| Abstract |
Purpose: This study examines and analyzes whether: (a) Green logistics is positively related to circular economy implementation, (b) Absorptive capacity is positively related to circular economy implementation, (c) Circular Economy (CE) implementation is positively related to Business Sustainability, (d) the role of CE implementation in mediating the influence of Green logistics on Business Sustainability, and (e) the role of CE Implementation in mediating the influence of Absorptive capacity on Business SustainabilityDesign/methodology: This study uses a quantitative approach. The population is all natural-colored batik SMEs in the Provinces of Central Java and West Java. Respondents are owners/managers of batik SMEs with a target sample of 250 SMEs. After the data is collected, 228 questionnaires are returned and can be processed further. The statistical technique employed is partial least squares with structural equation modeling.Findings: According to this study, there is a significant positive influence of: (a) Green logistics for circular economy implementation, (b) Absorptive capacity for circular economy implementation, (c) CE implementation for Business Sustainability. Furthermore, CE implementation mediates Green logistics for Business Sustainability, and (e) CE implementation mediates Absorptive capacity on Business SustainabilityResearch limitations/implications: In the SMEs under investigation, the circular economy is being implemented in a simple manner. The role of mediation can consider other variables that are no less important in the context of batik SMEs that use natural colors. Respondents are only represented by SME groups in associations in the Klaten (Central Java) and Ciwaringin (West Java) regions, thus it is feared that the results would not be adequate to be generalized for the natural dye batik SME population in Indonesia. It is recommended that future studies consider longitudinal approach to ensure and obtain a more robust data. Managerial Implication: Business processes in SMEs which use natural dye should consider green logistics aspects as it will have positive impact in the long term, especially on Business Sustainability. In improving SMEs business sustainability, it is necessary to conduct absorptive capacity consistently, continuously, persistently. This is crucial to do in order to raise the competence of SMEs. When all resources are good, CE implementation can be implemented better by integrating the existing business processes.Theoretical Implication: This study provides enrichment to the literature on circular economy implementation in SMEs that are influenced by green logistics and absorptive capacity. It can make a significant contribution to help boost the sustainability of businesses (business, social, and environmental performance). Originality/value: This study has its originality due to the lack of study examining circular economy implementation in the context of SMEs which is influenced by green logistics and absorptive capacity. This study also offers a significant contribution to improve business sustainability (business, social, and environmental performance). Likewise, it also examines the mediating role of CE implementation between Green Logistics and Business Sustainability, as well as the mediating role of CE Implementation between Absorptive Capacity and Business Sustainability. |