Federal budget: Businesses need more support to reach climate goals

​Ahead of this year’s federal budget, most Canadian business leaders are committed to integrating environment, social and governance (ESG) practices into their business strategies but say they need more help from government if Canada is to transition to a greener economy, finds a new KPMG in Canada survey.

The survey of 505 medium-sized enterprises reveals that most believe government needs to do more to compete with new U.S. and European Union green tax legislation, with eight in 10 (80 per cent) calling for additional tax incentives and investment tax credits to make it feasible for their company to adopt clean technologies and clean energy sources.

“Canada’s business leaders are ready to make the green transition but need government to create a more supportive environment, including further tax relief to help them transition away from carbon-intensive products and invest in clean energy and net-zero technologies,’’ says Lucy Iacovelli, Canadian Managing Partner, Tax, KPMG in Canada.

“More than eight in 10 (84 per cent) indicated that they are using existing government incentives to reduce their environmental footprint, but to stay competitive, they believe it is vital that Canada keeps pace with the new green investments and tax measures being adopted in the U.S. With the right supports and tools, Canadian businesses can play a key role in driving clean growth, creating sustainable jobs and carving out a unique place for Canada in the new global economy.”

• 82 per cent believe small- and medium-sized enterprises are key to the green transition in Canada
• 89 per cent say they have already integrated ESG practices into their business strategies
• 84 per cent stated their company currently uses government incentives to reduce their environmental footprint
• 77 per cent are finding the process of decarbonization increasingly complex
• 84 per cent think it’s vital for Canada to pivot quickly to stay competitive with new U.S. and European Union green tax legislation
• 82 per cent feel government investments need to grow significantly to develop the clean technologies/solutions that businesses need to meet Canada’s climate commitments
• 80 per cent think their company needs more consumer incentives for Canadians to adopt clean energy products

KPMG’s survey reveals more than eight in 10 (84 per cent) think inflationary pressures will last longer than expected, stretching into 2024. Most (81 per cent) peg this continued volatility, in part, on the green energy transition as well as supply shocks caused by deglobalization and rising political pressures.

“While committed to a green future, high inflation and rising interest rates are making the transition and the required investments increasingly more expensive for business,” says Mary Jo Fedy, KPMG’s National Enterprise Leader.

“With the economic volatility likely to drag on into the foreseeable future, more than eight in 10 (82 per cent) want government investment to increase significantly in order to develop the clean technologies and solutions that businesses need to meet Canada’s climate commitments,” adds Mrs. Fedy.

The survey reveals a strong commitment to sustainability among business leaders with 84 per cent saying their entire leadership team is engaged in support of their ESG strategy. The survey also found that most organizations (82 per cent) are planning to increase the amount they invest this year.

“It is encouraging to see that these business leaders plan to increase investments and resources in their ESG practices this year,” says Doron Telem, National ESG Leader, KPMG in Canada. “However, many may only be able to do so with stronger government support. We expect the federal budget will offer more details on the government’s economic plan to support business and the green transition, with a specific focus on emerging sectors, clean technologies, zero-emission vehicles and batteries, critical minerals and energy sources.

“But business is not just looking for tax incentives and programs that focus on them. Most (80 per cent) think government needs to support their green business transition by implementing more consumer incentives to further drive consumer demand for change.”

KPMG in Canada surveyed 505 Canadian companies between February 3 and February 16, 2023, using Sago’s Methodify online research platform. All respondents are business owners or executive-level decision makers. Forty-four per cent helm companies with more than $500 million in annual gross revenue; 20 per cent, between $300 million to $499 million; 16 per cent, between $200 million and $299 million; 16 per cent, between $100 million and $199 million; and the remaining 4 per cent, between $50 million and $99.9 million. Seventy-seven per cent of the companies are privately held and 23 per cent are publicly traded. Forty-four per cent are family-owned businesses.