Circular economy awareness, adoption, and its effects on business performance in Saudi Arabia

Abstract

A circular economy has become an innovative business model, though contentious, to replace a linear economy in achieving sustainable and efficient production. This study aims to investigate the level of awareness, adoption, and effect of factors driving the circular economy adoption on the financial performance of micro, small, and medium enterprises (MSMEs) in Saudi Arabia. The survey was conducted among 301 MSMEs, and the method of logistic regression was utilized for its analysis. The results revealed that the level of awareness is averagely high, with an average of seven out of 10 enterprises. However, the outcome further showed that only an average of three out of 10 had implemented a circular economy during the period of the survey. In addition, logistic regression revealed the significant influence of drivers of circular economy adoption on the financial performance of MSMEs. The following drivers of circular economy adoption have a great likelihood and significant effect on the enterprise’s financial performance: training of employees, availability of financial resources, top management commitment, digital technology, product/service upgrade, material generated/buy back cheaper to use, and pressure from people. This is based on the outcome of logistic regression of the survey conducted on the factors driving circular economy adoption in the previous literature. However, the results revealed that regulatory incentives toward the environment and pressure from government and companies are not significant. Hence, this study provides policy implications for stakeholders in the circular economic system.