Circular economy practices and financial performance of SMEs in Albania: evidence from an empirical survey

Abstract

Objectives This paper explores how the adoption of Circular Economy (CE) practices influences the financial performance of Albanian micro, small, and medium-sized companies (SMEs). Drawing on sustainability and smart economy literature, it provides empirical evidence from an emerging market in Albania. Prior work Based on a survey of 82 companies, two composite indexes were developed: the Circular Economy Index (CE_Index) and the Financial Performance Index (FIP_Index) both demonstrating high reliability (α > 0.90). Results Correlation, regression, and ANOVA analyses reveal a strong and statistically significant positive relationship between CE adoption and financial performance, with firms reporting higher profitability, sales, and cash flow improvements. Size effects are evident: micro and medium enterprises outperform small firms in both CE adoption and financial outcomes. Implications The study concludes that CE is not only environmentally beneficial but also a driver of financial resilience and competitiveness, reinforcing its role in building a smart, sustainable economy.