Cities and the private sector partner for high-power innovation

Amsterdam, the Netherlands' most populous city, is progressing on actions that reduce greenhouse gas emissions, due to public-private partnerships.

What makes a great city? With 5 billion people and 60 percent of the world’s population expected to be living in cities by 2030, city leaders face tough challenges. Developing countries need to cope with urbanization on an unprecedented scale, even as developed countries wrestle with aging infrastructure and stretched budgets. The common goal is to secure, or maintain, competitiveness without compromising the livelihood of citizens.

This global megatrend of accelerated urbanization will bring great opportunities for growth and well-being, but it also puts further pressure on resources. With city life said to drive 80 percent of total energy demand and 70 percent of global greenhouse gas emissions, a well-designed city can offer critical sustainable solutions to tackle current climate-related challenges. For this reason, the World Business Council for Sustainable Development (WBCSD) is calling for more cities to work with other cities and private-sector partners around the world on best practice.

Today’s global growth continues to be driven by urbanization, and cities are becoming more important to and more interdependent with businesses. While business involvement is imperative to implement the Sustainable Development Goals (SDGs) relevant for cities, it needs to be stronger. Incentive is certainly there: A recent report from the Business and Sustainable Development Commission calculates that achieving the SDGs in cities could generate $3.7 trillion in savings and new opportunities.

An effective city-business collaboration needs to have shared objectives and a common vision to ensure that businesses from different sectors and different local government departments work in unison to achieve urban sustainability objectives.

Traditionally, however, businesses and cities have worked in silos. To thrive, cities need to harness the dynamism, innovation and resources of the private sector. The difficulty often lies in not knowing where to start, whom to involve and what to do. In addition, there can be practical challenges, notably around rules governing conflicts of interest for public tenders and contracts.

No private-sector business wants to collaborate with a city authority if it results in their exclusion or somehow limiting their ability to win lucrative public-sector contracts. For this reason, WBCSD puts at the heart of its approach to more sustainable cities special focus on overcoming issues around procurement and other potential obstacles to commercial engagement.

Safe space

The key vehicle is called the Sustainable Cities Engagement Model, which helps to foster a strategic dialogue before any public procurement process starts. In effect, it provides a safe space, a neutral platform for connecting companies directly with city authorities to discuss how they can do more work together. This allows cities and business to set integrated priorities and ambitions, resulting in solutions that may include input from the private sector and then can be tackled in various forms — through procurement, public-private or private-private partnerships, or multi-stakeholder initiatives.

Critical to this is overcoming potential conflicts of interest. With this in mind, the Cities Engagement Model proposes implementing city-business collaboration through new vehicles — which typically might be the creation of a new entity or organization to drive the project. This overcomes potential conflicts of interest that might disadvantage a company engaging more directly, although it does not preclude that same company being one of several organizations (public or private) backing the new entity taking a lead.

This approach has achieved considerable success around the world, with the more forward-looking businesses and cities beginning to recognize the opportunities and to accept new partnerships and business models to help create sustainable cities.

WBCSD has several flagship projects, all involving a version of its Sustainable Cities Engagement Model. In Europe, for instance, where Amsterdam wanted to take a lead on zero emissions, WBCSD fostered the creation of ZOEnergy. This was set up as a local independent organization backed by both the city and a group of businesses, facilitating private-public partnership to develop an energy vision and drive projects. Amsterdam ArenA’s Utility Hub initiative is the first result of this multi-stakeholder collaboration, moving the area of Zuidoost toward using shared energy and infrastructure.

As a result, Amsterdam is making good progress on integrated actions that reduce greenhouse gas emissions. The project provides a platform for businesses and cities to collaborate in an open and transparent way, to understand a city’s challenges, engage stakeholders and develop organizational and financial models to implement innovative solutions.

As a world-leading city in electric transportation since 2008, the approach adopted in Amsterdam is very exciting and, we believe, showing the route forward for other cities seeking to reduce emissions. Already the promise is significant, as the Amsterdam Zuidoost area attracts 9 million visitors each year. Its commercial and entertainment districts, its 45,000 households and 86,000 inhabitants consume around 10 percent of the city’s total energy.

Similar examples are springing up in other parts of the world. For example, in the U.S. city of Houston, WBCSD helped to create a multi-stakeholder platform — EEB Houston — bringing the city together with private-sector partners to drive energy efficiency in buildings. This is another example of using an independent vehicle (in this case, EEB Houston) to engage private-sector partners and avoid direct conflicts of interest that might fall foul of procurement rules. As a result, many businesses have been able to get behind this project, which promises significant benefits for the city in environmental and economic terms.

There is a powerful business case for buildings that are more energy efficient, given that 40 percent of energy consumption in the United States comes from buildings. This should act as an incentive to create a vibrant market of more highly efficient buildings, which not only bring jobs but other benefits to the city.

For instance, the ambition of the Houston project is to halve forecasted energy use in buildings by harnessing state-of-the-art technologies and best practice. Further, the project partners calculated that in Houston, a 30 percent energy saving in the commercial sector alone would translate into nearly 20,000 new jobs, pumping over $500 million into Houston’s economy.

Overcoming obstacles

The bottom line is that engaging businesses in a more strategic way is critical to take cities from ambition to implementation — and overcoming obstacles that might deter private-sector engagement is central to the success of this.

WBCSD’s City Engagement Model, which overcomes critical issues around conflict of interest and procurement, is already making it possible for many more businesses to collaborate with cities on sustainability projects. We anticipate this will play an increasing role as more cities seek strategic alliances with the private sector to meet challenges that include pressure on resources, gridlocked urban transport, air pollution, lack of access to clean water and the need for innovation.

Private-sector participation provides businesses with a new growth strategy that opens opportunities while creating a world that is both sustainable and inclusive. The future of our cities — and our planet — depends on it.

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