This paper analyzes the problem of septage management on Croatian islands in accordance with the circular economy framework. The systems approach methodology has been used to analyze management issues. A large number of individual housing facilities on Croatian islands are not connected to the public sewage system. As a solution to the requirements of the competent services, holding tanks are used which are largely permeable. Due to tourism activities the amount of wastewater seasonally varies considerably and in summer is up to 10 times higher than in winter. Such a situation creates major problems for property owners due to mostly uncontrolled disposing of septage, which endangers the environment and human health. Although the situation is improving by application of EU directives, due to poor population density septage management will remain a permanent problem. The EU legal framework requires that organic waste be disposed of in accordance with the principles of a circular economy. This also applies to septage. It has been found that simple and robust options are sustainable and the best choice for a small island environment. After appropriate treatment, septage becomes a resource that strengthens the viability of living on the islands.