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The Risks of Unsustainable Urbanization to Businesses

Cities are growing at a phenomenal rate. According to the World Health Organization (WHO) and US consultancy firm Demographia, the world’s total urban population rose from 34% in 1960 to 56% in 2016. The WHO likewise expects the global urban population to increase by 1.63% per year between 2020 and 2025 and, in-line with this, the United Nations included sustainable urbanization in the Sustainable Development Goals (SDGs).

Urbanization can spur economic, social and cultural development. Unsustainable urbanization, however, can be detrimental to all sectors of society, especially business.

Uncontrolled rural-urban migration, for instance, can lead to the proliferation of overpopulated areas, which can trigger pollution and social instability, forcing businesses to move to more suitable locations. It is extremely important that unsustainable urbanization is prevented. Sustainable urbanization helps to provide safe communities and a healthy workforce. When communities are safe, and people are healthy and productive, businesses thrive and prosper.

Public Health Problems

Many public health problems can be traced to unsustainable urbanization which also strains urban housing facilities, driving many rural-to-urban migrants to live in impoverished areas. Living conditions in these types of areas can result in the spread of various diseases. These outbreaks, in turn, can cause companies with workers from these areas to lose profits due to reduced productivity and high employee turnover. The Centers for Disease Control and Prevention (CDC) reported in January 2015 that US businesses lose USD 225.8 billion to worker illness and injury each year.

In 2015, 12,000 new tuberculosis cases were detected in the poverty-stricken areas of Kenya’s capital, Nairobi. Health experts attributed this development to the cramped and overcrowded residences which hamper ventilation and accelerate the spread of Mycobacterium tuberculosis (the agent that causes tuberculosis). In addition, malnutrition, limited access to safe drinking water and lack of sanitation lower inhabitants’ resistance to the disease.

Tuberculosis has serious economic effects. According to the International Labor Organization (ILO) (n.d.), it usually strikes men and women from 15 to 54 years old —the most productive age group. Tuberculosis is often synonymous with loss of skills and experience, disrupted production and lowered productivity. Statistics from the WHO show that tuberculosis caused average losses of 3-4 months of work time every year and about 20%-30% of annual household income. Moreover, the families of those who die from the disease can lose up to 15 years of income. On a macro level, tuberculosis costs the global economy almost USD 12 billion each year.

Target 3.3 of the SDGs is “By 2030, end the epidemics of AIDS, tuberculosis, malaria and neglected tropical diseases and combat hepatitis, water-borne diseases and other communicable diseases.” In 2001, the Stop TB Partnership was formed, composed of 1,500 organizations (governments, non-governmental organizations (NGOs), civil society groups, research and funding agencies) working towards greater access to better tuberculosis diagnosis and treatment.

One of the Stop TB Partnership’s latest projects is the first gender assessment tool for national HIV and TB responses to support countries in Global Fund applications. Launched on July 1, 2016, this tool is intended to help identify gender-related barriers to effective HIV and TB detection and treatment. The Stop TB Partnership believes that cultural traditions and religious creeds can discourage TB patients from seeking proper diagnosis and treatment. According to Dr. Lucica Ditiu, Executive Director of the Stop TB Partnership, “We must find those barriers to [HIV/TB detection and treatment] services that men and boys, transgender people, women and girls, face in accessing quality services for health and we must develop interventions that address this.”

Higher Vulnerability to Natural Disasters

Unsustainable urbanization can cause localities to become more vulnerable to natural disasters. Unregulated construction and land development, for instance, can degrade forest areas and disturb natural drainage. These outcomes, in turn, can increase the incidence of floods and landslides. Not only do floods and landslides kill people; they destroy livelihood and property.

In 2015, a series of floods and landslides affected 20 provinces and regions in China. This catastrophe killed at least 108 people and left behind direct economic losses amounting to 35.3 billion yuan (USD 5.6 billion). The floods also damaged about 1.7 million hectares of crops and 44,000 houses. These losses then triggered other negative economic effects such as increases in transportation costs and the prices of basic commodities—China’s businesses raised their prices in order to make up for their profit shortfalls.

Zhang Jiatuan, a spokesman for China's Office of State Flood Control and Drought Relief headquarters, claimed that the aforementioned natural calamity is the product of shoddy urban drainage systems. While China’s cities expanded rapidly, the country’s existing drainage systems failed to keep up with their growth. Needless to say, massive flooding and landslides are common occurrences in China’s cities.

“For a long time, local authorities have paid too much attention to ‘above ground’ construction projects, which are highly visible political achievements, and have ignored factors that aren't usually seen, including the drainage systems,” Zhang said.

Target 11.5 of the SDGs is “By 2030, significantly reduce the number of deaths and the number of people affected and substantially decrease the direct economic losses relative to global gross domestic product caused by disasters, including water-related disasters, with a focus on protecting the poor and people in vulnerable situations.” Berlin impacted this target by becoming the seventh major Western city to divest from fossil fuels. On June 23, 2016, the Berlin House of Representatives voted to purge its fossil fuel assets (this policy is expected to begin in January 2017). Berlin’s decision to blacklist fossil fuel companies will help reduce the planet’s greenhouse gas (GHG) levels, which will, in turn, avert climate change-related disasters like floods and landslides.

Poor Infrastructure

Public infrastructure such as roads can experience tremendous strain as a result of unsustainable urbanization. The increasing affluence of city inhabitants led to an exponential increase in urban households owning cars. Delhi, for example, is home to about 2.7 million cars. In addition, an estimated 1,500 new vehicles are added to Delhi’s roads every day.

The challenge is that urban road infrastructure does not typically increase in proportion to the rising number of cars travelling on it, resulting in traffic congestion. Heavy traffic has a range of negative economic consequences, including greater fuel expenses, delays in the movement of goods and services, and decreased employee productivity. Vehicles travelling at less efficient speeds result in less profit for companies due to higher fuel bills and slower delivery of products and services. In addition, employees who spend long hours travelling to and from their workplaces may exhibit decreased productivity.

Target 9.1 of the SDGs is “Develop quality, reliable, sustainable and resilient infrastructure, including regional and transborder infrastructure, to support economic development and human well-being, with a focus on affordable and equitable access for all.” In 2015, Yichang, China invested in sustainable transportation constructing a high-quality BRT, 30 kilometers of bike lanes and 29 safe pedestrian lanes, as well as planted 700 trees. In February 2016, Yichang implemented a bike sharing system. Because of its efforts to promote sustainable transportation, Yichang won the Institute for Transportation & Development Policy's Sustainable Transport Award in 2016.

Proliferation of Slums

According to the Food and Agriculture Organization (FAO) (n.d.), unsustainable urbanization is “driven not by economic opportunity but by high birth rates and a mass influx of rural people seeking to escape hunger, poverty and insecurity.” Indeed, in unsustainable urbanization, local governments are often unprepared to accommodate the influx of rural-urban migrants. Poverty proliferates as a result. The WHO claimed that there are now 863 million inhabitants of slums worldwide, up from 760 million people in 2000 and 650 million people in 1990.

This increase may be detrimental to businesses. Clusters of impoverished housing can be an eyesore to both tourists and investors. Businesses that set up in or near these types of areas might find themselves without basic services (e.g., electricity, sanitation, transportation, infrastructure, etc.) which can lead to disruptions in business operations. This then perpetuates the cycle of poverty and joblessness.

Goal 11.1 of the SDGs is “By 2030, ensure access for all to adequate, safe and affordable housing and basic services and upgrade slums.” Hand Over, a project that aims to build affordable and sustainable housing in Egypt’s slums was launched by Radwa Rostom, who received a fellowship from The DO School in Hamburg, Germany in 2014. That year, about 16 million Egyptians were living in slums and about 35% of Egypt’s slums were at the risk of collapsing.

Hand Over trains slum dwellers to build sustainable houses, and trains engineers in the rammed earth technique, a sustainable construction technique. In April 2015, Rostom was ranked number 30 in Arabian Business magazine’s 100 most powerful Arabs under 40. In addition, she received a grant from the World Bank for the Women for Resilient Cities competition in September 2015.

Social Instability

If not addressed, unsustainable urbanization can lead to social instability. Poor governance can exacerbate socio-economic disparities among residents of an urban community. A small percentage of the community’s population may own most of the community’s resources and income, while the rest of the population struggles to make ends meet. As food, land, water, sanitation and livelihoods become increasingly scarce, the community’s have-not population may resort to illegal activity in order to survive.

Brazil is one of the world’s largest economies—it was ranked the 6th biggest economy in the world in 2014. Nevertheless, economic inequality remains rampant. In 2014, an estimated 8.5% of Brazilians lived on less than USD 1.3/day, and minimum wage was USD 335/month.

Economic inequality fuels other social problems such as poverty and crime. Brazil is notorious for its favelas, controlled by major criminal gangs. According to a May 2014 CNN article, this reign is so strong that residents are desensitized to their illegal activities:

“Even during the day, the drug business [in the favelas] is brisk and carried out in the open. Armed men, often just teenagers, stand watch at corners and communicate by radio as housewives, workers and children coming home from school walk by. Sales are made from a plastic table erected on a corner, piled with little baggies of marijuana, hashish, cocaine, crack, even an inhalant containing ether. Money is stuffed in plastic containers. The local dealers agree to talk [to the media] while they carry on with their trade.”

The article added that the favelas had become so dangerous that the police stayed away from them: “For decades, Rio's favelas were neglected by authorities, considered no-go zones even by police. Rival drug gangs fought for control. They became judge, jury and executioner — and a part of daily life.”

Widespread criminality may keep Brazil mired in poverty and economic inequality. Threats of crime and violence can make it perilous for employees to travel to and from work, and force investors to move their businesses to safer locations, leading to unemployment. These conditions can also lead to reduced employee productivity due to employees getting injured or killed in criminal attacks. Left with no decent means of livelihood, residents may turn to crime to survive.

Goal 8.3 of the SDGs is “Promote development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity and innovation, and encourage the formalization and growth of micro-, small- and medium-sized enterprises, including through access to financial services.” After hosting the 2014 FIFA World Cup, Brazil had to deal with the huge amount of waste the event left behind. As one of the sponsors and partners of the 2014 World Cup, Coca-Cola decided to help through the Coletivo Recycling program.

What made the Coletivo Recycling program remarkable was that it was able to clean up the waste that the World Cup left behind while, at the same time, provide livelihood to many poor Brazilians. The program hired 840 people to collect waste in the 12 stadiums that Brazil constructed for the event. In addition, Coletivo Recycling supported approximately 400 recycling cooperatives in Brazil, which provided waste management training and tools, as well as employment opportunities for young Brazilians. A decent means of livelihood through Coletivo Recycling may help poor Brazilians make an honorable living and get them involved in promoting sustainability.

Unsustainable urbanization will only bring about short-term gains. High-rise buildings, luxury malls and car-laden streets may project an image of prosperity, but this veneer is unsustainable. Employees cannot go to work if they are sick from air pollution and traffic-related stress. Businesses will not survive if they are located in calamity- and crime-prone areas. If ignored, unsustainable urbanization has the potential to defeat the purpose of establishing cities in the first place—to create areas that will spur economic, social and cultural development.

Sustainable urbanization, in sharp contrast, creates cities that work for their inhabitants. Efficient mass transport systems, as well as bike and pedestrian lanes, can reduce dependency on cars and, ultimately, air pollution. Proper urban planning results in cities that are effective and less susceptible to the adverse effects of natural disasters. Adequate basic services in cities can help reduce social and economic inequality. Safe spaces and a healthier population, in turn, will create an environment that is conducive to businesses.

FirstCarbon Solutions (FCS) is a leading sustainability solutions provider to organizations and governments around the globe. FCS gives expert advice on sustainability solutions to improve ESG performance and your bottom line.

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