By Jib Ellison, Founder and CEO, Blu Skye 
On November 11, 2014, while President Obama was meeting with President Xi and hammering out the details of a bilateral carbon reduction declaration, former Treasury Secretary Hank Paulson and former Vice Premier of China Zeng Peiyan convened 16 corporate leaders – 8 from China and 8 from the West – to launch a CEO Council for Sustainable Urbanization. As an adviser to the Paulson Institute, which launched the CEO Council as part of its Sustainable Urbanization program in China, I was in the room as 16 captains of industry agreed to work together to tackle the challenge of sustainable economic growth. It felt like a historic moment: this council, the first multi-industry, CEO-led bilateral organization to advocate for sustainable urbanization, is a potential game changer in redefining the leadership role that business can play in making cities more sustainable and livable.
The need is enormous in China. Skies were unusually blue as those meetings convened. But in order to clear the heavily polluted air during the APEC summit, power plants and factories were shut down, cars were restricted from driving, and even cooking was prohibited near the palace where dignitaries met. The cost to clear Beijing’s skies was significant and required government fiat to do it.
The efforts to clean up Beijing’s air underscored the high stakes driving the CEO Council: the development path China pursues over the next few decades will largely determine the health of the global environment. The CEO Council’s big idea is that it aims to harness the power of the business sector—which knows how to get things done—to help China tackle the challenge of building more sustainable cities. In the room were leaders in energy, building, manufacturing, finance and technology, in pursuit of an idealistic mission way beyond their own bottom lines: to make a positive contribution both to China’s development and to the global environment.
What are the lessons to be learned from this ambitious project?
First, it’s important to understand the opportunities and challenges inherent in what China is trying to achieve. Newly crowned as the world’s largest economy – and still growing at 7% annually – China is the key growth market for many – if not all – of the world’s major corporations. Indeed, China has embarked upon an aggressive path to become a consumer economy and is on the move. Because of its market size, and where it is on its consumption curve – at the beginning – it is essential for companies to be there. However, China is seen as an increasingly challenging place to do business and is also an epicenter of environmental distress characterized by frequent “airpocalypse” days, grave endemic water crises, and food safety issues. The environmental crisis is so bad it threatens China’s continued economic trajectory.
As foreign companies look to establish a lasting and durable foothold in the world’s largest growth market, they must increasingly tie their commercial efforts directly to bringing technology, process, and innovation focused on improving China’s acute eco-crisis. And what will tie the Yin and Yang together in this $10 trillion economy, is China’s ambitious efforts in sustainable urbanization over the next two decades.
China’s urbanization plans will be the defining business and sustainability event of the next 15 years, as the country moves an additional 350 million people into its growing cities by 2030 — more than the entire population of the United States. The unprecedented human migration will make and break companies and industries, and reshape the industrial face and consumer society of modern China. That’s why the Paulson Institute’s Sustainable Urbanization Program has been convening experts, training mayors, and promoting best practices in urban planning through an annual Prize for Cities of the Future. (This year’s prize, announced following the CEO Council inaugural meeting, was awarded to an innovative low-carbon urban project in southern Shenzhen.) Building experts speaking at a recent Paulson Institute conference in Beijing pointed out that the energy efficiency of China’s new buildings will be one of the most significant contributors to either significant increases or decreases in carbon over the next 25 years. As China’s urbanization project goes, so do we.
Managing the largest planned human migration in history is top of mind for Chinese leaders. They know it must be done in a new, more sustainable way. As such, actively supporting China’s sustainable urbanization represents an unprecedented opportunity for foreign corporations to do well by doing good. This is also is an opportunity to overcome some of the challenges of working in China. Premier Li Keqiang observed, “Urbanization will create China’s biggest domestic demand.”
The CEO Council’s five focus areas can provide a guide for companies hoping to make a difference. These are areas in which multinationals have the most products, technology and capabilities to contribute to China’s sustainable urbanization, and capture lucrative markets.
Building
In China, close to 2 million people per month will move into cities in the next 15 years. The buildings and supporting infrastructure required to absorb this constant influx of people is staggering. How these buildings are designed, with their materials, energy, water and waste efficiencies, will make a huge environmental difference. This is a key reason why the council is initially focused on improving building codes and enforcement to support rapid scaling of off-the-shelf, cost efficient sustainability technologies and incentivizing continued sustainability innovation.
Energy
Technologies and supporting policies to increase energy efficiency, capture carbon and scale renewable usage will all be essential to significantly reduce pollution and carbon emissions in the cities of the future. As we learned in Beijing, air pollution is an acute near-term health and well-being problem. Long-term it is China’s commitment to coal powered electricity that presents one of humanities’ biggest challenges – and one of businesses’ biggest opportunities to develop and deploy new technologies such as carbon capture. Yet today subsidies and utility pricing models don’t properly incentivize the rapid deployment of sustainable energy solutions. This too is an early focus area for council member activities.
Water
China’s infrastructure development has not kept pace with the rapid industrialization and mass urbanization of the past 30 years. Many provinces are facing severe shortages of water, and, unfortunately, even where plentiful, the water is often polluted. It is estimated that 65% of all urban drinking water sources are not potable. Industrial usage and agriculture account for the two largest consumers of water. The demands in these two areas are expected to increase with urbanization and the growth of the middle class. Tools and technologies that keep water clean without waste will go hand in hand with the growth of cities.
Transport
China has already overtaken the US as the largest automobile market in the world. Already many Chinese cities are experiencing LA-style traffic congestion and the related air pollution, time and fuel waste. As a result, China will most certainly be a most eager testing ground – and largest market – for electric vehicles, charging networks, urban rapid transit systems, high-speed rail, and smart traffic controls.
Supply Chain
Efficiently making and providing all the needed goods and services to the growing urban population is another facet of sustainable urbanization where Chinese and Western companies are well positioned to help. In August, Walmart, one of the Council’s founding members and one of China’s largest trading partners, announced a program to help 70% of their suppliers become more energy efficient by 2017. In addition to cutting emissions and reduce pollution, factory owners should see significant cost savings as well. This program has been offered to other council members.
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With Western company innovation and China’s ability to take sustainable technologies and products to scale, the country’s urbanization plans represent one of humanity’s greatest imperatives and one of the greatest business opportunities in history. And this is a project that we are all incentivized to get right. As goes China, so goes the world.
Jib Ellison is founder and CEO of Blu Skye, a strategy consulting firm specializing in sustainable growth, productivity and risk for global leaders. Most recently Blu Skye served as an advisor to the Paulson Institute, which launched the CEO Council for Sustainable Urbanization.