The number of people living in cities will have doubled by 2050, yet the world’s urban areas are already overcrowded. Developing countries see their urban areas suffer from shortages of clean water, electricity, and other resources essential to supporting their exploding populations and fragile economies.
The problems associated with rampant urbanization are among the most important challenges of our time. They also represent some of the greatest opportunities-and responsibilities- for the private sector. They allow businesses to position themselves to shape the sustainable, economically competitive cities of the future.
Many corporations and investors assume that fixing cities is the purview of government and that it will automatically activate. But the truth is that most governments are stuck-financially, politically or both. They can’t be relied on to single-handedly address the problems of urbanization or to conceive solutions, such as efficient electrification and reliable public transit, that will drive economic growth. Implementing those solutions requires large amounts of capital, exceptional managerial skill, and significant alignment of interests-all of which are often in short supply in city governments but abound in the private sector.
There are many different business strategies for addressing the challenges posed by rapid urbanization and scarce resources. Often they center on expanding supply- providing more water, more electricity, more roads, more vehicles. But increasingly businesses are discovering how to create and claim value by improving resource efficiency- through energy and other strategies that overcome business barriers, reduce waste, and stretch resources. Such opportunities should be identified and pursued.
Business models that generate profits optimize the use of resources. investments that encourage efficiency and a careful selection of markets ate the ones that succeed in the long run. Although any given company’s approach will depend on its capabilities and objectives and the market it is entering, the strategies provided are relevant both too obvious players such as infrastructure and financial services, to say the least. Whatever the industry, strategic investments in resource efficiency as cities are being built or rebuilt can generate value for companies over the long term while enhancing the cities’ competitiveness, livability, and environmental performance.
Businesses cannot ignore that soon most of the consumers will be centered in the urban centers. For businesses to thrive in this environment there will need to address the challenges that accompany rapid urbanization. Collaboration with governments by businesses and investors to solve these challenges will go a long way in promoting business success and improve the efficiency of smart cities.
A company or an investor for that matter could target an array of resource-management initiatives. Of these, I argue, water, electricity and transit projects deserve the greatest focus. Businesses that have water to process food and materials, that use renewable sources of energy to run operations and have an efficient and reliable supply chain are clearly at an advantage. Similarly, citizens with ready access to clean water, and who can commute efficiently and affordably have a foundation on which to thrive are competitive and help to fuel a country’s economic growth.
The opportunity
For businesses to understand where the opportunity lies, consider how resource efficiency initiatives measure up on both technological and financial sophistication. The products and services that new cities will require, and that provide the return investors and entrepreneurs need, optimize both. A company’s offerings can be positioned according to these characteristics.
All of this raises the bar for how companies conduct public interactions. Companies have to understand the complexities of each city’s context including how local governments make decisions and what the regulatory landscape looks like. They should align their focus under the city’s needs.
The inevitability or rather socio-economic necessity of smart cities represents a chance to transform and move forward innovatively and sustainably. There will be opportunities to generate revenue by becoming providers of new systems or services and to take advantage of the data generated from the increasingly digitally connected infrastructure.
