From Awareness to Action: Do Decision-Makers’ Mindsets Shape Circular Economy Adoption in German SMEs?

Abstract The transition toward a circular economy (CE) entails considerable challenges and opportunities for small and medium-sized enterprises (SMEs), particularly within the manufacturing sector. This study examines how decision-makers’ perceived benefits, conceptual understanding of the CE, and structural firm characteristics shape the adoption of CE strategies. Based on a standardized survey of 380 German manufacturing firms—283 of which qualify as SMEs—the findings indicate that structural or “hard” factors such as company size and revenue are more strongly associated with the implementation of CE practices than cognitive factors alone. While CE understanding contributes to engagement, firms with larger financial and organizational capacities are significantly more likely to operationalize circular approaches. Moreover, smaller firms express a pronounced need for external support during the transformation process. The results highlight the importance of aligning policy instruments not only with awareness-building but also with the various constraints SMEs face by establishing enabling framework conditions and stimulating markets accordingly in order to enable effective and widespread CE integration.