Adoption of Circular Economy Practices and Green Marketing on Upcycled MSME Product Purchase Decisions: The Mediating Role of Green Trust

Abstract

The paradigm transition from linear extraction models toward a circular economy has catalyzed innovation among Micro, Small, and Medium Enterprises (MSMEs), transforming textile offcuts, recycled polymers, and discarded biomass into value-added upcycled lifestyle goods. Nonetheless, upcycled items frequently encounter consumer skepticism regarding product hygiene, structural durability, and perceived greenwashing risks. This study investigates the impact of circular economy practices adoption and green marketing strategies on upcycled product purchase decisions, evaluating green trust as a mediating mechanism. An explanatory quantitative survey was administered to 205 consumers who have purchased or actively patronize upcycled fashion and home decor MSMEs in Manado and Tomohon. Data were evaluated via Partial Least Squares Structural Equation Modeling (PLS-SEM) in SmartPLS 4.0. The empirical results reveal that circular economy practices (β = 0.388, p < 0.001) and green marketing (β = 0.422, p < 0.001) exert significant positive effects on green trust. In turn, green trust strongly elevates purchase decisions (β = 0.518, p < 0.001) and serves as a complementary mediator bridging circular practices (β = 0.201, p < 0.001) and green marketing (β = 0.219, p < 0.001) to consumer purchase decisions. The structural model accounts for 52.6% of the variance in green trust (R² = 0.526) and 61.8% in purchase decisions (R² = 0.618). These insights demonstrate that traceable material provenance and verifiable eco-labeling form essential pillars for establishing buyer confidence in circular MSME goods.