Schilling et al. (Reference Schilling, Ritter, Kühner, Hirschberger, Zacher and Kauffeld2026) presented a study discussing how industrial and organizational (I-O) psychology science and practice can be employed for the implementation of circular economy (CE). The discussions in the focal article were conducted under the assumption and in the context of established businesses where the resources needed for the promotion and implementation of CE practices should be reasonably sufficient and available to these businesses. Expanding this boundary condition elicits the question whether the findings and recommendations from the focal article can be generalized to small businesses, startups, and family firms, which may not have comparable resources available to them to implement CE.
In the third phase of the CE evolution, where we are currently, legislation is moving from reactive to proactive. For example, The European Commission’s Integrated Pollution Prevention and Control (IPPC) framework requires companies to make significant improvements upstream, changing their processes to reduce or eliminate environmental impact (Beghetto et al., Reference Beghetto, Gatto, Samiolo, Scolaro, Brahimi, Facchin and Visco2023). However, small businesses, due to a lack of perceived legitimacy in the eyes of stakeholders, typically have to face issues of financial resource scarcity, inability to gain customer acceptance, difficulty of securing cash, and low bargaining power in negotiating with more powerful stakeholders (Rutherford & Buller, Reference Rutherford and Buller2007); therefore, the issue of capital shortages may become a barrier to small businesses in implementing CE practices due to the prohibitive financial expenses necessary for CE implementation, as well as the inherent administrative costs (e.g., time, skills, and knowledge of the CE practices implementation; Suchek et al., Reference Suchek, Ferreira and Fernandes2022). Small businesses, in general, have a high failure rate (Shane, Reference Shane2009). If small businesses struggle with even the most basic survival needs and immediate profitability, they may be more reluctant to invest in, adopt, and apply CE practices.
Within the population of small businesses and entrepreneurial firms, family-owned businesses have been identified as experiencing similar resource scarcity issues but differing from their nonfamily counterparts in terms of their engagement in CE practices. Specifically, Doucet and colleagues (Reference Doucet, Garrido-Prada, Parra-Domínguez, Requejo and Suárez-González2025) found that family small and medium-sized enterprises (SMEs) were more actively pursuing CE solutions due to their embeddedness and commitment to local communities (Berrone et al., Reference Berrone, Cruz and Gomez-Mejia2012), higher focus on long-term sustainability (Villalonga & Amit, Reference Villalonga and Amit2020), and higher likelihood of seeking alternative cost-management solutions in order to prevent relinquishing decision-making control to external parties (Jansen et al., Reference Jansen, Michiels, Voordeckers and Steijvers2023). CE practices, in the case of family firms, allow them to optimize the operations in pursuit of the above socio-emotional wealth objectives. This propensity to emphasize noneconomic goals gives family firms a unique ability to navigate the barriers to implementing CE practices successfully, which could be leveraged by other small businesses to offset the perceived drawbacks of CE and reduce their reluctance to engage in CE.
Schilling et al. cited gaps between CE concepts and CE business models, and between the global popularity of CE discourse and actual implementation. The gaps can have implications for entrepreneurs working in the social sectors. Social entrepreneurs may have a unique role to play in closing these gaps, viewing CE business model as design opportunities. The CE business model is about rethinking value creation in ways that align with global sustainable objectives (Schilling et al.). Thus, CE as a driving force will allow social entrepreneurs to embody an innovative mindset with the ability to see new possibilities, generate novel ways of resolving problems, and through experimentation and testing search for innovative business models.
In the US, small businesses account for 99.9% of all US businesses (Nugroho & Paramita, Reference Nugroho and Paramita2024). Because small businesses create countless jobs and play a critical role in the economy, it is important to consider and analyze ways to help them overcome the barriers to implementing CE practices. This commentary provides an extension to Schilling et al., by discussing the possibility of implementing CE practices in the context of small businesses. In the following sections, we offer a series of creative and cost-effective solutions for (a) the owners and key stakeholders of small businesses to consider utilizing in their efforts to develop and implement CE practices and for (b) policy makers to take into account in fostering a CE-conducive economic environment for small businesses.
Recommendations to promote the implementation of CE practices in small businesses
Recommendation #1: Incentivizing and facilitating CE practices through policy adjustments
One of the key cited reasons for limited CE practices in small businesses is the lack of incentives to promote them in such organizational settings (del Mar Alonso-Almeida et al., Reference del Mar Alonso-Almeida, Rodriguez-Anton, Bagur-Femenías and Perramon2021; Suchek et al., Reference Suchek, Ferreira and Fernandes2022). This issue is exacerbated in small businesses, as compared to larger enterprises, because they typically face disproportionate structural and resource-related barriers, which larger corporations are often able to overcome with internal resources (Cooper et al., Reference Cooper, Willard and Woo1986; Winborg & Landström, Reference Winborg and Landström2001), that is, the “liability of smallness” (Aldrich & Auster, Reference Aldrich and Auster1986). Specifically, lack of easily available capital and inferior technical aptitude of SMEs have been identified as such barriers that make it more challenging for small businesses to implement CE business models (Rizos et al., Reference Rizos, Behrens, van der Gaast, Hofman, Ioannou, Kafyeke, Flamos, Rinaldi, Papadelis, Hirschnitz-Garbers and Topi2016). To enhance the promotion of CE practices in small businesses and level their playing field vis-à-vis larger corporations, we recommend an institutional approach via which policy makers could create an institutional environment where sufficient support and resources (e.g., grants, funds, legal protection, professional support, etc.) are provided to entrepreneurs to help them undertake CE-related activities (Fernandes et al., Reference Fernandes, Veiga and Ramadani2025). For example, governments may consider reducing the difficulty to obtain clearances and certifications for CE-related products, reducing the costs and managing the complexity of complying with regulations and legal procedures, offering more financial incentives (e.g., grants, subsidies, low-interest loans, and tax credits for CE practices), giving preferences to small businesses that engage CE practices when it comes to the provision of government contracts, providing materials access through platform-based sourcing entities ranging from recycled plastics, textiles, and e-waste to newly engineered materials, and creating and fostering a developed technological infrastructure that is conducive to the implementation of CE practices (e.g., Suchek et al., Reference Suchek, Ferreira and Fernandes2022). In addition, family-owned SMEs have been found to be more proactive than their nonfamily counterparts in adopting CE practices (particularly in rural areas) (Doucet et al., Reference Doucet, Garrido-Prada, Parra-Domínguez, Requejo and Suárez-González2025). As such, their readiness and experience in pursuing such practices could be leveraged through policies that promote and enable sustainability networks that include family firms to facilitate knowledge transfer benefiting all small businesses and entrepreneurial firms in localized areas.
Recommendation #2: Using AI to assist the implementation of CE practices
Due to the availability of many AI tools at low or no cost, entrepreneurs may consider using these tools to not only assist in the process of implementation of CE practices but also better manage the costs of implementing them. As mentioned above, small firms face resource-related challenges that create barriers to this process that can be more easily overcome in large corporations through their slack capital and other available resources. Small businesses can utilize AI tools as resource multipliers and enhancers to lower the cost of circularity in their business models. For instance, AI tools can now be used for inventory optimization (to reduce waste and avoid overproduction), predictive maintenance (to optimize equipment usage and amortization), recycling, remanufacturing, and material recovery, but also for day-to-day managerial operations, such as automated decision support, documentation and reporting, assistance in funding inquiries, as well as demand forecasting and other market analysis tasks — all of which would serve to decrease or close the resource gap that may otherwise prevent small firms from implementing CE models to the same extent as in larger organizations (Tutore et al., Reference Tutore, Parmentola, Di Fiore and Calza2024).
Recommendation #3: Seeking collaborations to support the implementation of CE practices
As the implementation of CE practices often requires cross-disciplinary collaboration, entrepreneurs may consider partnering with other actors in the general environment in the process of data collection, product design, experimentation, and innovation (del Mar Alonso-Almeida et al., Reference del Mar Alonso-Almeida, Rodriguez-Anton, Bagur-Femenías and Perramon2021; Fernandes et al., Reference Fernandes, Veiga and Ramadani2025). These collaboration-based initiatives may include activities, such as product co-development, resource sharing, and open innovations. Entrepreneurs may leverage the use of digital technologies to not only find their collaborators but also quickly disseminate their products and services around the world (Fernandes et al., Reference Fernandes, Veiga and Ramadani2025). Although some research suggests that small firms may be better suited for initial disruptive innovation, including circular economy models, they are typically unable to generate the necessary resources and market reach on their own to scale their practices to influence and transform the market, and thus must rely on co-evolutionary interactions and collaboration to play a more substantial role in the market alongside large and established corporations (Hockerts & Wüstenhagen, Reference Hockerts and Wüstenhagen2010). Pacheco and colleagues (Reference Pacheco, Dean and Payne2010) also argue that collective action and collaboration through trade associations are necessary for small firms to force change and facilitate sustainable practices when competing with large incumbents.
Recommendation #4: Bootstrapping resources
Although fundraising appears to be an attractive option for small businesses to acquire important resources, which are beneficial for firm growth but also the implementation of CE practices, they usually face challenges in fundraising because financiers are generally reluctant to grant money to small businesses due to a lack of legitimacy and reputation (Rutherford et al., Reference Rutherford, Pollack, Mazzei and Sanchez-Ruiz2017). Therefore, entrepreneurs have to explore creative ways in order to accomplish important entrepreneurial tasks. One of such creative approaches favored by entrepreneurs is bootstrapping, which, in the context of the present study, refers to a creative approach to acquire resources and reduce the reliance on traditional sources of financing (e.g., external debt or equity financing) in order to accomplish the implementation of CE practices (Miao et al., Reference Miao, Rutherford and Pollack2017). Based on the conclusions discussed by Rutherford et al. (Reference Rutherford, Pollack, Mazzei and Sanchez-Ruiz2017), we recommend that entrepreneurs consider the following approaches to acquire and conserve the resources needed for the implementation of CE practices.
(a) As recycling, reusing, remanufacturing, refurbishing, and recovering materials as part of the CE implementation processes require additional operations and purchasing specialized equipment, entrepreneurs may consider cutting unnecessary costs and minimizing waste to save financial resources and cash (for example, buying used equipment, borrowing equipment, and/or sharing equipment with other businesses to reduce the cost of implementing CE practices).
Entrepreneurs can collaborate with existing organizations that manage CE processes. Three examples that stand out are the NextWave Plastics, the Ellen MacArthur Foundations, and Helsinki Regional Environmental Services Authority (HSY). The NextWave Plastics, convened by The Circulate Initiative and cofounded by Lonely Whale and Dell Technologies, works with companies to integrate ocean-bound plastics into products with the help of knowledge sharing and expertise (Gray & Bloch, Reference Gray and Bloch2020). The Ellen MacArthur Foundation offers Circulytics, which measures CE performance (Martinetti & Havas, Reference Martinetti and Havas2021). HSY actively promotes the CE in the region and develops their own processes, and they participate in national and international development efforts (Rossi et al., Reference Rossi, Reuna, Fred and Heinonen2018).
(b) Partner with local levels through universities, business incubators and accelerators, by leveraging their resources (e.g., faculty’s research expertise, student involvement, research labs, and research centers) and apply for joint research grants to support the implementation of CE practices at lower (or no) cost. In the U.S., the Environmental Protection Agency is prioritizing a circular economy approach through state level SBIR grants (Coenen et al., Reference Coenen, Visscher and Volker2023).
(c) Explore nonequity funding sources, which may support CE-related initiatives (e.g., grants and federal programs). For example, there are two high-level competitive awards: Santander X Global Challenge CE Revolution and The Earthshot Prize. Entrepreneurs can also seek funding focusing on circular innovations, such as Circular Innovation Fund and Circulate Capital.
(d) Negotiate favorable payment terms with suppliers (e.g., late/deferred payments) and/or lower rents with landlords in order to conserve funds that can be deployed to support the implementation of CE practices. An analogous approach might be to speed up the process of invoicing customers and collecting payments in a timely or expedited manner. Such bootstrapping actions serve to bridge the common resource gap in small firms by creating a temporary pool of working capital, which can be diverted into the operational budget to fund the immediate transition cost into a CE-based model (purchase of AI tools described earlier or better and more durable materials and equipment, hiring of a consultant, etc.). Winborg and Landström (Reference Winborg and Landström2001) found such actions are not necessarily signs of distress in small firms but often strategic measures to internally secure such working capital. This capital and other resources thus generated can also help offset the immediate perils of the initial CE-related investments before the resulting revenue streams begin, thereby providing the necessary liquidity to SMEs, especially because banks often view CE-related models as overly risky and thus unsafe to finance (Rizos et al., Reference Rizos, Behrens, van der Gaast, Hofman, Ioannou, Kafyeke, Flamos, Rinaldi, Papadelis, Hirschnitz-Garbers and Topi2016).
(e) If the implementation of CE practices requires developing or redesigning a product (e.g., developing a product so that it becomes repairable and recyclable), entrepreneurs may consider simultaneously providing consulting services which will not only produce cash flow but also lead to low-cost opportunities for product testing.
(f) Finally, as family-owned small businesses are typically cited as more strongly focused on long-term survival and sustainability and as more acutely struggling with resource scarcity, they are uniquely adept at exploring and successfully adopting CE practices (Doucet et al., Reference Doucet, Garrido-Prada, Parra-Domínguez, Requejo and Suárez-González2025). As such, their experience and best practices can be studied and replicated to understand and enhance the financial viability of implementing adequate CE solutions in nonfamily small businesses in order to find ways to offset the cost-related drawbacks of engaging in CE practices.
The roles of I-O psychologists in helping small businesses to implement CE practices
We suggest that I-O psychologists help entrepreneurs facing the issue of resource constraints to properly navigate such barriers to CE practices. For example, they might give presentations and workshops at practitioner-oriented conferences (e.g., trade conferences for entrepreneurs or small business owners) in order to help these stakeholders better understand the importance of CE and how to engage in CE practices at low or no cost.
I-O psychologists may partner with universities and provide mentorship services to small businesses in the local communities. For example, they might provide voluntary/pro bono consulting services to entrepreneurs to help them explore cost-effective ways to implement CE practices (Gonzalez et al., Reference Gonzalez, Offermann, Alonso, Bragger, Sessa and Kramer2023). I-O graduate programs at universities may add pro bono consulting services to their curricula (e.g., internship-focused experiential courses), which will lead to mutual benefits: junior students/consultants gaining experience and professional development and entrepreneurs receiving important advice and guidance (Gonzalez et al., Reference Gonzalez, Offermann, Alonso, Bragger, Sessa and Kramer2023).
We encourage entrepreneurs to consider Society for Industrial and Organizational Psychology (SIOP) as an important venue for resources and guidance. For example, I-O psychologists may serve on the advisory boards for small businesses to provide advice and guidance regarding CE practices. These opportunities may be advertised on the SIOP Career Center to connect I-O psychologists to the entrepreneurs seeking consulting services. In addition, SIOP website has a Resources & Publications section that includes a sizeable repository of free resources and information for practitioners and other stakeholders. I-O psychologists may consider continuously expanding this repository by adding free resources (e.g., publications and media resources) for entrepreneurs and other stakeholders to learn about CE practices.
We also call for more engagement from both small and large businesses in extended producer responsibility (EPR) by making businesses take the responsibility for the environmental impacts across the entire lifecycle of products (Gupt & Sahay, Reference Gupt and Sahay2015). This type of proactive policy engagement prevents businesses from just seeking mere CE compliance (e.g., merely outsourcing the CE related activities rather than proactively addressing the environmental impacts across the entire lifecycle of products) because the liability remains with the businesses themselves in the context of EPR (Gupt & Sahay, Reference Gupt and Sahay2015). We recommend that I-O psychologists may not only provide expert support to influence policy changes and implementations but also advise entrepreneurs and other business professionals to follow EPR policies.
Conclusion
This commentary provides a list of recommendations regarding how to promote the implementation of CE practices in small businesses, which typically face the issue of resource constraints. This study also discusses the roles of I-O psychologists in assisting small businesses to implement CE practices. We encourage policy makers, entrepreneurs, business professionals, and other stakeholders to consider the recommendations and advice presented in the current study to help small businesses to effectively implement CE practices.
