Investigating the Implementation of Circular Economy in the Textile Industry in Indonesia

Abstract

This study investigates and analyzes the influence of business analytics capability (BAC), green human resource management (GHRM), and digital supply chain (DSC) on circular economy implementation (CEI), as well as its influence on business sustainability (BS). Furthermore, this research also analyzes the mediating role of CEI in the influence of BAC, GHRM, and DSC on BS. The population and respondents comprised all textile MSMEs (fashion and clothing materials) located in the provinces of Central Java and West Java, Indonesia. The target respondents consisted of 300 textile MSMEs, selected purposively based on the following criteria: (1) having a waste water treatment plant (WWTP), either privately owned or shared; (2) generating a minimum monthly net income of IDR 10 million; and (3) being owned and/or managed by individuals with at least a high school education. Data were collected through direct visit to the respondents. After data recapitulation and screening of the completed questionnaires, 251 valid responses were obtained. The statistical analysis was conducted using SmartPLS3. This research found that CEI mediates the positive relationships between BAC, GHRM, and DSC with BS. CEI also mediates the positive relationships between BAC, GHRM and DSC with business performance (BP), environmental performance (EP), and social performance (SP). However, there are no significant differences in these relationships (across all variables) between the subgroups analyzed (fashion and clothing Materials). This study contributes to and enriches circular economy theory by examining the influence of BAC, GHRM practices, and DSC on improving BS, encompassing BP, EP, and SP. In addition, this study analyzes the differences between types of textile MSMEs in terms of BAC, GHRM practices, and DSC.