MSD Hub editor's note (Michael Field, Senior Systems Specialist, Vikāra Institute):
This blog highlights the quickly evolving learning journey that Vikāra is taking in support of greater circularity within market and economic systems. While many focus on firm-level business models, Vikāra has learned from its market systems resilience work that such closed loop systems can often increase fragility as the such firm level models tend to reduce diversity and encourage critical weaknesses to emerge with a business. At the same time, Vikāra has learned that circularity as it becomes more embedded at system levels, improves inclusivity, wellness and resilience outcomes as those practices increase the value of connectivity, shared-risk, and trust building investments across social barriers. The circularity when a central element of market and economic systems includes an inherent push for interdependence as one market system becomes a critical provider of inputs for other market systems in ways that were not imaginable even a few years ago. For example, insect farming as critical emerging connective tissue between food waste and specialized flavorant and protein inputs for food processes. As the blog notes, circularity holds immense potential, but it is not a silver bullet and requires more learning to better understand its potential risks and rewards
Circularity is not just an evolution of sustainability—it is a rethinking of how we use resources and design systems for long-term economic and environmental viability. As a strategic focus for the Vikāra Institute, circularity underscores the need for innovative policies that catalyze a shift in market systems to favor circularity, including empowering small and medium enterprises (SMEs) to drive related innovations. SMEs, which make up more than 90% of businesses worldwide, are uniquely positioned to lead the transition to circularity being more fully integrated into market system operational norms, including influencing the evolution of a favorable enabling environment. Here, we share Vikāra’s initial insights into catalyzing shifts in political systems that favor circular policies and highlight areas that demand further exploration and action.
Insights from Our Work
Policy Levers that Enable SMEs
Maybe, the most important insight that Vikāra has identified is that it is critical that circularity emerges and becomes more fully integrated into market, political and civil societal systems. Fro example, it is clear that financial incentives, regulatory frameworks, and market development policies are critical for enabling SMEs to adopt firms-level circular practices, as well as catalyze favorable shifts at the market system level. Policies such as tax rebates for sustainable materials, grants for renewable energy projects, and subsidies for waste-to-resource technologies have proven to be helpful. For example, in regions where extended producer responsibility (EPR) schemes are well-established, SMEs have been able to play more central roles in integrating recycling and reuse into the market systems in which they operate, creating both environmental and economic value.
Participatory Policy Cycles Are Critical to Longer Term Systemic Change
While it is often easier to start at firm level change processes, market systems resilience requires that circularity evolves to become more fully integrated into how market systems operate. Central to market systems changing is the ability of the political system to also change over time. Our engagements revealed that participatory processes at policy development, policy enactment, communications, enforcement, and monitoring is critical, including the involvement of SMEs, industry associations, and civil society. Without a participatory cycle that can improve a political systems ability to adapt over time, the significant systemic changes required to integrate circularity will be difficult. When SME voices are included in the design and roll out of, as well as learning from policies, the likelihood of catalyzing change that can add context-dependent value is much higher.. For instance, Vikāra’s work with stakeholders during the MSS Circularity Summit highlighted the importance of co-creating regulatory goals with stakeholders, ensuring practicality and feasibility. Additionally, it is critical to ongoing change in systems, as policies, laws, regulations, etc. will have to evolve over time, and the more participatory political systems are the better able they are to maintain and reinforce circularity principles.
Enabling Environments Need to Favor Investments in Capacity Building and Innovation
While the starting point is likely at the firm level, Vikāra recognizes that for circularity practices to generate substantial and durable benefits for society, the principles of circularity really have to be integrated at a systems level. More specifically, the competitive landscape needs to favor market systems that capture more value out resources by repurposing as much waste as possible from one industry so it can become a value-additive input in a different industry. Additionally, the landscape needs to sanction firms and industries that do not effectively capture value from resources. In practice this means that enabling environments need to favor investments in ongoing learning and adapting, including investments in capacity-building and innovation related to circular practices. In sectors like agrifood and textiles, targeted policies have enabled businesses to adopt practices like material repurposing and waste minimization, as well as improve connectivity between market systems that can take waste from one market system and repurpose it into input for another market system. Improving the connectivity across and between market systems actually improves market system resilience as it tends to increase diversity and redundancy within the wider economic system. It also creates a more robust competitive landscape that favors SMEs as drivers of innovation.
SMEs as Drivers of Innovation And Competitiveness
As the world becomes more dynamic, and circularity gains more traction as a central component to competitiveness, SMEs and their ability to be agile will become increasingly more important. For example, partnerships between research institutions and SMEs—facilitated by policy incentives—have led to the development of new technologies in recycling and product design that resonate with local market actors. While innovation is essential, it only adds value if the innovations fit into the local context, and SMEs are particularly well placed to direct innovations to fit the needs and interest of the local system. By creating collaborative environments that reduce the barriers to connect, market systems can improve their competitiveness by leaning on the agility of SMEs, particularly in industries like packaging, information technologies, and electronics.
Inclusivity and Wellness Outcomes
As circularity principles become more integrated into market systems they tend to contribute to job creation, improved working conditions, and improved wellness outcomes. Vikāra’s initiatives have demonstrated how the adoption of circular practices within market systems can lead to the emergence of new roles, such as recycling process engineers and sustainability officers. These roles not only offer new opportunities for young people, they also increase the value of inclusivity and inter-connectedness as different industries with different social profiles become more reliant on each other creating greater interdependency and shared value.
The Path Forward: Recommendations and Next Steps
Identifying Barriers and Opportunities
Despite these successes, significant barriers remain. High initial investment costs, fragmented regulations, and limited access to technical expertise continue to hinder markets systems, and especially SMEs from fully transitioning to circular practices. Addressing these challenges requires targeted interventions, such as capacity-building programs, public-private partnerships, and streamlined regulatory processes.
Strengthening Policy Design and Implementation
Vikāra’s experience underscores the need for adaptive political systems that are more inclusive and participatory that consider regional and sectoral contexts. Policymakers should prioritize stakeholder engagement, leveraging the insights of SMEs, industry players, and NGOs to co-create effective solutions. Additionally, stakeholders must be encouraged to play a more significant role in communications and monitoring and evaluation mechanisms to ensure policies are applied in ways that catalyzes positive outcomes in circularity, inclusivity and wellness outcomes.
Promoting Knowledge Sharing and Collaboration
The transition to a circular economic systems depends on the collective efforts of multiple stakeholders. Creating platforms for knowledge sharing and collaboration—such as Vikāra’s Circularity in MSD Community of Practice—can help disseminate best practices and foster partnerships. These initiatives are essential for building momentum and driving systemic change.
Investing in Education and Awareness
Finally, education and awareness campaigns are critical for fostering a culture of circularity. By increasing consumer demand for sustainable products and equipping market actors with the skills needed to innovate, these initiatives can accelerate the adoption of circular practices across market systems and societies. .
Conclusion
The Vikāra Institute is committed to advancing circularity through research, policy advocacy, and strategic initiatives. While our initial efforts have revealed promising pathways, there is much more to explore and achieve. By continuing to collaborate with policymakers, businesses, and communities, we aim to create systemic change that favors circularity, inclusivity, and wellness outcomes by empowering SMEs to lead the transition. Together, we can reimagine how resources are used, value is created, and systems are designed for a more resilient and equitable future.
About Vikāra Institute’s Circularity Initiatives
Vikāra's strategic focus on circularity is reflected in several key initiatives:
The Vikāra Learning Series on MSD & Circularity, which provides actionable insights for integrating circular principles into market systems.
The Circularity in MSD Summit (2024), a global platform that brought together over 75 participants to explore circular innovations.
The Business Circularity Challenge Fund (2024 and 2025 editions), in partnership with SOLVE@Waterfront and the V&A Waterfront, supports SMEs across Africa in adopting circular practices through challenge grants and technical assistance.
The Circularity in MSD Community of Practice (CoP), fostering collaboration and peer learning among stakeholders in the circular economy.
Membership in the African Circular Economy Network (ACEN) (2024, 2025), As a proud member, Vikāra continues to strengthen our ties to regional networks and reinforce our commitment to sustainable economic development.
Author:
Vikāra Institute