Digital Literacy as an Enabler of Circular Economy Adoption in SMEs: A Systematic Literature Review

Abstract

Digitalization is increasingly recognized as a catalyst for sustainability, yet the specific role of digital literacy in enabling small and medium enterprises (SMEs) to adopt circular economy (CE) models remains poorly understood. This systematic literature review examines how digital literacy influences CE adoption among SMEs. Searches were conducted in Google Scholar using predefined Boolean queries, yielding forty records, of which five peer-reviewed journal articles met the inclusion criteria of focusing on SMEs, digital capability, and circular economy practices. Studies included quantitative, qualitative, and bibliometric designs and were appraised using the Joanna Briggs Institute (JBI) Critical Appraisal Tools. The synthesis shows that digital literacy functions as a strategic organizational capability operating across operational, innovation, and ecosystem pathways that shape SMEs’ readiness and ability to implement CE. However, the evidence base remains fragmented, with digital literacy frequently measured indirectly through varied proxies such as fintech adoption, digital transformation readiness, or digital marketing capability. The small number of eligible studies and heterogeneity in conceptualization limit the generalizability of findings. Overall, the review highlights digital literacy as a foundational enabler of circular transitions in SMEs and underscores the need for clearer operational definitions, longitudinal evidence, and comparative research to advance theory, policy, and practice in digital-circular transformation.