The Future of Sustainable Business in Canada

Amidst a global climate crisis and geopolitical tensions, leading sustainable business is essential for countries around the world. For a sustainable business leader to make a significant impact in this context, it is vital for them to shift from a transition mindset to a transformation mindset, much like during the digital business transformation a decade ago. With 2023 recorded as the warmest year yet, there is consensus that climate change is real and that everyone needs to play their part to help counteract this by closely collaborating across all potential dimensions. A truly sustainable business aims to grow by ensuring that it brings prosperity and resiliency through its products and/or services without causing any negative consequences to the climate, nature, and humans. 

Some common approaches are followed by both developed and developing countries across the world to address the climate crisis. However, since every country has its own dominant economic sectors, geographical location, and circumstances, they must carefully develop their own unique strategies to become a sustainable business leader. Since economic growth is paramount to any country, such a strategy should inherently set them on a path of growth, equity, and resilience. 

So far, sustainability initiatives for businesses in Canada have been driven on a voluntary basis. In March 2024, the Canadian Sustainability Standards Board (CSSB) will launch a public consultation to shape Canada’s first sustainability standards.

For Canada to be a leader in sustainable business and economy, it needs to focus on five strategic pillars:

1. Ensuring integration of climate into business strategy
2. Advancing innovation
3. Operationalizing collaboration
4. Training workforce
5. Practicing justice

Integration: Prioritize Integrating Climate Strategy Into Business Strategy

To achieve the goal of running a sustainable business, it is prudent for companies to develop bespoke climate strategies and integrate them into their business strategies. For this integration to happen, everyone in the organization must be aligned toward a common goal. This requires both top-down engagement, involving the board and senior executives, as well as a bottom-up effort, involving multiple departments, such as finance, procurement, operations, and human resources. It is important for the Chief Financial Officer of a business to understand the language of sustainability and for Chief Sustainability Officers to be included in major business decisions. Furthermore, corporate boards need to include a climate expert who can advise on keeping business and climate goals integrated to decarbonize, manage climate risks, and drive performance in the evolving global regulatory landscape. 

At an organizational level, companies should determine their carbon footprint by using recognized greenhouse gas (GHG) accounting standards. They should then aim to set up a science-based target to reduce GHG emissions, ideally by using the Science Based Targets initiative (SBTi). Roadmaps should be developed to accelerate decarbonization to reach these science-based targets. Integrating nature-based and technology solutions will play a critical role in successful decarbonization. Organizations should, therefore, prioritize actual GHG reduction and minimize claims through carbon-offset purchases. The use of such carbon offsets to reach targets should involve the highest standards of verification to avoid backlash and public scrutiny. 

Furthermore, it is important for businesses to understand their climate risk and develop resiliency plans. Like annual reports, businesses need to be transparent and disclose their sustainability goals, using the applicable standards (e.g., the International Sustainability Standards Board’s inaugural standards IFRS S1 and IFRS S2, the Taskforce on Nature-related Financial Disclosures, and any forthcoming disclosure standards from the CSSB and the US Securities and Exchange), which can also help drive performance. Global shifts towards mandatory disclosures (e.g. the Corporate Sustainability Reporting Directive and the California Sustainability Disclosure Regulation) are further driving transparency, and double materiality assessments are becoming a norm. As corporations adopt plans to meet these regulations, they also need to build climate disclosure expertise and keep abreast of changes, as these standards may be updated from time to time. 

Innovation: Solving Climate Problems is an Opportunity for Innovation

Climate change can be seen as both an opportunity and a challenge, and Canada has shown leadership by using innovative ways to address climate change at both a policy and technological level. In Western Canada, Shell’s Quest CCS facility in Alberta is one of the world’s first commercial applications of carbon capture and storage (CCS) facilities at oil sands, and British Columbia has been a leader in setting a low carbon fuel standard like California. In Eastern Canada, Ontario was the first jurisdiction to ban coal-fired power plants in North America, as well as to introduce low carbon fuel regulation (ethanol in gasoline regulation) to decarbonize the transportation sector. This led to multiple ethanol plant investments in Ontario. Quebec has become a leader in transitioning to electric vehicles in Canada, and the province’s low-cost, clean hydropower generation is a major contributor to Quebec’s economy.  

With abundant hydropower, renewables, and legacy nuclear power, Canada has one of the cleanest grids in the world. Now, it is taking the lead again with Small Modular Reactors (SMRs) with plans to deploy the first grid-scale Small Modular Reactor (SMR) in North America by 2028. The steel sector in Canada is going through major transformations as it is moving away from coal to use more recyclable materials and green technologies. At a federal level, clean fuel regulations, output-based pricing systems, single-use plastic prohibition regulations, an aim to achieve a 100% net-zero grid by 2035, and a clean hydrogen investment tax credit incentive are a few of the latest examples of policy innovation that will drive the adoption of electric vehicles; generating, transmitting, and storing clean power; and achieving a circular economy.

Every sector is encouraged to challenge themselves to develop newer and more sustainable technologies while utilizing artificial intelligence to help with transformation. A critical component of any business is to focus on sustainable operations—bringing innovation into the supply chain and promoting local solutions where possible.

Widespread electrification across sectors will play a critical role in achieving a clean energy transition. A great example of how different sectors are collaborating to achieve this is the establishment of an electric vehicle battery plant in Ontario that leverages auto and mining sector expertise and the availability of critical minerals in Canada to strengthen Canada’s position in electric vehicle manufacturing. Other examples include battery recycling technologies and storage. Given the abundance of forestry resources in Canada, mass timber buildings are leading the way in reducing embodied carbon in the building sector. Startup incubators, accelerators, financial institutions, and advisory services can further accelerate innovation by developing a robust ecosystem. 

AI-based technologies could help to optimize operations on various fronts. Starting with a more granular climate risk assessment, AI can, for example, help track data for estimating emissions to ensure that things are done ethically and in alignment with corporate governance. 

It is, therefore, evident that a combination of many technologies across different sectors will be required to lay the path to a net-zero future.

Collaboration: Dissolve Boundaries and Collaborate

A crisis often forces us to think outside the box and leads us to unique ways of doing things, especially through collaboration, as demonstrated during COVID-19 efforts. Since the onset of the climate crisis, real progress has been made around the world to address the problem. Yet, a lot more still needs to be done. All stakeholders, including competitors, need to sit at the same table to break silos and innovate together to decarbonize their sectors in an accelerated way. For example, businesses need to actively participate in consultations with stakeholders during the policy development process to ensure their comments are heard and incorporated. Governments need to ensure policy certainty, especially for hard-to-abate sectors, and provide incentives to drive green innovation. Negotiations among stakeholders should involve maximum value creation to build an ecosystem that supports and sustains clean technology growth. Customers also need to be educated about the near-term and long-term benefits of greener products and services. 

Collaboration is furthermore critical to unlocking private finance initiatives and developing innovative financial tools to support and accelerate the scale-up of new technologies developed in academic settings and by startups. Canada needs to scale up climate investment to achieve a net-zero economy by 2050, as Canada’s climate investment gap is quite big. Canada’s Sustainable Finance Action Council has created a Taxonomy Roadmap Report to spur more private sector investment and to increase Canada’s competitiveness.

Another way for Canada to accelerate the development of technology while minimizing the risk of businesses moving out of the country is for the public and private sectors to collaborate on expediting the permitting process for clean technologies. 

Finally, extensive collaboration can truly help to develop an integrated approach towards biodiversity, water, and social impact. 

Workforce: Incorporate Climate Education and Provide Skilling Opportunities for the Workforce

Given that climate education is a relatively new concept, there is a huge gap in supply and demand for skilled labour for green jobs. With many economic sectors transitioning to a more sustainable way of doing things over the next decade, a green-skilled workforce will be essential for Canada to transition to a net-zero economy.

As a near-term strategy, businesses should actively explore and offer opportunities to employees to take courses to improve their understanding of climate problems, as well as provide job-specific training. To address the growing demand for climate jobs, businesses can work closely with community colleges and universities to ensure that graduating students are more accustomed to green technologies in their respective fields. They can also offer sustainability internships for university students in technical, business, justice, and other related areas.

As a long-term strategy, businesses should provide support for or contribute toward enabling climate education at elementary, middle, and high schools. The right type of education support is needed to build a long-term supply chain of human capital to support clean tech jobs now and beyond the 2050 net-zero goal. 

Businesses also need to focus on ensuring workforce diversity and providing flexibility in terms of their employees’ work environment. They need to engage with employees and encourage feedback on how to improve the workplace culture to create an environment of respect and collaboration.

They should also include budgets for educating and reaching out to their consumers to enable them to make better decisions when it comes to climate action. Consumers may see climate-wise choices as more expensive in the short term; however, they should also be encouraged to focus on the future and be made aware of the long-term benefits of making such choices—both on a personal or a societal level. 

Justice: Make Justice the Highest Priority

The time has come to move beyond just economics as the key decision matrix and to also address environmental impacts, reconciliation, and justice as part of the decision-making framework to ensure a resilient world for future generations. 

Given the global nature of business, much of the value chain for Canadian businesses is outside Canada. Therefore, Canadian businesses need to ensure equitable labour conditions at, for example, material suppliers in other countries. To ensure reliability and resiliency, it is further important for businesses to understand climate risks resulting from extreme weather events across the value chain and have a mitigation and management plan in place for business partners in and outside of Canada affected by these climate risks. 

To promote social justice, businesses further need to ensure that all income levels, genders, and immigrant types have the opportunity to contribute to a net-zero future by ensuring that environmental, social, and governance objectives are in place. 

Especially for Indigenous groups, businesses need to create opportunities to advance toward decarbonization by supporting the much-needed flexibility for these groups through regulations (e.g. delayed start or exemption on some regulations), by protecting nature, and by providing blended and unique financial vehicles to create ecosystems where change can happen.

A Vision for Sustainable Business

In summary, there is no “one size fits all solution” to address climate change and develop sustainable businesses across different sectors. Having an open, flexible, and inclusive mindset with a focus on the five pillars described here will help Canadian businesses to become changemakers and innovators that will lead by example to help solve the climate crisis. Rather than seeing sustainability and climate change as challenges, Canadian stakeholders can approach these as opportunities to secure a cleaner future by implementing the following strategies:

• Since decarbonization is not an isolated initiative but a journey that requires transformation, companies should take a full company-wide approach to sustainability, where an entire company adopts the latest technology, collaborates, and values people and nature
• Make an effort to try to achieve decarbonization both at a corporate and at the products or services level
• Empower stakeholders with the knowledge so they can make sustainable decisions for themselves while influencing individuals and communities around them
• While avoiding greenwashing, real efforts to combat climate change should be made to build a resilient supply chain and workforce, accelerate decarbonization, integrate nature-based approaches, unlock private finance, and use disclosures to drive performance