The future role of government series

From energy to water and food to minerals, the world’s natural resources are dwindling. Canada must act fast to manage and secure its supply sustainably and more efficiently—it relies on its abundant reserves for economic growth, not only as a direct contributor to GDP but also as a critical driver for manufacturing, capital, robust housing supply, and strong labour force participation. And as it’s been highlighted in international forums such as the World Petroleum Congress, energy security—a component of natural resource security—is a top priority for nearly every government that’s decarbonizing.

Canada is well positioned to be a sustainable and responsible energy producer as well as a global leader in this sector. How can government help to capture this opportunity?

Over the past few months, Deloitte leaders have come together to consider the evolving role of government and bring perspective to the state of this country’s natural resource security. Our collective aspiration is for a Canada whose natural resources are managed, secured, and developed in a responsible and sustainable manner that empowers economic growth and global competitiveness. This is done in a manner that preserves shared cultural and ecological environments, and honours the heritage of Indigenous Peoples.

This article is part of Deloitte’s future role of government series, which examines trends that are provoking governments to act and seeks to provide Canadian governments with bold ideas to help them address the underlying issues. Underpinning our work is a recognition that the role of government is evolving. Read our introductory report, The future role of government: Society is evolving. So must the way it is governed, for more context. We also acknowledge that, for the topic this article addresses, developing global situations and events are affecting trade, transport, and security; the perspectives here reflect our thinking as of January 2024.

Canada's natural resources—oil, gas, timber, minerals, fish, freshwater, and more—have long played a vital role in developing the country's economy, identity, and culture, and they still do in areas that depend on the industry for livelihoods and community. In 2023, natural resources directly and indirectly accounted for 1.7 million jobs and 19.2% of the nominal GDP.

But, like many other nations, Canada is facing the looming depletion of these finite resources and is working to establish sustainable alternatives. A changing climate not only jeopardizes the supply of natural resources but also our ability to access them—for example, extreme conditions that undermine critical infrastructure may result in having to alter extraction processes. The economic toll of floods, droughts, and storms could amount to a staggering $139 billion over the next 30 years in Canada, according to a report by a global engineering firm.

Climate is not the only challenge to the security of these resources, of course. Geopolitical tensions that directly or indirectly disrupt supply chains, such as attacks on ships carrying key natural resources across the Red Sea or events of the Russian-Ukraine war, magnify the fragility of nations’ energy security.
The delicate balancing act between preserving its domestic resources and remaining globally competitive underscores the complexity of Canada’s natural resource security. These challenges must be handled in a way that secures environmental sustainability and economic growth to preserve societal well-being.

The current state

We have identified four major trends in the natural resources industry that require Canadian governments to act: sustainable ecosystems; Indigenous reconciliation and partnerships; economic growth and export promotion, regulatory, and management innovation; and supply chain resiliency and natural resource availability.

• Sustainable ecosystems
  
  Sustainable environmental ecosystems are crucial for maintaining the health and well-being of the planet. They provide essential services such as clean air and water, nutrient cycling, and carbon sequestration, all of which support life. They also feed economic activity, such as resource extraction and energy production.
  
  While Canada’s natural resource industry is a significant contributor to its economic growth and prosperity, this growth must be balanced with good ecosystems stewardship. Sustainable forestry practices, for example, are accounting for inputs in a way that accelerates circularity, reduces waste, and lessens the environmental footprint. In agriculture, digital twins technology could be used to test and simulate different processes that could enhance the operational efficiency of farms and reduce water and fertilizer waste, all in a safe digital setting.  
• Indigenous reconciliation and partnerships
  
  As rights and knowledge holders, Indigenous Peoples are indispensable leaders in guiding Canada’s relationship with the land and the resources extracted from it. It is imperative to reconciliation efforts that Indigenous communities are seen as partners, owners, and stewards of natural resource projects.
  
  Progress in reconciliation has been made in some areas within this industry, but it’s not linear. In British Columbia, the Tobacco Plains Indian Band entered a rare deal that gives them veto power over a proposed mining project.  Other First Nations communities oppose natural resource projects for infringing on their treaty rights and failing to carry out the duty to consult. Yet partnerships hold promise for both industry and Indigenous communities. For example, the federal government recently announced a national loan guarantee program to support Indigenous equity ownership; how this program is administered will be the key to whether it advances reconciliation or not.4 Meanwhile, the Alberta Indigenous Opportunities Corporation (AIOC) funds $3 billion in loan guarantees annually; a federal version of this organization could help to strengthen economic partnerships across communities.
  
  With meaningful participation in the decision-making, monitoring, and evaluation, resource extraction projects can be socially and environmentally responsible and benefit the local community while driving economic growth. 
• Economic growth and export promotion
  
  The natural resource industry is a bedrock of Canada’s economy. As such, rising global competition between producers and changing market dynamics are creating the need for Canada to tend to its global competitiveness by boosting domestic output. The increasing global demand for energy has already led to significant investment in energy infrastructure for the export of oil and gas—and also, paradoxically, in the renewable energy transition, given Canada’s commitments to reaching net-zero emissions. 
• Regulatory and management innovation
  
  The shifting climate is magnifying the need to secure access to the many materials required to decarbonize systems as we transition to net-zero. Canada’s regulatory frameworks—the ones that govern resource extraction and development—were developed decades ago and have not kept pace with changing environmental and social concerns. While steps have been taken to modernize legislation and to streamline the regulatory processes, getting natural resource projects up and running is still considered a series of long and arduous processes susceptible to administrative burden and red tape. Indeed, the Supreme Court of Canada recently declared that sections of the Impact Assessment Act are unconstitutional given their infringement on jurisdictions that exceed the powers of the federal government. The minister responsible has affirmed the department would work quickly to amend it and ensure the impact assessment process works for all Canadians.
• Supply chain resiliency and natural resource availability
  
  Resilient and robust supply chains are crucial to any industry, but particularly to that of critical natural resources (e.g., lithium, cobalt, natural gases)—disruptions to these resources can inflict considerable economic loss  How Canada produces, distributes, and markets them, nationally as well as internationally, is affected by domestic crises and foreign conflicts. Examples of such events include extreme weather (e.g., wildfires in Quebec, British Columbia, and the Northwest Territories, and flooding in the Maritimes), geopolitical conflict, and domestic political turmoil.
  
  Canada must enhance its ability to plan for and respond to emergencies and volatile pricing that impact natural resources. A better capacity to meet these challenges would help secure their availability for Canadian consumers, industries, and international partners.

Recommendations

To help governments in Canada adopt an efficient, balanced approach to managing the country’s natural resources sustainably, we’ve developed numerous targeted recommendations. They are organized through four levers: people and leadership; policy and processes; technology; and collaboration.

People and leadership

How can we transform Canada’s governance and leadership structures to secure our natural resources?

1. Empower local governments as critical interest holders
   
   Local governments should be enabled to adopt community-based planning strategies, regional monitoring programs, decentralized decision-making, and co-management strategies with community interest holders. This means prioritizing the full inclusion of community perspectives and knowledge of natural resource management decisions across municipalities, communities, and Indigenous lands. A successful example of this approach is the Ahousaht First Nation in British Columbia, which has promoted stewardship and restoration in its traditional territories.
2. Foster sustainable cycles between industry and government
   
   There is growing momentum across Canada to integrate circular economies into industrial design, notably demonstrated by organizations such as Circular Economy Leadership Canada and Circular Innovation Council. Many existing policies focus on producer responsibility, despite a lack of robust integration supports for organizations that are held accountable. Nevertheless, an intergovernmental committee has begun efforts to lead the way for resource management and is developing a nationally integrated plan that enables implementation, education, and skills training at the local level. In turn, the ensuing dialogue as the committee develops this plan would inform outcomes-driven policy decisions and incentive frameworks that address risks and offset market solutions that require additional investment.
   
   Supported by regulations on product design, extended producer responsibility, recycling, education and reskilling, and green procurement, this should encourage the widespread adoption of circular economy principles. It would also help establish Canada as a leader in adopting new standards from the International Sustainability Standards Board.
   
   The cycle of sustainable economic growth begins with clear, goal-oriented, and agile policy instruments that help implementation: an effort led by government and supported across industries.
   
3. Use an integrated approach with Indigenous Nations
   
   The complex and dynamic issue of Indigenous rights in natural resource management has historically failed to be adequately considered by government. That must change, with the rights and perspectives of Indigenous rightsholders respected and protected in any process. Ensuring an integrated approach of stewardship and collaborative management with Indigenous governments and leaders who are trusted by local populations is critical to a socially just natural resource economy. Such an approach must focus on deepening and expanding relationships with Indigenous Peoples in advancing their leadership role in natural heritage conservation.

Policy and processes

How can Canada future-ready its policies and regulations to be a leader in this area? 

1. Consolidate recycling and waste management
   
   The practices at the end of the productive life cycle of a natural resource product or commodity should be just as important as during their extraction. Recycling programs vary by province and municipality and can even be optional, resulting in a patchwork of different operating models, even between neighbouring communities. 
   
   Consolidating recycling programs to improve resource management yields across more waste types—such as batteries, plastics, and rare earth metals—would help ensure consistency. Robust modern recycling programs that facilitate a more effective collection and minimized use of textiles, batteries, e-waste, and plastics packaging would also support circular economies across the country.
2. Incorporate Indigenous knowledge into conservation efforts
   
   The Canadian government uses conservation easements as a tool to protect natural resources, as embodied by ecological areas, cultural sites, and agricultural land use areas and often under the auspices of Parks Canada and agricultural heritage. The government also uses easements to restrict exploitative land use that affects Indigenous communities and ecological areas. The conservation strategy, developed in collaboration with those communities, focuses on Indigenous well-being and integrates local knowledge and practices into land and resource management to ensure ecological and social wellness. These practices were discussed at length at the UN Biodiversity Conference COP 15 in Montreal in 2023.Nevertheless, Canada stands at a unique moment to capitalize on the momentum by developing clear and concise legislation and policy guidance for the future. This should be done in collaboration with Indigenous Peoples to avoid challenges such as those that recently arose from the ambiguity of Bill C-61 regarding what constitutes water sources on First Nation lands. Canada should develop a collaborative strategy that ensures the voices of all nations are reflected in policy creation.
   
   

   The Kitigan Zibi Anishinaebeg First Nation, in Quebec, has employed a two-eyed seeing approach to conservation, bridging Indigenous knowledge with Western conservation methods. With a strong emphasis on water sampling and monitoring endangered species, its conservation program entails community members going out on the land to monitor ongoing resource extraction projects on their traditional territory.

3. Create clean energy storage regulatory frameworks 
   
   Supported by funding programs and initiatives, clean energy storage facilities in Canada continue to grow. Pilot projects are also underway to demonstrate the effectiveness of clean energy. Regulatory frameworks can enable and safely facilitate a nationwide deployment of clean energy, increasing cost competitiveness and regional access to energies like hydroelectricity. 
4. Mandate sustainable procurement strategies
   
   Green procurement strategies should be required across all levels of government, along with incentives for industry to purchase products and services that are energy- and resource-efficient. The full integration of sustainability principles into procurement processes and decision-making would create clear and comprehensive green frameworks that track, and report progress made, especially while collaborating with the private sector.
   
   Furthermore, a procurement framework requires clear specifications and evaluation criteria, as well as monitoring and reporting throughout the life cycle of the product or service procured. Examples of key metrics for evaluation include CO2 emissions, plastic waste reduction, energy consumption, and chemical safety requirements, which should be in line with strong systems and frameworks such as the Global Reporting Initiative (GRI) Standards.

Technology

How can governments use technology to safeguard Canadians and guarantee inclusive access to natural resources? 

1. Drive investment in decarbonized systems, efficient infrastructure, and clean energy storage
   
   More research, data, and capacity building are needed for scaling sustainable infrastructure technology, particularly in regions of the country prone to extreme weather events. There is a strong need for investments in green infrastructure (green roofs, permeable pavements, and urban forests) to help conserve natural resources and improve the sustainability of urban communities. By leveraging best practices and economies of scale across jurisdictions, wide integration of such infrastructure into urban design—in housing, energy, transportation, and water management systems—can be feasible. 
   
   Further, variations in storage systems can be significant across the country, with battery storage and pumped hydro storage mostly concentrated in Quebec, Ontario, and British Columbia. Storage systems like advanced batteries and compressed air increase the use of renewable energy and reduces the reliance on non-renewable resources. Eventually, electricity grids and energy systems across the country should be able to be supported by low-carbon and energy-secure storage that allow for wide integration and improved efficiency in both densely and sparsely populated regions.
2. Develop integrated and modernized recycling programs
   
   Disjointed recycling programs vary by municipalities across the country; new models of privatized and locally funded recycling programs would help enable circular economies. Developing and implementing advanced recycling technologies, such as chemical recycling and circular economy approaches, would help to conserve natural resources and reduce waste. Recycling programs should be modernized and integrated to collect key materials such as batteries, textiles, and e-waste that is consistent across local municipalities throughout the country, and to support circular economy practices.
3. Emphasize technological innovation 
   
   The integration of technology and innovation will play a critical role in how efficiently governments operate and manage key sectors, such as energy and natural resources, in the future. Investing in and strategically implementing technologies like digitalization, the Internet of Things, cybersecurity, and artificial intelligence would have a profound impact on whether Canada is able to meet its net-zero emissions targets; they can also be employed to analyze data sets that could provide insights on future sustainable practices and policies. 
   
   The ability of government to adapt these technologies will determine how new energy modelling tools, energy extraction technologies, and security can accelerate progress on energy transition goals. These investments should also support governance efficiency, supply chain resilience, global collaboration, and more.

Collaboration

How can governments collaborate with each other and with non-government actors to align and scale best practices?

1. Create natural capital accounting frameworks
   
   Natural capital accounting values resources by considering their social and environmental significance as well as their economic value by quantifying the benefits of these natural resources. This highlights the interconnectedness between economic, social, and environmental factors when making decisions. By incorporating these considerations, policymakers can make more informed decisions about resource management and development. Frameworks and pilots are underway across the UN organization and member states to assess the feasibility of natural capital accounting to inform development of sectors, such as forestry, and some integration in private sector organizations to better understand the true environmental impact of business operations. Natural capital accounting for private and public sector actors should be implemented to ensure the full consideration of the economic value of natural resources. 
   
   Despite existing challenges in implementing this type of framework, especially across resource-intensive industries, government can help organizations better understand disclosures reporting and enterprise-specific evaluations. Canada’s regulations on natural capital accounting are in line with those of the International Sustainability Standard Board (ISSB), specifically the recommendations made by the Task Force on Climate Related Financial Disclosures (TCFD).
2. Encourage collaboration in supply chain innovation
   
   Some industries in Canada have launched initiatives to optimize joint sourcing and create research centres, such as Canadian Wood Fiber Centre, but this practice of collaboration is not part of the culture of all industries. Government must inspire leaders in industry, and the public sector as well, to see the value in working together to develop shared resource hubs and holistic resource management practices that would minimize waste and increase resource efficiency across producers. Effective cost reduction and increased efficiency would enable Canadian companies to be more competitive.

Conclusion

If our governments, from federal to municipal, act now on these recommendations to ensure the security of the country’s vast natural resources, Canada can continue to enjoy the benefits while ensuring the health and safety of ecosystems and communities in an increasingly complex global economy, trade system, and environmental climate. 

We aspire to a future state where: 

• Canada uses Indigenous knowledge and collaborative approaches to conservation in protecting the environment and natural resources. Prioritizing sustainable ecosystems amid climate change, extreme weather events, and environmental degradation is critical to maintaining the services nature provides on which human life and economic activity depends. 
• Natural resource extraction occurs through the partnership, ownership, and collaboration with Indigenous communities. In this way, Indigenous reconciliation and partnership is meaningfully honoured throughout the life cycle of resource extraction projects as socially and environmentally responsible. 
• Retaining its competitive edge, Canada uses investment into green energy and innovation to continue to provide jobs and drive economic growth in the natural resources industry. Ensuring continued economic growth and export promotion helps ensure one part of a sustainable, stable economy.
• Regulatory frameworks in the circular economy and supply chain network are routinely updated to reflect the current state  of natural resources. Such systematic regulatory and management innovation maintains Canada’s leadership position in sustainable development in a time of global uncertainty and environmental concern. 

Endnotes

Thank you to our key contributor, Leo Xu.