Circular solutions in developing countries: coping with sustainability tensions by means of technical functionality and business model relevance

To foster sustainable development, transition to circular economy should happen globally. Lately, however, the implementation of circular solutions has been particularly slow in the developing countries where these solutions could bring about particularly positive changes. A successful circular solution couples technical functionality with business model relevance. In developing countries, the implementation of circular solutions reveals sustainability tensions that originate in resource scarcity, institutional voids, and market affordability. We have studied implementation of circular solutions that small companies operating in these conditions have developed. The systematic analysis of 79 cases shows how sustainability tensions influence on companies' everyday business conduct and their long‐term strategic orientation toward circular economy. We have also identified commonly applied business model features that allow companies to cope with the sustainability tensions. These features include: (1) locally tailored value proposition, (2) collective action approach in value creation, and (3) creativity in value capture. Ultimately, locally functional, embedded, and widely accepted circular solutions have potential to facilitate wider socio‐technical transitions toward more sustainable business practices.