A Systemic Circular Economy Transition in Germany

While Circular Economy (CE) discussions typically focus on environmental and economic goals, this report shines a spotlight on the often-overlooked social dimension as a critical lever for systemic change through CE. This study therefore explores characteristics and mechanisms of Circular Social Businesses – busi-nesses that integrate CE strategies along a strong social mission at the core of their business model – and identifies pathways to enable a holistically sustainable and inclusive circular transition in Germany.

Germany’s newly adopted National Circular Economy Strategy (NKWS) reflects growing political momentum. However, CE policy and funding remain heavily focused on technological and ecological innovation. As a re-sult, businesses that deliver social impact alongside circular solutions – such as Circular Social Businesses – are not yet fully recognized or supported, despite their potential to create holistic impact: economic, environ-mental, and social.

Based on a proprietary database of 274 circular businesses active in Germany, the study identifies a subset of Circular Social Businesses (39%) that meet three criteria: (1) a viable business model, (2) a clear environ-mental contribution using circular strategies (e.g. “reduce,” “reuse,” “restore”), and (3) a core social impact mission embedded in their primary business activities. These Circular Social Businesses work across sectors such as food, textiles, and packaging and are often locally anchored.

The analysis reveals that Circular Social Businesses focus more strongly than traditional Circular Startups on high-leverage circular strategies such as “rethink” and “restore”, which go beyond recycling and efficiency to transform how we produce, consume, and live. Their solutions foster behavioural change, social inclusion, social cohesion, local value creation, collaboration and ecosystem building, education, and empowerment. In doing so, Circular Social Businesses not only reduce resource use but also strengthen communities and en-able societal participation in the circular transition.

Circular Social Businesses show that the CE can be more than a technical fix – it can be a people-centred transformation. To fully unlock the potential of CE, social impact must be treated not as a side effect, but as a catalyst. Supporting Circular Social Businesses means accelerating the shift toward a circular future that is not only more environmentally sustainable but also more inclusive with the potential to foster systemic change.

Key recommendations:

• To businesses: Embed at least three of the five identified principles for systemic impact in the CE – address root causes, drive behavioural change, ensure accessibility, foster collaboration, and practice transparency – and align growth with their social-environmental mission.
• To funders and investors: Expand funding models beyond exit-driven mechanisms. Introduce impact criteria that value social inclusion and local relevance. Support replication of place-based solutions with systemic benefits.
• To policymakers: Establish the social dimension as a strategic pillar in CE strategies like the NKWS. Adjust public funding to explicitly include social business models. Use public procure-ment to stimulate demand for circular solutions that are both environmentally sustainable and socially inclusive.