The Circular Economy is a paradigm shift attempting to replace the end-of-life concept with reducing, reusing, recycling and recovering materials and to slow down, close and narrow material and power loops. This concept is much discussed in the academic literature, but limited progress has been accomplished so far regarding its empirical analysis. The objective of this work is to study circular economy practices and analyze in depth the circular economy behavior in European firms. We find that firms’ circular economy behavior is a gradual process where measures are implemented gradually, starting with activities involving control measures and ending with putting preventive practices in place. We discovered also that the most proactive companies in implementing circular economy measures generally come across certain common barriers such as administrative processes, regulations and a lack of human resources to perform these practices, while firms that have not implemented circular economy measures view financing, investment and cost–benefit barriers as the most significant. Significant efforts need to be undertaken by firms to accomplished circular economy. Also circular economy regulation should be improved to make it easier for companies to implement strategies that will make them more sustainable.

This study analyses strategic proactivity as a driving factor in the implementation of an advanced environmental strategy in a firm. Strategic proactivity is defined as a firm’s tendency to initiate voluntary changes instead of reacting to events in the environment and according to previous literature, can be interpreted as a combination of internal factors that characterise a firm’s business strategy as that of a prospector firm. In this study, we measured this through innovation, with two variables related to the firm’s entire production cycle: R&D expenditure and patents. However, we also considered two more strategic proactivity indicators: innovation proactivity and internationalisation proactivity. These two proactivity variables take into account the innovative and international actions of the firms, going beyond the actions usually taken by firms in the same sector. Using panel data methodology, we obtained results that show that firms who invest in R&D and patent their innovations achieve more advanced positions in their environmental strategies. Empirical evidence also shows that firms with a greater innovation effort throughout the production cycle (product, process, organisation and marketing) than their competitors also attain more advanced positions (proactivity) in environmental matters. In other words, innovation proactivity is a driver of environmental strategy. In relation to internationalization, the results also showed that firms that operate in a larger geographical area than their competitors adapt to the most demanding environmental legislation, placing them in a position of environmental leadership in their respective sectors. The inclusion of internationalization as an indicator of strategic proactivity, the measurement of proactivity variables and the correction of firms’ specific unobserved aspects are some of this paper’s contributions.