The Time for Delivery is Now Upon Us

How would you define the concept of sustainable innovation? What is its value in Canada’s future economy?

Sustainable innovation is a new and growing field. It allows for society to send signals to business, to governments and to civil society organizations about what is sustainable – financially, economically, socially, environmentally, politically, and technologically. It allows these groups to design the products and services of the future, which will meet society’s needs and will help us transition to a low carbon, more sustainable, and more socially just economy.

“Carbon pricing helps all groups with their business case because […] carbon is fully internalized in the cost of business.”

We are on a trajectory to decarbonize the global economy within a generation and that has significant impacts on all systems: food systems, water systems, infrastructure, urban systems, energy and transportation systems. All these systems have to transition and that includes financial markets – they have to reward those transitions. I am optimistic that we are on a trajectory in the next 10, 20, 30 years that will allow capital markets to reward good behaviours because the costs of bad behaviours would be incorporated in the costs of production, distribution and consumption. So in 30 years, I think everything will be sustainable. Innovation is going to be a major catalyst for delivering that sustainable future.

There are certain markets where good behaviour gets recognized and rewarded. Going beyond the green niche products like fair-trade coffee, there are products and services that are getting rewarded because the market is responding. But the market can only respond effectively when the costs of misbehaviour are fully incorporated, so that is really where governments and the fiscal authorities have to be able to act. We have to be bold in terms of internalizing the costs of environmental and social behaviour, whether that is through carbon pricing or increasing requirements for transparency and reporting on corporations so we can show where things are not working. Governments can do that. They can require high levels of transparency, higher levels of accountability from businesses and other institutions.

How is Canada doing in relation to its SDG goals and other social and sustainability commitments? What can be done to accelerate our progress?

Canada has to play a leading role internationally on the Sustainable Development Goals. I think the SDGs have been a greater rallying point for many in society, including businesses, than the Millennium Development Goals were, which is a good thing. The narrative is positive and people are looking for Canadian leadership and the Canadian Government to say many of the right things.

“We are not on track to meet our targets and that is a problem for the country given the strength of opinion that we have expressed in the last two or three years on addressing climate change and delivering on our Paris commitments.”

I think Canadians are currently happy to see the government articulate a case for the Sustainable Development Goals in specific terms. For example, Canada has been leading the way internationally on conversations around gender equity. But where Canada really has to raise its game is in the field of development assistance and on climate change. Many people believe we are not on track to meet our targets and that is a problem for the country given the strength of opinion that we have expressed in the last two or three years on addressing climate change and delivering on our commitments. There is a big hole, and we can only bridge that gap through some dramatic shifts in public policy and in technical innovation.

“I do not think that this generation will forgive Canadian governments who do not deliver on their narratives.”

On development assistance, Canada has not been meeting the UN target on percentage of GDP for development assistance, and has only recently put in place a Development Finance Institution, which is going to run as a subsidiary of Export Development Canada (EDC). I am an advisor to EDC and was slightly involved with that process. I think it is a great initiative, but it has a very small budget. Development finance is a very important tool for countries. In terms of overseas development assistance, we need to massively improve our approach. Canada cannot deliver without resourcing that properly. We have to raise our game on indigenous rights. We’ve seen a good start and a narrative that is positive, but now it is about delivery. I do not think that this generation will forgive Canadian governments who do not deliver on their narratives.

How must we support the private sector to bridge the gaps on these crucial goals, such as achieving our climate and emission reduction targets?

Canada’s cleantech sector holds much promise.. The capital markets are beginning to discover cleantech on a more significant scale. But one of the main challenges our cleantech sector faces is that its companies cannot get adequate access to finance and to human capital – this is an issue I am deeply involved with at the moment. So the current challenge for Canada is to keep up and there have been recent reports that suggest that we have a lot of things to fix.

The metric that really matters is not how many cleantech start-ups we have because they may not succeed and scale. It is how many jobs we are creating in cleantech companies in the country today and in the future. Those have to be sustainable jobs: real companies making real things that they are selling to real people in Canada itself, but most importantly, exporting to the rest of the world. On this point we are at risk of slipping into being non-competitive. The Federal Government’s approach is to encourage cleantech investment wherever they can, but I do not think that is necessarily the optimal approach. Ultimately, we have to increase the capital flow, increase the financial flows, and increase the human capital flow.

“Canada has to double down on the industries of the future whilst allowing the industries of the past to sunset themselves as gracefully as possible.”

Another component we must change is the way we do education. It is a massive challenge for a cleantech start-up that wants to scale from 200 to 2,000 employees if the education and other support systems are not there. We are behind as a country if you contrast our ability to develop such talent with parts of Europe and China, where they really seem to have this right. Even with China’s ‘command and control’ economy, the scale of cleantech innovation and the ability to sell into domestic markets is enormous, which then creates the conditions for exports. If we just look at what China is doing with electric vehicles and what it has done on solar panels, they have an approach that drives innovation and then drives domestic sales and their export strategy. Canada is not a command and control economy, so we have to think of smarter ways to compete and support the growth of cleantech if we are to address our own environmental challenges and those of other countries.

Our moment to make this impact is now. If you look at the US, which clearly is trying to go back to the industries of the past by protecting their steel and aluminum industries, and protecting coal, oil and gas – this is a bad strategy. Canada has to double down on the industries of the future whilst allowing the industries of the past to sunset themselves as gracefully as possible. It is very important for Canada to set a trajectory that is consistent with how the world is going to be part of that global change, and to keep the world the right side of two degrees in terms of atmospheric temperature increases.

“We either get to a low carbon, socially just economy by 2050 through dramatic shifts on how we deploy our resources and how we design our systems, or it is going to be a mess.”

There is no question that Canada is doing extremely well on this narrative. However, it is now about delivery. The time for rhetoric has now passed; the time for delivery is now upon us.

A prime minister needs to know that there are practical routes that are politically effective – if not risk-free, then at least risk-moderated. Canada’s pathways to a low carbon economy require policy changes that the government has well within its grasp. Procurement and investments in infrastructure are a perfect example. There are already hundreds of billions of dollars flowing so we have to harness existing spending as an immediate short-term opportunity. If the federal government is handing cash over to the provinces for things like infrastructure spending, and then that flows through to how we design our cities and how we design our institutional buildings, then everything that gets handed over needs to come with carbon compliance as a minimum. Federal monies transferred to the provinces need to be directed to ensure future carbon efficiency. That will help build a greener country because the infrastructures and the systems we are building with federal money – our tax dollars – will be greener. A lot of things can happen at the federal and provincial level that will help these transitions occur. We must seize these opportunities.

On a panel on Leadership Skills for a Sustainable World in 2013 you said, “How do we become disruptive and entrepreneurial within business organizations, which might not look like Corporate Canada today?” Five years later, and with the Academy for Sustainable Innovation now launched, what answers have you found and what issues still remain?

I could still pose that question today. There are many things that are underway focused on building our green economy and training its future leaders. For me, the key metric it is how many green jobs we must create and by when. We must track that.

It has been announced that a number of Canadian universities have slipped in the global rankings, which includes graduates’ employability and other factors. So we have some serious challenges to address. One of the challenges that I have spoken about publicly and written about is that unlike the UK, Australia, and other countries we are competing with, we have no national strategy on higher education. Higher education is a provincial jurisdiction, so we are lucky to have the University of British Columbia, University of Toronto, and entrepreneurial universities like Waterloo and Ryerson. But I am not confident that Canadian universities as a whole will maintain their place in the international rankings with the persistent underinvestment by provinces that we struggle with – it is the easiest thing to cut.

“Unlike the UK, Australia, and other countries we are competing with, we have no national strategy on higher education.”

What we see happening is that tuition levels go up, the students carry more debt, and when they graduate, they take a job – any job. They are less likely to be entrepreneurial, and they are less likely to want go and volunteer in Africa or Latin America, because they have to pay down their debt. We are therefore saddling this generation with debt that makes them less entrepreneurial, and we are also short-changing our universities in terms of their core funding. So whilst I totally support what other universities’ presidents have said in terms of the contribution they can make – and in certain cases, are making – I would say that they have a number of handicaps.

One of course is the provincial funding issue. Another is that universities move very slowly. Canada has a very traditional model of university education where academic programing is typically only determined by the academics. Programs that might support cleantech or might allow arts and humanities students to become more connected to entrepreneurial activity and make a difference in business – those programs do not really exist and academics are not always very interested in inventing them. So the university president only has so much power. Whilst you can look at particular faculties – engineering at Waterloo is a fantastic faculty, a lot of professors and students are involved in cleantech and other start-ups – the more conventional focus is mostly on getting scholarly grants, not about working with industry or with government to address our challenges.

“We are saddling this generation with debt that makes them less entrepreneurial, and we are also short-changing our universities in terms of their core funding.”

The Academy for Sustainable Innovation is working on a number of programs that will be delivered with universities and colleges, that maybe will get to market faster, and support universities in the transition of their programming to something that is needed now rather than in 10 years’ time.

Are you optimistic about the future, and how do you see Canada’s economy in 2050?

I always remain optimistic – there is no other way to be. Let me also be realistic. I think Canada has two choices. We either get to a low carbon, socially just economy by 2050 through dramatic shifts on how we deploy our resources and how we design our systems, or it is going to be a mess. The way we avert that is to be bold and dramatic in our public policy and business decision making, and recognize that not only is that the right thing to do but it is also the economic and socially smart thing to do. I am optimistic because I believe in human ingenuity and I believe that we have to motivate this generation not to become despairing, which is why I think we should eliminate tuition fees and a lot of other obstacles for them. But I also think that the pace of change in technology – such as artificial intelligence – means that we will have a dramatically different economy in 2050. It will be unrecognizable.

“We either have to be bold and carry everyone with us, or we have to be prepared for some pretty negative outcomes driven by technological change, social pressures, and security pressures.”

Robots are going to be taking a lot of jobs away – there is no question about that. The key question is: what do you do with that spare labour? If we do nothing, then we have dystopia, we have young people roaming the streets with nothing to do. Add to that environmental and social pressures, and it could be a mess. However, if we are proactive and we equip young people with the skills – which will be totally different than the skills they currently get in business schools – to manage their way to a new economy, then we can have the best country in the world. But this requires some bold decision-making and the choice is quite stark. I do not think we can muddle through on this. We either have to be bold and carry everyone with us, or we have to be prepared for some pretty negative outcomes driven by technological change, social pressures, and security pressures – and then Canada will not be a particular nice place to be in 2050.