Discussion Paper: Stimulating the Growth of Toronto's Green Sector

By Rob McMonagle
Sector Development Office, City of Toronto
24-sept-18 V3.07

This brief paper is part of the ongoing discussion about how best to foster economic growth in Toronto’s green
sector. Included is a brief overview of how Toronto's green sector is currently organized, a description of
emerging efforts to support the development of a local green cluster structure and a call for more focussed
collaboration efforts among industry, academia and government stakeholders. Further details on specific
elements can be found in the appendices.

Metrics on the growth of Canada's green sector are generally lacking or are not rigorous due to an absence of a
consistent methodology or adequate classification systems.1 As a result, it is difficult to quantify Toronto's
growth compared to other leading jurisdictions. According to research conducted by the City of Toronto’s
Economic Development & Culture office (EDC), employment in Toronto's green sector grew 6.5% between 2016
and 2017, from 29,200 to 31,100.2 This is significantly higher than the 2.1% average annualized employment
growth observed in the city between 2012 and 20173.

Despite this impressive growth, anecdotal evidence suggests companies in Toronto's green sector continue to
struggle on a wide variety of issues not currently being addressed in a coordinated fashion. Leadership is
another issue that needs to be addressed. For example, members of the solar industry identified a number of
actions that should be taken in response to the Ontario government’s cancellation of the cap-and-trade carbon
pricing scheme. Unfortunately, there is no clear understanding of who should act and how since there is no
single agency responsible for green sector growth.

There is a general agreement that collaboration of stakeholders is invaluable and necessary to stimulate sector
growth. However, collaboration in Toronto is mostly limited to informal networks where issues are discussed
and ideas exchanged. There are many local forums and organizations that support networking, such as the GTA
chapter of the Canadian Green Building Council, MARs, the Centre for Urban Energy at Ryerson, Cleantech
North, the Sustainability Consultants Network, the Centre for Social Innovation and also includes sector social
gatherings such as Green Drinks and Women in Renewable Energy. Provincial and national trade and advocacy
associations such as WaterTAP, Ontario Environmental Industries Association, the Ontario Sustainable Energy
Association, Sustainable Buildings Canada, and the Canadian Solar Industries Association provide varying
degrees of support to their Toronto members on a broad range of sector wide provincial and national issues but
these efforts are not necessarily coordinated.

Best practices globally indicate there are many economic advantages associated with collaboration by
companies in the same sector in what are called “clusters”. Many global examples of successful green clusters
are backed by local organizations. CLEAN in Copenhagen is a good example of this. A preliminary search
uncovered over 200 local green cluster organizations globally, while in Canada only two were identified that
cover most of the activities associated with a cluster organization - Ecotech Quebec in Montreal and the Zero
Emissions Building Exchange in Vancouver. The lack of organizational structure to focus and customize local
economic initiatives and drive the sector to grow and succeed represents a lost opportunity for Toronto firms.
Greater details on these can be found in the appendices.

1
Discussion Paper: Sizing the Green Economy; Rob McMonagle; 2015
2
Research using NAICS codes that EDC staff identified as including green sector companies
3
Research carried out by Economic Development & Cultures Research Office

1
Generally there are six broad categories that influence the growth of a sector within a local economy. These
relate to how well the sector collaborates, the policies and regulations that businesses must operate under, the
demand for its products (which can be influenced by government support such as incentives), the availability of
skilled workers - especially as demand grows, and marketplace awareness of the products being offered.
Successful economic growth is closely tied to how knowledgeable firms are on the drivers that impact their
growth and the firms’ ability to influence or advocate for the development of, or changes to, these drivers.

Local discussion and action to address climate change tends to focus on the development of greenhouse gas
(GHG) mitigation policies and technology deployment programs but these are only two of the six key drivers to
economic growth. There is far less focus on how to create sustainable growth in the industry. More discussion is
needed about how to supply and install these technologies at the levels needed to achieve desired targets to
drive business for economic growth.

The "cluster" theory of economic development was developed in North America in the 1990s but has been
adopted more widely in Europe, South America and Asia. Meanwhile, the focus in Canada and the United States
has been on sector growth. What's the difference? Boiled down to the essentials - a sector is a collection of
competitors while a cluster is a group of collaborators.

As a result of this difference, there are relatively few local cluster organizations in North America. There are only
two clusters in the Greater Toronto Area – one for the financial sector and one for life sciences - despite a
population of 6.5 million. By contrast Greater Copenhagen, with a population of 1.7 million, has 47 clusters.

There are organizations in Toronto's green sector that fulfill some of the roles of a cluster management
organization – mainly creating networking opportunities. However the primary roles of a cluster manager are to
act as a "centre of expertise" on issues that impact firms in the cluster, to provide advice, and to receive
direction from the cluster on initiatives designed to influence and impact the sector’s drivers of economic
growth.

Toronto’s green sector has enjoyed impressive recent growth in employment but that growth has been split
between six very diverse subsectors. These subsectors include firms that make and sell solar modules, bikes,
water filtration systems and buildings, recycle waste and turn Toronto's fallen trees into high end furniture. The
splintered nature of the businesses in the local green sector make it difficult to develop a focused cluster
management organization to address "what industry needs to do" issues. Many green sector services are also
delivered by government agencies, such as Toronto Water, that don’t have a lot of experience collaborating with
local industry.

So how can the members of Toronto's diverse, yet strong green sector collaborate effectively for economic
growth and success?

Early Steps to Determine the Value of a Strong Green Cluster Voice

Green sector stakeholders in Toronto are currently being engaged to highlight the value of a local cluster
organization. If the industry wants to move forward, a road map will have to be developed. While governments
can have an important role to support - industry leadership is a key element in the formation of a successful
cluster management structure.

2
The TCI Networks' International Cluster Conference in Toronto
Toronto is hosting a global cluster conference this fall from October 16th to the 18th.4 With over 400
international experts on clusters attending, this is an important opportunity for the local community. The
conference will include a tour of Toronto's Low Carbon Building Cluster and a mini-charrette for 40 cluster
experts, who will respond to the following challenge questions:

1. What works well in your region to motivate cluster champions, anchor firms, sector innovators and
cluster supporters to work together effectively?
2. What advice do you have for Toronto's low carbon building leaders?

Copenhagen Clean – Best Practices on Green Cluster Development

There will be an invitation-only event on October 15th, in conjunction with the cluster conference for key local
green sector stakeholders. There will be a presentation on how Copenhagen's CLEAN was founded and how this
cluster organization has created value for the clean-tech sector in Denmark.

Outcomes and recommendations coming out of these two events (the mini-charrette and the CLEAN
presentation) will be documented and a small report released. This report is meant to stimulate leading
stakeholders in Toronto's green sector to continue the cluster discussion and collaborate on developing
initiatives to address opportunities.

Two good podcasts to learn more about what clusters are and how clusters can be organized can be found
on the cluster conference website.

What Is A Cluster? (18 minutes) - https://soundcloud.com/user-363680810/cc-episode-1-what-is-a-cluster

How Do You Build A Cluster? (28 minutes): https://soundcloud.com/user-363680810/cc-episode-2-how-

do-you-build-a-cluster

4
TCI Global Conference 2018 - https://www.tci2018.org/

3
Appendices
Factors that Maximize Industry Growth
Expert economic opinion on the factors needed for successful sector and cluster growth vary. However the key
factors are generally captured under six broad drivers. Lacking on these factors can negatively impact the
competiveness and growth potential of companies in a local sector.

1. "Collaboration" Building. Knowledge is economic power. Creating or maintaining a strong network is

crucial for the sharing of information, creating opportunities, overcoming challenges, and building
consensus on priorities. These activities are often organized as collaborations between a diverse group
of public and private sector stakeholders and includes industry or cluster roadmaps, sharing intelligence,
the formation of cluster coalitions, supply-chain development to attract companies or investment into
the local sector, incubator services, and joint R&D projects. Without this collaboration it is nearly
impossible to effectively build initiatives in any of the below drivers. The organization of these network
activities has to be done by a lead organization.

2. Policy & Regulations. The policies and regulations are the "environment" that businesses must operate
in and are generally in place for the "common good" for society. Immigration policies used to attract
skilled workers, the Building Code and CSA (Canadian Standards Association) standards are examples of
these.

3. Workforce Development. Talent development and building skills in the workforce are crucial for
companies to compete. This includes developing sector specific training programs, helping businesses
hire employees and gain access to talent and attracting youth into the industry.

4. Market Development. The expansion of the total market for a product or company by entering new
segments of the market, converting nonusers into users, and/or increasing usage per user. Examples of
this would include the Feed-in Tariff program and international trade missions organized or supported
by governments.

5. Marketing and Promotion. Marketing is about communicating the value of a product, service or brand to
customers or consumers for the purpose of promoting or selling that product, service, or brand. The
provincial government's "Ontario Wood" campaign is an excellent example of a marketing program.5

6. Advocacy. Advocating for changes in government support for all the other "levers" listed above is often
a key element of sector wide collaboration. This includes the lobbying for programs, policies and
regulations that support the growth of the sectors and the changing of policies/regulations that hinder
their growth.

What is a Cluster?
An economic cluster is very different than an economic sector.

A sector is generally defined using an industry classification system that lumps together firms that do the same
thing. The food sector is a good example of this as it is broken down into categories such as: Flour Milling; Fruit
and Vegetable Canning, Picking and Drying; Animal (except poultry) Slaughtering; and Tortilla Manufacturing.

5
Ontario Wood - https://www.ontario.ca/page/ontario-wood

4
The firms inside each of these categories are competitors and often it is difficult for them to collaborate except
on broader issues around government policies and regulations.

However a cluster, while harder to quantify statistically, consists of the supply chain of companies and
organizations that interact together economically and intellectually. There is a broad sense of collaboration in a
cluster.

"Clusters are geographic concentrations of interconnected companies and institutions in a particular field.
Clusters encompass an array of linked industries and other entities important to competition. They include
suppliers of specialized inputs such as components, machinery, and services and providers of specialized
infrastructure. Clusters also extend downstream to channels and customers and laterally to manufacturers of
complementary products and to companies in industries related by skills, technologies, or common inputs. Finally
many clusters include governmental and other institutions – such as universities, standards setting agencies,
think tanks, vocational training providers, and trade association.”6

What Does a Cluster Management Organization Do?

Clusters naturally occur where there is a large or "anchor" firm that relies on numerous suppliers for different
products and services and where there are ties with academia for R&D and skill training, and where there are
supportive government agencies. In this case the anchor firm also is the cluster manager but it is focused
principally on its own interest and growth (i.e. the cluster manager will not help a small supplier to expand its
market to a competitor of the anchor firm).

International studies7 show that the most successful clusters (in terms of growth) are where the cluster
"managers" are independent and are responsible to all members of the cluster. These managers act as the
"eyes and ears" of the cluster and are in continual touch with the firms, the public sector, research institutions,
education institutions, other cluster organizations, and international markets. They know intimately the
strengths and weaknesses of the firms in their cluster and where the opportunities lie.

By the nature of a cluster (being a local network), a cluster management organization also needs to be local.
Being situated in Ottawa will not give them the connection and understanding of the local issues in Vancouver,
Calgary, Toronto or Halifax. As they work with a smaller group of companies that are already collaborating,
decisions or actions of the cluster organization tend to be driven by the members (bottom-up approach).

According to the Cluster Initiative Greenbook8 the six main activities that cluster management organizations
undertake includes the follow. Note that there is a significant overlay to the six drivers outlined above:

1. General cluster networking where different types of stakeholders come together to better understand
the cluster’s strengths and weaknesses. Activities include publishing cluster reports, sharing of
information through seminars, inviting speakers and developing websites.

2. Human resources upgrading to develop the available skills pool, e.g. vocational training and
management education. Such efforts can focus on different target groups of people. One type is

6
Clusters and the New Economics of Competition; published in the Harvard Business Review; Michael Porter, 1998.
7
Such as the Cluster Initiatives Greenbook -2.0; Göran Lindqvist, Christian Ketels and Örjan Sölvell;2013
8
ibd

5
 intended to attract and retain students to ensure the future supply of a skilled workforce. Another type
targets managers, and a third type is sector-specific vocational training and technical training.

3. Cluster expansion aims to increase the number of firms, through incubators or by promoting inward
investment and business attraction to the region. The intent of this is to strengthen the overall cluster.

4. Business development promotes firm operations, for example through joint export promotion, joint
purchasing, or sharing of services to reduce costs. These activities often target SMEs.

5. Innovation and technology objectives promote product, services and process innovation, for example
through increased commercialization of academic research. There are two general approaches to
innovation, and they are often combined. One is to promote innovation through enhanced cooperation
and networking between firms. The other is to enhance cooperation between the business sector and
the research sector in order to commercialize academic research.

6. Business environment objectives aim at enhancing the microeconomic conditions for business, through
improving the legal and institutional setting or improving the physical infrastructure. Improving the
business environment means that conditions outside firms are improved. Business environment
objectives therefore focus on issues that are in the hands of government, rather than working with firms
directly. There are two main aspects of the environment that can be addressed: the physical/technical
infrastructure, and the legal/institutional setting. In addition, regional branding is an objective that can
be assigned to this category.

What Makes Cluster Organizations Different from Industry Trade Associations?

An industry trade association is an organization founded and funded by businesses that operate in a specific
sector. An industry trade association participates in public relations activities such as brand marketing,
education, lobbying and the exchange of information. One of the primary purposes of trade groups is to
attempt to influence public policy in a direction favorable to the group's members.9

Trade associations tend to be national or provincial and their programs need to account for the nature of
companies who are in competition with each other and the varied needs of the members. As such the decisions
are mainly top-down driven and focused on the greatest impact for as many of its members as possible. They
mainly focus on the provincial and national levels as this is where advocacy is most effective. Due to this
needed focus on larger issues they are often unable to focus on the various needs and opportunities of the local
clusters in their sectors.

Industry trade associations and local cluster management organizations should not be viewed as competitors
but rather two complimentary organizations with different objectives and abilities. Germany, for example has a
very strong trade association culture but also have many highly successful clusters in the green sector.

9
Definition from Wikepedia

6
Examples of Cluster Organizations in Toronto and Throughout Canada
Canada does not have a strong cluster eco-system particularly when compared to Europe. Copenhagen has
forty-seven cluster organizations10 while Toronto has only two.

Toronto Financial Services Alliance - http://www.tfsa.ca/

The Toronto Financial Services Alliance (TFSA) is a unique, public–private partnership dedicated to growing
Toronto region’s financial services cluster and building it as a “top ten” global financial services centre.
Established in 2001, TFSA is a collaboration involving three levels of government, the financial services industry
and academia.

TO Health - http://www.tohealth.ca/
TO Health! (Toronto Region Human Health + Sciences) is an industry-led promotion cooperative focused on
raising the profile of the Toronto region’s Human Health & Sciences (HHS) cluster.

Outside of Toronto there are some notable examples of cluster organizations:

Bluewater Wood Alliance (southwestern Ontario) - https://bluewaterwoodalliance.com/

Bluewater Wood Alliance is a not-for-profit wood manufacturing cluster serving Southwestern Ontario that
facilitates the interests and needs of our members.

The Zero Emissions Building Exchange (Vancouver) – https://zebx.org/

ZEBx is a collaborative platform that strengthens the public, private and civic capacities for zero emission
buildings in Vancouver and British Columbia. We are an industry hub that facilitates knowledge exchange to
accelerate market transformation.

Quebec has a fairly extensive eco-system of cluster organizations which are centred around Montreal

Communauté métropolitaine de Montréal (Montreal) - http://grappesmontreal.ca/metropolitan-

clusters/montreals-metropolitan-clusters/?L=1
Greater Montréal has nine structured clusters. Each cluster benefits from the support of a secretariat, financed
by the private sector, the CMM and the Quebec government. Cluster secretariats include firms, business
associations, Emploi-Québec's sectoral workforce committees, the Quebec and Canada governments and
research and training institutions. The secretariats bring together key industry players designated by the
community.
 Ecotech Quebec - http://www.ecotechquebec.com/en/
In a sustainable development perspective, Ecotech Quebec mobilizes key players of the green economy
to create the most favorable conditions for the development and growth of companies, and encourages
end-users to increase the deployment of clean technologies.

Defining Toronto's Green Sector

One of the challenges facing cluster organizations is the need of a critical mass of companies that are already
working together and supportive organizations in academia and government. Toronto's green sector is
considerably diverse and covers these following subsectors.

10
Greater Copenhagen Cluster Catalogue (2017) - https://www.kk.dk/sites/default/files/uploaded-
files/greater_copenhagen_cluster_catalogue1.pdf

7
Subsector Description Employment
estimate
(2017)
1. Clean Businesses engaged in the manufacturing, distribution and/or servicing of 2,700
Energy renewable energy, energy storage, smart grid, or energy efficiency
technologies.
2. Green Businesses engaged in building practices with materials and processes that are 5,400
Buildings environmentally responsible and use significantly less energy or resources at
all stages of a building's life-cycle (siting, design, construction, operation,
maintenance, renovation, and demolition). Businesses that install clean energy
components to buildings, and businesses that install green roofs are included.
3. Sustainable Businesses involved in the manufacturing of products that provide 14,000
Transport transportation of people and products by modes that use less energy and
resources than the standard and firms and organizations that provide those
transportation services. This includes all transportation components such as
electric vehicles, bikes, buses, trains, and public transit. It includes the full
supply chain from manufacturing through to operation of public transport
systems.
4. Resource Businesses that focus on the sustainable use of natural resources, either 7,100
Management through the management or development of natural resources, which ensures
& that the needs of the present are meet through environmentally responsible
Environmental economic growth that does not compromise the ability of future generation to
Protection meet their own needs. Also included are businesses that focus on activities
that are intended to prevent, reduce, or eliminate pollution or other forms of
environmental degradation. This includes waste and water treatment, land
remediation, recycling, products that are made from recycled goods. For
Toronto - recycled wood is considered part of the Bio-Products sector.
5. Bio- Businesses involved in the harvesting and preparation of bio-mass for use in 1,800
Products non- industry standard types of products or service offerings. While the forest
industry is a sustainable sector, the use of wood for purposes such as housing
construction and furniture is part of society's norm and hence are not included
here. Businesses involved in the production or sale of food and beverages and
businesses engaged in the development and sale of pharmaceuticals or life
sciences-related products are excluded.
TOTAL 31,100

Note that this employment estimate has a fairly high level of uncertainty due to the lack of any industry
classification codes for green industries. The employment numbers also include some major government
agencies which provide services such as Toronto Water, Solid Waste and the TTC.

None of the subsectors listed above have high employment when the public sector service agencies are
removed and hence may not, when considered alone, have the critical mass needed to support a local cluster
management organization. Both of Toronto's cluster organizations, for life sciences and financial services,
received start up funding and continue to receive significant financial support from both the municipal and
provincial governments.

There has been little research to understand the naturally occurring green clusters in Toronto however there is
some indications that they do exist in:
- Energy Storage – this has been supported by initiatives at MaRS and the Centre for Urban Energy
- Urban Wood – this has been supported by the Sector Development Office at EDC

8
 - Photovoltaics – general growth of the industry and the local nature of installations may be fuelling a
cluster
- Green Buildings – supported by policies at the City and there is strong local chapter of the Canadian
Green Building Council
- Water – supported by the provincial wide industry trade association WaterTAP

The challenge with these naturally occurring clusters is that none of them have a cluster manager and hence
there is little coordinated focus on the various drivers that impact their growth.

Examples of Green Cluster Organizations Internationally

A search of various cluster databases indicates that there are at least 200 local green cluster organizations
globally.11 There are a number of notable examples of these:

CLEAN (Denmark) - http://old.cleancluster.dk/en/

CLEAN is a world-leading cleantech cluster with an international focus that is based in Denmark. Our mission is
to accelerate the green and sustainable transition while realising growth for the Danish cleantech sector.

Solarvalley (Germany) - http://www.solarvalley.org/mission

Solarvalley Mitteldeutschland is an internationally established cluster of photovoltaics (PV). Since 2009 more
than 100 projects with a budget of € 120 million have been concluded within the framework of a "leading edge
cluster“ sponsored by the Federal Ministry of Education and Research and with additional funding from the
three federal states Saxony, Saxony-Anhalt and Thuringa.

Cleantech San Diego (USA) http://cleantechsandiego.org/

Cleantech San Diego is a member-based trade organization that positions the greater San Diego region as a
global leader in the cleantech economy. As a non-profit organization, Cleantech San Diego is uniquely suited to
support the industry by fostering collaborations across the private-public-academic landscape, leading advocacy
efforts to promote cleantech priorities, and encouraging investment in the San Diego region. Cleantech San
Diego’s members include more than 100 local businesses, universities, governments, and non-profits committed
to advancing sustainable solutions for the benefit of the economy and the environment.

There are additionally two international green sector cluster associations:

International Cleantech Network - http://internationalcleantechnetwork.com/

Only clean tech clusters can be members. Currently there are 13 clean tech clusters members. The International
Cleantech Network is an exclusive network of cleantech clusters that aims to generate new business
opportunities, enhance competitive advantages and create value for companies, knowledge institutions and
local authorities across cluster regions.

Global Cleantech Cluster Association http://www.globalcleantech.org/

There are 41 members however not all are cluster organizations. The vision of the Global Cleantech Cluster
Association (GCCA) is to drive sustainable regional economic development, on a global scale. GCCA is a fully
independent and open platform designed to support the development towards a shared economy and low
carbon prosperity. GCCA provides access to capital, corporates, markets and insights.

11
The European Cluster Collaboration Platform https://www.clustercollaboration.eu/cluster-mapping
and the TCI Network http://www.tci-network.org/about_us/our_members/

9
While in Canada there are only a few organized green clusters there are many naturally occurring clusters and
organizations that play a partial role in cluster management. There is a national organization in Canada that
could provide a coordinating body to stimulate the growth of local cluster organizations. MaRS is the
representative for Ontario

Canada Cleantech Alliance - https://www.canadacleantechalliance.ca/

Canada Cleantech Alliance coordinates regional clusters, associations and hubs to identify and crowdsource
issues, obtain guidance and mobilize for change. Canada Cleantech uses a comprehensive and coordinated
approach that takes regional realities into account. It encourages its partners to go beyond sharing information
and emphasizes joint value creation by generating new knowledge together.

10