Circular Economy Financial Practices: Financing Models for Sustainable Business Innovation
Article Sidebar
-
Business Innovation, Circular Economy, Financing Models
Abstract
The transition to a circular economy requires innovative financial practices to support sustainable business models and reduce environmental impact. Traditional financing mechanisms often focus on linear growth, emphasizing short-term profitability over long-term sustainability, which limits the adoption of circular practices. Circular economy financing aims to provide capital, incentives, and risk mitigation strategies that enable businesses to implement resource-efficient, regenerative, and waste-minimizing processes. This study investigates financial models that facilitate circular economy adoption, including green bonds, impact investing, leasing schemes, and public-private partnerships. A qualitative research design was employed, combining systematic literature review with case study analysis of firms implementing circular strategies across manufacturing, energy, and service sectors. Data were analyzed thematically to identify patterns in financing approaches, success factors, and barriers. Findings indicate that tailored financing mechanisms, such as performance-based loans and blended finance models, effectively support circular business innovations by aligning financial incentives with environmental and social outcomes. Access to specialized capital, stakeholder engagement, and regulatory support were critical enablers, while high perceived risk and limited awareness constrained adoption. The study concludes that integrating innovative financial practices into circular economy initiatives can drive sustainable business transformation, enhance competitiveness, and reduce environmental footprint.
Full text article
References
Agafi?ei, M.-D., & Davidescu, A. A. (2025). Is There a Relationship Between Shadow Economy, Digitalization and Sustainable Development? Insights from a National and Regional Bibliometric Analysis: Vol. 530 LNBIP (M. A. Bach Tobji, R. Jallouli, H. Sadok, K. Lajfari, D. Mafamane, & H. Mahboub, Eds.; pp. 285–307). Springer Science and Business Media Deutschland GmbH; Scopus. https://doi.org/10.1007/978-3-031-76365-6_18
Akahome, J. E. (2025). Transitioning to Digital Circular Economy Practices: A Case Study on SMEs (pp. 229–248). Springer Nature; Scopus. https://doi.org/10.1007/9789819610648_12
Al Halbusi, H., Popa, S., Soto-Acosta, P., & Alshallaqi, M. (2025). The nexus of managerial and technical AI knowledge, disruptive innovation and the circular economy: The role of organizational change capability and financial resilience. Technology in Society, 82. Scopus. https://doi.org/10.1016/j.techsoc.2025.102937
Alshammari, S., Serret, V., Tiwari, S., & Si Mohammed, K. (2025). Industry 4.0 and AI amid economic uncertainty: Implications for sustainable markets. Research in International Business and Finance, 75. Scopus. https://doi.org/10.1016/j.ribaf.2025.102773
Bhanye, J., Shayamunda, R. H., & Matamanda, A. (2025). Smart Technologies and Approaches in Climate Change Mitigation and Adaptation: Implications for Policy-Making. In Climate Change Management: Vol. Part F567 (pp. 121–146). Springer Science and Business Media Deutschland GmbH; Scopus. https://doi.org/10.1007/978-3-031-85217-6_8
Braun, A. C., Mantilla, I., Rümmele, K., Kohler, P., & Hirth, T. (2025). International Scientific Cooperation for Sustainable Development—The German-Chilean Institute of Eco-Industrial Development (IECO). In Green Energy and Technology: Vol. Part F3989 (pp. 3–18). Springer Science and Business Media Deutschland GmbH; Scopus. https://doi.org/10.1007/978-3-031-73576-9_1
Chen, S., Elheddad, M., Sharma, N., & Lau, C. (2025). Impact of Financial Development on the Circular Economy: Empirical Evidence From the European Union. Business Strategy and the Environment. Scopus. https://doi.org/10.1002/bse.70168
Dhaigude, A. S., Verma, A., & Nayak, G. (2025). Sustainable production and consumption: A bibliometric analysis of SDG-12 literature through a financial management lens. Cogent Economics and Finance, 13(1). Scopus. https://doi.org/10.1080/23322039.2025.2467882
Dinçer, H., & Yüksel, S. (2025). Renewable Energy Projects and Investments: Interdisciplinary Knowledge, Analysis, Opportunities, and Outlook (p. 304). Elsevier; Scopus. https://doi.org/10.1016/C2023-0-50936-X
Gross, J. A., Blomsma, F., Djabbarov, I., & Busch, T. (2025). The Micro-Processes of Transitioning to a Circular Economy Through Capital Allocation: A Case of the Investment Field. Organization and Environment, 38(2 Special Issue: Organizational Transformations towards a Circular Economy), 309–341. Scopus. https://doi.org/10.1177/10860266251342567
Hashmi, H. S., & Aassouli, D. (2025). Islamic blended finance as a catalyst: Driving Sustainable Waste-Recycling Initiatives in Pakistan (pp. 361–384). Taylor and Francis; Scopus. https://doi.org/10.4324/9781003168508-28
Jadhav, H. L., Pandey, P. P., Pawar, G. G., & Kadam, P. B. (2025). The Green and Sustainable Business Model: A Review. In World Sustainability Series: Vol. Part F775 (pp. 191–215). Springer Science and Business Media Deutschland GmbH; Scopus. https://doi.org/10.1007/978-3-031-92636-5_11
Kharat, M. G., Kapoor, S., Parhi, S., Kharat, M. G., & Pandey, S. (2025). Operationalizing sustainability in pharmaceuticals: Green supply chain metrics for circular economy. Sustainable Futures, 9. Scopus. https://doi.org/10.1016/j.sftr.2024.100413
Kolupaieva, I., & Lindahl, M. (2025). Policy recommendations for building a circular Ukraine. Journal of Cleaner Production, 492. Scopus. https://doi.org/10.1016/j.jclepro.2025.144835
Kondi-Akara, G., Koungbanane, D., Bamba, M., & Ouma, C. (2025). Sustainable Solutions for Growing Cities in Sub-Saharan Africa: Trends in Urban Energy Demand. In World Sustainability Series: Vol. Part F571 (pp. 127–163). Springer Science and Business Media Deutschland GmbH; Scopus. https://doi.org/10.1007/978-3-031-87043-9_8
Kumar, L., & Kumar, N. (2025). Toward Zero-Waste Cities: A Comparative Study of Waste Management Strategies in Indore City and Surat City, India: Vol. 527 LNCE (A. Varma, V. Chand Sharma, E. Tarsi, & E. Tarsi, Eds.; pp. 511–526). Springer Science and Business Media Deutschland GmbH; Scopus. https://doi.org/10.1007/978-981-97-4988-1_30
Liang, Y., Le, H., & Lu, Z. (2025). How does strict financial supervision affect corporate green credit: Empirical evidence from the new capital management regulation. Finance Research Letters, 86. Scopus. https://doi.org/10.1016/j.frl.2025.108323
Lotz, M. T., Al-Dabbas, K., Rehfeldt, M., Herbst, A., Fleiter, T., & Worrell, E. (2025). Quantifying the impact of a circular economy in buildings on industry decarbonisation: Integrating material flow and industry modelling. Resources, Conservation and Recycling, 219. Scopus. https://doi.org/10.1016/j.resconrec.2025.108306
Luomi, M., Yilmaz, F., & Al Shehri, T. (2025). The GCC and the circular carbon economy: Progress and potential (pp. 30–56). Cambridge University Press; Scopus. https://doi.org/10.1017/9781009471527.005
Malik, A. H., Rehman, A. U., Bin Jais, M., Hussain, A., Shaharyar, S. H., & Rehan, M. (2025). Leveraging blockchain technology for transparent financial reporting in circular economies: Enhancing accountability and sustainability (pp. 155–178). IGI Global; Scopus. https://doi.org/10.4018/979-8-3373-5198-8.ch007
Metta, J., & Rousseau, S. (2025). Towards circular consumer behavior: Analysis of discount schemes on coffee cup use. Journal of Environmental Management, 374. Scopus. https://doi.org/10.1016/j.jenvman.2025.124055
Mirza, N., Umar, M., Sbia, R., & Mangafic, M. (2025). The impact of blue and green lending on credit portfolios: A commercial banking perspective. Review of Accounting and Finance, 24(2), 238–253. Scopus. https://doi.org/10.1108/RAF-11-2023-0389
Mohi-Ud-Din Qadri, H., Bhatti, M. I., & Omar, M. A. (2025). The routledge handbook of Islamic economics and finance (p. 453). Taylor and Francis; Scopus. https://doi.org/10.4324/9781003168508
Muzamwese, T. C. (2025). Towards a circular economy through networks: A case study of the Africa circular economy network (ACEN). Discover Sustainability, 6(1). Scopus. https://doi.org/10.1007/s43621-024-00733-1
Nayak, D. V., Arun Kumar, A. A., Chanal, G. B., & Bolagani, S. (2025). Sustainable Finance and Green Investments: The Role of Blockchain Circular Economy. In Environmental Footprints and Eco-Design of Products and Processes: Vol. Part F701 (pp. 17–29). Springer; Scopus. https://doi.org/10.1007/978-3-031-89183-0_2
Pant, P., & Gandhi, D. (2025). The economics of sustainability: Driving profitability and resilience in business models (pp. 427–452). IGI Global; Scopus. https://doi.org/10.4018/979-8-3373-0608-7.ch019
Park, S., Ju, Y., Kim, E., & Chang, J. (2025). Research On Consumer’s Intention to Use Mobile Payment Platforms: Based on the VAM and TAM Models. KSII Transactions on Internet and Information Systems, 19(3), 1007–1026. Scopus. https://doi.org/10.3837/tiis.2025.03.016
Qureshi, F., Qureshi, S., Ismail, I., & Yarovaya, L. (2025). Unlocking economic insights: ESG integration, market dynamics and sustainable transitions. Energy Economics, 145. Scopus. https://doi.org/10.1016/j.eneco.2025.108407
Rataj, O., Alcorta, L., Raes, J., Yilmaz, E., Riccardo, L. E., & Sansini, F. (2025). Sustainability vs profitability: Innovating in circular economy financing practices by European banks. Sustainable Production and Consumption, 53, 1–16. Scopus. https://doi.org/10.1016/j.spc.2024.11.025
Rebello, T. A., Mian, H. R., Chhipi-Shrestha, G., Hewage, K., & Sadiq, R. (2025). Integrating the circular economy concept with one water approach to enhance sustainability in urban water systems: Identification, selection, and ranking of key sustainability indicators. Clean Technologies and Environmental Policy. Scopus. https://doi.org/10.1007/s10098-025-03216-7
Taghizadeh-Hesary, F., Yoshino, N., Mirza, N., & Mohsin, M. (2025). SUSTAINABLE GROWTH AND GREEN POLICIES: Navigating Energy And Environmental Challenges (p. 253). World Scientific Publishing Co.; Scopus. https://doi.org/10.1142/14302
Tung Lam, N. T., Anh, L. T. L., & Le Luu, T. (2025). Greenhouse gas emissions in industrial wastewater treatment: Technologies, challenges, and strategies. Current Opinion in Environmental Science and Health, 47. Scopus. https://doi.org/10.1016/j.coesh.2025.100661
Wang, H., Wang, J., Lyu, Y., & Li, X. (2025). The impact of supply chain digitisation on sustainable development in global panel data. Does the energy efficiency matter? Energy Economics, 141. Scopus. https://doi.org/10.1016/j.eneco.2024.108147
Whiteman, A. D., Hennessy, N., & Wilson, D. C. (2025). Rethinking waste and resource management for underserved communities. Oxford Development Studies. Scopus. https://doi.org/10.1080/13600818.2025.2473957
Y?ld?r?m, D. Ç., Yildirim, S., & Kandpal, V. (2025). Inclusive finance in the digital era: Bridging climate goals and financial access (p. 263). IGI Global; Scopus. https://doi.org/10.4018/979-8-3373-5198-8
