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Putting a price on health

Considering that retrofitting for energy efficiency is largely driven by the ROI from operational savings, can the same financial case be made for investing in indoor environmental quality (IEQ) across the GCC region?
(Concluding part of a two-part series on indoor environmental quality)

| | May 4, 2020 | 2:21 pm
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In the March issue of Climate Control Middle East, industry stakeholders highlighted how cost-centric thinking has made IEQ an afterthought in many building-retrofit projects, citing many instances wherein IEQ design and specifications get “value-engineered” out in later stages to reduce cost.

Since the publication of that story, COVID-19 has rapidly spread to many parts of the world and sadly killed several thousands and impaired businesses and the broader economy.

More than ever before, the quality and efficiency of the global healthcare sector is being challenged and called into question. And with many countries issuing directives for most people to work from home, a bigger spotlight is being placed on indoor environmental quality (IEQ), not only in terms of its role in curbing the spread of airborne diseases but also its contribution to the overall health and productivity of inhabitants.

COVID-19 a harrowing reminder

The global health crisis serves as a clear and harrowing reminder that it is inexcusable to allow IEQ to fall by the wayside, with many stakeholders within the HVACR sector emphasising that there needs to be a shift in the way the construction industry looks at, and talks about, IEQ to ensure it is given as much, if not greater, consideration than energy efficiency in retrofit projects.

For many, a way of doing so is making a financial case for IEQ, similar to what has been done for energy-efficient solutions.

Undoubtedly, investment in energy-efficient solutions has gained stronger traction over the years, largely owing to concerted efforts among stakeholders to showcase the built-environment’s role in wider global sustainability goals. This has led to greater awareness among the general public and a shift in consumer habits. As Dr Sheikh Zuhaib, Project Manager, Buildings Performance Institute Europe (BPIE), points out, “Investors now realise that environmental factors have a crucial role in the value of real estate, and there is an ever-increasing demand for sustainable buildings.” Swapnil Pillai, Research Associate, Savills Middle East, adds that, today, the long-term advantage of sustainability outweighs any upfront financial implications and that coupled with the UAE government’s focus on energy efficiency, it’s essential for investors to be on the front foot.

The economics is also becoming clear to building owners, with Majd Fayyad, Technical Director, Emirates GBC, pointing out that the reduction in the utility bills and in maintenance and repair costs is a major driver for investing in energy-efficiency projects, complemented by financial schemes supporting investments in energy efficiency and the implementation of retrofit programmes. “Buildings, especially those that incur high utility bills, are especially interested in investing in energy-efficient equipment and systems,” he says. “In the region, several government buildings, hotels and office buildings have undergone retrofit projects to reduce operational costs.” 

Mimicking the momentum

In a bid to mimic the momentum energy efficiency has achieved in construction projects, stakeholders believe changing the discussion surrounding IEQ to showcase the financial payback for enhancing air quality, acoustical comfort and thermal comfort is vital to create a shift in consciousness within the construction sector. Prabhu Ramachandran, CEO, Facilio, believes that while the climate change crisis has served as a major driver of focus on sustainability, in much the same way the explicit and quantifiable enhancement in productivity, occupant health and quality of life, which higher standards in IEQ deliver, are creating a strong motivation for adoption. “Now, with across-the-board recognition of the potentially catastrophic risks that airborne contagions pose, in light of the COVID-19 outbreak, there is sure to be a far greater emphasis on implementing IEQ retrofits, as mandated in health and safety initiatives,” he says.

To further drive awareness, Fayyad says that developing an IEQ labelling and benchmarking scheme for existing buildings can drive the industry towards wider adoption of healthy building principles. “The creation of a national IEQ investment platform,” he says, “would be very helpful in designing innovative financial models for IEQ projects, develop roadmaps on healthy buildings and suggest changes to legal frameworks and policies.”

Ramachandran says that the consensus already exists for the need for IEQ-related benchmarking and quality assessment, which will only grow stronger. “We all know how star ratings, based on the energy consumption of gadgets, have transformed the electronic appliances marketplace,” he says. “A similar rakings system, which makes the IEQ performance of built spaces public, can provide a huge incentive for change in the CRE (commercial real estate) industry, as well. Frankly, given the bottom-line benefits that adapting to this new model delivers, adoption will only accelerate and assume a self-sustaining momentum, as awareness spreads.” Ramachandran adds that incentivising improved IEQ retrofits, based on maintaining optimal standards while also achieving greater energy efficiency, will bring industry stakeholders and occupants together, driving more conscientious behaviours, awareness and innovation in building operations.

 

Quantifying health and productivity

For Jens Lund, Managing Director, IT-Serve, to drive the importance on the true benefits of IEQ, it should be discussed and appreciated by the people in charge of human resources in terms of productivity and reduced sick days. Indeed, they should point out that investing in improving IEQ can increase productivity by as much as 50%, he adds. Ramachandran agrees with Lund. Citing figures from Integrated Benefits Institute (IBI), a non-profit organisation that researches links between health and productivity, he points out that sick days cost employers in the United States USD 530 billion in 2018 alone. “There is no reason to believe that these figures are peculiar to the United States,” he says. “In fact, enterprises around the world are now focusing on the wellbeing of their workforces, motivated by its correlation to productivity and quality of business outcomes.” Aspects, such as the air quality within office premises, have a direct bearing on the health and comfort of occupants, and building owners and facility managers are being called upon to address these needs, Ramachandran says. “With explicit figures of losses in productivity being reported, businesses have quantifiable ROI on investments they make into ensuring high standards in IEQ,” he says.

Fayyad also discusses IEQ’s role in reducing employee absenteeism and increasing productivity, citing an example from the WorldGBC’s report on the office of UK-headquartered consultancy firm, Cundall, which benefited from GBP 200,000 (USD 246,479) in savings per year, as a result of drop in absenteeism by 58% and a reduction in staff turnover by 27%. However, Fayyad points out that the UAE and MENA region lack studies that highlight the economic benefits of improved IEQ. “Thus, we need more research and case studies in the region that can serve as proof for the tangible economic benefits of improving IEQ,” he says.

Further highlighting the importance of awareness and education on IEQ, Ludovic Labidurie, CEO, Eolisair, weighs in to say that support from authorities is crucial. He adds that it is also important to showcase the financial benefit of investing in IEQ to stakeholders in other industry verticals, such as the health insurance sector. As an example, he points to the healthcare system in France, where the government, which is responsible for healthcare expenses of its citizens, has rolled out benefits for companies that have showcased willingness to invest in enhancing IEQ. “They have decided to give a specific allowance to companies using professional indoor air purifier, because they have definitive proof of their effort to improve IEQ,” he says. “This will improve worker productivity and reduce the sick days, which will lessen the requirement on the healthcare facilities, and be less of a burden on the overall healthcare system. So, this is very positive for both the workers and the company.” In that sense, Labidurie says, a system of collaboration among the insurance sector, public sector and private companies could be financially beneficial for all parties. Mahmood Amin, Architect Project Manager, says that such an approach has been implemented and has proven to be effective in other countries, as well. “A small trick while discussing the IEQ with stakeholders is the insurance deal – better IEQ in an office where people spend 10 hours a day, will affect the insurance bill,” he says. “It worked in Chicago, in the United States. Educating people will take ages, but when it’s about saving money, it will fly faster.”

 

Financial incentives and models

Labidurie says that companies offering IEQ solutions should also take it upon themselves to develop creative financial models by working in collaboration with building owners and operators to work around budgetary concerns. Speaking from the company’s own approach, Labidurie says, “There is an evolution in the way systems are being exchanged, and more and more it is moving towards lease model.” As Eolisair, Labidurie says, the company has rented out machines on short-term basis to hotels and to healthcare professionals. “If they have any illness involving their respiratory, you can rent this machine for two weeks or one month until you don’t spread the virus to all your family,” he says, adding that the company has also leased out the machine to offices to improve air quality and remove VOCs after renovation. “In that way, it’s not a capex. it is an opex,” he says, pointing out that whenever possible, subscription-based purchasing models could help lessen the burden of initial cost and, at the same time, help the uptake of IEQ-enhancing solutions. “We could dream of a cluster dedicated to environmental technologies with very special rate for companies,” he says. “It is the kind of financial things that can be done to enhance IEQ in the region.”

Gerald Stewart, Principal – Acoustics, Inhabit Group, adds that another way to develop sustainable financial models to promote IEQ is for the government sector to provide incentives to developers by potentially offsetting investment in IEQ-enhancing design and solutions. While in some parts of the world, these incentives can be given in the form of tax cuts, he says that in the UAE and other parts of the GCC region, where taxation is not prevalent, incentives can come by way of helping reduce operating cost. “Electricity, water and other utilities are government-owned in the UAE and other areas in the Middle East,” he says. “There is an opportunity within the criteria to neutralise initial cost in better IEQ by providing benefits to these building owners and developers of reduced utility bills. If you do that, people will buy an apartment in a building if service charges are less, and because it is a better quality building. If there is an incentive, it has to be a win-win for the developer, utility provider and occupant. There has to be some way of making more than one person happy, and one way to do that is having less cost to operate the building.”

‘Competing at a global level’

Stakeholders point out that the public sector and government entities can greatly benefit from driving more concerted efforts to improve IEQ, not only by improving quality of life for citizens but also by helping the country, or the city, to reinforce its global competitive advantage. Speaking in particular about the UAE, Paul Schwarz, Technical Director, Dubai Acoustic Research Laboratory; Partner & Principal Acoustic Consultant, Design Confidence; and Chairman, Middle East Acoustic Society, says: “Quality of life is a key part of the development of the Dubai brand, and the emirate’s reputation as a world-class hub has cost and benefit associated with it. We live now in a way that borders are essentially close, and investors come from all four corners of the planet. Any investor looking to rent or buy property in Dubai has the option to spend the money anywhere else they want. Regardless of regulation, local companies and developers are competing with quality of spaces in Singapore, London, Paris and New York, so quality of buildings and how they are built, is important. Whether local contractors want to understand it or not, they are competing at the global level and at global standards.”

Stewart adds that governments that are investing in better IEQ are, essentially, investing in cultivating the nation’s human capital. “People that come from certain countries have different quality expectations,” he points out. “If you imagine, the UAE is targeting a certain demographic to come and live here and invest here. If you don’t put that investment and give them something to come for, or if they see quality is not what it should be, people aren’t going to come. I think there is a competition between every country in the world to attract and retain talent, and talent is the human pool, and the human pool can bring a company or country more respect and more income, because people are there and are spending and generating money there for the coming generations.”

Stewart says that this should serve as an incentive to a country like the UAE, which is surrounded by many countries in the GCC region that are also on the fast-track towards growth and expansion as a global hub. “Saudi Arabia is changing dramatically, and they are on track to develop massive entertainment complexes,” he says. “That’s where Dubai and the UAE have to step up. We need to compete on equal footing and be more careful.” Stewart says that Saudi Arabia has been learning from Dubai, and also similarly showcasing stringent requirements in relation to energy efficiency and IEQ. “If you build it better, if it looks better and feels better and if it’s more exciting for me to go there and stay there, then I will,” he says. “Everyone wants something better all the time, we don’t want to go backwards.”

Schwarz shares a similar observation. “Saudi Arabia is developing regulations,” he says. “The ones they have are still outdated and are in the process of being changed. They recognise what Dubai and Abu Dhabi have done. They have also recognised that in some areas, enforcement hasn’t been there and that without enforcement it won’t work. The key takeaway, the missing part of the puzzle, is enforcement. Dubai can easily go to the next level. There has been a fair amount of retroactive work, but because of lack of enforcement, a lot of buildings are potentially not compliant and have to catch up.”

Lund emphasises that at the end of the day, the weakest link will always prevail. “If you look at investment and opportunities in investment, it should be focused on people and focused on the building these people are in.” This, Lund says, is the fundamental cost of society, adding that if productivity across the board goes down, this spells trouble for not only a company but the country as a whole. “I call it the last frontier,” he says. “It’s the thing people don’t talk about, but it’s the people that create society, and if society is not working well, the country is not working well.”

 


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