Adopting Sustainable Practices in Restaurants (Part 2)

PART 2 – SUSTAINABLE PRACTICES ADOPTED IN WWF PARTNER RESTAURANTS

Most of the information used in the analysis were expected to come from the WWF partner establishments themselves. But there were still data gaps from the initial probes, and due to the COVID situation it was not possible to go back to the establishments to get more data.

Best efforts using alternative sources of information to fill in the gaps, such as results of past studies, available conversion factors, and standard costs generated by credible organizations enabled the conduct of expanded (financial and economic) C-B analyses.

In the end, sufficient information was established for 10 SCP practices. These were use of energy-saving air-conditioners; use of energy-saving chillers/freezers; own production of purified water for drinking and cooking; repurposing into new meal selection; use as animal feed; (bokashi) composting; other unspecified SCP practices to conserve energy and water, reduce food waste (“soft measures”); own farm/garden production of raw/fresh food ingredient; contract growing; and import replacement (beef).

To make the results of the analyses in each of the practices suited for comparison, a hypothetical firm reflecting the average specifications of the sample establishments – in terms of floor area, number of diners per day, raw food ingredient (RFI) requirement per day, meal order per diner, value of meal order per diner (PHP), etc. – was created and assumed to be adopting these practices. The period of analysis was also standardized to five years, the typical replacement period for commercial appliances and devices.

Two measures were used to establish viability or worthwhileness of the practice. These are net present value (NPV), the sum of the discounted annual stream of net benefits (benefits less cost) over the period of analysis, where NPV should be greater than zero; and the benefit-cost ratio (BCR), the ratio of the sum of the stream of benefits to the annual stream of costs, where BCR should be greater than 1.0 for the activity to be considered cost-effective.

Eight of the 10 SCP practices were determined to be financially beneficial or generated financial gains to restaurants. The most beneficial were soft and residual SCP measures in energy, water, and food waste; repurposing food waste for new meal selection; the use of filters, purifiers, or treatment devices for drinking and cooking water; and use of energy-saving air-conditioning units.

Eight of the 10 SCP practices were determined to be financially beneficial… Nine were economically beneficial.

Two SCP practices yielded negative NPVs. This may not necessarily mean actual loss to the restaurant but perhaps an accounting loss due to the attribution of costs that may not totally and accurately accrue from the practice, as in the case of use of food waste as animal feed, or simply foregone sales or opportunity loss in the case of import replacement.

Nine SCP practices were economically beneficial. Import replacement, which has negative financial NPV, showed positive economic NPV (the fourth highest) as it creates the opportunity to produce more goods (beef, in this instance) domestically and hence boost household livelihood and income. At the same time, it saves the economy foreign exchange.

The top three SCPs in terms of economic viability are also the top three SCPs in terms of financial viability – soft and residual measures, repurposing of food waste, and use of water filters, purifiers or other treatment devices.

Given the negative results of the financial CBA on use of food waste as animal feed and import replacement, it may be difficult to sell these practices to establishments. However, the use of waste as animal feed could still be pursued by restaurants with integrated organic hog raising operations. The loss associated with the production of feed could be absorbed by the hog raising component.

Economic analysis determines SCP practices where state/LGU policies and programs can focus on, especially if the financial viability results suggest that there is no financial advantage in adopting the practice, but which is determined to be economically viable. This is the case for beef import replacement. Government can provide technical and financial assistance, and marketing support to the local cattle/beef industry, to increase local production of quality beef cuts. Although this does not directly address imports, it promotes the use of local beef in the food service industry through increased availability of good quality and reasonably priced products.

Policy intervention can also help reinforce organic farming, composting, and other practices in which economic net benefits exceed financial net benefits, through technical assistance, training, dissemination of technical and market information, and tax incentives. Intervention should also focus on educating, raising awareness and shaping the behavior of consumers. Private advocacy groups can be an ally and partner in the promotion of these sustainability practices.

In cases where there is a challenge to convince establishments to take up certain SCP practices which are seen to be beneficial to society, and beneficial to the establishments, but the latter fail to see the benefit because they are difficult to measure, rules can be imposed to encourage the establishments to make the needed change. A system of rewards and punishments can be put in place by authorities, national or local. This may help push the adoption of soft and residual measures, where the benefits as specified in the e-CBA may still need to be specified in more concrete terms.          

About this Research

These notes were drawn from the background research and results of the study led by the author for WWF Philippines entitled “The Cost-Benefit Study of Integrating Sustainable Consumption and Production into Business Operations of Food Service Establishments.” The study was completed in May 2021. Part 2 reports on the results of the cost-benefit analyses of selected sustainability practices in WWF partner restaurants.