Circular Economy in Small and Medium Sized Enterprises—Current Trends, Practical Challenges and Future Research Agenda

1. Introduction

The target of developed and emerging economies of the world to become carbon neutral by 2050 is not achievable unless Small and Medium Enterprises (SMEs) become part of carbon reduction plans of larger corporations. SMEs are an important part of the supply chain, and they employ almost 60% of the world’s employable population (http://www.thefsegroup.com/definition-of-an-sme/). Around 90% of world’s business happens through SMEs. On one side, SMEs are major employment generator, but as per estimate they also contribute towards 70% of the global pollution. Specifically, it is observed that manufacturing SMEs account for almost 65% of the air pollution. This is due to limited compliance (around 0.5%) by the SMEs towards environmental management system [1], amongst other. Thus, the growing importance of SMEs has brought its own challenges in terms of environmental issues, and they need to rethink and redesign their business models to respond and overcome the emerging challenges [2,3]. In such circumstances, adoption of circular economy (CE) principles by SMEs could be a strategy to overcome business challenges and ensuring economic growth.

The concept of CE builds on the work of [4], an ecological economist. According to him, following the pattern of Earth’s closed economic system, we need to develop a circular economic system for longer sustainability of human life. Building on this initial concept, [5] in their theoretical framework explained the need to shift from open-ended economic system to CE system. CE has now come a long way and changed the manner of interaction between human society and nature [6]. The focus of CE has also gone through a paradigm shift with a focus on sustainable development at micro (enterprises and consumers), meso (economic agents integrated in symbiosis) and macro (cities, regions, governments) levels [7]. Attainment of circular model also requires innovation both in cyclical and regenerative ways following a manner by which society produces, consumes, and legislates. According to [8], CE constitutes emerging components - energy and resource recirculation, resource demand minimization, recovering value from waste through either reuse, reduce, and recycle, and a multi-level approach to achieve sustainable development through closely connecting with the societal innovation.

In the last 5 years or so, there has been considerable research on CE. Several review papers have been published focusing on the factors related to sustainability linking to the concept of CE. Review on sustainability has mainly focused on barriers or challenges related to sustainable development [9] or adoption of lean practices to facilitate sustainable development [10]. There are also some reviews on sustainable development in SMEs focusing on drivers, motivators, and financial performance [11,12,13]. The reviews on CE are more on understanding the major ingredients required for its adoption. One aspect of the reviews is to focus on drivers, barriers, challenges, business models, and practices [14,15,16,17]. Another aspect of the reviews is to focus on sectors such as manufacturing, supply chain or SMEs [18,19,20,21]. There are also reviews which focus on product-service system to achieve resource efficiency through CE adoption [22] or to understand the interplay between environmental and economic systems as result of CE adoption [23]. Unlike reviews on sustainability there are limited review focusing solely on the adoption of CE in SMEs.

The literature reflects the exploratory nature of research to understand CE adoption in different environments. This is reflected in a multitude of articles on qualitative studies and research questions asking more of “What” than “How” questions. A lot of theories have also been applied to explain the CE adoption phenomenon in different contexts. These include the systems theory, resource-based view, and stakeholder theory in the context of CE adoption in supply chain [24,25,26,27]. Further, a considerable focus of research has been to understand the building blocks such as drivers, enablers, barriers, challenges, and practices of CE adoption. Some of the major enablers highlighted in the literature relate to customers awareness, environmental safeguards, economic considerations, policy, and regulations [28,29,30]. Some of the barriers or challenges relate to resource constraints, external factors such as government regulations, training requirement, and initial investments [19,31,32].

The above analysis shows that although a considerable amount of research is there on CE adoption but there is still lack of research to understand its adoption mechanisms in supply chain specifically linked to SMEs and CE adoption. The current policies and regulations as well as government support are not adequate for SMEs, hence there is a need for a focused understanding of the adoption of CE in the SME context. Although there is research on CE adoption in larger organizations (e.g., [33]), studies on SMEs adoption of CE are scant [34]. There is also a lack of research on integrated approaches to successful implementation of CE in manufacturing SMEs in both developed and emerging economies [35].

Accordingly, the aim of this review paper is to create an opportunity to fill the gaps in the existing literature by assembling conceptual, theoretical, and empirical developments related to the topic of CE in SMEs from a multi-disciplinary perspective. While doing so, we reveal areas of research related to CE in SMEs that has been largely overlooked. Conducting a structured literature review, using secondary data from published articles in peer reviewed journals published between 2010 till date through content analysis we address the below questions.

RQ1: What are the emerging trends and theories applied in the research of CE adoption in SMEs?

RQ2: What are the drivers/enablers, issues, and challenges linked to the adoption of CE in SMEs?

RQ3: What strategies (e.g., energy and resource efficiency, waste management, wellbeing, corporate social responsibility), practices and frameworks are utilized for the CE adoption in SMEs?

By answering the research questions, the paper makes following contributions. The literature so far has mostly focused on supply chain or large corporations. Thus, our review identifies specific drivers, challenges, and strategies related to CE in SMEs. There is existing paper in implementation of CE from supply chain perspective. This study helps in the implementation of CE from SMEs perspective.

Section 2 presents the methodology for selecting the relevant papers for undertaking this review and a framework for analyzing the research questions. Section 3 analyses the selected papers following the proposed framework. Section 4 discusses the findings in line with the research questions. Section 5 presents propositions for future research on SMEs adoption of CE and concludes the analysis.

2. Literature Review

This section provides an overview about the existing research on CE and sustainability and reveal the emerging knowledge gaps. Existing literature review in the field of CE started around 2008 but picked-up the from 2014 onwards [19]. The existing literature review papers have been critically examined to establish the rationale for the necessity of this review paper. We initially focused our review only on SMEs but found that there are no review papers on CE adoption in SMEs. Though there are some articles about sustainability and SMEs, the articles on sustainability and SMEs focused mainly on innovation [11], drivers [12], barriers [9], lean practices and sustainability [36]. In case of review on CE, there were no articles on SMEs but rather they focused mainly on business models [14,16,37,38], or adoption in manufacturing [18,20], or in supply chain context [19].

The reviewed papers provide a comprehensive overview of sustainability practices, with a particular focus on eco-innovation in SMEs and Circular Economy (CE) principles. There is an underrepresentation of social dimensions in eco-innovation, highlighting the need for frameworks that incorporate the triple bottom-line approach. A significant gap exists in understanding the financial impacts of circular business models, especially during design, implementation, and evaluation phases. The literature lacks detailed strategies for CE implementation across different organizational levels, suggesting a need for models that address micro, meso, and macro-level challenges. Geographical variations in the barriers and enablers of CE, particularly outside of contexts like Chinese SMEs, are underexplored. Moreover, there’s a scarcity of empirical studies on CE implementation tools and a need for more in-depth research in circular finance within supply chains. Studies on the systematic application of circular practices in different industries, such as the automobile industry, are also lacking. These gaps underscore the need for more comprehensive, practical frameworks for CE, particularly in SMEs, and a deeper understanding of the integration of circular economy principles into competitive strategies without compromising economic growth.

Thus, there are no reviews, which focus on drivers, barriers, practices, actions, etc. from SMEs perspective. Another aspect which is missing is a robust framework that can enable the adoption of CE and objectively deriving solutions to successfully achieve higher sustainability performance. This is an important consideration when discussing about CE adoption in SMs. A summary of the review papers is presented in Table A.1.

3. Methodology

This study adopts a structured literature review approach. To achieve the aims of the research the authors have adapted the systematic review procedures outlined by [39] that consist of three stages: planning, execution, and reporting. The approach has been followed to combat the potential effect of researchers’ bias, and to ensure that a traceable path has been followed. One of the advantages of undertaking the systematic review approach is to become aware of the breadth of research and the theoretical background in a specific field [40]. Researchers believe that it is very important to conduct a systematic review in any field, specifically to understand the level of previous research that has been undertaken and to know about the weaknesses and areas that need more research [41]. Further, to ensure that the systematic literature review is valuable for the readers, we prepared a transparent, accurate and complete account of why the review is done, what is the process we followed, and present findings based on the suggestions by [42]. In order to achieve up-to-date reporting guidance, we also followed Preferred Reporting Items for Systematic Reviews and Meta-Analysis (PRISMA) statement published in 2020. As mentioned by [42], “familiarity with PRISMA 2020 statement is useful when planning and conducting systematic reviews to ensure that all recommended information is captured.

3.1. Material Collection

The articles related to CE were collected from the Web of Science. The period of collection of articles was from 2008 to 2022. During this period, we found the focus of CE by researchers has been on supply chain management and primarily SMEs. Though the number of papers specifically focused on SMEs we found were limited, our initial search focused mainly on CE but later we refined our search based on the developed research questions and focus of our study. The steps we followed in this regard are presented in Figure 1. Figure 2 presents the article selection process we followed.

3.2. Article Selection

The first set of articles are identified based on the keyword/phrase of “circular economy”. This helped us understand the breadth of publications on the topic. In the next stage, we started narrowing down our search based on the focus of our study and aligned with our research questions. This focused search helped us to reduce the number of articles to 247 from initial 958. The next phase of the search focused on only peer reviewed journal articles eliminating editorials, book reviews, academic dissertations, textbooks and working papers or any other form of grey literature.

The articles were selected from double-blind, peer reviewed journals, as they are the known sources of valuable knowledge [43] and are also helpful in setting up the theoretical and empirical work undertaken in the research domain [44]. In this phase, we also looked into the major journals in the field to enhance the coverage of our review and included additional articles, which might have got excluded in the first instance [45,46]. The authors also cross-checked with prior reviews and undertook manual searches of different citations and reference lists from selected articles in an attempt to minimize the number of articles that were omitted out due to human error [45,47]. For this, manual searches of several reference lists were carried out from the selected papers to identify additional relevant papers that are covered under the defined selection criteria.

The last two phases of the methodology focused on the selected papers (215 papers) from the previous phase. Now the focus is more on the contents of the articles. Starting with Abstracts we wanted to understand whether these papers are relevant for our aim and to address our research questions. Each researcher went through the contents and when there was an agreement about the relevance of the article for our study those were included. There were some articles for which we were not sure (based on the abstract), so those articles were taken to the final phase of our selection process. The final phase required us to extensively go through the articles to closely scrutinize them and ensure that our study includes most relevant articles required to answer our research questions. One of the keys eliminating factors of the articles in the final phase was articles which have engineering orientation such as papers focused on chemical engineering processes, or thermodynamics-based papers (aligned with mechanical engineering). Finally, we ended up with 163 articles which were then analyzed. Descriptive analyses focused on trends, research methodology, and theories applied in these articles. The purpose was to understand the current scenario and how we can interpret the progress in the field based on these trends.

More in-depth content analyses were further carried out to understand the major themes of the articles published in the area of green supply chain, sustainable supply chain, and circular supply chain. The content analysis was followed by meta-analysis of the literature. Finally, a conceptual framework was developed. The objective is to understand these themes in broader supply chain context and then develop a conceptual underpinning for SMEs.

4. Current Trends of Circular Economy Research in SMEs

4.1. Content Analysis

Content analysis focused on addressing our three research questions. Initial part of the analysis focused on descriptives such as trends, research questions examined, research methodologies adopted, and theories utilized for research. This helped us to understand the nature and theory stage [48] of CE adoption research in SMEs. We observed an increasing trend on CE adoption in SMEs, though the focus is still very much on the overall supply chain. An analysis of the research questions and methodologies helped us to realize that the focus of CE adoption research is still at a nascent stage [48] with more focus has been on exploratory qualitative case studies. Detailed discussion on content analysis is provided in the sections below.

4.1.1. Trends

The research on CE has grown exponentially in the last decade. But the focus of the research has been more generic and mostly in the areas of engineering and biological sciences [19]. As can be seen from Figure 3, there is an increasing trend in the number of articles from 2016 onwards. This period has seen an increase in review articles too. The reviews are mainly focused on CE implementation in green supply chain, circular supply chain, and sustainable supply chain. In the last three years there has been an increase in number of articles which explore drivers, practices, and challenges not only from supply chain perspective but also from the SMEs’ context.

4.2. Research Questions Addressed by Previous Research

4.2.1. Research Questions

One of the first aspects which we wanted to investigate was the research questions of the articles which were focused on CE implementation in supply chain or SME context. This helped us in understanding the focus of the articles.

Looking at the research questions (see Table A.2) helps us to understand that researchers have focused on CE implementation in supply chain from various lenses. One lens is based on their field of expertise such as in human resource [49], strategy [50,51,52], operations management [53] or marketing [54,55]. In operations management area, the research questions can be further categorized based on the focus such as SMEs [34,56], supply chain [19,40,57,58], reverse logistics [59], Industry 4.0 [60,61], remanufacturing [55], etc.

Another criteria use to address the research question is linked to the geographic location where the study was based, such as in Thailand [62], India [55], Mexico [57], Scandinavian countries [63], the Netherlands [64], the United Kingdom [34] and other European countries [35] There is also a generic lens where the focus is either on factors or on drivers, practices, challenges, etc. about CE adoption in supply chain or SMEs such as in the studies by different scholars [19,34,60,65,66]. There are articles which are also focused on understanding the theories that are required to explain the phenomenon of CE adoption. Some of these articles are by [68] and [69]. Overall, we see that the research about CE adoption in supply chain or in SMEs is still very open ended and the researchers are still exploring the phenomenon using different lenses.

4.3. Research methodology and Theory that are used to answer the research questions

4.3.1. Research Methodology

The research questions identified in the reviewed articles have been addressed using the methodologies as depicted in Figure 4. It becomes clear that dominant research methodology in the articles is qualitative studies or modeling without empirical evidence. According to [70], the choice of research strategy should consider three conditions: the type of research questions, the extent of control an investigator has over the actual behavior events and the degree of focus on contemporary as opposed to historical events. This aligns with the observations from the previous section where we found most of the research questions are exploratory in nature and for both qualitative studies and mathematical models the investigators have control. Thus, based on the observations from research methodology we can say that the theory of CE adoption in SME context is at a nascent stage [48].

4.3.2. Theory

Our survey of the articles shows that the CE adoption in Supply Chain and SMEs have seen the advent of theories in explaining the phenomena only in last 4-5 years (see Table 1). Some of the major theories that are used include, Agency theory, Institutional theory, Prospect theory, Stakeholder theory, Systems theory. Given that SMEs are vital component of supply chain inclusion of these theories help in explaining the interlocking mechanism between them and Overall Equipment Manufacturers (OEMs) or Public Sector Units (PSUs). This is evident from the articles by [71,72,73,74,75] where they applied institutional and stakeholder theories. According to them, these theories substantiate the effect of both internal and external pressures, where these pressures help SMEs to change their practices in order to reduce negative impacts and increase positive ones in CE adoption. Application of systems theory by the researchers such as [76,77], shows that the theory helps in explaining consideration of the various interrelated elements that collectively affect the viability of CE adoption in SMEs.

4.4. Enablers and Challenges

4.4.1. Enablers

In last 5 years, there are a few articles that highlight enablers, drivers, motivators, or success factors for CE implementation (refer Table A.3). For our research, we call them together as enablers, but we are equally aware of the slight difference in meanings of these terminologies. Some of these enablers mentioned in the literature are very context dependent such as from fashion industry [63], feedstock industry [83], and also if the articles are discussing about CE adoption in the whole supply chain or in a particular sector of SME or SMEs in general.

After going through the enablers of CE adoption in the reviewed articles, we classified the drivers for SMEs individually and then we came together and discussed further about the classification. Once we all agreed on the categories then we individually started to list the drivers in those categories and similar to categories finalization we came together again to finalize the list under each category of drivers for SMEs. The finalized list is provided in Table A.4.

Based on the review of enablers, we can see that there are lot of enablers that can be considered for CE adoption in SMEs. We have gone beyond some of the existing classification systems in the literature such as by [19,89]. These classifications were from supply chain perspective so, there is a need for understanding the enablers from SMEs context. Based on our prior research we have found that employee wellbeing and adoption of new technologies are the enablers for SMEs, if they are adequately supported by OEMs [34].

4.4.2. Challenges

The review of the articles showed us that there are around 29 articles which discuss about the challenges in CE adoption or implementation in supply chains or SMEs.

The challenges have been classified by various researchers (see Table A.5). Most of the classifications are around environment, economy, technology, stakeholder, and market [19,32,34,80]. There are two classifications which are based on design [29] and specific product – printer cartridge [81]. [29] based on design orientation classified challenges as interface design, technology upgradation, and synergy model; whereas [81] classified the challenges as related to collection of the cartridges, issues in remanufacturing and challenges at organization level. Overall, the challenges still have common categories and accordingly we categorized them for the SMEs as shown in Table A.6. One of the categories which we felt is not explored much in supply chain and not at all in the SMEs is about introducing workplace wellbeing and need to be further studied.

5. Meta-Analysis

Meta analysis has been undertaken to answer research questions 1 and 2.

5.1. Research Trends, Questions, Methods, and Theories

In order to answer RQ1, we focused on understanding the articles trend in CE research, different types of research questions, research methods, and theories. The article publication trend shows steady increase in the numbers. There is a sharp drop in article numbers in 2020, which might be attributed to COVID-19 when everything went to a standstill. But last three years has shown a steady increase in number of articles about CE adoption in SMEs. This shows that there is an increased interest about CE adoption in SMEs. This is evident from the types of research questions framed and also the theories applied in these research papers. The questions were primarily exploratory in nature and wants to understand the enablers, barriers, practices, and strategies related to CE adoption in SMEs.

The patterns are also evident through the research methodologies applied. Our meta-analysis shows that qualitative research methods were primarily used is most the articles and this aligns with the research question pattern [70].

5.2. Enablers and Challenges

Figure 5 below shows that first four categories almost cover 80 percent of the enablers for CE adoption. Advancement in technology is one of the major enabler categories, followed by conceptualization, market perspectives, and economic considerations. Surprisingly, stakeholder involvement is much lower in importance than other. This is counter intuitive given the notion that top management commitment has always been a key success factor behind successful adoption of any initiative. It also can be argued from the point of view of difference between enabler and success factor. Top management commitment can definitely be high ranked success factor but enabling an adoption requires other considerations such as marketing perspective, economic considerations, etc.

Technology is going to be a major enabler due to the emergence of Industry 4.0 in manufacturing sector [29]. There is an emergence of other technologies such as IoT, visual computing, and big data which help not only the companies but also the customers in making more responsive and better decision maker due to shorter feedback cycle [90]. SMEs being in the supply chain of manufacturing industries will definitely need adequate support from OEMs (Overall Equipment Manufacturers) to keep them abreast in technological advancements for successful CE adoption. Conceptualization is related to design and development of processes and operations which aligns with different technological advancements and help SMEs in developing products and services aligned with the benefits due to CE adoption. The literature suggests that the enablers in this category are mostly related to development of supplier network with low environmental impact [28], proper inventory management system both for raw materials and remanufactured products [78], increased and efficient information sharing and better utilization of resources [78,85,87], and adequate know-how to improve existing processes according to the requirements of CE adoption [85].

Marketing perspectives are driven by two factors. One is identification of markets for remanufactured, reused, recycled products and services and other is the consumer awareness about environment friendly product and services creating pressure for CE adoption [19,56,86,87]. Finally, economic considerations which revolve mostly around cost savings [80,88,89]. but also include policies related to benefits received due to design, development, and production of environment friendly production and services through CE adoption [19,47,90]. The economic considerations such as policy and regulation development towards incentivizing for CE adoption, we feel will definitely benefit SMEs and motivate them towards green solutions.

Low consideration of workplace wellbeing as an enabler is one category, which we feel needs to be looked in-depth. As suggested by [85], that it will be good to develop potential workplaces and improve vitality in order to motivate employees towards CE adoption. Further, SMEs can benefit greatly from investing in their employee health and wellbeing [63,76].

In an analysis similar to enablers, we found technology, economic considerations, and market perspectives as major challenges (refer Figure 6) along with stakeholders towards CE adoption. Here stakeholders are mostly external to the organization such as government and policy makers. Lack of government and legal standards, regulations, and policies towards incentivizing the organizations, in this case SMEs has been highlighted as major roadblock towards CE adoption [19,34,81,85]. Even there is lack of definition about sustainability from SME perspective [28]. Challenges on technical front include bottlenecks related to designing of reusable or recoverable products, lack of knowledge related to intellectual property or patents for in-house innovative technology development [81], and lack of technical skills and innovation capacity [2,40,87].

Economic challenges are related to both technological and stakeholder related challenges. One of the costs is about high investment or transition cost which will be due to developing green solutions or investing in R&D or newer technologies [63,88]. Another aspect which is related to cost considerations is about adequate policies and procedures related to financial support and incentives, which makes it difficult for SMEs to think of CE adoption. This leads SMEs to believe developing sustainable products and services as cost rather than an investment [31,35,40,89]. Finally, though enablers suggest that there is pressure due to customer education about environment friendly products and services, the literature on barrier and challenges suggest otherwise. According to several authors, there is lack of social awareness and also uncertainty about customers’ responsiveness and subsequent demand for recycled, reused or remanufactured products [19,51,82]. There is also poor market confidence on refurbished or recycled products as there is lack of technical standards related to such products and services. So, we feel that there are interlinkages between challenges and if they are addressed at policy level then the challenges will be more internal than external to an organization. The literature focusses for both enablers and challenges are still about government and legal policies and procedures so, more understanding is required about CE adoption from organizational change management perspective as well as about employee health and wellbeing. These factors are more important from SMEs perspective.

We also explored literature to understand the measures that will be useful for SMEs to understand the success of CE adoption. The literature mainly suggests cost savings as one of the metrics followed by reduction in greenhouse gas emission. The cost savings will happen mainly due to reduced cost of production, disposal, inventory carrying, and transportation. Also, there will be more profitability due to customer satisfaction, better resource utilization, and less cost of raw materials [30,79,88]. The literature is still limited on measuring the success of CE adoption and thus there is further research scope to work on developing appropriate metrics for SMEs.

5.3. Strategies, Practices and Framework for Circular Economy Adoption

The content analysis of 163 papers resulted the robust strategies, practices, and framework for CE adoption in SMEs. The whole underpinning is to embed CE philosophy within organizational value chain (i.e., circular economy fields of action – design, procurement, production, distribution, consumption and recover) and supply chain drivers (facility, transportation, inventory, information, sourcing, and pricing). Practicing sustainability-oriented innovation and lean approach [35,72,83] across products, processes, facilities, and supply chains will enable to achieve both energy and resource efficiency, wellbeing, waste management and corporate social responsibility (CSR) following reduce, reuse, and recycle principle. Both inter and intra organizational human resource management covering leadership, awareness and training, CSR, Governmental regulations are also key to adopt CE. Demand management encompassing understanding products attributes and customers’ requirements dynamically contributes to sustainability in turn CE adoption. Policy-makers regulations related to climate change issues also governs CE practices for effective adoption in dynamic environment. Both conversion technology and communication technology play major role to embed sustainability practices across CE fields of action and supply chain drivers. All these lead to enhance sustainability (economic, environmental, and social) performance.

This robust framework will enable organizations and their supply chain measure CE current state, identify issues and challenges, and means for improvement. A cost – benefit analysis will be undertaken to develop a business model to make decision on CE project implementation. An evaluation of the improvement project will be undertaken following the implementation of the improvement project.

6. Discussion

The advent of CE in the last couple of decades have seen an increase in research interest related to sustainable products and services, sustainable development and sustainable consumption, economic and environmental sustainability assessments, technical advancements in products and processes, etc. Larger corporations are already investing the resources and time towards CE adoption but same cannot be said about its adoption in SMEs. So, understanding this lacuna in the literature and check the state of the art we did a systematic literature review about CE adoption in SMEs. As SMEs are the vital cog of supply chain so, we focused on the articles on CE adoption not only in SMEs but also in supply chain.

Three major research questions were the driving force behind this study. They are: What are the Drivers/Enablers for CE implementation in SMEs? What are the Challenges and Barriers for CE implementation in SMEs?; and How to measure CE implementation success for SMEs?. We also focused on basic demographics of the articles, but major thrust was to understand the research questions, research designs, and the theories applied so far in the studies selected for our research. This helped us in understanding the theory stage of the research [48] on CE adoption in SMEs or supply chain.

In answering RQ1, analysis of research questions and research design helped us to understand that the field is still exploratory in nature as most of the research methods are still qualitative. According to [48], we can suggest the research on CE adoption in supply chain as well as in SMEs is at nascent stage. This shows that there are lot of opportunities to explore CE adoption and so our review at this stage is timely. The theories applied in the studies so far include stakeholder theory, systems theory, agency theory, and institutional theory. Most of these theories focus on the arrangement of and relations between the parts which connect them into a whole. As our study focused on supply chain and SMEs so, application of these theories is understandable. But the application of theories is still very limited. Going forward there is a need to look beyond the existing theories which can explain CE adoption in SMEs as well as develop theories to help SMEs in CE adoption. In literature there is immense discussion about SMEs being resource poor and also might not have required capabilities to successfully adopt CE [76,88]. In such scenarios, it will be worthwhile to study CE adoption strategically and look through the theoretical lenses such as resource-based view [49] or dynamic capability [57]. We started with several research questions initially but for this study we narrowed down to 3 research questions and through SLR and meta-analysis tried to explore and answer the questions. We found that there is very limited research about CE adoption in SMEs and there is definitely a need to have an extensive study. SMEs being the growth engine for not only emerging but also developed economies so a thorough understanding and developing a pathway for CE adoption in SMEs is a need of the hour.

To answer to RQ2, based on our analyses and findings we developed a conceptual framework (refer Figure 7), which includes enablers, challenges, and outcomes. In enablers and challenges, there are two broad categorizations. One is “Push” and the other “Pull”. These broad categorizations help us to understand CE adoption in a better manner. As per our framework, we feel that Technology, Stakeholder, and Organization actually push SMEs towards CE adoption. Technology due to ongoing advancements will prompt SMEs to always look for new technologies not only to align with customer needs but also in developing sustainable products and services. Similarly, there is always a push from the stakeholders and organizational aspects to stay ahead of the competitors and align with the customers which prompts SMEs towards adoption of CE. On the Pull side, market, economy, and environment. Market aspect is driven by either customer or competition. These two factors both pull SMEs towards CE adoption as either there is a requirement from the customers, or the competition prompts them to stay ahead or at least stay abreast [25,42,86,87]. The economic considerations such as policy and regulation development towards incentivizing for CE adoption and development of supplier network with low environmental impact further pull SMEs towards CE adoption [19,28,67,76]. We feel that enablers will help in overcoming the challenges and thus CE adoption will lead to measurable outcomes or sustainable performance for SMEs.

Finally, as strategies resource and energy efficiency are important to facilitate CE adoption in SMEs. Moving towards CE will help increasing resource efficiency by keeping highest values of the materials as well as keeping different materials, components, and products in the economy as long as possible. This will help in reducing or eliminating not only the waste but also the extraction of virgin materials as inputs for production [35]. [88] proposes processes related to closing, slowing, and narrowing resource loops (refer Table 2) in order to achieve resource efficiency.

Improvements in the resource efficiency provides a complimentary solution to the policies related to decarbonization by the addition of renewable energy sources or through energy efficiency [47,59,63,77,81,94]. Resource efficiency also provides a pathway to minimize primary energy use and waste and also addresses issues related to resource scarcity [97].

Thus, through content analysis, meta-analysis, and conceptual framework we have tried to answer all the research questions. Figure 7 shows, the framework which could be used to implement CE adoption in SMEs.

The research question 3 is to suggest the strategies for SMEs to promote implementation of CE in SMEs. The analysis provided in the findings section can be summarized as below:

(a)

Conceptualization, Design, Implementation, and Operations:

The drivers for the conceptualization, design and operation in SMEs is they struggle with integration of manufacturing processes, resource efficiency, and assessing circular economy as their competitive advantage. SMEs also face challenges in navigating renewable energy markets, forecasting spare parts, and complexity in supply chains.

Hence the strategies for CE adoption lies in the step-by-step approach. The SMEs first need to overcome supply chain complexities and enhance forecasting accuracy in the context of renewable energy and resource-efficient operations. They need to develop integrated systems that combine manufacturing, remanufacturing, and recycling. Also there needs to be focus on efficient resource utilization, product quality improvement, and ensure adequate storage facilities for remanufactured products.

(b)

Stakeholders:

SMEs actively work in collaboration with stakeholders to understand policies and secure support for sustainability training. In this process, SMEs must navigate bureaucratic issues, the lack of clear sustainability guidelines, and the insufficient implementation of circular economy laws. Therefore, SMEs should initiate efforts to streamline bureaucratic processes, establish clear guidelines, and enhance stakeholder collaboration for the effective implementation of sustainability practices.

SMEs should strive to foster collaborations with stakeholders, including NGOs and government bodies, promote and support policies that incentivize sustainability, engage in dialogues about circular economy projects, and emphasize sustainability training at all organizational levels.

(c)

Adopting Newer Technology:

SMEs can access enhanced information sharing, gain access to clean technology, and use environmentally friendly materials.

However, SMEs face limited innovation capacity, technological limitations, and design challenges, along with limited financial resources. SMEs should develop innovative technologies and design solutions to overcome these limitations and effectively utilize environmentally friendly materials. They should aim to implement advanced information management technologies for better data sharing. Additionally, they should adopt clean and eco-friendly technologies in product design and manufacturing. SMEs should also leverage big data and cloud manufacturing for improved operations.

(d)

Organizational Transformation:

SMEs unique characteristics involve Commitment to sustainability, innovation, and leadership for sustainable commitment. SMEs have challenges across Organizational reluctance, conflicts with existing culture, and lack of effective business models. Hence for the organizational transformation SMEs need to adopt Frameworks and models to align organizational culture with sustainability goals and foster internal cooperation. Cultivate a culture of sustainability within the organization, Encourage management commitment to sustainable practices. SMEs need to explore new business opportunities that align with sustainability goals.

(e)

Introducing Workplace Wellbeing:

For SMEs there is workforce wellbeing if there Increase in workplace vitality and job creation. However, there is Lack of employee skills in circular economy.

SMEs need to have programs for skill development and training in circular economy practices to enhance workplace wellbeing. Create a work environment that promotes employee well-being and vitality. Focus on job creation and providing opportunities that align with sustainable practices.

(f)

Economic Considerations:

SMEs are capable of Cost savings and generating new revenue streams. However, SMEs face challenges of High investment costs, perception issues, and economic disincentives.

SMEs need strategies to balance investment costs with long-term benefits and to change perceptions of sustainability as a valuable investment. They tend to utilize waste as a resource to reduce costs. SMEs need to access financial resources dedicated to sustainability projects, improve cost efficiency, and explore new revenue streams through sustainable practices.

(g)

Market Perspectives:

SMEs have Increased customer awareness and market potential for recovered products. However, the SMEs face challenges: of Low consumer awareness, need for new consumer behaviours, and flawed perceptions.

The SMEs strategy would be Marketing strategies and educational initiatives to enhance consumer awareness and acceptance of recycled and remanufactured products. Respond to increasing consumer demand for environmentally friendly products. Develop a market for recovered products and use environmental awareness as a tool for brand differentiation and strengthening.

(h)

Environmental Considerations:

SMEs have compliance with environmental regulations, environmental management systems. However, they have Lack of knowledge in smart waste management.

The SMEs strategy would be Education and knowledge-sharing initiatives focused on smart waste management and adherence to environmental regulations. Comply with environmental laws and regulations. Implement an environmental management system. Be proactive in declaring substances for recycling and adapt to challenges posed by rapid urbanization.

7. Conclusions

In the last decade, circular economy has become an imperative because of growing population and rapid urbanization. This has also necessitated that researcher focus on this phenomenon and also explore possibilities of CE adoption in different contexts. There have been several review papers which have focused either on CE definitions [7], CE business models [21] or on CE in supply chain [19]. There are also several reviews as evident from our paper are about drivers, practices, challenges of CE adoption but there are no reviews about drivers, barriers, practices, etc. about CE adoption in SMEs to the best of our knowledge. We have observed an increase in number of articles focusing specifically on SMEs in the last two years. Which is an encouraging sign showing the growing importance of SMEs in various economies. The focus of these articles is on enablers and barriers of CE adoption for SMEs. This helped us to understand the enablers and barriers of SMEs in a better manner.

7.1. Implications

Thus, based on the review of 163 articles on CE adoption in supply chain and SMEs we identified the research methodologies used, theories applied to explain the CE adoption phenomenon, drivers, and challenges of CE adoption. We found that the literature mostly talks about from lack of policy and regulations, government interventions, and technological advancements in CE adoption and categorize based on economy, environment, stakeholder, technology, and social perspectives. Many of these categorizations will for CE adoption in SMEs but there is real need to understand the drivers, barriers, etc. from SME perspective. So, keeping this in view we have classified the drivers and challenges for SMEs based on conceptualization, stakeholder perspective, technology adoption, organizational transformation, employee wellbeing, economic, marketing, and environmental considerations. The key contribution of the review is the framework proposed. The framework can be used by practitioners for implementation of CE. The framework has been derived from a structured approach for understanding the subject matter. The key contributions of the review include synthesizing existing literature, identifying gaps in knowledge, and proposing the framework for implementation.

7.2. Future Directions

Further studies will be needed to empirically explore the drivers and challenges of CE adoption in SMEs as well reorganize the categories. We feel our work provides –

• A landscape of research questions, theories, drivers, and challenges on CE adoption in SMEs in the last decade.
• This review helps both practitioners and researchers to develop a pathway for CE adoption and understand the whole gamut of drivers and challenges to manage successful CE adoption.
• The information synthesized from this research shows the power of systematic literature review through content analyses and visualize large volume of content in a structured manner from peer reviewed journals.