Government Support, Collaboration, and the Circular Economy: Impacts on ESG Performance and Firm Reputation

ABSTRACT Despite the growing emphasis on the importance of circular economy strategies in increasing a firm's performance, the relationship between Environment, Social and Governance (ESG) and circular economy needs to be further justified. This study assessed the effects of government support and circular economy‐oriented collaboration on the implementation of circular economy strategies. In addition, we investigated the effects of circular economy strategies adoption on firms' ESG performance and reputation. This study surveyed 235 Brazilian agri‐food firms. Data were analyzed using the Partial Least Squares–Structural Equation Modeling method. This study found a positive and significant effect of circular economy‐oriented collaboration on circular economy strategies and a positive but lower effect of government support on circular economy strategies. The study's findings also demonstrate that the adoption of circular economy strategies has a profound effect on ESG performance and firm reputation. We also identified a partial mediation of circular economy‐oriented collaboration on the relationship between government support and circular economy. This study's findings contribute to advancing the theoretical discourse on CE and collaborative governance by validating their interconnected roles in enhancing sustainability outcomes. Moreover, our research contributes to the theoretical discourse on CE by showing how internal capabilities and relational assets jointly influence agri‐food firms' sustainability transitions.