Advice to the Treasury Board (June 2023)

Regulatory excellence is a priority for Canada

Regulatory excellence means households can trust Canadian products and services, businesses are confident about investing, and regulators are constantly striving to make compliance as easy as possible for all who interact with the system. Regulatory excellence, at its simplest, is about maintaining appropriate standards of protection while minimizing compliance burdens and improving our quality of life.

Regulatory excellence is not an end goal, but a culture of constant learning, collaboration towards excellence, and having support for the aspiration to do better. We, like the first EACRC, believe regulatory excellence could be a key strategic advantage for Canada and a core contributor to the well-being of Canadians. But there is considerable work to do to make this a reality.

We heard from one presenter that Canada’s regulatory system should be thought of as an asset. This resonates with us as we see regulatory excellence as part of “good government,” a core Canadian value.

We heard examples of our regulatory assets delivering good value. For example, our agricultural goods from blueberries to salmon are highly desirable in markets around the world because they come from a country known for safe food and high environmental standards. This clearly illustrates how “appropriate standards” make regulatory excellence an advantage.

However, we also heard many more examples where compliance burdens are far heavier than needed to maintain appropriate standards and regulation is not hitting the mark.

For example, what objective is served when a new immigrant gets stuck in regulatory quagmires such as needing Canadian experience to get licensed, while requiring a license to gain Canadian experience?

Who benefits when forms are longer than needed and written in complicated language? Why not make regulatory compliance easier for those with lower incomes and less access to technology? Why are large projects in Canada taking so long to approve that investors are increasingly seeing Canada as too risky for investment?

The benefits of regulatory excellence include but are not limited to:

• more access to quality products and services at affordable prices for all Canadians
• less frustration with government which builds more trust and higher compliance. It also lowers our collective blood pressure
• more investment in projects that create jobs, generate tax revenue to support healthcare and education, and help deliver priorities such as meeting our climate targets
• more time for regulators and the regulated to focus on meeting regulatory standards for higher risk activities, training staff and creating new business plans
• pride in delivering the Canadian value of “good government” for individuals and being seen as a great place to do business due to our safe and predictable regulatory environment

Recommendations

1. Make regulatory excellence a priority across government, championed at the Cabinet table by all ministers

   Ensure a group of deputy ministers is accountable for making progress towards regulatory excellence across government. The group should have a structure, a strategy, support from assistant deputy ministers, and measurable deliverables that make sense to Canadians. It should engage frontline staff, including compliance officers and inspectors, in identifying opportunities to promote regulatory excellence.

   The group should prioritize minimizing unintended consequences of regulation. Examples of unintended consequences may include disrupting supply chains (which reduces the availability of goods and services and leads to higher prices) and impeding projects in the national interest (which reduces the availability of high-paying jobs, lowers tax revenue, and leaves a gap between our intentions and reality on priorities such as critical minerals, alternative energy and affordability).

2. Equip Canada’s regulators to be world class

   • Invest in core training for regulators to develop knowledge around what Harvard professor Malcolm Sparrow calls “the regulatory craft,” which is the art of effectively defining the important problems, evaluating whether regulation is the right solution, and knowing which regulatory tools are best suited to solve identified problems.

     A group such as the Community of Federal Regulators, with support and expertise from Treasury Board of Canada Secretariat (TBS) and with sufficient resources, could oversee the development of more robust, modern training for Canada’s regulators. Amongst others, two specific areas that clearly need attention are promoting risk-informed and outcomes-focused regulation and ensuring adequate digital literacy and greater use of technology to reduce burdens and improve outcomes.

   • In addition to core training, regulators at all levels need regular opportunities for continuous learning. They need to stay in conversation with other regulators (including from other departments, provinces and countries) as well as those from outside government who work in the regulatory space (academics, think tanks, business groups, and regulated parties). This allows them to keep up with best practices and learn from case studies of successes and failures. The Community of Federal Regulators annual conference creates some of these opportunities, and more opportunities for continuous learning are needed.

     Putting more focus on mentorship and talent development is an important part of supporting continuous learning.

     Continuous learning, including mentorship, could make public sector regulatory jobs more attractive, at a time when turnover is a challenge, and reduce frustration in the private sector around dealing with newer regulators who lack the experience to deal with more complex situations. For Canadians, more generally, efficiency due to a better knowledge transfer contributes to keeping goods and services available and prices more reasonable.

3. Modernize regulatory engagement

   As noted in recommendations made by the previous EACRC, consultation and engagement should begin much earlier in the process at the stage of defining and understanding problems. We heard significant frustration around this point.

   There is also a gap in what happens after regulations are implemented. Appropriate consultation post-implementation can contribute to continuous learning and help regulators pivot to better approaches if unintended consequences are undermining desired outcomes. We may have more to say on this point in future advice. For now, we recommend:

   • Use modern engagement tools that are inclusive and appropriate for different affected parties such as journey maps, “suggestion boxes,” and lived and living experience forums to bring alignment and understanding to problem and solution definition. Results from “suggestion boxes” and forums should be regularly reviewed by senior leadership and, where possible and appropriate, made public.
   • Move beyond “What was heard” reporting with stakeholders to connect to “What was done with what was heard,” while respecting Cabinet confidence. It is frustrating when consultations seem to go into a black box with no communication about the outcomes of consultation.

Next steps

We hope our advice is helpful. Canada’s regulatory system is an asset that needs more investment and focus to be fit for purpose, trusted by the public, and able to adapt to changing circumstances. The system needs help. We offer these initial recommendations as core components supporting continuous improvements.

We note that the Treasury Board is currently consulting on the use of regulatory sandboxes and incorporation by reference of internal documents that may be updated in an ambulatory fashion. We are supportive of these ideas with the appropriate guardrails in place. We see these tools as having potential to increase the pace of approvals and contribute to regulatory excellence.

We look forward to turning our attention to other parts of our mandate, including assessing progress on the first EACRC’s recommendations, providing advice on stock reviews, and providing advice on the Cabinet Directive on Regulation. We expect the recommendations in this letter will set the stage for our upcoming discussions and advice.

Thank you for taking the time to meet with us at our first in-person meeting last fall. We would welcome an opportunity to discuss our recommendations with you further and look forward to hearing from you soon.

Sincerely,

Laura Jones
Chair, External Advisory Committee on Regulatory Competitiveness

On behalf of Committee members:

• Yves Bourgeois
• Christian Dandeneau
• Robin Ford
• Keith Mussar
• Shino Nakane
• Nancy Olewiler

Views expressed by committee members are their own, not the views of the organizations they are affiliated with.

Acknowledgements

The committee members had the privilege of hearing from representatives of organizations across Canada during this first part of our mandate.

• Ryan Androsoff, CEO and Founder, Think Digital
• Oumar Dicko, National Director, Government Partnerships, Windmill Microlending
• Marsha Forman, Regulatory Affairs Manager, McCormick & Co.
• Giles Gherson, Executive Vice President and Chair of the Economic Blueprint Institute, Toronto Region Board of Trade
• Maureen Haan, President and CEO, Canadian Council on Rehabilitation and Work
• David LePage, Managing Partner, Buy Social Canada.
• Sharon Mohammed, Director, Regulatory Management, Maple Leaf Foods
• Tanis Ostermann, Owner and Principal, CanSustain
• Corinne Pohlmann, Senior Vice President, National Affairs and Partnerships, Canadian Federation of Independent Business
• Jane Proctor, Vice President, Policy and Issue Management, Canadian Produce Marketing Association
• Kathleen Sullivan, Vice-President, Government and Industry Relations, Maple Leaf Foods

We would also like to thank our speakers from the public sector for sharing their experiences and lessons learned on initiatives within their organizations:

• Kelly Acton, Assistant Deputy Minister, Digital Policy and Performance, Office of the Chief Information Officer
• Alexandre Daoust, Executive Director, Community of Federal Regulators
• Michael DeJong, Vice President, Regulatory Affairs, and Chief Communications Officer, Canadian Nuclear Safety Commission
• Leanne Hachey, Executive Director, Stakeholder Relations and Inter-governmental Initiatives, Office of Regulatory Affairs and Service Effectiveness, Government of Nova Scotia
• Nancy Hamzawi, formerly Assistant Deputy Minister, Health Products and Food Branch, Health Canada, current Executive Vice President, Public Health Agency of Canada
• Doug Hyndman, formerly Chair and CEO, Securities Regulator, Canadian Securities Transition Office
• Steven Jurgutis, Co-Chair, Agile Regulations Table, Agriculture and Agri-Food Canada
• Antoinette Leung, Head of Financial Institutions and Mortgage Brokering Conduct, Financial Conduct Authority of Ontario
• Karen Reynolds, Director General, Pharmaceutical Drugs Directorate, Health Canada
• Jennifer Saxe, Director General, and Jennifer Pelley, Director, Office of Legislative and Regulatory Affairs, Controlled Substances and Cannabis Branch, Health Canada
• Mark Steel, Director Regulatory Systems, Office of the Chief Executive, Ministry of Business, Innovation and Employment, Government of New Zealand
• Rumina Velshi, President, Canadian Nuclear Safety Commission

Finally, the committee wishes to extend its sincere thanks to the Government of Canada’s Community of Federal Regulators for generously inviting us to attend their session with Professor Malcolm Sparrow on The Modern Regulator.

If you have an interest in speaking to the committee, please reach out to EAC-CCE@tbs-sct.gc.ca. We are particularly interested in perspectives from groups traditionally less engaged with regulatory system discussions.

Appendix A: What we heard

In our consultations, we heard frustration and the clear need for a more concerted focus on regulatory modernization. This is not new. Today, however, the calls are becoming louder and more urgent. We heard:

• Canadians support health, safety, security and environmental standards, but those standards should be proportionate to identified risks and regulatory objectives, and the costs of regulations should not exceed the benefits.
• In general, regulators need to consult much earlier to better define problems and solutions.
• New immigrants are often caught in licensing quagmires such as the requirement to have Canadian experience to get a license but not being eligible to get Canadian experience without being licensed. This is a frustrating waste of time undermining the quality of life and living standards for immigrants and preventing them from more quickly contributing their skills in our tight labour market. We also heard frustration around the duplication of language assessments— they are required during the immigration process and again during the licensing process. Another frustration is the lack of recognition of immigrant credentials, leading to underemployment and poverty, despite having skills that are in high demand.
• The Canada Disability Benefit referenced in the Canada Disability Inclusion Action Plan may inadvertently keep people in poverty by limiting employment opportunities. We also heard about the need to review the Canada Pension Plan Disability Benefit rules through the specific lens of improving the return-to-work program. Changes in these areas could obviously benefit both those with disabilities and employers struggling to find staff. Better engagement with those directly affected by the regulations in this area is needed.
• The government should do more to reach out to underrepresented groups to resolve regulatory frustrations. The committee sought (and continues to seek) engagement with underrepresented groups. Many were surprised as they are typically not asked for their perspectives on regulation.
• Cost, time and technology can be a barrier for some in underrepresented groups to participate in consultation. Pragmatic approaches to understand and overcome these challenges are appreciated and important.
• Regulation (including compliance obligations) often include complicated language and processes that makes it challenging for Canadians with fewer resources or less access to technology. Plain language and accessible regulatory staff are often lacking. Regulatory compliance should take a more user-centered approach while maintaining appropriate standards.
• Regulatory compliance is a top concern for Canada’s small business owners. When they struggle with overly complex or inappropriate compliance obligations, it adds costs and detracts from time to train staff, grow the business and be with their families. It also discourages the next generation of entrepreneurs from starting businesses.
• Knowledgeable, accessible staff are important to minimizing frustration and wasted time. We heard examples of new inspectors being tasked with complex oversight without sufficient knowledge and support to exercise the necessary judgment. This wastes considerable time as businesses must escalate what is now a problem to more senior regulatory staff.
• Many larger businesses do not have confidence that decisions can be made in a timely, reasonable and predictable way. This undermines prosperity and living standards as larger firms choose to move or expand elsewhere, taking the jobs and tax revenue that would go with those investments elsewhere.
• There are too many silos between government departments and not enough collaboration. This wastes time, is costly and creates frustration.
• Regulators need more support in core training and continuous learning. There is limited foundational learning available to regulators widely across the federal government.
• Journey mapping can be a useful tool for ensuring regulators and industry collaborate from the start.
• There is a need to increase digital literacy and use of technology across the system, with a focus on user-centered design.
• There is a need to be more open in consultations to understand lived and living experience. This can improve problem definition, user-experience and outcomes.
• There are significant opportunities to improve outcomes for Canadians by reducing unnecessary regulatory burdens. For example, the Government of Nova Scotia partnered with doctors to reduce unnecessary paperwork to free up time to see additional patients. The province estimates that reducing unnecessary administrative burden by just 10% is the equivalent of 150,000 patient visits. A 10% reduction across Canada is the equivalent of 5.5 million patient visits a year.
• Some Canadian regulators are using risk-informed approaches to improve efficiency and outcomes. But we are behind other countries such as the UK in adopting risk-informed approaches.
• The United States has at least two universities—Harvard and the University of Pennsylvania—doing strong work in the regulatory area. So far as we are aware, nothing like these centres currently exists in Canada.