BSOM046 : Managing Operations and the Supply Chain

CIRCULAR ECONOMY
PRINCIPLES OF CIRCULAR ECONOMY
By
Professor
Name of the University
The Date
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Table of Contents
Cover page………………………………………………………………………………………..1
Table of Contents……………………………………………………………...…………………2
Background Information about Alteo Mauritius………………………………………..…….3
Introduction to the Circular Economy……………………………...………………………….4
Characteristics of Circular Economy……………………………………………..……………5
Drivers of the Circular Economy………………………………………………………………6
Importance of the Circular Economy………………………………………………………….7
The role of circular supply chains in supporting restorative processes advocated by the
circular economy…………………………………………………………………….………….8
Alteo Mauritius Operations and Supply Chain based on Circular Economy…………….…9
Conclusion………………………………………………………………………….………….12
References………………………………………………………………………………….…..13
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Background Information about Alteo Mauritius
Alteo Limited is a sugar milling company which is situated in Mauritius. The company’s vision
is to be a sustainable regional leader in the sugarcane industry, renewable energy and property.
Its vision on the other hand is to responsibly create value through people development, strategic
partnerships, innovative thinking, market focus and operational excellence. The company has
several values including respect (being considerate of each other's feelings and views), integrity,
spirit of entrepreneurship (triggers the ability to conceive ideas with a fresh outlook and generate
bold and brilliant projects that will enhance development), and excellence (pushing further
relentlessly).
The company’s products and services include production of sugar, electricity and molasses from
sugarcane, and conducting Corporate Social Responsibility programs aimed at benefitting the
community in which the company operates. Consumers of the company products include locals
in Mauritius while some are exported to the European Union.
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INTRODUCTION TO CIRCULAR ECONOMY
The Concept of Circular Economy
A circular economy is a type of regenerative system where material input, emitted wastes
and energy leakages are all minimized by way of closing and reducing energy and material
loops. This can be accomplished by use of long-lasting designs, proper maintenance and repair,
reuse, remanufacturing, refurbishment, recycling and upcycling (Murray, Skene, and Haynes,
2017, 369-380).
It is argued that for a sustainable world to be achieved, it does not require changes in the
quality of consumers’ lives or loss of revenue and other extra costs on the part of manufacturers
and other agents of the economy. It is argued that circular business models can also be profitable
just like linear business models and still consumers the opportunity to enjoy similar products and
services like those produced in linear models. Circular economy’s focus is on such areas as
design thinking, extension of product life, systems thinking and recycling (Yuan, Bi, and
Moriguichi, 2006, 4-8).
A circular economy model aims at moving away from practices in the linear business
model which is characterized by the “take, make, dispose” industrial processes. The lifestyles
which depend on such industrial processes deplete limited resources in the creation of products
that end up being buried under the earth or in furnaces which burn refuse. This reality triggered a
number of scientists to think about how this norm can be changed (Su, 2013, 215-227).
A circular economy model distinguishes between biological cycles. In biological cycle,
there is consumption; where food and other biologically-based materials like wood are meant to
feed back into the economic system through such processes as decomposition and aerobic
digestion. The cycles then regenerate living systems, for example, soil which provides renewable
resources in the economy. Technical cycles on the other hand are concerned with the recovery
and restoration of products, components and materials by application of strategies such as reuse,
repair, remanufacture or recycling (usually the last resort) (Lieder, and Rashid, 2016, 36-51).
The concept of circular economy is deep historically and philosophically. The idea of
feeding back which is present in cycles in the real-world systems begun long ago and has its
origins in various schools of philosophy.
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Characteristics of Circular Economy
The circular economy exhibits the following characteristics;
i. The economic system is naturally adaptable and strong.
The economic system is able to respond to system shocks and crises since it has governance
systems, motivational factors and mechanisms in place. This ranges from power distribution,
information network structures and having back-up systems in place to ensure the system can
still continue working in case of failures (Geissdoerfer, 2017, 757-768).
ii. Human activities generate value in financial and other measures.
Availability of materials and energy is finite in measure. Thus, there use should be purposeful
and should lead to a positive contribution to the creation of value in the society. The kind of
values which are beyond the financial category include emotional, aesthetic and ecological. All
these measures should be recognized as value categories on their own since they cannot be
linked with each other so as to come up with one common measure.
iii. There exists support for the health and wellbeing of humans and other available species.
In this economy, there is elimination of toxic and hazardous substances. It the transition phase to
the circular economy, the toxic and hazardous substances are minimized as possible and kept in
cycles which are highly controlled. The economic activities in a circular economy poses no
threat human health or their wellbeing (Ghisellini, Cialani, and Ulgiati, 2016, 11-32).
iv. There is preservation human society and culture.
It is important to preserve human cultures and social cohesion since they are forms of diversity
and complexity in an economy. In this economy, processes and organizations are a reflection of
the needs of the affected stakeholders. This economy seeks to avoid activities undermine the
existence or wellbeing of specific human cultures structurally (Andersen, 2007, 133-140).
v. There is support for and enhancement of biodiversity through all human activities.
A circular economy acts on the principle of preserving complexity. For the economy to be able
to recover from depressions, then there must be preservation of ecological diversity. Biodiversity
is prioritized over material and energy losses. It is better to experience loss in material and
energy for the sake of preserving diversity. Efforts are made so as to protect rare habitats so that
they are not encroached upon or structurally damaged through human activities (Sauvé, Bernard,
and Sloan, 2016, 48-56).
vi. All the energy used is based on renewable sources.
The system exhibits maximum energy efficiency without affecting system performance and
service output. There is recovery of materials used for generation of energy and storage
technologies back to the system since the materials are designed to be recovered in the system
with ease. There is intelligent preservation of energy and the energy is also cascaded in cases
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where there are lower values of energy for use. The level of energy consumption is equal to the
level of energy which is available locally.
vii. Materials are cycled at continuous high value.
Preservation of material complexity is prioritized through cascading them for as long as it may
take. The designs of material cycles are such that they are of lengths which are applicable to
human timescale, appropriate to the natural cycles which they are connected to, equated to
scarcity of materials and short geographically. Materials are mixed in such a manner that they
can be separated and purely recovered unless there is possibility for them to cycle endlessly in
their mixed form and at high value. Also, materials are only used when it is necessary (Zhijun,
and Nailing, 2007, 95-101).
Drivers of the Circular Economy
The circular economy is an approach that aims to move from linear consumption towards reuse.
The four main principles of circular economy are as discussed below;
1. There is no wastage of materials and energy in a true circular economy. In a circular
economy, nothing is thrown away. This is because waste is used in the making of several
things for repair, disassembly and reuse.
2. In a circular economy, there are two kinds of inputs; disposable and durable inputs.
Disposable inputs are those that are biodegradable, for example, fabric, paper, etc.
Durable inputs are those that can be reused and they include metal and plastic.
Everything that is used under circular economy must belong to one of these two
categories to make it possible for it to be reused or put back into nature. It should also be
possible for more complex things to be broken down for them to fit into these two
categories at the end of their lives.
3. The energy that powers such an industry should be entirely renewable for the industrial
cycle to be sustainable. This will make it possible for a business to reduce frequent
exposures to depletion of required resources or supply dilemmas.
4. In circular economy, customers are considered to be users and not consumers. This
implies that after the customers are done with using the materials, businesses will still
want them back for reuse. This may imply being given incentives to return materials to
businesses at the end of their useful life on the part of the customer or it may imply that
customers lease, rent or share the materials with businesses.
5.
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Importance of the Circular Economy
a) Economic growth.
This is measured in terms of the GDP. Economic growth is realized in terms of reduction in
production costs since the number of circular activities is increased. Circular economy leads
to use of less resources, extraction of less raw materials and thus little expenditure on
extraction of raw materials. Demand and supply are affected since there will be changes in
input and output of economic production activities. The changes may include increase in
household income as a result of increased labor compensation. This in turn leads to increase
in savings and expenditure on buying commodities Tukker, 2015, 76-91).
b) Employment creation.
Jobs are created in all sectors of the industry as a result of development small and medium
enterprises which implement new logistical technologies and ways of doing business.
c) Environmental benefit.
Circular economy enables reduction carbon dioxide emission. The economy also results in
reduction of primary material consumption which are measured in terms of real estate land,
synthetic fertilizer, agricultural water use, pesticides, construction materials, etc. (Ning,
2001).
d) Innovations.
Replacement of goods in the linear economy with those that are circular in design and the
creation of logistical facilities suitable for circular economy offers businesses the opportunity
to use new ideas thus helping them to generate new channels of income (Jawahir, and
Bradley, 2016, 103-108).
e) Savings in net material cost.
By employing economy in the use of raw materials costs associated with acquisition of raw
materials are greatly reduced since lower levels of raw materials are used in production. This
leads to cost savings in acquisition of raw materials.
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The role of circular supply chains in supporting restorative processes advocated by
the circular economy
A circular supply chain has the following benefits (Despeisse, 2017,75-84);
 A circular supply chain reduces wastage, provides alternative sources of inputs and
takes advantage of the original forward supply chain management.
 Consumer power. Currently, customers expect to return products they don’t like
anymore or which they purchased and have not been used. As a result of this, there is
growth in the circular supply chain since materials are reused (Genovese, 2017, 344-
357).
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Alteo Mauritius Operations and Supply Chain based on Circular Economy
Alteo group is a sugar milling company based in Mauritius. Its business model, that is, in
terms of its operations and supply chain are in line with how a circular economy operates.
The company has classified its activities into different categories based on what is carried out
under each category. The different categories are; Alteo Agri, Alteo milling limited, Alteo
refinery limited and Alteo energy limited. We are going to look at each categories and the
activities that are performed under each one of them to see how they incorporate the circular
economy principles and characteristics (Lewandowski, 2016, 43).
Alteo Agri
Alteo agri manages up to 11.400 hectares of land under sugarcane cultivation all located in
Mauritius. There has been witnessed implementation of adapted technology and cultural
practices in this sector which have enabled the company to achieve substantial gains in terms
of efficiency through overhead costs management and improvement in overall productivity.
The company has also invested maximally in agricultural and transport equipment, increased
the levels of mechanization in its agricultural activities and applied efficient irrigation
methods which will ultimately lead reduction in the overall costs of production for the
company. This will greatly help the company in developing its competitive advantage so as
to be able to compete favorably and increase its profit margins. There has been introduction
of appropriate technologies on a large scale including a GPS guidance system and a
Geographical Information System which will greatly improve the decision making process,
guarantee efficiency in company operations and thus maximize the yields (GAO, CHEN, and
LIANG, 2007, 22).
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Alteo milling limited
Alteo milling is currently the remaining sugar milling operation located to the east of
Mauritius. Its location at Union Flaq has reduced sugarcane transportation costs significantly.
It has the capacity of processing 1.5 million tonnes of sugarcane which come from around its
own factory area and from DRBC’s factory area following its closure. The company has
witnessed an increase in sugarcane tonnage since it has to process sugarcane coming from
DRBC’s factory area. Since there is no wastage of resources in the circular economy, the
company has devised ways of ensuring that all the cane is absorbed and that nothing goes to
waste. The company has therefore come up with investment plans which are aimed at
achieving this objective with emphasis on;
 Further automation of processes which aims at reducing production costs and
improve sugar recoveries.
 Expansion of the front end capacity.
 Approaching environmental issues in an integrated manner.
 Introduction of milling technology able to achieve higher calorific value bagasse for
energy production (Bundhoo, 2017).
 Savings on steam which will in turn result to optimum internal thermal combustion.
This new operation will capitalize and expand on the company’s expertise as far as sugar
production is concerned. This will help the company to achieve its objective of being a world
leader in producing and distributing sugar which specifically processed for direct consumption.
This also includes higher value Demerara and Moscovado sugars. As a result of the company
having a larger production base, more efficient operations and producing high value products, it
will to a financially stable sugar milling company in future.
Alteo refinery limited
Alteo refinery operates a back end refinery which has an operating capacity of 170,000 tonnes.
The company is concerned with refining locally produced and imported white sugar. Alteo has
been able to increase its sugar production by importing larger volumes of raw sugar which is
later sold to the local and regional market, and some exported to the European Union. The
company also has plans to explore the potential to produce higher added value products from
white refined sugar and by-products of refining.
Alteo energy limited
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Alteo energy has been in operation since 1984 and operates two bagasse plants which supply
energy to the national grid (Beeharry, 1996, 441-449). As a result of closure of DRBC and
expansion of Alteo milling capacity, Alteo energy has been benefitted greatly from the extra
bagasse available for generation of renewable energy (Beeharry, 2001, 421-429). This
development helps the company to use renewable sources of energy which are healthy to the
environment (Surroop, and Raghoo, 2017, 688-694).
Conclusion
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In conclusion, a circular economy tends to move away from the norm of linear of “take, make,
dispose” by ensuring that materials are reused. This type of economy ensures nothing goes to
waste so that the economy can sustain itself for a much longer period without the need of having
to extract more materials. Whatever is available is used economically till the end of its usability
life. We have tried to bring out a picture of the circular economy by looking at Alteo Mauritius, a
sugar milling company located in Mauritius and how it uses all the resources available to ensure
there is no wastage and putting by-products into use like use of bagasse in generation of
electricity.
References
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Bundhoo, Z.M., 2017. Renewable energy exploitation in the small island developing state of
Mauritius: Current practice and future potential. Renewable and Sustainable Energy
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Surroop, D. and Raghoo, P., 2017. Energy landscape in Mauritius. Renewable and Sustainable
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Beeharry, R.P., 2001. Strategies for augmenting sugarcane biomass availability for power
production in Mauritius. Biomass and Bioenergy, 20(6), pp.421-429.
Beeharry, R.P., 1996. Extended sugarcane biomass utilisation for exportable electricity
production in Mauritius. Biomass and bioenergy, 11(6), pp.441-449.
Lewandowski, M., 2016. Designing the business models for circular economy—Towards the
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Yuan, Z., Bi, J. and Moriguichi, Y., 2006. The circular economy: A new development strategy in
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Geissdoerfer, M., Savaget, P., Bocken, N.M. and Hultink, E.J., 2017. The Circular Economy–A
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Sauvé, S., Bernard, S. and Sloan, P., 2016. Environmental sciences, sustainable development and
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Development, 17, pp.48-56.
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Lieder, M. and Rashid, A., 2016. Towards circular economy implementation: a comprehensive
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