Transitioning to Circular Economy in Agriculture Sector: An Extended Institutional Theory and Stakeholder Perspective

Deepak Kumar Sahu and Divya Choudhary

Business Strategy and the Environment, 2025, vol. 34, issue 6, 7180-7209

Abstract: The deteriorating impact of traditional linear model on agriculture productivity and ecology has drawn a serious emphasis on the espousal of circular economy (CE) practices in the agriculture sector. Accordingly, an increasing number of startups operating on circular principles are emerging in the agriculture sector to create value from the agri‐waste. In this research, we aim to investigate the challenges faced by these agri waste‐to‐value (WTV) startups, which is currently missing in the extant literature. In the process, we have used the lens of extended institutional theory (EIT) to identify and understand the challenges faced by WTV startups and stakeholder theory (ST) is used to propose strategies for overcoming these obstacles. An innovative integrated model based on probabilistic linguistic term sets (PLTS), evidential reasoning algorithm (ERA), and aggregated‐ranking model considering psychological preferences of decision makers is developed to examine the challenges. This is one of the initial studies to comprehensively explore the challenges faced by WTV startups in the agriculture sector and propose a framework to overcome these challenges based on EIT and ST. A multidimensional analysis is performed to consider the economic, operational, and socio‐environmental implications of the challenges. Different analyses are conducted for better understanding about the sector and maturity stage specific challenges faced by startups. The findings reveal that coercive challenges pose the most critical threat and a policy restructuring is urgently required to support the WTV startups in the agriculture sector. Further, operational challenges related to raw materials and infrastructure appear to be more critical in the waste‐to‐material sector whereas waste‐to‐energy sector is struggling due to technological issues.

Date: 2025
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