Circular Economy and Business Performance: A Strategic Environmental Management Perspective from a Systematic Review

The circular economy (CE) is increasingly recognized as a strategic approach that enables firms to address environmental challenges while enhancing competitiveness and long-term value creation. However, evidence regarding its impact on business performance remains fragmented across sectors, performance dimensions, and organizational contexts. This study presents a systematic literature review conducted in accordance with the PRISMA 2020 guidelines to examine how CE practices influence business performance. The review synthesizes evidence from 79 peer-reviewed publications published between 2015 and 2025. The findings identify five major channels through which CE practices affect business performance: (1) economic, environmental, and social performance, (2) operational and supply chain performance, (3) competitive advantage and strategic positioning, (4) financial and environmental performance, and (5) barriers and performance in SMEs. Across these dimensions, CE practices are frequently associated with improved resource efficiency, cost reduction, innovation capacity, supply chain resilience, and enhanced environmental outcomes, including waste reduction and lower emissions. The review suggests that the performance effects of CE are contingent upon contextual factors such as firm size, ownership structure, industry characteristics, regulatory environment, and digital capabilities. While large firms often benefit from greater resources and organizational capacity, SMEs face significant barriers related to finance, technology, and governance, although these can be mitigated through collaboration networks and digitalization. The study contributes to the Strategic Environmental Management literature by indicating that CE practices may function not only as environmental initiatives but also as strategic capabilities that support competitiveness, resilience, and sustainability transitions. The findings provide implications for managers seeking to integrate circularity into business strategy and for policymakers designing institutional conditions that enable circular business transformation.