The circular economy—designing out waste, keeping materials in use, and regenerating natural systems—offers a compelling alternative to the extract-make-dispose model that dominates industrial production. But translating circular principles into viable business models that can attract investment, achieve scale, and compete with linear incumbents remains one of the most challenging problems in sustainable entrepreneurship.
Iswoyo, Fauzuddin, and Ermawati (2025) provide a bibliometric map of research at the intersection of business models and social enterprises, analyzing 363 articles to identify themes, gaps, and trajectories. Their analysis reveals that the field has matured from advocacy (arguing that social enterprises should adopt sustainable business models) to mechanism design (understanding how they actually do so). The dominant research themes include value proposition redesign (how social enterprises create value that combines financial returns with social and environmental impact), stakeholder engagement models (how they manage relationships with communities, investors, and regulators who have different value priorities), and revenue model innovation (how they generate income from activities that traditional markets do not price, such as waste reduction and ecosystem restoration). A persistent gap the analysis identifies is scalability: most social enterprise business model research examines small-scale ventures, with very limited evidence on how these models scale beyond local markets.
Hamzah, Shaari, and Yusof (2025) present a detailed case study of Kloth Circularity Malaysia, a social enterprise that recycles and upcycles textile waste. The case illustrates both the promise and the constraints of circular business models. On the promise side, Kloth Circularity demonstrates that textile waste—a massive and growing environmental problem—can be converted into commercially viable products while creating employment and reducing landfill pressure. On the constraint side, the venture faces challenges that illuminate broader structural issues: virgin textile materials remain cheaper than recycled alternatives (because environmental costs are not priced), consumer willingness to pay for recycled products is limited and inconsistent, and the logistics of collecting and sorting textile waste are complex and labor-intensive. The case suggests that circular business models often require policy support (extended producer responsibility, landfill taxes, recycled content mandates) to level the playing field with linear competitors.
Sofiq, Wulandari, and Idries (2025) examine a different circular model: converting rice straw waste into substrate for mushroom cultivation in Indonesian MSMEs. This case is instructive because it demonstrates circularity at the simplest possible scale—a single agricultural waste stream converted into a single value-added product within a local supply chain. The business model works because the economics are straightforward: rice straw has near-zero cost as an agricultural residue, mushroom cultivation is labor-intensive but low-capital, and local demand for mushrooms provides a reliable market. The model's limitation is also its strength—its simplicity means it solves one waste stream problem elegantly but does not address the systemic redesign that comprehensive circularity requires.
The synthesis across these studies suggests that circular economy startups face a paradox of scale. The most commercially viable circular models tend to be narrow (one waste stream, one product) and local (short supply chains, known customers). The comprehensive circularity that environmental scientists advocate—systemic redesign of production and consumption—requires coordination, infrastructure, and policy support that individual startups cannot provide alone. The implication is that circular entrepreneurship and circular policy must develop in tandem: startups demonstrate what is possible, and policy creates the conditions under which it becomes competitive.