes to the literature on the intersection of dynamic capabilities and corporate sustainability by offering insights into how sensing, seizing, and reconfiguring capabilities facilitate the successful implementation of the social dimension in CE strategies.