Driving the Growth of Green Start‑ups in Canada

5. Conclusions and recommendations for Canada

Abstract

This chapter sets out the key findings and conclusions from the assessment of Canada’s policies to support green start-ups and strengthen the green entrepreneurial ecosystem. It also proposes policy measures for consideration by the Canadian authorities to increase the number and performance of green start-ups in Canada, drawing on the Canadian assessment and lessons from international best practices.

Canada overall has an extensive and diverse support system for green entrepreneurship, with a good mix of public support options complemented by a rich network of private and non-governmental support organisations that are active in the green entrepreneurial ecosystem. A standout feature of Canada’s policy approach is the integration of advisory services into major funding programmes for green start-ups, most notably through the Industrial Technology Advisors at NRC IRAP. The country demonstrates best practice in providing internationalisation assistance to green start-ups, most notably through the Trade Commissioner Service and Export Development Canada. Federal and regional governments have been very active for many years in helping to build vibrant green entrepreneurial ecosystems across the country by funding an array of incubators, clusters, hubs, and other support organisations.

The key challenge for Canada’s green entrepreneurial ecosystem is providing the conditions and opportunities for green start-ups to scale. A frequent complaint among stakeholders is that there are not enough opportunities for green start-ups to find customers in Canada’s domestic market, attributable to risk aversion among large buyers, a lack of engagement from public procurers, as well as a softer demand for green products and services overall in Canada compared to other countries that might face more pressing environmental challenges or resources constraints. These challenges cause many Canadian start-ups to bypass the Canadian market and move straight to US and Europe where barriers to adoption are lower. However, without a large reference first client, this can be difficult to achieve. Important public initiatives are underway to address this issue, including the planned launch of a Green Public Procurement Tool by Public Services and Procurement Canada, the BC Fast Pilot programme, and potential technology calls through the Innovative Solutions Canada programme.

The scaling up of green start-ups is also constrained by insufficient funding opportunities to cover the costs of commercial-scale demonstrations and deployment of green technologies. The launch of the Canada Growth Fund is a key development that is boosting public investment and helping to catalyse private investment into Canadian cleantech, building on the important role of the BDC Capital’s green funds. However, these initiatives are predominantly based on the provision of dilutive funding. Canada lacks the equivalent of an Office of Clean Energy Demonstrations in the US or the Australian Renewable Energy Agency, which are competitive funding bodies that provide very large, mostly non-repayable grants to fund the commercial-scale deployment of specific technologies in priority areas.

There are also regulatory factors affecting green entrepreneurship in Canada. Policy interventions and frameworks and environmental regulations are central to ensuring the competitiveness of many green start-ups. However, policy and regulatory uncertainty is weighing on confidence and investment in the green entrepreneurial ecosystem. This is compounded by the volatile international trading environment and an apparent softening of some countries’ stance towards the green transition. Regulatory differences between Canada’s provinces and territories also make it challenging for green start-ups to scale domestically.

To increase the number and performance of green start-ups in Canada, the Canadian authorities should consider the following measures in the short to medium term:

Continue to fund the early-stage support system with the newly established NRC IRAP Clean Tech programming

SDTC was one of the largest and most impactful public entities in Canada dedicated to supporting the development of green start-ups and its dissolution has had a major detrimental impact on the green entrepreneurial ecosystem. A priority for Canada’s green entrepreneurship policy is to ensure that federal funding continues to deliver these historic impacts in its new form within NRC IRAP. It is important to continue to equip NRC IRAP’s Clean Tech programming with the resources required to ensure adequate funding levels for early-stage start-ups. However, it is also critical for the programming to deliver broader assistance for start-ups including connections to other ecosystem actors and public programmes. NRC IRAP’s well-established services and domestic and international networks make the new Clean Technology programming is well-positioned to assume that role. Nonetheless, it is important for strong early efforts to raise awareness of NRC IRAP’s Clean Technology programming among entrepreneurial ecosystem actors and to build its brand to continue.

Explore a national initiative to connect green start-ups with domestic buyers

Finding first customers is a key challenge for green start-ups in Canada, driven in part by relatively limited opportunities in the domestic market. One of the issues is a lack of awareness among large domestic buyers of the products and services that green start-ups have to offer. Another is the perceived risk associated with being the first adopter of new technologies, products or services. Canada would benefit from a national initiative that matches potential domestic buyers with green start-ups whose products can address their specific needs and challenges, bringing together parties where there is a genuine chance of a commercial partnership developing. The initiative should not only facilitate meetings between the start-ups and buyers; it should also provide funding to cover the costs of piloting or demonstrating the green start-ups’ products or services with the potential customer. While this type of initiative exists at the local level through the BC Fast Pilot Programme, it would be beneficial to expand access to this support to green start-ups across Canada. A national approach would not only reach more green start-ups; it would also facilitate better and more relevant connections given the larger pool of start-ups and buyers the programme could leverage. Inspiration can be drawn from Canada’s best practice approaches to connecting start-ups to international buyers through the Trade Commissioner Service of Global Affairs Canada and Export Development Canada, which both leverage large networks of well-connected advisors and experts who can make introductions to relevant contacts overseas. There is not currently a domestically-focused programme or platform that facilitates connections in this way between green start-ups and Canadian buyers.

Expand the scope of federal advisory services for green entrepreneurs to foster collaboration in Canada’s green entrepreneurial ecosystem

Canada’s green entrepreneurial ecosystem nationally benefits from the presence of a diverse range of private actors, public support programmes and non-governmental support organisations, which each play an important role in supporting the development of new green enterprises and clean technologies. However, the other side of the coin is that the ecosystem can be difficult to navigate, not only for start-ups but for other ecosystem actors such as investors, corporates or universities. The locally oriented nature of many of Canada’s support programmes and organisations adds to this complexity.

Throughout its existence, the Clean Growth Hub (CGH) served as a highly effective navigational aid for green entrepreneurs by advising its clients on available and relevant supports. The scope of federal advisory services could be expanded to incorporate actions to bring private and public entrepreneurial ecosystem actors together and foster networking, connections and collaboration between green start-ups and other ecosystem actors.

Boost the role of public procurement in supporting green start-ups

Public procurement has strong potential to support green start-ups by enabling them to obtain reference first customers that can help them gain traction in the market. A first priority is ensuring the timely launch of Public Services and Procurement Canada’s Green Public Procurement Tool, which will significantly raise the visibility of and demand for green start-ups’ products among potential buyers, both from the public and private sector. Another important step is to expand approved vendor lists to include more start-up companies. Continuing the work of Innovative Solutions Canada in partnering with federal departments to stimulate the development, testing and commercialisation of Canadian technologies – including in the area of clean technology – and connect Canadian companies with domestic buyers is also key.

However, even with increased visibility and access to public procurement opportunities, procurers’ current tendency to prioritise lowest cost over sustainability will remain an issue. To address this, requirements for public entities to procure green or eco-labelled products or take into account environmental factors or lifecycle costs should be considered for certain types of goods and services. Much can also be achieved by enabling public entities to make more environmentally sustainable purchasing choices on a voluntary basis. Establishing a Green Partnership for Public Procurement – similar to what exists in Denmark – would provide a framework through which national and regional public entities can make a voluntary commitment to achieving specific green procurement targets. Negotiating trade agreement carve-outs to allow preferential procurement for domestic clean innovations is another aspect that is important in overcoming potential legal obstacles to public procurement from green start-ups.

Develop a national strategy to co-ordinate and set the direction for Canada’s green entrepreneurship policy

As a component of more co-ordinated approach to entrepreneurship policy, a national strategy for green entrepreneurship would help to reduce fragmentation and enhance the coherence and effectiveness of the policy support system. The strategy should set out shared strategic objectives, key performance indicators (KPIs), targets, and policy actions which inform the activities of relevant public actors. It should also define a small number of cleantech sub-sectors that Canada’s green entrepreneurship policy should prioritise the development of, based on market opportunities, strategic priorities, and existing strengths and capabilities. Further, the strategy should articulate actions for achieving synergies between different programmes and organisations (for example referrals, resource sharing, or integrated application processes) and avoiding overlap in the provision of support. This requires conducting a comprehensive mapping of the programmes and organisations (both national and regional) involved in green entrepreneurship promotion in Canada. The mapping exercise would also enable the identification of regional imbalances in the provision of green entrepreneurship supports and resources, which should be addressed by actions in the strategy.

The development of the strategy could be led by a dedicated taskforce with representation from relevant public, private and non-governmental actors and stakeholders. Involving a broad range of different entities in the development of the strategy through the taskforce increases the credibility of the strategy among green entrepreneurial ecosystem actors. It also strengthens buy-in from the different parties involved in the implementation of the strategy. The members of the taskforce should act as a liaison between the taskforce and their respective organisations, for example by periodically updating on the progress of the strategy and its proposed actions and communicating relevant information and concerns to the rest of the taskforce so that these can be considered and addressed. Collaboration can further be ensured by focusing on unlocking synergies between existing green entrepreneurship support initiatives, for example by identifying how resources, knowledge or contacts within a particular initiative can also be leveraged elsewhere.

The taskforce should also be responsible for co-ordinating the monitoring and evaluation of the strategy and its constituent actions. One measure that would make it easier to monitor progress in Canada’s green entrepreneurial ecosystem is to work with Statistics Canada to provide more granular data on green start-ups within the framework of the existing Clean Technology Data Strategy. This would significantly enhance the availability of information on the number and performance of green start-ups in Canada.

Incorporate Canadian cleantech within national security and economic resilience agendas

One of the key barriers to investment in green entrepreneurial ventures is investor uncertainty surrounding the extent of governmental support for tackling environmental challenges in the future. Bolstering national security, reshoring supply chains for strategic sectors, and economic resilience are topics that have risen up the policy agenda both in Canada and internationally in recent years. The role of cleantech in advancing these agendas – for example by increasing energy independence or domestic capacity for the production of critical items – should be highlighted in the messaging and content of government strategies and policies. This would bolster overall public support for green start-ups while also increasing investor confidence in the Canadian government’s sustained backing of green technologies into the future.