January 19, 2004

Western Canada's environment sector poised for domestic, international growth, innovation, says Globe Foundation

The environmental sector in Western Canada is on the cusp of great things, both domestically and internationally, says a new report from the Vancouver-based Globe Foundation. Recently released at the Western Canadian Environmental Technology Forum in Vancouver, the study concludes that "the environment sector in Western Canada has the potential to be innovative and competitive in the domestic and international markets and is capable of forming international alliances and partnerships."

"The Western Canadian environmental sector is diverse, fragmented, and dominated by small- to medium-sized service providers that service local markets driven by government regulation," Globe Foundation president and CEO Dr John Wiebe told Forum participants. "Environmental technology developers and suppliers are beginning to explore the international scene," he continued, adding that "the beginnings of a number of key technology clusters (fuel cells, green construction, etc) are emerging, adding to our proven expertise in traditional market segments (energy, water/wastewater, solid wastes, etc) in all the western provinces."

The Globe Foundation report was prepared with assistance from Western Economic Diversification Canada, which also sponsored the Forum. The study consolidated the findings of environmental sector reviews conducted in each province. In an accompanying, separate review, the Foundation also examined the environment sector in British Columbia. (Both reports may be viewed on Globe's Web site, www.globe.ca.)

Dr Wiebe said developing and commercializing environmental technologies and expertise needed to pursue domestic and international market opportunities will require both increased access to capital, enhanced marketing and branding, and closer co-operation among private companies, governmental agencies, and academic research institutions. Progressive public policies will also be needed to support private sector initiatives, he added.

The report describes Western Canada's environmental sector as a growing mix of private enterprises and public institutions developing or providing goods and services designed to prevent or mitigate environmental problems and supporting sustainable development activities in every aspect of human society. In Canada as a whole, it notes, service providers rather than technology producers dominate the environmental sector, although the demand continues to escalate for new technologies to combat climate change, increase energy efficiency and enhance sustainability in the transportation, agriculture, energy and natural resource sectors.

The study found that the Western Canadian environmental business sector is undergoing a fundamental reorientation and renewal. The current trend towards pollution prevention at source is not only decreasing the demand for traditional-and often more expensive-end-of-pipe pollution control technologies, it is spurring the development of more energy-efficient and cleaner technologies for application in the primary resource, manufacturing, energy and service sectors. Climate change and the search for more energy efficient technologies to reduce greenhouse gas emissions is forcing the sector to redefine itself and to form new alliances and partnerships with governments and academia, focused more broadly on sustainability.

The drivers of the transformation process are as diverse as the client base of the industry itself, the report adds. Changing environmental management practices in the private sector, new approaches to public policy-making with respect to environmental protection, and shifting economic forces worldwide are helping to reshape the sector. No longer focused on "end-of-pipe" solutions to treat pollutants released into the air, water or soil, the sector is evolving into a complex and rapidly changing constellation of engineering, analytical and design services designed to help businesses incorporate environmental considerations into their production processes and their dealings with clients. The sector is now much more closely linked to organizations involved in sustainable community development; green building design and construction; energy efficiency and eco-industrial networking; sustainable urban infrastructure; and sustainable resource management.

The environmental sector in Western Canada has traditionally drawn strength from its domestic client base. In recent years, opportunities in the export market have become more enticing, a reflection not only of the increasing globalization of the sector but also of Canada's growing international reputation for quality technological and environmental expertise, particularly related to water and wastewater treatment, liquid and solid waste management, environmental instrumentation and analysis, energy efficiency and renewable energy, and engineering and consulting services.

Despite this growing interest in the international market, most firms active in this sector are still small to medium-sized enterprises (SMEs), established to respond to local conditions and requirements. As such, they often lack the money, managerial capacity or staying power needed for extensive technology development and/or international market expansion activities. As noted initially, however, the sector is capable of great innovation and has a future in the international marketplace. Moreover, notes the report, each province has capacity and demand in almost every sector. The challenge is to determine precisely where the comparative and competitive advantage lies, particularly when it comes to new technology development.

Technological solutions with broad application nationally and internationally will require capital, perseverance, extensive product development and verification activity, as well as market development and promotion. These opportunities require focus as well as strategic partnerships involving private companies, governmental agencies, as well as academic and research institutions. The study suggests that centres of excellence, offering a coalition of interests and comparative and competitive advantage, would provide the core support essential to successful development of such technologies.

The report proposes a number of measures for encouraging the growth and development of Western Canada's environmental sector.

1. Support should be given to establishing or strengthening sector-specific centres of excellence and/or government-industry industry clusters in each province to foster the development of innovative environmental technology solutions to global environmental problems. Such centres, preferably industry-led, should bring together the academic, marketing, business development and financial management competencies needed to facilitate the development and commercialization of innovative technologies, services and environmental solutions required in the national and international marketplace. These centres and clusters should be established only where there is a clearly defined, actual or potential critical mass, and a market sufficient to warrant any required investment. Existing centres and initiatives set up for this or similar purposes should be reviewed to assess their actual effectiveness. Green buildings/sustainable construction, water/wastewater, alternative energy sources and contaminated site/brownfield remediation are the most obvious focal points for new centres or clusters.

2. A comprehensive research program specific to each province should be launched to clarify the barriers that limit the adoption of innovative technologies and related environmental solutions by municipalities, government departments and agencies and by major industry players in each sector. This should be followed by risk reduction strategies and/or the provision of incentives for the early adoption of innovative technologies and industry capacity-building measures. Among the latter might be:

*targeted programs to support the re-design, re-engineering, and retrofitting of production processes and product lines to increase business resource efficiency and waste reduction in specific sectors, particularly those that face intense competition or that compromise quality of life;

*a link between infrastructure renewal dollars and the degree of innovation and local content included in a municipality's (or other organization's) funding submission. This could create a stronger presence for local entrepreneurs in local markets without being perceived as an industry handout.

*targeted strategies for import substitution in those environment-related areas where Western Canada is dependent on imported products and technologies, primarily in the water/wastewater, solid waste management, air quality management, contaminated site remediation and energy sectors.

3. The report proposes the creation of a comprehensive marketing program to build national and international recognition of Western Canada's environmental excellence. This would include collaborative activities such as technology demonstration projects; market development and networking; and national and international promotional efforts designed to attract new customers and new investment to the sector.

4. A program should be created to support demonstration projects, particularly involving large scale, real-world urban showcase sites where Western Canadian environmental technologies, products and services can be tested, verified and displayed in order to attract new national and international customers, and to foster their adoption by local industries and municipalities.

5. The merits of adopting financial incentives in the environmental business sector, similar to those used in other sectors (e.g. fiscal regimes for oil sands development), should be reviewed. Financial incentives such as provincial R&D tax credits, renewable energy incentives etc., and other fiscal measures should be examined to determine their overall economic impacts and technology development potential.

6. Continuing mentoring should be provided for SMEs in environmental business sectors. This would involve working with individual firms and industry associations to improve environmental technology development and commercialization; to provide the tools and up-to-date intelligence needed to penetrate new markets; and to establish mutually supportive networks to promote the delivery of flexible solutions and technologies for local, regional and international customers.

7. A comprehensive review should be done of current government funding programs that support SMEs from the research and development stage through to technology development and commercialization. This would include such federal programs as IRAP's Pre-commercialization Assistance Program and the Program for Export Market Development (PEMD). This review should make recommendations concerning:

*improving co-ordination among available programs;

*providing more consistency in focus from one jurisdiction to the other;

*simplifying access to these programs and the administrative processes associated with them; and

*instituting provisions for affordable, repayable financing for early stage product development.

8. Government policies at the federal, provincial and municipal levels should be reviewed to ensure that public policy supports private initiative in developing the environmental technology sector, e.g. procurement policies, regulations affecting demonstration projects, etc.

The British Columbia environmental business sector profile indicates that as of 2000, there were more than 800 firms active in the province providing environmental products and services. Most were SMEs and had been been in business for five years or more; together, they represented 12 to 15% of Canada's environmental industry, employing more than 22,000 people and generating more than $1.8 billion in annual revenues.

The BC environmental sector is particularly strong in the areas of alternative energy systems (including fuel cells, clean fuel technologies and biomass/cogeneration systems); sustainable resource management, specifically related to forestry and mining reclamation; and environmental instrumentation technologies. The sector's main weakness stems from the fact that it is not a homogenous whole, but rather is made up of a series of market segments, each with significant differences in market conditions and different challenges with respect to technology development and commercialization.

In addition to alternative energy systems and associated technologies, the profile cites two other areas as those with the most promising opportunities for this sector. They include: urban environmental management systems (including contaminated site/brownfield remediation, green building design, technologies and products, and planning for sustainable communities and integrated environmental solutions); and water/wastewater technologies, services and solutions. The strategies for fostering the BC sector's growth and development parallel those proposed for the Western Canada environmental sector as a whole.

More information is available from Frank Came at the Globe Foundation, 604/666-5833, FAX 604/666-8132, E-mail frank.came@globe.ca, Web site www.globe.ca.

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