Green Entrepreneurship and Innovation in the Circular Economy: Opportunities for Startups

and Small Businesses.

ABSTRACT
This paper explores the intersection of green entrepreneurship and innovation within the
circular economy framework, focusing on opportunities for startups and small businesses.
The circular economy presents a paradigm shift from the traditional linear economic model,
emphasizing resource efficiency, waste reduction, and environmental sustainability. Green
entrepreneurship emerges as a crucial driver in this transition, offering innovative solutions
to environmental challenges while creating economic value. The study examines how green
entrepreneurship aligns with circular economy principles and identifies key factors that
enable its growth, including regulatory support, access to resources, and collaborative
ecosystems. The paper highlights unique opportunities for startups and small businesses in
areas such as product lifecycle management, resource recovery, circular supply chains,
renewable energy, digital technologies, and consumer engagement. Through case studies
of successful green businesses, the research demonstrates the practical application of
circular economy principles in various sectors. The findings suggest that green
entrepreneurship not only contributes to environmental sustainability but also offers
significant economic potential in the evolving circular economy landscape. This study
provides valuable insights for entrepreneurs, policymakers, and researchers seeking to
understand and capitalize on the opportunities presented by the circular economy
transition.

INTRODUCTION
An economic system known as the "circular economy" (CE) closes the energy and material
loops in the systems of production and consumption (Mura et al 2019). The Circular
Economy (CE) is an economic system based on business models that replace the "end-of-
life" concept with reducing, additionally reusing, recycling, and recovering materials in
manufacturing, distribution, and consumption operations Sarja et al 2020). It is an approach
that challenges the traditional open-ended system and aims to address the complications
of resource scarcity and waste disposal (Ucar et al 2020). Organizations worldwide are
placing greater and greater emphasis on the shift to the circular economy (CE). The circular
economy (CE) is viewed as an alternative to the take-make-waste linear economy. It is based
on the ideas of regeneration, preserving resources while cutting waste, and lowering
pollution (Chauhan et al 2022, Demirel and Danisman 2019).

According to Soleimani et al. (2023), "green entrepreneurship" describes eco-friendly

companies that seek to solve environmental issues while promoting environmental
sustainability and assisting local communities. Being a subcategory of sustainable
entrepreneurship, "green entrepreneurship" aims to strike a balance between
environmental preservation and social well-being (Fernandes et al., 2023). Therefore, in the
circular economy, green entrepreneurship offers startups and small enterprises a lot of
chances to be creative and make a positive impact on sustainability. Through an emphasis
on eco-friendly practices and circular business models, these businesses can generate
revenue while addressing urgent environmental problems (Filho 2022).

Planing (2015) states that switching to a circular economy requires a focus on four key
business domains: a) product and material design; b) novel business approaches; c) global
reverse networks; and d) enabling conditions. This paper seeks to explore the second
minimally, and so the objectives of this paper are to;
1. Enunciate how Green entrepreneurship seamlessly fits into the circular economy business
model.
2. Emphasize how crucial it is to have access to resources, education, and awareness to
support green entrepreneurship in the circular economy.
3. Identify opportunities for startups and small businesses within the circular economy, while
focusing on innovation and entrepreneurship.
4. Present effective case studies and illustrations of creative company models that show
how green entrepreneurship may spur economic growth and sustainability.

GREEN ENTREPRENEURSHIP IN THE CIRCULAR ECONOMY

The amount of industrial waste produced and disposed of at a wide range of American
industrial facilities throughout the country's extensive industrial layout is estimated by the
US Environmental Protection Agency to be over 7.6 billion tons (EPA, 2023). This comprises
residues from a wide variety of procedures, including toxic chemicals, sludges, ashes, and
kiln dust. The result has been a complex web of risks to human health and the environment,
explosion and pollution concerns, and deterioration of the land and water, costing the
typical citizen thousands of dollars a year and the government billions (Veleva and Bodkin
2018). Technology, expertise, and business-corporate strategic alliances are essential for
cutting expenses in terms of money, time, energy, resources, and environmental effects, all
of which contribute to the establishment of sustainable business models (Veleva and Bodkin
2018).

Herein lies the primal strength and purpose of the concept of “circular economy”. The
circular economy is based on three principles: using renewable energy to support
sustainable systems; separating biological and technical nutrients to ensure their return to
the biosphere or infinite reuse, respectively; and reducing waste via design (Roshan et al
2024). A circular economy is crucial for reducing climate change since materials
management accounts for a large amount of greenhouse gas emissions (42 percent in the
U.S., for example). Studies indicate that adopting circular economy practices could
substantially reduce emissions and boost employment, highlighting its potential to deliver
both environmental and social benefits, including increased access to resources, technology,
and job opportunities for disadvantaged populations.

Most research on the role of business in advancing the CE to date has focused on large
companies such as OEMs exchanging waste and materials or taking back and
remanufacturing old products (Hall et. al., 2010; Veleva et. al., 2013). But for a variety of
reasons, including inertia, expenses, logistical challenges, and a lack of regulations, many
multinational corporations neglect to include Circular Economy principles in their business
plans. This offers a chance for enterprising businesses with creative business plans to close
the gap and serve as vital connectors for businesses in reverse supply chains, all the while
generating new revenue streams and positive social effects (Veleva and Bodkin 2018).
According to estimates, the circular economy will have a $1 trillion+ commercial potential
in addition to major social and environmental advantages (WEF, 2016). Putting this together
demonstrates the immense benefits and opportunities that abound for innovative thinkers,
and socially strategic entrepreneurs.

Green entrepreneurship quickly comes to mind here. Green entrepreneurship has gained
significant attention in recent decades as a viable approach to preserving sustainability and
giving businesses in the circular economy a competitive edge (Soleimani et al. 2023).
Innovations that improve the environment, or "green innovations," are vital to improving
resource efficiency and hastening the shift to a circular economy, according to recent
economic theory and global data. Comprehending the factors that motivate companies to
adopt environmentally beneficial technologies could enhance the body of knowledge for
policies designed to encourage companies to invest in green innovations and promote
sustainable development and a circular economy (Siedschlag et al. 2022). Green
innovations are brand-new or altered goods, procedures, methods, and frameworks that
try to lessen or eliminate how negatively economic activity affects the environment.

THE UNIQUE TRAITS OF GREEN ENTREPRENEURSHIP

In the circular economy, green entrepreneurial startups are fundamentally different from
conventional startups and businesses in several important ways:
1. Emphasis on Sustainability: "Green startups" place a high priority on sustainability by
implementing business strategies that limit waste, encourage resource efficiency, and lessen
their negative effects on the environment. Circular economy businesses include social and
environmental concerns in their fundamental operations, in contrast to traditional startups
that might just be concerned with making money (Veleva et al 2013, Hall et al 2010).

2. Creative Business Models: "Green startups" frequently present creative business models
centered on ideas such as circular materials trade, waste-to-resource solutions, and product
take-back platforms. These models strive to challenge typical startups' linear production
and consumption patterns by establishing a closed-loop system where resources are used
efficiently and waste is avoided (Sarja et al 2020).

3. Collaboration and Partnerships: To develop creative solutions and construct a circular

ecosystem, green startups depend on collaboration and partnerships with established
businesses, governments, and non-governmental organizations. They differ from traditional
startups, which might function more independently and concentrate mostly on internal
growth plans, with their collaborative approach (Veleva and Bodkin 2018).
4. Technology Integration: The present global industrial landscape is characterized by
Advanced Industry 4.0. Green entrepreneurs use cutting-edge technologies like blockchain,
AI, and IoT to proactively show off their genuine value by streamlining operations,
improving resource efficiency, and developing more sustainable solutions. Technology is a
key differentiator for circular economy companies from traditional businesses that might
not place the same emphasis on technology improvements when it comes to efficiency and
innovation (Roshan et al 2024, Suchek et al 2021).

5. Customer Engagement: To meet the growing demand for environmentally friendly

substitutes, green entrepreneurs in the circular economy frequently engage customers by
providing distinctive and sustainable products. Unlike traditional startups that only focus on
meeting market demands, circular economy startups attract environmentally conscious
consumers and nurture loyal clients by focusing on the creation of products with recycled
or upcycled materials and encouraging sustainable consumption habits.

FACTORS THAT BOOST GREEN ENTREPRENEURSHIP

In an extensive research carried out by Siedschlag et al. (2022), in which they sought to
prove and ascertain the factors that really matter in enabling Green innovations and startups
in a circular economy, they identified six different premises from the several works of
literature they reviewed. They are;
A. Health and Environmental Regulations and Policies: By establishing criteria that
encourage companies to embrace sustainable practices, stringent environmental laws can
serve as accelerators for green technologies and startups in a circular economy. Regulation
compliance requires the creation of novel technologies and procedures, opening doors for
entrepreneurs to offer solutions that satisfy these specifications (Mura et al 2019).

B. Innovation Inputs: Green businesses and innovations can be greatly aided by having
access to resources including capital investment, research and development facilities,
strategic education, and knowledgeable labor. These inputs facilitate the shift to more
sustainable behaviors by giving entrepreneurs the groundwork they need to create and
scale their circular economy solutions.

C. Sector-and industry-specific Factors: Different sectors and industries may have certain
traits that help or impede the rise of green startups and breakthroughs. For example, sectors
that produce a lot of trash or consume a lot of resources could be more likely to implement
the concepts of the circular economy, which would be good for startups that provide
solutions in that area.

D. Exposure to Global Competition: By motivating companies to set themselves apart with

sustainable practices and goods, exposure to global competition can spur innovation.
Businesses that use the ideas of the circular economy may find a competitive advantage in
the global marketplace by drawing clients that value environmental sustainability.
E. Effects from Other Green Innovators: Working together and exchanging ideas amongst
green innovators might hasten the journey to a circular economy. Startups can gain from
the ideas, technology, and best practices that are spilled over from other creative businesses,
creating a positive ecosystem that encourages more innovation and expansion.

F. Public Funding: The government may help green entrepreneurs by offering vital financial
resources through public funding initiatives, which they can use to develop and market their
ideas. Entrepreneurs can be given more confidence and stability to seek creative solutions
with fewer barriers to entry when they get grants, subsidies, and incentives targeted at
encouraging sustainability and circular economy activities (Demirel and Danisman 2019).

OPPORTUNITIES FOR START-UPS AND SMALL BUSINESSES

SMEs make up 99% of European enterprises and produce two-thirds of all jobs in the global
context (Mura et al 2019). However, their participation in the CE is relatively small because
the major firms they supply often dictate their activities. A sizeable portion of SMEs—often
referred to as green entrepreneurs—can significantly shift markets through radical product
innovations and entrepreneurship, notwithstanding the inadequate EI skills of the majority
of SMEs in the economy. Small and medium-sized firms (SMEs) are increasingly searching
for ways to reorganize their operations and differentiate to fit into the circular economy (CE)
idea, which is becoming more and more popular among customers and producers (Demirel
and Danisman 2019).

With the plethora of benefits inherent in Green entrepreneurship in the circular economy,
coupled with the various factors that actively create an enabling ecosystem and catalyze
business terrain, entrepreneurs and innovators have several opportunities that can be
maximized, and possibly spun and scaled into medium and large scale businesses. Some
of these opportunities include;

1. Product Lifecycle Management: Within the ecosystem of a green and circular economy,
startups don’t necessarily have to develop their own unique product. The challenge of
gaining entrance into an already burgeoning and/or overcrowded market can be daunting
and overwhelming. A crucial loophole that can grant sure and foolproof access and
potentially vast profits is developing innovative solutions for extending the lifecycles of
existing products. This could be through repair, refurbishment, and remanufacturing;
creating value and new revenue streams for startups. Services such as product-as-a-service
models and sharing platforms can capitalize on the circular economy principles of resource
efficiency and waste reduction (Opstal and Borms 2023).

2. Resource Recovery and Recycling: Recycling is a concept that has been suggested,
taunted, and discussed for several decades now. But the rate of practice, even in Europe
(which has the highest rate of recycling) still hovers around 30%. Recycling and recovery of
materials, and transforming waste streams into valuable resources is a viable entrance that
startups and small businesses can innovate around. This could be through the development
of technologies for advanced sorting, material recovery, and/or upcycling offering
opportunities to create high-value products from discarded materials, contributing to a
more sustainable and circular economy by offering alternatives to already existing products
that are less recyclable or that create more waste.

3. Circular Supply Chains: Green entrepreneurs can cause a disruption in conventional linear
supply chains by providing products and services that maximize resource utilization, reduce
waste, and encourage circularity. To facilitate the efficient flow of materials and goods
throughout their lifecycle, startups can specialize in supply chain management tools, reverse
logistics, and logistics. These services are all based on the ideas of the circular economy. An
excellent illustration of this is the advancement of clean hydrogen technologies as a
substitute for fossil fuels, which frequently cause logistical problems because of the volatile
circumstances around the oil industry.

4. Renewable Energy and Clean Technologies: The adoption of clean technologies and the
shift to renewable energy sources are essential elements of the circular economy. To
offer sustainable alternatives to traditional energy sources and technology, startups can
innovate in fields including energy storage, renewable energy generation, and energy
efficiency solutions. Renewable energy generation startups, such as those that focus on
solar, wind, and hydropower, help to decentralize energy production, which lessens
dependency on centralized fossil fuel-based power plants and improves energy security.
Furthermore, improvements in energy storage technology, such as those related to
batteries and hydrogen storage systems, make it possible to use renewable energy sources
more effectively, reducing interruption problems and facilitating the transition to an energy
infrastructure that is more trustworthy and resilient.

5. Digital Platforms and Technologies: Emerging digital technologies like big data,
blockchain, artificial intelligence (AI), and the Internet of Things (IoT) could be leveraged by
the circular economy (CE). It is believed that these digital technologies, when paired with
innovative business models, can offer solutions to many global issues, such as those
pertaining to the transformation of the circular economy. Startups can promote
cooperation, resource sharing, and circular business models by utilizing digital platforms
and technologies. Digital marketplace innovations, supply chain transparency applications
using blockchain, and resource optimization through data analytics allow organizations to
function more sustainably and efficiently in the circular economy (Chauhan et al 2022).

6. Consumer Engagement and Education: Small and startup companies have a big potential
to engage and inform customers about the circular economy's tenets. The fact that social
media content creation and advertising are now ubiquitous makes the conversation even
more fascinating. Novel strategies for product labeling, branding and
packaging, transparency, and consumer awareness initiatives enable people to make
knowledgeable decisions that promote sustainability and increase demand for sustainable
goods and services; supplying educational materials, training courses, and seminars to
increase knowledge of and capacity for circular economy principles. Startups may enable
people and businesses to embrace circularity and create positive change by creating
thrilling experiences, certification programs, and e-learning platforms.

7. Circular Design and Innovation Services: Consultancy has become much more prominent
in today’s global economy. The need for businesses and whole industries to keep abreast
of innovative ideas and sustainable design principles and ideologies is prevalent. Aligning
business models to diverse social causes has also become fashionable and so, providing
consultancy and design services focused on integrating circular principles into product
development processes is one area small businesses and startups can exploit. Startups can
offer expertise in eco-design, materials selection, and lifecycle analysis to help businesses
create products with minimal environmental impact and maximum circularity.

It must be mentioned that only a few of the opportunities available within such a robust
and fertile context are listed here. The emphasis is to provide a brief overview of the
possibilities and potentials that are currently being harnessed and that can be further taken
advantage of as more green businesses are created and the circular economy becomes
predominant.

A FEW CASE STUDIES OF CURRENT GREEN BUSINESSES AND INNOVATORS

1. Winnow and Leanpath: Sophisticated technology is deployed by these companies to help
restaurants and other food businesses waste less food. They have systems that keep track
of how much food is produced, and the quantity of that being thrown away. From the data
collected, they can effectively suggest ways to cut down on waste, save money, and help
the environment.

2. RePack and Returnity: Their goal is to generate as little waste as possible by providing
reusable packaging options. Customers can return used packaging materials to be used
again, which reduces the need for new materials and saves energy, as opposed to tossing
them away after use.

3. TerraCycle: Coffee capsules and cigarette butts are two examples of the kinds of materials
that TerraCycle recycles in partnership with large corporations. By gathering these hard-to-
recycle materials and repurposing them, they contribute to preventing garbage from
ending up in landfills or the ocean.

4. Optoro: Optoro assists retailers in handling returned merchandise. They use intelligent
technology to automate the process as they determine the best course of action for
handling returns, whether that means recycling or reselling them.

5. Huue: Huue is trying to improve the environmental effects of the dyeing method used
on clothing and cosmetics. They help to clean up the fashion business by using
biotechnology to make less toxic dyes.
6. Lizee: Lizee assists clothing companies in renting out their items rather than selling them.
Clothes are used more often and thrown away less in this way, which is better for the
environment.

7. RecyclePoints: By rewarding users for their waste, RecyclePoints motivates individuals to

recycle. In Nigeria, this promotes environmental preservation, job creation, and clean
community maintenance. Following that, these wastes are given to recycling companies for
new uses.

8. AIO: AIO produces environmentally friendly substitutes for oils like coconut and palm oil.
To produce oils that are better for the environment and lessen the need for damaging
farming practices, they use specialized microbes.

9. MyGug: MyGug has developed a clever method for converting food waste into fertilizer
and electricity. Food waste is broken down by specific machinery so that it can be used
instead of being thrown away.

10. Mura: Mura recycles plastic in a unique way. They assist to lessen the quantity of plastic
that ends up in landfills and the ocean by using their own technology to recycle old plastic
into new products.

CONCLUSION

The transition to a circular economy presents a transformative opportunity for green

entrepreneurship and innovation, particularly for startups and small businesses. This study
has illuminated the symbiotic relationship between green entrepreneurship and the circular
economy, demonstrating how innovative business models can drive sustainable
development while creating economic value.

The unique traits of green entrepreneurship, including its emphasis on sustainability,

creative business models, collaboration, technology integration, and customer engagement,
position it as a key driver in the circular economy. The identified enabling factors, such as
supportive regulations, access to resources, and exposure to global competition,
underscore the importance of creating an ecosystem that nurtures green innovation.

The diverse opportunities available for startups and small businesses within the circular
economy framework are particularly promising. From product lifecycle management and
resource recovery to circular supply chains and digital platforms, these areas offer fertile
ground for innovative solutions that can address pressing environmental challenges while
generating profitable ventures.
The case studies presented in this paper provide tangible evidence of the potential for
success in green entrepreneurship. These examples demonstrate how businesses can
leverage circular economy principles to create value, reduce waste, and contribute to
environmental sustainability across various sectors.

However, the transition to a circular economy is not without challenges. It requires a shift in
mindset, both for businesses and consumers, as well as supportive policy frameworks and
infrastructure. Green entrepreneurs must navigate these challenges while seizing the
opportunities presented by the growing demand for sustainable solutions.

Looking forward, the role of green entrepreneurship in driving the circular economy is likely
to become increasingly significant. As global awareness of environmental issues grows and
regulatory pressures increase, the demand for innovative, sustainable solutions will continue
to rise. This presents an unprecedented opportunity for startups and small businesses to
lead the way in creating a more sustainable and resilient economic model.

Finally, green entrepreneurship and innovation are not just desirable but essential
components of the transition to a circular economy. By fostering an environment that
supports and encourages green entrepreneurship, we can accelerate the shift towards a
more sustainable future, creating economic opportunities while addressing critical
environmental challenges. The success of this transition will depend on the collective efforts
of entrepreneurs, policymakers, investors, and consumers in embracing and promoting
circular economy principles across all sectors of the economy.
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