Circular Economy and Sustainable Business Models: The Leadership and Managerial Challenges in Transitioning from a Linear to a Circular Model

The transition from a linear “take-make-dispose” economic model to a circular one represents one of the most significant structural transformations of the contemporary industrial era. While the potential benefits of the circular economy (CE) in decoupling economic growth from resource consumption are widely acknowledged, the leadership and managerial challenges inherent in this transition remain profoundly underestimated and undertheorized. This paper presents a comprehensive, critical analysis of these challenges, moving beyond conventional inventories of barriers to develop novel theoretical frameworks that capture the deep-seated complexities of circular transformation. Through a systematic synthesis of existing literature and an in-depth analysis of empirical case evidence, this research identifies fundamental, often paradoxical, tensions that leaders must navigate. This paper introduces five novel, integrative frameworks to advance human understanding of these challenges: (1) The Triadic Tension Model, which posits that circular transformation is defined by the permanent and irreconcilable tensions between profitability-sustainability, agency-structure, and legitimacy-efficiency; (2) The Organizational Reproduction Cycle (ORC) Model, which specifies the micro-mechanisms through which firms unconsciously perpetuate linearity, thereby frustrating transition efforts; (3) The Legitimacy Deficit Cascade, which models how legitimacy challenges compound across six distinct stakeholder levels, creating a self-reinforcing cycle of rejection; (4) The Circular Leadership Paradox Matrix, which identifies four core paradoxes—Visionary Realism, Distributed Hierarchy, Internal-External Focus, and Acceleration-Deceleration—that demand a new, paradox-centric leadership approach; and (5) The Circular Transition Failure Typology, which systematizes the primary modes of failure to enable proactive risk management. Collectively, these frameworks challenge the prevailing linear, problem-solving paradigm in management studies and propose a new model of circular leadership centered on complexity management, paradox navigation, and systems orchestration. The paper concludes by outlining the theoretical contributions, managerial implications, and a future research agenda predicated on this new, more nuanced understanding of the leadership imperative in the circular economy transition.