Published in Business Strategy and the Environment, a new study from the University of Eastern Finland offers a fresh perspective on how circular economy startups succeed in developing their business in markets where consumer demand for sustainable products is equivocal, institutional support is lacking and dominant players are slow to adapt. The study shows how circular economy startups create new opportunities by committing to reducing or minimising their environmental impact, engaging in experimentation, piloting and feedback-driven development, and fostering close collaboration with customers and partners.

Value-driven entrepreneurship shapes markets

Traditionally, the circular economy is examined through technologies and business models. According to researchers, less attention has been paid to how sustainability-driven entrepreneurs create entirely new opportunities in markets that do not yet support the logic of circularity. The study draws on 31 narrative interviews with startup entrepreneurs describing the early stages of their ventures, learning processes and efforts to reshape markets.

“Circular economy startups demonstrate that market transformation often begins with values and a desire to fix something that does not work in the current system,” says Research Director Ville-Veikko Piispanen of the University of Eastern Finland, the lead author of the study.

Piispanen emphasises that circular entrepreneurship is a combination of learning, interaction and systemic change – not about finding readily available opportunities.

“It is remarkable that these entrepreneurs view the vast traditional markets as an opportunity rather than an obstacle. This reflects their readiness for change. It is a positive sign that we have such actors among us,” Piispanen notes.

Three key practices reshape markets

The study indicates that circular economy entrepreneurship is an iterative and experimental process in which entrepreneurs learn and co-create markets with customers and stakeholders. Startups are navigating regulatory frameworks, market barriers and diverse expectations while challenging prevailing practices.

Circular economy startups create new opportunities through three key practices identified in the study: commitment to environmental impact, experimentation, piloting and feedback-driven development, and close customer–partner collaboration. These practices help startups build legitimacy for their operations, and also influence the competitive landscape for larger players.

“Sustainable startups act as important agents of change by questioning norms, building new models of collaboration and creating conditions for sustainable markets. Their role is crucial as society moves towards an economy based on sustainable circularity,” notes Hanna Lehtimäki, Professor of Innovation Management at the University of Eastern Finland and a co-author of the study.

Sustainable startups are major accelerators of the sustainability transition

The study shows that value-driven motivation and entrepreneurs’ strong personal beliefs help challenge established market practices and encourage customers to adopt new, more sustainable solutions. These processes make sustainable startups significant accelerators of the sustainability transition as well as change-makers in traditional markets.

The study was carried out as part of the activities of the University of Eastern Finland Business School and the Research Centre for Sustainable Circular Economy (CECE). CECE conducts multidisciplinary research aimed at deepening our understanding of circular economy phenomena and supporting the circular transition across different sectors of society.