Insurance as a Catalyst of Circular Economy and ESG Implementation: Risk Governance, Resilience and Financial Performance under the CSRD

Abstrakt

The transition towards a circular economy is increasingly embedded in ESG-oriented management processes and corporate sustainability reporting regimes, particularly under the Corporate Sustainability Reporting Directive (CSRD). Circular business models can support resource productivity, resilience and long-term sustainable value creation, yet their scaling remains constrained by risk-related barriers, including uncertain asset performance, ambiguous liability structures, fragmented reverse logistics, limited lifecycle data and insufficient access to patient capital. These barriers are not merely technological or behavioural; they also affect financial performance, investment readiness and the credibility of ESG implementation. Despite this, the role of insurance in enabling circular economy transformation has received limited theoretical attention. This paper develops the concept of the Insurance-Circularity Nexus and proposes a conceptual framework explaining how insurance mechanisms can act as catalysts for circular and ESG-oriented transformation. Drawing on circular economy theory, risk management, sustainability transitions, green finance and sustainable insurance, the article argues that insurance is not only a compensatory instrument but also a risk-governance institution that reduces uncertainty, strengthens stakeholder trust, improves investment readiness and enhances systemic resilience. The framework identifies five interrelated mechanisms: risk transfer and pooling, operational risk mitigation, data-enabled prevention, trust and legitimacy building, and value-chain stabilisation. The study formulates seven testable propositions and discusses boundary conditions such as moral hazard, data asymmetry, affordability, regulatory ambiguity and greenwashing risk. The article contributes to theory by positioning insurance as an enabling institution within circular economy and ESG systems and provides a research agenda for future empirical studies on insured circularity, sustainable underwriting, CSRD-relevant risk governance and financially robust circular business models.