Capability Additionality: Rethinking the Evaluationof Circular Policy for European SMEs

Abstract

European circular economy (CE) policy is increasingly framed as an agenda for competitiveness, industrial resilience, and resource security rather than as a purely environmental one. For small and medium-sized enterprises (SMEs), however, the effectiveness of this agenda depends not only on whether policy support induces the adoption of circular technologies and practices, but also on whether firms become better able to pursue circularity after that support ends. This Perspective develops capability additionality as a CE-specific policy-evaluation lens, integrating evidence from 12,778 SMEs across 26 EU Member States with research on organisational capabilities and policy additionality. We define it as the attributable and persistent improvement in a firm’s ability to select, integrate, adapt, recombine, and scale circular solutions. Drawing on the behavioural-additionality tradition, the concept focuses on whether policy-induced organisational changes become durable, reusable capacity for subsequent circular action. We further distinguish buying, building, and bridging circularity as diagnostic pathways through which different capability gaps arise and different forms of policy support may operate. The central argument is that the success of circular policy for SMEs should be assessed not only by what firms adopt during an intervention, but also by what they remain able to do afterwards.