Achieving Sustainable Development: Integrating Circular Economy and Natural Capital for Environmental Sustainability in Europe

Natural capital stock (NCS) is the center of our living and economic development, yet it poses significant environmental threats. Preventing environmental degradation is undoubtedly vital for sustainable development. The circular economy (CE) can resolve the dilemma at this critical juncture. Therefore, the study aims to investigate the dynamics between NCS, CE, and environmental sustainability (ENS) to identify effective pathways for achieving sustainable development. It establishes three fundamental pillars: (1) efficient use of NCS, (2) sustainable production and consumption through CE, and (3) securing ENS to achieve UN's Sustainable Development Goals−8, 12, and 13 (SDGs 8, 12, and 13). The research underscores a trinity solution, emphasizing the interplay between NCS, CE, and ENS for sustainable development. In the investigation, the study applies the method of moments quantile regression (MMQR), including the mean group estimation (MG), augmented mean group estimation (AMG), fully modified ordinary least square (FMOLS), and canonical cointegration regression (CCR). The findings demonstrate that while direct extraction of NCS harms ENS, integrating NCS into CE practices significantly mitigates these adverse effects and promotes ENS. Our research provides valuable insights for policymakers and recommends the “active” economic policy to achieve sustainable development through enhancing ENS.