In recent years, the circular economy (CE) has emerged as a compelling alternative to the traditional linear model of “take-make-use-dispose.” Defined as an economic system in which products and services circulate in closed loops, CE seeks to extend resource lifecycles, reduce waste, and foster regenerative processes. Central to operationalizing CE is the “6R” framework—Reduce, Reuse, Recycle, Remanufacture, Redesign, and Recover—which offers organizations a structured vocabulary and set of principles for rethinking operations. These principles, when embedded into decision-making, can yield material cost savings, lower environmental impact, and improve resilience.
While the benefits of CE are well documented, smaller enterprises often struggle to conceptualize and integrate these principles into their strategies. This challenge underscores the potential of integrated reporting (IR) and its foundational principle, integrated thinking (IT), as tools for aligning CE with organizational management. The International Integrated Reporting Council’s framework organizes resources into six “capitals”—financial, manufactured, intellectual, human, social and relationship, and natural—and maps their transformation through business activities into outputs and outcomes. IT is defined as “the active consideration by an organization of the relationships between its various operating and functional units and the capitals that the organization uses or affects” (IIRC, 2021, p. 3). It demands recognition of interdependencies, trade-offs, and long-term value creation across all dimensions.
A case study of Small Farm Ltd., a family-owned agri-food company in Italy, illustrates how IR and IT can enable CE adoption. The farm’s resources range from livestock, crops, and olive trees to machinery, skilled staff, and stakeholder networks. Through a structured intervention involving 13 meetings, researchers introduced IR concepts, identified the farm’s capitals, and mapped its activities, outputs, and outcomes. Owner C noted, “This classification definitely helps me to think about our resources adopting a different perspective and from different angles.”
Using systems thinking tools—specifically subsystem diagrams and stock-and-flow diagrams—the team visualized the farm’s operations, boundaries, and resource flows. These diagrams revealed causal linkages and feedback loops, both reinforcing and balancing, that underpin value creation. For example, a positive loop was identified in compost production: investments increased livestock, which generated waste, leading to compost creation, sales, and ultimately replenished liquidity for further investments. Owner A reflected, “It is different to look at our company in this way, to actually see on the paper what it is made of and how complex it is.”
Mapping these loops operationalized IT by making visible the connections between capitals and activities. Trade-offs became clearer—for instance, how financial investments influenced natural capital through livestock acquisition, or how human capital affected manufactured capital via maintenance practices. This analytical lens also highlighted where CE’s 6Rs were already active. Reduce, Reuse, and Recycle were ingrained in daily operations: bulk purchasing reduced packaging waste; equipment was repaired and reused; organic residues were composted. As Owner B observed, “Whatever we produce has some value, even what is residual becomes a by-product or is reused as new raw material.”
The process revealed opportunities to strengthen less prominent Rs, such as Remanufacture and Recover, by expanding partnerships with suppliers and trade associations. These strategies were discussed using the stock-and-flow diagram to anticipate short- and long-term impacts on various capitals. The integration of IR concepts into this analysis provided a dual benefit: internally, it structured the owners’ understanding of their business domain; externally, it offered a coherent narrative for communicating CE activities to stakeholders.
The case underscores the performative role of IR in fostering dialogue, enhancing conceptual clarity, and embedding CE into organizational culture. By coupling IR with systems thinking, Small Farm Ltd. transitioned from a static view of operations to a dynamic, feedback-oriented perspective. As Owner C concluded, the process was “not only useful to understand better our business, but also to understand better ourselves and the way in which we think and operate.” This alignment of integrated thinking with circular economy principles demonstrates a pathway for small enterprises to navigate complexity, identify leverage points, and pursue sustainable value creation.