Transition of Manufacturing Companies towards the Circular Economy: The Role of the Balanced Scorecard Approach

Circular Business Models (CBMs) are central to firms’ transition towards a Circular Economy (CE), however the lack of integrated tools to evaluate both circular and financial performance limits managerial decision-making. This study addresses this gap by developing and empirically testing a Circular Balanced Scorecard (CBSC). Grounded in thirteen identified managerial practices for CBMs, the CBSC translates these practices into measurable objectives. Using a single case study of an Italian manufacturing company transitioning towards circularity, the research validates the CBSC through over 30 h of interviews with nine top managers and extensive document analysis. The findings propose a strategy map that links 16 quantitative and 4 qualitative measures across four perspectives, unveiling two strategic pathways for the transition towards CE: value discount (i.e., cost reduction through eco-efficiency) and value premium (i.e., turnover growth through CE-based differentiation). The value discount pathway emerges as the primary driver of the transition towards CE, as its profitability can be more readily demonstrated compared to other transition routes. Moreover, the results illustrate how managerial practices can be operationalized within a holistic CBSC that balances circular and financial goals. This study contributes to the literature by bridging performance management and CE research, offering a practical, process-oriented tool for managers to design, implement, and monitor CE strategies in industrial manufacturing contexts, while providing a structured, theory-driven approach to managing and evaluating circular transitions.