Approaches to the Formation of a Mechanism for Sustainable

Development in the Innovative Ecosystem of Housing and Communal

Services in the East Kazakhstan Region

Nadezhda Shmeleva

, Almaz Kabdrakhmanov

and Katarzyna Gdowska

National University of Science & Technology (MISIS), Moscow, Russia

D. Serikbayev East Kazakhstan Technical University

AGH University of Science and Technology. 30-059 Kraków, Poland

Keywords: Sustainable Development, Innovative Ecosystems, Water Supply Systems, Management of Innovative

Activity in Housing and Communal Services.

Abstract: This paper highlights a sustainability and self-organization perspective of the innovation ecosystems in

housing and communal services. The theoretical basis of the research are the concepts of sustainable

development, open innovation, circular economy, and the theory of complex systems sustainability. The

article formulates the basic principles of innovative technologies implementation in the water supply sector

of housing and communal services. A conceptual model of the organizational and economic mechanism for

managing the development of an innovative ecosystem in the water supply sector in the East Kazakhstan

region has been developed. Theoretical and methodological provisions, conclusions, applied

recommendations can be used in the process of diagnostics and monitoring of innovative development of

water supply systems on the regions level, in the development of national strategies for economic and

innovative policy of the Republic of Kazakhstan. The propositions arising from this analysis provide

information to help academics, policymakers, government, and individual enterprises with a more adequate

understanding of the practical mechanisms and tools that help trigger self-organization and sustainable

development of the innovation ecosystems..

1 INTRODUCTION

Globalization has led to an increase in competition on

international markets. Technological, digital, and

political trends have rapidly engulfed all institutional

and economic processes. Breakthrough innovation

and cross-industry impact have become the norm in

many processes.

At the same time, integration, in which different

systems interact with each other and create value

from data streams, forming an innovation space is

crucial. The unsolved problem of post-Soviet states

economies is the search for specific drivers that

ensure innovative sustainable development, which

creates favourable conditions (organizational and

economic mechanisms, scientific and technical base,

https://orcid.org/0000-0002-2564-6241

https://orcid.org/0000-0003-1778-6321

https://orcid.org/0000-0002-7964-3724

motivational and stimulating mechanisms) for the

generation and implementation of innovative

activities, the introduction of scientific and

technological developments in production, and the

promotion of products to the market.

The Sustainable Development Goals (SDGs) aim

to promote sustainable economic growth through

higher levels of productivity and implementation of

technological innovations. As stated in Goal 9, there

is a request to build “sustainable infrastructure,

promoting sustainable industrialization and

innovation” (Report of the WCED, 2019). There is a

need for an integrated multi-stakeholder approach to

progress across the multiple SDGs set in the 2030

Agenda for Sustainable Development.

Innovative technologies in the field of housing

and communal services as the leading direction of

178

Shmeleva, N., Kabdrakhmanov, A. and Gdowska, K.

Approaches to the Formation of a Mechanism for Sustainable Development in the Innovative Ecosystem of Housing and Communal Services in the East Kazakhstan Region.

DOI: 10.5220/0010665700003223

In Proceedings of the 1st International Scientiﬁc Forum on Sustainable Development of Socio-economic Systems (WFSDS 2021), pages 178-185

ISBN: 978-989-758-597-5

socio-economic development of the state, have an

impact on the quality of life of a person and society.

The implementation of innovation development

policy is mainly due to the internal innovation

potential and effective management influence. The

study of the innovative development theories has

increased the attention to innovations in the field of

water supply.

The lack of quality drinking water is an important

factor in the health of the population. Back in the 19th

century, Louis Pasteur said: "People drink 90% of

their diseases." (Garrone,2017).

In Kazakhstan, every year there are up to 1,000

new cases of diseases per 100 thousand people due to

the poor quality of drinking water. Water is an

exhaustible resource, so more and more countries

around the world are recognizing the need to increase

innovation capacity in the water sector.

The water supply sector is a socially significant

area, the infrastructure and condition of which are of

strategic importance for the national security and

economy of each state. The importance of

strengthening the innovative sector of modern water

supply systems is largely due to the course of

modernization of socio-economic policy and

sustainable development.

The paper is organized as follows. First, a

theoretical overview of the innovation and

sustainable development concepts, related schools are

provided. Section 3 introduces the factors influencing

the development of innovative processes, followed by

Section 4, which presents research methodology.

Section 5 presents an innovative organizational

model of housing and communal services (HCS).

reform. In Section 6, the authors make some

concluding remarks and discuss prospective models

for creating an innovation ecosystem in HCS. The key

findings of the study, theoretical contribution and

practical significance of the study are highlighted.

2 LITERATURE REVIEW

The theoretical basis of the research are the concepts

of sustainable development, open innovation, circular

economy, and the theory of the stability of complex

systems. The most acknowledged definition of

“sustainable development” is that proposed by the

United Nations World Commission on Environment

and Development (UNWCED): “Sustainable

development is development that meets the needs of

the present without compromising the ability of future

generations to meet their own needs”. This means that

the strategy of each market participant focused on

long-term development should ensure a balanced

triad of economic, social, and environmental

components. There are different approaches to the

concept of sustainable enterprise development

(Adams, 2016; Hope, 2009; Zu, 2013; Tolstykh,

2020a; Wirtenberg, 2008). Sustainable enterprises

consider both the economic and social aspirations of

people related to the enterprise and the impact on the

natural environment (Shmeleva, 2018).

Summarizing the positions of researchers, the

authors understand the sustainable development of an

individual industrial enterprise as the long-term

balanced development of a company, the targets of

which are accumulated and harmonized according to

the principle of triad: technological, social, and

environmental areas. In the digital age, a large role is

given to innovativeness in the triad of sustainable

development.

Innovative sustainable development is a

development that creates favourable conditions

(organizational and economic mechanisms, scientific

and technical base, motivational and stimulating

mechanisms) for the generation and implementation

of innovative activities, the introduction of scientific

and technological developments in production, and

the promotion of high-tech products to the market.

The concept of open innovation was first

formulated by Chesbrough H. (Chesbrough, 2006).

This concept allows us to overcome geographical,

institutional, and disciplinary barriers due to the

openness of R & D, the diffusion of technologies, the

exchange of knowledge between universities,

scientific laboratories, engineering centers, suppliers,

consumers, government. Open innovations (Yun,

2019; Carayannis, 2016) are based on the following

principles:

 transition from the use of exclusively internal

closed developments to the use of external

knowledge.

 there are many ideas on the market that can make

a profit for the company.

 creating a sustainable business model of the

organization is a priority compared to market

leadership.

An innovation ecosystem can be defined as an

open and self-developing system of network equality

of economic actors, self-organizing based on a special

environment formed because of the exchange

(overflow) between the actors of innovative energy,

namely, new knowledge, technology, information, or

unique resources (Tolstykh and Shmeleva, 2020b).

Over the last decade, the discourse on enhancing

the sustainability of industrial development has

focused on the circular economy model, and the idea

Approaches to the Formation of a Mechanism for Sustainable Development in the Innovative Ecosystem of Housing and Communal

Services in the East Kazakhstan Region

179

to reshape the industrial systems following the

objective of a more balanced interplay of

environmental and economic systems has gained

increased attention worldwide. Circular economy is

widely considered as a strategy to reconcile industrial

systems with the natural environment through the

careful design of new products and implementing the

“closed-loop system” processes (Fischer, 2017).

Implementing the circular economy (CE) concept

encourages environmental protection and social

prosperity (Sverko,2020), eliminate the

environmental problems faced by society, while

enabling value-added growth of industries in line with

country’s sustainable development. Originally, CE

aims to increase the efficiency of resource use, with a

special focus on urban and industrial waste, to

achieve a better balance and harmony between

economy, environment, and society (Ghisellini,

2016). The understanding of circular economy is

ambiguous among researchers today. Many studies

argue the CE implications in managerial terms for

business efficiency (Bocken,2016). Meanwhile,

“there is no single group with the undisputed

authority to define what circular economy means

exactly” (Lewandowski,2016). Many studies show

that the CE model traces different methodological

approaches and that its origins seem to be mainly

rooted in different fields. The principles of CE are

mainly gathered from other schools of thought,

including industrial ecology, ecological economics,

performance economy, natural capitalism, product-

service systems, blue economy (Pauli, 2010), etc. A

deeper analysis of the approaches proposed by these

schools of thought is presented in (Borrello,2020) In

addition, it is crucial to identify how CE and the

concept of sustainability relate. As noted in (Tolstykh

and Shmeleva, 2020b), CE can contribute to the

United Nations Sustainable Development Goals,

including environmental, economic, and partly social

dimensions of sustainability.

Several approaches are used to define the stability

of the socio-economic system as a complex concept

(Gershanok, 2006; Blauberg, 1973). The first

approach, the stability of the socio-economic system

is related to the security, stability, reliability,

integrity. It should be noted that the stability of the

national economy is determined based on the criteria

of its security, stability, ability to be updated and

constantly improved. The stability of a country as a

single system means the strength and reliability of its

elements, economic and organizational ties between

them, and the ability to withstand internal and

external loads. In contrast, safety, reliability, and

resistance are considered as conditions and attributes

of the stability of a socio-economic system, while

reliability and resistance are mainly inherent in

technical systems.

The second approach is based on the

understanding of the stability of the socio-economic

system as the stability of parameters over a certain

period. Stability is "a necessary condition under

which the system must return to a state of equilibrium

after any small jolt." The stability of a system is

characterized by its ability to remain relatively

unchanged, despite internal and external

disturbances. As a counterargument, the opponents of

this approach put forward the property of self-

organization of the socio-economic system. It has a

built-in mechanism for transforming the system and

performing its functions, ensuring the survival and

stability of the system and its approach to the goal.

This does not exclude the occurrence of

contradictions in the system itself since its parameters

are constantly changing during development and

operation.

The third approach, stability is "the ability to

maintain a dynamic balance". From this point of

view, the economic stability of the regional economic

system is considered as an integral property of the

system to maintain dynamic equilibrium when

changing the parameters of the external and internal

environment within acceptable limits. Considering

the approaches exposed, we must emphasize that

there is a lack of organizational and managerial

models that ensure sustainable development.

3 CONCEPTUAL FRAMEWORK

The search for organizational and managerial models

that ensure innovative sustainable development has

been conducted for more than a decade. However,

common approaches to determining the effectiveness

of the activities carried out in the innovation sphere

have not yet been fully developed. The study of the

factors influencing the development of innovative

processes in water supply systems and the conditions

for the development of socio-economic systems from

the perspective of an innovative approach allows to

solve the following priority tasks:

• precise definition of the institutional

conditions for innovative development of a particular

region.

• search for the most significant and effective

factors for the effective functioning of state and

regional systems.

• determination of the optimal criteria for the

ratio of the scientific result and the invested funds.

WFSDS 2021 - INTERNATIONAL SCIENTIFIC FORUM ON SUSTAINABLE DEVELOPMENT OF SOCIO-ECONOMIC SYSTEMS

180

• identification of relationships between

different sectors of the economy that also affect

innovative development.

• assessment of the current state of innovative

development of the water supply system in the

region.

Ignoring the priority of solving the set tasks raises

several objective and subjective obstacles to the

effective development of both the state as a whole and

its individual regions.

Noting the high potential of regional and urban

mechanisms of socio-economic policy that can

influence innovative management. The level of

innovation in the country's region is formed from the

general interaction of many factors. All factors

influencing the formation of the innovation

environment can be divided to four groups: socio-

economic conditions of the region's development;

human capital; innovative potential and management

capacity.

Ensuring the sustainable development of the

economy, the formation of the economic security of

the country or region assumes a state of the economy

in which the level of social, political, defense

existence and innovative development is consistently

maintained.

The ability to self-develop and progress means the

ability to independently create a favourable

investment and innovation climate, develop

innovative and intellectual potential.

Developing countries depend on innovation, as

new digital technologies and innovative solutions

create opportunities to fight disease, poverty, and

hunger in the world's poorest regions.

As a result of the survey of residents of the East

Kazakhstan region, the key factors hindering the

development of innovative activities were identified

(Fig. 1)

Figure 1: The main barriers to the development of

innovation activities.

These are, first, political instability, corruption

and high taxes, and a shortage of qualified workers.

To consider, the interests and identify consumers of

housing and communal services, their classification is

proposed:

1. Focus on satisfying the customer's details.

- direct services that meet the immediate needs of

customers (payment,

commercial, investment

services).

- indirect or related services that make it more

convenient to provide direct services without the

client receiving additional utility (clearing services,

consulting services, etc.).

- services that bring additional utility to the

functioning of housing and communal services or

reduce housing and communal services costs.

2. Segmentation by customer groups. According

to the complexity of the organization, there are

several options for services provided by housing and

communal services enterprises:

- services that are in the greatest demand from

residents (services for overseeing the provision of

water resources).

- services that require a special level of

organization of housing and communal services and

training (asset management of housing and

communal services, investment services).

- services that require professional knowledge in

the use of services.

- services that require special knowledge and

skills in the field of institutional planning of housing

and communal services, investment engineering.

In addition, the innovation management

principles in the housing and utilities system are

determined, based on the quality management system

and innovation management. The system model that

provides the implementation of the principles of

innovation management in housing and communal

services is shown in Figure 2.

Approaches to the Formation of a Mechanism for Sustainable Development in the Innovative Ecosystem of Housing and Communal

Services in the East Kazakhstan Region

181

Figure 2: Principles of innovation management in housing and communal services.

Source: compiled by the authors

The fundamental principles of the innovative

technologies in the water supply sector of housing

and communal services, which allow to ensure proper

quality by meeting a certain set of established

requirements.

The first group of requirements, utilities based on

the introduction of innovations must strictly meet the

system of quality standards, standards, technical and

sanitary requirements, the terms of the concluded

contract, ISO criteria.

The second group of requirements, a utility

service based on the introduction of innovations, must

meet the needs and expectations of the consumer, the

requirements dictated by the company's charter, rules,

norms for the protection of the environment, and the

welfare of the housing stock. Moreover, it is the

consumer (the homeowner or the initiative group)

who should evaluate the impact of innovations on the

quality of the service provider's work. To implement

a full-fledged comprehensive assessment, it is

necessary to develop a methodological approach and

a system of indicators for assessing the impact of

innovation results on the quality of services in the

housing and utilities system.

This system should be based on the following

groups of indicators: organizational and economic;

technical and operational indicators; indicators of

resource conservation; environmental efficiency.

The third group of requirements, the utility service

must be built based on an economically reasonable

tariff that can satisfy all sides of the utility relations

and be profitable for them.

The process of implementing the principles of

innovation management in the housing and utilities

system is based on the development and description

of certain rules and algorithms for the work of the

management company and accountable persons in the

context of innovation implementation. This process

assumes that the operations performed in the

provision of services based on the introduction of

innovations should be put under the control of

responsible persons, and that orders, decisions and

orders will be communicated to a specific performer

and executed at the required level. The presented

principles and factors of innovative development

should be considered when forming the mechanism

of sustainable development of housing and communal

services.

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4 RESEARCH METHODOLOGY

The study of innovation ecosystems is based on the

methodology of complex systems and networks. In

accordance with the theory of complex systems,

ecosystems be-long to the class of nonlinear systems.

The innovative organizational model as an ecosystem

of integrating knowledge obeys of a systematic and

self-organization law. The law of self-organization

works when the sum of the potentials of the system

significantly exceeds the total effects of the micro-

and macro environment. The basis for implementing

preventive measures for the ecosystem is the constant

work to increase the amount of knowledge

accumulated by complex systems, the constant

processing and transformation of information and

creative ideas into knowledge and new technologies.

From our point of view ecosystem is not only the

ability to respond and reflect technological and digital

challenges, but also create intelligent technical

environment that are minimize negative

consequences and create optimal conditions for the

implementation of projects at any level.

Another approach to the study of ecosystems is

represented by the entropy theory by I. Prigogine

(Prigogine, 1991). The ecosystem is a dissipative

system, as the dissipation function (entropy

production within the ecosystem per unit time in a

unit volume) is different from zero. Dissipativity is a

loss of energy. One of the main properties of complex

self-organizing systems is the accelerated production

of entropy, that is, when a new ordered structure

arises, the rate of knowledge entropy production

increases. Entropy is a quantitative measure of

disorder in a system. The greater the entropy of the

ecosystem state, the more ways it can be implemented

between actors, the less ordered it is, and the more

self-organized the actors of this ecosystem are. In

other words, an increase in entropy means an increase

in the degree of freedom of the actors from external

control, and, consequently, an increase in its self-

organization and, as a result, responsibility for its own

sustainable development.

The assessment of knowledge production in the

system or intellectualization should reflect the

economic return on investment in the development of

technologies, human resources and increase the level

of intellectual potential. The effect of system

intellectualization occurs when technologies stimulate

the transfer of knowledge, business innovations, and

lead to increased productivity within the company.

And finally, speaking of innovation ecosystems as

cooperation of actors it is necessary to study the

processes of networkization in terms of the theory of

scale-free networks. B. Barzel and A.-L. Barabási

[2013] suggested that networks form a kind of

framework for the corresponding complex systems

and proved that scale-free networks are very resistant

to accidental damage, or external accidental

influences. However, deliberate damage to one or

more nodes with many connections (degree

centrality) leads to the disintegration of the network.

The authors propose using this approach to model

water system in East Kazakhstan region.

5 RESULTS

The East Kazakhstan region belongs to the most

affluent and rich in water resources region of the of

Kazakhstan, which is determined by its natural and

climatic conditions. The water fund of the region

includes rivers, lakes, swamps, ponds and reservoirs,

underground waters, and glaciers. The total

freshwater resources per inhabitant of the region are

about 50 thousand cubic meters per year.

However, the East Kazakhstan region is a major

industrial centre of the Republic of Kazakhstan. There

are more than a thousand medium and large industrial

enterprises operating in the region. In this regard, the

water fund of the region has a "moderate and high

level of pollution" in terms of chemical indicators: the

maximum permissible concentration of sulphates,

nitrites, ammonium, and some heavy metals of copper,

zinc, and magnesium. The main factors of technogenic

influence are the discharge of untreated industrial,

agricultural, and domestic wastewater into filter

reservoirs, the loss of polluted water from utilities,

emissions of gaseous substances into the atmosphere,

and the increase in the groundwater level in residential

areas and irrigation massifs. Water is defined as a

"critical resource", and growing problems with water

supply and wastewater treatment are turning the water

agenda into an area of increased attention from large

corporations and the state.

To ensure the sustainable development of the

economy of the East Kazakhstan region, it is

proposed to develop and implement a promising

innovative model for managing the development of

the water supply system.

As the analysis showed, in the water supply sector

of housing and communal services of the East

Kazakhstan region, there are no uniform norms and

rules of activity, as well as mechanisms for their

interaction with state authorities. As a mechanism for

improving the water supply system in the territory of

the East Kazakhstan region, a model of an innovative

ecosystem is proposed, the main actors of which are

Approaches to the Formation of a Mechanism for Sustainable Development in the Innovative Ecosystem of Housing and Communal

Services in the East Kazakhstan Region

183

Figure 3: Innovative organizational model of housing and utilities sector reform in East Kazakhstan region.

regional operators in the housing and utilities sector.

The proposed model is shown in Figure 3.

In accordance with the presented model, a non-

profit association of organizations in the housing and

utilities sector of the East Kazakhstan region appears

on the territory of the subject, which is an open

platform where housing and utilities professionals

and regulatory authorities have the opportunity to

meet and discuss important topics, highlight current

problems and try to find ways to solve them together.

"The process of governance is gradually

becoming not one-sided, but a bilateral and even

multilateral process." This leads to the transformation

of the borders between the state and society, as well

as changes in the format of their interaction. This

cooperation is necessary to find the most effective

tools for the development and strengthening of the

housing and utilities sector. To solve the problems, it

is necessary to regulate the issues of protection and

rational use of water resources at the legislative level,

more strictly, as well as to accelerate the processes of

innovation in water supply systems as early as

possible.

6 DISCUSSION AND

CONCLUSIONS

As a result of the study, it was found that water system

in the East Kazakhstan region has not yet reached the

necessary level of development. One of the priority

tasks is to create an effective innovative model based

on the ecosystem and circularity principles,

considering the concept of open innovation.

Further steps for the implementation of the

innovative model should be the formation of self-

regulatory organizations of the East Kazakhstan

region in the field of water supply and sanitation. To

do this, it is necessary, first, to increase the scientific

potential of the region through the implementation of

large innovative projects in the field of water supply,

financing of R&D by the state on a grant basis.

Secondly, by improving the tax system, developing

cluster strategies aimed at commercializing

innovative projects, accelerate the development of

innovative entrepreneurship. Third, by reducing

bureaucratic processes in making investment project

decisions, increasing the number of grants, creating

business incubators, and increasing the level of

development of multi-level innovation infrastructure.

Fourth, by simplifying the conditions for attracting

investors and financial institutions, by promoting the

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development of a network of individual investors, to

develop the financial infrastructure of the region.

ACKNOWLEDGEMENTS

This research was funded by the RFBR grant No. 20-

010-00470

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