How Businesses Can Navigate Canada’s Climate Policy Framework
How Businesses Can Navigate Canada’s Climate Policy Framework
Senior Advisor, Climate Change & Sustainability
George Sutherland is a Senior Advisor with the BMO Climate Institute, working at the intersection of climate science, policy, and finance to understand and man…
George Sutherland is a Senior Advisor with the BMO Climate Institute, working at the intersection of climate science, policy, and finance to understand and man…
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Canada’s latest National Inventory Report highlighted a 7% decline in greenhouse gas emissions, demonstrating progress toward the goal of reducing emissions by at least 40% below 2005 levels by 2030. However the heavy lifting remains to be done. While a growing number of businesses are paying attention to climate impacts on their operations and seeking to implement strategies that are good for business and the climate, decision makers should regularly evaluate how prevailing climate policy is affecting all corporate sectors.
By understanding and capitalizing on the themes below, businesses can navigate the complexities of Canada's climate policy framework and position themselves for success in an evolving landscape.
Here are five areas of Canada’s climate policies where business leaders should pay attention.
By understanding and capitalizing on the themes below, businesses can navigate the complexities of Canada's climate policy framework and position themselves for success in an evolving landscape.
1. Pricing carbon and signalling change
The foundation of Canada's climate policy is a pricing system designed to create incentives, avoid costs, and innovate across value chains.
Each business will experience the effects of carbon pricing differently, largely as a function of their fuel usage, the elasticity with which they can pass costs downstream, and the ease of implementing actions that reduce their exposure to carbon pricing. Businesses can benefit from examining the impact of rising carbon prices on their operations, cost of inputs, and market access, allowing for informed decision-making regarding fuel switching, enhancing energy efficiencies, generating or purchasing high quality carbon offsets, or any combination of these strategies.
2. Rewarding innovation and emission reductions
Market-based systems at federal and provincial levels provide revenue-generation opportunities for businesses that reduce emissions. Those that innovate will not only lower their compliance burden in regulated carbon pricing systems, but also have the potential to monetize credits through sale.
Businesses can conduct a comprehensive analysis of their operations to identify areas for emission reduction that qualify for carbon offset credit generation. A growing list of opportunities exist, including improved management of forests, grasslands, and agriculture soils, reducing methane from landfills or livestock, fleet vehicle conversion, charging infrastructure installation, hydrogen distribution, or switching chemicals in refrigeration systems and manufacturing processes. These programs seek to channel investment from high emitting to low-emitting companies and technologies.
3. Setting standards for a greener future
Sector-specific regulations play a growing role in federal efforts to align industries with decarbonization targets. Regulations mandating the phase-in of zero-emission vehicles and a net-zero energy grid by 2035 present opportunity for businesses in vehicle and battery manufacturing, renewables generation, energy storage, and infrastructure development. In the building sector, cascading federal, provincial, and municipal mandates also signal a shift toward net-zero ready new builds by 2030, along with ratcheting up Building Performance Standards for existing real estate.
Businesses can benefit from regularly evaluating the economics of low-carbon building materials, high-efficiency or non-emitting equipment, smart energy management systems, and the opportunity to align capital renewal cycles with evolving regulations in the jurisdictions where they operate. Early investment in technologies and practices that comply with upcoming regulations can save businesses money in the long run and ensure they remain competitive in a low-carbon future
4. A landscape of incentives to drive sustainable growth
Canadian climate policies offer a suite of incentives that businesses can leverage to reduce costs associated with emissions reduction decisions. Investment Tax credits (ITCs) are the primary lever of federal policy to tilt the economics in favour of low-carbon projects by reducing upfront capital outlays that have historically been a barrier to investment. While these commitments are projected to deliver $93 billion in value by 2035, according to federal estimates, the government is still in the implementation phase, having only introduced legislation to enact two of the ITCs.
Once implemented, these tax credits will be available to a wide range of businesses that can benefit from examining how these upcoming incentives influence the business case for clean technologies, products, and markets relative to the cost of business as usual under a rising price on carbon.
Direct funding is also available to businesses, targeting areas where the economics of low-carbon decisions may not be fully realized through ITCs. While the Canada Growth Fund and Canada Infrastructure Bank provide key avenues to access capital for low-carbon projects, many other incentive programs exist at federal and provincial levels.
Understanding available incentives enables businesses to make informed investment decisions and maximize the financial benefit of adopting sustainable practices.
5. Increasing transparency through climate reporting
While climate-related disclosure remains voluntary for Canadian businesses outside of federally regulated financial institutions, the Canadian Sustainability Standards Board has proposed a draft climate disclosure framework, customized to the Canadian economy, that securities regulators could adopt.
A growing number of major corporates, governments, industry associations, and lenders are ahead of this trend and are committing to reduce their emissions, which stimulates demand for greener buildings, technologies, and products as they engage across their value chain to reduce their carbon footprint.
As a result, a strategy that capitalizes on the landscape of incentives is becoming an increasingly important competitive advantage for businesses, in addition to staying attuned to the sustainability ambitions of their stakeholders and B2B customers.
Conclusion
With investment in the low-carbon economy reaching a record US$1.8 trillion globally in 2023 and CA$30 billion in Canada, there is a growing opportunity for Canadian businesses as they navigate the policy landscape. While there are increasingly stringent regulations and pricing systems for businesses to navigate at federal and provincial levels, there are more incentives and opportunities than ever for businesses to reduce costs, to innovate, and to generate revenue through pragmatic actions that align business decisions with broader government targets.
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Wendy Cohen, President and CEO of Kitchell, a construction and development firm headquartered in Phoenix, Arizona.
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Kate Fitzgerald, senior at Arizona State University, founder of VBAmerica, a volleyball lifestyle clothing brand.
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Linda Williams, realtor, former news anchor of Fox 10 Phoenix
As BMO’s Managing Director of North American Commercial Professional Development and Executive Leader for our U.S. Women’s Initiatives, I was proud to serve as the moderator. Here’s a summary of our insightful discussion.
How to keep moving forward
While the female economy is booming in many respects, it’s crucial to continue the momentum for financial parity. Women make up only 10.9% of the construction industry workforce and, according to some reports, only 1% of chief executives in the industry. That makes Cohen’s accomplishment as Kitchell’s first female CEO all the more impressive. It’s also why she believes women in positions of power need to stand up for others.
“As leaders, we have to make sure that the decisions that we are in charge of consider equity every single day,” Cohen said. “All of us as leaders have a responsibility to look at how we operate our own businesses and how we treat our own people first. It's hard to ask for equity for yourself when you're not treating other people that way. It starts with how you engage others in your life and in your business.”
Fitzgerald noted the value in keeping women inspired. A major in biological science with the goal of being a neonatal intensive care nurse, Fitzgerald is a four-year starter on ASU’s beach volleyball team. In 2021, when the rules changed to allow student athletes to control and profit from their name, image and likeness (NIL), Fitzgerald saw an opportunity and launched VBAmerica, a volleyball lifestyle clothing brand. The company currently has licensing agreements with 10 universities and plans to expand to more than 50 in the next year. Along the way, she’s used her platform to encourage other young women to pursue their goals.
"I saw a gap in the market, and I saw a way to create NIL deals for female volleyball players and other female athletes,” Fitzgerald said. “At ASU, the female athletes are outearning the males in NIL deals, outside of football. That’s really exciting, but people have no idea because it’s not talked about. So, coming up with new ideas, bringing value to the table, then spreading the word about those ideas [is important.]”
Williams believes the momentum needs to begin in elementary school. "There needs to be a course about financial parity,” she said. “How to get it, and how to grow it.” Williams, pointing out a fourth grader in the audience, added, “She needs to start knowing right now. If I had known in the fourth grade, then I would have retired at 55.”
Finding the right allies
Gains don’t come without advocacy and allyship, from men as well as women. Knowing your true allies, however, requires keen judgment and a willingness to let go.
“Know how to surround yourself with the right people, how to let go of the people who are not supportive, and to know the difference,” Cohen said. “Because we often hang on to people that we think are helpful, but they're really not. My true definition of allyship is somebody that will say your name in the room in a positive way when you're not in the room. You also have to let go of those people that don't say your name in the room or may say negative things. And sometimes those are the hardest lessons, because those are the people you're trying to impress the most.”
Fitzgerald’s biggest champion has been Jeff Kunowski, associate director of ASU’s innovation programs for the Global Sport Institute. He mentors student entrepreneurs of sports-related startup companies. For Fitzgerald, it’s about taking the initiative to find an ally.
“What’s worked with our dynamic is showing at a young age that I deserve to be there as well,” she said. “Sometimes all it takes is being the one to reach out and setting up a follow-up meeting to say, ‘I’m interested in doing this.’ Girls, take the initiative and reach out, and that will put you 10 steps ahead of anyone else, because there’s so many people who want to help you, especially help young women right now. But it takes that phone call and that text to say, let’s set up a meeting, or will you show me what to do?”
Defining your ‘all’
America Ferrera’s iconic speech in Barbie struck a nerve. It also asked us to question the idea of whether women can have it all.
"I think we can have it all across the seasons of our life, but not all at one time,” Cohen said. “There's this whole concept of balance. Somebody once told me that you can't look at balance in a day; you need to look at balance over the course of months. There are some days that you may be working 12, 14, 16 hours, and then there may be days that you're on the couch watching Love Is Blind all day long. But the reality is, if we look at it in the decades of life, I think having it all is achievable. But we set ourselves up for unrealistic expectations to have it all, all of the time. The reality is success comes with really hard work. Having a family and having all the other things that we want to have in our life to create that balance takes time. When you look at the course of a life, I want to look back and say I had a balanced life, I got to do a lot of different things.”
Fitzgerald noted the importance of showing yourself grace. “We have this expectation that we've set for ourselves to be perfect,” she said. “Someone recently told me that perfect is just not possible. But you can be excellent. You can be good, you can be great, and you can also just not be good at something, and that's OK. It’s about looking at that scale and knowing what to sacrifice, what to be OK with just being good at, and then knowing what you really want for your life.”
After spending 42 years as a TV journalist, Williams retired in January. In her case, “retirement” isn’t quite accurate. Three weeks after leaving journalism, she enrolled in real estate school and recently earned her real estate license. She's in what she calls the “encore stage” of her career. With her storied journalism career, her children and now the second act of her professional life, Williams can truly say she’s had it all. But she points out that it’s not so simple.
"I think having it all should be fluid,” Williams said. “From the outside looking in, people have said I had it all, but I got to define what my ‘all’ was. And if you need to change what your ‘all’ is daily, weekly, or by the minute, then do it to keep yourself sane and balanced and moving forward. But make sure it's your ‘all’ and it's you who’s defining it.”
Listening to the stories from such accomplished women across different generations helps keep us inspired, connected and empowered. It’s proof that while everyone’s journey is unique, women everywhere are demonstrating the resilience and determination required to continue breaking barriers and paving the way for future leaders.
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