Why building design matters in response to coronavirus:
Your office building as a risk management solution
By:
Dr. Whitney Austin Gray, Senior Vice President, Research, International WELL Building Institute
Sarah Welton, Vice President, Commercial, International WELL Building Institute
Abstract
Recent global disruptions — power outages, wildfires, novel coronavirus outbreaks — have a way of revealing dormant organizational problems. But, they also have a way of revealing outliers of business excellence. Companies need to be adaptable to an increasingly disruptive world in order to be successful long-term. Today, adaptability is achieved through engagement in proven risk management processes, with particular focus on organizations’ most important assets — their people. With new threats of infectious diseases and workforce engagement at consistently low levels, workplace design and policy strategies can be used to help reduce risk in times of disruption. Both the effort and effect from these practices should be captured in more robust social metrics reported in environmental, social and governance (ESG) documentation, as research suggests these items are increasingly material to investors.
INTRODUCTION
The best corporate leaders in the world expect chaos.¹ And in today’s world, the best of the best are expecting and planning for chaos from all angles.
The novel coronavirus pandemic has arguably changed the world permanently. Inevitably, it will also transform organizations — from the way they operate to the way they plan for risk. This pandemic affected the vast majority of businesses across the world, forcing them to do everything from implement work-from-home policies to issue mass layoffs. But prior to the outbreak, we also have to acknowledge there was plenty of disruptive change anticipated that many ignored or were under-prepared for.
For instance, scientists have been warning us for years about the effects climate change will have on both natural and human systems — wildfires, droughts, heatwaves, and increases in vector-borne diseases.² At the same time, economists have been warning of dramatic shifts in a post-industrial economy that centers more on knowledge, services, technology and experience than ever before.³
With uncertainty being the only certainty, strategic corporations are focusing on perfecting their organizational process of risk planning, iterating, and identifying tools and strategies that will help them achieve their risk-mitigation goals in ever-changing circumstances.
Many organizational leaders are beginning to understand that some of the most powerful, unexpected tools in their toolkit are in the realm of workplace design and organizational policy.⁴ Corporations measuring and reporting use of these new 21st century risk mitigation strategies will likely take shape as key Environmental, Social and Governance (ESG) metrics referenced by investors.
In particular, we anticipate that enhanced Social ‘S’ metrics in traditional ESG reporting will be deemed critical and material information in the future.⁵
THE WORLD AS WE KNOW IT HAS CHANGED FOREVER. AND IT’S STILL CHANGING…
In 1989 the infamous Exxon Valdez oil tanker spilled 10.8 million gallons of crude oil in Alaska’s Prince William Sound — killing thousands of animals and damaging over 1,000 miles of coastline.⁶ The incident captured Americans’ attention and their outrage was clear. This marked a pivotal incident that — from an environmental perspective — the worst can happen. And it did happen.
The Exxon Valdez spill was later largely attributed to failed monitoring equipment on the vessel that was deemed ‘too expensive’ to fix. The incident fundamentally shifted how organizations monitored and measured their environmental risk factors in real-time. It also catalyzed more robust environmental risk mitigation planning and implementation amongst businesses.⁶
Today, the novel coronavirus pandemic is the issue capturing most everyone’s attention globally. Unlike the Exxon Valdez, most people around the world are directly personally affected by the pandemic. They are ‘sheltering in place,’ social distancing, cancelling conferences, and — for many — working from home. Many are getting laid off and are worried about how they are going to pay for basic essentials for themselves and their families.⁷ ⁸
In short, the effects of the pandemic are being felt here and now. They are not predictions of future loss or future problems. They are not effects that will ‘trickle down’ to them through a complex ecosystem or through natural processes eventually.
These types of ‘in your face’ problems are the ones that humans tend to respond to.
Of course, this pandemic will pass, but effects on employees’ fear, anxiety and overall mental health will likely ripple out much longer. The key question therefore is, what are organizations going to do to solve for the fallout, and why are prioritizing these actions a strategic business move?
FOCUS ON EMPLOYEE MENTAL AND PHYSICAL HEALTH IS A STRATEGIC BUSINESS MOVE RIGHT NOW
This pandemic is unique from a business perspective because it’s spreading amidst an already rapidly evolving economy — one where human mental and physical health are the bedrock of profit (i.e., knowledge work).³
In previous decades investors and corporations measured business value in terms of tangible assets (e.g., property, machinery). Today, market value is largely made of intangible assets (e.g., patents, copyrights, brand reputation, etc.) In fact, as of 2015, only 16% of S&P 500 firms’ market value is embedded in their tangible assets. In 1975, this was reversed — 17% of market value was embedded in intangible assets and 83% was tangible.⁹
In short — successful businesses today are more dependent on highly functioning people — not necessarily highly functioning machinery.
As such, in this distinctive era of knowledge, service, and experiential work, people should be recognized as an organization’s most valuable asset.
And when these ‘assets’ feel physically safe, psychologically safe, socially connected, recognized, and purposeful they are better able to perform during even the most challenging circumstances — both personally and professionally.¹⁰ Supporting employee mental and physical health is therefore not only the right thing to do — but it also makes good business sense for any employer.
Physically, the focus for many office-based workers over the past few decades has been reduction of chronic disease through lifestyle changes such as increasing exercise and improving nutrition.¹¹ However, with rising threats of infectious diseases now on the table, corporations will need to enact new supportive policy and design measures to help reduce risk.
Mental health of human ‘assets’ is, of course, just as important as their physical health. Employee engagement (defined as employees “who are involved in, enthusiastic about, and committed to their work and workplace”) — has been shockingly low for years. A 2017 Gallup survey of almost 200,000 people across the US found that only 33% are engaged at work.¹² Human resource professionals overwhelmingly identify stress (both at home and work) as the largest contributor to these low employee engagement numbers.¹³
Workplace design and policy strategies can also play a unique role in supporting increased engagement and stress management among workers. Here’s how.
REAL ESTATE’S ROLE IN RISK MITIGATION
Construction workers, engineers, and fire fighters are just some professions that are issued personal protective equipment with the purpose of reducing hazard exposure to an acceptable risk level. With a new focus on the level of risk surrounding infectious diseases in office buildings, can strategically designed and maintained commercial real estate be considered a new type of personal protective equipment for knowledge and service workers?
The design of indoor spaces has long been known to affect human health.¹⁴ Proper building cleaning protocols are a critical first step that is unfortunately often overlooked in many instances. But less understood, vital aspects of building design also can play a critical role in establishing a healthier building.
Air quality measures are one example. Humidity levels, air ventilation rates, and proper filtration can all play a role in reducing the spread of viruses like the novel coronavirus.¹⁵ These same measures would also serve building occupants in other extreme events, such improving indoor air quality during the recent wildfires in California or Australia.
These design measures represent a key opportunity for employers to aim to reduce their risk and establish trust so that employees can ease some of their own stress around staying healthy and focus on their work at hand.
Remote work resilience
At the same time, flexibility and adaptability are key in any organization — in times of both global crises (novel coronavirus) or even personal crises (a family death, divorce). Organizational culture and policy can help develop this resiliency by, for instance, preparing workforces to effectively work remotely if needed and where possible. This might look like a flexible policy that allows employees to work from home a certain percentage of their time — while also giving them the resources and tools to do so effectively.16
Policies like these would encourage set up of at-home workstations and strengthen self-management skills and productive work habits. In fact, Gallup reports that the most engaged employees spend up to 20% — or 1 workday — of their time working remotely.¹⁶
This might lead some to ask — Is the physical workplace going to die? Once we all realize we can work from home, will ‘going into the office’ be a thing of the past?
This is unlikely.
Employee perception of their organization’s community (i.e., the quality of the social context of one’s work setting, including relationships with managers and colleagues) is one of six key contextual areas can contribute to engagement¹⁷ and quality of work¹⁸ in the workplace. Physical workspace will likely always have a place because these shared spaces are more supportive of building relationships. Employees are able to read body language, don’t have to worry about technical webinar problems (the dreaded audio echo, trouble dialing in), and are able to have spontaneous conversations that can end up as innovative business ideas.
Increased connection with co-workers can also reduce feelings of loneliness and isolation, as well as improve health.¹⁹ Employees are able to see and be immersed in a physical environment intentionally curated by their organization, which can subtly communicate organizational values in itself.
Organizational Planning and Managing Risk
Of course, healthy workplace design and remote work resiliency are just two risk mitigation strategies that can be decided upon in the context of larger organizational risk planning and management activities. Undertaking these important planning measures and risk assessments can reduce organizational uncertainty in a range of scenarios.
Typically, this process consists of a number of core steps, including:²⁰
1. Establishing the Context
2. Identifying the Risk
3. Analyzing the Risk
4. Evaluating the Risk
5. Treating the Risk
6. Monitoring the Risk
For example, in the case of returning to workplaces in the wake of COVID-19, a high-level risk management planning process might look something like this:
As part of each of these risk planning steps, it’s often helpful to establish a range of targeted questions from the literature, leadership, and employees themselves. For example, the following 10 questions are suggested in managing healthy building risk in pandemic disruption planning might include:
1. Can our company operate with 90–100% of staff working remote? What measures could be taken to make this a possibility in the future if it is needed?
2. Are our employees trained in ways to reduce their risk to infectious and chronic diseases both in the office and at home?
3. What infrastructure and policy support is needed to transition a remote workforce back to the office after a disruptive event?
4. How will our company monitor building metrics that affect human health in our offices?
5. Should building health monitoring opportunities be extended to employees working from home?
6. What procedures do we have in place to report and widely communicate measures that have been taken to improve health and safety in all of our facilities?
7. What can we do to help employees feel safe at work when they return after a disruptive event?
8. What anonymous employee feedback mechanisms do we have to ensure fears or concerns over building health are captured and addressed?
9. Is there a trained building health / wellness professional on our team who can help navigate healthy building feature implementation?
10. These risk management discussions, plans and preparations are critical to reducing harm in the face of disruption.
WHY THIS MATTERS TO INVESTORS
Many would argue that it’s not enough for corporations to engage in these risk management practices.
They will also be required to report them to their current and future investors, if and when they are deemed material. The Securities and Exchange Commission “believe(s) that investors would be better served by understanding how each company looks at its human capital and, in particular, where management focuses its attention in this space. The intent of the proposed requirement is to elicit, to the extent material to an understanding of the registrant’s business, disclosures regarding human capital that allow investors to better understand and evaluate this company resource and to see through the eyes of management how this resource is managed.”⁵ ²¹
Environmental, Social and Governance (ESG) reporting refers to the non-financial data that is disclosed by a company to help investors determine their future financial performance in terms of return and risk.²² Because of incidents like the Exxon Valdez spill, which cost an estimated $7 billion in clean up and legal fees, much of the focus of ESG reports has been placed on the ‘E’ (environmental data).
Traditionally, less focus has been put on ‘S’ (social) metrics.
In fact, within the Sustainability Accounting Standards Board Materiality Matrix, six of the 11 sectors had one or fewer human or social capital issues (out of a potential ten) that were considered likely to be material for the majority of their industries. Only two sectors were considered to have three or more material issues,²³ which indicates there are challenges with assessing human and social capital metrics, lack of agreement around the value of disclosing, and/or inconsistency regarding what data should be included within the social component of ESG.²⁴ ²⁵ Part of the perceived devaluation of the “S” metrics has been attributed to lack of understanding of what metrics are actually material and social indicators that often focus on effort rather than effect.
Organizations taking effort is social realm are hedging against risk. So long as an organization engages in a robust risk management planning process (defined in ‘G’ — governance — metrics) to strategically identify the social components that matter to their business performance, these efforts should be considered material.
And in the age of knowledge and service work, many research-backed mental and physical health interventions would definitely be considered material, as they are protecting the companies’ largest asset.
What we do know is that in the recent wake of the coronavirus outbreak, ESG funds have “generally kept pace with the S&P 500 during the downturn.”²⁶ And sustainable equity funds have generally performed better than their conventional peers, while passive sustainable equity funds performed better than those following conventional market indexes.²⁷
CONCLUSION
Recent global disruptions — power outages, wildfires, novel coronavirus outbreaks — have a way of revealing dormant organizational problems. But, they also have a way of revealing outliers of business excellence.
Those companies that are able to have their employees effectively work from home during a pandemic or other unexpected happening — or have adequate office air filtration when wildfires are raging nearby — have likely gone through and executed a resiliency plan of some kind. Of course, they might not call it this. They might just call it good business.
It’s becoming increasingly apparent that healthy companies understand themselves and the external forces (market, nature) that could or could not work with them. They know things go wrong. And they have prepared to deal with them when they do.
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