Unpacking Circular Economy Practices and Carbon Emissions Relationships: Co‐benefits and Legitimacy Perspectives

ABSTRACT Circular economy practices can provide co‐benefits beyond resource utilization that potentially result in climate mitigation. Drawing on co‐benefits theory and using a panel of 1599 manufacturing companies for the period 2014–2021, this study investigates the relationship between circular economy practices and carbon emissions, evaluating two hypotheses. The first hypothesis speculates a negative association between circular economy and Scope 1, Scope 2, and Scope 3 emissions—meaning greater circular practices relate to fewer emissions. We then turn to legitimacy theory to evaluate this relationship within sustainability‐ sensitive and non‐sensitive industries. The results show that only the product redesign strategy is associated with lower levels of Scope 1 and Scope 2 emissions. No circular economy practice is related to improvements in Scope 3 emissions. Industry‐specific characterizations are also evaluated. The work provides interesting and sometimes counterintuitive results that require greater investigation to further understand the phenomena. From a theoretical perspective, the study contributes to the literature on organizational antecedents of carbon emission intensity and extends the application of co‐benefits theory to the firm level, linking it to a legitimacy theoretical perspective. Practically, the study provides managers with insights into the effects of individual CE practices on the three emissions scopes, complemented by industry‐contingent findings.