How air pollution is impacting business decisions

With persistent air pollution becoming a challenge for several Indian cities and not just the Delhi-NCR region, several firms have begun to review investment plans, note experts.

Seema Arora, Deputy Director General and CEO, Centre of Excellence for Sustainable Development at CII, says that air quality management has become a crucial factor when it comes to investment decisions, or when selecting locations for expansion, particularly for service sector companies such as those in tourism or IT. “Attracting and retaining talent, especially for new-age companies, can be difficult as air quality is an important concern now,” she says.

Pradeep Singhvi, Executive Director, Energy and Climate Practice, Grant Thornton Bharat also concurs and points out that Gurugram—the start-up hub of the north—has seen many start-ups move or expand to other cities due to air quality. “Many multinational corporations are increasingly favouring cities such as Hyderabad over highly polluted regions like Delhi NCR, recognising that air quality has a direct bearing on workforce health, productivity, and talent retention,” he says.

There are also several reports that highlight the cost of air pollution to the Indian economy. The World Bank said in a report that lost output from premature deaths and morbidity attributable to air pollution accounted for economic losses of $36.8 billion in India in 2019, accounting for 1.36% of the country’s gross domestic product (GDP).

In another report commissioned by the Clean Air Fund (CAF) and developed in partnership with Dalberg Advisors, Blue Sky Analytics and the Confederation of Indian Industry (CII) from November 2020 to March 2021, the cost to the country’s GDP was seen to be even higher. It said that air pollution costs Indian businesses $95 billion or 3% of India’s GDP every year.

The study pointed out sectoral losses as well. While the IT sector loses an estimated $1.3 billion, decreased consumer footfalls cost the economy $22 billion in 2019. Reduced tourist footfalls cost the tourism sector $1.7 billion every year, it said.

“The cost of air pollution manifests in six ways—lower labour productivity, lower consumer footfall, premature mortality, lower asset productivity, increased health expenses, and welfare losses. Out of these, employee productivity, consumer footfall and premature mortality impact businesses directly,” explained the report, titled Air Pollution and its Impact on Business.