Best practices for sustainable development in emerging-market cities, by Jaana Remes and Jonathan Woetzel

The need to prioritize sustainability has never been more urgent than it is today. This is particularly true in emerging markets, which are entering a period of mass urbanization that could dramatically raise productivity and standards of living, but that also poses environmental and other threats that could significantly reduce the benefits of growth.

Many emerging markets are already pursuing sustainable development—economic growth that improves lives without exhausting the environment or other resources—but the absence of accepted frameworks for evaluating success in emerging-market cities often prevents officials from discovering and implementing effective solutions.

Our team created a new metric, the urban sustainability index, to address this gap and help policy makers in emerging markets identify approaches that will work in their cities. The index is designed to measure the performance of cities in five sustainability categories: how well they are meeting their citizens’ basic needs, resource efficiency, environmental cleanliness, built environment, and commitment to future sustainability.

China became a test bed for the index for a number of reasons. It has more emerging cities than any other country, and they are growing faster than any other cities in the world. Moreover, the necessary data are increasingly available in China, and the country’s leadership is showing increasing commitment to urban sustainability.

By analyzing the policies and programmes of some of China’s most sustainable cities, we identified five common themes for achieving sustainability in emerging-market cities: industrial restructuring linked to land renewal, “green” urban planning, transparent standards and charges, integrated large-scale recycling, and cross-departmental coordination.

A question naturally emerges as to whether the insights gleaned in China would be relevant in emerging markets elsewhere. Certainly regional variations would yield differences in the particulars of policy, and ultimately cities will benefit from using the index to conduct analyses in their specific geographies. But in the interim, our experience working in cities around the world suggests that the themes we identified in China are generally valid across cities in emerging markets, and thus policy makers, companies, and civic organizations in other emerging markets can use the findings from China to advance sustainability in their own cities.

Rapid growth, little guidance on sustainability

Our analysis indicates that 423 emerging-market cities will generate more than 45 per cent of global GDP growth from 2007 to 2025. The population of these cities will grow by an estimated 40 per cent over this period, and the average income (measured in GDP per capita, adjusted for purchasing power parity) will more than double from $13,000 to $31,000. As a result, these cities will account for nearly 20 per cent of the global population and about 30 per cent of global GDP by 2025.

Cities in these regions lag significantly on sustainability when compared with cities in the developed world, but they face challenges so different that the benefits of the comparison are limited. Moreover, there is very little sustainability data on emerging-market cities, so it has been difficult even to identify reference points against which these cities could measure their performance.

While the United Nations, the World Bank, and other institutions have made great contributions by developing approaches that measure sustainability in cities, incompatibility remains a challenge.

The urban sustainability index

We created the urban sustainability index to fill the gap in current analysis of sustainable development. The index measures the performance of cities in the emerging world on a common set of sustainability categories. We wanted to gauge not only the environmental sustainability of cities but also city officials’ commitment to handling their growing urban populations in a sustainable way, and their efficiency in using resources.

We evaluated 112 cities selected by China’s national government as the focus of sustainable development, using data for 2004 to 2008. We examined policy successes and failures among urban areas featuring similar financial constraints, policy environments, and experience. We then created a five-part definition of sustainable development, encompassing 18 individual indicators (exhibit):

  • Basic needs. Access to safe water, sufficient living space, adequate health care, and education are fundamental priorities for urban populations.
  • Resource efficiency. A city’s efficiency in such areas as the use of water and energy and the effective recycling of waste directly correlates to the quality of life of its citizens.
  • Environmental cleanliness. Limiting exposure to harmful pollutants is fundamental to a city’s livability.
  • Built environment. Equitable access to green space, public transportation, and dense, efficient buildings makes communities more livable and efficient.
  • Commitment to future sustainability. An increase in the number of employees and the level of financial resources devoted to sustainability suggests how vigorously city governments are committed to implementing national and local policies and standards.

An encouraging finding is that sustainability does not come at the expense of wealth. Most of the critical indicators that drive sustainability—such as wastewater treatment, mass-transit usage, and environmental investment—were unaffected by level of economic development. Indeed, the best-performing cities in our study group improved sustainability while increasing GDP from 2005 to 2008 at an above-average rate.

Five themes for sustainable development

As a result of analyzing the policies and programs of some of China’s best-performing cities, we identified five themes common to sustainable cities in the emerging world. They are discussed below.

Industrial restructuring linked to land renewal

Rising costs and tighter national environmental standards—particularly for sulfur dioxide emissions—have made many city officials press heavy industries to shutter urban factories and build more modern plants in new industrial parks or in suburban development and economic zones. In Tianjin, for example, smokestack industries are moving east from the city center into some parts of the Binhai New Area, a development zone. This phenomenon is common to many growing markets in the industrialization phase.

Many industries that relocated have invested money raised by selling land-use rights in urban cores to buy state-of-the-art technology and emissions-control equipment, as well as to cover their relocation costs. Although the trend is just beginning, indications are that consolidating heavy industry away from urban centers brings economies of scale large enough to offset the costs of sophisticated infrastructure retrofits and new equipment.

Green urban planning

Chinese cities that have successfully balanced sustainability and growth incorporate both objectives when they create mass-transit networks and urban amenities. Efficient and attractive mass transit takes cars off urban roads, cutting emissions and congestion. Green space provides environmental oases that help refresh the air of cities and make them more attractive places to live and work. Urban forests and parks serve as a net to filter dust particles caused by vehicles, industrial development, and other sources. They also absorb carbon dioxide, helping clean the air. The best-performing cities have recognized these benefits and included efforts to enhance mass transit and green space in their development programmes.

Use of transparent standards and charges

Our research indicates that cities that adopt clear goals, publicize their progress toward meeting them, and hold responsible parties accountable for their performance are more likely to achieve high standards of sustainability. For example, superior environmental supervision and strict monitoring of digital information pay off for cities such as Qingdao.

Part of Qingdao’s consistent performance in wastewater treatment is the result of pressure from Shandong province officials, who publicly identified the region’s 1,000 biggest polluters and set aggressive waste-reduction targets for each of them.

Integrated large-scale recycling

The best-performing cities excel at creating efficient local linkages among industrial producers from different sectors. In the next five years, leaders of rapidly industrializing small and midsize cities must find ways to reduce the volume and increase the efficiency of resource consumption. One promising approach in China links manufacturing or utilities plants in a given locale. Tianjin’s Binhai New Area, for example, started with two ambitious projects to transform itself into a desalinization center.

Cross-departmental coordination

Our interviews with urban officials in China indicate that success in executing sustainable development projects depends on coordination among city agencies and other bodies. For example, successful transit projects typically involve experts in urban planning, construction, and the environment.

To break down silos and facilitate cooperation, municipalities should establish processes to ensure projects meet coordination requirements before they are approved. In Shenyang, for example, all projects must be approved by a department directly affiliated with the state council.

We will continue our efforts to identify similar findings as we develop the urban sustainability index to provide a yardstick that cities can use to measure success and identify initiatives for sustainable development.

In particular, we intend to identify a larger suite of best practices for emerging-market cities that are committed to sustainable development. We expect to develop a better understanding of the cost and time trade-offs implicit in these measures, explicitly searching for those that can be implemented rapidly with noteworthy results.

Jaana Remes is a consultant at the McKinsey Global Institute, and Jonathan Woetzel is a director in McKinsey’s Shanghai office.

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