Circular economy and clean energy integration in manufacturing SMEs: A systematic review and multi-level theoretical framework

Purpose The intersection of circular economy (CE) principles and clean energy adoption represents a critical yet underexplored frontier in sustainable industrial transformation. Despite manufacturing small and medium-sized enterprises (SMEs) accounting for a disproportionate share of global industrial energy consumption, no prior systematic review has jointly examined this nexus at the SME level, leaving policymakers and practitioners without a consolidated, methodologically transparent evidence base. Design/methodology/approach A PRISMA 2020-compliant systematic literature review was conducted on 68 peer-reviewed records retrieved from the Scopus database (2015–2026). Latent Dirichlet Allocation (LDA) with a four-cluster solution (K = 4), selected through a coherence-based robustness check, was deployed to identify latent thematic structures, complemented by Pearson correlation analysis to examine inter-cluster relationships and bibliometric associations. Findings LDA identified four thematic clusters: Drivers and Barriers (40.1%), Policy Instruments (26.0%), Sustainability Performance (19.6%), and Life-Cycle Assessment and Materials Circularity (14.3%). Negative inter-cluster correlations (r = −0.465 to −0.304, p < 0.001–0.012) indicate limited within-document co-occurrence among these four clusters, consistent with distinguishable thematic emphases within the corpus. The literature is structurally imbalanced, privileging antecedent condition diagnosis over outcome measurement and lifecycle rigour. Originality/Value Drawing on Resource-Based View, Dynamic Capabilities Theory, Institutional Theory, and as a proposed theoretical gap Frugal Innovation Theory, this review synthesises an integrative multi-level theoretical framework linking macro-institutional pressures through firm-level capabilities to CE–clean energy performance outcomes, moderated by firm size, sector, institutional quality, and digital readiness. Five empirically testable propositions and a structured future research agenda are developed, prioritising longitudinal designs, configurational methods, and evidence from underrepresented Global South manufacturing contexts.