Air pollution costs Indian businesses about USD $95 billion every year, around 3% of India’s total GDP. To save lives and improve economic prospects, businesses and policymakers must become more active advocates for clean air by showing how much the economy and society stands to gain.
Footfall in Mumbai’s Linking Road shopping district drops by 5% during the highly polluted period between November and January. A rooftop solar company reports a 13% decrease in its solar panels’ productivity on high pollution days, reducing economic viability for solar in India. Employees suffer an 8-10% productivity reduction while at work in Bangalore’s Whitefield Corporate Zone, a major hub for the Indian technology industry.
To date, the discourse on air pollution in India and around the globe has tended to focus on its public health implications. But a first-of-its-kind report from Dalberg Advisors — in partnership with Clean Air Fund, Blue Sky Analytics, and the Confederation of Indian Industry — shows how much the economy and society stand to gain if collaborative action is taken to clear the skies.
In existing publications, GDP per capita and growth rate are often linked to emissions levels, one predicting the other. As a result, many business heads believe that growth and good air-quality are always in conflict. ‘Air Pollution in India and the impact on business’ challenges this perception by calculating the true cost of weak environmental regulations and poor emissions practices: USD $95 billion every year, or 40% of the cost of tackling the Covid-19 pandemic in the country — year after year.
The costs of poor air quality manifests in six ways: lower labor productivity, lower consumer footfall, premature mortality, lower asset productivity, increased health expenses and welfare losses. To calculate the impact of air pollution, the analysis used big data analytics, a primary survey, existing literature, and inputs from diverse stakeholders including academic experts in air pollution, along with cross-sectoral business heads and service providers.
“People from other parts of country who come here suffer more and leave sooner, as they aren’t so used to the pollution” — IT HR head, Ghaziabad
These sources uncovered the previously hidden or unquantified impacts of poor air quality, such as the dip that employees’ physical and cognitive performance takes when pollution levels are high, and the fact that consumer spending is reduced when consumers avoid exposure to pollutants — reducing spending in the country by 1.3% or USD $22 billion in 2019.
How do air pollution’s hidden costs appear across India’s business landscape? The report outlines four ways:
- Productivity costs that go beyond absenteeism: India could have gained 1.3 billion working days and $6 billion in business revenue by curbing pollution-induced absenteeism in 2019. And as employees tend to overwork to compensate for lost time, these shortfalls continue to manifest in burnout, attrition, and increased difficulty to attract talent. The impact of decreased productivity is seven times greater in cognition-intensive sectors which rely on mental output, like investment banking and software development.Absenteeism has a major impact on the IT sector in particular: every year, it loses USD $1.3bn to pollution-induced productivity loss, amounting to 1% of its total sector value. It is presenteeism — the lost productivity that occurs when employees are not fully functioning in the workplace — that drives 80% of this impact. Survey results that informed the report indicated that aggressive internal and client-imposed turnaround times mean that only 10% of employees can afford to take time off work on the highest pollution days.
- A consumer economy that falters when pollution levels rise: When air quality suffers, people tend to stay indoors for all but the most essential activities. In 2019, consumer-facing businesses could have gained $22 billion in revenue if pollution levels were improved. Discretionary purchases with few online substitutes, such as clothing buys and restaurant outings, take the biggest hit. These categories bear ~50% of the overall cost, reminiscent of consumer behavior in Covid-19.
- Premature deaths that come with a human and economic toll: Air pollution is responsible for 18% of all deaths in India in 2019, translating to a loss of 3.8 million workdays. People’s productive working lives are cut short by air pollution, creating devastating impacts for families and limiting the amount they are able to contribute to economic growth in a lifetime. The premature death of children under one year of age comes with the highest cost: 34% of the dollar impact of premature mortality is driven by these losses.
- Business assets with reduced lifespan and productivity: Sulfur dioxide and other pollutants speed up the degradation of electronic circuitry, reducing the efficiency and shelf life of IT assets, and increasing the frequency with which they need to be replaced. In agriculture, airborne pollutants stunt the flowering and growth of crops, causing an estimated 5-12% loss in agricultural yields.
“People will continue to put in hours. If they are sick, they step out to buy medicine and return to work. Productivity takes a hit” — BPO business head, Mumbai
Catalyzing the business case for clean air – a public and private collaboration
Traditionally, air pollution has been regarded as an inevitable cost of a developing economy and as a public health burden that must, to a large extent, be borne by society as a whole. However, this report shows how air pollution is very much a profitability issue; clean air is a precondition for businesses to thrive – and for India to realize its vision of becoming a USD 5 trillion economy by 2025.
Individual businesses – and their employees – have a direct stake in improving air quality. Thus, industry leaders should take more ownership and become advocates in the movement for cleaner air. Through this realization and associated action, plus active and sustained collaboration between the public and private sectors, bluer skies and a healthier economy can become India’s reality.