As we navigate the economic landscape in 2024, a transformative shift is sweeping across the boardrooms of Canada.
Gone are the days of playing it safe and sticking to the old playbook. According to a recent EY survey, Canadian business leaders are now boldly charting a course towards a future where sustainability isn't merely a buzzword — it's the focal point.
There’s no denying that 2023 was a wake-up call marked by extreme weather events across the world including droughts, wildfires and rising global temperatures — underscoring the need for appropriate climate action and reform. But it’s not happening at a fast enough rate.
At COP 28, the “global stocktake” revealed that current efforts fall short of the Paris Agreement objectives, and called for countries to triple their renewable energy capacity and double energy efficiency improvements by 2030.
Since then, Canada has made some changes that indicate its doubling down on sustainability. The Canadian Sustainability Standards Board announced the first-ever Canadian Sustainability Disclosure Standards. Additionally, the 2024 federal budget also announced measures around carbon capture rebates, as well as clean technology investment tax credits.
Clearly, sustainability remains a critical priority in the Canadian economy and business leaders across Canada aren’t just talking about it — they’re actively working on building a more sustainable future. Nearly half of CEOs are eyeing mergers and acquisitions as a strategic differentiator, leveraging the approach as a tool to achieve short-term objectives, including market share expansion and technological integration, with sustainability considerations front and centre in their decision-making process. This signals a fundamental shift in strategic priorities towards environmentally conscious decision-making.
Although Canadian CEOs are happy to embrace more sustainable practices, they remain largely concerned by the potential impacts of environmental, social and governance (ESG) factors. The majority of Canadian respondents indicated that companies are leaning towards “green-hushing” due to greenwashing concerns. They’re also anticipating risks of stranded assets or partial impairments due to new ESG regulations and are worried about the impact of sustainability issues on supply chains.
Further, 70 per cent of Canadian CEOs view sustainability mainly as a compliance and reporting issue, meaning they may find themselves caught between a rock and a hard place — struggling to balance shareholders who prioritize profits over environmental concerns.
It begs the question: are leaders prioritizing sustainability at the expense of business performance? It's a valid concern, especially when you look at the stark contrast between Canadian and global growth strategies.
While our global counterparts are laser-focused on tech and AI investments, Canadian leaders are doubling down on sustainability as a long-term play. These differences in strategic direction may position Canadian businesses well from an ESG lens, but the opportunity cost of prioritizing sustainability over business performance may be significant.
So, what's the game plan? Enforcing financial penalties on organizations for not going green fast enough isn’t going to move the needle any quicker. Canadian business leaders need policies that don't just pat them on the back for going green but actually help them get there — think subsidies or tax relief for green technologies, such as the European Green Deal or the U.S. Inflation Reduction Act. While measures announced in the federal budget are helpful, they only benefit a select few.
Canadian CEOs are also expressing support for government investment in infrastructure that can handle the energy transition and climate resilience. But given the challenges of raising capital and the need for smarter public-private partnerships, they're not holding their breath.
Here’s the bottom line: greater collaboration between corporates, investors and policymakers could unleash a new wave of bottom-up initiatives that could help accelerate the road to net zero and unlock a more sustainable future. But to maintain their competitiveness, Canadian organizations need to align their priorities with global peers, seizing opportunities in AI and innovation, while striking a delicate balance so that operations are both resilient and reflective of global sustainability trends.
Mauricio Zelaya is the national economics leader at EY Canada
