The Role of Circular Human Resource Management to Circular Economic Performance: A Mediation and Moderation Model

Abstract

This study examines the role of Circular Human Resource Management (CHRM) in enhancing Circular Economic Performance (CEP) through the mediating effect of Green Knowledge Management (GKM) and the moderating role of ethical leadership. Grounded in Self-Determination Theory, this research adopts a quantitative approach by collecting data from 250 employees working in manufacturing companies in Indonesia across multiple sectors. Data were analyzed using Partial Least Squares Structural Equation Modeling (SEM-PLS) with SmartPLS 4.0. The findings indicate that CHRM has a significant positive effect on CEP and GKM, while GKM also significantly influences CEP. Furthermore, GKM partially mediates the relationship between CHRM and CEP, confirming that knowledge-based processes are critical mechanisms in translating HRM practices into circular performance outcomes. The results also reveal that ethical leadership strengthens the relationship between CHRM and CEP, highlighting the importance of leadership as a boundary condition. This study contributes to the literature by addressing the conceptual ambiguity of CHRM and providing an integrated framework that links HRM, knowledge management, and circular performance through a motivational perspective. Practically, the findings suggest that organizations should align HR practices with knowledge management systems and leadership strategies to achieve sustainable and circular performance in manufacturing contexts.