Impact Podcast | How can Canada build big things?

KANINA BLANCHARD (KB)

Exclusive insights, actionable strategies and ideas that ignite change. You're listening to the Ivey Impact Podcast from Ivey Business School.

JULIAN BIRKINSHAW (JB)

Hello and welcome to dialog with the Dean, the flagship series on the Ivey Impact Podcast. I'm Julian Birkinshaw, Dean of the Ivey Business School. Canada is on the brink of a national building boom. The recent passage of Bill C-5, the One Canadian Economy Act, aims to fast track major infrastructure projects, pipelines, ports, mines, clean energy corridors and more. All in the name of economic growth and national resilience. But can this country actually get shovels in the ground? Why is it so hard to build anything big in Canada? And what does this window of opportunity mean for firms navigating complex stakeholder landscapes? To help us tackle these questions. Is Adam Fremeth, associate professor of business, economics and public policy here at Ivey. Adam is an expert on how firms engage with regulators, activists and community stakeholders, particularly when the stakes are high and the spotlight is bright. Adam, welcome to Dialogue with the Dean. It's great to have you here.

ADAM FREMETH (AF)

Julian, thanks so much for having me today. Looking forward to the conversation.

JB

Perfect. So I always want to start by asking you a little bit about how you got here. Just give us your, you know, your brief sort of life story, as it were.

AF

Oh, perfect. Great. Well, so, Ivey is actually a place I've spent a lot of time. I did my undergraduate degree here and came back here following my doctoral, degree in the US. I was really excited at the time in 2009 to, to return to Canada and have a role in leading, Ivey and the important role we play in educating business students and supporting the economy.

JB

Got it. Before we get into the main story around the C-5 Act, talk a little bit about some of your studies that you've done in the earlier part of your career. What's your big research agenda been?

AF

Yeah. No problem. So, like you mentioned, I'm in the business economics and public policy group at Ivey, and so it's a really unique group that we have here in Canada of scholars are really understanding how firms engage with the environment. Policymakers, stakeholders, and in particular, in my case, the energy industry. And so a lot of the work that I focus in on is how firms try to shape policy and also respond to public policy, in particular the electricity utility sector. You know, one that I think is obviously quite important to in the future growth of our economy, that laid the groundwork for where we are here today and also has important role in, improving the sustainability of the Canadian global economies as well.

JB

So, this would be, for example, the extent to which electrical utilities are investing in renewable energy rather than using nuclear or hydro or whatever.

AF

Yeah, well that's right. So, in particular, a lot of my work looked at how firms had a role in helping to craft the renewable energy policies that we have here in Canada and in the United States. How they've been meeting some of those demands and trying to stay on top of where the market could be going as well.

JB

Let's get into the big question, which is, you know, Canadian investments in big infrastructure projects. I've been living here now for a year, and I've experienced it personally. Everybody tells me Canada's really bad at doing these big infrastructure projects. Give us a sense, and I don't think anybody's going to dispute that as a general proposition. Give us a sense of why. What are the reasons why it is so difficult and so slow to get these things moving.

AF

So, let me go back in time a little bit on this, because it wasn't always the case. You know, Canada for a long time was really good at nation building projects. The Trans-Canada highway, the rail line that went coast to coast, the, gas main line pipeline that went, you know, from, western Canada, eastern Canada. Ports, the development of the Saint Lawrence Seaway. We were really good for a long time, at big infrastructure development. And for the past decade, really, we've seen what many consider the last decade, right? That we had an opportunity to build out some key industries, some export-oriented industries and, and nothing really happened. Right. There's a real constrain on, on getting shovels in the ground, getting the capital that we need and maintaining the capital in this country that's required. And so, you know, that has had a detrimental impact on our economy.

JB

So, I was doing a little bit of research before our conversation. This is just data from the OECD, which is the big trans trans country organization. Canada ranked second worst in the OECD for time required to obtain a general construction permit.  And between 2006 and 2020, Canada fell from fourth to 23rd place in the World Bank's Ease of Doing Business ranking. So, your point is, is substantiated, if you like, by hard data. What went wrong? What has happened over the last 10 or 15 years to slow things down.

AF

I think we just ran into, a lot of obstacles in getting the support that we need from, policymakers and any blame could be passed, across the board at different levels of our government to not provide the supports needed for firms to actually build the projects out that, that are required. And this means, all different levels of support, right? You know, making sure that you've got the support on labour that required. Opening up the borders to trade and investment so you've got the inputs that you need. And ensuring that firms are willing to invest in this country. I could say, around 2014. So, you know, just about ten years ago, we had a mass exodus of foreign firms that were investing in the oil and gas sector in Canada. We had all the large companies here. We had Total from France, you had the Koreans, you had the Japanese and so all of a sudden we had a drop in the oil price, but also the constraints on building new projects, just vanished. And so that is a real detriment to us. And so I think it's making sure that we've got the supports needed, treally speaks to the data that you had provided here that you can't be investing hundreds of millions or, billions of dollars in the ground to not actually see a project come to fruition because you get slowed down in some processes that we had. And some of these processes were well intentioned, and, some of them actually created a lot of hurdles.

JB

To sort of push a little bit on the Canada specific part of this, because having lived most of my life in the UK, the UK is terrible at infrastructure projects as well. And there's always a sort of, a conversation about why does the UK do it so badly. Canada's got some unique challenges. I mean, obviously the physical size is one. Is Canada, the different branches of government, Are they pandering too much to too many different stakeholder groups? Is that is that part of the problem, because the more stakeholder groups whose voice finds its way into the conversation, obviously the more things get slowed down. It's just a question. Really?

AF

I think that's a I think that's important part of it. Right? I think it's getting the right people in the room and having constructive, productive conversations to make things happen. And also, you know, entering in these conversations with best intentions. Right? Not, you know, the goal to, to create obstacles or perhaps to keep the resources in the ground, but also thinking about how we can do this better than other countries. And this is the challenge when you talk about resource extraction, which is, you know, where Canada has its greatest comparative advantage going back to the massive size of who we are. We have a lot of what the world wants, and we just need to be able to pull that material out of the ground responsibly, which I believe we do well in a world class basis and then feed the world with what they need. And so, for example, just a few years ago, the German chancellor came over to Canada, soon after the war in Ukraine had had erupted, and was seeking natural gas. Right. And our prime minister at the time, you know, retort was, well, we can't help you today. And so it really left, what I could see as important money on the table, given the vast natural gas resources that we have. Just a few months ago now, we've had the opening of Canada's first liquefied natural gas terminal in Kitimat, which is, I, I'd say, a huge success story, a big development, but maybe a little bit late to the party. But these efforts are ones that I think we need to consider. Okay. Well, how did that happen? How do we start to replicate that to make sure that the right people are making the right decisions and projects and shovels are being put into the ground.

JB

And so, obviously, we come to the present day and we've seen this C5 Act because you and I and everybody understands the background of the Trump government and the challenges to Canada and Carney being elected. Just tell us a little bit, not every listener will be really familiar with the One Canadian Economy Act. We're not going to go into detail, but one of the one of the basic principles behind that.

AF

So, I think it's really meant to be a nation building policy. One that is focused on infrastructure development while we're in sort of a slowing economy stage, almost stagnating economy, ensuring that we're able to knock down trade borders between provinces, and find ways to get capital and money in the hands of developers, you know, and financing schemes so that we can get projects built. While also recognizing the important role that Canadians, indigenous communities have and the stake that they that they maintain in the development of our economy.

JB

Got it. And so what's your prognosis for how this plays out? Because, yeah, Carney obviously came into power with, a mandate for being a little bit more pro I mean, a little bit of a lot more pushy, proactive about taking the Canadian economy and the growth of that economy seriously. What's your sense of how successful he's going to be over the next…. Because at the moment he's still, essentially in this honeymoon period where, you know, we're we're kind of fighting the challenges we're getting from down south. How is it going to play out?

AF

So, I don't have a crystal ball. Like to always say that, you know, as an economist, too, I'm terrible at making forecasts. Right? But, you know, I think we have a window of an opportunity here. Okay. And that window could be short. We have, people in his cabinet, like Tim Hodgson, for instance, that have, you know, very good sense of the industry and how projects can get developed and the financing of that as well. And so my hope would be that we could find a way to, to get all the players, together and projects built. But, you know, we got I think the next six months will be very telling on us. And, you know, we have different provinces coming up with projects that they have, a key interest in. I spoke to, you know, some leaders out in Nova Scotia not long ago about offshore wind projects, but what I'd like to see are developers, actual firms coming up with these initiatives and not necessarily just provincial leaders or premiers that are putting these forward. There has to be a real commercial angle to what's happening.

JB

So, let's explore that for a second. To the nature of the public private partnerships, if you want to call it that? And I, I recall we interviewed Bill Morneau, a couple of months back, and of course, he was the finance minister at the time when the Trans Mountain extension pipeline was built and invested in. And my understanding is essentially the federal government stepped in because B.C. and Alberta couldn't agree and the US company that had owned it basically said, we're not going to invest. I mean, building on that example is, is that this should we be trying to find ways of getting more private money into these types of investments? Or should the federal government just be essentially, you know, running up the debt and investing itself?

AF

In practicality, I think it's both. That the government needs to have a hand in de-risking the projects. That it cannot be seen as a place where things can't get done and the government has a role to play in this. The Canadian Infrastructure Bank could be one outlet for that. That is happening.

JB

Say a bit more about the Canadian Infrastructure Bank.

AF

It's, the Crown corporation that the government created, not long ago, actually, to try and fund infrastructure projects in the country. It was slow going at the beginning. But now you seen, new developments come on and the speeding up of these types of efforts. There's a story most recently about sort of ferry systems in British Columbia that they're funding in. The things that you need to enhance the productivity of this, of this country. And so, you know, institutions like that have an important role, but you need the business people of this country to also step up and identify where are the priorities. Where are we actually going to be world leading in our efforts and, and return to perhaps where we were, you know, I would say about 20 years ago now, in being a highly productive, and well-integrated, economy.

JB

But inevitably, as some of these projects get put forward, we're going to sort of fall back into old practices, which is different branches of government of each got their own regulatory systems. And I was reading up in advance and reading of specific examples where it feels like your proposal goes into a black hole of the government, and it gets going around and you, you don't hear anything for a year. Any sort of insights or thoughts on how that can be resolved.

AF

This is the ultimate question, right? Is the black box of regulation and understanding how that process could get sped up? You do always have these initiatives in some provinces to, to cut the red tape and, cut back. We see a lot of that obviously going on in the US as well. It doesn't necessarily mean anything moves quicker, but I do, see a real effort in bills like C5 and other initiatives from the government to change the queuing system for approvals. That when you have a commercial ready project, it's going to move up a lot quicker and move through perhaps a parallel process. One that requires the right level of scrutiny, but not necessarily something that's going to take years to develop, and hundreds of millions of dollars on the developer side to be sitting on their hands and waiting.

JB

Let's move to, I mean, sort of linking to what we've just been discussing and was linking it back to some of your research because obviously you spent a lot of time in these earlier studies looking at the strategies of firms as they respond to different forms of regulation. On one side and activism on the other. If you're advising companies at a very sort of generic level, what's your advice to them in terms of engaging with these various different activist groups and so forth?

AF

From the work that I've done, you need to engage early and often. You see projects here in Canada that have been successful are the ones that found collaborative relationships with partners that are willing to work with you. And it's not always the case, perhaps. But often is that there's some ground to find where a project could get developed and opportunities provided to those that have concerns. For instance, I think a great example of this was the Coastal Gaslink, pipeline that was produced, developed in British Columbia to feed the natural gas into the LNG project that, that was developed in Kitimat. There TransCanada, TC energy now, you know, negotiated, impact and benefit agreements with I believe it was 21 different indigenous communities over the years and was really working with these communities to educate them about what the project and development would include. What the opportunities were for them to participate as partners within those. And also to, express any concerns that they have with where that pipeline would go and, environmental or traditional issues that this development would have. Without that pipeline, this $40 billion project that we have in British Columbia would never come to existence. And so I think that's a great example of a strategy that firms need to take. You know, you can't put your paperwork into the federal government and then start a conversation. Conversation has to happen years before you actually put that in. This goes back to, to, are we going to get projects done? I think the projects are going to get done are the ones where these conversations have already begun.

JB

Of course, Canada's got compared to some other countries like the UK, it's got a big Indigenous, community of people across the country. How do we deal with that set of challenges, opportunities in a more effective way? Because obviously the risk is it's just another stakeholder group who is going to slow things down, but there must be proactive ways of of doing that.

AF

I think the number one thing is that it's not just another stakeholder group. And so, this has to be looked upon as from a nation to nation perspective. And this is, what's often different from the academic literature in dealing with communities or stakeholders, it's probably a lot closer to, to some of your work in terms of how, you know, companies from one country deal with companies from another country or government in another country. And that's the perspective that needs to be needs to be brought on. What I've seen or my time since I've returned, to Canada and became a lot more involved with these issues, is how do you bring these groups together, these nations together as active participants? And, and today equity ownership is table stakes.

JB

So, I'm building a mine and I give a percentage of that mine to the original landowners…

AF

I would say it's more than that. Because you're not just providing them the equity ownership, you're providing the opportunity for them to invest in the equity of that project. Okay. Which is which is a different sort of mindset as well. In the past, a lot of the, consultation that would go on and engagement would go on would be, investing in the community or providing some sort of benefit or service. Now it's actually bring them on to have, voice, in what that project will involve and then benefit both with the risk and the reward, of what's going to happen there. We've got a great example that not far from here. Six Nations of the Grand River, which is, community that's, close to Brantford. We worked very closely with the executive development officer, there. And, you know, they've got investments now in billions of dollars of renewable energy technology and, Canada's largest, electricity battery storage project and really have sort of built upon that. And, it all began with equity investments, in the first stage of the real power push here in Ontario and, sort of the 2010s, 2011.

JB

Let’s change focus slightly towards, I mean, you've been here now for 15 years. You've been an MBA program director. You've been teaching our students on all these topics. How do you how do you engage your students in these issues? So the question is, what is it that our students need to know about these types of issues to make them successful in their business and sometimes government careers?

AF

I've learned as well. And so, I guess one key, the key lesson that I've taken out to when I, when I teach these concepts is the notion of perspective taking. It's very easy at a business school to be focused on the commercial perspective. The developer, the firm, the bank, whatever it is. What I found to be quite effective is to position the students into different perspectives. Start to take on that role of let's say the CEO of an economic development center, an indigenous community that's considering investment of this type. And this is where, the case method here is quite effective because you have to start to consider, the perspectives of different players and have some back and forth and a narrative that goes on. And this is something I've done, in all our programs and with executives as well. And it really opens up a different level of conversation on how you could reach cooperative relationships, with groups that you may not be predisposed to initially.

JB

Got it. And so, I mean, if you wouldn't mind just playing out a brief example of that, what would be a case that you would teach where you're you're asking the students to take these different perspectives?

AF

We just published a new case, on Hydro One, which is the large transmission, entity here in Ontario. One the largest transmission companies in, in North America, looking to produce, and build a new transmission line in northern Ontario. Which is really important, actually, going back to resource development in this country, because we need to be able to have power to mine some of the resources that we have there. In that case, Hydro One was negotiating with, I believe it was 4 or 5 different indigenous communities, that would be impacted by this, by this new transmission line, but would also benefit from having more reliable electricity up and cheaper electricity up in northern Ontario. There we we asked students to take on different perspectives, right? That of, of the developer, that of the policymaker that, of an indigenous community. And think about how that negotiation would ensue as they're working towards, an impact and benefit agreement, which is how you tend to now develop arrangements, formal arrangements between firms and, indigenous communities in Canada.

JB

So before we close out, a couple of final questions. First, what are you working on now? What are your next exciting projects that you'd like to be, you know, reporting on in a couple of years time?

AF

So, I’m pursuing a number of different areas related to, to this area of conversation that we've had. One paper that I'm particularly excited about, I'm working on with some colleagues here at Ivey, is looking at how, nuclear firms, have been targeted by activists in the past and the technology choices that they make in response, should they abandon nuclear technology. Why I think this is really important for us right now is as we're in the midst of, important energy transition here, we've got Ontario, Alberta, Saskatchewan, possibly even Quebec looking at new nuclear investment. We're talking about billions. We're talking about tens of billions of dollars of investment that could potentially go into this both, in small modular reactors, but also new builds, of large, new generation technologies, which I think can be an important part of our energy mix. But they're going to face some challenges, both at the policy side, but also with local communities and indigenous communities as well, and thinking about should we not be able to develop that baseload technology, then what options they have out there? And so, you know, this paper that we're working on is looking at, historically, what went on and what perhaps, led to choices that were optimal in the immediate and pragmatic, but in the longer run, you know, had a had a much more severe impact on, on the environment and the economy.

JB

Got it. And if business leaders or policymakers listening today only remember one thing or maybe two things from the last half hour, what should it be?

AF

I think number one is let's find cooperative agreements that we could develop with activists communities, even those that support the projects that we have there and engage early. But, you know, I think that can't be understated. You can't expect that the policy process is going to work as envisaged. And success involves laying lot of ground work out there beforehand.

JB

Got it. And I sense a certain optimism that that we're turning a corner here, that the current government is doing the right things in terms of helping us to kind of get the country moving again. Is that right?

AF

I think the window is here right now. If we don't act on this, now, then I don't know when we will. And I believe that we've got the leaders, now that have, our best interests in mind. And, now it's, our job at Ivey and, business leaders in this country to start to find a way to, to get projects done.

JB

Perfect. What a great way to end. Thank you. You have been listening to dialog with the dean from Ivy Business School. A big thank you to my guest, Adam Fremeth, for sharing his time and insights. And of course, thank you for tuning in. Until next time, goodbye.

KB

This was Dialogue with the Dean an Ivey Impact Podcast series. For more insights from Ivey, including thought leadership on critical issues and additional podcast episodes, visit iveyimpact.ca, or subscribe on your preferred podcast platform. Thanks for tuning in.