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Dual Pathways to Regenerative Business: How Green Leadership and Climate Anxiety Drive Circular Economy Success

Jianmin Sun,Ahmad Zaeem Faraz,M. Sarfraz,Shafaq Arshad

Published 2025 in Sustainable Development

ABSTRACT

The universal effect of climate change on humanity is agonizingly evident. The adverse outcomes of climate change have significantly influenced individuals' perception of resource regeneration, a crucial aspect of the circular economy model. While circular economy practices encourage eco‐friendly consumption and waste mitigation, resource regeneration extends beyond harmonizing and reconciling the world's ecosystem to restoring natural processes that have been harmed or depleted by humans. This study investigates how green transformational leadership, psychological safety, and climate change anxiety (CCA) shape circular economy (CE) implementation and resource regeneration in Chinese organizations. Using survey data from 350 managers in the manufacturing, logistics, and energy sectors, we tested a dual‐pathway model in which sustainability knowledge sharing and digital innovation function as mediators. The results reveal that green leadership and psychological safety significantly enhance both knowledge sharing and digital innovation. Notably, CCA exhibits an inverted U‐shaped relationship with these outcomes, suggesting that moderate anxiety optimizes engagement, while excessive anxiety impedes progress. Perceived environmental resource scarcity amplifies the positive effects of knowledge sharing and innovation on circular economy behaviors and resource regeneration. These findings offer guidance for organizations and policymakers to foster regenerative business models that are both psychologically and technologically resilient. Businesses must cultivate green transformational leadership through sustainability training and integrate circular economy principles into strategies to encourage innovation. Policymakers should facilitate this transition by creating supportive regulatory frameworks, providing grants, raising awareness, and promoting collaboration to progress toward a circular economy.

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