fbpx

How Globalization Is Impacting Canadian Businesses

Background & Context Globalization can be defined as the increasing integration of economic, cultural, political, and social systems across countries (Oxford Reference). The import and export of goods or trade across borders has been happening for thousands of years. The Silk Road in 130 B.C.E. was the first recorded existence of globalization, where goods moved from China to the Middle East and Europe. Since that time, globalization has evolved exponentially. Trade agreements, reduced tariffs, and advancements in the movement of money have played a role in supporting and promoting globalization. According to Statista, the total value of goods exported globally in 2019 was approximately 19 trillion USD, which is almost 20 per cent of the 2019 global gross domestic product (GDP), based on Organisation for Economic Co-operation & Development (OECD) data.

Globalization 4.0 According to the World Economic Forum, we have entered a new era of globalization: Globalization 4.0. This phase of globalization is centered on digital capabilities, automation, and artificial intelligence. These forces are projected to lead to a global GDP of 200 trillion USD by 2050 (OECD). This would represent approximately 40 trillion USD in global trade in fewer than 30 years, a 110 per cent increase since 2019. In a Canadian context, the 2019 trade in goods and services totalled $1.5 trillion (Canada’s State of Trade 2020, Government of Canada). This represents approximately eight per cent of the total value of goods exported globally in 2019. This suggests that, as Canada enters this new phase of globalization, it has the potential to more than double the value of its trade in goods and services to $3.2 trillion by 2050. To help accomplish this objective, there are three critical aspects of Canadian businesses that need attention: climate change, access to human resources, and regulation.

Climate Change As the volume of traded goods and services increases, the level of emissions also increases. These higher levels contribute to rising global temperatures, which, according to Bloomberg Businessweek, could reduce the 2050 projected global GDP by 20 per cent. The potential impact to Canada is $640 billion in lost opportunity.

While Canada’s contribution to greenhouse gases (GHG) globally is 1.5 per cent, from 2016 to 2019, Canada’s total GHGs reported an increasing trend in conjunction with increasing GDP (National Inventory Report 1990 –2019, Greenhouse Gas, Government of Canada). Primary sources for GHGs in Canada were the oil and gas (26 per cent) and transportation (25 per cent) industries. While these industries have started to reduce their emissions, there are opportunities for Canadian businesses to help advance these strategies, which can serve as models for the global community.

Considerations: 

  • Targeting corporate, entrepreneurial, and higher-education research and development in a collaborative effort to develop innovative approaches that reduce GHG emissions in high emitting industries. 
  • Establishing policies to prioritize working with suppliers and partners (nationally and internationally) who have implemented sustainable and measurable strategies to reduce their environmental impact. 
  • Building adaptable, long-term incentive programs to promote the reduction of GHG in cooperation with the government and small business, national, and multinational organizations.

Considerations: 

• With location flexibility now a minimum expectation, businesses need to invest in innovative work environments to maximize remote-working capabilities, while establishing the appropriate process and policies to enable managerial routines, safeguard company information, and promote employee well-being. 

• Businesses need to revise their accounting practices to provide greater flexibility and enable employees to work remotely and/or abroad to widen their access to talent.

 • The government and businesses need to jointly develop competitive recruitment strategies that offer tailored compensation packages, which include a mix of health, family, education, and financial benefits, plus short- and long-term incentives

Regulation

 Domestic and international entrants to the Canadian market — particularly in financial services and telecommunications industries — continue to face regulatory barriers. These barriers have protected Canadian businesses and employees in the past. Most notably, the regulations in the financial services sector shielded Canada from the full impact of the 2008 financial crisis. At the same time, these regulations have limited innovation and restricted Canada’s contribution to global markets. According to the National Bureau of Economic Research, innovation is reduced in a more regulated economy. The OECD specifically identifies regulation as a barrier to entry in Canada and the cause for low levels of innovation and adoption of new technologies. With this new wave of globalization underpinned by technological forces, Canadian businesses need to impact and influence regulatory advancement to promote innovation and ensure its share of the 40 trillion USD in global trade by 2050. 

Considerations: 

• Establishing a partnership between government and industry with the primary objective of modernizing regulation and achieving mutually agreed-upon goals and growth.

 • Focusing regulatory changes on critical aspects of Canadian business — like reducing GHG in the transportation industry or securing highly demanded human resources — which will produce compounded benefits.

 • Piloting the easing of regulatory restrictions in select industries through controlled scenarios that identify risks and assess the effectiveness of controls to mitigate those risks. Globalization 4.0 can provide a multi-trillion-dollar opportunity for Canadian business. The probability to maximize the opportunity depends on effectively addressing specific areas of the business environment: strategically concentrating efforts to reduce GHG in select industries, innovating the approach to attract and retain global talent, and accelerating the easing of regulation through a risk-based approach. //

Nigel Taklalsingh | Contributing Writer

Share:

Facebook
Twitter
Pinterest
LinkedIn

Edge Newsletter

Subscribe to our newsletter for updates from The Edge, A Leader’s Magazine.

Trending Articles

Available in all Indigo & Chapters stores. 

Peter Williams

Featuring Jamaican-Canadian Actor Peter Williams on how he redefines artistry and his memorable impact on Sci-Fi Fandom.