The Impact of Consumer Behavior on Circular Economy, Focusing on the Role of SMEs in Pakistan : A Quantitative Study

Abstract

This study explores the influence of consumer behavior on Purchasing Decision (PD) based on the circular economy in SMEs in Pakistan. The objective of the research is to examine the effects of consumer understanding, awareness, willingness to pay more, and the growing demand for circular products. The process includes the influence of external factors, such as access to technology for SMEs and government support, and collaboration with SMEs in Pakistan. The Theory of Planned Behavior was used for conceptual understanding and analyzing the behavior of consumers. Quantitative approach has been carried out for research design, and data collection was initiated through structured questionnaires from SMES across major industries and commercial sectors in Pakistan. Regression and correlational analysis were conducted along with ANOVA and reliability testing to examine the significance and relationship of variables based on the hypothesis. It is concluded from the results that consumer willingness to pay and consumer demand had the largest impact on the circular purchasing decisions of SMEs, implying that market-driven incentives significantly facilitate the adoption of circularity. Consumer understanding and awareness were weaker but positive. Technology access and supportive governmental policies enhanced the impact of consumer factors on circular adoption, thereby suggesting that institutional readiness enabled the SMEs to be more responsive to circular market expectations. The collaboration among SMEs and value-chain partners further facilitated the process of circular adoption by enabling the sharing of resources and knowledge exchange. Overall, the findings offered practical implications for policymakers and SME managers interested in promoting the development of a circular market that focuses on strengthening consumer involvement and enabling sustainable production systems in the longer term in Pakistan.