RESEARCH ARTICLE Sustainable development-oriented regulatory and competitive pressures to shift toward a circular economy: The role of environmental orientation and Industry 4.0 technologies Abdullah Kaid Al-Swidi 1 | Joseph F. Hair 2 | Mohammed A. Al-Hakimi 3 1 Department of Management and Marketing, College of Business and Economics, Qatar University, Doha, Qatar 2 Department of Marketing and Quantitative Methods, University of South Alabama, Mobile, Alabama, USA 3 Department of Marketing and Production, Thamar University, Dhamar, Yemen Correspondence Abdullah Kaid Al-Swidi, Department of Management and Marketing, College of Business and Economics, Qatar University, Doha, Qatar. Email: swidi@qu.edu.qa Abstract Automakers' transition from a linear economy to a circular economy (CE) in response to sustainable development-oriented regulatory and competitive pressures is a chal- lenging process that requires innovative, practical technologies. However, Industry 4.0 (I4.0) technologies are an important part of the transition to CE for environmen- tally friendly companies. In this study, we examine whether regulatory pressure (RP) and competitive pressure (CP) toward sustainability motivate firms to implement I4.0 technologies for CE, along with the mediating effects of environmental orienta- tion (EO). PLS-SEM via SmartPLS software was used to analyze data from 230 man- agers in the automotive and auto component manufacturing industries in India. The findings of this study showed that RP and CP positively influence I4.0 adoption, which impacts CE capability. Furthermore, EO partially mediates the relationship between RP and CP with I4.0 technologies. As a practical implementation of this study, to transition to CE and contribute to sustainable development, managers need to deal effectively with RP and CP. Several implications for theory and practice are discussed at the end of the study. KEYWORDS circular economy, competitive pressures, environmental orientation, Industry 4.0 technologies, regulatory pressures, sustainable development 1 | INTRODUCTION In the past few years, India has made a commitment to limiting the effects of its economic growth on the natural environment, establish- ing a “win-win” environmental and economic model, and creating a society that saves resources and is environmentally friendly on the path to transition toward sustainability (Priyadarshini & Abhilash, 2020). The circular economy (CE) is regarded as a key component of sustainable development; the government has enacted a set of rules and regulations targeting industry and society in an effort to adopt a circular industrial system based on the economy (Zeng et al., 2017). On the other hand, firms are also under a lot of pressure from their competitors to adopt environmentally friendly practices (such as CE) (Dai et al., 2014), as is the case for Indian auto- makers, given the presence of many global auto manufacturers (such as Suzuki, Honda Ford, Toyota, Yamaha, etc.). CE capability is “the general term implementing the 3R principles (reduction, reuse and recycle) for firms” (Zeng et al., 2017). This capa- bility encompasses a set of interdependent CE practices that work together to accomplish an objective. In the CE, industrial waste is turned into a valuable input that can be fixed, reused, and upcycled using low-cost waste management methods, generating eco-friendly Abbreviations: α, Cronbach's alpha; AVE, average variance extracted; CCA, confirmatory composite analysis; CB‐SEM, covariance‐based structural equations modelling; CE, circular economy; CP, competitive pressure; CR, composite reliability; EO, environmental orientation; HTMT, Heterotrait-Monotrait; I4.0, industry 4.0; MAE, Mean absolute error; RBT, Resource- based theory; RMSE, Root mean square error; RP, regulatory pressure; ST, Stakeholders theory; VB-SEM(PLS), variance-based structural equations modelling. Received: 23 October 2022 Revised: 30 January 2023 Accepted: 13 February 2023 DOI: 10.1002/bse.3393 Bus Strat Env. 2023;1–16. wileyonlinelibrary.com/journal/bse © 2023 ERP Environment and John Wiley & Sons Ltd. 1