Why A Drop Of 4 Degrees Made A Big Difference For A Garment Maker's Bottom Line
A few summers ago in the southern Indian city of Bangalore, an economist named Anant Nyshadham was heading to lunch with some executives at a garment factory.
"We walked through the factory floor on the way to the canteen," he recalls. "And I thought, 'Wow, this is really hot.' "
And this is a man who grew up in the state of Georgia. "But you know, I don't think I'll ever get used to the heat and humidity [there]," he says, laughing. "And India is on a different level."
That is because in India, as in a lot of developing countries, garment factories generally don't have air conditioning. Central air is only just beginning to spread to some homes and offices as the country has grown more prosperous. But it's still considered prohibitively expensive to install in many factories, given the tight margins they operate on.
Nyshadham, a professor at Boston College, had come to the factory to research an unrelated program to teach workers about financial literacy and other skills. But he found he couldn't stop thinking about the heat — specifically its impact on both the workers and even on the company's bottom line.
"I mean, I can't imagine being able to work for eight hours a day in this environment," he says.
Certainly, laboratory studies suggest that once the temperature rises above around 85 F degrees — what is sometimes referred to as the "heat stress threshold" — our bodies can no longer dissipate the heat fast enough to keep our core temperature stable. We start to warm up on the inside, and doing pretty much anything becomes more difficult.
"But it's a different thing to be able to show this in a real-world, working setting versus in a laboratory," notes Nyshadham.
Then Nyshadham hit on an unexpected way to do just that, when, he says, one of the executives at the garment factory mentioned: " 'Oh by the way, we've been rolling out this lighting change.' "
The company, Shahi Exports, has more than 50 factories, employs about 100,000 workers and supplies brands that include Gap, Uniqlo, Zara and H&M. Some of these brands had encouraged the company to be more environmentally responsible by switching out the fluorescent tube lights in its factories for LEDs that would consume about one-seventh the amount of energy.
Nyshadham's reaction: "Look, if you're consuming a seventh of the energy, you're probably dissipating something like a seventh of the heat as well." This lighting switch was probably going to lower the temperature on the factory floor, too.
"We realized, 'Oh! We can use this as a natural experiment.' "
So over the next several years, Nyshadham started crunching the numbers – working with Achyuta Adhvaryu of University of Michigan and Namrata Kala of MIT Sloan School of Management. They compared the day-by-day relationship between the outside temperature and the number of garments produced at 26 factories before and after their lights were switched to LEDs.
Anant Ahuja is one of the managers at Shahi Exports who helped get this data to Nyshadham.
"I was thinking that maybe he was wasting his time looking into this," Ahuja recalls with a chuckle.
He says the view among company officials was essentially: This is India — we're used to the heat. And besides, Bangalore isn't even all that hot compared to other parts of the country.
Then Ahuja saw the results. "I think all of us were kind of like, 'Wow. That's amazing,' " he says.
The researchers found that at those 26 factories, the mercury spiked above the heat stress threshold (roughly 85 degrees inside the factory) one quarter of the time. And once the temperature passed that tipping point, for every extra degree it got hotter, productivity went down by 3 percent and profits went down by 2.2 percent.
That can add up quickly, notes Nyshadham. "On the days it's hot enough to matter — it matters a lot."
The findings have been featured on VoxDev.org, a platform that highlights research on economic policy in developing countries.
One person who is not surprised to hear about the results is Manjula, a 34-year-old seamstress at one of Shahi's factories. (Like many Indians, she goes by one name.)
I reach her by phone as she is sitting at a long row of sewing machines, finishing up her shift. She tells me she has been putting the zippers on a set of jeans for H&M.
Manjula has been doing this work for over a decade. She says it requires her "maximum concentration."
"These are powerful machines," she notes. "If I lose my concentration and don't watch what I'm doing, I could break my finger — or my hand."
And not only is there no air conditioning, but there are also no fans. She recalls that on one particularly sweltering day, she and some colleagues asked the factory official charged with looking after worker welfare about putting in a few fans. "We were told, 'No. This is a denim unit.' " A fan would kick up too much fluff and dust from the fabric. And that could cause respiratory problems.
So when it gets really hot, Manjula says, the sweat starts pouring down her face, she starts feeling tired, and sometimes, she'll need to take a break. Inevitably, production slows.
But she says, ever since the tube lights were swapped for LEDs, she has noticed it's not as hot. And the daily production targets?
"We can achieve more of them," she says.
In fact, the study found that the LEDs reduced the temperature on the factory floor by over 4 degrees. And the resulting boost to profits covered the cost of swapping in the LEDs in less than eight months.
These findings have implications well beyond this one company, says Rema Hanna, an economist at Harvard University who has researched various environmental impacts on labor in poor countries.
"I was really impressed with this study," she says. For one thing, it illuminates one of the challenges that developing countries face as they strive to lift their populations out of poverty. Worker wages are directly tied to productivity – and on average, workers in poor countries are substantially less productive than workers in wealthier ones. Lower levels of education and health are among the reasons. But poor countries also tend to be a lot hotter.
"There have always been these theories that part of why the Northern Hemisphere grew faster than the Southern Hemisphere was because of temperature issues," she notes. "So this starts to give some credence to that."
Just as significantly, it points to yet another downside of climate change: Namely how the expected rise in the frequency of extreme heat days could sap the productivity of businesses around the world.
But there is a silver lining to this, says Hanna, because "it changes the conversation around climate policy."
"There's this idea that there is a trade-off between climate change policies and economic growth," she explains, meaning that in order to be more environmentally responsible, businesses must sacrifice their profits. But, says Hanna, "if actually having stronger climate change policies reduces heat and that improves worker productivity, that suggests climate change policies can have positive effects on growth."
In other words, businesses actually have an incentive to lead the charge in adopting environmentally-friendly practices.
Ahuja of Shahi Exports says officials at the company have already absorbed that message when it comes to designing their newest factories. They have committed to the principle of keeping their facilities a minimum of about 9 degrees lower than the outdoor temperature. And they believes it's not necessary to do so with air conditioning, which is not only costly but also contributes to climate change by consuming so much energy.
The findings on LEDs "gave us the conviction that there are all sorts of other ways to further reduce temperature," says Ahuja. In contrast to its older factories — which tend to be multistory structures in hot, urban neighborhoods — Shahi is building many of its newest factories in the cooler countryside area. It is also keeping them to one-story structures with high ceilings that allow for greater air circulation and using construction materials that enable better insulation.
Nyshadham, the researcher, says he hopes the study inspires other businesses to adopt a similar approach. After all, manufacturing plants are a major source of the emissions that are driving climate change.
"When it really comes down to trying to bring down energy consumption, trying to affect the carbon footprint, industry is so important."
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