Frugal innovation as a new technological paradigm for inclusion and sustainability

Adhering to the circular economy principles has become pivotal for firms aiming to comply with the climate-neutral transition while maintaining long-term competitiveness in the market. This chapter investigates to what extent Italian firms are approaching new circular economic models by means of circular innovation. After providing the theoretical definition of Circular Eco-innovation and the categorization of circular innovative practices by using the product life-cycle approach, the study verifies firms’ level of engagement using data collected on Italian SMEs in two-year periods (2017-2018; 2019-2020). The analysis shows that companies are committed both to innovations related to the reduction and efficiency of raw material use and to practices such as reusing waste and transferring it to other companies. However, the level of implementation of practices belonging to the first group is higher in both periods examined. Further to this, generally northern Italian regions stand out as the most virtuous in terms of implementing circular innovation in the two time periods, followed by several central and southern regions i.e. Marche, Tuscany, Campania and Puglia. Notwithstanding, despite the overall positive adoption rate, there is a widespread downward trend across Italy in 2019-2020, probably due to the occurrence of the COVID-19 crisis.