The Technology Strategy Board will invest £1.25m into closed loop design feasability studies as part of a product innovation competition.
The public body, which aims to foster innovation in business, said the new designs - of products, components or systems - should keep resources within the UK economy over several cycles of use and lead to a lower environmental footprint.
The board will be awarding grants of up to £25,000. SMEs could win up to 75% of their project costs, while large companies will win no more than 65% of their project costs.
The competition is open to UK companies, which can apply collaboratively or as single companies.
The board said moving towards a circular economy is “a significant opportunity for UK business to contribute towards a resource efficient and low-carbon economy, to reduce their costs and supply risks, and to generate value”.
The first round of applications has closed, but the second round opens on 11 February for registrations by 20 March, followed by an application deadline of 27 March.