Economics of IAQ: A Tough Sell or Is It?

Loss of productivity, absenteeism, unhappy tenants and the threat of litigation as a result of poor indoor air quality (IAQ) can negatively impact the bottom line and return on investment not to mention building occupants' health. While this statement makes intuitive sense, getting designers, builders, building owners and managers, and corporate executives to see the value of providing good IAQ and to do something about it is a tough sell…or is it?

This article reviews the reasons for this reluctance, results of research that may compel some to rethink their positions, and what steps can be taken to gain value by providing good IAQ and by preventing problems before a crisis arises.  The following are the main topics covered in this discussion:

Committing to Providing Good IAQ - A Tough Sell
Good IAQ Pays - Compelling Research, Economic Analyses
IAQ vs. Energy Conservation: Competitive or Complementary Goals
Building Occupants Place High Value on Good IAQ
Employer Investment in Employee Health Pays Off
Healthy "Green" Workplaces: The Economic Choice
References
Additional Information

Committing to Providing Good IAQ - A Tough Sell

Historically, private industry and many public agencies do not recognize the full economic value of providing good indoor air quality. While they may acknowledge some benefits associated with green or sustainable buildings, especially energy, waste and water conservation, they often undervalue or ignore significant financial and health benefits associated with good indoor air quality. The following are some reasons for these positions:

• Unlike energy, waste and water conservation, which are fairly predictable and can be directly measured, the relationship of health and productivity to indoor air quality is not as precisely understood and far more difficult to accurately predict. In addition, the costs associated with poor IAQ are hard to measure and generally are "hidden" in sick days, lower productivity, unemployment insurance and medical costs.[1]

• Some factors that may contribute to lower productivity, occupant discomfort and adverse health effects are not readily observable, such as elevated levels of volatile organic compounds (VOCs) emitted from building products, furnishings and office equipment; mold growth embedded deep within wall cavities or heating, ventilating and air-conditioning (HVAC) systems; inadequate ventilation rates; or poor operation, maintenance and balancing of the HVAC system. These situations can persist for long periods of time, silently taking a toll on occupants and worker productivity. Consequently, it is easy to overlook potential problems that are not directly observable or do not constitute an immediate crisis.

• The predominant method of building construction in the US, namely design-build, is not particularly conducive to preventing IAQ problems from occurring during a building's life cycle. In an effort to hold down costs and be competitive in the bidding process, there is more emphasis on pulling standard designs "out of the drawer" and much less emphasis on designing buildings and mechanical systems to address specific needs.

• Building commissioning during and just after construction, which has received a great deal of attention since the early 1990s, is valuable but may not be enough. It may help with building performance and correcting poor construction practices, but it does not address inherent design flaws.[2]

• These observations also hold true for VOCs emitted from indoor sources. Once high emitting products, furnishings and office equipment are installed, they are much more expensive and difficult to remove than if low-emitting materials and equipment had been specified from the start. In addition, proper airing out of a building (new or renovated) prior to occupancy often is not done.

Good IAQ Pays - Compelling Research, Economic Analyses

Buildings can positively and negatively impact workplace performance. For example, high performance knowledge work, like that done in many commercial office buildings, requires the absence of distractions and discomfort; tools and environmental features that support thinking and foster positive moods and well being; and the ability of building occupants to control and adapt conditions to individual preferences.[3]

Memory studies offer a clear demonstration of the connection between the built environment and how the mind works. Researchers have found that people who learn tasks in one room do better on recall tests up to one week later when the tests are taken in the learning room than when they are taken in another room.[4, 5] If sound and smell cues are added to the learning environment, performance improves. According to Dennett, memory appears to encode time, place and contextual information in a complex process.[6] The dependence between the environment and cognitive functioning appears to be the brain's way of saving processing energy by unloading some of its work onto the environment.

Many buildings today are designed and built without a clear understanding of how the indoor environment impacts worker productivity and health, and as a result often create an environment that is inhibits productivity rather than enhances it.

Results of hundreds of other studies and reports also demonstrate a significant and causal correlation between improving the indoor environment and gains in productivity and health. Many of these findings may be found in a comprehensive online database entitled Indoor Health & Productivity Project.

The IHP database, developed and managed by the Lawrence Berkeley National Laboratory in partnership with the National Research Council, the University of California, Carnegie Mellon University and Harvard School of Public Health, contains over 900 papers from more than 100 journals and conferences. Abstracts for about 700 of these articles are available online, and the entire database is searchable by keywords or by author or category.

One of the most authoritative and most quoted studies to date on quantifying potential health and productivity benefits from providing good indoor environmental conditions (IAQ, thermal and lighting) was conducted by William Fisk, head of the Indoor Environment Department at Lawrence Berkeley National Laboratory, and his colleagues. Their findings reflect an analysis of a large number of earlier studies (see Table 1 for a summary of their findings).

Fisk et al concluded: "Improving air quality would not only lead to significant reductions in illness but would have a direct positive impact on worker productivity…The potential direct increase in office workers' performance was estimated to range between 0.5 percent and 5 percent."[7, 8, 9]

They also estimated the annual economic costs of common respiratory illnesses (reported in 1996 US dollars):

• 180 million lost workdays

• 120 million additional days of restricted activity

• ~$36 Billion ($140 per person.) in health care costs

• ~$70 Billion ($270 per person) total cost

The ASHRAE Journal published a summary of this study and Fisk et al's findings as a part of a six-part series on the relationship of indoor air quality to health, comfort and productivity. Click here for a full listing of these articles.

In another study, Federspiel looked at the labor cost of responding to complaints about an indoor environment. He concluded that by reducing the frequency of complaints, a potential 20 percent savings of labor costs associated with HVAC operation and maintenance is possible.[10]

A frequent strategy for reducing energy costs is to decrease the amount of ventilation, which can result in other indirect costs that will offset any savings. A study of 3720 employees in 40 buildings used sick leave data of office workers as a measure to evaluate indoor air quality. The results showed an association between ventilation rate, humidification and short-term sick leave. Specifically, in spaces with lower ventilation rates, an increase of 1.2 to 1.9 days of sick leave per person per year, depending on age and gender, was found.

The investigators also illustrated the economic benefit of using higher ventilation rates. If additional ventilation costs were $8,020 and sick leave costs associated with lower ventilation rates were $48,000, a savings of $39,950 per 100 corporate employees could be obtained by investing in a higher ventilation rate. Applying this same example to fulltime workers in the US, the cost of sick leave is $24,444 per 100 workers. If higher ventilation rates are used, a potential savings of $16,394 per 100 workers could be achieved (reported in 1997 US dollars).[11]

IAQ vs. Energy Conservation: Competitive or Complementary Goals

The indoor environmental factors that most influence occupant health and welfare are thermal conditions, lighting and concentrations of indoor pollutants. Energy professionals are in a strong position to affect thermal conditions and lighting, while they are often less knowledgeable about indoor pollutants. As a result, to achieve energy efficiency goals, very often ventilation rates are reduced to the detriment the quality of the indoor air and the building occupants breathing that air, thus supporting the misconception that providing good indoor air quality and energy conservation are competing goals.

Compounding the misconception is the energy required to operate the HVAC system is about one-half of a building's energy cost. Since energy efficiency can reduce operating costs, and because the burning of fossil fuels is a major source of greenhouse gases, energy conservation has become a matter of public policy. There are some indications, however, that IAQ is gaining ground in the public policy arena as evidenced by the increasing number of proposed IAQ-related state legislation in the past several years.

The US Environmental Protection Agency's (EPA) evaluation of energy cost and IAQ performance of ventilation systems and controls addresses this misconception by demonstrating that good IAQ and effective energy conservation can complement each other while providing significant savings and protecting the outdoor environment. According to the EPA, many energy efficiency measures with the potential to degrade indoor environmental quality appear to require only minor adjustments to protect the indoor environment.[12]

In this study, when energy efficiency measures (including lighting upgrades), which were adjusted to either enhance or not degrade indoor environmental quality, were combined with measures to meet the outdoor air requirements as proscribed in ANSI/ASHRAE Standard 62-1999, Ventilation for Acceptable Indoor Air Quality, total energy costs were cut by 42 percent to 43 percent for the office building and 22 percent to 37 percent for the school. Not included were savings from reduced lighting during unoccupied hours that could provide 12 percent to 22 percent savings, or improved equipment operations that could provide 5 percent to 15 percent savings.

Operational measures that could degrade IAQ, such as widening the daytime temperature dead band, relaxing the nighttime temperature setback and reducing HVAC operating hours, were not included. Cumulatively, these three measures that are not compatible with IEQ would have reduced total energy costs by only 3 percent to 5 percent in the office building, and 7 percent to 10 percent in the school. When compared with the potential savings noted above, the EPA concluded there is a demonstrable compatibility between indoor environmental and energy efficiency goals, when energy saving measures and retrofits are applied wisely.

To assist building designers, owners and operators effectively integrate indoor air quality, energy efficiency, and building economics, the EPA developed its Indoor Air Quality and Assessment Model (I-BEAM). I-BEAM consists of many individual modules that explain different aspects of IAQ including how to manage, operate, and maintain buildings for IAQ, and how to insure that energy efficiency projects are compatible with IAQ. I-BEAM also contains modules that are interactive, allowing building managers to set up maintenance and housekeeping tasks for IAQ and to calculate budgetary impacts of IAQ. Click here to access the I-BEAM website.

Building Occupants Place High Value on Good IAQ

Perhaps one of the strongest arguments for improving IAQ is building tenants and office workers believe indoor environmental quality (IAQ, lighting, comfort) are among the most important components of job satisfaction. Further, some tenants are willing to pay more in rent to obtain benefits from intelligent buildings, including enhance building controls, ventilation and IAQ.

The study, What Office Tenants Want: 1999 BOMA/ULI Office Tenant Survey Report, analyzed 1800 office tenant surveys in 126 metropolitan areas. The study, conducted by the Building Owners and Managers Association (BOMA) and the Urban Land Institute (ULI), found that 95 percent of those responding to the survey ranked comfortable air temperature and 94 percent ranked indoor air quality as among the "most important" tenant comfort features. The study also found that the number one reason tenants move out is problems with keeping the indoor temperature comfortable.[13] Federspiel found that complaints about temperature comprise the vast majority of unsolicited complaints from building occupants (77 percent).[10]

The results of a series of national opinion surveys taken in 2000 to 2002 consistently showed that overall concern for indoor air quality is at an all-time high. With respect to office workers, 75 percent of people who are employed fulltime ranked the quality of air at work as very important, another 20 percent believed it is somewhat important, but only 3.1 percent said that it was not important.[14]

Employer Investment in Employee Health Pays Off

Insurance companies have embraced the concept that helping employees stay healthy and productive is good for business. The insurance industry, for example, estimates that corporate wellness programs can give employers a 50 percent to 400 percent return on investment on health care costs. Most employers with more than 50 workers have some kind of program, saving $1.49 to $4.91 on each dollar spent.[15] These figures clearly illustrate the financial value of encouraging employees to live healthier life styles while helping to manage chronic disease. As indoor air pollutants can significantly impact chronic diseases, such as allergies and asthma, it makes sense for employers to invest in good IAQ as a part of providing a healthier place to work.

Healthy "Green" Workplaces: The Economic Choice

Although environmentally friendly buildings made their debut in the mid-1970s, it was not until 1985 that the term "green building" was first used when the Environmental Defense Fund in New York City unveiled its new office building. The renovated building used natural and non-toxic construction materials, low emitting furnishings and natural lighting. Since then, businesses have adopted "green" building concepts as they began to realize that saving energy meant saving money.[16]

References

1. Kats G, Alevantis L, Berman A, et al. 2003. The Costs and Financial Benefits of Green Buildings. California Sustainable Building Task Force Report. California Sustainable Building Task Force. Sacramento, Ca.

2. Odom D. 2003. The predictability of moisture problems: Prevention versus diagnosis and remediation. Selected Papers From the Aerias Third Annual National Symposium. Aerias, LLC. Atlanta, Ga. October 2003.

3. Heerwagen J, Johnson JA, Brothers P et al. 1998. Energy effectiveness and the ecology of work: Links to productivity and well-being - 8.123. 1998 ACEEE Summer Study on Energy Efficiency in Buildings Proceedings, American Council for an Energy Efficient Economy. Washington, DC.

4. Parker A and Gellatly A. 1997. Movable cues: A practical method for reducing context-dependent forgetting. Applied Cognitive Psychology. 11:163-173. As cited in Heerwagen et al.

5. Fernandez A. and Ginberg A. 1995. Memory and Cognition. 13(4): 333-345. As cited in Heerwagen J et al.

6. Dennett DC. 1996. Kinds of Minds: Toward an Understanding of Consciousness. New York. Basic Books. As cited in Heerwagen J et al.

7. Fisk, WJ. 2000. Estimates of potential nationwide productivity and health benefits from better indoor environments: an update. IN: Indoor Air Quality Handbook, Chapter 4. Eds John D. Spengler, Jonathan M. Samet , John F. McCarthy. McGraw Hill. New York, New York. 2000.

8. Fisk, WJ, Rosenfeld AH. 1997. Estimates of improved productivity and health from better indoor environments. Indoor Air '97 7: 158-172.

9. Kumar S and Fisk, WJ. 2002. The Role of Emerging Energy Efficient Technology in Promoting Workplace Productivity and Health: Final Report. Lawrence Berkeley National Laboratory. February 13, 2002, pp. 20-21. (http://www-library.lbl.gov/docs/LBNL/497/06/PDF/LBNL-49706.pdf)

10. Federspiel CC. 1998. Statistical analysis of unsolicited thermal sensation complaints in commercial buildings. ASHRAE Transactions. 104(1): 912-923.

11. Milton, DK, Glencross, P, Walters, MD. 2000. Risk of sick leave associated with outdoor air supply rate, humidification and occupant complaints. Indoor Air - International Journal of Indoor Air Quality and Climate 10 (4): 212-221.

12. US Environmental Protection Agency. 2000. Energy cost and IAQ performance of ventilation systems and controls. Indoor Environments Division. Office of Radtional and Indoor Air Office of Air and Radiation. Washington, D.C. January 2000. (http://www.epa.gov/iaq/largebldgs/eiaq_page.htm)

13. Building Owners and Managers Association and Urban Land Institute. 1999. What Office Tenants Want: 1999 BOMA/ULI Office Tenant Survey Report. Building Owners and Managers Association. Washington, D.C.

14. Chelsea Group, Ltd. (Press Release July 31, 2000). People are willing to spend money to improve indoor air quality. www.safetyonline.com/content/news. Date accessed: September 2000.

15. The Kiplinger Letter - Forecasts for Management Decisions. 80:42. pp 2. October 17, 2003.

16. Martin S. 2000. Green building: The right stuff. Mother Earth News. June/July 2000.
    

Additional Information

Kumar 2003. Studies of the effect of comfort and air quality on staff productivity - The Indoor Health and Productivity Project. Presented at the Third Annual Aerias National Symposium, Atlanta, Ga. October 22-24, 2003. Lawrence Berkeley National Laboratory. Washington, DC.

In 2002, the ASHRAE Journal published a series of six articles on how IAQ impacts building occupants health and worker productivity.

Kumar S, Fisk WJ. IEQ and the impact on building occupants. ASHRAE Journal. April 2002

Fisk WJ. How IAQ affects health, productivity. ASHRAE Journal. May 2002.

Heschong L. Daylighting and human performance. ASHRAE Journal. June 2002.

Kumar S, Fisk WJ. IEQ and the impact on employee sick leave. ASHRAE Journal. July 2002.

Sepannen O., Fisk WJ, Mendell MJ. Ventilation rates and health. ASHRAE Journal, August 2002.

Sieber WK, Petersen MD, Stayner LT, et al. HVAC characteristics and occupant health. ASHRAE Journal. September 2002.