AbstractSustainable production and consumption are the need of the hour. Adopting the Circular Economy (CE) approach fosters sustainable business practices. Cloud computing is a new way of storage and application deployment. Cloud computing enables sustainable business processes, which in turn contributes towards the effective implementation of the Circular Approach to Business Practices (CABP). The current study aims to understand the potential of cloud computing to foster circular economy practices in Small and Medium Enterprises (SMEs). We conducted a Systematic review of 186 scholarly articles published in Web of Science (WOS), selected using the PRISMA framework. We conducted scientometric analysis on sources, authors and country level and thematic analysis to pinpoint further research areas. This was followed by a detailed literature review of the articles selected to study the concept and current practices of circular economy and an evaluation of its implementation in emerging economies. The paper proposes an integrated framework grounded in two approaches, that is, the Technology, Organization and Environment (TOE) framework and institutional isomorphism as determinants of cloud adoption and CE implementation. The proposed model explores the impact of institutional forces on the various parameters of TOE, thereby culminating in the adoption of Cloud Computing in SMEs. The study would encourage leaders and managers of SMEs to adopt cloud computing for competitive advantage and achieve a circular economy approach together. The adoption of cloud‐based applications has a great potential to foster industrial and economic progress with minimum damage to the ecosystem, furthering sustainability and achieving Sustainable Development Goals (SDGs).