The Path Forward for Hong Kong’s Smart and Sustainable Development

Smart and Sustainable Development

KPMG shares perspectives with the Jumpstart team on Hong Kong’s ongoing evolution toward a smart and sustainable city. 

For Hong Kong to elevate its status as a world-leading innovation hub, it needs to continue to evolve as a smart and sustainable city. The reason is simple: Smart city initiatives can serve as a catalyst for start-up-led innovation, particularly from the city’s already well-developed fintech sector. 

The city already benefits from one of the highest consumer Fintech adoption rates in the world. Further, the growth of smart city applications is expected to continue to increase over time given the city’s well-developed technology infrastructure, as is evident in the high 5G penetration in the city. 

There is evidence that the COVID-19 pandemic created strong momentum for “smart” initiatives in Hong Kong. A 2022 KPMG survey of Hong Kong residents found that 84% of respondents were more aware of technologies that could improve their quality of life since the start of the pandemic. 

There was also strong demand for new initiatives that improve sustainability: A significant portion of respondents polled called for increased measures to reduce the carbon footprint of buildings and vehicles in the city. These findings suggest that residents would be receptive to new initiatives aimed at smart and sustainable city development, including new technology solutions developed by regional startups.

Making sustainable development a cornerstone of progress 

Given the strong public interest in smart city development, what does the path to a smarter and more sustainable Hong Kong look like? And what is the role of startups to make this happen? 

In 2020, the Hong Kong SAR government released its Hong Kong Smart City 2.0 Blueprint. It emphasizes building a strong economy and a high living standard for residents and outlines 130 initiatives to expand existing city management measures and services. The government has also pledged to set Hong Kong on a path to becoming carbon-neutral by 2050, unveiling its Climate Action Plan 2050 in 2021 which outlined the major decarbonization strategies. It makes the case that the government, citizens and local businesses must work together to combat climate change. 

Building on these measures, KPMG’s Connected Cities Conference in November 2022 highlighted the importance of creating a digital twin for Hong Kong. Creating the digital twin of a city means making the exact replica of a city (both in terms of physical appearance and information) in the virtual world. This would help governments and other stakeholders prioritize where to spend their resources and even plan infrastructure development with climate risks in mind. 

Digital twin technology has already been put to use for several years at Hong Kong International Airport. Implementing this technology on a city-wide scale could help Hong Kong reach its sustainability goals while optimizing operational processes, allowing the city to save resources and reduce its carbon footprint.

Globally, KPMG has assisted public and private sector clients with several successful digital twin adoption initiatives. For instance, this year, KPMG helped an energy company in Eastern Europe save EUR2 million by enabling them to check the effectiveness of their wind turbines using digital twin technology. In another project with a Singapore-based university, digital twin technology was able to cut down the energy consumption of the said university by 25%

Further adoption of digital twins can lead to business optimization and at the same time support Hong Kong’s net-zero agenda. A recent initiative launched by one of Hong Kong’s leading developers aims at utilizing a digital control tower concept to generate machine-learning predictive models, which drive energy-saving sustainability targets.

“Utilizing the power of digital twins can lead the way for a more sustainable Hong Kong whilst positively impacting business results. These two objectives can go hand-in-hand”, says Axel Kurschat, ASPAC Head of Cities & Local Governments, KPMG China. 

The role of startups in Hong Kong’s smart city development

As of 2022, Hong Kong is home to 3,985 startups, with approximately 93 start-ups focused on smart city projects, according to InvestHK figures.

A few examples of Hong Kong-based start-ups working on smart city initiatives include:

  • ArchiFiction—a mixed reality tech company that is trying to unlock the true potential of the virtual world;
  • Carbon Wallet—a company that helps people take steps towards sustainable living; 
  • Formwork IO—a startup encouraging carbon neutrality in the construction industry; and 
  • Varadise—a digital twin building firm.

Sandboxes, or closed virtual environments for software developers to test new applications, play a crucial role in enabling innovators to pilot their products and gather data and feedback on them. One such example is Kai Tak, the former airport and industrial area in East Kowloon. It is now being used as a pilot area to run proof-of-concept trials for smart city solutions, including real-time energy consumption monitoring, illegal parking detection and a smart recycling bin system.

As Hong Kong continues to roll out new smart city applications, stakeholders will need to manage the vast new amounts of data being generated. Open source platforms present great promise to facilitate large-scale data sharing between the public and private sectors. However, this data needs to be properly structured, stored, shared and analyzed to optimize the benefits for end users. 

“As these platforms are being developed, a data-sharing governance framework should be implemented to ensure that data assets are consistent. Robust data security measures should also be in place so that participants’ personal data is appropriately safeguarded,” Kurschat says. 

In addition, to maximize the benefits of smart city projects to end users, larger organizations need to better understand the benefits of collaborating with startups. 

“The mindset of larger organizations needs to further evolve so that they see start-ups as partners rather than service providers or vendors, or even competitors as the local and global economy continues its transformation,” says Irene Chu, Head of New Economy and Life Sciences, Hong Kong, KPMG China. “This change requires viewing innovation and sustainability as something that permeates an entire organization as opposed to a single department or office. It also requires more focus on creating value for a wider group of stakeholders rather than return on investment, taking a longer-term view to build competitive advantage using technology.”

Please see KPMG China’s latest report on smart city development, Hong Kong’s Connected Future, for more insights.

Header image courtesy of KPMG.

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