Advocating for Green Business Support in Budget 2026
Read our recent submission to the federal government for 2026 budget consultations
Advocating for Green Business Support in Budget 2026
Read our recent submission to the federal government for 2026 budget consultations
From the Executive Director of Green Economy Canada
Matthew Lynch
From the Executive Director of Green Economy Canada
Matthew Lynch
The federal government has identified the critical importance of small and medium-sized enterprises (SMEs) for Canada’s economic and trade diversification agenda: Canada needs SMEs that are clean, competitive, and supply chain ready.
What does this mean in practice? It requires taking advantage of the electrotech revolution, and building the climate maturity of SMEs so they can both compete in key export markets and drive the climate competitiveness of Canada’s export-oriented value chains.
But beyond a group of first movers, Canada’s 1.3 million SMEs need strategically-targeted action and investment to “kick start” this transformation. Green Economy Canada, as Canada’s only national non-profit focused on the SME energy and climate transition, has a unique understanding of how we move forward.
We recommend that the government considers two bold initiatives for Budget 2026 to accelerate action:
National SME Accelerator
The National SME Accelerator will help Canada’s SMEs unlock the business benefits of investing in electrification, energy efficiency and sustainable technologies, identifying the most important actions they can take and connecting them with available incentives and financing to make action even more compelling.
SME Catalyst Fund
A strategic SME Catalyst Fund could play a flagship role in mobilizing SME action, jump-starting investment in electrification, energy efficiency, and sustainable technologies. A $2 billion catalyst fund could provide meaningful incentives and support that could enable 50,000+ Canadian SMEs to take action that makes their business more efficient, competitive, and resilient. The SME Catalyst Fund would be a “game changer” for Canadian small business and would put Canada at the vanguard of the electrotech revolution.
These initiatives could be mobilized quickly to drive meaningful action in the next 6-12 months and could be targeted to key industries and regions to maximize their impact and counter the impact of US tariffs.
The Importance of SMEs
SMEs are a critical element of the Canadian economy, responsible for over 50% of GDP and 65% of private-sector payroll employment. From a climate perspective, they are responsible for 52% of private sector GHG emissions. However, despite their importance, SMEs as a dispersed and heterogeneous constituency have generally been underappreciated and neglected in policymaking.
We welcome that this is changing rapidly under the current government. The new government’s vision of generational change is, at its core, a vision of an economy rebuilt on the productive capacity of Canadian workers, Canadian materials, and Canadian enterprises — the vast majority of which are small and medium-sized. Across every major strategy released in its first year, SMEs appear not as an afterthought but as the primary vehicle through which industrial sovereignty and trade diversification are to be achieved: in housing, in defense supply chains, in food processing, in AI adoption, and in the clean energy economy.
National SME Accelerator
The National SME Accelerator will help Canada’s SMEs unlock the business benefits of investing in electrification, energy efficiency and sustainable technologies, identifying the most important actions they can take and connecting them with available incentives and financing to make action even more compelling.
SME Catalyst Fund
A strategic SME Catalyst Fund could play a flagship role in mobilizing SME action, jump-starting investment in electrification, energy efficiency, and sustainable technologies. A $2 billion catalyst fund could provide meaningful incentives and support that could enable 50,000+ Canadian SMEs to take action that makes their business more efficient, competitive, and resilient. The SME Catalyst Fund would be a “game changer” for Canadian small business and would put Canada at the vanguard of the electrotech revolution.
These initiatives could be mobilized quickly to drive meaningful action in the next 6-12 months and could be targeted to key industries and regions to maximize their impact and counter the impact of US tariffs.
The Importance of SMEs
SMEs are a critical element of the Canadian economy, responsible for over 50% of GDP and 65% of private-sector payroll employment. From a climate perspective, they are responsible for 52% of private sector GHG emissions. However, despite their importance, SMEs as a dispersed and heterogeneous constituency have generally been underappreciated and neglected in policymaking.
We welcome that this is changing rapidly under the current government. The new government’s vision of generational change is, at its core, a vision of an economy rebuilt on the productive capacity of Canadian workers, Canadian materials, and Canadian enterprises — the vast majority of which are small and medium-sized. Across every major strategy released in its first year, SMEs appear not as an afterthought but as the primary vehicle through which industrial sovereignty and trade diversification are to be achieved: in housing, in defense supply chains, in food processing, in AI adoption, and in the clean energy economy.
Canadian SMEs: Clean, Competitive & Supply-Chain Ready
This new vision of the economy is centred around SMEs that are clean, competitive and supply chain ready. There are three key opportunities areas to consider in realising this vision:
Rapidly-declining costs for “electrotech” (including renewables, heat pumps, electric vehicles, and batteries) are resulting in rapid reconfiguration of production models and value chains globally. The cost of the core technologies have declined over 90% in the last decade, and many developing economies are jumping over fossil-fuel intensive industrialisation straight to a clean, low-cost future. SMEs often have more flexibility and agility to adopt new production technologies. Catalyzing the electrotech transition for Canada’s SMEs provides a strategic opportunity to stay ahead of this global transition, driving innovation, enhancing productivity, and decoupling margins from energy price volatility.
While the US is backsliding on climate requirements, 8 of Canada’s top 10 trading partners have or will soon have mandatory climate disclosures. New measures such as the EU’s Carbon Border Adjustment Mechanism (CBAM) are putting specific focus on the emissions intensity of exports. Analysis by EDC (and others) has identified the increasing importance of climate maturity for Canadian SMEs seeking to enter new export markets.
SME action is also essential for the decarbonization and climate competitiveness of Canada’s key export-oriented value chains. For most large industrial companies, most of their emissions “footprint” is in their supply chain: often 90-95% of their total GHG emissions (referred to as Scope 3 emissions). A substantial component of Scope 3 emissions are associated with SME suppliers, and these are often cited by large firms as one of the most challenging components in implementing their climate transition plans. Supporting SMEs to take climate action therefore has a double dividend: direct benefits for SMEs and increased climate competitiveness for Canada’s major exporters in sectors including high-tech manufacturing, food and beverage, and critical mineral production.
Supporting the SME transition: what does the evidence tell us?
Recent surveys, research and analysis by BDC, EDC, the Conference Board, and GEC (see reference section) give us a clear picture of the opportunities and challenges:
BDC found 50% of all Canadian SMEs have already taken at least some basic action to reduce their carbon footprint in the previous five years, with 73% of this group intending to act again in the next five years. A further 18% of SMEs had not acted but are intending to do so.
According to the BDC survey, SMEs took only 16 months, on average, to recover their energy and climate investments. For proactive firms that had taken multiple actions, 26% posted annual sales growth of 10% or more over the last year, compared to 12% of those that have not taken several actions.
GEC’s recent studies focused on net-zero manufacturing showed that a diverse set of SME manufacturing participants could reduce GHG emissions by 47% to 86% just through adopting existing technologies and behaviour change.
The Conference Board survey found that most SMEs, regardless of province or region, are at a relatively low level of “climate maturity” and most are at an early stage in their emissions-reduction journey. Only 18% of the surveyed SMEs are measuring carbon emissions, and even fewer (15%) have set net-zero targets.
BDC’s survey found that the most significant barriers to climate action for SMEs are: having more urgent priorities; not having internal expertise; limited financial resources; and uncertainty about the return on investment. The Conference Board survey found that the majority of SMEs feel they do not have the internal or external support needed to measure GHG emissions. They identified financial support and lending as the most significant factors in enabling SMEs to implement an emissions reduction strategy.
An Action Agenda for SMEs
Drawing on this evidence base, the key elements of the path forward are clear:
Targeting action ready businesses
In addition to the “first-mover” SMEs (~20%) engaged in climate issues, there is a much larger group of SMEs (40-50+%) that are “action-ready”, having taken some initial steps or intending to do so. These businesses are a key group to target for support and finance.
Targeting action ready businesses
In addition to the “first-mover” SMEs (~20%) engaged in climate issues, there is a much larger group of SMEs (40-50+%) that are “action-ready”, having taken some initial steps or intending to do so. These businesses are a key group to target for support and finance.
Enabling business & climate benefits
These action-ready firms have the opportunity to directly benefit from near-term actions with clear financial paybacks, also resulting in significant energy use and emissions reductions.
Enabling business & climate benefits
These action-ready firms have the opportunity to directly benefit from near-term actions with clear financial paybacks, also resulting in significant energy use and emissions reductions.
However, catalytic support is needed
Energy and climate action will be prioritized by SMEs if basic technical support and guidance is available, the return on investment is clarified, and they are connected with incentives and financing.
However, catalytic support is needed
Energy and climate action will be prioritized by SMEs if basic technical support and guidance is available, the return on investment is clarified, and they are connected with incentives and financing.
While Canada’s SMEs are innovative and agile, this transition to being clean, competitive and supply chain ready requires support to happen at scale. Unfortunately, this type of SME-tailored support is not readily available and is fragmented across the country.
With the negative consequences of US tariffs and the conflict in the Gulf already impacting the economy, supporting SMEs now to make them more efficient, competitive and resilient is critical to help protect businesses, jobs and local economies, while taking advantage of new trade opportunities emerging from a global economy in flux.
We propose two solutions to be mobilized quickly to drive meaningful action in the next 6-12 months and that can be targeted to key industries and regions to maximize their impact and counter the impact of US tariffs: the National SME Accelerator and the SME Catalyst Fund.
Solution 1: National SME Accelerator
The National SME Accelerator is a “one stop shop” enabling thousands of SMEs a year to take rapid action to invest in electrification, energy efficiency and sustainable technologies. The Accelerator provides structured, SME-friendly concierge service through an expert adviser, following the accelerator model being used to support wide-scale energy retrofits in commercial and residential buildings.
The National SME Accelerator will help Canada’s SMEs unlock the business benefits of investing in efficiency and clean technologies, identifying the most important actions they can take and connecting them with available incentives and financing to make action even more compelling. The SME Accelerator will build and maintain the Action SME Support Stack — a comprehensive inventory of government and utility incentives, tailored financing options, and free/low-cost services and solutions — that can be combined and deployed to make action more attractive. A National SME Catalyst Fund (Solution 2) could form a key element of the Action Support Stack to drive SME action at scale.
From GEC’s decade of experience enabling hundreds of SMEs to measure and reduce their GHG emissions, we know the Accelerator Model will deploy support that actually enables SMEs to move forward with action and investment. We stand ready to work with our national ecosystem of partners (including federal agencies, financial institutions, chambers of commerce, and foundations) to help make the National SME Accelerator a reality.
Solution 1: National SME Accelerator
The National SME Accelerator is a “one stop shop” enabling thousands of SMEs a year to take rapid action to invest in electrification, energy efficiency and sustainable technologies. The Accelerator provides structured, SME-friendly concierge service through an expert adviser, following the accelerator model being used to support wide-scale energy retrofits in commercial and residential buildings.
The National SME Accelerator will help Canada’s SMEs unlock the business benefits of investing in efficiency and clean technologies, identifying the most important actions they can take and connecting them with available incentives and financing to make action even more compelling. The SME Accelerator will build and maintain the Action SME Support Stack — a comprehensive inventory of government and utility incentives, tailored financing options, and free/low-cost services and solutions — that can be combined and deployed to make action more attractive. A National SME Catalyst Fund (Solution 2) could form a key element of the Action Support Stack to drive SME action at scale.
From GEC’s decade of experience enabling hundreds of SMEs to measure and reduce their GHG emissions, we know the Accelerator Model will deploy support that actually enables SMEs to move forward with action and investment. We stand ready to work with our national ecosystem of partners (including federal agencies, financial institutions, chambers of commerce, and foundations) to help make the National SME Accelerator a reality.
Solution 2: SME Catalyst Fund
A strategic SME Catalyst Fund could play a flagship role in mobilizing national SME action, jump-starting a national wave of investment in electrification, energy efficiency, and sustainable technologies.
A $2 billion catalyst fund could provide meaningful incentives and support that could enable 50,000+ Canadian SMEs to take action that makes their business more efficient, competitive and resilient. Such an investment would be a “game changer” for Canadian small business and would put Canada at the vanguard of the electrotech revolution. The investment would have the double dividend of turbo-charging the growth of Canada’s clean tech ecosystem, building the supporting industries and expertise to deploy solutions, creating thousands of high-paying jobs from coast to coast to coast.
We advocate that eligible SMEs are encouraged to stack contributions from the fund with existing incentives from energy efficiency agencies and utilities to further drive a case for action.
The National Climate Accelerator (Solution 1) would be a primary delivery platform for supporting SMEs to deploy the financial support from the SME Catalyst Fund.
Solution 2: SME Catalyst Fund
A strategic SME Catalyst Fund could play a flagship role in mobilizing national SME action, jump-starting a national wave of investment in electrification, energy efficiency, and sustainable technologies.
A $2 billion catalyst fund could provide meaningful incentives and support that could enable 50,000+ Canadian SMEs to take action that makes their business more efficient, competitive and resilient. Such an investment would be a “game changer” for Canadian small business and would put Canada at the vanguard of the electrotech revolution. The investment would have the double dividend of turbo-charging the growth of Canada’s clean tech ecosystem, building the supporting industries and expertise to deploy solutions, creating thousands of high-paying jobs from coast to coast to coast.
We advocate that eligible SMEs are encouraged to stack contributions from the fund with existing incentives from energy efficiency agencies and utilities to further drive a case for action.
The National Climate Accelerator (Solution 1) would be a primary delivery platform for supporting SMEs to deploy the financial support from the SME Catalyst Fund.
Who is Green Economy Canada?
Green Economy Canada (GEC) is a national non-profit accelerating Canada’s transition to a vibrant and inclusive net-zero future. GEC convenes a network of hundreds of businesses through our National Hub and expanding network of local Green Economy Hubs across the country. Over the past decade, GEC has built unique expertise in supporting hundreds of SMEs to measure their GHG emissions and take concrete action to make them more sustainable, competitive, and resilient. So far, GEC has helped over 700 organizations make more than 230,000 tonnes in GHG emissions reductions.
GEC’s strategic ambition is to mobilize 10,000 businesses in the net-zero transition by December 2028. To deliver on this ambition, we are engaging a growing ecosystem of partners, including leading businesses and financial institutions (RBC, BDC, The Co-operators, TD, Scotiabank, HP Canada), business networks (e.g. the Manitoba Chambers of Commerce), and major climate-focused foundations (e.g., Trottier Family Foundation). We also run the nationally recognised Climate Action Boot Camp virtual webinar series for SMEs, funded by RBC.
GEC has a long track record of partnership with the federal government, for example:
References
- Green Economy Canada (2025) Unlocking Net-Zero Pathways for SME Manufacturers
- Green Economy Canada (2025) Fast Forward: Enabling the Net-Zero Transition for SME Manufacturers in Atlantic Canada
- Conference Board of Canada/EDC (2023) The Path to Net Zero: Survey Results From Canadian SMEs
- Conference Board of Canada/EDC (2023) The Path to Net Zero: A Primer on How to Assess SME Progress
- BDC (2023) The Benefits for SMEs of Taking Climate Actions
- Smart Prosperity Institute (SPI) (2020) The Low Carbon Policy Ecosystem: Leaving Small and Medium Sized Enterprises Behind