IC-SD Strategy 1997-Marketplace Climate

3.1 Marketplace Climate

Strategic Objective	Foster a marketplace climate in Canada that promotes sustainable development
Priorities	i) Marketplace rules and services - assess the links between the marketplace "ground rules" and sustainable development
	ii) Reasoned advocacy to shape sustainable development policy - bring economic, competitiveness, trade and consumer expertise and concerns to policy development which supports sustainable development
	iii) Consumer choice and the marketplace - draw consumers more effectively into the promotion of sustainable development by raising awareness and providing information

3.1.1 Marketplace Rules and Services

Knowledge-and technology-based innovation requires a marketplace climate that is stable, predictable, efficient and responsive. A healthy marketplace climate attracts investment and facilitates trade, which in turn stimulates the wealth and innovation that can be used to support sustainable development.

The micro-economic rules that govern the way businesses operate - for example, those addressing incorporation, competition, bankruptcy, labelling, advertising and intellectual property - play an important role in influencing the marketplace climate. The nature of these rules and how they are administered have an important impact on investment decisions. Firms need a marketplace climate that encourages innovation and the kind of long-term investment decisions required to develop and use new technologies and approaches that create wealth and jobs. The resulting prosperity can contribute to sustainable development.

Industry Canada's Role

Industry Canada has the primary responsibility within the federal government for setting marketplace rules and ensuring that they are implemented and enforced. The department administers some 20 business- and consumer-related laws, including the Bankruptcy and Insolvency Act, the Canada Business Corporations Act, the Competition Act and the Consumer Packaging and Labelling Act, and provides related services to ensure a fair, efficient and competitive marketplace.

Through its marketplace framework responsibility, Industry Canada affects a wide range of business activities, and influences the way firms and consumers make decisions. The department can help to create a marketplace climate that enables companies to invest in innovations that improve their business performance and their ability to address growing environmental challenges.

As part of its broader marketplace legislative reform agenda, Industry Canada has reviewed various statutes where discrete environmental issues were raised. For example, reforms to two of the department's marketplace framework statutes - the Bankruptcy and Insolvency Act (BIA) and Companies' Creditors Arrangement Act (CCAA) - advance sustainable development objectives by promoting the clean-up of environmentally contaminated properties of bankrupt debtors or debtors reorganizing under the BIA or CCAA. These reforms will help to avoid "orphan site" problems, alert environment ministries quickly to environmental problems and provide available funds from the estate to help finance the clean-up. The reforms to the BIA and CCAA demonstrate an innovative approach to integrating economic and environmental considerations.

Marketplace framework laws can work for or against sustainable development. Industry Canada is continuing its efforts to examine framework legislation and rules to ensure that they support sustainable development objectives. The ongoing review of the many complex statutes under the Minister of Industry's responsibility is a challenging task. It is driven by a range of factors, including concerns about the inefficient operation of markets, international developments in framework law and technological change. An important step is to better understand the links between marketplace framework legislation and sustainable development.

Action Plan Item - Marketplace Rules and Services Pilot project to help develop a general framework for situating marketplace framework legislation from a sustainable development perspective based on economic, environmental and social impacts. Using this framework, the project will determine the links between the Canada Business Corporations Act (CBCA) and sustainable development.

3.1.2 Reasoned Advocacy to Shape Sustainable Development Policy

Environmental pressures and the response of governments, business and consumers to these pressures have an increasing impact on the marketplace. Governments have a responsibility to ensure that the views and activities of business and consumers are represented in policy development.

Both groups have important perspectives to contribute. Their views can help to shape environmental policy into a positive force that contributes to sustainable development and encourages innovative approaches to meeting environmental objectives. Business, for example, looks to government to: set clear priorities among environmental issues and between these issues and other priorities related to job creation and economic growth; formulate environmental regulations that do not hinder competitiveness; and create a stable, predictable environmental regulatory climate that gives business the incentive and flexibility it needs to develop long-term, innovative approaches to managing environmental pressures.

Business and Consumer Needs Canadian business and consumers need an environmental management regime that encourages innovation in meeting environmental and economic objectives. Governments have a responsibility to ensure that this regime does the following: sets environmental objectives based on sound, risk-based scientific analysis meets environmental objectives through policy instruments which encourage pollution prevention, technological innovation and cost-effective, innovative responses by the private sector responds to evolving practices and trends in the private sector is open and transparent, and is based on cooperative work with business, consumers and non-governmental organizations with expertise in environmental and sustainable development issues

Consumers are concerned about health and safety related to the use of products and services; the effect of environmental pressures and policies on the economy and jobs; the availability of reasonably priced products and services; and the broader socio-ethical implications of advanced technologies.

Canadian environmental policy continuously evolves as it seeks to facilitate solutions to a broad range of environmental issues. Governments recognize that it is largely industry and consumers that will generate the innovation needed to tackle these tough challenges. Leading companies are turning risks into opportunities as they learn that innovative, cost-effective ways to improve environmental performance are also good for business. Stronger consumer involvement with business and government in managing environmental issues is building support for non-regulatory approaches. Combined, these business and consumer endeavours feed back into policy development and reinforce a more efficient, effective blend of performance-based regulations, market-based instruments and voluntary approaches.

Industry Canada's Role

Industry Canada plays an important advocacy role in bringing business and consumer perspectives and activities to federal policy development. The department pursues a reasoned advocacy role to shape sustainable development policy. It works with Environment Canada and other federal departments to ensure that trade and competitiveness matters, private-sector innovation and consumer perspectives are taken into account in the formulation of environmental policies. The department will continue these endeavours, building especially on leading business practices and consumer efforts to manage environmental challenges and promote sustainable development.

Bringing the business perspective to policy development

Integrating economic, trade and competitiveness considerations - Industry Canada's role to ensure that competitiveness and trade considerations are taken into account in developing environmental policy is evident in several recent initiatives. These include the Canadian Environmental Assessment Act (CEAA), the Toxic Substances Management

Policy and the Canadian Environmental Protection Act (CEPA). The department's role also extends to global issues such as climate change, the transboundary shipment of hazardous wastes and persistent organic pollutants. Climate change is an important departmental priority during the current round of protocol negotiations leading up to the third session of the Conference of the Parties to the United Nations Framework Convention on Climate Change to be held in Kyoto, Japan in December 1997. In helping to develop Canada's position, the department's objective is to achieve an outcome from the negotiations that allows Canada to meet any new climate change commitments in a manner that best reflects our national economic circumstances.

Canada's resource-intensive, export-oriented economy is vulnerable to international competitiveness pressures. Business must have the flexibility it needs to take cost-effective action to limit greenhouse gas emissions and the incentive to take advantage of current and emerging climate change-related market opportunities both at home and abroad. Industry Canada will continue to focus on ensuring that trade, competitiveness and marketplace factors are reflected in federal climate change policy and program considerations and that business perspectives are brought to policy development on the basis of substantive analysis and knowledge.

Sectoral analysis to inform policy makers - Industry Canada works with several industrial sectors to maintain and improve their competitiveness. Many of these sectors - for example, the automobile, paints and coating, plastics, metal smelting, and pulp and paper industries - face environmental challenges. The department develops Sector Competitiveness Frameworks¹ which create a strong knowledge base from which the department can assess the implications of specific environmental regulations at the sectoral level.²

Risk management approach - Risk management can strengthen the credibility of environmental policy by giving it a stronger basis in science and economics. Industry Canada promotes the value of risk management in assessing existing environmental regulations and in developing new policy and program initiatives. Risk-based assessment is required to guide decision making on priorities for the government's Toxic Substance Management Policy and under CEPA.

Four Tenets of Risk Management Approach Good science - objective assessment of scientific knowledge to determine if exposure to the pollutants in question may represent a significant danger to human health or the environment Risk-based priorities - environmental problems should be ranked in order of priority by a comparative risk process Risk trade-offs - proposed regulations and initiatives should reduce risks of targeted pollutants by a greater degree than they increase other risks Cost-benefit - the costs of regulations or initiatives must be reasonably related to the degree of risk reduction expected from the pollution reduction

Effective use of policy instruments - Industry Canada supports the use of a range of policy instruments to meet its objectives. These include regulations, market-based instruments, information, voluntary approaches and strategic investments. The department advocates using the best mix of policy instruments to achieve the maximum societal benefit at the least cost. It concentrates on finding innovative ways to improve the effectiveness of the policy instruments used to serve economic, environmental and social objectives. It focuses particularly on the following areas:

Assessment and reform of environmental regulations - Industry Canada recognizes the importance of including well-designed environmental regulations in the mix of instruments. Both existing and proposed environmental regulations must be assessed on an ongoing basis to ensure that the management of environmental problems also addresses economic, environmental and social objectives. It is important to involve business in the development and assessment of environmental regulations to ensure a better understanding of how the regulations will affect business and competitiveness and to engage the private sector in developing innovative new approaches to managing environmental issues. Industry Canada has focused on encouraging an effective business-oriented analysis of regulatory proposals and on developing market-based and voluntary approaches as complements or alternatives to regulations. It encourages the use such micro-economic tools as the Business Impact Test (BIT), which identifies the impacts of regulatory initiatives on Canada's physical, intellectual, industrial and capital resources.

Market-based environmental policy instruments - Industry Canada supports the use of market-based instruments and has concentrated recently on promoting emissions trading. Analytical work demonstrates that the abatement cost differences among sectors in Canada are large enough to provide companies with the incentive to trade. Industry Canada and Environment Canada have worked together on such projects as studying the feasibility of emissions trading in Atlantic Canada and the co-sponsorship of a report on emissions-trading case studies. Industry Canada is also participating in the Pilot Emission Reduction Trading (PERT) project, a multi-stakeholder examination of the environmental and economic impacts of, and important design issues related to, an emission-reduction trading system for oxides of nitrogen and volatile organic compounds in the Windsor-Cornwall corridor.

Voluntary approaches for environmental management - Voluntary approaches are increasingly accepted as a complement or alternative to other policy approaches. The department works to expand the knowledge base for voluntary policy instruments and seeks new opportunities to support their application. In particular, Industry Canada is pursuing opportunities to use new tools and practices such as those relating to eco-efficiency and environmental management systems, through voluntary approaches (see Section 3.2 for more detail.)

Information - Industry Canada recognizes the importance of keeping Canadians aware and informed about sustainable development matters so that they can integrate economic, environmental and social considerations into their decision making. The department supports the use of a wide range of information and awareness tools that improve decision making. These include labelling initiatives, technology development and sharing, sustainable development indicators, quality standards and research. Industry Canada also supports the sharing of this knowledge and information through the most effective communication avenues available, including Internet Web sites and publications.

Growing Use of Voluntary Approaches Canada and other countries increasingly use voluntary approaches to achieve environmental goals. These approaches range from codes of practice and other self-initiated management practices in the private sector to more formal "covenants" among government, industry, consumers and communities. The Canadian Chemical Producers' Association (CCPA), for example, launched its Responsible Care® program in 1985. The program, which consists of detailed environmental guidelines and codes of practice relating to community awareness and emergency response, research and development, manufacturing, transportation, distribution and hazardous-waste management, has since been adopted in other countries and is recognized by the United Nations Environment Programme. In 1995, the Minister of Industry and the Minister of Environment signed a Memorandum of Understanding with the CCPA to reinforce the program by encouraging and publicly recognizing the progress of the association and its member companies. Industry Canada also works with Environment Canada, other departments and the private sector to develop and implement voluntary multisectoral government-industry partnership agreements. These endeavours have led to several initiatives such as the Major Industrial Accidents Council of Canada (MIACC)1 and the Accelerated Reduction/Elimination of Toxics (ARET) program2. Memoranda of Understanding (MOUs) between government and industry regarding commitments to manage environmental issues also have considerable potential. Industry Canada has helped to establish several MOUs such as those with the CCPA, the Vinyl Council of Canada and the Canadian Vehicle Manufacturers' Association (CVMA). The CVMA Pollution Prevention MOU has been the model for other sectoral MOUs such as those signed with automotive parts manufacturers, metal finishers, and the printing and graphics industry3. The department will strengthen its efforts in this area. Voluntary approaches provide an opportunity for governments, businesses, consumers and other stakeholders to work together to better define their respective roles and responsibilities in meeting specific environmental objectives. The success of such endeavours depends on ensuring that a number of critical factors are addressed. These include adequate planning and analysis; appropriate management systems; open, transparent reporting; and, satisfactory levels of stakeholder involvement. Industry Canada intends to improve the knowledge base on these critical factors of success related to voluntary approaches. 1 Formed in 1987, MIACC is a uniquely Canadian, not-for-profit organization that works to minimize the risk from major accidents involving hazardous substances by promoting the implementation of prevention, preparedness and response programs. It pursues its objectives through voluntary, consultative and consensus-building processes. 2 ARET has significantly reduced emissions of toxic substances through facility-based commitments and action plans in eight sectors, which together represent more than 40 per cent of Canadian industrial production. ARET participants have reduced their toxic emissions by 17 460 tonnes (49 per cent from base-year levels) and have committed to reducing by a further 8000 tonnes by 2000. The Ministers of Industry, Environment and Health have recognized this success. 3 The first sectoral voluntary pollution prevention MOU was signed on May 29, 1992 by the CVMA, Chrysler Canada Ltd., Ford Motor Company of Canada Ltd., General Motors of Canada Ltd., and the federal and Ontario governments. The project is a success story: significant amounts of the toxic substances targeted have been reduced or eliminated.

Bringing the consumer perspective to policy development

Industry Canada and consumer representatives are working together to integrate consumer analysis and perspectives as early as possible into the government's policy formulation process. To accomplish this, the department is building innovative networks and partnerships with other stakeholders;

instituting a market-focused, analytical approach to consumer and related marketplace issues; and ensuring that stakeholders have the information they need to provide meaningful input.

This approach has led to important consumer contributions in several areas. They include: the review of the Canadian Environmental Protection Act; climate change policy developments; the renewal of the National Biotechnology Strategy; the regulation of sulphur in gasoline; and the establishment of environmental codes of practice. The department also provided technical and financial support to develop an environmental labelling system in Canada.

Industry Canada will continue to work with the consumer movement to select where and how consumer analyses and perspectives can be brought to the government's policy formulation process. Some of the priorities being discussed - such as the environmental issues mentioned above - have strong links to sustainable development. Others represent issues whose links to sustainable development are largely unexplored but are matters of concern to consumer groups. These include electronic commerce, privacy issues and access to the Internet, regulatory reform in telecommunications and electricity, the Agreement on Internal Trade, and new approaches to consumer policy and law in a knowledge-based economy.

In particular, Industry Canada's work on voluntary environmental codes of practice emphasizes the need to have all relevant stakeholders, including consumer and environmental groups, at the table when such codes are being developed and implemented. This work has successfully brought consumer, business and environmental groups together to share information and expertise.

Action Plan Items - Reasoned Advocacy to Shape Sustainable Development Policy Bring expertise on economic, trade, competitiveness, consumer and related marketplace factors into policy development and implementation on high-priority environmental/economic files (e.g. Canadian Environmental Protection Act, climate change, toxic substances, transboundary movement of hazardous wastes and transportation fuels issues). Undertake analysis on economic, trade, competitiveness, consumer and related marketplace factors in relation to the climate change issue. Based on work with Treasury Board Secretariat, other government departments, business, consumers and environmental groups, publish a Voluntary Codes Guide to better inform government and non-government organizations regarding the conditions under which voluntary codes of practice are most likely to be successful, and the steps needed to develop and implement a successful code. Work in partnership with government departments, business and other stakeholders to develop and encourage effective and innovative use of policy instruments for environmental management with a major focus on voluntary initiatives. For example, work through: Memoranda of Understanding with the private sector; broadening participation in the Accelerated Reduction/Elimination of Toxics program; and reviewing the success of select voluntary initiatives and identifying areas where improvements could be made, as well as candidate sectors for new voluntary initiatives.

3.1.3 Consumer Choice and the Marketplace

Surveys over the past decade show that people will do their part to protect the environment as long as the claims behind the product or service are credible, and the price, quality and product features are comparable. The success of the blue box program is one example of how the interests of consumers and industry can be satisfied concurrently.

However, consumers have become more sophisticated in demanding clear, accurate information about goods and services, and may be unwilling to pay a premium for items or services to support sustainable development goals. This is the result of many years of little or no growth in household incomes, rising consumer debt, record levels of consumer bankruptcies and the need to be reassured that "green products" are truly valid.

Consumers are more likely to consider information credible if it is validated by more than one group (e.g. government, industry, the academic community or public-interest organizations). Multistakeholder networks, partnerships and voluntary arrangements thus become critical in raising consumer awareness and acceptance and developing two-way information exchanges.

Industry Canada's Role

Industry Canada will continue to raise awareness and provide information to consumers so that they can make informed decisions that contribute to sustainable development. This involves making existing information more readily available; establishing a mutual understanding of the kind of information consumers need and who can best provide it; and bringing consumer, business and environmental groups together to share knowledge and expertise. Industry Canada will continue to explore new ways to get information to consumers, both electronically and in print.

Industry Canada plans to build on the experience it gained in the Biotechnology, the Consumer and the Canadian Marketplace research program³ to find the best ways to reach consumers with information about advanced technologies and products. Such areas might include the commercial use of the Internet; the application of electronic commerce to banking, other financial services and government services; and environmental technologies, products, services and related issues.

Action Plan Items - Consumer Choice and the Marketplace Consistent with past project funding under Industry Canada's Grants and Contributions Program for consumer groups, provide financial support and technical assistance to consumer groups for project research, analysis and advocacy work related to the environment and sustainable development. Facilitate networks and partnerships between consumer groups and other government departments and public-interest groups on priority areas related to sustainable development.