Economic, Environmental, and Social Returns to Whey Valorisation in Kenya’s Dairy Industry

The Kenyan dairy sector plays a crucial role in the national economy, yet it faces challenges related to the low-value utilization of by-products such as whey, leading to economic inefficiencies and environmental burdens. This study applies an expanded cost–benefit analysis (CBA) framework that integrates environmental and social externalities—using a value-transfer approach—to evaluate the economic feasibility of whey valorisation at selected dairy-processing facilities in Kenya.By systematically assessing production, processing, and marketing costs against both market and non-market benefits, this research provides data-driven insights for policymakers, investors, and industry stakeholders. The study examines how dairy processors convert whey into high-value products, including whey yogurt, smoothies, and ricotta cheese, all while achieving financial viability, using net present value (NPV), internal rate of return (IRR), and benefit-cost ratio (BCR). Sensitivity analysis using Monte Carlo simulations confirms the robustness of financial outcomes, while the inclusion of externalities—greenhouse-gas reduction, wastewater pollution avoidance, renewable energy recovery, and rural employment creation—raises total social net benefits by approximately 12–18%.By positioning whey valorisation within a circular economy framework, this study highlights the potential to minimize waste and advance Kenya’s climate, food-security, and bioeconomy goals. The findings present a strong case for targeted policy measures, including investment incentives, cooperative processing models, and green-technology support and certification, to scale sustainable whey valorisation. Overall, this research demonstrates how internalizing environmental and social externalities strengthens the business and policy rationale for a low-carbon, inclusive dairy transformation.