Driving forces for sustainable development of smallholder sugarcane agribusiness: a system dynamics approach to circular economy strategies

Budisantoso Wirjodirdjo, Ahmad Fatih Fudhla, Moses Laksono Singgih and Hafidz Ridho

Agricultural and Resource Economics: International Scientific E-Journal, 2025, vol. 11, issue 2

Abstract: Purpose. This study aims to develop a dynamic model based on Circular Economy (CE) principles to evaluate the sustainability of smallholder sugarcane agribusiness. The model addresses socioeconomic and environmental challenges in developing countries, improving income stability, product diversification, job creation across all skills, and solid waste reduction. Methodology / approach. Smallholder agribusinesses are pivotal for rural economies but face sustainability challenges. This study addresses these challenges through CE principles. A System Dynamics approach was used to evaluate the impacts of two CE strategies (R4-Repair and R7-Repurpose). A 10-year simulation evaluates key indicators, including farmers’ income savings, product diversification, job creation, and solid waste reduction. Data was obtained from government reports, industry statistics, and stakeholder interviews. Results. The findings reveal that the R4 strategy reduces unexpected costs, stabilises income, and increases farmers’ savings by 37.5 %. Meanwhile, the R7 strategy generates the most significant impact, with a 17.4 % reduction in solid waste and the creation of new employment opportunities at various skill levels. Together, these strategies support socioeconomic and environmental sustainability. The model also demonstrates the feasibility of implementing early-stage circular strategies in smallholder systems with limited capital and infrastructure, offering a replicable framework for similar contexts. Originality / scientific novelty. This research offers a novel application of System Dynamics modelling in smallholder agribusiness, integrating CE principles to address the interplay between socioeconomic and environmental factors. The study fills a critical gap by focusing on small-scale farming systems in developing countries, providing a holistic evaluation of circular strategies. Practical value / implications. The proposed model provides actionable insights for policymakers and agribusiness stakeholders to design adaptive strategies, optimise resource use, and promote sustainable development. It is particularly relevant for agrarian economies facing similar socioeconomic challenges, fostering economic resilience and sustainability.

Keywords: Agribusiness (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:ags:areint:364307

DOI: 10.22004/ag.econ.364307

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