Circular Economy as a Catalyst for <scp>ESG</scp> Performance: Unlocking the Strategic Role of Resource Productivity in the Nordic Region

ABSTRACT This study investigates the impact of circular economy (CE) practices, resource productivity (RSP), economic growth, urbanization (URBA), and clean energy use on national Environmental, Social, and Governance (ESG) performance in Nordic countries during the period 1995–2021. Although circular economy initiatives are widely discussed in sustainability research, empirical evidence on how these factors influence national ESG performance remains limited, particularly for the Nordic region. Using panel data techniques, including the PMG‐ARDL estimator with robustness checks through AMG and CCEMG estimators, the results reveal distinct effects across variables. Circular economy performance, proxied by recycling waste per capita, significantly improves ESG outcomes, indicating that stronger recycling systems contribute positively to environmental quality, social awareness, and governance transparency. In contrast, resource productivity exhibits a negative effect on ESG performance, suggesting that productivity gains may sometimes lead to resource overuse and environmental pressure. Economic growth positively influences ESG performance by enabling greater investments in sustainable technologies, institutional development, and social welfare. Urbanization shows a negative relationship with ESG, implying that rapid or poorly managed urban expansion may undermine sustainability outcomes. Conversely, clean energy use significantly enhances ESG performance by reducing environmental pressures and supporting long‐term sustainability goals. These findings highlight the importance of strengthening recycling systems, promoting clean energy transitions, and integrating ESG considerations into economic and urban development policies to achieve balanced and sustainable growth in advanced economies.