The Corporate Incentive to Enter Smart City Conversations

Technology and artificial intelligence (AI) have proven themselves invaluable in the making of more sustainable cities—not just in terms of improved efficiencies and opportunities from a business standpoint, but also in terms of improving quality of life, globally revitalising the environments in which people live, move, and work. 

By utilising IT  in conjunction with renewable energy and other innovative solutions, governments and municipalities have the ability to construct smarter and more sustainable cities for their citizens. A smart sustainable city is one that employs IT to enhance the quality of life for its inhabitants, streamline urban operations and services, and bolster its competitiveness. At the same time, it ensures that it fulfils the economic, social, environmental, and cultural needs of both current and future generations.

While no city has yet achieved complete connectivity across all urban systems and services, many are already making strides towards becoming smarter and more sustainable. These cities leverage IT to improve various aspects of urban life, including energy efficiency, waste management, housing, healthcare, traffic flow, safety, air quality, crime prevention, and water and sanitation.

Savvy businesses are already aware that this transformation is underway, and how it may benefit them.  The only question is what role businesses could and should play in helping bring it about.  What could they do to align their commercial, sustainability, and built environment strategies to ensure the right city developments are done the right way at the right time.

Take the example given by Alexis Haass, the Chief Sustainability Officer at Arcadis. The Dutch global design and engineering firm is actively embedded in the infrastructure conversation. Haass describes a scenario whereby communication between corporates, and local and national authorities, is crucial to determine the commercial success of a strategy, such as electric vehicle (EV) fleet adoption. 

“EVs, especially at the fleet level, can provide significant lifetime savings for their owners, and the cost curve on electric vehicles is continuing to rapidly decline,” says Haass. “So from a company’s investment standpoint, the transition to EV fleets is inevitable – however a significant variable in determining their immediate payback is the availability and intelligence of the grid infrastructure, along with the distribution and availability of charging points.” 

Delays in governmental action to deliver much-needed charging infrastructure, or the technologies to smartly allocate energy across vehicles and fleets will only result in over-stressed energy networks in cities later down the line.

“I would hope that the C-suite is more actively and vocally communicating with municipal and national governments to get them to put the kind of support and structures in place to make it easier for them to make these investments already, because they need to hear from corporates that they want this, and at an accelerated pace” says Haass.  

If businesses do not regularly communicate and advocate for these improvements to their governments, they can fail to receive proper consideration for their infrastructure needs, when they need them. From an EV adoption perspective, businesses that aim to switch their fleets to all-electric require the charging services and infrastructure in advance to be successful in doing so. 

What Haass explains is that when those companies fail to communicate their short and mid-term expectations to authorities, assumptions halt progress in delivering the necessary services. 

“The reality is that businesses want predictability, they want clarity, and what we've got at the moment is uncertainty driven by both the private and the public sector trying to predict the rate of adoption of sustainable technologies. There are huge changes coming—in some places faster than others—and in some places they’re more supported,” says Haass.  

“In some ways, corporations—especially the global ones that are running ahead—often find it helpful when governments at all levels put the structures in place today that enable their smart investments in the green transition in a year’s time. People shouldn't wait and wish for that to happen.” 

The cost of complacency

Businesses taking a conservative approach to adopting new infrastructure may be wary of the cost of such large investments in things like EV fleets and net zero facilities, which may feel risky to invest in with uncertainty in the future. The reality is that the paradigm has already shifted, resulting in a pragmatic approach from a cost and growth perspective, which is to begin investing in new, smart, net zero solutions today. 

“I think there are companies that aren’t building this into their strategy and, right now, are locking themselves into future sunk costs. If you are a property developer, let’s say you build a brand new asset, but you’ve built the entire HVAC system around fossil-fuels,” says Haass as she unpacks this thought process. 

“If you build a fully electrified net zero facility from the start, you will financially benefit in the near term both because you won’t have to retrofit due to (likely coming) regulatory changes, but more so because you can ride the cost curve down as cheaper renewables become a larger share of the market.”

As renewable energy reaches a pivotal point, everyone is beginning to see how feasible a sustainable solution can be, but this comes with the correct infrastructure. The result: smart management of energy consumption through digital systems, which leverage battery storage to grant more reliable power from a variable source—renewables. 

See the curve and ramp up

In all of this there is an overarching point regarding the trends across infrastructure sectors. The cost improvements and innovation of sustainable technologies have improved steadily for decades, but Haass explains this trajectory is skyrocketing.

“We’re on a sharp curve, not a steady one. Many companies are planning for that steady growth in technology, in smart systems, and adaptation,” she says. “They’ve got the scale wrong. Even with the current pressures of the property market, for example, there are no-regrets decisions that can be made right now that will pay off.”

Now, this isn’t to say that costs have wavered in the face of technology’s growth. There are significant financial hurdles to consider when positioning investments in new infrastructure and real estate. But, Olans Haass stresses that these costs will continue to increase in some major areas, notably the value of physical assets, particularly when the economy retains its steady incline across most western countries. 

The key to combating inflationary pressures when she says: “You might not get more profitable, but you’ll defend against loss depending on the circumstance”.

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