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In Canada’s 44th election, a remarkable thing happened: all four major parties agreed that Canada must substantially cut its emissions over the next decade. Make no mistake, given that Canada is the world’s fifth-largest energy producer, this development was, in fact, remarkable.
As Erin O’Toole battles to remain leader of the Conservative Party of Canada, he must now convince members that his relatively progressive stance on climate was the right one, a tough sell given his party’s underwhelming electoral performance and the rise of the People’s Party of Canada. Simultaneously, Canadians and Canadian businesses continue to bear the brunt of extreme weather events, a burden that will only become heavier as climate change accelerates.
Of course, it is not a matter of if climate change accelerates. The United Nations Intergovernmental Panel on Climate Change says that the climate will continue to warm for at least the next 30 years, and that changes to the oceans, ice coverage and global sea levels are for the most part irreversible for hundreds and potentially thousands of years.
This bleak situation is not lost on us. According to a Navigator survey, two-thirds of Canadians consider climate change to be the most serious issue facing the country. In turn, corporations are feeling the heat from consumers, often driven by their younger employees, customers and institutional investors.
Rich Lesser, global chair of Boston Consulting Group (BCG), observed that many CEOs were initially shielded from this trend due to “bubble” thinking where younger employees explicitly or implicitly received the message that their perspectives were unwelcome. However, BCG, like many others, saw its bubble burst over the past two years when COVID-19 forced a rethink of working models and climate risk.
BCG is not alone as businesses around the world are more directly contemplating the economic implications of wildfires, droughts, extreme weather, crop yield declines, water shortages and climate-induced forced migration. John Sterman, professor of management at MIT’s Sloan School of Management, states that the most effective way for companies to protect their supply chains against these risks is to “find ways to cut your emissions that also improve your resilience and generate other benefits for you.” For instance, during the deep freeze in Texas last year, Credit Human’s new headquarters was fully operational while many others were not. That’s because the building was highly energy efficient and built with a massive solar array on the roof along with ground source heat pumps.
In Canada, a change in thinking from big business has been met by a similar shift from regulators and central bankers. In 2020, the Bank of Canada and the Office of the Superintendent of Financial Institutions (OSFI) announced plans for a pilot project that would improve Canadians’ ability to assess financial risk related to climate change. Based on the high level of credit exposure identified in the report and the need for improved national data, OSFI is now warning that financial institutions that cannot be trusted to adequately adjust for climate risk may be forced to keep more capital in their rainy- day funds.
Growing awareness and improved analysis of climate risk come with direct implications for Canada’s largest export and largest emitter, the oil and gas sector. As customer demand for these resources remains robust, the sector must markedly reduce the intensity of its emissions.
It’s a challenge that an alliance of Canada’s five largest oil sands producers has committed to taking on directly, working in collaboration with provincial and federal governments to achieve net zero greenhouse gas emissions from oil sands by 2050.
This pledge, met by escalating federal climate policy that will cap oil and gas emissions at their current level, demonstrates a rare consensus point between Canadian government and industry. For this pledge to hold weight among the Canadian public, producers must now undergo the difficult work of making it a reality. While the road ahead will no doubt be challenging, this same spirit of collaboration, combined with a sustained focus on the evolving needs of consumers and businesses, could finally position the country to face the seemingly daunting task ahead.
In many ways, this is the easy part. Canada’s decarbonization journey requires a combination of willpower, innovation and adaptability from all stakeholders that must transcend electoral cycles or quarter-bound pressures.
However, by finally agreeing upon a common goal, businesses and governments are positioned to move quickly and co-operatively. It could not have come a moment too soon.