Driving the Growth of Green Start‑ups in Canada

Executive summary

Fostering more green start-ups is an important policy priority for Canada. These companies have strong potential to contribute to the transition to a cleaner and more environmentally sustainable economy through the development and deployment of innovative products and services that address environmental challenges. Their innovations can significantly contribute to job creation and enable productivity growth by offering technologies that increase resource efficiency and improve productivity across industries. These solutions can also stimulate economic growth by opening new markets and enhancing the competitiveness of Canadian firms in the global green economy, thereby strengthening Canada’s long-term economic resilience and industrial advantage. Government policy plays an important role in unlocking the potential of green entrepreneurship by helping green start-ups to overcome various obstacles that can constrain their development.

This report presents the key findings and recommendations from a project undertaken by the OECD to provide advice to the Canadian government on the development of policies to support the creation and growth of green start-ups. This has involved an assessment of Canada’s green entrepreneurial ecosystem and green entrepreneurship support policies in order to identify development bottlenecks faced by green start-ups and to examine the appropriateness of current policy supports in addressing these challenges. International good practice policies from four other OECD countries (Australia, Denmark, Portugal and the United States) have also been analysed with a view to identifying transferable policy lessons for the Canadian government. The Canadian assessment and international policy cases have informed a series of proposed policy actions for Canada to better support green entrepreneurs and start-ups.

The first chapter of this report discusses overall policy issues in green entrepreneurship promotion, looking at definitions for green entrepreneurship and setting out the major development bottlenecks that green start-ups face internationally and the challenges for policy. Chapter 2 comprises an international benchmarking of green entrepreneurship across OECD countries, leveraging data from Crunchbase and the Global Entrepreneurship Monitor. This situates Canada’s green entrepreneurial ecosystem within an international context. Chapters 3 and 4 of the report discuss the key findings from the OECD’s assessment of Canada’s green entrepreneurship policies and programmes and the lessons from the four case study countries, with Chapter 3 focusing on direct public supports for green start-ups (e.g. financing or training) and Chapter 4 examining policies to strengthen the overall green entrepreneurial ecosystem (e.g. the formation of cluster organisations or start-up support organisations, or measures to stoke demand for green start-ups’ products and services). Finally, Chapter 5 presents the main conclusions from the study and puts forward a series of recommended policy actions for the Canadian government.

Key findings

Canada has a relatively strong performance in generating green start-ups, with the fourth highest number of green start-ups in the OECD and the highest number per capita outside of Europe. Approximately one in twenty Canadian start-ups are green start-ups (i.e. belonging to sectors where reducing environmental impacts is a core consideration and feature of the goods or services being developed), while 64% of early-stage entrepreneurs in 2024 reported taking steps to minimise the environmental impact of their business. The share of women founders in Canada’s green start-ups is also among the highest in the OECD, while green entrepreneurship activity is more geographically dispersed in Canada than in other countries.

Green entrepreneurial activity in Canada is aided by strong public supports for green entrepreneurship, particularly for early-stage start-ups. Policy has excelled in supplementing the provision of funding with non-financial assistance in the form of advisory services, most notably through the Industrial Technology Advisors of the longstanding National Research Council of Canada’s Industrial Research Assistance Program (NRC IRAP). Many of the major funding programmes for start-ups have dedicated cleantech teams or divisions, ensuring that green start-ups can receive tailor-made support. However, temporary disruptions to programming through the dissolution of Sustainable Development Technology Canada (SDTC) in late 2023 and early 2024 were widely seen to have left a critical gap and have left uncertainty in the early-stage green entrepreneurship support system. In 2024, SDTC’s programming mandate was transitioned to NRC IRAP, which now manages IRAP Clean Technology programming to support the growth of Canadian clean technology companies.

A hallmark of Canada’s green entrepreneurial ecosystem is the abundance of private and non-governmental support organisations, which are often partially or fully funded by government entities. Coupled with the extensive federal and provincial programmes available, this creates a dense and complex support landscape, making it important for green start-ups to receive guidance in navigating it effectively. Here, Canada’s Clean Growth Hub plays a vital role, helping green start-ups to find available and relevant supports and acting as a whole-of-government focal point for the clean technology sector. There are also co-ordinating entities for green entrepreneurial ecosystems at the provincial level.

A priority for policy going forward is enriching support for the scaling up of more advanced green start-ups. While the Canada Growth Fund and Business Development Bank of Canada (BDC) Capital’s green funds play an important role in boosting equity financing opportunities – both through direct investment and by catalysing private investment – Canada could consider whether additional mechanisms to fund the demonstration and deployment of green technologies at commercial scale are needed. For example, the United States Department of Energy’s Office of Clean Energy Demonstrations (OCED) and the Australian Renewable Energy Agency have proven transformative in expanding opportunities for cleantech in their respective countries. Both entities principally deliver non-dilutive funding but have introduced a variety of mechanisms to safeguard and maximise the benefits of the public investment, including milestone-based funding, knowledge sharing requirements, and recoupment rights in the event of subsequent commercial success.

A further barrier to scale-up is the difficulty green start-ups encounter in accessing customers within the Canadian domestic market. This is potentially driven by a range of possible factors including a lack of procurement of Canadian cleantech from large corporate buyers and public authorities and an overall weaker demand for green products and services compared with other countries. Through the Trade Commissioner Service and Export Development Canada, the public authorities provide effective support in helping Canadian start-ups to connect with overseas buyers, but there is a lack of nationwide programmes focusing on initiating and supporting commercial partnerships between green start-ups and domestic buyers.

Public procurement is another area where more can be done to support green start-ups in finding a reference first customer. While not specific to clean technology, Innovative Solutions Canada has had success as a Canadian government-wide procurement-based programme that connects federal departments to innovative Canadian companies, leveraging government purchasing power to stimulate technology research, development and commercialisation of Canadian technologies. Denmark’s Green Procurement Partnership Model, through which public entities commit to ambitious green procurement targets on a voluntary basis, could have promise in the Canadian context. This can also be supplemented by mandatory requirements for the purchasing of environmentally friendly or eco-labelled products for certain types of goods and services, as has been pursued both in Portugal and in Denmark.

Policy recommendations

Strengthening Canada’s green entrepreneurship ecosystem can enable economic growth and productivity gains, which are key objectives for the Government of Canada. Based on the assessment of Canada’s green entrepreneurial ecosystem and support policies together with the review of international policy practices, it is recommended that Canada:

• Develop a national strategy for Canada’s green entrepreneurship policy, which should articulate shared objectives, key performance indicators (KPIs), targets, and policy actions, as well as priority cleantech sub-sectors and measures to unlock synergies and reduce overlap between programmes and organisations.

• Continue to support NRC IRAP’s Clean Technology programming, ensuring it has the necessary resources to fully assume and maintain SDTC’s former role within the green entrepreneurial ecosystem. This includes not only its funding activity but also its wider role in providing technical credibility for green SMEs and start-ups developing clean technologies and referring them to other programmes.

• Explore a national initiative to better connect green start-ups with domestic buyers. The initiative could facilitate meetings between start-ups and buyers and could provide funding to cover the costs of piloting or demonstrating the green start-ups’ products or services, drawing inspiration from BC Fast Pilot projects – delivered jointly by NRC IRAP and Innovate BC – in British Columbia.

• Expand the scope of the federal advisory services to green entrepreneurs to incorporate activities that convene private and public entrepreneurial ecosystem actors and foster connections and collaboration between start-ups and other ecosystem stakeholders. Further actions could include the organisation of networking events and matchmaking initiatives.

• Expand the role of public procurement in supporting green start-ups and driving the adoption of innovative, sustainable technologies. This includes launching Public Services and Procurement Canada’s Green Public Procurement Tool, continuing the work of Innovative Solutions Canada in partnering with federal departments to stimulate the development, testing and commercialisation of Canadian technologies, and strengthening requirements for the procurement of environmentally sustainable options for certain goods and services.

• Integrate support for cleantech within programmes for boosting national security and economic resilience and highlight the contribution of green start-ups to security and resilience agendas in cleantech programming.