An inclusive green transition

November 29, 2023

A young Black woman green tech worker takes a call during a solar pannel installation.

Moving small and medium enterprises to net zero

Q&A with Wendy Cukier, Founder and Academic Director, Diversity Institute at Toronto Metropolitan University, and Research Lead for the Future Skills Centre

What do you see as key measures for advancing our journey to net zero?

We have to move beyond only discussing big players in sectors like oil and gas and a preoccupation with creating new greentech solutions. While these are obviously important, we need a laser focus on small and medium enterprises (SMEs) and on transition planning and implementation. In Canada, SMEs provide almost 90 per cent of private sector employment opportunities. They also produce (PDF file) 200 million tonnes (external link) of greenhouse gases (GHGs) annually, which is more than emissions from the entire Canadian oil and gas sector. By reducing their GHG emissions, SMEs can make a significant contribution to achieving net-zero emissions by 2050.

Globally, the UN-backed Climate Hub’s survey (external link) of member SMEs suggests that small businesses lack skills and knowledge (63 per cent), funding (48 per cent) and time (40 per cent) for climate action. Data on North American SMEs present a similar picture. A 2022 survey (external link) by the BMO Climate Institute shows that among SMEs not taking action, 15 per cent do not know where to begin, and 28 per cent cite cost as a deterrent. This gap is not met by government policies and actions in Canada: among 99 federal (PDF file) policies and programs aimed at climate action, only five are directed at SMEs.

Previously, we did a study with Smart Prosperity Institute (SPI), which was supported by the Future Skills Centre and funded through the Government of Canada. The study (external link) showed that job creation is a co-benefit of the net-zero transition.

While many SMEs are willing to embrace change, they need more support to overcome hurdles that hamper efforts to improve their sustainability performance; for example, transitioning to local suppliers, prioritizing renewable energy, developing sustainable products, converting to greener infrastructure and using more energy-efficient production methods.

There is a growing will and sense of urgency, but many SMEs are struggling to just keep the lights on. We have to make it easier for them to do the right thing. Our research shows many SMEs lack the resources, knowledge – including skills, training and mentorship – and tools to “greenify” their operations. To support the green transition, we need to help bridge these gaps; for example, by creating opportunities for developing new skills as well as reskilling and upskilling. This should not be limited to science, technology, engineering and math (STEM) grads. We need people who know how to drive organizational and behavioural change – and we need to provide the tools and training to support them.

We also know that women entrepreneurs and Indigenous entrepreneurs, in particular, have a special role to play in the net-zero economy, but they are often overlooked. Women entrepreneurs now are majority owners (external link) of almost 20 per cent of SMEs and make up almost 40 per cent of self-employed Canadians. They are more inclined (external link) to focus on sustainability initiatives in comparison to their men counterparts.

And since Indigenous entrepreneurs are more likely (external link) to think about long-term impacts, seven generations forward, this translates to making sustainability central to their businesses.

What can we learn from past experiences with digitization, and how can we best catalyze a society-wide transformation?

I believe there is much to learn from the successes and failures of digitization. While COVID-19 dramatically accelerated adoption of technology, we still have many tools – such as AI, the internet, AR/VR and cybersecurity – that are underutilized. While we need to keep investing in the development of new solutions, we also need to hold “the pedal to the metal” and focus on adoption.

The same is true for the transition to net zero. I sense that people are starting to experience the real effects of climate change, connecting natural disasters and extreme weather events to environmental degradation in a way that is new. That’s a massive opportunity to drive action. However, people need to know specifically what they can do – and how to do it. Too much of the discussion is at a high level, and there are gaps in practical examples and tools, especially for small businesses.

In addition, we need to celebrate innovation and entrepreneurship in sustainable products, local sourcing and processes as much as we do new technologies. The transition to net zero has to be part of every community, organization and business, and moving forward requires a deep understanding of both catalysts for – and impediments to – “greenification” at the societal, organizational and individual levels.

Empowering SMEs in their efforts to transition to net zero is critically important – but it won’t happen overnight. We must start by offering tools and supports, which can be adapted across sectors, for helping SMEs navigate the transition process. Through research from the Women Entrepreneurship Knowledge Hub (WEKH) and Coralus (formerly SheEO) (external link) supported by the Future Skills Centre – Paths to Net Zero – we analyzed case studies and leading practices to provide practical solutions showcasing the work of sustainability leaders, particularly women and Indigenous entrepreneurs.

Through our work with the Future Skills Centre (external link) , we are helping to define and develop the skills needed to support transition planning and transformation for SMEs to meet sustainability targets. In practical terms, this can include tools and resources to facilitate the shift to sustainable options or access R&D opportunities to advance innovation.

Are SMEs ready for a leadership role in the green transition?

Our Women Entrepreneurship Knowledge Hub (external link) study with BMO on women entrepreneurs in sustainability (external link) showed committed entrepreneurs and role models driving significant change. This year, our new study with Coralus (external link) documents the important work of “greenpreneurs” and provides a conceptual framework, indicators and best practices to help SMEs across sectors transition.

It comes as no surprise that women entrepreneurs are leading the way to reduce the carbon footprints of their enterprises. Women entrepreneurs are more likely to develop businesses that combine economic sustainability with social and environmental goals. They are also more inclined to set organizational goals for achieving gender equality and environmental sustainability.

How can research be leveraged for better outcomes?

There are many examples of excellent practices, but we need strategies to replicate and scale these measures. It is essential that we understand the levers that drive change – and that we provide tools, support and guidance on concrete priority actions.

For inbound logistics activities and procurement, businesses can make decisions to source raw materials, services and resources that are environmentally friendly. Opting to use sustainable and renewable energy sources can cut down on an organization’s carbon footprint. SMEs can also prioritize sustainable – and often shorter – supply chains when sourcing goods and services, instead of going with the most cost-efficient choice.

In terms of operations, organizations can seek to reduce costs and maximize efficiency to reduce carbon emissions and waste. Companies can design products and services and product packaging that have a lower environmental footprint (external link) or fit into a circular economy.

On the side of outbound logistics or distribution, an organization can use sustainable transportation where possible – and consider prioritizing local suppliers to reduce the carbon intensity of outbound supply chains. Marketing and sales activities also need to apply a sustainability lens. Especially with consumer-facing products, this can become a competitive advantage. Firm infrastructure – such as buildings, production facilities, technology and capital assets like fleets – can be upgraded or replaced with more energy-efficient approaches.

The opportunities are there, but to make them happen, we need appropriate policies, access to financing, skills and tools.

What’s your vision for moving forward?

As we embark on a major economic transformation to realize significant emission reductions, the resulting shift will have social and economic implications – and any tools and methodologies have to take this complexity into account.

Our action-oriented research – combined with a focus on future skills, training and employment – has led to changes in practice. We need evidence-informed inclusive innovation to advance the bottom line of Canadian companies and achieve our net-zero goals.

We are working with networks of entrepreneurs – including women and Indigenous entrepreneurs and many others – to identify best practices. We are also partnering with chambers of commerce and business associations to better understand barriers and drivers for change. Net-zero transition priorities and plans must meet the needs of SMEs and reflect their realities.