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Review

Towards a Sustainable Circular Economy (SCE) for Nepal: Current Realities and Perspectives

by
Gavin Melles
1,*,
Suresh Gautam
2 and
Richan Shrestha
2
1
Faculty of Architecture and Industrial Design, Swinburne University, Victoria 3124, Australia
2
School of Education, Kathmandu University, Lalitpur 44700, Nepal
*
Author to whom correspondence should be addressed.
Challenges 2025, 16(3), 44; https://doi.org/10.3390/challe16030044
Submission received: 7 July 2025 / Revised: 28 August 2025 / Accepted: 1 September 2025 / Published: 4 September 2025
(This article belongs to the Special Issue Planetary Health and the Role of Regenerative Economies, Regenerative Business and Wellbeing Economies in the Symbiosene)
Versions Notes

Abstract

Nepal, like its South Asian neighbours, is exploring Circular Economy (CE) as a pathway to Green Economy and Net Zero commitments. Current studies focus primarily on sector-specific 3R (Reduce, Reuse, Recycle) waste management strategies. However, these approaches overlook the broader sustainability transformation implied by a Sustainable Circular Economy (SCE). This study examines whether a locally relevant SCE model is feasible for Nepal. We conducted thematic analysis of interviews with thirteen representatives from nine CE organizations, supplemented by a literature review. Our findings reveal that while most SCE elements exist individually in Nepal’s context, integration into a comprehensive socially inclusive framework remains underdeveloped. We propose a Nepal-specific SCE framework that could challenge conventional industrial development trajectories focused solely on growth. The authors believe that this Nepal case study has valuable lessons for other developing countries pursuing CE as a strategy, as it suggests that a wider SCE scope is necessary to achieve inclusive development.

1. Introduction

Since the new millennium, the literature on the aspirational ambitions of the circular economy (CE) has grown into a popular business narrative of green growth [1,2]. This has led inter alia to a proliferation of terms being used to define CE and calls for clarity on its links with sustainable development [3,4,5]. While global enthusiasm for CE is a recent phenomenon, it is widely acknowledged that circularity as an idea is much older, although it is rarely acknowledged that resource efficiency and sustainability have long been aspects of older indigenous practice [6,7,8,9].
The global discussion has particularly focused on the promise of CE in highly industrialized countries to enable green growth decoupled from resource extraction [10,11,12]. However, these aspirational claims about decoupled CE have shown modest results in highly developed countries [13]. CE has increasingly become a useful addition to other strategies towards climate action and reduced resource use within particular local contexts rather than a comprehensive answer to sustainable development [14].
While it has already been shown that CE’s technical and sectoral solutions are not an answer to sustainable development challenges, Nepal has also declared ambitions to follow global examples. We examine in this paper an inadequate CE strategy and perspective not focused on Nepal’s needs that should be expanded [15]. In this study we critically examine whether the mainstream CE model is appropriate for Nepal and neighbours in the South Asia Region and whether there is an argument and model for connecting circularity with sustainable development as has been discussed in many circles [3,5].
At a broader level, we see a limited connection between mainstream CE and regenerative business and planetary health, a major theme of this Special Issue. Mainstream CE is not regenerative in its ambitions, while SCE as we propose it below explicitly is. A regenerative economy that contributes to planetary health is a common feature of more recent revisions of circular thinking such as doughnut economics [14]. Thus, our argument in this paper is explicit about the role of SCE in Nepal as a contribution to inclusive and regenerative economics.

1.1. Nepal: Country Profile

Nepal, a landlocked nation nestled between China and India in the heart of the Himalayas, represents a developing economy with significant potential despite facing considerable challenges. With a population of approximately 29.7 million people as of 2024, Nepal’s economy is dominated by the services sector, followed by agriculture and industry. Major industries include tourism, carpet and textile manufacturing, small rice mills, jute processing, sugar and oilseed mills, cigarette production, and cement and brick manufact. According to latest data, over eighty percent of the working population is still in informal employment [16].
The country faces mixed economic indicators that reflect both progress and ongoing challenges in its development trajectory. Tourism plays a crucial role in Nepal’s economy and supports over one million jobs. The country’s urban population comprises a quarter of the total population, indicating that Nepal remains predominantly rural. Nepal is rich in natural resources, including water resources, extensive forests covering 25.4% of the country, and mineral deposits. Agriculture remains the principal economic activity, employing about 65% of the population and providing 31.7% of GDP, though only about 20% of the total area is cultivable [17].
Nepal’s circular economy discourse has become intertwined with green growth ambitions. The country’s transition toward a green economy [18,19] incorporates circular economy principles, particularly through its commitment to Green, Resilient and Inclusive Development (GRID-SAP). These initiatives position circular economy as integral to Nepal’s climate commitments, including its ambitious UNFCCC net-zero target by 2030. The International Centre for Integrated Mountain Development (ICIMOD) has achieved successes in developing greener, more inclusive, and climate-resilient economic approaches in the Hindu Kush Himalayas, with circular economy strategies representing valuable additions to their sustainable development and resilience focus [20].
However, despite significant renewable energy potential, particularly hydropower, only 17% of Nepal’s final energy consumption derives from renewable sources. Moreover, large-scale hydropower development often generates significant social and ecological damage [21]. A recent review of green development progress in Nepal and Bangladesh revealed limited advancement due to stagnating renewable energy growth and inefficient resource utilization [22]. These implementation challenges reflect broader global patterns and highlight the complex relationship between circular strategies and energy transition requirements [23].
Given the current interest in CE in Nepal and South Asia and the lack of analysis of CE approaches beyond 3R thinking and towards sustainable development, the authors concluded it was timely to examine the current state of thinking and future prospects of Sustainable Circular Economy (SCE) model for Nepal. The SCE model, as outlined below, reconnects CE considerations with sustainable development, and is particularly relevant to developing country ambitions to implement CE.

1.2. Adapting Circular Economy to Developing Economies

The adaptation of CE policies and practices to developing world objectives has become an important discussion [24]. While there remains an emphasis in the CE literature on ‘material design of commodities and development of new services’ [25], aspects of the necessary social and institutional changes are less discussed. Consequently, agendas for circular cities in developing countries are not inclusive and are undermined by competing urban sustainability agendas, the lack of recognition of informal expertise, and the fundamental contradiction between accumulative and redistributive goals [26]. These limitations have led to the articulation of revised, more equitable and sustainable circular agendas, such as the sustainable circular economy [27], circular society [28], and Doughnut Economics [14]. These revised agendas place more explicit emphasis on social equity, participation and recognition of ecological limits in an era of climate change.
In a recent Chatham House report on inclusive development through CE implementation, the authors note that in rich countries discussion of sustainability has tended to emphasize reform of specific supply chains rather than the full-economy transformation suggested by the complete r-ladder [29]. Challenging the claim that Nepal should learn from Europe’s Green Economy and Circular strategy as in [30], the authors note that if the EU path is followed, such change is decades away. As a result, the authors identify scope in developing countries to create a unique CE model which has higher labour and social benefits [29]. This model will require not only domestic but international coordination and support, including through supply chain measures, for implementation in Nepal. Patwa et al. [31] draw similar conclusions on CE in emerging economies, noting there is need for government intervention, systemic business change and consumer behaviour change. Such wide-ranging transformation beyond the current 3R (recycle, reuse, reduce) approach is scarcely alluded to in current discussions.
An intentionally strong sustainability approach which rejects decoupling, seeks a nature and human resource balance, and redesigns industrial systems and business models for diversity and multi-dimensional values—social, ecological, environmental—through participation aligns with the principles for an SCE that are compatible with the ambitions and challenges of Nepal. Combined with the specific conditions of a developing country, reform of the deficiencies in the mainstream circular story are on the agenda for a sustainable circular economy (SCE) where all the elements of inclusion and participation in a country-wide transition can be implemented. As per [27], the ten principles of SCE include:
  • Beneficial reciprocal flows of resources between nature and society;
  • Reduce and decouple resource use;
  • Design, select and transform industrial systems, supply chains, materials and products;
  • Circular business models to integrate multi-dimensional and local value;
  • Transform consumption towards systems-of-provision and more sharing, service and experience-based consumption;
  • Citizen participation in sustainable transitions;
  • Coordinated participatory and multi-level change;
  • Mobilize diversity to develop a plurality of circular economy solutions;
  • Embed strong sustainability in political-economic systems;
  • Whole-system assessment.
Although absent from discussions in Nepal, these modified agendas support the idea that CE implementation in developing countries should strike its own path towards an inclusive and sustainable model of CE as suggested. We take up the impetus from Paykurel [32] who argues for a ‘Nepali way’ towards CE that will be distinct from conventional approaches and recognize existing traditions of eco-friendly practices. A first step towards such an SCE for Nepal is to examine whether the elements of a system-wide agenda of sustainable circular economy (SCE) has already been articulated albeit in fragmentary form in the literature. In addition to synthesizing the existing literature, in interviews with key CE advocates and stakeholders, we further consolidate and expand on the findings from this first comprehensive review.

2. Literature Review

This literature review examines the evolution of circular economy (CE) discourse in Nepal, tracing the progression from narrow 3R approaches to broader visions of sustainable circular economy (SCE). Our analysis reveals a fragmented landscape of sector-specific initiatives that, while promising, lack integration into a coherent SCE model consistent with Nepal’s socio-economic context.
Nepal’s engagement with circular economy principles has followed the regional South Asian trajectory, beginning with the limited but foundational 3R (Reduce, Reuse, Recycle) framework. As a regular participant in the Regional 3R Forum in Asia and the Pacific since 2006, Nepal has consistently reported on its progress toward waste management goals [33]. However, recent assessments reveal significant limitations in this approach. Mohan’s [34] comprehensive review of regional 3R progress concludes that across South Asia, “a strong circular economic roadmap to fully capitalize on good management is still in its early stages” [34], citing limited waste management focus, poor stakeholder engagement, and inadequate infrastructure. Nepal’s own government reports echo these challenges, identifying lack of awareness, insufficient policy frameworks, inadequate technology, and unwillingness to pay as primary barriers to 3R advancement [35].
The Asia Development Bank’s recent analysis of CE transition prospects in South Asia reinforces these concerns, highlighting that private sector engagement, plastic waste reduction, waste-to-energy strategies, and municipal solid waste management in cities remain poorly addressed [36]. Critically, the editor’s note that “while a circular economy approach extends beyond solid waste management and the 3Rs, both are precursors and remain major challenges for the region” [36]. This regional assessment underscores a fundamental limitation: the 3R framework represents only the lower rungs of the circularity ladder.
As Potting et al. [37] and Fitch-Roy et al. [38] demonstrate, recycling, reuse, and recovery strategies entail merely minor adjustments to the linear economy. The more ambitious 10R framework, with its emphasis on system-wide transformation through strategies like product refusal and socio-institutional rethinking, remains largely unexplored in the Nepali context [39,40]. Despite these foundational challenges, Nepal has witnessed the emergence of promising sector-specific circular initiatives that, while valuable individually, lack coherent integration into a broader SCE framework.
Municipal solid waste (MSW) management represents Nepal’s most developed circular economy application. Comprehensive studies advocate for integrated approaches including source sorting, informal sector integration, digital tools, and organic waste-to-energy transformation in key urban centres [41,42,43]. Recent research demonstrates that sustainable financing of waste collection, particularly plastics, could generate significant revenue streams [44], though market acceptance of plastic waste-based products remains challenging [45].
The potential for waste-to-energy initiatives extends beyond traditional recycling. Biogas production from MSW presents high-impact circular opportunities [46] while improved wastewater treatment for biogas generation could yield substantial economic and environmental benefits [47]. Innovative approaches combining agricultural waste with MSW for biogas production [48] and emerging waste-to-hydrogen projects [49] suggest significant untapped potential. However, implementation remains problematic. Despite supportive policies and pilot initiatives, active implementation of waste management laws and regulations is largely absent [50], highlighting the gap between technical potential and institutional capacity.
Nepal’s agricultural sector presents compelling opportunities for circular transformation that align with broader sustainability and food sovereignty goals. Bhattarai et al. [51] demonstrate how integrated farming system design, coupled with appropriate tax mechanisms, could reduce environmental discharges while improving waste management. This vision gains particular relevance given Acharya’s [52] assessment that environmental costs of intensive fertilizer and pesticide use now outweigh productivity benefits.
The convergence of agroecology and CE strategies offers pathways toward agricultural sustainability and endogenous food sovereignty, contrasting sharply with import-dependent, high-yield monoculture approaches characteristic of mainstream neoliberal development [53]. Innovative approaches include alternative domestic feedstocks such as insects, algae, and plants for livestock production [54] and indigenous fruit harvest systems with closed-loop byproduct utilization [55]. These agricultural circular strategies embody multiple benefits characteristic of domestically driven SCE approaches, emphasizing local resource utilization, reduced external dependencies, and integration of traditional ecological knowledge.
Nepal’s significant tourism sector presents additional circular opportunities through product innovation, resource efficiency improvements, reuse strategies, and new business models [56]. However, realizing this potential requires substantial government intervention and policy support [57]. Similarly, Nepal’s fashion and textile sector shows modest CE awareness among industry representatives in urban centres like Lalitpur, though comprehensive development strategies remain nascent.
The sectoral initiatives described above highlight a critical challenge: the disconnect between technical potential and institutional capacity for circular transformation. This gap becomes particularly evident when examining business and stakeholder perspectives on CE implementation. Limited stakeholder research reveals concerning patterns. Alqassimi and Upadhayay’s [58] comparative study between Nepal and the USA found that while respondents were familiar with 3R concepts, their understanding of broader CE remained “limited and muddled.” Significantly, respondents reported the virtual non-existence of circular organizations and employment opportunities, emphasizing that regulatory frameworks and government support were essential for progress.
For small and medium enterprises (SMEs), the transition challenges are particularly acute. While Sharma et al. [59] found that 3R-focused approaches could encourage linear-to-circular transitions, they emphasized that innovation and training agendas were more critical than government support alone for organizational behaviour change. The Impact Hub Kathmandu [60] study in two Nepali provinces identified finance gaps, inadequate government support, limited partnership opportunities, and insufficient innovation support as primary obstacles to business development in the circular economy space.
A particularly critical implementation challenge concerns informal sector integration. Multiple studies emphasize that informal workers represent both a significant opportunity and a major challenge for circular economy development in Nepal [36]. Tuladar [61] argues that successful integration requires explicit policy recognition of informal sector roles, combined with targeted training on health, safety, and entrepreneurial opportunities. However, recent analysis by Cataldo et al. [62] reveals that informal sector work remains “tolerated but not recognized,” with existing socio-economic vulnerabilities exacerbated by continued marginalization. Price volatility for recycled materials, inadequate treatment facilities, and absent regulatory capacity represent major barriers to circular economy development from the informal sector perspective. This integration challenge reflects broader questions about inclusivity in Nepal’s circular transition, particularly regarding women’s economic participation and the recognition of indigenous circular traditions [63].
The literature review reveals a disconnect between Nepal’s circular economy aspirations and implementation realities. While technical possibilities for waste-to-energy transformation and sector-specific circular initiatives show promise, the business and institutional changes required for comprehensive circular transformation remain inadequately addressed. Particularly problematic are attempts to model Nepal’s circular economy development on European examples, given both poor EU circular economy results and Nepal’s unfavourable implementation environment. In the context of Nepal’s future socio-economic development ambitions and climate challenges, the country requires a unique circular agenda that prioritizes inclusivity and sustainability over simple replication of external models.
This need for locally adapted approaches aligns with broader recognition of contested development visions for Nepal [64], including but extending beyond middle-income status ambitions through more ‘subaltern’ [65] and locally focused approaches [66]. Recent scholarship has begun articulating such locally adapted frameworks. Shrestha et al. [67] discuss localized CE models that integrate informal workers and engage society in comprehensive behaviour change. Bhusal [63] emphasizes the need to acknowledge indigenous circular traditions alongside socioeconomic integration of informal workers and women’s economic participation.
This literature review reveals critical gaps in current understanding of circular economy potential in Nepal. First, although it is recognized that the 3R focus is limited, most of the research and reports remains focused on this. This raises the first question:
  • How do key organizations promoting circularity in Nepal conceptualize CE beyond the 3R framework?
Second, scattered suggestions for adapting CE to Nepal’s particular needs and ambitions have not been integrated into a coherent sustainable circular economy (SCE) model. Thus, we ask a second question:
  • What model of CE would best align with Nepal’s unique history and socio-economic development goals?
Third, limited systematic analysis exists of local stakeholder perspectives and implementation challenges of such a coherent transformation. These gaps are particularly significant given that successful circular economy implementation requires understanding of local business, government, and societal challenges. This leads to the third research question:
  • What specific challenges do these organizations face in implementing circular practices?

3. Methodology

While existing studies have provided generic insights about Nepal’s small business sector needs—including financing, innovation support, policy intervention, and awareness raising (Impact Hub Kathmandu, 2024 [60])—a critical gap remains in understanding how key stakeholders conceptualize and implement circular economy beyond traditional frameworks. While we only recruited 13 interviewees, we were fortunate that they spanned multiple organizational categories, including NGO, small business, and incubators. This is important in that it is a network of actors who are needed to implement and promote SCE (and CE) in the country. An exclusive focus on sector actors, while important, does not reflect this key network effect for innovation.
To consolidate the review findings, we conducted semi-structured interviews with thirteen representatives from nine organizations actively promoting circular economy initiatives in Nepal. As per the methodology of reflexive thematic analysis and the interpretive approach we were not concerned with strict sampling procedures typical of quantitative models but to gather a purposive representative group of actors in Nepal (see Table 1 below). Our purposive sampling strategy [68] targeted organizations—both businesses and NGOs—currently advancing circular agendas across diverse sectors.

3.1. Data Collection

Primary data collection occurred in September 2024 in Kathmandu, with interviews conducted in Nepali by research team members. We supplemented this with secondary analysis of a publicly available transcript from Doko Recyclers’ participation in a 2019 panel discussion on circular economy business contexts. This inclusion was justified by DKR’s significant role in Nepal’s CE landscape and the unavailability of the founders for direct interview during our fieldwork period. The profile of the participants is shown in Table 1.
All interviews followed a semi-structured protocol addressing three core areas:
  • Organizational definitions and conceptualizations of circular economy.
  • Direct experience with CE or 3R implementation.
  • Perceived challenges and barriers to circular economy development.

3.2. Data Analysis

Following interview completion, all Nepali transcripts were translated into English for analysis. We employed reflexive thematic analysis [69], recognizing that themes are generated through interpretive processes rather than simply discovered in data. Our analysis process involved:
  • Individual Analysis: Three researchers independently reviewed translated transcripts.
  • Consensus Building: Collaborative discussion to identify common themes across interviews.
  • Systematic Coding: Import into NVivo 14 for structured thematic analysis.
  • Theme Development: Iterative refinement of thematic structure reflecting interconnected topics.
This approach acknowledged that our interpretation was shaped by theoretical assumptions about sustainable circular economy principles while maintaining analytical rigour through systematic procedures [70,71].

3.3. Findings: Stakeholder Perspectives on Circular Economy in Nepal

Our analysis revealed six interconnected themes that illuminate how Nepali organizations conceptualize, practice, and envision circular economy development. These findings demonstrate both the potential for locally adapted circular approaches and the systemic challenges requiring comprehensive transformation.

3.3.1. Theme 1: Rediscovering Indigenous Circular Practices

This first theme connects to the need for local circumstances and history to be better reflected in circular models for Nepal. A striking finding across all interviews was participants’ emphasis on pre-existing circular practices embedded in Nepali culture and communities. Rather than viewing circular economy as an entirely new concept, stakeholders consistently positioned it as formal recognition of traditional resource efficiency practices.
“In their community, people have long practiced circular economy principles without using the formal terminology. The older generations were already aware of the importance of maximizing the lifespan of products and applied this knowledge in their daily lives.”
(KFZ)
“The concept of the circular economy is relatively new in Nepal, but traditional practices have always aligned with it. Most Nepalis are already practicing the circular economy without realizing it.”
(WCN)
This indigenous foundation provided participants with confidence that circular economy principles could gain traction in Nepal, as they align with existing cultural values rather than imposing foreign concepts. However, the challenge identified was synthesizing traditional practices with contemporary circular economy frameworks to address modern environmental and economic challenges.

3.3.2. Theme 2: Definitional Boundaries and 3R Dominance

The second theme highlights how existing narrow technical definitions centred on recycling and reuse are too narrow to reflect the sustainable development ambitions of Nepal. When asked to define circular economy, participants offered diverse but consistently narrow conceptualizations focused primarily on waste management, product life extension, and material reuse. Few references emerged to broader systemic transformation consistent with SCE principles.
“We define the circular economy as maximizing the use of products and generating economic value from them while preventing waste from ending up in landfills.”
(KNV)
“So circular economy at its heart it’s all about keeping materials and products in a usable form for as long as possible within the system right. It’s about closing the loop.”
(DKR)
While some organizations demonstrated broader understanding—particularly Impact Hub Kathmandu, which described circular economy as “a systemic approach that covers everything from the ideation phase to post-delivery”—most definitions remained within 3R frameworks. This pattern reflected participants’ exposure to training programmes and workshops that emphasized waste management and recycling over systemic transformation.

3.3.3. Theme 3: Waste Management as Primary Entry Point

Related to theme 2 above is the acknowledgement that waste and recycling are still a necessary entry point to change and ultimately will be part of the overall transformation. All participants identified waste and recycling as central to their circular economy engagement, with specific attention to material-specific challenges including plastic, composite packaging, e-waste, and glass. This focus reflected both Nepal’s pressing waste management challenges and the practical entry points available to small organizations.
“At present what’s going on here in Nepal is only high-value items are recycled which say for example… aluminium metal paper etc but a lot of low value items that have negative recycling value like plastics are typically dumped.”
(DKR)
“Nepal faces significant fertilizer shortages, and this initiative helps address that problem while also reducing waste from poultry farms. This dual purpose motivates our organization to continue its work in this area.”
(KFZ)
Several organizations had developed innovative approaches to waste-to-value transformation, such as converting poultry waste to fertilizer or upcycling textile waste. However, participants noted that downcycling dominated over higher-value circular strategies, and collaboration between organizations remained limited.

3.3.4. Theme 4: Diverse Circular Practices and Future Ambitions

Despite definitional limitations, participants’ actual practices encompassed a broader range of circular strategies than their formal definitions suggested. Current activities included:
  • Product-focused strategies: Upcycling, repurposing, and designing for disassembly.
  • Service innovations: Buy-back schemes, rental services, and circular design consultancy.
  • Organizational practices: Renewable energy adoption and internal resource efficiency.
  • Supply chain localization: Shifting from imported to locally sourced materials.
“We are moving away from importing fabrics from China and India, now focusing on locally sourced materials like sheep wool and silk from silkworms.”
(ADH)
“HHN collects damaged saris, processes, repurposes, and sells them as new products. Customers who purchase these products can return them after use and receive a 50% discount on another item.”
(HHN)
Future ambitions for KNV included electric vehicle delivery systems, comprehensive buy-back programmes, and achieving net-zero organizational status, indicating that practice was already moving beyond traditional 3R boundaries.

3.3.5. Theme 5: Education and Awareness as Transformation Catalysts

Strategies for change have been suggested in the literature and include education and awareness raising but often there is lack of detail in what this means. Our interviewees were clearer about these strategies for transformation. All participants emphasized education and awareness-raising as critical to circular economy development, identifying multiple target audiences requiring different approaches: government officials, businesses, consumers, and different generational cohorts.
“It’s challenging to make local communities understand the concept of the circular economy. Many are unfamiliar with the term and the benefits it offers.”
(IHK)
“The organization emphasizes that younger generations need to learn about circular economy concepts.”
(KFZ)
Organizations like IHK and WCN positioned themselves as intermediaries facilitating knowledge transfer between international circular economy frameworks and local contexts. This educational mission reflected recognition that circular transformation requires comprehensive behavioural and institutional change across society.

3.3.6. Theme 6: Systemic Change Imperatives and Nepal-Specific Models

Perhaps most significantly, all participants emphasized that circular economy success in Nepal required systemic transformation extending beyond individual organizational practices. These systems thinking considerations aligned closely with SCE principles, even when participants’ formal definitions remained narrow.
Participants identified several elements essential to Nepal-specific circular economy models:
Cultural Integration: Buddhist teachings and community forest management were suggested as inspiration for circular approaches adapted to Nepali values and priorities.
Multi-stakeholder Collaboration: Success was viewed as requiring coordinated action across government, business, civil society, and consumer groups.
Inclusive Development Focus: Many organizations emphasized social goals, particularly women’s economic empowerment and leveraging local skills and practices.
Policy and Financial Innovation: Participants identified regulatory frameworks and innovative financing mechanisms as essential enabling conditions.
“If all stakeholder groups, i.e., government, consumers, business and non-government organizations could network and collaborate and jointly promote CE, Nepal had potential to be a leader of its own model of inclusive and sustainable CE.”

3.3.7. Theme 7: Implementation Challenges: Barriers to Circular Transformation

While there is discussion of a range of barriers and enablers in the literature, our interviewees added additional considerations not previously highlighted, such as cross-sectoral collaboration, policy monitoring, and delays in seeing results from financial investments. Across all themes, participants identified consistent implementation challenges that illuminate the gap between circular economy potential and current reality in Nepal. Small businesses faced difficulties accessing capital for circular initiatives, which often required longer investment horizons than conventional approaches.
“As a small business, we encounter financial hurdles, particularly given the long-term nature of the project, which requires time before results can be seen.”
(KFZ)
While participants acknowledged existing policies supporting circular economy development, implementation and monitoring remained inadequate.
“Even when policies are made, putting them into practice and ensuring they are followed is a significant challenge.”
(IHK)
Limited consumer awareness and acceptance of circular products, combined with price premiums for circular alternatives, constrained market development. Despite recognition of systemic change requirements, limited collaboration between organizations hindered comprehensive approaches to circular development.

4. Discussion

Our findings reveal a complex landscape where traditional circular practices coexist with contemporary sustainability challenges, creating both opportunities and obstacles for circular economy development. Themes identified also point to awareness of indigenous traditions and other economic and business hurdles.
Three key insights emerge from this analysis. While participants’ formal definitions remained largely within 3R frameworks, their actual practices and aspirations demonstrated implicit systems thinking consistent with broader SCE approaches. This suggests that Nepal’s circular economy development may be more advanced in practice than in formal conceptualization, indicating potential for rapid scaling if appropriate frameworks and support systems are developed.
The consistent emphasis on traditional circular practices provides a crucial foundation for locally adapted circular economy development. Unlike contexts where circular economy represents a radical departure from existing practices, Nepal’s cultural and traditional base offers authentic grounding for circular transformation. However, this foundation requires systematic integration with contemporary circular economy frameworks to address modern challenges.
Participants’ unanimous emphasis on multi-stakeholder collaboration and systemic change demonstrates sophisticated understanding of circular economy requirements, even when formal definitions remained narrow. This recognition provides a foundation for comprehensive SCE development that integrates technical, social, economic, and political dimensions.

4.1. Proposed Nepal-Specific SCE Framework

Based on our literature review and stakeholder interviews, we propose a Nepal-specific SCE framework (Table 2 below) that synthesizes SCE principles with local contexts and stakeholder insights:
This framework moves beyond the 3R focus dominating current CE discourse in Nepal toward a comprehensive SCE conception aligned with the country’s inclusive development aspirations. It recognizes that while technical solutions for waste management and resource efficiency are important, sustainable circular transformation requires fundamental rethinking of economic, social, and political systems to ensure benefits reach all segments of society while respecting environmental limits.
The stakeholder insights reveal that such transformation is both necessary and potentially achievable in Nepal, given the cultural foundation of circular practices and growing recognition of systemic change requirements. However, realizing this potential requires coordinated action across the ten dimensions outlined above, supported by appropriate policy frameworks, financing mechanisms, and capacity building initiatives.
This study represents the first comprehensive analysis of sustainable circular economy (SCE) potential in Nepal, revealing a complex landscape where traditional resource efficiency practices coexist with contemporary sustainability challenges. Our analysis extends recent scholarship challenging the universal applicability of European circular economy models to developing countries [31]. While Bhandari [30] advocates learning from EU circular strategies, our findings support Paykurel’s [32] argument for a distinctly “Nepali way” that builds on indigenous foundations rather than importing external frameworks wholesale.
The stakeholder perspectives reveal sophisticated systems thinking that aligns with Velenturf and Purnell’s [27] sustainable circular economy principles, even when formal definitions remain within 3R boundaries. This suggests that Nepal’s circular transformation may be more conceptually advanced than current policy discourse indicates, supporting Beamer et al.’s [7] argument that indigenous systems of circularity can inform universal policy development.
Our proposed Nepal-specific SCE framework addresses the limitations identified by Anantharaman [26] regarding circular cities in developing countries—namely the lack of inclusivity, inadequate recognition of informal expertise, and fundamental contradictions between accumulative and redistributive goals. By emphasizing multi-dimensional value creation, citizen participation, and diversity mobilization, our framework responds to calls for more equitable circular agendas.
The study reveals significant alignment between stakeholder practices and SCE principles, despite limited formal exposure to comprehensive circular frameworks. Organizations like Kapal Fertilizers exemplify Dhungana et al.’s [48] vision of integrated waste-to-energy systems, while textile enterprises demonstrate the potential for supply chain localization advocated by Khanal and Thapa [53] in their discussion of endogenous circular economy approaches.
However, our findings also illuminate the implementation challenges identified in recent assessments. The financial barriers faced by small businesses align with Impact Hub Kathmandu’s [60] identification of finance gaps and inadequate government support as primary obstacles. Similarly, the limited consumer awareness reported by participants reflects Alqassimi and Upadhayay’s [58] finding of “limited and muddled” CE understanding among Nepali stakeholders.

4.2. Coordinated Action, Policy Frameworks and Capacity Building

The emphasis on informal sector integration echoes concerns raised by Cataldo et al. [62] about marginalization of informal workers in circular transitions. Our framework’s focus on inclusive development and citizen participation directly addresses these equity concerns, supporting Tuladar’s [61] argument for explicit policy recognition of informal sector contributions.
While municipal solid waste management remains Nepal’s most developed circular application [41,50], our analysis reveals emerging integration across sectors. The convergence of agricultural sustainability and circular principles demonstrated by participants aligns with Bhattarai et al.’s [51] vision of integrated farming systems and Acharya’s [52] critique of resource-intensive agricultural approaches.
The tourism and textile sector initiatives identified in our study extend Kunwar’s [72] analysis of multisided platforms in Nepal’s tourism industry and support R. Shrestha et al.’s [56] findings on circular awareness in the fashion sector. However, our framework emphasizes that realizing this potential requires the comprehensive government intervention and policy support identified by Suram [57].
Our findings reveal a critical gap between Nepal’s 3R policy foundation and the systemic transformation required for comprehensive circular development. While the Government of Nepal [35] continues to frame circular economy within traditional waste management boundaries, stakeholder perspectives demonstrate readiness for more ambitious approaches. We suggest that explicit cross-sectoral agreements and discussions on the network effects required for SCE are undertaken. Such discussions and agreements would take explicit notice of integrating and capacity building for the informal sector—as explicit goals. While individual initiatives should continue government and external investors and actors should coordinate their efforts towards a set of SCE goals for Nepal, hinted at already above.

5. Conclusions

The integration of circular economy principles into Nepal’s green growth strategy [19,22] provides institutional foundation for SCE development. However, our analysis suggests that current approaches remain within what Fitch-Roy et al. [38] characterize as “conceptual recycling” rather than fundamental transformation. The ten-principle SCE framework we propose addresses this limitation by providing a comprehensive alternative to narrow 3R approaches. This framework aligns with Nepal’s GRID-SAP ambitions for a green, resilient and inclusive development more adequately than the current focus on technical recycling and reuse solutions being proposed, as it encompasses the social and institutional dimensions emphasized by our stakeholders. Moreover, we suggest that other countries in the South Asia region and beyond should more closely examine the SCE principles as they will help see beyond the narrow technical confines of 3R thinking to reconnecting with sustainable development [15,25,26,27,28].
Several limitations qualify our findings. First, our sample focused on organizations already engaged with circular economy concepts, potentially overlooking perspectives from traditional sectors and communities. Second, the study was conducted primarily in Kathmandu, limiting insights into rural and regional contexts where different circular challenges and opportunities may exist. Third, while our framework synthesizes stakeholder perspectives with SCE principles, empirical testing of implementation pathways remains necessary. Future research should examine specific mechanisms for translating the proposed framework into policy and practice, particularly regarding financing innovations, regulatory frameworks, and capacity building initiatives. Additionally, our analysis would benefit from comparative research examining how other South Asian countries are adapting circular economy frameworks to local contexts. Such analysis could illuminate regional patterns and identify opportunities for knowledge sharing and collaboration.
Our research supports the argument that Nepal should develop a distinctive approach to circular economy that builds on traditional foundations while addressing contemporary challenges. This “Nepali way” aligns with broader recognition of contested development visions for the country [64] and the need for locally focused approaches that prioritize social equity and environmental sustainability [66]. This Nepali way would be a real contribution to regenerative economics and planetary health in as much as it is not just focused on resource efficiency and waste but directly concerned with regenerative agriculture, and business focused on upstream strategies of environmental protection and enhancement as well as social development. As Nepal continues to navigate its development trajectory in an era of climate change and resource constraints, the integration of circular economy principles offers both opportunity and necessity. The question is not whether Nepal should pursue circular transformation, but rather how to develop approaches that serve the country’s inclusive development aspirations while contributing to global sustainability transitions.

Author Contributions

Conceptualization, G.M. and S.G.; methodology, G.M. and S.G.; data collection, S.G. and R.S.; data analysis, S.G. and R.S.; validation, G.M., S.G. and R.S.; writing—original draft, G.M. and S.G.; writing—review and editing, G.M., S.G. and R.S.; supervision, G.M. All authors have read and agreed to the published version of the manuscript.

Funding

This research received no external funding.

Institutional Review Board Statement

The study was conducted in accordance with the Declaration of Helsinki, and approved by the Research Committee Kathmandu University School of Education (RC, KUSOED) (protocol code KUSOED-O10624, 5 June 2024).

Informed Consent Statement

Informed consent was obtained from all subjects involved in the study.

Acknowledgments

We express our gratitude to the Australian Volunteers Program for providing the research grant that supported this study. This funding enabled critical collaboration and fieldwork in Nepal, significantly contributing to the project’s success. All authors take full responsibility for the content and findings of this publication.

Conflicts of Interest

The authors declare no conflict of interest.

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Table 1. Interview participants and organizations.
Table 1. Interview participants and organizations.
OrganizationIntervieweesDescription
Impact Hub Kathmandu (IHK)Director & Program Officer (2)Global Impact Hub Network member fostering sustainable innovation, including EU-funded Roots of Circularity programme
Eco Saathi Nepal (ESN)CEOLifestyle brand focused on eco-friendly alternatives to everyday products
Kapal Fertilizers (KFZ)Founders (2)Environmental and social enterprise converting waste to fertilizer, addressing Nepal’s fertilizer scarcity
Kinnovation (KNV)President & Project Engineer (2)Technology enterprise focusing on electric vehicle charging, food dehydration, solar energy solutions
Wildlife Conservation Nepal (WCN)DirectorConservation organization supporting nature protection through multi-stakeholder collaboration
AbiR Designer’s Hub (ADH)Organization LeadEnvironmentally conscious clothing brand specializing in natural and sustainable textiles
Hatti Hatti (HHN)Co-founder & PresidentWomen’s entrepreneurship platform focused on clothing repurposing
Re-Kriti Nepal (RKN)Co-founders (2)Specialized in denim upcycling and repurposing
Doko Recyclers (DKR)Co-founderEstablished 3R and circularity advocate (data from 2019 panel discussion)
Note: Interviewees and organizations in the study.
Table 2. Nepal-specific SCE framework.
Table 2. Nepal-specific SCE framework.
SCE PrincipleNepal-Specific Application
Beneficial reciprocal flows between nature and societyDevelop agro-ecology approaches emphasizing conservation and environmental sustainability, building on traditional practices
Reduce and decouple resource usePromote reuse, extended product lifecycles, and efficient resource use consistent with existing cultural traditions
Transform industrial systems and supply chainsFocus on localizing supply chains and transforming industrial processes for closed-loop production benefiting local workforce
Circular business models for multi-dimensional valueInnovate circular business models generating multiple social, economic, and environmental benefits domestically
Transform consumption systemsIncrease sharing and service economy models reducing consumption and waste effects
Citizen participation in sustainable transitionsEnsure community participation in both benefits and design of circular social enterprises
Coordinated multi-level changeEncourage business, government, and society collaboration in rethinking sustainable development
Mobilize diversity for plural solutionsIntegrate gender, ethnicity, and other social concerns in developing diverse circular solutions
Embed strong sustainability in political-economic systemsCritically evaluate traditional growth paths for consistency with inclusive development goals
Whole-system assessmentDevelop circular proposals from systems perspective rather than continuing piecemeal solutions
Note: SCE principles and implementation strategies for Nepal.
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Melles, G.; Gautam, S.; Shrestha, R. Towards a Sustainable Circular Economy (SCE) for Nepal: Current Realities and Perspectives. Challenges 2025, 16, 44. https://doi.org/10.3390/challe16030044

AMA Style

Melles G, Gautam S, Shrestha R. Towards a Sustainable Circular Economy (SCE) for Nepal: Current Realities and Perspectives. Challenges. 2025; 16(3):44. https://doi.org/10.3390/challe16030044

Chicago/Turabian Style

Melles, Gavin, Suresh Gautam, and Richan Shrestha. 2025. "Towards a Sustainable Circular Economy (SCE) for Nepal: Current Realities and Perspectives" Challenges 16, no. 3: 44. https://doi.org/10.3390/challe16030044

APA Style

Melles, G., Gautam, S., & Shrestha, R. (2025). Towards a Sustainable Circular Economy (SCE) for Nepal: Current Realities and Perspectives. Challenges, 16(3), 44. https://doi.org/10.3390/challe16030044

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