The circular economy and Industry 4.0 are two transformative approaches in the steel industry that simultaneously pursue environmental sustainability and productivity enhancement. This study aims to identify and analyze the key challenges in implementing these two approaches at Khouzestan Steel Company. First, through a systematic literature review and the use of previous research findings, a set of challenges was identified across ten main dimensions. Then, the fuzzy DEMATEL method was applied to examine the causal relationships among these challenges. The results indicate that in the human resources and change management dimension, “fear of job position reduction” and “fear of criticism and supervision”; in technical skills, “need for advanced training” and “lack of specialized knowledge”; in cost and budget, “high initial investment requirement” and “continuous maintenance and upgrade needs”; in security and privacy, “information security” and “weak security policies”; in technology development, “lack of network infrastructure” and “shortage of improvement technologies”; in integration complexity, “insufficient awareness of emerging technologies” and “absence of data-sharing protocols”; in big data and analytics, “difficulty in combining diverse data sources” and “differences in data interpretation”; in strategy, “lack of effective governmental support” and “absence of planning for emerging industries”; in the participatory model, “infrastructural gaps” and “human–machine incompatibility”; and finally in environmental impacts, “lack of environmental regulations” and “reduction of natural resources” represent the most influential and affected challenges.