Implementation of Circular Economy Business Models by Small and Medium-Sized Enterprises (SMEs): Barriers and Enablers

TLDR

SMEs recognize the benefits of circular economy—such as cost savings, competitive advantage, and new markets—but face barriers like limited financial resources and technical skills. This study seeks to deepen understanding of the barriers and enablers that SMEs encounter when adopting circular economy business models. The authors conduct a literature review and analyze SME case studies featured on the GreenEcoNet EU‑funded web platform to identify these barriers and enablers. They find that while policy instruments exist, significant barriers persist, and recommend that European and national policies focus on greening consumer preferences, market value chains, and company cultures, and support SMEs through dedicated marketplaces and communities of practice.

Abstract

Small and medium-sized enterprises (SMEs) are increasingly aware of the benefits of closing loops and improving resource efficiency, such as saving material costs, creating competitive advantages, and accessing new markets. At the same time, however, various barriers pose challenges to small businesses in their transition to a circular economy, namely a lack of financial resources and lack of technical skills. The aim of this paper is to increase knowledge and understanding about the barriers and enablers experienced by SMEs when implementing circular economy business models. Looking first at the barriers that prevent SMEs from realising the benefits of the circular economy, an investigation is carried out in the form of a literature review and an analysis of a sample of SME case studies that are featured on the GreenEcoNet EU-funded web platform. Several enabling factors that help SMEs adopt circular economy practices are then identified. The paper concludes that although various policy instruments are available to help SMEs incorporate circular economy principles into their business models, several barriers remain. The authors recommend that European and national policies strengthen their focus on greening consumer preferences, market value chains and company cultures, and support the recognition of SMEs’ green business models. This can be achieved through the creation of dedicated marketplaces and communities of practice, for example.