Catalysing social sustainability
For thousands of years, governments have used a combination of legislation, regulation and social norms to influence the behaviour of their citizens. The extent to which governments attempted to become involved in the lives of citizens has varied from country to country, as has the level of involvement that was considered acceptable. Often, the two were different.
More recently, there is evidence of a broader consensus that it is acceptable for government to influence behaviour, particularly in areas such as sustainability and environmental protection, but also on equality issues and public health. Indeed, it can be argued that promoting and enabling sustainability is a new role on which governments must deliver.
This includes a wide range of different areas delivered in a variety of ways – through government policy and regulation, through experimentation and supporting promising ideas, through being a role model and building capacity (such as through government procurement and internal practices). The key areas are embracing environmental responsibility, elevating the equality agenda, fostering economic sustainability, and leveraging smart and sustainable cities.
Embracing environmental responsibility
In the past five years or so, environmental issues have been elevated to centre stage, prompted by growing evidence of human-induced climate change and mounting concern about the extent to which the earth’s natural systems are being damaged and its resources depleted.
Although governments have struggled to agree solutions to these problems, they recognize that some form of sustainable development, encompassing environmental and social issues, is essential for future prosperity and well-being.
Take the results of a 2014 study by GLOBE International and the Grantham Research Institute on Climate Change at the London School of Economics. As of 2013, sixty-one of sixty-six countries surveyed (including the EU as a single entity), accounting for more than 88 per cent of global greenhouse gas emissions, including the United States and China, have ‘passed laws to promote domestic, clean sources of energy’, while fifty-four have ‘legislated to increase energy efficiency’.118
There are many areas where governments can act to improve sustainability and the environment. Energy efficiency is one. Making homes, businesses, vehicles and transport systems more energy efficient is pivotal to solving the interconnected problems of pollution, climate change, fossil-fuel depletion and energy security.
Buildings offer the greatest potential for energy savings, as they account for around a third of global energy use and are the single largest contributor to greenhouse gas emissions. Policy options range from retrofitting existing buildings with improved insulation, air conditioning and lighting, to setting stringent regulations on energy efficiency and the materials used in new construction, and ensuring buildings are optimally designed. Modern appliances, such as refrigerators, washing machines and cookers, are far more efficient than those made a decade ago, and many countries have adopted energy-input labelling for all new appliances.
More efficient use of energy also requires people to be aware of their consumption and modify their behaviour – switching off lights and appliances when not in use, for example. Governments can use a mixture of awareness-raising campaigns, incentives and eco-taxes to help.
Renewable energy forms are an area in which governments can make a difference. Solar, wind, biomass and geothermal energy are low-carbon and potentially low-cost forms of power generation. They are also emerging technologies, offering jobs and competitive advantage to those countries that take a lead in their development. Investments in renewable energy are substantial. Total investment in renewable power and fuels was $214 billion in 2013 (a figure which was actually down on previous years, thanks to a sharp decline in the prices for solar energy systems).119
Elsewhere, experimentation with alternative low-carbon fuels continues, notably for electric and biodiesel vehicles and, to a lesser extent, hydrogen and compressed air. Electric vehicles are moving closer to competing in range with conventionally powered vehicles. Questions remain, but electric vehicles are a low-pollution, noise-free and low-cost solution in urban settings. They are especially appropriate for fleets of delivery vans, buses, taxis and government-run cars, and authorities are promoting their use through sustainable public procurement policies.
On a related front, reducing waste, recycling, reusing and repairing products can bring significant cost savings, prevent the unnecessary depletion of natural resources, and reduce the pollution and greenhouse gas emissions associated with landfill. There is a huge opportunity for governments to treat waste as resource. A UN Environment Programme report on waste management estimates that 1.3 billion tonnes of solid waste is collected worldwide annually. The global waste market is estimated at $410 billion a year, with over 500,000 people employed in recycling in the EU alone.120 Yet UN estimates put the proportion of the world’s waste recovered or recycled at just a single quarter.
Water scarcity is another resource challenge. Current population growth rates of around 80 million people a year will create additional fresh water demands of some 64 billion cubic metres annually, according to the United Nations World Water Development Report 2012. In Europe, 60 per cent of cities with over 100,000 inhabitants are using groundwater faster than it can be replenished.121 Fortunately, technologies exist to efficiently filter and reuse water in buildings and across municipalities, and these can be coupled with incentives to persuade individuals and businesses to use less water.
Governments adopting a green approach should target spending accordingly. Consumer sentiment and behaviour can be influenced and green investment promoted through a mix of taxes and market-based instruments. Public spending in areas that deplete natural resources should be minimized. Artificially lowering the price of goods through subsidies encourages inefficiency, waste and overuse. The International Energy Agency (IEA) estimates that fossil fuel subsidies amounted to US$544 billion in 2012, up from $523 billion in 2011. These subsidies also created a barrier to investment in more sustainable renewable technologies.122 123
Building the capacity of institutions and NGOs to act on social issues, such as climate change, is vital for ensuring a transition to a greener, more sustainable economy, as is appropriate training and education. Governments can lead by example – by hiring environmentally focused staff.
A sound regulatory framework is also essential, both for reducing unsustainable behaviour and business risk, with its clear implications for investors.
The attractions of embracing environmental responsibility are more varied and appealing than often understood. There are significant cost savings, and in some cases increased revenues, to be made by reducing man-made climate change. Reducing the demand for energy, by improving the efficiency of buildings and their heating and air-conditioning systems, as well as the efficiency of industrial plants and transportation systems, drives down costs for individuals and governments.
In a major oil- and gas-producing country, cutting the demand for energy helps to preserve finite resources for future generations and promotes economic diversity by lessening dependence on hydrocarbon extraction. At the same time, promoting and investing in renewable energy can bring improved public health and energy security, as well as boosting employment and growth.
Many governments are using carbon-pricing mechanisms to help ameliorate the impact of business on the environment and climate change. A carbon tax can be levied. The principle is that the polluter pays; in this case, pays a fixed amount per tonne of carbon released into the atmosphere. Australia became the first country to repeal its carbon tax in July 2014. Alternatively, a cap-and-trade system can be used, in which the government caps emissions and these emission allowances are then traded on markets which determine the price.
Minimizing fresh water use means significant cost savings in countries dependent on expensive desalination plants. Waste services, which account for a substantial proportion of most local governments’ budgets, can generate revenues through reuse and recycling. For example, Brazil is the world leader in recycling used aluminium cans. It recycled some 267,000 tonnes of aluminium beverage cans in 2012, or 19.8 billion aluminium cans, a recycling rate of close to 98 per cent.124 In doing so, it added some US$270 million to the Brazilian economy.
There are health benefits too. Greener, more efficient public transport systems produce less pollution and reduce congestion, with benefits for public health and improved productivity. Such policies tend to be associated with creating more pleasant urban environments, in turn conducive to creativity and enhanced well-being.
Transformation at work: leading by example
Sweden is a trendsetter in environmental policy and the birthplace of the ‘polluter pays’ principle, introduced in 1975. Building energy efficiency standards championed in Sweden are commonplace around the world. In 2009, the Swedish government committed to investing €27.3 million (US$39 million) annually on energy efficiency measures from 2010 to 2020.
In Germany, regulations on pollution, waste and recycling have been steadily strengthened, encouraging firms to use less energy and fewer resources. Investment in efficient, state-of-the-art recycling facilities and public transport – along with stringent regulations – have led to high levels of household recycling and helped foster a strong sense of environmental responsibility. In Italy, a strategy for promoting corporate social responsibility (CSR) resulted in green public procurement policies being implemented in all public tenders.
The EU has a price for carbon and a working mechanism for limiting greenhouse gas emissions, putting it ahead of other regions. When it launched in 2005, the EU Emissions Trading Scheme covered around 11,000 power stations and industrial plants in thirty countries, whose carbon emissions make up almost 50 per cent of Europe’s total.
China has introduced a host of environmental policies. In 2007, it adopted EU directives that prohibit hazardous substances and mandate the recycling of household appliances and consumer electronics, allowing Chinese products to be exported to the EU’s 500 million consumers. And in 2008, it imposed a ban on ultra-thin plastic bags. Although flouted, the ban reportedly saved the equivalent of 1.6 million tonnes of oil in the year after it was introduced and led to the closure of the country’s biggest plastic bag manufacturer.
China’s twelfth Five-Year Plan (2011–15) contained several progressive environmental policies. These include a new carbon-intensity goal (the level of emissions allowed per unit of GDP), an increase in renewable energy (mainly hydro and nuclear power), greater forest cover and more stringent legislation on major pollutants, including nitrogen oxide and ammonia. As an example, China committed to 100 gigawatts of installed wind capacity by 2015, and 1000 gigawatts by 2050.
Transformation at work: recycling and composting in Austria
Austria achieved one of the world’s highest rates of recycling and composting at over 70 per cent of waste. It did this through a mixture of coercive and persuasive policies. The Federal Ministry sets the overall framework for waste management, but the municipalities manage day-to-day operations. A number of policy initiatives created incentives for citizens and businesses:
- Fiscal: Austria introduced a landfill tax in 1989. The levy was steadily increased, reaching €87 (US$126) per tonne of waste in 2006, one of the highest levels in the world at the time. Revenue generated by waste taxes was earmarked for funding the remediation of contaminated land.
- Legislative: Since 2004, strict legislation banned landfill for all waste not treated by incineration or mechanical biological means. This created incentives for using alternatives such as Refuse Derived Fuel (RDF) and several Austrian manufacturers are market leaders in recycling technology.
- Producer responsibility: Austria has required all manufacturers to recover their packaging waste since 1993. Altstoff Recycling Austria (ARA), a private sector initiative entirely funded by industry, assumed responsibility for running the scheme.
The country has over forty waste incineration plants. Households have been required to separate waste since the early 1980s, and legislation was later extended to composting. Companies with more than a hundred employees must nominate a trained ‘waste officer’. - Information campaigns: Tough legislation has been combined with various campaigns to make Austrians more recycling aware. For example, Vienna’s Strategic Waste Prevention Group spent around €5 million (US$7.2 million) on education and awareness schemes and promoted reusable products over disposable ones. Another example is the Reuse and Repair Service Centre in Vienna, which revitalized the repair and refurbishment of electrical goods, attracting widespread international attention.
Elevating the equality agenda
Social sustainability (which includes concepts such as social equity, human rights, social justice and social responsibility) touches the environment and where we live.125 While some aspects of social sustainability are relatively recent rallying points for citizens and governments, others are of much longer standing but remain as areas of potential opportunity and discord.
The word ‘discrimination’ derives from the Latin discrimire, which means to separate or distinguish between. Discrimination exists in all societies, often involving some form of exclusion or rejection – whether that is access to education, employment or public services – with obvious implications for people’s well-being and social standing.
Following a UN drive at its inception, many countries have enacted laws to prevent discrimination. In 1995, for example, the US government-funded Glass Ceiling Commission recommended affirmative action – considering an employee’s gender and race in hiring and promotion decisions – as a way of tackling the issue. However, governments still resist legislating on some issues relating to equality, turning instead to the private sector and markets for self-regulatory solutions.
Some progress has undoubtedly been made. Women account for more than 50 per cent of employees in management or professional occupations in the US.126 Yet stumbling blocks remain. On gender equality in work, for example, there is little evidence to suggest that women are making significant progress into senior executive positions in major corporations, despite their greater representation in the workforce.
In some countries the lack of progress is prompting legislative action in areas where a self-regulatory approach has been the preferred strategy. In Europe, Norway led the way in 2006, introducing a 40 per cent quota for female board members in public limited companies. Germany followed – stock-exchange-listed boards will need to be 30 per cent female by 2016 – and Belgium, France, Italy, the Netherlands and Spain all have gender quotas. Elsewhere, Japan has stated an intention to have women in at least 30 per cent of executive positions by 2020.
During the past decade, several countries have enacted laws on equality and discrimination in the workplace, such as the UK’s Equality Act. Rapid advances have been made in implementing legislation to prohibit discrimination on the basis of disability and age. Race and gender are specifically included in almost all legislation, although other grounds for discrimination, such as social origin and political opinion, are often absent.
In Europe, anti-discrimination legislation has been consolidated, and definitions of discrimination and the allocation of the burden of proof brought into line with EU directives. Malaysia has included gender as a prohibited ground for discrimination in its constitutions. South Korea outlawed age discrimination in 2008.
Family-friendly policies complement existing legislation, as well as policies for continued training for older workers and quotas for women in managerial positions. However, in its third Global Report on discrimination, the International Labour Organization (ILO) warns that having laws and institutions to prevent discrimination at work and offering remedies is not sufficient; the challenge is to get them to function effectively.
Many institutions and inspection services face severe financial constraints. The ILO also reports that migrant workers have been particularly affected by the global economic downturn, with more discrimination relating to access to employment and migration opportunities, increased xenophobia and violence, and worsened working conditions.
Even where laws exist to prevent it, racial, ethnic and caste discrimination, as well as inequity on grounds of language and religion, remain serious and pressing issues in many countries. Gender discrimination remains entrenched throughout the world; women are disadvantaged, excluded from education and employment. Disability discrimination is widespread, and is often most clearly evident when people are excluded from buildings and services not adapted for disabled access.
Beyond eradicating the innate inequity involved with discrimination, there are other advantages to be gained from equality provisions. Embracing equality and diversity in the workplace and legislating to outlaw discrimination means that organizations are likely to tap into a wider range of experience, ideas and creativity.
There is a link between greater equality and less discrimination and better performance, both at an organizational and national level. Employees not distracted by issues of discrimination are able to focus on their work, with clear benefits for productivity. Harmonious work environments are associated with reduced absenteeism, greater loyalty and a lower turnover of employees. When there is mutual respect, employees are more likely to work cooperatively as a team, while businesses and institutions that embrace equality tend to have good reputations, untarnished by human rights complaints or litigation.
According to the OECD study, Babies and Bosses: Reconciling Family and Work Life, family-friendly workplace practices and attention to gender equity in hiring and management help improve productivity and economic performance.127
Policies that encourage women to participate in the workforce help to counter the potential negative effects of declining birth rates and population ageing on overall prosperity. Another OECD report, Gender and Sustainable Development: Maximising the Economic, Social and Environmental Role of Women, demonstrates that a better use of the world’s female population could increase economic growth, reduce poverty, enhance societal well-being and help ensure sustainable development in all countries.128
There is also the possibility that more equal societies fare better. In The Spirit Level, British epidemiologists Richard Wilkinson and Kate Pickett provide evidence to support their argument that almost all societal problems, from ill health to violence and illiteracy, are affected not by how wealthy a society is, but how equal it is. ‘As well as knowing that health and social problems are more common among the less well-off within each society, we now know that the overall burden of these problems is much higher in more unequal societies’, write Wilkinson and Pickett.129
Anti-discrimination and equality legislation is central to any effective anti-discrimination strategy. This takes many forms, from national-level laws to various labour laws prohibiting discrimination in the workplace.
In government, the wide-ranging implications of equality legislation can be handled by a single government office. In the UK, for example, the Government Equalities Office sits within the Department for Culture, Media and Sport, but works across the whole of government to develop equality strategy, including the Equality Act 2010.
Despite widespread recognition of the benefits of equality and diversity, there are often gaps between equality law and good practice and what actually happens in the workplace. Research shows that well-intentioned employers can be wary of taking action on equality and diversity because they fear getting things wrong, or appearing unskilled and incompetent. Good practice is more often found in larger organizations. With small employers, there is a need for clear, relevant advice and training, and this can be provided by government departments or NGOs.
If governments want to combat inequality, they must disseminate relevant information to employers, private and public sector organizations, and citizens. Government departments are not always particularly effective at informing people of their rights in areas such as employment law. NGOs, such as the Citizens Advice Bureau in the UK, frequently fill this gap, providing independent advice and assistance. Such NGOs rely on support from a range of donors, including support from government grants, and volunteers.
Fostering economic sustainability
How governments act as stewards of the environment and how they create opportunities for all citizens are vital issues in creating sustainable societies. An additional perspective is the economic one. How can governments foster economic sustainability? Some countries have large resources at their disposal. How best should they invest them?
The term Sovereign Wealth Fund is relatively recent, attributed to a 2005 article by Andrew Rozanov, ‘Who holds the wealth of nations?’ in the Central Banking Journal.130 The concept is not new, however. Wealth funds, set up by states to manage national wealth and maintain long-term financial security, date back to the 1950s. In 1953, for example, the Kuwait Investment Authority set up a Sovereign Wealth Fund created from oil revenues. Kiribati in the Pacific Ocean set up the Revenue Equalization Reserve Fund in 1956, funded by the export revenues from the nation’s phosphate resources.
Sovereign wealth funds can be used for strategic purposes beyond commercial and wealth management motivations, such as achieving better rates of return. They can, for example, be set up as development funds, which earn a return in order to finance national infrastructure developments. More subtly, foreign investments help acquire raw materials, get technical know-how and gain access to foreign markets. Then there are political motivations. Funds can be mandated to invest only in domestic assets, which is effectively state protectionism.
Funds vary in type and use. On the investment side, these state-owned funds invest in a range of assets, including stocks, bonds, precious metals, private equity and hedge funds, and real estate, for example. On the funding side, sovereign wealth funds can be funded by the proceeds of commodity exports such as oil and gas. Alternatively, funding can come from non-commodity sources such as the transfer of assets from official foreign exchange reserves, and from government budget surpluses and privatization revenue.
Non-commodity sovereign wealth funds are increasingly popular as a way for governments to invest their excess foreign exchange reserves, budget surpluses and privatization revenue. Sovereign wealth funds capitalized through earnings or assets that are unrelated to commodity-based wealth are not new. In the 1970s, the Singapore government incorporated Temasek Holdings, one of the earliest and biggest of what are commonly known as non-commodity sovereign wealth funds.
The number of funds supported by non-commodity sources now totals some twenty-three of the seventy-four or so wealth funds in operation around the world (Diagram 8). By the end of 2011, non-commodity sovereign wealth fund assets totalled US$2.1 trillion (up from less than US$250 billion in 2000).131 Given that high current-account surpluses are likely to persist across East Asia for much of the coming decade, non-commodity funds are likely to continue this rapid growth.
Diagram 8. The growing popularity of sovereign wealth funds (number of funds)
Source: Sovereign Wealth Fund Institute, EIU
Through non-commodity-based funds, governments can reallocate excess surpluses, both foreign exchange and fiscal, in a wide variety of asset classes that offer greater long-run returns and diversification than more traditional low-risk investments such as US Treasuries. These investments might include equities, bonds, real estate and derivatives, for example.
The accumulation of capital for non-commodity sovereign wealth funds is often linked to the inflexibility of a country’s currency regime and exchange rate intervention. The yield the fund receives on its investments helps to offset the costs associated with sterilization of foreign exchange inflows.
Governments often decide to set up non-commodity funds after the accumulation of more-than-adequate stocks of foreign assets or registering consistent primary fiscal surpluses. What constitutes adequate is debatable, but foreign exchange reserves that can support three months of imports and cover all external short-term debt obligations are often considered sufficient.132
The option of forming a sovereign wealth fund is also likely to be weighed against paying down foreign debts or simply having the central bank manage them from a long-term perspective. Typically, funds should be set up when reserves look set to continue to grow steadily and there are clear objectives for improving the return on these assets or growing them.133
When setting up a non-commodity fund, the government must decide on the institutional arrangements appropriate to the policy objectives of that fund. The policy objectives of non-commodity funds tend to focus on enhancing returns on foreign assets or growing pension assets.
Sovereign wealth funds with pension liabilities, given their relatively well defined investment horizon, tend to have much clearer operational risk tolerances than funds simply seeking enhanced returns. Non-commodity funds tend to place less emphasis than commodity funds on fiscal stabilization, as they are less prone to the typical boom-and-bust commodity cycle. They try to avoid any action that would drive up the real exchange rate and undermine exports, as these are usually the source of capital for non-commodity funds.
Non-commodity funds, just like commodity funds, can be set up as separate legal entities or within the central bank or finance ministry. Whatever the governance structure, the operational management of the fund should be independent, with the fund’s mandate and objectives precisely defined.
Creating a sovereign wealth fund under a different entity or institution reallocates financial power and influence, and is likely to benefit certain individuals or groups within a government. The potential for behind-the-scenes political infighting is a concern and could undermine a fund’s operations. Operational independence from those involved in the fund’s oversight is an important issue, since political interference – whether real or perceived – can undermine the fund’s investment goals. The rules and regulations governing a fund’s financing, withdrawals and investment operations need to be well set out and consistent with the fund’s objectives.
The use of professional managers is becoming increasingly popular among non-commodity funds. The China Investment Corporation’s decision to buy its stake in the Blackstone Group, one of the world’s largest private equity firms, was partly due to the desire to gain investment expertise.
Fund transparency is increasingly necessary to gain legitimacy in the eyes of citizens, who want to know where their money is being invested – especially following losses during the global financial crisis.
It is no surprise that economies that have benefited from rapid export-led development and accumulated massive foreign exchange (FX) reserves, such as China, Hong Kong, Singapore and South Korea, have established the largest non-commodity sovereign wealth funds. While the biggest sovereign funds still belong to oil exporters, China’s combined sovereign fund assets (all non-commodity based) are worth more than any other country’s holdings.134
Transformation at work: Fundo Soberano do Brasil
Brazil launched its first sovereign wealth fund, the Fundo Soberano do Brasil (FSB), in late 2008. It is operated on a day-to-day basis by the Ministry of Finance, although the governing board – the Deliberative Council of the FSB – which sets the FSB’s goals and investment guidelines, includes the planning minister and the chairman of Brazil’s central bank, the Banco Central do Brasil.
Despite the country’s sizeable FX reserves (US$368 billion as of September 2013), the fund was capitalized through the issue of domestic bonds. This domestic financing channel was designed to allow the fund to function as a vehicle for saving primary budget surpluses beyond yearly targets.
The fund is small by global standards, with a market capitalization of just US$11.3 billion in 2012, and relatively transparent, issuing quarterly reports. In many ways, this Brazilian fund bears little resemblance to Asian non-commodity SWFs. The FSB’s aims are to promote investment in Brazil, generate public saving, smooth the economic cycle and promote strategic projects domestically and abroad.
To date, the fund has been largely used to invest in domestic securities and to augment Central Bank interventions to offset the appreciation of the Real, selling domestic currency for US dollars. In theory, the FSB allows the finance ministry to intervene in the currency markets with less dependence on the Central Bank. Its degree of operational independence from political influences remains unclear. In late 2010, the president and finance ministry said the FSB had been authorized to purchase US dollars. However, in practice, such interventions are likely to have limited influence, given the relatively small amount of capital at the FSB’s disposal.
Leveraging smart and sustainable cities
One area where governments are likely to have a big social sustainability impact on people’s lives in the future is through city design, development and growth. Cities should be seen as engines of development and societal progress. Well managed, their emergence can be a vital tool in achieving sustainable development.
The pace of urbanization is accelerating. The challenge is to manage it smartly and in a sustainable way. The statistics are staggering. In 1950 the only megacity with a population of over 10 million was New York City. In 2007, the urban population crossed a threshold, with 3.3 billion people. For the first time, over half of the world’s population was living in urban centres. In 2012 more than 180,000 people were moving into cities every day. Every second, the urban population grows by two people. By 2015 the UN estimates that there will be twenty-two megacities. By 2050, some 70 per cent of the population – 6.4 billion people – will be city dwellers.
The figures for individual countries are equally incredible. In India, over the next two decades, an estimated thirty people a minute will leave rural India heading for urban areas. An additional 500 new cities will be needed to accommodate this mass migration. In China, tens of millions of people have flocked to the cities, searching for prosperity and encouraged by the government. Some research suggests that 900,000 villages vanished from the Chinese countryside in the first decade of the century, with the number of villagers declining from 3.6 million in 2000 to 2.7 million in 2010.135
The dramatic growth in urbanization and city dwelling has a number of important effects. It places considerable pressure on the existing cities. There are also implications for the design and planning of new cities, plus the rise in city living has an impact on global challenges, such as resource shortages and climate change. For example, in India only 74 per cent of urban households have piped water, while (as of December 2013) no city is able to offer its population water on tap 24 hours a day, seven days a week; an average of four to five hours a day is more common.136 137 Cities produce nearly 80 per cent of the world’s carbon emissions, and consume 75 per cent of its energy.138
Existing city infrastructure, whether that is water, power, transportation, housing or other city services, will need considerable capital expenditure, innovative reworking and redesign. With existing cities growing and new cities being built, sustainability strategies will be required to deal with increased greenhouse gas emissions and greater demands on resources. Economic inequalities between rural and urban areas will be magnified, and policies required to avoid the polarization of economic benefits to society.
Many cities are taking sustainable and smart development very seriously. New York, Copenhagen and Rotterdam have developed sustainable development plans covering all aspects of city life, including efficient buildings, smarter transport systems, cleaner energy supplies, citizen-centric and IT-enabled services, and sustainable waste management. They have also adopted quantitative targets, which are monitored frequently. For example, PlaNYC is the sustainability and resiliency plan for New York City, with very specific objectives on issues such as housing, parks, transport, energy, waste and climate change.139
Transformation at work: Masdar City
In Abu Dhabi, the government is building Masdar City via the Mubadala Development Company. The city is intended to be a beacon for renewable energy and clean-tech industries, and a model city for sustainable urban development. The city has six technology focus areas: smart buildings/smart grid, a green supply chain, transportation, thermal energy, ICT and energy-efficient lighting.
The focus on sustainability runs through the city’s entire planning and development to include water and energy reduction targets, a commitment to sustainable products and sustainable mixed-use buildings, a pedestrian-friendly environment with cutting-edge clean transport systems, and the latest sustainable technologies and practices used in the urban planning, architecture, design, construction and operations processes. The city is also used ‘as an open technology platform and real-world test-bed for technologies relevant to the development and success of the city’.140
Among other projects, MASDAR delivered in March 2013 the $600 million Shams 1 concentrated solar plant, the largest renewable energy project in the Middle East. This project is based on a partnership between Masdar, Total and Abengoa. The 2.5 km2 facility uses solar thermal collectors to concentrate heat from sunlight into a central tube, where a special oil is heated to 393°C. In turn, the heat from the oil generates steam that drives a turbine, which then powers a steam generator – and that produces electricity for Abu Dhabi’s grid.
Masdar’s Shams 1 concentrated solar power (CSP) plant in Abu Dhabi catapulted the United Arab Emirates to its new ranking as third among the world’s nations in both 2013 CSP technology investment and total CSP capacity. The UAE now ranks behind only Spain and the United States in total CSP generation; India and China round out the world’s top five.
Through Masdar, Abu Dhabi is working towards creating a balance between hydrocarbons and renewable energy to address both climate change and energy security challenges.
Many cities are increasingly being empowered to govern their local affairs, taking action and making an impact on matters where central government might be gridlocked. For example, in 2005 New York City committed to reducing its carbon emissions by 30 per cent by 2030, a target the federal government does not have and could not commit to. The city had already achieved a 19 per cent reduction in carbon emissions by June 2013, well ahead of schedule.141
Some 80 per cent of the population of the UK lives in cities. The UK government wants to use smart-city technology to ensure that cities in the UK are ‘fit for purpose in the digital age’.142
It also wants the UK to share in a smart-cities industry, estimated to be worth some $408 billion by 2020.143 144 In 2013, the UK was already investing £95 million in research into smart cities funded by Research Councils UK, £50 million for the new Future Cities Catapult centre, established by the Technology Strategy Board in London, and £33 million in future-city demonstrators.
The demonstrator cities included Bristol, where the Smart City Bristol programme is a collaboration between the public sector, business and community that aims to reduce CO2 emissions by 40 per cent by 2020 using smart technologies. The city also has a digital partnership, Connecting Bristol, which focuses on next-generation broadband infrastructure, open data, green ICT and digital inclusion, and the Gigabit Bristol project, which is rolling out a high-speed broadband test-bed, citywide, wi-fi network using an experimental radio frequency network, and received £11 million in government funding. In Glasgow, another future-cities demonstrator, the city is using its £24 million funding through the Technology Strategy Board to help provide integrated services across health, transport, energy and public safety, boosting the local economy and improving the quality of life for citizens.145
As these examples make clear, technology built into the fabric of the city is the key enabler in creating smart cities. Governments must help facilitate this, directly or indirectly. Eventually, as smart cities become the norm, ICT will be ubiquitous – readily available, often invisible, but ever present.
To achieve this there are significant barriers to overcome. Wim Elfrink, tech giant Cisco’s executive vice president of emerging solutions and chief globalization officer, and Rik Kirkland, a partner at the management consultancy McKinsey & Company, suggest five elements necessary for a successful smart-city programme.146 Leaders must be enthusiastic about and committed to the smart-city concept over the long term. That leadership should partly be directed at forging strong, and truly mutually beneficial, public-private partnerships that can help to provide continuity across electoral cycles.
Smart regulation is needed to ensure that standards are updated. In Australia, for example, there has been a long-running and ongoing debate about the merits of installing compulsory water tanks in every new home. A smart policy approach would involve tanks being specified depending on water scarcity, rather than as a one-size fits all solution.
Delivering cities of the future means creating new ecosystems to deliver new services. It may even mean creating new industries. As Elfink and Kirkland note, in a smart city, people should not have to drive around, polluting the city and damaging the environment, in a lengthy search for a parking space. The driver would be informed of a selection of available parking spaces, whether by smartphone app or in-car information systems.147 The very combination of technologies and organizations needed to provide such a service requires a high degree of collaboration between many organizations such as city authorities, car manufacturers, sensor technology providers, mobile network corporations, cloud service providers – to name a few.
In a nutshell: catalysing social sustainability
Sustainability, in its wider definition, is becoming a new role for government. Governments are stewards of the future as well as deliverers of today’s services. The growing recognition of the need for a more sustainable approach to development comes amid rapid climate change, increasing scarcity of resources and rising inequality – which all pose significant threats to progress.
A sustainable approach to development can be enabled through relevant policies and regulations, and effective institutions and tools, as well as through funding and pioneering pilot initiatives, experimenting with more innovative practices, being a role model and building relevant capabilities.
As part of this, governments increasingly need to empower and leverage cities as engines of smart and sustainable development through accountable and effective city governance that creates and monitors new sustainable ecosystems. They should also leverage existing and innovative institutions (e.g. sovereign wealth funds and green development banks) to promote financial stability, environmental sustainability, equitable development and sustainable wealth for future generations.