This article was previously published in the National Observer.
Trade has been a central focus of the national political agenda since President Trump took office earlier this year and upended the global trade order. It is set to remain a top political priority, with Prime Minister Carney pledging to double exports to non-U.S. countries over the next 10 years.
Diversifying Canada’s export markets is indeed a necessary path forward to ensure the future competitiveness of businesses and the prosperity of Canadians. Canada’s economy has become too dependent on our neighbours to the south, making it vulnerable to the vagaries of shifting demands on tariffs and trade deals.
Yet, counterintuitively, diversifying Canada’s economy hinges in part on whether businesses are prepared for climate change and shifting markets.
It just so happens that most of the biggest, most lucrative global markets are also the places where the energy transition is well underway, and where climate policy continues apace. These are already some of the largest export markets for Canadian goods outside of the United States. Jurisdictions like the U.K., the European Union, China, and India continue to forge ahead with policies that will expand their carbon markets, implement carbon tariffs, and create—or even mandate—standards for how companies disclose their performance on managing climate-related risks and opportunities. Not only that, but these economies are rapidly expanding their use of renewables and electric vehicles, signalling major shifts in consumer demand.
All this means that Canadian businesses looking to sell into these markets need a coherent business strategy that allows them to compete—and that’s where transition plans come in.
Transition plans are a powerful—and so far underutilized—tool that can help companies be more resilient and competitive amid an accelerating global energy transition and worsening climate impacts, which can dramatically impact corporate assets and value chains.
Transition planning helps companies identify the biggest climate-related risks and opportunities facing their business and integrate this information into business strategy and financial planning.
As a recent report published with our partners at Business Future Pathways lays out, credible transition plans can drive multiple benefits for Canadian companies.
Most fundamentally, these plans can support access to markets and capital. Businesses are facing increasing pressure—from investors, insurers, clients, and regulators—to show how they plan to stay profitable amidst climate disruption. Credible transition plans can improve a business’ ability to attract and secure new capital, as investors look to proactively manage climate-related risks and opportunities in their own portfolios. Transition plans may even reduce lending costs, further helping companies access credit.
Moreover, as major world economies continue to standardize guidance and rules for climate-related disclosures, including transition plans, Canadian companies will face increased pressure to develop their own plans, simply to participate in global supply chains that span these economies.
There are other advantages. Transition planning can enhance a company’s internal capacity and co-ordination across different parts of its business, help to identify and prioritize major investments, and generate reputational benefits with stakeholders and the public—something that is particularly important in an era where many are concerned about perceptions of greenwashing.
The most important thing is for companies to start the process, allowing them to better manage disruption as climate impacts intensify and markets shift.
Yet despite the many benefits, the data show that most businesses in Canada are not developing or publishing climate transition plans. In fact, Canadian companies are at risk of falling behind international competitors. Most indicators we looked at put Canada behind its global peers, and the gap may get bigger as other countries establish national guidance or mandates for transition planning.
As the world moves ahead, more Canadian companies need to develop transition plans in order to stay competitive in global markets. To do so, companies need Canadian- and sector-specific guidance on what matters for credible transition planning, and consistency from Canadian investors on their expectations. Business Future Pathways aims to help fill this gap, by partnering with Canada’s financial community to publish practical, actionable guidance for Canadian companies to chart resilient growth strategies in an era of climate disruption.
Businesses that plan for climate disruption are planning for success—paving Canada’s path to more diversified trade balance and a more competitive economy.
