Adoption Barriers to Circular Business Models in Small and Medium-Sized Enterprises: A Financial Perspective

Abstract

The construction sector is a significant consumer of natural resources and a major contributor to global carbon emissions, positioning it as a critical sector in the transition to-ward the adoption of circular economy (CE) principles. Small and medium-sized enterprises (SMEs) are central to this transition, given their prevalence and influence within the sector. However, they often face substantial financial barriers when implementing circular business models (CBMs). This study investigates the financial barriers to implementing CBMs, with a focus on their variation across distinct CBM types. The empirical investigation was carried out in two distinct phases. The first phase comprised 11 semi-structured interviews with representatives from Finnish SMEs, large enterprises, and public-sector organisations. The second phase employed an online inquiry to gather more targeted insights from eight participating SMEs. The preliminary findings high-lighted the interconnected nature of financial and non-financial barriers, showing that financial constraints are closely linked to market dynamics, knowledge gaps, infrastructure limitations, regulatory challenges, and risk-related concerns, ultimately amplifying strategic and operational difficulties for SMEs. The identified barriers were most pronounced for “Circular Inputs”, “Product Life Extension”, and “Resource Recovery” business models, while “Product-as-a-Service" and “Sharing Platforms” showed no distinct financial obstacles, although limited investment capacity and persistent skepticism to-ward their economic viability remained evident. The study underscored the critical role of CBM-related knowledge, sector-specific context, and targeted support measures in mitigating financial constraints and fostering the adoption of CE practices.

Keywords: Circular Business Models (CBMs), Adoption Barriers, Small and Medium-Sized Enterprises, Construction and Sector SMEs

DOI: 10.54941/ahfe1007007