Understanding the organisational capabilities required for MSMEs to adopt circular economy business models

Abstract

Waste management is increasingly becoming a global challenge due to the increase in population leading to an increased demand for food, water, energy and other resources. MSMEs are argued to be responsible for a bulk of environmental problems such as pollution and waste. Transitioning to a circular economy is argued to be important approach that move businesses away from the “take-make-use-dispose” linear business model to one that slows or closes the resource loop allowing resources to circulate in a system for as long as they reasonably can, while maintaining high levels of utility. The circular economy concept however is still developing and therefore there is still limited research on the transition of SMEs in developing countries. This research therefore aimed to provide insights into the organisational capabilities of MSMEs transform to a circular economy, highlighting the barriers they face. The study followed a qualitative research approach, gathering primary data through 12 semistructured online and telephonic interviews with individuals representing MSMEs, environmental experts and policy experts. The three groups were interviewed to establish how SMEs in Eswatini were incorporating circular economy into their business models using dynamic capabilities as a framework. The research further aimed to understand the organisational barriers for the adoption of circular economy approaches. The study found that the MSMEs were not implementing circular economy practices or approaches due to inadequate information on how to derive value from circularity. The study further found that circular economy did not form part of decision making for MSMEs when pursuing new business interests due to the lack of a green mindset as well as financial, technical, cultural, policy and capacity barriers. The insights from this study contribute towards understanding the enablers for a sustainable circular economy, with a focus on MSMEs. Future research in this field could focus on the socio-environmental and socio-economic impacts of implementing circular economy approaches in MSMEs.