Sustainable Development Technology Canada (SDTC): Where’s the CleanTech Money Headed?

In 2001, the Government of Canada created an arm's length non-for-profit organization - Sustainable Development Technology Canada (SDTC) - to support projects that develop and demonstrate new technologies that address issues related to climate change, air quality, clean water and clean soil. As of March 2018, the SDTC submitted to the Innovation, Science and Economic Development (ISED) Performance Measurement and Evaluation Committee that it had invested $833 million to support 341 projects since 2001 (see here), and in 2021, ISED entered into a five-year $1-billion contribution agreement with SDTC.

After having received a whistleblower complaint criticizing the management of public funds and engaged an external accounting firm - Raymond Chabot Grant Thornton (RCGT) -  to conduct an investigation of these allegations, Innovation Minister Champagne announced on October 3rd, 2024, the suspension of the SDTC’s activities. According to the Canadian Broadcasting Corporation’s (CBC) article of the same day, the RCGT report raised serious questions about the distribution of funds, which “did not appear to be consistent with the requirements" of SDTC's contribution agreement, as well as falling offside with respect to the conflict of interest policy, amongst other findings.  The following day - October 4, 2024 - the SDTC released a public statement arguing that “the report found no clear evidence of wrongdoing or misconduct at SDTC and indicated that no further investigation is merited” and that the “SDTC Board of Directors and leadership team are carefully reviewing the report and are taking action to implement the recommendations as quickly as possible to minimize disruption to Canada’s sustainable innovation ecosystem.”

What’s the Auditor General of Canada’s take…? 

Since the RCGT report, the Office of the Auditor General of Canada (OAG) has also weighed on the fate of the SDTC. In Report 6 dated June 4, 2024 (see PDF), the OAG found that the:

• Sustainable Development Technology Canada did not establish clear assessment guidance to determine eligibility of projects: 
  

  • The foundation had not established targets or clear guidance for assessing eligibility criteria

  • The foundation awarded funding to ineligible projects

  • The foundation did not inform Innovation, Science and Economic Development Canada of funding that needed to be recovered

  • The foundation poorly managed conflicts of interest

  • The foundation’s records showed that the conflict-of-interest policies were not followed in 90 cases

  • The foundation’s conflict-of-interest policies were not aligned with all elements in its legislation

  • The foundation did not report conflicts of interest to the department

• The board of directors failed to oversee the foundation’s compliance with key legal requirements
  

  • Legal requirements for the number of the foundation’s members were not met

  • The board of directors did not consistently follow the terms of contribution agreements or its established practices when it approved funding

• The department did not sufficiently assess whether the foundation complied with the contribution agreements

• The department did not sufficiently assess and monitor the foundation and its use of public funds

• The department did not monitor conflicts of interest at the foundation,
  

and provided a series of recommendations contained in Report 6. 

Standing Committee on Public Accounts: An OAG follow-up

The Auditor General of Canada, Ms. Karen Hogan, was called upon by the Standing Committee on Public Accounts (PACP) to testify to the contents of Report 6 (see minutes and video) along with other witnesses to speak about the chronology of events, commencing as of the date of the whistleblower complaint, which occurred sometime in November 2022. The issue of restoring trust in CleanTech funding was significantly discussed by the participants, and the Members of Parliament (MPs) asked sharp questions about the design of the SDTC and recovery of funds that were paid for ineligible activities. The video is well worth the watch and notes should be taken on board oversight and governance. 

An Eventual Transition to the National Research Council of Canada (NRC) and then the Canada Innovation Corporation (CIC)

On the same day of the publication of Report 6 - June 4, 2024, Minister Champagne announced a new governance framework for cleantech funding, indicating: 

“In light of the above, over the coming months, SDTC programming will transition to the National Research Council of Canada (NRC). The NRC’s vast experience supporting innovative, tech-focused SMEs, under programs such as the Industrial Research Assistance Program (IRAP), makes it an ideal choice to take on the responsibility of supporting homegrown clean technology companies. As a Government of Canada organization, the NRC is subject to rigorous and stringent oversight of its personnel and finances. This structure will help rebuild public trust while increasing accountability, transparency and integrity.”

While the transition is assuredly welcomed by those receiving or applying for SDTC funds - the fundees - an important question that surfaces is when will the Canada Innovation Corporation (CIC) be created? especially considering: 

1. the “abolishment” of the SDTC and its eventual transition to NRC; and

2. the proposed absorption of the NRC-IRAP funding program by the CIC as announced in the Government of Canada’s Blueprint (February 2023) (see also: BetaKit article). 

In a Newswire dated June 4, 2024, Minister Champagne clarified that the CIC should be established sometime in 2026-2027, further stating:

"SDTC programming as well as the NRC's IRAP, will come together under the previously announced new Canada Innovation Corporation (CIC), creating a national-scale integrated platform to support business research and development, and innovation-driven growth. Once the CIC is established, by 2026-27, SDTC and IRAP employees will be transitioned seamlessly, and their employment will continue under the CIC." 

A Recent Push for More Environmental Regulation and a Need for Management

Understanding that ESG and SDGs are become more prevalent (see our blog) and that the  Government of Canada is seeking to reform the Canadian Competition Act with respect to environmental claims and greenwashing (Bill C-59) and further unveiled the National strategy to protect nature in Canada with a bill to ensure accountability, namely the Nature Accountability Act (Bill C-73), it is obvious that much focus will be placed on CleanTech companies as solution to current environmental woes. All the these requirements will need to specially managed by companies.

Enhanced Scrutiny of Eligibility Requirements

Though the SDTC CleanTech funding program will continue following a serious management review, it is important for applicants seeking funding to understand that  any funding application will undergo more scrutiny than ever before.

Contact us for an evaluation of your eligible activities for CleanTech funding as well as special management of projects.