This study investigates how a CE Transformation is facilitated in the adverse conditions. We analysed the experimental case of establishing business clusters Himalaya, Nepal that aims to set up innovation systems for distributed remanufacturing businesses in the remote areas to transform local plastic waste into housing products. The empirical data collected through participatory action research approach is analysed based on the Innovation Systems theories. The study presents the Innovation Systems Dynamics framework for CE Transformation in the Global South. The presented framework consists of four components: missing innovation constructs; 5-stage entrepreneurial innovation process; iterative knowledge creation and diffusion activities; and the challenge-driven business clusters. The study concludes with a rich set of learning to guide the innovation systems and CE researchers on how to instigate the innovation systems for CE transformation in the Global South; understand what works and what doesn’t; and how to address the gaps. This study empowers practitioners and policy makers in the Global South regions for CE transformations in the absence of supportive resources and conditions.