Artificial intelligence driven ethical procurement systems, circular economy and governance: A supplier performance analysis

Given the significance of ethical procurement systems in the contemporary business landscape, a critical yet under-explored question in the literature on supplier cost performance is whether AI-driven ethical procurement systems influence the circular supply chain orientation of purchasing firms. Additionally, it is important to investigate the potential connections between circular supply chain orientation and both contractual and relational governance in relation to supplier cost performance. The data used was collected using a survey approach, and the model was further tested via structural equation modeling. It is confirmed that AI-driven ethical procurement systems positively influence the circular supply chain orientation of buying firms. However, firms' contractual governance has no significant influence on supplier cost performance in a circular economy (CE) context. The novelty of this research is based in its empirical demonstration of the positive influence of AI-driven ethical procurement systems on enhancing the circular supply chain orientation of buying firms. Additionally, this study offers fresh insights by exploring the distinct functions of relational and contractual governance in CE, showing that relational governance nurtures better supplier cost performance, while contractual governance does not. This suggests that relational mechanisms, such as trust and cooperation, are more adaptable to the evolving needs of CE than rigid contractual governance. The key lesson is that trust-based relationships are crucial for aligning procurement and governance practices with circularity goals in a firm's supply chain network.