The Future of Cities: Measuring Sustainability

The future of cities: measuring sustainability

Preface 4

Introduction 5

What is sustainability measurement? 6

Existing guidelines for measuring cities 8

Case study: the Bristol Quality of Life Survey 14

Case study: the Happy City Index 15

Case study: Tokyo Metropolitan Government 17

Case study: Region of Waterloo, Canada 18

Measuring the impact of a program or service 21

Lessons from working with measurement data 25

The future measurement of sustainability 26

What is my city worth? 28

What are the next steps? 29

Where do we go from here? 30

Preface

The prestigious title of European Green Capital is awarded annually by the European Commission to promote and reward the efforts of cities to improve their sustainability for their residents. The award, which was established in 2010 in recognition of the vital role of sustainable, low-carbon living for cities and citizens everywhere, has been won by Stockholm, Hamburg, Vitoria-Gasteiz, Nantes, Copenhagen, and in 2015, by Bristol, the first UK city to do so. Ljubljana bears the title in 2016. During its tenure as European Green Capital, Bristol convened leading practitioners from a variety of sectors to promote the sustainable future of the city. As part of that discussion, the city council asked KPMG to work with others to develop a knowledge-transfer program that other cities around the globe could apply to their own sustainability needs. The result was the Bristol Method, a series of modules addressing different aspects of urban sustainability. KPMG’s Global Sustainability and Cities practices worked with stakeholders to produce practical modules that guide city governments in measuring their current and future sustainability and building a vision for stakeholders. These modules have been updated and enhanced to form The future of cities report. The report has two modules: “Creating a vision” and “Measuring sustainability”. It draws on the expertise of many sources and includes a range of case studies to ensure that cities find approaches relevant to their own context. Although the report has its genesis in the experience of Bristol, its findings are widely applicable, outlining the considerations and processes involved in building sustainable cities for current and future generations.

Introduction

Ever since the first cities were founded, their leaders have needed metrics to understand what was happening in them. What we have measured has changed over time as the needs of city leaders and the role of government have changed. The metrics have become more complex and higher profile, and their uses have expanded, particularly as government addresses a wider range of social needs. When we measure cities now, we are seeking to understand them in order to manage them better and to provide evidence of performance. Increasingly, we measure cities to understand their viability and to make decisions that will allow those who live in them to be happier and healthier in the future.

The measurement of what we call a city’s inequality and other issues. The 1990s ‘sustainability’ has also changed over concept of environmental, social and time. We might say that sustainability economic balance nevertheless still used to be about measuring the level of stands, as recognition grows that these pollution and the amount of parkland. three are interdependent. Focusing on In the 1990s, many cities began to environmental, economic or social aims to take a new approach to balancing their the exclusion of the other two areas will environmental, social and economic not guarantee a successful city — but it impact, using metrics not only to measure may guarantee an unsuccessful one. factors such as energy, water use and This paper discusses some of the ways pollution but also to address concerns in which cities are being measured and such as crime, employment and health. how these metrics could evolve. More In recent years, the definition of important, it provides practical examples sustainability has become even more of what leading cities are doing, the sophisticated, and the metrics we use lessons to be learned and how these to measure it have broadened to include can be applied to other cities. social cohesion, biodiversity, well-being,

What is sustainability measurement?

Sophisticated performance measurements link service outputs to program outcomes. The output of a city’s fire services, for example, supports the outcomes of its public safety program, but a public safety program requires the output of more than a fire service to support its intended outcomes. We therefore need to be able to measure the impact of multiple activities that support or hinder the same goal.

When all city services are effectively protection. This means balancing the When we consider sustainability, it delivering outputs to support all city burden of current taxation against is important to think beyond simple programs, sustainability is at a sweet investment for the benefit of future environmental protection. The spot where quality of life is being generations. definition should take the following, maximized for city residents. Quality much broader view. It also means having a clear vision of life is one measure of the long-term of what the city wants to offer to its sustainability of the city. current and future residents. We cover Financial sustainability Sustainability is most commonly this topic in another module. Many cities around the world are finding referred to as: they do not have enough funds to provide Creating a happier and healthier city the programs and services within their should involve encouraging values and mandate. The challenges of inadequate responsible behaviors that enhance funding are many and varied, but the “meeting the needs of the the quality of life for its residents relevance to sustainability is whether current generation without both now and in the future, rather a city is forced to sacrifice investment compromising the ability of than excessive behaviors that create in long-term social, environmental and future generations to meet current happiness at the expense of financial outcomes in view of short-term their own needs”. future happiness. Imagine a municipal constraints and needs. government that lowered taxes or spent all its revenues on items with relatively This definition makes a lot of sense in Social sustainability an urban context. Any sustainable city short-term ‘vanity’ benefits, such as needs to determine how its citizens poorly conceived festivals or sporting As cities around the globe become can thrive while it also ensures that events, at the expense of investment larger, the issue becomes whether the needs of the next generation are in employability, skills training, legacy increasing social unrest, violence met through education, investment in infrastructure and green spaces. Current and tensions between cultures can infrastructure, cultural and community and future generations would receive be avoided and the rising demand for development, and environmental little or no sustained benefit. social supports can be managed as the

population grows. This is true whether The design and layout of a city are key to is pollution reduction, the two priorities cities are densely built or develop into its ability to meet those needs. support one another, but if the goal is to vast urban sprawls, as every form alleviate congestion, they do not. Sustainability is clearly a multi- comes with specific challenges. dimensional concept that involves So while a city might make every balancing city programs so that they effort to optimize the effectiveness of Environmental sustainability operate effectively, and then passing its services, the indicators for those Just about every resource society uses that balanced approach along to the services might be indirectly affected is either grown or mined. Our way of life next generation. As soon as we tip by other levels of government, making depends on the productive capacity of the balance in favor of one program it challenging to attribute the effects to the land and the resources that can be area over another, the city runs into one government’s services or another’s. extracted from the ground or recovered problems. This suggests that the impact of all from our own waste. It is therefore vital related services needs to be considered A key challenge facing city sustainability for the future viability of cities that we systemically. is the mandate of other levels of carefully steward these resources. government to deliver services. While the city might do its best to achieve Physiological and sustainability within its program psychological sustainability mandate, if all levels of government The physiological and psychological needs do not synchronize their actions, of urban residents are often considered sustainability can be challenging, if not part of social sustainability. We need to impossible, to achieve. consider if cities can continue to meet A city may wish to incentivize the not only basic needs such as food, shelter development of public transport and security but also more advanced and cycling, whereas the national needs such as a sense of belonging and government may seek to subsidize low- the opportunity for self-actualization. emission private transport. If the target

Existing guidelines for measuring cities

City stakeholders use data to Who looks at the The Improvement and make decisions about: measurements? 3 Efficiency Social Enterprise (IESE) Cities in Motion — where to deploy resources Stakeholders can include infrastructure, Index healthcare and education providers; — how to develop a policy residents and businesses; as well as — whether to start, change or stop potential investors, migrants and The GNH Index developed a program other cities. 4 by the Happiness Alliance — what options to offer or withhold from people Many guidelines for measuring the sustainability of cities already exist. These methods are sometimes — where to live, move or work Four methods are summarized in referred to as common guidelines — how to spend time and money this section: because they can be applied to many cities, generating comparisons and — how to form an opinion about an issue The Circles of Sustainability knowledge sharing, although they have — where to lend support. 1 model developed by the not been used often and widely enough Global Compact Cities to be considered standard sector Different types of data are needed to initiative approaches. enable stakeholders to make different types of decisions. 2 The Green City Index

1 Global Compact Cities Circles of Sustainability

The Circles of Sustainability method Each of these domains is then divided The benefit of this approach is that it helps urban communities understand into seven sub-domains. For example, considers a range of indicators, allowing how to become sustainable. It has been economics is categorized into policy makers to understand the impact used by numerous cities, among them production and resourcing, exchange of their actions across diverse social Johannesburg, Melbourne, New Delhi, and transfer, accounting and regulation, settings. Traditional tools, by contrast, São Paulo and Tehran. consumption and use, labor and typically focus on only one dimension. welfare, technology and infrastructure, Responses to questions about and wealth and distribution. economic, ecological, political and cultural ‘domains’ are scored to develop a comprehensive profile of the sustainability of an area.

Figure 1: The Circles of Sustainability method indicators

ECONOMICS ECOLOGY Production & Resourcing Materials & Energy Exchange & Transfer Water & Air Accounting & Regulation Flora & Fauna Consumption & Use Habitat & Settlements Labour & Welfare Built-Form and Transport Technology & Infrastructure Embodiment and Food Wealth & Distribution Emission & Waste

Organization & Governance Identity & Engagement Law & Justice Creativity & Recreation Communication & Critique Memory & Projection Representation & Negotiation Belief & Ideas Security & Accord Gender & Generations Dialogue & Reconciliation Enquiry & Learning Ethics & Accountability Health & Wellbeing POLITICS CULTURE

Vibrant Good Highly Satisfactory Satisfactory+ Satisfactory Satisfactory– Highly Unsatisfactory Bad Critical

Source: Global Compact Cities Programme (http://citiesprogramme.com/)

2 Green City Index

Created in 2009 the Green City Index water and sanitation, waste management, seven key lessons on how to become a is a tool to help cities compare their air quality and environmental governance. greener city. environmental performance. A mix of quantitative and qualitative The benefit of this approach is that indicators measures not only each city’s Over 120 cities in Europe, Latin America, cities can learn from each other as current environmental performance but Asia, Africa and North America have they debate policies and strategies to also its intention to become greener. had their environmental performance minimize their environmental footprint, measured to identify their strengths and A summary report documents key accommodate population growth, challenges. findings of the Green City Index about promote economic opportunity and each region, highlighting the best- safeguard quality of life for urban The index uses approximately performing cities, making comparisons dwellers today and in the future. 30 indicators, including CO emissions, 2 between continents and outlining energy, buildings, land use, transport,

Figure 2: The Green City Index indicators

— Green action plan — CO2 intensity

— Green management — CO2 emissions

— Public participation — CO2 reduction strategy in green policy

— Nitrogen dioxide Environmental — Energy consumption — Sulphur dioxide governance CO2 — Energy intensity — Ozone — Renewable energy — Particulate matter consumption Air — Clean air policies Energy — Clean and efﬁcient energy quality policies Index

— Water consumption Water Buildings — Energy consumption of — System leakages residential buildings — Wastewater system — Energy-efficient buildings treatment Waste & standards Transport — Water efficiency and land use — Energy-efficient buildings treatment policies initiatives

— Use of non-car transport — Municipal waste production — Size of non-car transport — Waste recycling network — Waste reduction policies — Green transport promotion — Green land use policies — Congestion reduction policies

Source: Siemens AG Green City Index (http://www.siemens.com/entry/cc/en/greencityindex.htm)

3 IESE Cities in Motion Index

The Improvement and Efficiency Social international outreach, social the index is intended to be used by Enterprise (IESE) Cities in Motion cohesion, mobility and transportation, city stakeholders such as mayors, Index is an annual study. Using publicly human capital and the economy. administrators, companies that available data, the index surveyed provide solutions for urban challenges The aim is to create knowledge and 148 cities in 57 countries for its 2015 and interest groups that promote an develop valuable ideas and innovative report, 55 of them capital cities. improved standard of living for urban tools that can generate smarter cities residents. It examines cities through and promote change at the local level. 10 ‘dimensions’: governance, urban The IESE Cities in Motion Strategies planning, public management, report that details the findings of technology, the environment,

Figure 3: Cities in Motion Index dimensions

Economics Human Environment Social Urban Resources Cohesion Planning

Governance Public Technology Mobility & International & Civic Management Transport Presence Participation @

Source: IESE Cities in Motion Index (http://citiesinmotion.iese.edu/indicecim)

4 GNH Index

The Happiness Alliance, a Seattle-based balance, social vitality and connection, poverty rates, air emissions, voter turnout, organization, was inspired by a survey education, arts and culture, environment graduation rates, volunteer rates, rates of conducted by the government of Bhutan and nature, good government and domestic violence and other crime, life using a ‘gross national happiness’ (GNH) material well-being. expectancy, length of commute, work index, rather than referring solely to gross hours and so on. The Happiness Alliance, which has domestic product. been endorsed by Seattle City Council, Thousands of Seattle residents have taken Bhutan surveys its citizens on nine key was the first organization in the US to part in the survey. The findings allow policy aspects of happiness: psychological well- develop objective indicators to measure makers to make more effective decisions being, physical health, time or work–life happiness. The indicators measure when serving their communities.

Figure 4: GNH Index

Psychological wellbeing — Life satisfaction Living standards — Positive emotions Health — Assets — Negative emotions — Mental health — Housing — Spirituality — Self reported health — Household per status capita income — Healthy day — Disability

Ecological diversity and resilience — Ecological issues Time use — Responsibility towards — Work environment — Sleep — Wildlife damage (Rural) — Urbanization issues GNH

Community vitality Education — Donations (time & — Literacy money) — Schooling — Community — Knowledge relationship — Value — Family — Safety Cultural diversity Good governance and resilience — Gov’t performance — Speak native language — Fundamental rights — Cultural participation — Services — Artistic skills — Political — Driglam Namzha participation

Source: The Happiness Alliance (http://www.happycounts.org/)

In summary Using guidelines that are designed to apply to common urban sustainability issues, rather than developing methods that apply to the particular city, offers various benefits and challenges.

Benefits of using common guidelines Challenges of using common guidelines

— the opportunity to compare cities — the inclusion of key performance indicators (KPIs) that are irrelevant to a city’s priorities — a comprehensive breakdown of many drivers of sustainability — the time required to participate in a method that uses numerous KPIs — peer and specialist support — the likelihood of a program being in the pilot stage — the opportunity to meet a defined standard and having few comparator cities — academic research and corroboration — the use of macro-level KPIs that are unlikely to — a way to determine whether all relevant issues are change over the short term, rather than of KPIs that covered drive impacts — a means to identify areas in which the city can — prohibitive costs in times of budgetary constraint perform better

The following case studies highlight their strengths and limitations, and studies featuring Tokyo Metropolitan some ways in which particular cities they are followed by helpful guidelines Government and the Region of and organizations have measured their for other cities to effectively measure Waterloo both included direct progress on the issues that matter most the sustainability of their programs, support from KPMG firms. to them. These real-life examples have services and interventions. The case

Case study: the Bristol Quality of Life Survey

The Bristol Quality of Life Survey1 aspects of the city’s neighborhoods, the has been distributed annually to up Bristol survey measures them using five to 29,000 households for the past levels of indicators: 15 years. It not only provides a snapshot 1. common European indicators of the quality of life in Bristol but also demonstrates how this changes over 2. national and regional headline time. As well, the survey gives city indicators residents an opportunity to voice their 3. stakeholder indicators (selected after opinions about local public services and consultation) other issues close to their hearts. 4. ward and city-wide indicators The statistics are analyzed by age, (introduced as benchmarks and gender, ethnicity and city area, or ward. measured by the city authority) A strict coding protocol and rigorous quality-checking procedures are applied 5. community group indicators to the data set. (developed in 2001–02 and measured by each group). The survey outputs are then used by the city council, health service and other The report of the survey selects the public-sector partners to help plan local indicators of widest interest and uses services, track change and improve the maps and trends to present the material quality of life for residents. The survey in an accessible and comprehensible is the council’s main tool for providing format. neighborhood-level statistics and Professionals and politicians need the information about public perceptions. public’s insight and feedback. The survey Sometimes the differences between has significant potential to empower hard data collected on such indicators citizens and voluntary and community as traffic speed, noise or air quality organizations to make a case for change. and the perceptions residents have of The information helps them to effect those indicators are interesting in and of change themselves and to enable others themselves. to do so. Many cities have explored Sustainability and quality of life can be running studies similar to the Bristol considered synonymous. To provide a Quality of Life Survey. comprehensive picture of these two

1 http://www.bristol.gov.uk/page/council-and-democracy/quality-life-bristol#jump-link-2

Case study: the Happy City Index

Happy City is an initiative that works are most relevant to people’s well- with a wide range of organizations, being, and why. The Happy City Index from grassroots community groups to has therefore been developed to help international bodies such as the United stakeholders understand, measure and Nations and the European Union. The improve well-being. If well planned, initiative helps communities facilitate channeling scarce resources to key sustainable happiness on a city scale. areas can then make a lasting difference to people’s lives, creating ripple-through With limited resources, local policy effects and ensuring significant impact makers need to know which factors for less money. Why measure well-being? Governments attempt to measure the well-being of their citizens for three main reasons.

A common Measuring The beneﬁts of currency what matters well-being

All major policy sectors have an Over the past 40 years, the Higher levels of well-being impact on well-being, but they measurement of well-being have been shown to have a often operate independently has developed to such an positive impact on important despite the potential beneﬁts of extent that we can now conditions such as physical working across policy areas. rigorously monitor the impact and mental health, social and Measures of well-being have the of policy areas that have environmental behaviors, potential to unify the traditionally been thought of productivity and resilience. development and assessment of as intangible. This includes Promoting well-being should policies, providing a common measuring the impact of not be seen as a luxury. It currency not only for all policy green and social spaces and needs to be a serious sectors but also for community cultural policy. concern of governmental organizations, businesses, groups policy. and individuals across the city.

How to measure well-being Key findings Well-being is measured using external Happy City performed a pilot study and internal factors. External factors are on the city of Bristol in 2015, the first the drivers of well-being. They are the measurement of its kind in the UK. The conditions that are necessary for people index combined two different kinds and places to thrive. Internal factors of data: pre-existing data from local affect the individual’s experience of and national sources on the ‘drivers of well-being. They involve how a person is well-being’; and primary survey data on feeling and functioning in day-to-day life. ‘experienced well-being’. The Happy City Index breaks external The result was the ability to identify the and internal factors into a number of conditions that make a difference to domains. people’s experienced lives across a city.

This allows local policy to be developed City has developed an online survey in from the standpoint of improving response. The format is intended to be well-being, rather than considering engaging, and allows people to better well-being only once economic policy understand various aspects of their objectives have been met. It combines well-being and compare their results economic and non-economic objectives to those of others who have taken the into a single framework and permits the survey. The survey will target a number potential economic and social benefits of community organizations across of well-being policy to be identified. the city to ensure that people who would otherwise not participate in the Better well-being is associated with measurement process are reached. better health, socialization and higher “The Happy City Index can productivity, while ‘city livability’ is Demographic differences may mean move us towards a single an increasingly important criterion for that policy makers will have to consider common measure that every companies deciding where to invest. different well-being factors when agency — public, private promoting well-being in different areas To reap benefits, local well-being or business — can sign up of the city. policy needs to be made across to and measure its success departmental boundaries and from The Bristol pilot was performed on a against. Using this as a a long-term perspective. It is not small scale, and its main finding was common benchmark, we have enough to look at the obvious, direct that certain factors have a much bigger a powerful tool for joining up connections between a given policy impact on people’s well-being than public services and driving real area and well-being. Policy makers need others. Identifying these city-level public-sector reform that can to understand the various pathways factors can help policy makers set be used all over the country through which their work affects priorities for service provision when and beyond.” people’s well-being. resources are limited. — Paul Taylor Head of the Executive Office A larger-scale pilot study will reveal Bristol City Council The challenges of factors that make a difference on a implementation neighborhood or street level. This can Collecting representative data on certain help determine specific interventions to demographic groups — 16–24-year-olds improve well-being. and minority communities — proved For more information, see difficult. It is important to ensure a www.happycity.org.uk/content/happy- representative sample, and Happy city-index.

Figure 5: The Happy City Index

External Internal Factors Factors Secure income Positive emotion Good work Autonomy Local business Competence Experienced well-being

Sustainability Meaning Formal learning Resilience

Informal learning E Optimism N

T Skills and hobbies J O N Y E P EDUCATION M WORK U E Vitality R P O S Physical activity Healthy lifestyles Bodily awareness Physical health HEALTH Mental health B Appreciation

O D Y R Peace of mind M

E I N D Flow S PLACE CULTURE L

P A I

T C Y Good homes I H O N S O T Public spaces I M N Connection Transport M U Equality Social activity Drivers of well-being Drivers Intimacy

Participation Belonging Cultural vibrancy Trust Social isolation Altruism

Source: http:// www.happycity.org.uk

Case study: Tokyo Metropolitan Government

With the 2011 tsunami shutting down challenges. Among the 1,312 owned 30 percent of Japan’s energy supply and and occupied assets, comprising Tokyo set to host the Olympic Games in 9,258,379 square meters, were offices, 2020, the Tokyo Metropolitan Government forum and event spaces, schools, needed an energy optimization strategy hospitals and public sporting facilities. that could be implemented across more The assessment was based on data and than 1,300 assets. did not include site visits, and this made it difficult to find deeper opportunities Objectives for savings. The Tokyo Metropolitan Government wanted to reduce energy and carbon Results consumption by 20 percent and to As well as achieving its stated achieve annual energy cost savings objectives of energy savings and carbon of ¥20 billion (US$175 million). It reduction, the project outlined how to asked KPMG in Japan to undertake realize the following benefits: an assessment of its real estate asset portfolio in order to identify energy — to reduce the government cost base

consumption and CO2 emission with limited capital investment reduction in areas such as heating and — to reduce carbon emissions cooling, ventilation, lighting and asset replacement improvements. — to improve the indoor environment for occupants of the real estate Method assets Benchmarking was conducted and — to improve air quality, leading to unique formulas were developed better public health and well-being to calculate the energy and carbon — to provide a successful government reduction potential of various example for the market to follow. improvements. Criteria were established for the evaluation of energy Key recommendation consumption, and CO2 emission reduction targets were set for each It is important to start with a macro facility/bureau. assessment. It is then possible to create a plan that prioritizes the worst Challenges performers, outlines how to bring all assets up to average performance and Due to the large volume of government then eventually brings them up to high assets being studied, data assembly performance. was one of the most significant

Case study: Region of Waterloo, Canada

With over half a million people, the constraints. Carrying out service Region of Waterloo is one of Ontario’s reviews that consider opportunities growth areas. Its population growth to enhance the efficiency and rate from 2006 to 2011 surpassed both effectiveness of service delivery while the provincial and national averages, taking into account fiscal and service becoming the 10th largest metropolitan impacts is one strategy to ensure the area in Canada and the fourth largest community receives the best value. in Ontario. Over the next 20 years, the The Region engaged KPMG in Canada Region is projected to gain an additional to conduct a service review with the 200,000 residents. following objectives: This growth and expected future — to determine whether the Region growth has caused both the elected was providing the desired level of and the unelected leadership of the service as efficiently and effectively Region to think about the efficiency as possible and effectiveness of regional service delivery, and possible changes to — to consider whether any changes services and service levels. to the level of services should be undertaken Objectives — to recommend mechanisms As with all municipal and other orders of to improve the efficiency and government, the Region must balance effectiveness of ongoing service service expectations against financial delivery.

Method

Project Service proﬁle Benchmarking Analysis Final report planning development

Meet to clarify Develop an Survey five Identify potential Develop and expectations. inventory of comparative opportunities to present a final municipalities. achieve the most report containing Refine lines of programs and efficient and practical and inquiry. services provided by Benchmark the the Region, using Region’s services operationally effective achievable Develop a work KPMG’s Municipal to identify potential approaches to service recommendations program for the Reference Model. cost savings and delivery. on service delivery. review. improved efficiencies. Conduct public engagement.

The inventory of programs and services The benchmarking Opportunities were grouped into was created through a series of results were those already in process, those worth workshops with the leadership of each included in service pursuing and those not to be pursued. Regional department, interviews with profiles of each A workshop identified the five top Council members and a review of key Regional opportunities for deeper analysis, corporate documents (budget, financial department. which KPMG in Canada then statements, operational plans, etc.). An conducted. online survey was also used to ask the public what services were important to them.

Challenges Results — Develop a five-year plan to phase out children’s centers owned by It was necessary to understand all the The final report offered five concrete the Region and use the savings to businesses of the municipality. Each recommendations for optimizing service expand the number of subsidized different business was inventoried and delivery value: childcare spaces offered by other benchmarked on service level, type and — Stop competing with non-profit community childcare providers. performance. The Municipal Reference employment agencies. Model was used to standardize the language in which the Region’s — Create a regional consortium of Key recommendation operations were described so that they municipalities and establish a The in-depth analysis was presented could be explained consistently both shared data center and desk support in the form of five business cases. within and beyond the organization. service for member municipalities. The project team responded well to having the top five opportunities Inevitably, Regional staff and Council — Restructure the road maintenance analyzed in greater depth, as this members had a vested interest in agreement between member added value to the project. Providing certain services that were delivered by municipalities in the Region to detailed fact-based evidence of the municipality. Region of Waterloo establish the same rate structure for measurable, achievable cost savings staff were particularly concerned about all participating municipalities. and efficiencies is essential to the the childcare delivery model, and — Test the market for private-sector success of a service review. Council members were preoccupied interest in the municipal airport, with the municipal airport. The service not only to drive operational and review provided fact-based evidence strategic goals but also to reduce of opportunities to increase the the operational costs and lessen effectiveness and efficiency of the impact of airport costs on the Regional operations significantly and property tax levy. cut through the protectionist approach of affected groups.

Measuring the impact of a program or service

Cities measure their total sustainability but they also want to understand the impact of specific programs and services. When interpreting the impact any of these activities, several factors must be considered.

Input, output and impact about how much money is given to a management — or they are seen as measures school or how many teachers that pays subjective. The measurement of the for and the effect on exam results, but we ‘impact’ of a program is often far more It is increasingly recognized that the may not consider how these factors affect subjective than the direct inputs and choice of key performance indicators the students’ well-being and prospects. outputs. Determining the impact may (KPIs) often reflects what matters to also require a degree of interpretation More often than not, the most individual program managers rather and may not be evident until months important KPIs are unavailable, or than the goals of the funders or program or years after the management action cannot be directly altered by program recipients. For example, we may care is taken.

It is therefore important to understand the distinctions between input, output and impact KPIs.

Input KPIs Output KPIs Impact KPIs Input KPIs are measures of the Output KPIs are direct measures Impact KPIs reflect long-term resources that go into a service, of the results of the deployment effects that are closely related to such as: of resources. Often referred to as the purpose of the activity. Many service management KPIs, they cannot be measured within program — budget allocated measure short-term changes as a timeframes. — people involved result of inputs, such as: They usually involve changes to well- — resources deployed — number of people reached being or performance as a result of behavior change. — time available — projects implemented — target market. — change in output — change in behavior.

Pathways of change and For example, a program to encourage pathway based on the theory of change. timeframes companies to switch to low-emission The theory stipulates that several vehicles (LEVs) may measure the steps, both sequential and parallel, are Some stakeholders will be more number of LEVs introduced to the city. required in order to achieve change. interested in inputs (e.g. finance The study may also quantify how many As completing these steps takes departments, politicians), some in high-emission vehicles (HEVs) were time, it isn’t possible to assess directly outputs (e.g. program managers, press) replaced and seek to determine how and quickly whether the final desired and some in impacts (e.g. program many of the new LEVs were introduced change is going to be achieved. Instead, beneficiaries, community groups, as a direct result of the program. measuring certain proxy factors along healthcare and education providers). More difficult would be measuring a an outcomes pathway can provide some When choosing which measures to change in air quality, illness related assurance that the actions being taken report, it is important to consider who to air quality, and associated cost are leading to the final change. savings from a reduction in illness, and will want the information and when. The Constructing an outcomes pathway is clearly attributing those changes to the nature of modern government means an approach to defining all the building program. that many stakeholders want information blocks required to bring about a long- on the progress of a program before its The diagram on the next page is a term goal. real impacts have been felt. This leads to very simple example of an outcomes an overreliance on output KPIs.

Pathways of change and timeframes

3 4 Total number of new LEVs on the road in the period 5 6 Net change in particulate emissions Number of LEVs Reduction in 1 2 introduced as a healthcare direct result of costs program Reduction in Funding Program adverse is allocated operates health impact Improved Number of HEVs well-being removed from the and human road in the period Reduction in capital and particulate health emissions Number of HEVs retired as a direct result of the program

Inputs Outputs

Impacts

The pathway shows how the input of are further beyond the control of the is taken, the more accurately it will allocated funding allows the program to program manager and therefore often determine whether the desired impact operate (column 1). harder to demonstrate. has been achieved. Operational activities then produce Obtaining reliable data becomes There is some overlap between output outputs (column 2) such as number more challenging the further along the and impact KPIs because stakeholders of advertisements placed or people outcomes pathway an impact occurs, or program managers tend to consider reached with respect to the program. and it also becomes more difficult to factors that are under their direct Column 3 shows the impact of the attribute changes to the program itself control, the quantity of resources that example program, and columns 4, 5 because external influences will come can be allocated to measurement and and 6 show subsequent impacts. Each into play. At the same time, the further the timeframe over which the program successive column shows impacts that along the pathway a measurement is measured. The lower the level of

control and the shorter the timeframe, supported LEVs, column 3 would If there is limited appetite or resources the closer to the beginning of the show outputs (because the program to measure impact, construct an pathway the chosen KPIs will be. manager would have much more control outcomes pathway and find more over the number and type of vehicles measurable KPIs that will have a positive If the program were an advertising purchased) and the impacts would occur impact on the program goal. campaign to encourage businesses in column 4 (air quality) and column 5 to purchase LEVs, for example, the The four-step approach below outlines (health). output KPIs (such as the number of what needs to be considered when advertisements placed) would occur Key message measuring the sustainability of a in column 2 and the impact would be program. shown in columns 3 and, potentially, 4. When planning what to measure about If the program were instead a long-term the sustainability of a program, consider market intervention to provide financial how to measure the impact of an action, incentives to purchase government- not just the outputs that arise from it.

Four-step approach to measuring the sustainability of a program

Decide what you Assess the Focus on outcomes Monitor, adjust 1. want to achieve 2. contribution to 3. that will achieve the 4. and report long-term impacts desired impacts

— Prioritize what is — Differentiate — Group activities — Drive the quality of important to the city’s outcomes from according to what your investment of vision and to key impacts. they are intended resources. stakeholders. — Consider community to achieve. — Report on the — Determine how to and business beneﬁts. — Align measurement achievements to make the greatest tools with resources stakeholders, impact with the and chosen metrics. including those resources available. who are affected. — Establish timelines.

It is vital to consider the purpose of data before gathering and presenting it. In KPMG’s experience, there are some common pitfalls.

KPMG’s top tips — Be transparent about how reported — Be transparent about areas for measures are defined and calculated. improvement and feed this learning — Communicate progress to back into all related programs. stakeholders, including inputs, — Use a combination of quantitative outputs and impacts. and qualitative information to tell the — Verify the data and reported story of the activities. information.

Pitfall Possible solutions

Working with too Understand the purpose of the data by talking to stakeholders. much data

Regularly examine what sort of data is being gathered and whether it fits the purpose. Using available data instead of Find out where the data goes instead of assuming that because it has always been needed data collected it must have a use.

Presenting data in Per capita, per family, per journey and similar units of measurement are often far more inappropriate units useful than a total, even if they are only averages.

Using data over the wrong Keep in mind that many data sets are seasonal or change only over long periods. timeframe

Examining data at too high or Consider whether stakeholders are interested in city-wide statistics or much more too low a level local metrics.

Drawing incorrect, misleading Unless specifically asked to draw conclusions, it is often best to let the stakeholders or biased conclusions on come to their own conclusions and to include appropriate caveats that explain any behalf of the stakeholder assumptions that have been made.

Making incorrect assumptions Determining how the stakeholder will react to and use the data is important. Users can about users’ understanding have different levels of familiarity with and understanding of the data.

Mistaking the level of Although it is important to be as transparent as possible, it is also necessary to be careful. confidentiality Consider what can be released, and do not assume everything is confidential all the time.

Mean, modal and median averages can be powerful tools, but sometimes the range and Applying inappropriate distribution of data points tell the most important story, such as income distribution or averages equality metrics.

Expecting greater certainty Seeking a suitable or ‘good enough’ level of confidence in the data may make better use than is possible of resources than seeking perfect data.

The future measurement of sustainability

The world of sustainability measurement is evolving rapidly. Lessons learned in the corporate world are being applied in the public sector and vice versa. In their role as the working group for the Bristol 2015 initiative, KPMG in the UK and members of the Green Capital Partnership Measurement Group brought together a range of stakeholders to discuss and develop a new and more flexible approach to reporting sustainability.

That experience can help other cities understand their progress in becoming happier, healthier and more sustainable.

Why create a new framework? The group reviewed several existing approaches to measuring city sustainability, but although these had advantages, they were not flexible enough to measure how much happier, healthier and more sustainable Bristol had become as a result of being a European Green Capital. Criteria for selecting a The biggest challenge was that many Criteria for selecting a existing measurement frameworks framework measure or KPI did not take the theory of change A framework should: into account sufficiently. Almost — The indicator is already being all the KPIs measured some of the — be credible measured or can be measured with ultimate impacts of an intervention, little extra effort. — be globally recognized but the group wanted to assess the — Appropriate baselines exist for impacts of the Bristol 2015 program — provide a clear structure comparison. over the course of the year, in order — incorporate the city’s themes to determine whether the activities — The measurement will show change but function independently being undertaken would have a positive over a year. of them impact on longer-term goals that were — The indicator can be compared with months or years in the future. — consider every aspect of the city that of other cities. — take account of the theory of The criteria that the group used to — The indicator is meaningful to change develop a measurement framework residents and other stakeholders. are widely applicable. — be flexible enough to adapt or — The indicator is on the appropriate expand as assessment proceeds. change pathway.

The Integrated Reporting — Economic capital: GDP, tax Integrated Reporting Framework revenues, jobs, employment, Framework process investment No existing measurement tool for — Social capital: community cohesion, 1 sustainable cities was appropriate for connection, integration, diversity, the purposes of Bristol 2015. Instead, crime Chose the IR Framework and defined the working group chose to use the what the six capitals meant to the city. Integrated Reporting (IR) Framework — Natural capital: areas of natural developed by the International beauty, biodiversity, wider ecosystem Integrated Reporting Council (IIRC) to services assess the city’s change in sustainability 2 over the year. — Human capital: happiness, well- Mapped 150+ KPIs from existing being, education levels Originally developed for reporting standards onto the six capitals. in business, the IR approach is now — Manufactured capital: roads, being extended to government. It is railways, water infrastructure designed to create a ‘clear, concise and comparable format’ for measuring — Intellectual capital: patents 3 sustainability that will bring consistency registered, students, ideas, common Chose KPIs that were of particular to sustainability reporting. knowledge interest to city stakeholders. The six capitals and their The flexibility of the IR Framework allows application to cities city leaders to examine the various capitals, choose suitable KPIs from 4 At the heart of IR is the concept of the among the best tools reviewed and then six capitals. Put simply, to achieve true examine the change pathways required Worked with academics to long-term sustainability, six types of for those KPIs. consider indicative, representative value that exist in any organization, behavioral proxy metrics that could For Bristol 2015, this process made it group or society must be optimized. The be influenced and would change possible to decide on which behavioral approach recognizes that too often we within a year. change to encourage during the year focus on economic or financial value at and to develop a way to measure that the expense of investing resources in change. Encouraging the right behaviors Output and impact KPIs human, natural or intellectual capital. by residents and businesses would then The IR Framework encourages us to provide positive outcomes for the broader 5 think about how values can be moved sustainability of the city in the long run. between the various capitals. For Categorized the chosen metrics by The process that the working group example, economic capital (money) is availability of data. followed can be outlined in six steps. used to pay for new roads or to develop new healthcare solutions that in turn improve human capital (health). 6

Developed intervention/project- level metrics against relevant capitals in order to infer the contribution to macro-level changes through interventions.

Input and output KPIs

KPMG insight What is my city worth?

What is your local park, library, bridge or The six areas of capital are as follows: For example, many libraries have been swimming pool worth? We can easily forced to close in cities in recent years, put a dollar figure on infrastructure, but — Economic capital: the earnings but a library creates intellectual capital that can never truly reflect the long-term of business and individuals across through access to learning materials return that an asset provides to a city. the city and information. It improves local Cities need to take a much wider set — Manufactured capital: the value of people’s job prospects and increases of measurements to make informed the constructed physical assets of a city’s social capital by providing a judgments about where to allocate their the city, including roads, buildings, venue where older people who would increasingly scarce resources. vehicles, dams and so on otherwise be isolated can enjoy human contact, children can attend playgroups Disbursements from central governments — Human capital: the health and well- or adults can get a boost simply by have been reduced over the past few being of citizens meeting friends for a coffee. years, as has revenue from taxing — Intellectual capital: the cumulative hard-pressed business. Simultaneously, Closing that library would generate a know-how and collective skills of demands on welfare services have short-term cost saving but could have the city grown. From Sydney to Shanghai, cities an extremely detrimental effect on the have to do more with less. — Social capital: the strength and longer-term cohesion of the community effectiveness of the relationships and the skills of the local workforce. Under this pressure, it would be easy within the city, including families, to put more value on infrastructure that communities, business and the The majority of existing measurements generates economic growth, but that perception of the city by others focus too heavily on output indicators, could be a mistake. New factories can (e.g. tourists) like the number of buses, libraries or create economic growth, but if those schoolbooks you get for your money. It — Environmental capital: the natural factories pollute the water supply, their is considerably harder to measure the resources that benefit the city or, effect on the population’s health and impact of that investment, as that could considered negatively, the costs well-being would be damaging — not to take years to filter through the system. imposed by carbon emissions and mention the economic harm caused by However, if we truly want our decisions other pollution. the pollution of natural resources. to affect the long term, we must start to Measuring value in this way lays bare factor in True Value much more. While working with Bristol in 2015 during how services that look like costs can in its year as the European Green Capital, fact generate long-term value elsewhere. By measuring the True Value of each KPMG used the six capitals model along It also gives us a way of thinking that aspect of a city’s capital, we can have with our True Value approach to consider recognizes we can often create value by an evidence-based discussion about how cities can more consistently measure optimizing the trade-offs between capitals the areas that genuinely create value the value of their services and assets. instead of focusing on one or for the city and its residents. Linking the Considering these six capitals can help two at the expense, or without thought, beneficiaries of the True Value of a service cities assess the broader contribution of of others. or asset with its funding can create a fairer their assets to their long-term viability approach to funding city infrastructure. and well-being.

What are the next steps?

The work of KPMG in the UK and Integrated Reporting The diagram below demonstrates the members of the Green Capital Framework how various types of city activity are Partnership Measurement Group for linked within the IIRC’s Framework Bristol 2015 has produced what we The IIRC Integrated Reporting Framework and identifies where some of their True believe is one of the leading frameworks offers a way to capture the positive and Value may lie. Each of the activities and for thinking about the long-term negative contributions to each of the six functions described within the MRM can sustainability of a city. It allows us to think capitals made by any given city activity. have positive and/or negative impacts on about how we transfer value between the six capitals encompassed by the IR the six capitals to ensure that the most KPMG’s True Value Framework. Only some of these impacts, important aspects of a city’s sustainability however, will be significant to the whole goals are optimized. methodology program or to particular stakeholders. True Value recognizes this distinction and KPMG’s True Value2 approach KPMG is currently working on an calculates the material contributions of recognizes that although we need extension to this process, merging a each activity to the relevant capitals. number of approaches that have already to expand the focus beyond simple been applied to the public sector. economic valuation, it is far easier to Some sustainability measurement compare the six capitals when they work has already been carried out Municipal Reference Model use the same measure. Using a wide for various national infrastructure range of sources, the methodology operations such as long-distance The Municipal Reference Model (MRM) selects measures from the most rail and telecommunications. This provides a consistent framework important capitals and converts them approach is right at the forefront of city for examining all the services and into financial values, making it easy to measurement, and KPMG welcomes activities within a city, whether they are compare actions across all six capitals. discussion with any city interested in provided by the city government, the trialing the approach. Please contact For example, we conduct studies on the private sector or others. These include [email protected]. justice, education, parks, water, power, value of every square kilometer of parks communications and culture, among in a city, and use that information to other areas. This broad approach is indicate a return on investment for a city’s important because it allows comparisons parks service that can be compared to across cities and stakeholders when other spending allocations. services may be provided by various mixes of city, state, private and third- sector organizations.

KPMG’s True Value methodology Municipal Reference Model Describes the various Function 1 Function 2 Function 3 activities/functions a city performs/requires

Econ Social Natural Human Manuf Intel Econ Social Natural Human Manuf Intel Econ Social Natural Human Manuf Intel Integrated Reporting + + + + + + + + + + + + + + + + + + Provides a recognized framework to categorize the values created − − − − − − − − − − − − − − − − − − or destroyed by programs and services True Value + + + + + + + + + + Offers a method and IR to calculate the relevant values − − − − − − − − − − −

2 For more information, go to www.kpmg.com/truevalue

Where do we go from here?

This module has shared examples of what others are doing in measuring the sustainability of their cities. It is almost certain that every city in the world has some form of data collection, and that it will include sustainability metrics — although they may not be called that.

The experiences of the cities described in this report suggest some key questions that any city should consider when planning next steps.

Questions to ask when measuring sustainability

— Why am I measuring? What impact do I want to make? — Do I want to measure behavior as outcome, or results as impact? — What data already exists? — Who will want to know the results of measurement? May I speak with them? What do they want to know, and how will they use the data? — Who can I work with? — How long can I wait for answers? What level of certainty am I looking for? Where do I stop on the change pathway? Acknowledgments

KPMG’s Global Sustainability and Cities practices worked with stakeholders from around Bristol to produce the initial version of this module of The future of cities. The case studies are written by those involved in sustainability work. The rest of the paper is written by KPMG based on insights from helping organizations measure their sustainability for more than 20 years. For further information, contact:

Joanna Killian Partner, Local Government, Public Sector and Health KPMG in the UK [email protected]

Stephen Beatty Americas and India Head of Global Infrastructure Head of Global Cities practice KPMG in Canada [email protected]

Alan Mitchell Executive Director, Global Cities practice KPMG in Canada [email protected]

We would also like to thank Mike Zeidler and Sam Wren-Lewis of the Happy City Index, Alex Minshull and Mark Leach of Bristol City Council, and Grant Patterson of the International Integrated Reporting Council. Without their contributions, this paper would not have been possible. The authors wish to thank the faculties of the University of Bristol and University of the West of England for their contributions to the section on measuring the impact of programs and services.

30 The future of cities: measuring sustainability Contacts

Richard Wagenmakers Partner KPMG Advisory T: +31 20 656 8243 E: [email protected]

Sander Grunewald Senior manager KPMG Real Estate T: +31 20 656 8447 E: [email protected]

kpmg.com/socialmedia kpmg.com/app

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. © 2016 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. otherAlthough member we endeavor firm vis-à-vis to provide third accurate parties, and nor timely does information,KPMG International there can have be no any guarantee such authority that such to information obligate or is bind accurate any memberas of the firm.date itAll rights reserved. Theis received KPMG or name that itand will logo continue are registeredto be accurate trademarks in the future. or trademarks No one should of KPMG act on suchInternational. information without appropriate professional advice after a thorough examination of the particular situation. Designed by Evalueserve. Publication© 2016 KPMG name: Advisory The futureN.V., registered of cities: withmeasuring the trade sustainability register in the Netherlands under number 33263682, is a member firm of the KPMG network of independent member firms affiliated wThe name KPMG and logo are registered trademarks of KPMG International. Publication number: 133402-G Publication date: April 2016