Green Business Models: The Key Enabler for Smart Cities in Europe
Photo by IISD/ENB | Angeles Estrada Vigil
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Launched in 2014 and funded by the European Commission, the READY project aims to develop and implement creative technical solutions that increase buildings’ energy efficiency and reduce the needs for fossil fuels in two European cities.

The creation of Green Business Models along with energy-efficiency initiatives like READY can be the pathway to follow by other European cities.

Cities in Europe are currently experimenting in their transition towards sustainability. Terms such as “smart cities” or “green cities” have become a hot topic. As cities generate up to 80% of global C02 emissions, creating smart and sustainable cities is necessary to confronting the incoming environmental, social and economic challenges.

Achieving this goal will not be easy. More than half of the world’s population lives in cities, and in Europe, that percentage is even higher, at 75%. This means that cities—and their residents—will have to adopt and implement new patterns of consumption, new financing mechanisms and new business models. Citizens will need an increased awareness, serving as a source of ideas and promoting collaboration between civil society and the public and private sectors.

The READY project (Resource efficient cities implementing advanced smart city solutions) highlights some of the innovation already taking place in European cities in this regard. Launched in 2014 and funded by the European Commission, READY aims to develop and implement creative technical solutions that increase buildings’ energy efficiency and reduce the needs for fossil fuels in two European cities: Aarhus, Denmark, and Växjö, Sweden. Such innovative solutions include low temperature district heating, heat-driven appliances, photovoltaic thermal solar cells (PVT), heat pumps, second-life batteries and sustainable mobility. They independently aim at delivering heat and electricity at both the municipality and the building levels.

Aarhus, the second biggest city in Denmark, is driven by a climate strategy to become carbon neutral by 2030. Already, half of the city’s energy supply is based on Renewable Energy Sources (RES), mainly wind, biomass and district heating. The Aarhus municipality is also currently testing READY’s proposed technical solutions within different types of buildings, such as residential and municipal buildings.

The case of Växjö is similar. This dynamic regional business and trading hub in the south of Sweden has been repeatedly called “the Greenest City in Europe.” In 2011, residents of Växjö emitted only 2.7 tons of fossil fuel C02, which is relatively low compared to the average in Sweden (5.3 tons), and even lower when compared to the average in Europe (7.3 tons). The city also launched an environmental programme in 2011, drawing up a roadmap for the development of specific projects such as READY. This has helped to bring smart renovations to its existing public housing stock, as well as energy-saving measures to district heating and cooling systems.

The concept of Green Business Models tackles these initiatives by proposing business models that deliver value to customers while encouraging sustainability, including by reducing resource use/waste and promoting environmental benefits.

Cities are in the midst of a critical change. The way they are planned must be improved if we want to succeed in the decarbonisation of Europe. The creation of Green Business Models along with energy-efficiency initiatives like READY can be the pathway to follow by other European cities.

Companies are increasingly willing to develop greener solutions in order to achieve the high European environmental objectives, reduce their costs associated with primary resources, and face the increasing competition for environmentally conscious consumers. Within this evolving scenario, having a well-tailored business model for an innovative technology is seen to be the key enabler to success in the market. The concept of Green Business Models tackles these initiatives by proposing business models that deliver value to customers while encouraging sustainability, including by reducing resource use/waste and promoting environmental benefits.

Implementing Green Business Models is not an easy task. The first few stages of development for renewable technologies and sustainable products are very costly, and innovation can be tricky to put into practice. However, many initiatives are within reach. Offering services instead of just selling products or exploiting recycling methods to reduce environmental costs are some of the trends to follow.

LGI, a French consultancy that specialises in sustainable innovation, has led the creation of Green Business Models for the technologies implemented in READY. As a sustainable innovator, LGI has worked for new ways of brainstorming, heading co-creation workshops that change the traditional way of thinking. As an example, the ‘Business environment methodology’ was used in a workshop in which all the partners of the project worked together to come up with ideas for the development of potential Green Business Models. An economic assessment was then carried out to identify financial risks taken by the different stakeholders.

For more information, visit the project’s website.

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