Sustainable production: The economic returns of circular economy practices

Assessing the economic consequences of sustainable production choices aimed atreducing negative environmental externalities is crucial for policy making, in light ofthe increasing interest and awareness experienced in recent EU policy packages. Thisassessment is one of the goals of the current work, which tries to provide new empir-ical evidence on the economic returns of circular economy practices, drawing on pre-vious literature on the underlying determinants of greener production choices, whichare stated to differ from standard technological innovations as they are subject to aknowledge and an environmental externality. Using an original dataset on approxi-mately 3000 Italian manufacturing firms, we provide evidence on the relations amonginnovations related to the circular economy concept and economic outcome in theshort run. The evidence shows that in the short run, it is difficult to obtain economicgains from circular economy related innovations when taken in isolation, especiallyfor Small and medium-sized enterprises (SMEs), which may also experience negative returns.