The digital transformation needed to achieve sustainable cities

Rapid urban growth, urban pollution, and a lack of resilience to climate shocks; these are just some of the challenges cities around the world currently face. For cities in low- and middle-income countries though, such issues are exacerbated by limited financial resources, said Lisa Da Silva, the principal investment officer who oversees several cross-sector solutions including smart cities at the International Finance Corporation.

“If you look at the Pacific and Caribbean islands, which are increasingly impacted by storms, floods, [and other] extreme weather instances, these cities face challenges to find the financial resources necessary to reconstruct and adapt as needed,” she said. “And when cities are rapidly urbanizing, the administration struggles to keep up and can't develop the infrastructure needed fast enough to deploy resources efficiently.”

According to the United Nations’ World Urbanization Prospects report, last revised in 2018, cities such as Delhi in India, Dhaka in Bangladesh, and Lagos in Nigeria are among the top 10 fastest urbanizing cities. The likes of Lahore in Pakistan, Delhi, and Dhaka are also among the most polluted, and among those most affected by climate change are Jakarta in Indonesia, Karachi in Pakistan, and Lima in Peru.

These cities, like many others, have seen their budgets constrained by the economic impact of COVID-19, as well as the rising costs of energy and food related to the war in Ukraine, Da Silva said, which makes it difficult to invest in solutions.

According to UN-Habitat, it costs between $18 million and $54 million annually for small cities — fewer than 100,000 residents — in lower-income countries to achieve Sustainable Development Goal 11, which focuses on creating “sustainable cities and communities” by 2030.

But Peter El Hajj, manager in the U.K. firm and digital twins lead for the net zero urban program at KPMG, believes the use of digital technology can help countries become more efficient both in terms of costs and in achieving sustainability. It is “a critical success factor,” he said, for cities in lower-income contexts as they move to become smarter, more sustainable, and resilient to the challenges they face.

How technology can help

Electric tuk-tuks, three-wheeled motorized vehicles used as a taxi in Bangkok, Thailand, for example, are helping to improve mobility in the city while reducing the carbon emissions produced by traditional diesel-powered tuk-tuks. In Bogotá, Colombia, city authorities are using data from smart sensors to reduce energy consumption, manage traffic, and assess environmental risks related to floods, landslides, or forest fires. And in Indore, India, a GPS-based vehicle-tracking system is monitoring and improving public waste collection.

Ultimately, it’s about access to better data that allows local governance to be more efficient and provide better outcomes to citizens, El Hajj explained. Digital twin technology is another example of a tool that El Hajj says can help cities, including those of a lower income, as they try to navigate potential solutions to complex and systemic challenges.

Digital twins are virtual representations of an object, system or process that spans its lifecycle, is updated from timely data, and uses simulation and reasoning to help decision-making and interventions in the physical world.

In the context of cities, El Hajj explained that a city authority might create a digital replica of its city and underlying systems to test out potential scenarios and solutions pertaining to the risks they face or opportunities they want to unlock.

For example, they’ve been used to help plan traffic flow when relocating a public service and to analyze the impact of flooding on city systems. He said KPMG firms have also used digital twins in their Net Zero Urban Program — which aims to accelerate deployment of decarbonization solutions in cities — to test out several possible interventions and the outcomes they could deliver for the city. 

Although it may sound costly, El Hajj said this type of technology is “becoming increasingly affordable and a go-to for enhancing decision-making in cities.”

But before a city embarks on a digital solution — whether twin technology or a drone delivery system — Da Silva said cities must start with a clear understanding of what issue they’re trying to address. From there, it’s a case of delving into the suite of technological options available and identifying which would be best for that specific issue.

The IFC has developed a smart city toolkit to support cities in assessing their specific challenges — whether urbanization, congestion, water, or health — and finding a solution from a suite of various digital technologies and then providing the financing for that solution.

For example, it has worked with city authorities in Izmir, Turkey, to implement smart traffic management systems, which have contributed to a reduction in air pollution.

“For me, smart cities are ultimately about making critical or strategic decisions about how you use shared resources in a way that is not just sustainable, but also even financially regenerative,” said Kristian Mjøen, co-founder of United Cities, an organization that aims to support smart and sustainable urban transitions globally.

“This is even more pressing in a context where you don't have strong institutions, where you have low levels of trust, and where resources are really scarce.”

Challenges and solutions

But while smart cities can be useful to aid better decision-making in some challenging contexts, it’s also important that good governance principles are applied when using the technology.

Whether you're in Norway or in sub-Saharan Africa, such digital solutions can’t be implemented in a context where there is bad governance, said Mjøen. “It's not about the right battery technology, the right water management technology, or the right mobility system; it's that local capacity to capture data, process that information, learn from that information, and put that information to use through a governance system, which upholds some basic governance standards,” he said.

United Cities works with cities to invest in people and governance systems alongside deployment of a smart solution. In Lebanon, for example, where per capita access to energy can be less than three hours per day, Mjøen said United Cities is trying to tackle the energy crisis.

“On the one hand, we're interested in building the right type of technical solutions for them to power up their energy grids and choose technologies that make sense for the local context … but before we get to that investment in infrastructure, we’re eager to see an investment in social systems,” he said. “We don't want to end up with what typically happens in this part of the world — a nice grant which keeps them going for five to 10 years, and then there's no plan to maintain this over time.”

For Mjøen, that means cities must invest in anti-corruption mechanisms and build adequate legal systems and trust in authorities while educating people on the importance different solutions can make and how communities can make the most of them.

A part of good governance is ensuring collaboration and cooperation among different government departments, Da Silva explained. “The way that many cities run is just like many private companies. You have different departments that focus on a specific solution; they have their own budgets, decision-making processes, rules, regulations, and solutions,” she said.

When implementing digital technology at the city level, coordinating these different aspects requires the buy-in of senior city officials, she said. “You need your mayor, you need a driver, and a champion who has authority as well as influence to ensure that the different departments see the win-win,” she said, adding that partnership, whether across departments or sectors, is also key.

The advice she shared is to work across departments to maximize implementation success and ensure that solutions don’t exacerbate the divide between those who have and those who don’t, or that digital technology isn't seen as the definitive answer to all problems.

“Smart solutions are a means to an end. They're not an end in and of themselves,” said Da Silva.