How Environmental Management Systems Enable Sustainability Transition: The Roles of Green Transition and Policy Support in Driving Circular Product Innovation

This study examines how environmental management systems (EMSs) function as information-based organizational capabilities that drive circular product innovation in manufacturing SMEs operating in an emerging economy. Grounded in the resource-based view (RBV) and institutional theory, the study develops and empirically tests a model linking EMSs to circular-oriented product innovation through the mediating role of green transition, while assessing the moderating influence of policy support. Data were collected through a cross-sectional survey administered in two temporally separated phases to mitigate common method bias, targeting senior managers of ISO 14001-certified manufacturing SMEs registered in the Turkish Trade Register Gazette. A total of 511 valid responses were analyzed. Measurement reliability and validity were established using confirmatory factor analysis, and hypotheses were tested via Hayes’ PROCESS macro. The results indicate that an EMS significantly enhances circular product innovation both directly and indirectly. Green transition emerges as a strong partial mediator, explaining a substantial share of the total effect, highlighting its critical role in translating environmental information, routines, and capabilities into product-level circular outcomes. While organizational sustainability policy does not moderate the EMS–green transition relationship, policy support significantly strengthens the impact of green transition on circular product innovation. Firms operating within more supportive policy environments achieve substantially higher levels of circular innovation. Overall, the study advances the understanding of how information system-enabled capabilities and supportive institutional conditions jointly shape sustainability transitions, offering insights for managers and policymakers seeking to foster circular innovation in manufacturing SMEs.