Measuring Corporate Alignment With the Circular Economy: a Text‐Based Circularity Index From Mandatory Non‐Financial Disclosures

The transition to a circular economy (CE) has become a strategic priority for firms, yet empirical assessments of corporate circularity remain fragmented and heavily dependent on structured indicators or self-reported metrics. This paper proposes a novel, text-based circularity index derived from mandatory non-financial statements of large Italian companies. Using a corpus of FTSE MIB sustainability reports (2017–2022), we compute cosine similarity scores between firms' disclosures and an authoritative CE vocabulary built from 135 institutional and scholarly documents, generating a replicable and weighting-free measure of firms' alignment with circularity principles. We link this indicator to regional environmental infrastructures and contextual characteristics, focusing on recycling performance and energy recovery systems. Our findings show that firms operating in regions with more advanced recycling infrastructures—particularly higher hazardous waste recovery—consistently exhibit stronger semantic alignment with CE concepts. Younger firms and those with greater international exposure also display higher circularity engagement, suggesting that organizational dynamism and global normative pressures shape the adoption of circular strategies. These results highlight the importance of place-based environmental conditions in enabling corporate CE transitions and demonstrate the potential of text mining to enhance the monitoring of sustainability reporting and strategic environmental alignment.