How sustainable cities can drive business growth

How sustainable cities can drive business growth

sustainable cities and business growth
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Businesses can reap the benefit of the sustainable cities boom.

The notion of sustainable cities usually conjures environmental themes, but sustainable urban design’s greatest impact could be on economic performance. By creating improved quality of life conditions for residents, sustainable cities simultaneously lay the foundation for wide-ranging economic benefits. 

The greatest competition in today’s footloose economy is the fight for human talent, and urban quality of life strongly determines whether cities can attract a smart workforce, as well as the innovative new companies employing them. 

Cities weren’t always ideal for business, and for decades the attraction of space and privacy drew people toward suburbia, with businesses following suit. But within the last decade people have begun returning to the city, and this trend symbolically accelerated in 2015 when millennials overtook Generation X as the largest generation in America’s workforce. 

This generation is often characterized as smart, single, career-focused and experience-driven — a group attracted to cities with walkable neighborhoods, public transportation options, educational opportunities and cultural activities. But more than just young adults are increasingly drawn to the features of urban living, and employees of all ages are working longer hours, pushing them to live closer to work to free up more precious leisure time. 

A changing workforce

Smart companies have taken heed, realizing the benefits of an urban location over a suburban one.

A recent report by Smart Growth America, "Core Values: Why American Companies are Moving Downtown (PDF)," tracks the migration of nearly 500 businesses back downtown, with firms citing increased employee recruitment and retention as the main reason for their move.

And the talent pool these companies seek prefers both living and working in vibrant, accessible neighborhoods. As such, the surveyed companies relocated to more central, urban areas that increased their average locational walk scores (from 51 to 88), average transit scores (from 52 to 79) and average bike scores (from 66 to 78). 

Some of Corporate America’s biggest names are leading this charge.

In January, General Electric announced it would relocate its headquarters from suburban Connecticut into downtown Boston as part of the company’s effort "to attract the talented workers who prefer to live and work in cities." Major companies joining the suburban exodus include ConAgra Foods and Motorola Mobility in Chicago, Expedia in Seattle and Zappos in Las Vegas

The smart (and green) choice for cities

So if today’s workforce prefers modern urban living, and businesses seek locations catering to employee interests, which urban development practices should government and developers consider in long-term city planning?

A handful of urban design features form the core of sustainable cities, all of which have the common objective of being focused on the person (or employee) instead of the car, street or building. 

These features, as outlined in the "Green and Smart Urban Development Guidelines" developed by our firm, Energy Innovation, are tailored to human interests while supporting a clean urban environment and healthy economy. The Guidelines outline a dozen features related to urban form, transportation and energy and resource management, comprising the foundation of sustainable urban development.

Five features stand out for cities and businesses seeking smart growth synergy:

  1. Mixed-use neighborhoods: Intermingling residential, commercial, cultural and institutional spaces makes amenities more accessible. By locating destinations closer together, people feel less need to drive from one place to the other, encouraging them to walk or bike more often.  

  2. Public transit and transit-oriented development: In sustainable cities, public transit becomes an alternative to cars when the distance between destinations is too far to walk or bike. Cities encourage public transit use by focusing development around public transit systems through transit-oriented development, which locates amenities or services near transit stations or on transit lines. 

  3. Non-motorized transit: Non-motorized transit such as walking and biking are priority modes of transportation in sustainable cities, and are reinforced by mixed-use development locating amenities and services within comfortable distances. 

  4. Small blocks form a connected urban grid: Small street blocks create a dense urban grid, enabling direct pathways and making trips shorter and safer for pedestrians and bikers. Narrower streets make intersections less of an obstacle, and when combined with elements such as one-way streets or dedicated bus lanes, help traffic move more efficiently, too.

  5. Public green space: Attractive public spaces such as parks and plazas bring economic and cultural richness to a city by providing neighborhoods with an identity and sense of community, while also offering an outlet from the clamor of regular city life.

The business payoff

These features have an enormous payoff for a city’s inhabitants — residential and business alike. Our recent study, "Moving California Forward (PDF)," found significant economic benefits from smart growth – a development pattern emphasizing compact or infill urban development to facilitate mixed-use neighborhoods and non-motorized transit options – in California’s urban regions. 

Benefits included average annual household savings of up to $2,000 from reduced transportation costs and more than $1 billion in annual public health savings from reduced air pollution and car use, both by 2030. 

Sustainable cities directly benefit businesses by attracting a smart and diverse workforce, and indirectly boost the corporate bottom line by improving workforce health and time efficiency. These "payoffs" from sustainable cities fall into four categories:

  • Increased time efficiency: Commute times are reduced when people live closer to their jobs, and the transition from private cars to public transit or non-motorized transit reduces traffic congestion.  Today, the average car commuter loses 42 hours every year — up to 80 hours in some places — due to traffic. Companies benefit when employees avoid sitting in traffic, earning back nearly two days’ worth of time every year.
  • Access to talent: Skilled workers increasingly want to live in walkable and centrally located places close to services, amenities and job opportunities. Not only are companies more attractive to skilled workers if they are located nearby, but their central location accesses a greater talent pool for hiring. 

  • Improved health: A physically and mentally healthy workforce is a more productive workforce. Shorter commutes means more time for people to get involved in activities improving their minds and bodies — research shows every hour per day spent driving increases the risk of obesity 6 percent. Alternatively, biking even just a couple miles to work can increase cardiovascular fitness and reduce cancer mortality. A healthy workforce reduces workplace absenteeism while increasing job productivity (quantity of work) and performance (quality of work). 

  • Innovation inspired by diversity: Sustainable cities attract demographically and professionally diverse talent — a major catalyst for new ideas. In "The Rise of the Creative Class," Richard Florida notes diversity trumps ability in driving innovation and creativity. Access to public spaces, a feature of sustainable cities, fosters interaction among diverse groups of people.

Cities with universities, laboratories and cultural institutions are also the perfect platform for cross-industry collaboration. Mixed-use development facilitates connections through proximity to spaces where people can interact, while walking and public transit encourage unplanned connections and exchanges among people.

The smart choice

The city always has had a dynamic relationship with its businesses, and today’s influx of new inhabitants opens fresh opportunities for sustainable urban development.

In "The Death and Life of Great American Cities," Jane Jacobs wrote, "Cities have the capability of providing something for everybody, only because, and only when, they are created by everybody." A city’s identity is the product of its inhabitants, and it is nothing without them — much like businesses, the identities of which are driven by their employees.

As peoples’ preferences evolve over time, cities must grow sustainably to attract the right mix of new residents and innovative businesses.  While "sustainable" sounds complicated, the basic pattern is pretty simple — build up walkable, bike-friendly, transit-oriented, mixed-use neighborhoods.

It is the city’s role to adopt smart growth features to keep "providing something for everyone" — that’s the smart choice and the sustainable choice. The result will be new liveable places, better for business and the environment.