Revealed: How SMEs are losing millions to lack of circular economy certification rules

Many small and medium-sized enterprises (SMEs), particularly those operating within local food ecosystems and community-based value chains, have yet to fully access or benefit from existing policy and legislative frameworks that support the circular economy. 

This is despite Kenya making notable progress in developing an enabling policy environment for circularity.

Legislative instruments such as the Sustainable Waste Management Act, the Extended Producer Responsibility Regulations and the Green Economy Strategy and Implementation Plan, reflect the country’s commitment to advancing circular economy practices within the agri-food system.

As a result, Kenya continues to experience substantial food losses across its agricultural systems. These losses are largely driven by inefficiencies in storage, transportation and market access.

These losses are particularly pronounced for perishable commodities such as fruits, vegetables, milk, fish and cereals, where inadequate cold chain infrastructure and weak market linkages contribute significantly to spoilage.

At the consumer level, food waste is estimated at 99kg per person per year, highlighting broader inefficiencies across the value chain.

Collectively, these losses undermine national food security, reduce incomes for smallholder farmers and contribute to avoidable greenhouse gas emissions.

These findings are highlighted in a new policy brief by the O-Farms Project, which examines Kenya’s progress toward a circular economy in agri-food systems.

The brief underscores both national policy advancements and the practical challenges that continue to limit SME participation in implementation.

Bopinc Country Director Beryl Oyier notes that SMEs are still not fully benefiting from these frameworks in practice.

“Despite this evolving policy landscape, only 18 per cent of SMEs report familiarity with prevailing circular economy laws, evidencing an enormous policy-implementation gap,” she says.

The event, convened under the O-Farms Project and led by Bopinc in partnership with Biovision Africa Trust and Unconventional Capital and funded by the IKEA Foundation, brought together stakeholders from agri-food and environmental organisations, development institutions, and policy, advocacy and technical sectors working in circular economy and agribusiness.

The initiative works with SMEs in Kenya and Uganda to transform food waste into value, support livelihoods and reduce environmental impact across East Africa.

The study draws on surveys of 45 Kenyan SMEs and consultations with 26 key informants, revealing several interconnected operational challenges.

A significant 93 per cent of SMEs report difficulties accessing stable and reliable markets, limiting their ability to plan, invest and scale.

Many enterprises continue to rely on informal channels: about 80 per cent depend on word-of-mouth for customer acquisition, while 64 per cent sell directly from their production sites.

Certification processes present another barrier, with 78 per cent of respondents describing them as costly, complex and overly centralised in Nairobi, limiting participation for enterprises in other regions.

In access to finance, 60 per cent of SMEs identify it as a key challenge. Additionally, 63 per cent report limited access to appropriate production technologies, particularly in remote areas.

A further 56 per cent say they are not aware of existing policies and regulatory frameworks designed to support their participation in circular economy markets.

Jackson Kinyanjui, Senior Inclusive Business Advisor at Bopinc, explains that awareness and implementation support have not kept pace with policy development.

“These challenges are further influenced by variations in regulatory frameworks across national and county levels. Enterprises operating in different countries may face differing waste management and compliance requirements. This increases administrative complexity, raises operational costs, and creates uncertainty for businesses seeking to expand or replicate their models,” he says.

 Acting CEO of Biovision Africa Trust Frederick Ochieng notes that when SMEs are unable to participate effectively in circular economy markets, food loss continues at scale.

“This contributes to greenhouse gas emissions and leads to inefficient use of water and land resources. It also reduces the value that could otherwise reach farmers and local communities, while employment opportunities linked to circular agri-food innovation remain underdeveloped,” he says.

As a result, Kenya’s green growth agenda, despite being well-designed at the national level, lacks its most powerful delivery mechanism, entrepreneurs and small enterprises operating within the food system.

Senior Program Manager at Bopinc, Ebenezer Amadi, highlighted the need to bridge the gap between policy frameworks and business realities.

“What we are seeing in Kenya is that SMEs are already innovating, turning waste into value and building markets, often through informal channels. The challenge is not a lack of effort, but navigating systems that are complex and not always well understood,” he explains. 

He notes that certification processes remain difficult to access, while awareness of standards and regulatory frameworks is still low among many enterprises.

Amadi emphasised the need to make systems more practical through clearer guidance, assisted compliance and targeted support that helps SMEs meet certification requirements.

Strengthening business associations and ensuring SMEs have a voice in policy development will also be essential for building a more responsive and scalable circular economy.

The report outlines five key areas for action. First, strengthening SME capacity on standards and compliance through structured programmes with national agencies and targeted technical assistance, ensuring certification becomes an enabler rather than a barrier.

Improving access to tailored financing by engaging financial institutions on the viability of circular economy SMEs and developing green financial products suited to small enterprise cash flows.

Scaling consumer and policymaker awareness through targeted campaigns, product labelling, and strategic messaging that positions circularity as a solution to climate change and food security challenges.

Increasing SME awareness of existing policies, standards, and incentive frameworks, ensuring that regulatory systems are known and accessible to intended beneficiaries.

Finally, strengthening coordination between the government, private sector, and development partners at both the national and county levels to reduce duplication and improve enforcement.

 The brief concludes that implementing these recommendations will enable SMEs to access appropriate financial services, develop skills to transform waste into valuable products, and contribute more effectively to wealth creation, employment and Kenya’s green growth agenda.