Circular Economy Needs Entrepreneurs Not Just Big Corporations

The Circular Economy Has a Startup Problem

In 2018, a Dutch company called Fairphone raised eyebrows by selling a smartphone designed to last a decade. Users could swap out a broken screen, replace a dying battery, and upgrade the camera module themselves. It was a radical bet against planned obsolescence, and it worked well enough to keep the company alive. But here is the part that keeps circular economy researchers up at night: Fairphone is still a niche player. Meanwhile, Apple, Samsung, and the rest of the linear economy giants continue to ship hundreds of millions of phones every year, most of which will be replaced within 24 months.

The gap between Fairphone’s ambition and Apple’s scale is not just a business story. It is a research problem. And according to a new systematic review by Nathalia Suchek, João J. Ferreira, and Paula Odete Fernandes, published in Business Strategy and the Environment, the academic world has been looking at circular economy entirely backwards.

For years, the dominant narrative has been that large corporations will lead the transition to a circular economy. The logic is seductive: big companies have supply chains, capital, and market power. If Walmart decides to eliminate waste, the thinking goes, the entire retail ecosystem will follow. But Suchek and her colleagues found something else entirely. After analyzing 102 academic papers on circular economy and entrepreneurship, they discovered that the research community has been obsessed with one specific type of company: the growing circular small and medium enterprise (SME). These are companies like Fairphone, or a textile recycler in Germany, or a food waste startup in Portugal. They are the startups and scale ups that are actually building circular business models from scratch.

But here is the problem: the research is not keeping up with the reality.

What the Paper Actually Found

Suchek, Ferreira, and Fernandes conducted a systematic literature review, which is a fancy way of saying they scraped every relevant paper from the two biggest academic databases, Scopus and Web of Science, and then read them all. They started with over 700 potential articles, filtered down to 102 that specifically addressed the intersection of entrepreneurship and circular economy, and then coded them for themes.

The authors identified four distinct clusters of research:

• ▸Growing circular SMEs: Companies that started as linear businesses and are transitioning toward circular models.
• ▸Born circular firms and startups: Companies founded from day one with a circular business model.
• ▸Social entrepreneurship in circular economy: Ventures where social mission and circularity are intertwined.
• ▸Support ecosystem for circular entrepreneurship: The policies, incubators, and funding mechanisms that enable circular startups.

The finding that jumped out? The vast majority of papers focused on the first group, the growing circular SMEs. But the authors argue that this is the least interesting group for understanding how circular economy actually scales. Why? Because these companies are often just doing incremental improvements on linear models. They are recycling more, or using less packaging, or sourcing recycled materials. That is good. But it is not a fundamental shift.

The real action, according to the review, is in the second and third groups: born circular firms and social enterprises. These are the companies that do not just reduce waste; they design waste out of the system from the beginning. They are the ones that might actually disrupt the linear economy, because they are not trying to make the existing system slightly less bad. They are building a different system.

Why Big Corporations Are Bad at Circular Economy

This is where the paper gets uncomfortable for corporate sustainability officers. The authors found that the literature on circular entrepreneurship has a strong European bias. Of the 102 papers, the majority were set in Europe, with a heavy concentration in the United Kingdom, Germany, and Italy. This is not just a geographic curiosity. It reflects a deeper structural reality: European policy has created a more favorable environment for circular startups, through extended producer responsibility laws, landfill taxes, and waste reduction targets.

But even in Europe, the big corporations are not leading. They are following, and slowly.

The reason is not malice. It is physics. Big corporations are optimized for linear efficiency. Their entire operational model is built around extracting resources, manufacturing products, selling them, and then externalizing the cost of disposal. Changing that model means rewriting supply contracts, retooling factories, retraining sales teams, and often cannibalizing existing revenue streams. A car company that sells vehicles is not naturally incentivized to design cars that last 30 years and can be easily disassembled. That would destroy its parts business.

Startups have no such baggage. A born circular firm does not have to unlearn anything. It can design its entire business model around circular principles from day one. This is not a theoretical advantage. The authors cite research showing that born circular firms are more likely to adopt radical circular innovations than incumbent firms. They are also more likely to engage in product as a service models, where the company retains ownership of the product and the customer pays for the outcome. Think of a lighting company that sells light, not lightbulbs. Or a tire company that sells miles, not rubber.

The Social Entrepreneurship Blind Spot

One of the most striking findings in the review is how little attention social entrepreneurship gets in the circular economy literature. The authors found that social entrepreneurship is the smallest of the four thematic groups, with only a handful of papers. This is a problem, because circular economy is not just a technical challenge. It is a social one.

Consider electronic waste. The global e waste problem is not just about designing better phones. It is about the informal recycling sector in countries like Ghana and India, where millions of people make a living by dismantling old electronics, often under dangerous conditions. A circular economy that ignores these workers is not circular. It is just outsourcing the problem to a different part of the world.

Social entrepreneurs are often the ones who bridge this gap. They create collection networks that pay fair wages to informal recyclers. They design repair programs that employ people with disabilities. They build community composting systems that turn food waste into local jobs. But the research community has largely ignored them, focusing instead on tech startups with venture capital backing.

The authors argue that this is a missed opportunity. Social enterprises may not have the same growth potential as a software startup, but they have something else: trust. They are embedded in communities, and they can mobilize people in ways that a corporate sustainability program cannot. If circular economy is going to scale, it will need both the efficiency of startups and the legitimacy of social enterprises.

What the Research Does Not Prove

This review is not a prediction. It does not claim that startups will inevitably win. It does not argue that big corporations are irrelevant. What it does is map the landscape of what we actually know, and the map has some big blank spots.

First, the research is almost entirely Western. The authors note that there is almost no scholarship on circular entrepreneurship in Asia, Africa, or Latin America. This is a problem because those are the regions where the linear economy is growing fastest. A circular economy that only works in Berlin and San Francisco is not a global solution.

Second, the research is short term. Most of the papers in the review are case studies or cross sectional surveys. There are almost no longitudinal studies that track circular startups over time. So we do not actually know if born circular firms survive longer than linear ones. We do not know if they grow faster or fail more often. We have lots of inspiring stories, but very little hard data on survival rates.

Third, the research is fragmented. The authors found that papers on circular entrepreneurship are scattered across journals in business, environmental science, engineering, and social policy. There is no dedicated journal for this topic, and no unified theoretical framework. This makes it hard for researchers to build on each other's work, and it means that policymakers and investors are working with incomplete information.

Why This Matters for Entrepreneurs

If you are thinking about starting a circular business, this paper offers a kind of permission. The research suggests that you do not need to wait for the big corporations to lead. In fact, you should probably not wait. The most interesting circular businesses are the ones that were born circular, not the ones that are trying to retrofit their linear model.

But the paper also offers a warning. The support ecosystem for circular entrepreneurship is still weak. The authors found that research on policy, funding, and infrastructure is one of the smaller thematic groups. This means that circular startups are often operating without the safety nets that linear startups take for granted. There are fewer venture capital funds that understand circular business models. There are fewer accelerators that specialize in product as a service. There are fewer government programs that reward waste reduction rather than revenue growth.

This is both a problem and an opportunity. The entrepreneurs who figure out how to build circular businesses in the absence of a supportive ecosystem will have a massive advantage when the ecosystem finally catches up.

What This Actually Means

• ▸Stop asking how to make big corporations circular. The research suggests that the most promising path is to build new companies from scratch, not to try to reform incumbents. If you are an investor, look for born circular startups. If you are a policymaker, design programs that support new ventures, not just corporate sustainability reports.

• ▸Social entrepreneurship is underrated and understudied. The circular economy will not work if it only serves wealthy consumers. The most impactful circular businesses are often the ones that address social equity, like fair trade recycling or community repair networks. Researchers and funders need to pay more attention to this group.

• ▸Europe is not the world. The research is overwhelmingly focused on European countries, but the biggest circular economy challenges are in Asia and Africa. If you are an entrepreneur in a developing country, you are building in the dark. There is almost no academic research to guide you. That is a gap, but it is also an opportunity to be the first to document what works.

• ▸Data on success rates is missing. We do not know if circular startups survive longer than linear ones. We do not have the longitudinal studies yet. This means that every circular entrepreneur is taking a leap of faith, but it also means that the first researcher to run a proper survival analysis will have a landmark paper.

• ▸The support system is the bottleneck. The research shows that the ecosystem for circular entrepreneurship is underdeveloped. This is not a reason to give up. It is a reason to build your own ecosystem. Founders who share resources, create informal networks, and lobby for better policies will have an edge over those who wait for the system to appear.

The circular economy is not a technology problem. It is a design problem, a business model problem, and a cultural problem. And the people who are best equipped to solve those problems are not the ones sitting in corporate boardrooms. They are the ones building something new from nothing. The research finally agrees.