Smart City Solutions for a Riskier World
Lou Celi, CEO, ESI ThoughtLab
This article discusses the results of a recent study conducted by ESI ThoughtLab on how smart city innovation can drive urban resilience, sustainability, and citizen-well being. The article is based on a presentation delivered at SGO’s Smart Cities International (Virtual) Symposium in February 2021. The study was sponsored by a number of organizations, including Bentley, Cisco, Deloitte, GM, Hatch, Honeywell, Intel, Microsoft, Oracle, NTT and others. The full results of the study may be found on the ESI ThoughtLab website (www.econsultsolutions.com).
The purpose of the study was to explore how cities currently are achieving their social, environmental, and economic goals. The study was based on a five-stage research methodology, as follows:
1. Surveyed and benchmarked 167 cities around the world, in six different regions, which included in-depth data on city investments, outcomes and returns
2. Created a City Sustainability Progress Index, which recorded progress against the UN’s 17 Sustainable Development Goals (SDGs)
3. Gathered city data from trusted sources, which included the World Bank, IESE, and other respected sources
4. Conducted interviews with urban leaders and experts to identify best practices and provide case studies
5. Established a multi-disciplinary advisory board, including city, corporate and academic leaders
As summarized in the figure below, the 167 cities surveyed were in 82 countries, and together represent about 7% of the global population.
The cities in the study range in population from 80,000 to nearly 27 million. Thirty-nine percent of the cities have less than one million inhabitants. The cities vary by level of economic development. Fifty-three percent of the cities are in emerging markets, and 47% in developing countries, as shown below.
Stages of SDG and Smart City Progress
A prime goal of the research was to assess how smart urban solutions – such as use of emerging technologies and forging new partnerships – can help cities achieve the SDGs. To measure the headway that cities have made in driving the SDGs, we developed an SDG progress framework. We also built a smart city maturity framework, so that we could compare the two.
As shown in the figure below, there were three stages of SDG progress. The Implementers make up 20% of cities and are in the early stages of including SDGs in their planning. Advancers make up 58%, and are making progress on SDGs. Finally, Sprinters are most advanced in SDGs and make up 22% of cities studied.
One of our key findings is there is a link between smart and sustainable cities, with 54% of the smart city leaders also being sprinters, since digital technology can help deliver better social, economic and environmental results. Technology optimizes the use of scarce resources, scales quickly to adjust to changing conditions, and improves communication between governments and citizens. As Filipe Araujo, the vice mayor of Porto, told us, “a smart strategy is a sustainable strategy.”
Changing Goals and Priorities: The Impact of the Pandemic
The pandemic was indeed a watershed event for cities. In fact, it was by far the biggest upheaval that cities faced in recent memory. Cities in every region ranked it as the top disruption in 2020, except for those in Africa, where it was tied with declining economic growth, an offshoot of the crisis.
“The challenges we faced with the pandemic – the need for a good health system, a good education system, less inequalities, and a more resilient economy – were already on the agenda,” said Miquel Rodriguez Planas, 2030 Agenda Commissioner on the Barcelona City Council, “The pandemic just made us believe more in the agenda.” Tourism dried up in the city as a result of the pandemic, and showed that Barcelona was too dependent on tourism. This refocusing on social, economic and environmental priorities was a key result of the pandemic, and even accelerated plans in these areas.
COVID-19 also highlighted the value of smart city programs in the eyes of respondents. With social distancing preventing physical interaction in cities, smart technology became the only game in town. As shown below, for 65% of cities, the biggest lesson learned during the pandemic was just how crucial smart city programs were for their future. The pandemic also drove home the need to work differently. COVID-19 convinced cities of the need to invest more in upgrading core infrastructure and in reliable and affordable connectivity.
“Technology enables SDG progress because it can integrate both technical and social solutions,” commented Andrew Caruso, Director of Strategy and Operations, Urban Solutions, at Hatch. “Further, it enables both front-end insights and feedback loops that power a cycle of continuous improvement.” Also, technology can scale very quickly and does not leave a carbon footprint when used correctly.
Our survey found that the pandemic heightened the SDG imperative overall, as illustrated below.
Pandemic Impacts
36% — The pandemic has stimulated new thinking about our priorities to build the social good
28% — The COVID-19 health crisis has made the SDGs a higher priority for our city
18% — Our SDG program has helped our city to respond to the COVID-19 pandemic
14% — The pandemic has led to environmental benefits that our city is striving to maintain
“The pandemic will upturn traditional urban development models and compel cities to reimagine mobility, health infrastructure, housing, education, energy consumption and more,” said Michael Flynn, Global Government and Public Services Financial Advisory Leader at Deloitte. “It has laid bare the inequities in access and has impacted disadvantaged communities more. Along with inclusion, addressing these systemic inequities in the current urban development model will be critical for cities.”
Cities are focusing on the SDGs around people, prosperity and the planet
As shown below, the UN categorizes the 17 Sustainable Development Goals (SDGs) into five Ps -- people, planet, prosperity, peace and partnerships. Most cities are including SDGs in their urban development plans. Cities are doing the most with SDGs relating to people: 91% include no poverty, 89% include good health and well-being, and 86% include quality education in their plans. Cities are also focusing on prosperity: 86% include decent work and economic growth in their plans, and 76% incorporate sustainable cities and communities. SDGs around planet, peace, and partnerships are included slightly less often.
The study found that SDG “Sprinter” cities take five key steps to ensure success, as summarized below. More than nine out of 10 sprinter cities monitor their SDG progress and 58% conduct voluntary local reviews.
Cities will face challenges over the next five years. The study found that cities believe complex policies, finding the right partner, and data security and privacy will bog down their SDG efforts. The figure below summarizes the top 5 challenges, as well as challenges in emerging vs. advanced markets.
When Smart and Sustainable Meet: Cities 4.0
To analyze the impact of smart city solutions on sustainability, we examined the intersection of SDG sprinters and smart city leaders.
The pandemic has been a catalyst for lasting technological, business, and social change. With the expectations of citizens rising, and businesses gearing up for the Fourth Industrial Revolution, the most successful cities will be those that are advanced in using smart technology, citizen engagement, and partnerships to drive social, environmental and economic agendas. We call these cities, Cities 4.0
We found that the cities which do the best are going to be those that not only use digital technology and engage citizens, but also are very attuned to the SDGs. We identified 20 cities where smart meets sustainable – where cities were both SDG Sprinters as well as smart city leaders, as shown below.
These 20 cities are in the fourth stage of smart city evolution, as illustrated below.
A few years ago, stage three was the most sophisticated kind of smart city, where municipalities were tuned into the social and digital issues of utilizing technology. They involved citizens in decision making, started partnerships, and used technology in interesting ways – not just to transform different parts of the city, but to interconnect them. Now, the most advanced smart cities (4.0) exhibit a high level of excellence in using technology datasets, engagement, and partnerships. They are highly sensitive to the SDGs and try to make their cities much better places for their citizens. That is where we are today.
The Four Steps in Becoming a City 4.0
To become a City 4.0, there are four main steps, as illustrated below.
First, a city makes significant investment not only in foundational technologies like cloud, mobile and IoT, but also in specialized solutions, like AI and biometrics. They understand that these technologies can help them advance the SDGs. Next, they make data a strategic asset, gathering a rich set of data, analyzing it on a real time basis, and using it to forecast trends and make effective decisions. They harness diverse data sets not just from IoT, but also biometric, geospatial, peer-based and real-time data. They have gone further to drive value from data, even monetizing it to generate revenue for their cities.
Third, Cities 4.0 are excellent in tapping urban ecosystems of universities, communities, industry associations, companies and banks. Cities 4.0, like London, New York, Singapore, and Boston, typically have very strong academic foundations that drive digital innovation and sustainability solutions. And finally, they fully engage citizens in decision making. They have meetings and involve them, showing the impact of technology and thereby allaying some of their fears. They do a lot to get citizens on their side and bridge the digital divide in their cities.
Cities 4.0 unlock greater value from their ecosystems by taking partnerships to a higher level. They proactively manage partnerships, monitoring progress and challenges in order to make continual improvements. These cities develop the capabilities and culture to promote partnerships across domains, utilizing public-private partnership (PPP) schemes more often and looking for innovative vendor financing.
Cities 4.0 are open to new ideas. They invite ecosystem partners to help solve their problems by holding open pitching sessions and using more flexible RFPs. In addition, they collaborate with other cities and share best practices. At the same time, they have more inter-governmental autonomy.
Sector Focus: Energy, Water, and other Utilities in the Smart City
Cities 4.0 focus on leveraging the ecosystem to achieve their goals in the domain of energy, water, and other utilities, while promoting cleanliness and efficiency. Their top investments help to empower citizens to make better resource usage decisions.
These technologies include apps to allow citizens to track and manage their resource usage and smart meters, for both water and electricity. All of these generate firm returns.
One technology where cities are trailing badly is data analytics to help make better predictive maintenance decisions. Only 15% of cities use data to make such decisions about their water infrastructure and 8% use it for electricity infrastructure.
One such city is Porto, Portugal, which uses smart technology to improve its urban water cycle. It commissioned the development of a smart water management platform called H2Porto. This digital twin has helped to improve the accuracy of data produced from sensor readings to nearly 99%. After deploying the technology, the city’s water service interruptions fell by 22.9%; sewer collapses decreased by 54%; and repairs for pipe burst and sewer and service connections improved by 8.3% and 45.5%, respectively. The integration of real-time data and the ability to access information in the field helped to improve operations by 23%.
In Conclusion: The ROI of Being a 4.0 City
As part of this study, we asked city leaders to estimate the ROI achieved from their technology investments across urban domains. Based on reported ROI estimates, the average return on investments made by Cities 4.0 across urban domains ranges from 5.14% to 6.22%. Investments in living and health drive the greatest returns for Cities 4.0, followed by mobility and transportation, and digital infrastructure.
These percentages likely represent lower-bound ROI estimates, since many of the social, health, environmental, and business benefits are difficult to quantify. Such qualitative benefits include creating new business opportunities, filling talent gaps, improving public health, reducing crime, boosting productivity, and addressing income inequality. In addition, the payback period can be long on these projects, with bigger returns coming from wider deployment.
“You don’t need a lot of money to have impact,” says Emily Yates, Smart City Director, Philadelphia. “You can be creative, and the value doesn’t always have to be financial for everybody. Our value-add when we partner is to provide some of the funds, but we also provide the capacity and absorb the risk. And I always keep focused on the economics, the environmental impacts, and the social impacts. Those are what really drive the selection of projects.”
About the Author
Lou Celi is the CEO of ESI ThoughtLab, a company he founded in 2014 to create visionary thought leadership that sits at the intersection of economics, technology, and management strategy. Lou has nearly 40 years of experience as a corporate leader, author, speaker, entrepreneur, and consultant. During that time, he has helped top organizations build their business with corporate and government decision makers. A pioneer in evidence- based thought leadership, Lou has led a broad range of research initiatives on the digital transformation of cities, industries, companies, and management practices. Prior to setting up ESI ThoughtLab, Mr. Celi was board director and president of Oxford Economics, where he built the firm's successful business in the Americas and set up its global thought leadership practice. Before joining Oxford Economics, he was president of Llesiant, a technology start-up acquired by Bloomberg BNA in 2009.