Background: The transition to a Circular Economy is crucial for addressing global sustainability challenges, with only 9.1% of the world economy currently operating within circular principles. Small and Medium-sized Enterprises play a pivotal role in fostering sustainable economic growth, compelled by regulatory pressures and changing consumer preferences to adopt circular practices. However, while business model transformations present opportunities, numerous implementation challenges remain, especially for Small and Medium-sized Enterprises. The External Enablement Framework offers valuable insights into how macro-environmental changes drive the transformation of business models towards CE, defining triggering and shaping roles linked to External Enablers. Exploring these changes becomes increasingly essential for Small and Medium-sized Enterprises to effectively transition towards Circular Economy implementation in the evolving business landscape.

Purpose: The purpose of this research is to enrich the current body of literature on Circular Economy by examining how macro-environmental changes influence Small and Medium-sized Enterprises’ business model transformation towards circularity, examining the triggering and shaping role. We identify and analyse macro-environmental changes as catalysts for the implementation of Circular Economy initiatives, based on the concept of External Enablers and the External Enablement Framework. By providing theoretical insights and practical guidance, the study intends to encourage decision-makers, notably in the political domain, to promote Circular Economy practices. 

Method: This research adopts a holistic multiple-case study, employing a qualitative approach aimed at objectively observing phenomena to reveal patterns within the context under study. The data sample encompasses ten Small and Medium-sized Enterprises in the German manufacturing market. In order to generate the data, we conducted semi-structured interviews with representative experts from the ten case companies. Utilizing qualitative techniques like thematic analysis and pattern coding, we identified recurring themes and patterns in Circular Economy business model transformation through both within-case and cross-case analyses.

Conclusion: Our study highlights the significant role of External Enablers in triggering and shaping transformation towards a more Circular Economy, with societal transition, political and regulatory, and macroeconomic factors identified as key External Enablers. An interplay of External Enablers, along with enabling mechanisms, trigger and shape Circular Economy initiatives in Small and Medium-sized Enterprises. When these External Enablers affect businesses, they are likely to be supported by firm-level factors within the decision-making process towards adopting Circular Economy initiatives. External Enablers are interconnected and, when potentially combined with firm-level factors, also foster the triggering and shaping roles. Moreover, Missing External Enablers represent undeveloped External Enablers with the capability to evolve over time. The three main External Enablers, their interplay, and the accompanying firm-level factors, along with the consideration of yet-to-mature Missing External Enablers, trigger and shape Small and Medium-sized Enterprises' business models towards Circular Economy initiatives.