An Integrated Strategic Policy-Based Approach to Circular Economy, Corporate Risk Management, and Innovation Capability for Enhancing Sustainable Firm Performance at PT PLN (Persero)
Main
Willy Novananda Siregar*
Willy Arafah
The development of electric vehicles (EV) in Indonesia presents economic opportunities as well as environmental challenges, particularly regarding the management of used electric vehicle battery waste. In this context, the implementation of circular economy becomes an important strategy for creating sustainable value through waste reduction, material recovery, and battery life cycle extension. However, the success of this approach is also influenced by the effectiveness of corporate risk management in anticipating regulatory, technological, and environmental risks arising from energy transformation. On the other hand, innovation capability is needed to drive efficiency and develop new business models capable of improving the competitiveness and profitability of companies. This study aims to integrate these three concepts with strategic policy as a mediating variable that ensures strategic alignment in achieving corporate performance objectives. The method used is an integrative literature review that examines literature from various disciplines to develop a conceptual model regarding the relationship between circular economy, corporate risk management, innovation capability, strategic policy, and sustainable firm performance. The results of the review indicate that circular economy, corporate risk management, and innovation capability have strong potential in driving improvements in firm performance, but their maximum contribution can only be realized through the support of adaptive and visionary strategic policies, particularly in large-scale organizations such as the state-owned enterprise PT PLN (Persero). Thus, this study provides a theoretical contribution in the development of a new conceptual framework as well as a strategic approach for strengthening the electric vehicle ecosystem and circular economy in Indonesia.
Adams, M., Jiang, W., & Ma, T. (2024). CEO power, corporate risk management, and dividends: disentangling CEO managerial ability from entrenchment. Review of Quantitative Finance and Accounting, 62(2), 683–717. https://doi.org/10.1007/s11156-023-01216-6
Agyapong, D., Agyapong, G., & Frimpong, S. E. (2024). Precursors of circular economy practices. Cleaner Environmental Systems, 12, 100163. https://doi.org/10.1016/j.cesys.2024.100163
Ahmad, N., Mobarek, A., & Raid, M. (2023). Impact of global financial crisis on firm performance in UK: Moderating role of ESG, corporate governance and firm size. Cogent Business & Management, 10(1). https://doi.org/10.1080/23311975.2023.2167548
Ajeigbe, K. B., & Ganda, F. (2023). Management of risk of corporate distress and failure before, during and after the COVID-19 pandemic via corporate governance performance. International Journal of Innovative Research and Scientific Studies, 6(4), 741–752. https://doi.org/10.53894/ijirss.v6i4.1900
Altaf, K., Ayub, H., Shabbir, M. S., & Usman, M. (2022). Do operational risk and corporate governance affect the banking industry of Pakistan? Review of Economics and Political Science, 7(2), 108–123. https://doi.org/10.1108/REPS-12-2019-0156
AlTaweel, I., & Al-Hawary, S. (2021). The Mediating Role of Innovation Capability on the Relationship between Strategic Agility and Organizational Performance. Sustainability, 13(14), 7564. https://doi.org/10.3390/su13147564
Andersen, T. J., Sax, J., & Giannozzi, A. (2022). Conjoint effects of interacting strategy-making processes and lines of defense practices in strategic Risk Management: An empirical study. Long Range Planning, 55(6), 102164. https://doi.org/10.1016/j.lrp.2021.102164
Arias Gómez, H. Y., & Antosová, G. (2025). Management of a strategic policy, exports and external performance of the Colombian regions. Panoeconomicus, 72(4), 525–545. https://doi.org/10.2298/PAN211016006A
Ayinaddis, S. G. (2023). The effect of innovation orientation on firm performance: evidence from micro and small manufacturing firms in selected towns of Awi Zone, Ethiopia. Journal of Innovation and Entrepreneurship, 12(1), 26. https://doi.org/10.1186/s13731-023-00290-3
Baloyi, T., & Ozumba, A. (2020). Strategic Risk Management among Small Enterprises in the Construction Industry. MATEC Web of Conferences, 312, 02013. https://doi.org/10.1051/matecconf/202031202013
Banihashemi, S., Meskin, S., Sheikhkhoshkar, M., Mohandes, S. R., Hajirasouli, A., & LeNguyen, K. (2024). Circular economy in construction: The digital transformation perspective. Cleaner Engineering and Technology, 18, 100715. https://doi.org/10.1016/j.clet.2023.100715
Battistella, C., Ferraro, G., & Pessot, E. (2023). Technology transfer services impacts on open innovation capabilities of SMEs. Technological Forecasting and Social Change, 196, 122875. https://doi.org/10.1016/j.techfore.2023.122875
Beckett-Camarata, J. (2020). Best Practices in PPP Policy Choice Based on Infrastructure Finance Policy and Implementation. In Public-Private Partnerships, Capital Infrastructure Project Investments and Infrastructure Finance (pp. 195–203). Emerald Publishing Limited. https://doi.org/10.1108/978-1-83909-654-920201008
Berzon, N. I., Novikov, M. M., Pozharskaya, E. L., & Bakhturina, Y. I. (2022). Monitoring the Modern Experience of Financial Risk Management in Russia Based on Corporate Social Responsibility for Sustainable Development. Risks, 10(5), 92. https://doi.org/10.3390/risks10050092
Bhaskaran, R. K. (2023). Sustainability Initiatives, Knowledge-Intensive Innovators, and Firms’ Performance: An Empirical Examination. International Journal of Financial Studies, 11(1), 14. https://doi.org/10.3390/ijfs11010014
Borisova, I. (2020). Strategic Risk Management in Design Companies (Based on LLC Giprosintez). Vestnik Volgogradskogo Gosudarstvennogo Universiteta. Ekonomika, 22(1), 135–145. https://doi.org/10.15688/ek.jvolsu.2020.1.12
Carmine, B. (2022). The Management of Corporate Risk Factors: The Business Risk-management and L’enterprise-wide Risk Management. International Journal of Economics, Business and Management Research, 6(8), 334–343. https://doi.org/10.51505/ijebmr.2022.6821
Chang, K., Luo, D., Dong, Y., & Xiong, C. (2024). The impact of green finance policy on green innovation performance: Evidence from Chinese heavily polluting enterprises. Journal of Environmental Management, 352, 119961. https://doi.org/10.1016/j.jenvman.2023.119961
Chatterjee, S., Chaudhuri, R., Mariani, M., & Fosso Wamba, S. (2023). The consequences of innovation failure: An innovation capabilities and dynamic capabilities perspective. Technovation, 128, 102858. https://doi.org/10.1016/j.technovation.2023.102858
Corvellec, H., Stowell, A. F., & Johansson, N. (2022). Critiques of the circular economy. Journal of Industrial Ecology, 26(2), 421–432. https://doi.org/10.1111/jiec.13187
Dühr, S. (2024). Population Growth and Distribution in Australia: Policy and Governance Challenges for a More Balanced Settlement Structure. Urban Policy and Research, 42(2), 109–123. https://doi.org/10.1080/08111146.2024.2320651
El-Dessouki, A., & Mansour, O. R. (2023). Small states and strategic hedging: the United Arab Emirates’ policy towards Iran. Review of Economics and Political Science, 8(5), 394–407. https://doi.org/10.1108/REPS-09-2019-0124
Fernández-Temprano, M. A., & Tejerina-Gaite, F. (2020). Types of director, board diversity and firm performance. Corporate Governance: The International Journal of Business in Society, 20(2), 324–342. https://doi.org/10.1108/CG-03-2019-0096
Freije, I., de la Calle, A., & Ugarte, J. V. (2022). Role of supply chain integration in the product innovation capability of servitized manufacturing companies. Technovation, 118, 102216. https://doi.org/10.1016/j.technovation.2020.102216
Fu, P., Ren, Y.-S., Tian, Y., Narayan, S. W., & Weber, O. (2024). Reexamining the relationship between ESG and firm performance: Evidence from the role of Buddhism. Borsa Istanbul Review, 24(1), 47–60. https://doi.org/10.1016/j.bir.2023.10.011
Gama, F., & Magistretti, S. (2025). Artificial intelligence in innovation management: A review of innovation capabilities and a taxonomy of AI applications. Journal of Product Innovation Management, 42(1), 76–111. https://doi.org/10.1111/jpim.12698
Ghofar, A., Muhammad, M., Rasli, A., Narullia, D., & Prestianawati, S. A. (2022). An investigation into factors affecting corporate risk management in ASEAN-4 Countries. Cogent Business & Management, 9(1), 2135204. https://doi.org/10.1080/23311975.2022.2135204
González, Y. M. (2023). Reforming to Avoid Reform: Strategic Policy Substitution and the Reform Gap in Policing. Perspectives on Politics, 21(1), 59–77. https://doi.org/10.1017/S1537592722000135
Gun, L., Imamoglu, S. Z., Turkcan, H., & Ince, H. (2024). Effect of Digital Transformation on Firm Performance in the Uncertain Environment: Transformational Leadership and Employee Self-Efficacy as Antecedents of Digital Transformation. Sustainability, 16(3), 1200. https://doi.org/10.3390/su16031200
Hartley, K., & Kirchherr, J. (2023). Circular economy: Trust the models? Resources, Conservation and Recycling, 190, 106793. https://doi.org/10.1016/j.resconrec.2022.106793
Haryana, A. (2022). Impact Analysis of Strategic Policy of Natural Resources and Environment in the Indonesian Long-term Development Plan of 2005-2025. The Journal of Indonesia Sustainable Development Planning, 3(2), 136–148. https://doi.org/10.46456/jisdep.v3i2.300
Hurtado-Palomino, A., De la Gala-Velásquez, B., & Ccorisapra-Quintana, J. (2022). The interactive effect of innovation capability and potential absorptive capacity on innovation performance. Journal of Innovation & Knowledge, 7(4), 100259. https://doi.org/10.1016/j.jik.2022.100259
Husaini, H., Nurazi, R., & Saiful, S. (2023). Moderating role of risk management effectiveness on corporate social responsibility- corporate performance relationship. Cogent Business & Management, 10(1). https://doi.org/10.1080/23311975.2023.2194465
IEA. (2023). Prospects for electric vehicle deployment. https://www.iea.org/reports/global-ev-outlook-2023
Iranmanesh, M., Kumar, K. M., Foroughi, B., Mavi, R. K., & Min, N. H. (2021). The impacts of organizational structure on operational performance through innovation capability: innovative culture as moderator. Review of Managerial Science, 15(7), 1885–1911. https://doi.org/10.1007/s11846-020-00407-y
Jung, S.-U., & Shegai, V. (2023). The Impact of Digital Marketing Innovation on Firm Performance: Mediation by Marketing Capability and Moderation by Firm Size. Sustainability, 15(7), 5711. https://doi.org/10.3390/su15075711
Kalina, I., Khurdei, V., Shevchuk, V., Vlasiuk, T., & Leonidov, I. (2022). Introduction of a Corporate Security Risk Management System: The Experience of Poland. Journal of Risk and Financial Management, 15(8), 335. https://doi.org/10.3390/jrfm15080335
Kompas. (2025). Strengthening the Domestic Electric Car Assembly Industry to Maintain the National Automotive Market. Kompas.Id. https://www.kompas.id/artikel/en-perkuat-industri-perakitan-mobil-listrik-dalam-negeri-untuk-menjaga-pasar-otomotif-nasional
Kroh, J., Globocnik, D., Schultz, C., Holdhof, F., & Salomo, S. (2024). Micro-foundations of digital innovation capability – A mixed method approach to develop and validate a multi-dimensional measurement instrument. Technological Forecasting and Social Change, 198, 122942. https://doi.org/10.1016/j.techfore.2023.122942
Kulinich, T., Andrushko, R., Prosovych, O., Sternyuk, O., & Tymchyna, Y. (2023). Enterprise Risk Management in an Uncertain Environment. International Journal of Professional Business Review, 8(4), e01700. https://doi.org/10.26668/businessreview/2023.v8i4.1700
La Rocca, M., Fasano, F., La Rocca, T., & Neha, N. (2024). Women in CEO duality and firm performance in Europe. Journal of Management and Governance, 28(1), 177–214. https://doi.org/10.1007/s10997-023-09669-6
Lazarevic, D., Salo, H., & Kautto, P. (2022). Circular economy policies and their transformative outcomes: The transformative intent of Finland’s strategic policy programme. Journal of Cleaner Production, 379, 134892. https://doi.org/10.1016/j.jclepro.2022.134892
Lebedev, V. V., Deberdeeva, N. A., Farkova, N. A., & Korobeinikova, L. S. (2022). Systemic Risk Management of Investments in Innovation Based on CSR. Risks, 10(5), 87. https://doi.org/10.3390/risks10050087
Leo, R. M., Camboim, G. F., Avila, A. M. S., Reichert, F. M., & Zawislak, P. A. (2022). Innovation capabilities in agribusiness: evidence from Brazil. RAUSP Management Journal, 57(1), 65–84. https://doi.org/10.1108/RAUSP-02-2021-0019
Lin, C.-C., & Chang, Y.-C. (2024). Impact of circular economy network building: resilience strategy to climate action. International Journal of Climate Change Strategies and Management, 16(3), 337–361. https://doi.org/10.1108/IJCCSM-12-2022-0150
Lu, H., Liu, X., & Osiyevskyy, O. (2023). Doing safe while doing good: Slack, risk management capabilities, and the reliability of value creation through CSR. Strategic Organization, 21(4), 874–904. https://doi.org/10.1177/14761270221122428
Malodia, S., Dhir, A., Alshibani, S. M., & Christofi, M. (2025). Born global: antecedents and consequences of innovation capabilities. Asia Pacific Journal of Management, 42(2), 1025–1058. https://doi.org/10.1007/s10490-023-09909-1
Mendoza-Silva, A. (2021). Innovation capability: a systematic literature review. European Journal of Innovation Management, 24(3), 707–734. https://doi.org/10.1108/EJIM-09-2019-0263
Messina, D., Barros, A. C., Soares, A. L., & Matopoulos, A. (2020). An information management approach for supply chain disruption recovery. The International Journal of Logistics Management, 31(3), 489–519. https://doi.org/10.1108/IJLM-11-2018-0294
Morseletto, P. (2020). Targets for a circular economy. Resources, Conservation and Recycling, 153, 104553. https://doi.org/10.1016/j.resconrec.2019.104553
Musiello-Neto, F., Rua, O. L., Arias-Oliva, M., & Souto-Romero, M. (2022). The role of corporate risk management in the relationship between open innovation and organizational strategy. International Journal of Innovation, 10(1), 6–29. https://doi.org/10.5585/iji.v10i1.20703
Naibaho, E. A. B., & Mayayogini, N. M. C. (2023). The Impact of Risk Management on Firm Performance: Corporate Governance as Moderating Variable. Media Ekonomi Dan Manajemen, 38(1), 129–146. https://doi.org/10.56444/mem.v38i1.3432
Neligan, A., Baumgartner, R. J., Geissdoerfer, M., & Schöggl, J. (2023). Circular disruption: Digitalisation as a driver of circular economy business models. Business Strategy and the Environment, 32(3), 1175–1188. https://doi.org/10.1002/bse.3100
Nguyen, H. T., & Nguyen, A. H. (2020). The Impact of Capital Structure on Firm Performance: Evidence from Vietnam. The Journal of Asian Finance, Economics and Business, 7(4), 97–105. https://doi.org/10.13106/jafeb.2020.vol7.no4.97
Noone, B. M., Lin, M. S., & Sharma, A. (2024). Firm Performance During a Crisis: Effects of Adhocracy Culture, Incremental Product Innovation, and Firm Size. Journal of Hospitality & Tourism Research, 48(1), 153–183. https://doi.org/10.1177/10963480221086846
Oliveira Rosa, B., & de Oliveira Paula, F. (2023). Circular economy adoption by European small and medium-sized enterprises: influence on firm performance. Review of Business Management, 25(3), 421–438. https://doi.org/10.7819/rbgn.v25i3.4232
Park, S.-B. (2023). Bringing strategy back in: Corporate sustainability and firm performance. Journal of Cleaner Production, 388, 136012. https://doi.org/10.1016/j.jclepro.2023.136012
Peña, I., Andrade, S. M., María Muñoz, R., & Barba-Sánchez, V. (2024). Wellness Programs, Perceived Organizational Support, and Their Influence on Organizational Performance: An Analysis Within the Framework of Sustainable Human Resource Management. Sage Open, 14(1). https://doi.org/10.1177/21582440241229358
Peng, D., Colak, G., & Shen, J. (2023). Lean against the wind: The effect of policy uncertainty on a firm’s corporate social responsibility strategy. Journal of Corporate Finance, 79, 102376. https://doi.org/10.1016/j.jcorpfin.2023.102376
Petersen, T. (2023). Strategische Handelspolitik 2.0. Wirtschaftsdienst, 103(5), 326–331. https://doi.org/10.2478/wd-2023-0099
Purwanto, E., Anwar, M., & Evanthi, A. (2022). The mediation role of organizational strategy orientation on the effect of environmental uncertainty on the performance of travel agency companies. International Journal of Research in Business and Social Science (2147- 4478), 11(8), 50–58. https://doi.org/10.20525/ijrbs.v11i8.2154
Putera, P. B., Widianingsih, I., Ningrum, S., Suryanto, & Rianto, Y. (2022). Regulatory Amendments of The Strategic Policy for The Job Creation in Indonesia: Research and Innovation Aspect. ASEAN Journal on Science and Technology for Development, 39(1). https://doi.org/10.29037/ajstd.735
Reike, D., Hekkert, M. P., & Negro, S. O. (2023). Understanding circular economy transitions: The case of circular textiles. Business Strategy and the Environment, 32(3), 1032–1058. https://doi.org/10.1002/bse.3114
Saari, U. A., Damberg, S., Schneider, M., Aarikka-Stenroos, L., Herstatt, C., Lanz, M., & Ringle, C. M. (2024). Capabilities for circular economy innovation: Factors leading to product/service innovations in the construction and manufacturing industries. Journal of Cleaner Production, 434, 140295. https://doi.org/10.1016/j.jclepro.2023.140295
Sarfraz, M., Ivascu, L., Artene, A. E., Bobitan, N., Dumitrescu, D., Bogdan, O., & Burca, V. (2023). The relationship between firms’ financial performance and performance measures of circular economy sustainability: an investigation of the G7 countries. Economic Research-Ekonomska Istraživanja, 36(1). https://doi.org/10.1080/1331677X.2022.2101019
Somwethee, P., Aujirapongpan, S., & Ru-Zhue, J. (2023). The influence of entrepreneurial capability and innovation capability on sustainable organization performance: Evidence of community enterprise in Thailand. Journal of Open Innovation: Technology, Market, and Complexity, 9(2), 100082. https://doi.org/10.1016/j.joitmc.2023.100082
Sudolska, A., & Łapińska, J. (2020). Exploring Determinants of Innovation Capability in Manufacturing Companies Operating in Poland. Sustainability, 12(17), 7101. https://doi.org/10.3390/su12177101
Torraco, R. J. (2016). Writing Integrative Literature Reviews. Human Resource Development Review, 15(4), 404–428. https://doi.org/10.1177/1534484316671606
Vu, H. M. (2020). A Review of Dynamic Capabilities, Innovation Capabilities, Entrepreneurial Capabilities and Their Consequences. The Journal of Asian Finance, Economics and Business, 7(8), 485–494. https://doi.org/10.13106/jafeb.2020.vol7.no8.485
Wang, D., & Xia, X. (2024). The impact of corporate digital transformation on firms’ performance in utilities sector. Heliyon, 10(1), e23362. https://doi.org/10.1016/j.heliyon.2023.e23362
Yalçın, N. G., Paredis, E., & Jaeger-Erben, M. (2024). Contested discourses of a circular plastics economy in Europe: prioritizing material, economy, or society? Environmental Politics, 33(2), 219–239. https://doi.org/10.1080/09644016.2023.2192145
Zulqarnain, Nizamani, S. A., & Shehwar, D. (2024). German Strategic Policy after the Cold War (1991-2017). Journal of European Studies (JES), 40(1), 27. https://doi.org/10.56384/jes.v40i1.334
