Does Circularity Pay? Circular Economy Adoption and Economic Performance in European SMEs

Small and medium-sized enterprises account for 99% of EU firms, making their engagement with circular economy (CE) practices indispensable to any economy-wide transition, yet the firm-level business case for voluntary adoption remains empirically contested, and existing evidence geographically narrow. This study examines, at the EU27 scale, the firm- and country-level determinants of CE adoption and whether adoption yields measurable economic returns. A two-level (firm and country), cross-sectional design combines micro-data from Flash Eurobarometer 549 (13,124 SMEs, June 2024) with Eurostat institutional indicators, applying hierarchical regression, K-Means clustering, and crosstabulation with post-stratification weights. Adoption is associated with resource-efficiency investment (β = 0.119), climate-strategy formalisation (β = 0.093), and national circular material use rate (β = 0.108, partially supported), while firm size shows no independent effect; the barrier index is the strongest predictor (β = 0.333), an unexpected positive association tentatively interpreted as a commitment effect whereby firms already active in CE better recognise obstacles. CE adoption shows no economically meaningful short-term association with performance (β = 0.025, negligible), with a small provisional exception in the industrial sector. Cluster analysis identifies three descriptive profiles: Efficiency Investors (13.7%), Strategic Green (32.0%), Passive (54.3%). CE adoption reflects strategic intent rather than firm size; economic benefits appear indirect and long-term, and more than half of European SMEs remain passive, requiring differentiated support at the national level.