Transitioning from Linear Economy to Circular Economy in SMEs: Butterfly Effect Through Actionable Steps!

Numerous studies have addressed the challenges and barriers to the Circular Economy (CE). However, only a few of these studies have focused on the practical implementation of CE and guided a smooth and successful transition from a linear economy (LE) to CE. This research aims to analyse and synthesise the existing literature on the implementation of CE in Small and Medium Enterprises (SMEs) in developing countries, identifying key steps for a successful transition. This study presents a systematic literature review on the implementation of CE in SMEs within developing countries, utilizing the SPAR-4-SLR methodology. The research drew on papers extracted from Scopus and the Web of Science (WOS), with 87 papers published between 2017 and 2025 thoroughly analysed using descriptive and content analysis techniques. Based on this analysis, the study identifies core areas essential for implementing CE and transforms these into actionable steps for SMEs in developing countries. Additionally, the estimated impact of these steps is illustrated through a butterfly diagram, which reflects value creation while assuring the 3Ps of sustainability (Planet, People, and Profit). This study synthesizes relevant literature and highlights the crucial role played by governments, collaborations, Industry 5.0, and sustainable behaviours in facilitating the transition to CE in SMEs in developing countries. Furthermore, it provides a future research agenda to support the successful application of CE in SMEs, thereby benefiting the stakeholders involved, represented through the butterfly diagram and outlining five stages of Circular Economy adoption.