Pathways to Circularity: Engagement patterns of European SMEs in the circular Economy

Abstract

Compliance with the 2030 agenda is forcing small and medium-sized enterprises (SMEs) in the European Union (EU) to transition from linear to circular business models, boosting the adoption of circular economy (CE) activities. More information is needed to know the transition stage of these companies. Therefore, the objective of this study is to evaluate the implementation patterns of nine CE activities by EU SMEs and explore the relationships between the implementation of CE activities and the characteristics of these companies in terms of economic activity and ownership. To this end, we used a sample of 13,322 SMEs from the EU, using the Latent Class Model to identify the implementation patterns of CE activities and correspondence analysis to relate the implementation of CE activities with the characteristics of the SMEs. The results show that in the implementation of CE activities, five patterns of SMEs involvement can be identified, with CE activities being systematically independent in each pattern. It was also demonstrated that the SMEs with the highest probability of engagement are those dedicated to service activities, medium-sized companies established more years ago, with high and growing turnover, which invest most of their turnover annually in CE activities, and those that sell products or services to multiple final destinations. This study contributes to demonstrating that the essential dynamic capabilities of SMEs to become circular must be incorporated into a pattern of implementation of CE activities and that in their implementation, CE activities are not independent of each other but follow a specific pattern of involvement, in which activities are invariably interdependent in relation to other patterns.