Abstract

The rise in environmental threats, scarce resources, and the demand for sustainable business restructuring has made SMEs realize the necessity of adopting CE. There is insufficient evidence about the degree of circular economy adoption and its impact on sustainable business development in the case of SMEs operating in emerging countries, including Lebanon. The current paper is focused on examining the adoption of the circular economy by Lebanese SMEs and the role of such practice in sustainable business development via resource efficiency, waste minimization, recycling and reuse initiatives, sustainable production, and circular supply chain management. A quantitative approach was used based on a survey performed among 350 Lebanese SMEs. Data collection was followed by data analysis using descriptive statistics, reliability and validity testing, and correlations to determine associations between the application of the circular economy approach, organizational capabilities, environmental influence, and sustainable development of businesses. The results of the analysis show that circular economy adoption is at a fairly high rate for small and medium-sized enterprises in Lebanon, where the mean value of Circular Economy Adoption was 3.78, and the mean value of Sustainable Business Development was 3.92. A positive correlation was found between circular economy adoption and sustainable business development (r = 0.74, p < 0.01), proving that circular economy leads to higher operational efficiency, environmental awareness, and business resilience. It can be said that organizational capabilities and the external environment are necessary conditions for circular economy transition.