Digital drivers of business model transformation in the circular economy paradigm

Abstract

This study provides a quantitative assessment of the digital drivers influencing business model transformation within the circular economy paradigm, using data from European Union countries. An integrated framework for evaluating the level of digital-circular integration is developed and implemented. The methodological approach includes the construction of a composite index, correlation and regression analyses, K-means clustering, principal component analysis (PCA), and scenario modelling. The study introduces the Integrated Digital Circular Economy Index (IDCEI), which comprises five core indicators reflecting digital intensity and resource efficiency. It is hypothesized that operational digital integration particularly through enterprise resource planning (ERP) systems and the Circular Material Use (CMU) rate are key drivers of the circular transition. The analysis reveals asymmetries in digitalization levels and investment structures across EU member states. The robustness of the IDCEI is validated through empirical verification. Based on digital-circular transformation trajectories, three clusters of countries are identified. The study outlines three development scenarios: intensive digital integration, fragmented implementation, and digital stagnation. A typology of transition models is proposed and visualized, facilitating the identification of transformation pathways. The findings provide a foundation for policy development in digital-environmental transformation, cross-country benchmarking, and integration monitoring. The IDCEI shows potential for broader application in international comparative studies. The scientific contribution lies in the formalization of a novel index for measuring digital-circular transformation and the methodological integration of quantitative and qualitative tools. Research implications include expanding the data set, refining digital indicators (e.g., AI, IoT, DPP), and applying the framework to sectoral analyses. This chapter is empirical in nature.