Digital Transformation and Circular Economy Integration: Pathways for Sustainable Business Innovation

ABSTRACT: The accelerating pace of digital transformation has reshaped how industries pursue sustainability, offering innovative ways to integrate environmental responsibility into business strategy. This study examines how digital technologies such as artificial intelligence, blockchain, the Internet of Things, and big data analytics enable the adoption of circular economy principles in sustainable business innovation. Using a systematic literature review of 85 studies published between 2015 and 2025, the research identifies key mechanisms through which digital transformation enhances resource efficiency, extends product lifecycles, and promotes transparent supply chains. The findings show that digitalization strengthens competitiveness and sustainability but presents challenges such as high implementation costs, unequal access to digital infrastructure, and the environmental footprint of information and communication technology systems. The study concludes that aligning digital adoption with organizational culture, governance structures, and supportive policy frameworks is essential for realizing circular economy strategies at scale and achieving resilient, low carbon, and sustainable business models.