Journal Pre-proof

Key Resources for Industry 4.0 adoption and its effect on Sustainable production and
Circular Economy: an Empirical Study

Surajit Bag, Gunjan Yadav, Pavitra Dhamija, Krishan Kumar Kataria

PII: S0959-6526(20)35277-X
DOI: https://doi.org/10.1016/j.jclepro.2020.125233
Reference: JCLP 125233

To appear in: Journal of Cleaner Production

Received Date: 21 March 2020

Revised Date: 9 October 2020
Accepted Date: 18 November 2020

Please cite this article as: Bag S, Yadav G, Dhamija P, Kataria KK, Key Resources for Industry 4.0
adoption and its effect on Sustainable production and Circular Economy: an Empirical Study, Journal of
Cleaner Production, https://doi.org/10.1016/j.jclepro.2020.125233.

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Author Statement
We submit author(s) statement outlining individual contributions as follows:
Dr. Surajit Bag: Conceptualization, Methodology, Formal analysis, Investigation, Data
curation, and Writing- original draft
Dr. Gunjan Yadav: Methodology, Visualization
Dr. Pavitra Dhamija: Writing-review & editing
Dr. Krishan Kumar Kataria: Supervision, Project administration

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Key Resources for Industry 4.0 adoption and its effect on Sustainable
production and Circular Economy: an Empirical Study

Dr. Surajit Bag

Department of Transport and Supply Chain Management,

School of Management, College of Business and Economics,

University of Johannesburg, Johannesburg, South Africa

Email: surajitb@uj.ac.za

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Dr. Gunjan Yadav

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Mechanical Engineering Department,
Swarrnim Starup & Innovation University, Gandhinagar, Gujarat
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gunjanyadav86@gmail.com
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Dr. Pavitra Dhamija

Department of Industrial Psychology and People Management,

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College of Business and Economics,

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University of Johannesburg,
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South Africa, 2006

Email: pavitradhamija@gmail.com

Dr. Krishan Kumar Kataria

Technical Education of Haryana
State Board of Technical Education,
Panchkula, Haryana, India
krishankumar.kataria@gmail.com
 Key resources for Industry 4.0 adoption and its effect on Sustainable
Production and Circular Economy: an Empirical Study

Highlights

• Develop a theoretical model linking key resources for Industry 4.0 adoption,
sustainable production and circular economy.
• Industry 4.0 adoption has a positive relationship with sustainable production.
• Sustainable production has a positive relationship with circular economy capabilities.
• Significant efforts are required to bring suppliers into confidence and engage them
into various research and development programs related to circular economy.

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Graphical abstract
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 Key Resources for Industry 4.0 adoption and its effect on Sustainable
Production and Circular Economy: an Empirical Study

ABSTRACT
Developing countries like South Africa is aiming to be a nation that has fully harnessed the
potential of Industry 4.0 technological innovation to grow the economy and uplift people of
the country. The country has motivated manufactures to focus on smart manufacturing
considering the sustainable development aspects to develop circular economy capabilities.
However, manufacturers are facing various resource related challenges, which has slowed

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down the progress of Industry 4.0 adoption. This study aspires to develop a theoretical model
linking key resources for Industry 4.0 adoption that are essential to drive technological

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progress; and its effect on sustainable production and circular economy capabilities. The
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review of literature led to the identification of thirty-five resources that are essential for the
adoption of Industry 4.0. Further, exploratory factor analysis was used to group the variables
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under relevant factors and thereafter research team developed a theoretical model that was
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further tested using PLS-SEM technique. Research findings indicate that production systems,
human resources, project management, management leadership, green logistics, green design,
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information technology, big data analytics and collaborative relationships are key resources
for Industry 4.0 adoption; second, Industry 4.0 adoption have a positive relationship with
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sustainable production and finally, sustainable production has a positive relationship with
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circular economy capabilities. The study concludes with theoretical and practical
implications.

Keywords: Industry 4.0, Sustainable production, Circular economy, Ethical business

development, Sustainable resources

1. Introduction
Circular economy denotes a manufacturing process or system, which is recuperative in nature
(Geissdoerfer et al., 2017; Korhonen et al., 2018). In a circular economy (CE), the system is
designed to substitute the end-of-life notion; thereby emphasizing the alternative/renewable
sources of energy and reducing the use of hazardous chemicals in manufacturing processes
(Yadav et al., 2020a, 2020b, 2020c). CE transforms the production and consumption
processes by creating value from discarded waste materials (Bag et al., 2020a). CE looks
beyond the current manufacturing and consumption-based business models and aims to
develop a closed loop system (Elhabashy, 2019). The concept of CE is based on three main
beliefs; design out of waste, keep goods in use and revive natural systems (MacArthur, 2013).
Globally, the availability of key resources is gradually diminishing and at the same time
intensity of pollution is also increasing (Rajput and Singh, 2019a, 2019b; Sharma et al.,
2020). Perceiving the danger that is waiting in the near future has made organizations more
cautious to extend their efforts towards adoption of CE principles to increase circularity and
further enhance longevity of resources (Zhu et al., 2011; Liu and Bai, 2014). Countries such
as China, EU, Japan and USA have recently started using CE principles (Yadav et al., 2020a).
CE is in the nascent stage of development and majority of the organisations are focusing on

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recycling rather than reusing principles (Ghisellini et al., 2016; Yang et al., 2018). Few key

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factors like current technological use, supply chain complexity, operations strategy, planning
and control, regulations and consciousness among people must be considered while
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practicing and promoting CE (Lin, 2018; Nascimento et al., 2019). Okorie et al. (2018)
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indicated that CE research publications are on the rise; however, the aspect that digitalisation
can deliver a survivable CE is still comparatively untouched. Industry 4.0 (I4.0) is evidenced
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as the most accepted aspect of digitalisation (Saidani et al., 2017; Elia et al., 2017; Figge et
al., 2018). I4.0 is based on the progression of information and communication technologies,
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which has made it possible to adopt the process of advanced manufacturing technologies into
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production systems and using technologies such as internet of things, big data, cloud
computing for plant automation (Telukdarie et al., 2018). Recently, few studies have
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investigated the concealed link between I4.0 and CE (de Sousa Jabbour et al., 2018a; de
Sousa Jabbour et al., 2018b). These studies have identified the critical success factors;
enablers and barriers in adoption of I4.0 and sustainable manufacturing to unlock CE (Saidani
et al., 2017; Nascimento et al., 2019). Since the research related to I4.0 and sustainable
production and CE is in the early stage (Garcia-Muiña et al., 2019); therefore, current study
aims to explore the key resources required for I4.0 adoption in sustainable production context
to unlock CE. Hence,
RQ1: What are the necessary resources for I4.0 adoption in context to sustainable
production and CE?
Manufacturing set-ups are featured to share a dual responsibility (Yang et al., 2018). On one
side, the substantial return on investment is expected, and on other side negative impacts on
environment are to be addressed (Elhabashy, 2019). I4.0 can facilitate sustainable growth
and development especially in manufacturing environment (Geissdoerfer et al., 2017).
Consulted research anticipates that by using privileges of information and communication
technologies, I4.0 can provide excellent opportunities that can contribute towards
sustainable manufacturing especially in developing countries (Franklin-Johnson et al., 2016;
Huysman et al., 2017). However, the research team evidenced that referred literature on CE
along with involvement of I4.0 is limited (Kerin and Pham, 2019; Nascimento et al., 2019).
Pertinently, little attention has been extended towards I4.0 adoption and sustainable
manufacturing and CE in an integrated manner.
The current research study focused on manufacturing firms as this industry is dependent on
raw material and some of them are valuable metals, which present strategic challenge for
operations managers. Sixty percent of these valuable metals are used as an input in

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manufacturing of automotive parts, which anticipates a big risk of material shortage by 2030

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(MacArthur, 2013). Unless, the end of life automotive products enters the circular loop; it is
not possible to develop harmonised balance between society and environment (Saidani,
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2017). I4.0 plays an instrumental role in overcoming CE challenges such as operations level
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risks (Bag et al., 2020b), ownership issues, remanufacturing market demands, technological
development and reverse logistics uncertainties (Bressanelli et al., 2018a, 2018b). However,
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allocation of appropriate resources and development of certain organizational capabilities

are essential to aid the integration of I4.0 and sustainable manufacturing and further to
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promote CE, which is missing in the current literature. Hence,

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RQ2: Can we establish a relationship between I4.0 adoption, sustainable manufacturing

and CE capabilities?
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The research team aspires to bridge the existing gap and address the call of past researchers.
Forthcoming, section 2 provides the review of literature followed by section 3 on research
design; section four presents the data analysis and findings. The final section provides the
conclusion drawn from the study and agenda for ethical business development in CE driven
by I4.0 and sustainable production.

2. Literature Review
This section presents the review of literature and has discussed key concepts and links among
I4.0, sustainable production and CE.

2.1 Underpinning theory

The resource based view (RBV) theory of the firm is a good way in identifying the internal
sources of competitive advantage (Wernerfelt, 1995; Barney et al., 2001). However,
managers following RBV theory may not focus too widely on each resource and capability,
and they may not even analyse properly the connections existing among various resources
and capabilities and their associated connections with environment. The case of American
airlines clearly indicates that managers need to gauge various resources and capabilities
properly with a wider context. Successful business is developed based on the ability of firm
to maintain set of resources that are precious, uncommon, matchless and hard to replace
(Barney, 1991). Situations may change in this highly dynamic business environment and
firms must avoid focusing too narrowly on the resources to avoid risks. In a firm there are
multiple functions such as sales, operations, finance, human resources and therefore,
resources must be assessed across these functions. It must be understood that few resources

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may be required in particular situations while they may not be required in other situations.

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However, managers must have an overview of all the available resources and capabilities and
more importantly they must understand how each of these resources interact with each other
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and conditions under which each of them maintains or drop importance. It is also indicated
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that higher level of competition augments the values of resources and capabilities (Teng and
Cummings, 2002). Resources are possessed and controlled by the firm whereas capabilities
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are the abilities of a firm to position resources using its business processes. Therefore,
capabilities comprise of a bundle of resources that are required to execute some job. Such
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capabilities are developed under various functions by integrating technical, physical and
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human elements (Ravichandran et al., 2005). The next section has discussed the resources for
Industry 4.0 adoption and sustainable production to unlock CE capabilities.
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2.2 Resources for Industry 4.0 adoption and sustainable production to unlock circular
economy capabilities
Resources are essential for integrating I4.0 and sustainable production (Bressanelli et al.,
2018a; de Sousa Jabbour et al., 2018b). Literature has indicated various resources that are
summarized in Table 1. Present digital era comprise of internet of things and big data
analytics as important resources for the organisations (Bressanelli et al., 2018a). These
technologies act in a combined manner to develop the ability to run remanufacturing,
recycling and reusing production lines (Saidani, 2017).
Literature also reveals other resources like teamwork, organisational culture, environmental
knowledge, project management resources, green human resources, robotics in shop floor,
environmental awareness of workers, reverse logistics resources and top management
commitment.
Organisation culture and top management commitment plays an important role towards
successful sustainable projects (Muduli et al., 2013). Green human resource teams motivate
employees to pursue green production related initiatives (Jabbour and de Sousa Jabbour,
2016). Green teams develop their skills and environmental knowledge based on continuous
education and various training programs designed by human resource managers as per
requirement of the firm. Green training aids in adoption of green supply chain practices.
Green training of employees must be aligned with green supplier trainings to fulfil the cleaner
manufacturing requirements (Teixeira et al., 2016). Reverse logistics resources and project
management resources are critical for the success of cleaner manufacturing methods
(Govindan and Soleimani, 2017). Old and defective items consisting of electronic and

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computer parts, phones, automobile parts, machine components are returned to the suppliers,

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which generally pass through a number of steps such as disassembly, cleaning, refurbishing,
remanufacturing, assembling, painting, quality checking, packaging and return to the
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customers (Bag and Pretorius, 2020). Reverse logistics play an important role in return
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management of such goods. Reverse logistics resource commitment leads to investment in
reverse logistics resources which is directly correlated with reverse logistics and
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remanufacturing performance (Daugherty et al., 2001). It is essential that firms manage

changes in the organisation in a proper manner and configure resources as per business
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environment to achieve the desired outputs.

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Resources are essential to integrate two concepts that includes I4.0 and sustainable
production. Traditional management systems must be replaced with new innovative systems
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to fit the I4.0 and sustainable production requirements. Management involvement and
transformational leadership skills are capable of driving the changes in the supply chain.
Most importantly the ability of firm to perform planning and control of inventory, developing
flexible production lines, design for design for environment, design for remanufacture, aided
assembly, intelligent storage management, self-configured workstation layout, product and
process traceability and assembly control system play a critical role in integration of I4.0 and
sustainable production projects. I4.0 technologies such as cyber physical systems can drive
cleaner ways of manufacturing without producing wastages and using non moving resources.
Other I4.0 technologies such as internet of things can enable production in masses and meet
customer demands without manufacturing excess of non-moving items. Cloud computing can
restrict uncontrolled use of resources and additive manufacturing can help in proactive
maintenance of activities in the factory and save energy and resources (de Sousa Jabbour et
al., 2018b). These resources need to be configured by firms to develop a competitive edge
over its competitors.
The review of literature led to identification of thirty-five resources (see Table 1) that are
essential for the adoption of I4.0 in sustainable production and will aid in unlocking CE
capabilities.

Table 1. List of resources

Sr. No. Items Source
1 Teamwork and the implementation team de Sousa Jabbour et al. (2018b)

2 Organisational culture de Sousa Jabbour et al. (2018b)

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3 Project management resources de Sousa Jabbour et al. (2018b)
4 IT resources Telukdarie et al. (2018)

5 Top management approval

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6 Environmental knowledge Liu and bai (2014)
7 Green human resources Bag and Pretorius (2020)
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8 Environmental awareness Liu and bai (2014)

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9 Reverse logistics knowledge Elia et al. (2017)

10 Environmental cooperation Zhu et al. (2011)
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11 Robotics in shop floor Kerin and Pham (2019)

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12 Circular product design and production Elia et al. (2017)

13 Intelligent storage management Li et al. (2019)

14 Flexible remanufacturing systems Kerin and Pham (2019)
15 Supply chain relationships Sandberg and Abrahamsson (2011)
16 Aided assembly Li et al. (2019)
17 Self-configured workstation layout Li et al. (2019)
18 Product and process traceability Li et al. (2019)

19 Assembly control system Li et al. (2019)

20 Cross cycle and cross sector Elia et al. (2017)
collaboration
21 Management systems innovations and Liu and bai (2014)
long term investments
22 Inventory Control Sandberg and Abrahamsson (2011)
23 Strategic alignment de Sousa Jabbour et al. (2018b)
 24 Management leadership de Sousa Jabbour et al. (2018b)
25 Training and capacity building de Sousa Jabbour et al. (2018b)
26 Managerial knowledge and presence Sandberg and Abrahamsson (2011)
27 Empowerment of employees de Sousa Jabbour et al. (2018b)
28 Readiness for organisational change de Sousa Jabbour et al. (2018b)
29 Communication ability de Sousa Jabbour et al. (2018b)
30 Cross-functional teamwork Sandberg and Abrahamsson (2011)
31 Information processing capability Bag and Pretorius (2020)
32 Learning Sandberg et al. (2011)
33 End-of-life resource management Elia et al. (2017)
34 Design for environment Saidani et al. (2017)
35 Design for remanufacture Saidani et al. (2017)
Source: Author’s compilation

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3. Methodology

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The research team has considered exploratory research approach (EFA) to reduce the long list
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of resources and categorize them under relevant groups in the first part of this study. The
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research team used SPSS version 22.0 software for performing EFA.
In the second phase of this study the theoretical model was developed and tested by using
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WarpPLS software. The research steps followed in this study are presented in Figure 1.
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Figure 1. Research steps (authors’ compilation)

3.1 Operationalization of constructs

The measurement items for various resources were derived from EFA. The I4.0 construct (3
items) was considered from the study of Frank et al. (2019); sustainable production (8 items)
and circular economy capabilities (10 items) was considered from the study of Zeng et al.
(2017).

3.2 Data collection strategy

The data is collected from manufacturing firms based at South Africa. A structured
questionnaire was used for to gather primary data. The instrument was developed based on a
five-point Likert scale design. A multiple-item, 5-point Likert-type scale (1=“Strongly
Disagree”; 2=“Disagree”; 3=“Neutral”; 4=“Agree”; 5=“Strongly Agree”) was used.
The list of firms was selected using convenience sampling technique from Ezee-dex online
supplier database. Firms were selected from the heavy engineering, automobile component
manufacturing, electronic parts manufacturing and castings manufacturing category.
The online structured questionnaire was sent online to 1170 firms during the month of
September 2019. Only 27 filled up questionnaires were received within three weeks of
sending the initial request. A gentle reminder was sent during early October 2019 to rest of
firms that have not responded till then and further the research team received 35 filled up
questionnaires. In the month of November 2019, another gentle reminder was sent; and the

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research team received 168 filled up questionnaires before end of December 2019. Besides

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sending friendly reminders over online portal the research team made phone calls and made
polite requests to the target respondents to fill up the questionnaires.
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In total, the research team received 230 complete filled up questionnaires. The response rate
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was 21.49 percent, which is acceptable in social science research. The demographic summary
is presented in Table 2.
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Table 2. Demographic summary

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Metric Number of Percentage

respondents
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Primary Industry
Heavy engineering 34 14.78
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Automobile component 96 41.73

manufacturers
Electronic parts manufacturers 43 18.69
Castings manufacturers 57 24.78
Number of Employees
101-300 22 9.56
301-500 47 20.43
501-1000 146 63.47
More than 1000 15 6.52
Age of your Firm
Below 10 years 0 0
11-20 years 19 8.26
21 - 30 years 143 62.17
Above 30 years 68 29.56
Age of Employees
20-30 44 19.13
31-40 165 71.73
41-50 16 6.95
51-60 5 2.17
Corporate role
CEO/President/Owner/MD
CFO/Treasurer/Controller
CIO/Technology Director
Chief Procurement Officer
Senior VP/VP
Head of Business Unit
Department
Senior Manager
Junior Manager
Company Engineer
Data Analyst
Others
Years’ of work experience
Less than 5 years
2 0.86
6 2.60
2 0.86
3 1.30
8 3.47
or 14 6.08
179 77.82
8 3.47
5 2.17
3 1.30
3 1.30

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6-10 years 101 43.91
11-20 years 94 40.86

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Above 20 years 32 13.91
Source: authors’ own compilation
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From table 2 it is observed that maximum responses were received from automobile
component manufacturers. This sector has shown more interest towards digitalization and
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sustainable manufacturing.
It is also noticed that more responses are received from firms with employees in the range of
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500 to 1000. This can be due to the reason that medium and larger size firms have shown
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more interests towards I4.0 adoption and sustainable production and CE as they are having
more resources and capabilities than smaller firms.
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Thirdly, higher number of responses were received from the age group 31-40 years who are
mainly in the senior managerial positions having more than 5 years of work experience and
mainly responsible for driving projects. Therefore, the data obtained for this study is suitable
for performing analysis as senior managers have knowledge on the subject and it is unlikely
that any kind of bias would be involved in the data.

3.3 Common method bias

Various measures were adopted during the data collection stage to avoid effect of common
method bias on the data. Firstly, a small note was included before the actual questions started;
indicating that this questionnaire is for academic use only and at no point of time this data
will be used for any commercial work. This note aimed to build confidence among target
industry samples and also to encourage them to share the correct data with the research team.
Secondly, the research team used the much popular Harman’s single factor test to check the
CMB. From the SPSS output, it was found that nine factor emerged and first factor accounted
for 14.15 percent of variance which is much below the maximum limit of 50 percent which
means that the data is free from CMB (Podsakoff et al., 2003).

3.4 Non response bias

Non response bias test was also performed. The responses were received in various phases
after doing follow-ups. The early and late waves were compared using homogeneity of
variance test and the results indicate that no values were statistically significant, which means
that between the waves, no significant difference exists (Armstrong and Overton, 1977).

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4. Data Analysis and findings

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The results of exploratory factor analysis are presented below.
4.1 Exploratory factor analysis
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EFA is a popular technique used previously in supply chain management research. EFA is
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mainly used to uncover the underlying structure of a large number of variables (Osborne et
al., 2008). The KMO value is 0.87 (see Table 3) which is more that the recommended
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minimum value of 0.60 (Kaiser, 1974). The Bartlett's Test of Sphericity result was also
significant for the resources considered in this study. Therefore, the listed resources are
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suitable for applying EFA technique.

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Table 3. KMO and Bartlett's Test

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KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy 0.87
Bartlett's Test of Sphericity Approx. Chi-Square 7308.50
df 595
Sig. 0,000
Source: authors’ own compilation

The rotated component matrix is presented in Table 4. It indicates that 35 resources were
grouped under nine factors. The factor loadings were more than 0.50. All the eigen values
were more than 1.00.
 Table 4. EFA results

Group Resources Items Item Eigen Cumulative

Loading values percentage

I Production Flexible remanufacturing 0.753 4.953 14.153

Systems systems
Aided assembly 0.924
Self-configured workstation 0.929
layout
Product and process 0.918
traceability
Assembly control system 0.802

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II Human Training and capacity 0.547 4.350 26.582
Resources building

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Empowerment of employees 0.798
Readiness for organisational 0.883
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Cross-functional teamwork 0.888
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Learning 0.884
III Project Teamwork and the 0.735 3.756 37.312
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Management implementation team

Organisational culture 0.844
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Project management 0.816

resources
Top management approval 0.554
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IV Management Management systems 0.791 2.866 45.500

Leadership innovations and long-term
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investments
Strategic alignment 0.508
Management leadership 0.868
Managerial knowledge and 0.529
presence
V Green Environmental awareness of 0.747 2.561 52.818
Logistics transporters
Green logistics resources 0.677
Environmental knowledge of 0.676
transporters
Reverse logistics knowledge 0.606
VI Green Design Circular product design and 0.521 2.239 59.216
production
End-of-life resource 0.644
management
Design for environment 0.634
Design for remanufacture 0.816
 VII Information IT resources 0.542 2.015 64.973
Technology Knowledge of robotics in 0.748
shop floor
VIII Big Data Communication ability 0.839 1.971 70.605
Analytics Big data processing 0.844
capability
IX Collaborative Supply chain relationships 0.876 1.105 73.761
Relationships
Source: authors’ own compilation

The key resource groups that emerged from the EFA analysis were production systems,
human resources, project management, management leadership, green logistics, green design,

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information technology, big data analytics and collaborative relationships.

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4.2 Developing research framework and hypotheses
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This sub section elaborates the research framework that was developed based on preceding
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discussion and analysis (refer to Figure 2).
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Figure 2. Research Framework (authors’ compilation)

The explanation related to eleven hypotheses is presented below:

4.2.1 Production systems relationship with I4.0 adoption
Technological enhancements in the form of I4.0 are bridging the gap between physical,
biological and production systems globally (Bajracharya et al., 2016). I4.0 capacitates itself
to revolutionise the production systems (Onat and Bayar, 2010), by altering operations related
to shop floor and eventually facilitating real time supply chain management for the end user
(Donini and Marusic, 2019). Further, I4.0 enables the development of new products and
services for the customers while consuming less time and efforts (Cardin, 2019). I4.0 extends
a gamut of technologies like internet of things, cyber physical systems and industrial internet
of things to name a few (Elhabashy et al., 2019). However, it is pertinent to understand that a
firm need to acquire and configure key resources such as aided assembly, flexible
remanufacturing systems, self-configured workstation layouts, product and process

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traceability and assembly control system to enable I4.0 (Fernández et al., 2019). Hence, we

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hypothesise:
H1: Production systems based resources have a positive relationship with I4.0 adoption.
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4.2.2 Human resources relationship with I4.0 adoption
Technological involvement in human resource services has brought in a dramatic change in
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this domain (Whysall et al., 2019). Typical human resource processes are witnessing a
dramatic technological change (Sivathanu and Pillai, 2018). Eminent researchers opine that
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organizations with a positive mindset to implement technologically equipped human resource

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processes are outshining in comparison to organizations continuing with traditional

approaches (Barreto et al., 2017). Aligning human resource processes with I4.0 is expected
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to enable digitization of trainings, empowerment of employees, cross-functional teamwork

and learning (Benešová and Tupa, 2017). Rana and Sharma (2019) shared certain expected
challenges like standardization of processes, technologically competent workforce and
secured infrastructure (Longo et al., 2017). In contrast, Hecklau et al. (2017) states that
automation of human resource processes is not new. First human resource information
systems was realised in 1950's and gradually it has gained popularity. It is important to train
workforce and get ready for fitting in I4.0 projects. Therefore, we hypothesise:
H2: Human resources have a positive relationship with I4.0 adoption

4.2.3 Project management relationship with I4.0 adoption

Project management is the process that targets a particular concern or issue with respect to
particular business set-ups (Ghobakhloo and Fathi, 2019). It involves various interrelated
activities that jointly provide a solution for the problem in hand (Oesterreich and Teuteberg,
2016). I4.0 is considerably providing the automation of project oriented activities; as flexible
human-interfaces are capable to deliver promising productivity outcomes (Turner et al,
2019). Safety of workers has always been a concern in different manufacturing set-ups
(Benešová and Tupa, 2017). Veile et al. (2019) opines that implementation of technological
solutions can anticipate the deteriorating condition of the system, which can eventually lead
to possible solutions. Consulted literature confirms that apart from technological oriented
trainings; top management support, welcoming organizational culture and project
management resources are expected to positive outcomes (Pejic-Bach et al., 2020).
Subsequently, we hypothesise:
H3: Project management resources have a positive relationship with I4.0 adoption

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4.2.4 Management leadership relationship with I4.0 adoption
Pertinently, I4.0 is evidencing revolutionary changes in majority of the organizations across
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the globe (de Sousa Jabbour et al., 2018a). Involvement of technology in almost every sphere
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of organizational activities cannot be denied (Luthra and Mangla, 2018), and management
leadership constitutes an indispensable aspect from organizational perspective. Schneider
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(2018) stated that for any organization, management leadership must be positioned to accept
and deal with the technological challenges and related disruptions. Further, the traditional
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leadership approaches fall short for digitalization aspect especially from the perspective of
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smart industries (Mittal et al., 2018). Understanding leadership aspects like innovative
leadership styles and strategic process alignments is crucial (Lee et al., 2015). Successful
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leadership management is plausible only if leaders are ready to adopt changes and accepts
situational demands; here it is I4.0 adoption (Popkova and Sergi, 2018). Hence,
H4: Management leadership based resources have a positive relationship with I4.0 adoption

4.2.5 Green logistics relationship with I4.0 adoption

Technological involvements in the production processes is not novice, neither is the
associated environmental degradation (Donini and Marusic, 2019). Environmental specialists
shoulder the responsibility to spread awareness regarding environmental degradation due to
manufacturing procedures (Sharma et al., 2020). Green logistics is one of the efforts towards
sustainable manufacturing with seamless growth and development (Carvalho et al., 2018).
The upcoming of I4.0 and allied technologies are advantageous for manufacturers as well as
consumers (Bajracharya et al., 2016). Hussain and Malik (2020) highlighted the significance
of adopting green by extending the idea of green jobs in manufacturing and construction
sectors with an aim to protect and restore sustainable ecosystems (Longo et al., 2017).
However, environmental awareness of transporters, knowledge about green supply chain
resources, knowledge related to reverse logistics process is highly essential (Benešová and
Tupa, 2017). Therefore, we hypothesise:
H5: Green logistics resources have a positive relationship with I4.0 adoption

4.2.6 Green design relationship with I4.0 adoption

Digital industrialization is the core of green product development and sustainable production
processes currently, and organizations who are yet to adapt this feature are witnessing
survival difficulties (Mittal et al., 2018). Besides plenty benefits, I4.0 has put across a big

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environmental challenge worldwide (Sharma et al., 2020). In the race of neck to neck

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competition, every organization is moving towards sustainable production processes which
includes green designing (Hecklau et al., 2017). The basic design considerations of
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sustainable production comprise of environmentally friendly manufacturing, end-to-end
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resource management and capabilities to design remanufacturing or recycling of valuable
resources (Geissdoerfer et al., 2017). To achieve the green design goals along with I4.0
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perspective, the sustainable developmental goals by United Nations development program is

the key here to understand the customer expectations globally (Rana and Sharma, 2019).
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Hence, we hypothesise:
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H6: Green design resources has a positive relationship with I4.0 adoption
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4.2.7 Information technology relationship with I4.0 adoption

Industrial production set-ups are evidencing cut-throat competitions globally (Lee, 2015).
The attributable reasons include dynamic technological up gradations, changing business
paradigms and vulnerability to adapt this fast changing environment (Bajracharya et al.,
2016). Information and communication technologies infrastructure is greatly contributing
towards this phenomenon (Onat and Bayar, 2010). Oesterreich and Teuteberg (2016) opine
that information and communication technologies in the era of I4.0 are one of the best
sources to bridge a gap between traditional and conventional manufacturing technologies
(Benešová and Tupa, 2017). In contrast, data driven activities are very much susceptible to
digital challenges, for example connectivity and security issues (Geissdoerfer et al., 2017).
However, information technology resources when coupled with I4.0 contributions like
robotics in shop floor and artificial intelligence for real time data traceability can deliver best
possible results (Sharma et al., 2020). Subsequently, we hypothesise:
H7: Information technology has a positive relationship with I4.0 adoption

4.2.8 Big data analytics relationship with I4.0 adoption

Contemporarily, majority of the organizations are struggling with the data-rich requirements
to achieve competitive edge (Hecklau et al., 2017). Technological enhancements are
presumed to be an important source to develop manufacturing intelligence (Donini and
Marusic, 2019), which extends certain benefits like excellence in organizational operations
management and reduced environmental depletion (Lee, 2015). However, manufacturing
intelligence involve management of big data sets that play an important role in smart
manufacturing (Rana and Sharma, 2019). Big data analytics is also expected to improve

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digital communication strategies with the availability of advanced software’s for big data

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processing capabilities (Mittal et al., 2018). Therefore, we hypothesise:
H8: Big data analytics have a positive relationship with I4.0 adoption
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4.2.9 Collaborative relationships relationship with I4.0 adoption
Collaborative relationships are becoming extremely important for sustainable smart
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productions (Machado et al., 2020). Availability of various business models, for example
business-to-business has remarkably contributed towards advanced collaborative
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manufacturing set-ups (Hussain and Malik, 2020). Collaborative relationships extend optimal
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utilization of technological resources (Onat and Bayar, 2010). It is believed that collaborative
relationships improve the decision making process and organizational culture externally and
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internally (Carvalho et al., 2018). In the era of I4.0, digital collaboration creates new
knowledge, techniques and learning processes for sustainable supply chain productions (Lee,
2015). Collaborative relationships are creating a transparent path for virtual supply chain
management processes (Sivathanu and Pillai, 2018). However, there is a need to explore the
dynamism in manufacturing set-ups. Thus, we hypothesise:
H9: Collaborative relationships have a positive relationship with I4.0 adoption

4.2.10 I4.0 adoption and sustainable manufacturing

Sustainable manufacturing relates itself to the development of manufacturing systems that
can benefit everyone at present while saving the similar resources for future generations
(Machado et al., 2020). I4.0 competence can provide seamless opportunities to enhance
sustainable manufacturing (Sharma et al., 2020). I4.0 for manufacturing set-ups revolves
around three important aspects; (a) horizontal integration, (b) vertical integration, (c) end-to-
end engineering of product life cycles (Carvalho et al., 2018). Schneider (2018) opines that
I4.0, by using the information and communication technology infrastructure provides a
sustainable platform for manufacturing organizations. The involvement of I4.0 can really
prove beneficial as it facilitates optimal utilization of production networks and processes,
transparent energy consumption and recycling of resources (de Sousa Jabbour et al., 2019),
which is eventually sustainable smart manufacturing (Luthra and Mangla, 2018). Hence, we
hypothesise:
H10: Sustainable manufacturing has a positive relationship with I4.0 adoption

4.2.11 Sustainable manufacturing relationship with circular economy capabilities

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Circular economy extends sustainable growth and development opportunities while

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considering essential concerns like environment and resource conservation (Zeng et al.,
2017). It capacitates to implement 3R strategy that aims to reduce, reuse and recycle
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materials to the extent possible (Turner et al, 2019). Manufacturing organizations are one of
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the medium that results in massive and rapid degradation of environment and non-renewable
sources of energy (Geissdoerfer et al., 2017); which in turn calls for immediate efforts, and
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concept of circular economy can extend a feasible solution (Hussain and Malik, 2020).
Sustainable manufacturing can be a strategic initiative to utilise circular economy capabilities
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(de Sousa Jabbour et al., 2019). Depletion of materials and resources is creating concerns for
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the nations in general and world in particular (Liu et al., 2018). Sustainable manufacturing
and circular economy capabilities can prove rewarding for manufacturing firms. Hence, we
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hypothesise:
H11: Sustainable manufacturing has a positive relationship with circular economy
capabilities

4.3 Analysis
WarpPLS software was used to test the hypotheses. Data was cleaned and sorted before
following all the five key steps in PLS–SEM analysis.
The model fit and quality indices were checked before proceeding with the path modelling.
For instance, Average path coefficient = 0.171, Average R-squared = 0.265 and Average
adjusted R-squared (AARS) = 0.258 were found to be statistically significant.
The research team also checked Average block VIF = 1.710 and Average full collinearity
VIF (AFVIF) = 2.113 which were found within acceptable limit and indicates that
multicollinearity does not affect the analysis. Tenenhaus GoF was found to be 0.396, which
means a large fit of the model. Additionally, Sympson's paradox ratio (SPR) = 1.000, R-
squared contribution ratio (RSCR) = 1.000, Statistical suppression ratio (SSR) = 1.000;
Nonlinear bivariate causality direction ratio (NLBCDR) = 0.727 which means that no
endogeneity issues are present in the model. The tested model is presented in Figure 3.

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Figure 3. Tested model (WarpPLS output)

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The results of hypotheses testing are presented in Table 5.

Table 5. Hypotheses testing

Sr. No. Hypotheses Path p Supported
Coefficients value (Yes/No)
H1 Production systems have a positive 0.21 0.05 Yes
relationship with I4.0 adoption
H2 Human resources have a positive 0.11 0.03 Yes
relationship with I4.0 adoption
H3 Project management have a positive 0.15 0.05 Yes
relationship with I4.0 adoption
H4 Management leadership have a positive 0.12 0.05 Yes
relationship with I4.0 adoption
H5 Green logistics have a positive relationship 0.10 0.05 Yes
with I4.0 adoption
 H6 Green design have a positive relationship 0.41 <0.001 Yes
with I4.0 adoption
H7 Information technology have a positive 0.10 0.04 Yes
relationship with I4.0 adoption
H8 Big data analytics have a positive 0.44 <0.001 Yes
relationship with I4.0 adoption
H9 Collaborative relationships have a positive 0.27 <0.001 Yes
relationship with I4.0 adoption
H10 I4.0 adoption has a positive relationship 0.22 <0.001 Yes
with sustainable manufacturing
H11 Sustainable manufacturing has a positive 0.08 0.05 Yes
relationship with circular economy
capabilities

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Source: authors’ own compilation

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5. Discussion
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The findings indicated that production systems resources have a positive relationship with
I4.0 adoption. Therefore, H1 was supported. Second, Human resources have a positive
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relationship with I4.0 adoption. Hence, H2 was supported. Third, Project management
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resources have a positive relationship with I4.0 adoption. Therefore, H3 was supported.
Fourth, Management leadership resources have a positive relationship with I4.0 adoption.
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Therefore, H4 was supported. Fifth, Green logistics resources have a positive relationship
with I4.0 adoption. Therefore, H5 was supported. Sixth, Green design has a positive
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relationship with I4.0 adoption. Therefore, H6 was supported. Seventh, Information

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technology resources have a positive relationship with I4.0 adoption. Therefore, H7 was
supported. Eight, Big data analytics based resources have a positive relationship with I4.0
adoption. Therefore, H8 was supported. Ninth, Collaborative relationships based resources
have a positive relationship with I4.0 adoption. Therefore, H9 was supported. We also found
that I4.0 adoption has a positive relationship with sustainable manufacturing. Therefore, H10
was supported. Finally, sustainable manufacturing has a positive relationship with circular
economy capabilities. Therefore, H11 was supported. The current research findings are
supported by some of the recent studies such as Cezarino et al. (2019); Chauhan et al. (2019);
Daú et al., (2019); Garcia-Muiña et al. (2018); Prieto-Sandoval et al., (2019); Schneider et
al., (2019); Turner et al. (2019) which have explored the links between I4.0 and CE.
However, the current study is unique as it highlights the key resources that are essential for
firms to integrate I4.0 and sustainable production and further open CE opportunities.
Jabbour and Santos (2008a, 2008b) highlighted the importance of human resources in
developing sustainable businesses. Our findings highlight that not only human resources but
other than that eight other type of resources are positively associated with I4.0 adoption and
further it is positively associated with sustainable production and CE capabilities which are
new links that we have established in our study.

6.1 Theoretical implications

The RBV theory suggests that resources that are precious, extraordinary, difficult to duplicate
and non substitutable can bring competitive edge for the manufacturing firms. Integration of

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I4.0 and sustainable production require a set of resources to further build CE capabilities. The

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most important resources found important in South African context are: Big data analytics,
Green design, Collaborative relationships and Production systems. RBV is used in this
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research study to examine and understand firm’s internal resources and give emphasis to
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critical resources in formulation of strategies to achieve CE capabilities. These resources are
considered as key inputs to perform tasks and activities by the firm. Therefore, RBV
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highlighted the key resources required by firms to integrate I4.0 and sustainable production
by taking an “inside-out” view and stresses that firms can develop competitive advantage.
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6.2 Practical implications

The research team provides a detailed agenda for ethical business development in this digital
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era; for firms practicing I4.0 and sustainable production with the aim to unlock CE.
The CE is an economic method that is being used by several manufacturers to transform the
linear economy models into circular models for sustainability. In traditional linear systems
the products are disposed at the end of its use. CE replaces this end-of-life concept with
‘cradle to cradle’ which means the product will take re-birth at the end of its life. CE business
models include repair and maintenance; reuse and redistribution; refurbishment and
remanufacturing; recycling; cascading and repurposing; and organic feedstock business
model patterns. CE business models can eliminate the resource scarcity problems and help in
creating value for the firm. Various resources are required to drive CE business models which
require high initial investment, innovations and careful monitoring to avoid any unethical
practices. Many firms tend to use short-cuts and dishonest practices to do CE oriented eye
washing of customers which creates negative impact in the long run.
CE implementation takes time as the gathering of necessary resources and configuring them
as per business requirement consumes lot of time and therefore firms need to be patient
during the adoption phase. CE related awareness creation among stakeholders can be helpful
to eradicate unethical practices. Firms can start marketing campaigns pertaining to resource
circularity and environmental thinking to promote remanufactured/recycled products and
elevate customers’ sustainability and ethical awareness. It is very important to bring suppliers
into confidence and engage them into various research and development programs related to
CE business models. Drawing up service level agreement with suppliers for any long term
job will help to maintain ethics in the business transactions. It is essential to wisely use the
scarce resources and avoid wastages and rejections. Penalty clause must be present in the

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contract to penalize suppliers for any material wastage. This will lead to a more ethical and

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responsible procurement practices in CE. Also focus must be given towards ethical way of
profit sharing in the circular economy. CE business models will not sustain unless ethical
practices are followed by all stakeholders.
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Lastly, more focus on production systems, human resources, project management,
management leadership, green logistics, green design, information technology, big data
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analytics and collaborative relationships are required for I4.0 adoption in context to
sustainable manufacturing. These are internal resources which can develop firm’s capabilities
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to perform critical tasks. The orchestration of these resources seems to have been
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underestimated in the past and which negatively influenced building of CE capabilities. Not
all resources of the firm can help to integrate I4.0 and sustainable manufacturing. The current
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research study therefore highlights the strategic resources for such integration. Managers
must understand the importance of each strategic resource and focus only on these resources
for effective integration process and unleash CE.

7. Conclusions
The study aspired to develop a theoretical model linking key resources for I4.0 adoption,
sustainable production and circular economy in South Africa. The reviews of literature led to
identification of thirty-five resources that are playing a critical role in adoption of I4.0 in
context to sustainable production environment. This work is an excellent contribution to the
existing body of knowledge as the research team has extensively identified the resources for
sustainable manufacturing practices. Majority of the discussed factors falls in line with the
guidelines of sustainable developmental goals suggested by United Nations Developmental
program. Production systems form the core of every manufacturing organization irrespective
of product being produced. The article has highlighted several factors that can contribute
towards environmental conservation goals along with producing sustainable products and
services, which has become even more crucial due to enhanced vulnerability and scarcity of
essential resources in the present volatile situation.
Exploratory factor analysis was used to group the resources under relevant factors and
thereafter the theoretical model was developed. Finally, variance based SEM was performed
using WarpPLS software. Research findings indicate that resources such as production
systems, human resources, project management, management leadership, green logistics,
green design, information technology, big data analytics and collaborative relationships are
required for I4.0 adoption in context to sustainable manufacturing; second, I4.0 adoption

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have a positive relationship with sustainable production and finally, sustainable production

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have a positive relationship with circular economy capabilities. In line with the suggestion of
Carmeli and Tishler, (2004) that resources are essential for performance of manufacturing
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firms; the research team argued that resources are essential to support adoption and growth of
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I4.0 in sustainable production environment and further enhance CE capabilities which is also
supported by prior study of Fatorachian and Kazemi, (2018); where they had established a
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clear link between I4.0 and smart manufacturing. Earlier, de Man and Strandhagen (2017)
have opined that I4.0 can be exploited to drive sustainable business models. However, there
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are various challenges to I4.0 in supply chain sustainability (Luthra and Mangla, 2018) which
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can be overcome by understanding the relationships between resources leading to

sustainability (Paulraj, 2011; Turner et al., 2019).
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The study has been designed in a scientific manner; however, suffers from few limitations.
The research topic is contemporary and literature is scarce in this area which has forced the
research team to adopt exploratory study in the first phase and group the resources. Firms
involved in heavy engineering, automobile component manufacturers, electronic parts
manufacturers and castings manufacturers were only selected because I4.0 and CE is
relatively new in South Africa and only these sectors are practicing them. This led to low
response rate. The research team cautions future researchers to interpret the findings in
context to an emerging economy and further progress with exploring new areas related to this
topic.

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 Declaration of Interest Statement

Declarations of interest: none

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