Manufacturers: How Can You Cope With Changes in the Market?

The manufacturing sector is still one of the pillars of Québec’s economy. It represents 12.6% of the GDP, employs more than 500,000 individuals and generates close to 86.8% of Québec’s international exports. However, despite its economic weight, the sector now operates in an environment that has changed significantly.

The risks (flooding, trade tensions, instability among suppliers, social pressure) that manufacturers are facing are much more than temporary disruptions. They are progressively redefining the conditions for production, export and financing business growth.

In this context, environmental, social and governance (ESG) criteria are becoming a condition for operational continuity, market access and financial viability.

Is your supply chain at risk?

In the current climate, optimizing costs is still essential, but it’s no longer enough. If your supply chain is too geographically concentrated or not sufficiently prepared for climate uncertainty, it can undermine all of your business activities, even if your suppliers are performing well.

If a significant portion of your inputs are from one country or region only, you’re exposed to disruptions that are beyond your control. Trade tensions between Canada and the U.S. clearly illustrate this. According to the Fédération des chambres de commerce du Québec, 15,000 jobs in Québec’s manufacturing sector were lost in the first half of 2025 as a result of these disruptions. Diversifying your suppliers on both a geographical and sectoral level is now essential.

Manufacturers that rely on a single supplier of aluminium or critical components are particularly vulnerable to tariffs, trade disputes and supply chain disruptions.

Flooded production facilities, inaccessible raw materials, disrupted logistics infrastructure and damaged equipment are no longer merely theoretical scenarios. They can directly impact your operations. The Québec government recognized that manufacturing is one of the sectors that is most affected by climate change and the consequences can include a temporary or permanent cessation of activities.

This is why addressing environmental challenges today requires much more than reducing greenhouse gas emissions. ESG criteria provide a structured environment for:

• better understanding your exposure to geopolitical and climate risks;
• diversifying your supplier base;
• assessing your suppliers’ climate resilience;
• documenting your mitigating measures;
• responding more efficiently to the expectations of your clients, insurers and financial partners.

Are you ready for international markets?

Major international contractors in the aerospace, agri-food, metal processing and industrial equipment sectors in particular are now integrating ESG requirements into their qualification process and tenders. In other words, the combination of inputs traceability, emissions reduction throughout the entire life cycle, and transparency in social practices all influence the awarding of contracts. A total of 82% of major buying organizations in Canada are already requiring their suppliers to disclose information regarding their ESG practices.

This commercial pressure is also compounded by a new regulatory constraint for manufacturers that export to Europe. On January 1, 2026, the Carbon Border Adjustment Mechanism (CBAM) officially came into effect. As a result, organizations that export steel, aluminium, cement, fertilizer, electricity or hydrogen to the European Union must declare the emissions related to manufacturing your goods and pay the corresponding carbon tax. And this is just the beginning.

According to the Centre interprofessionnel technique d’études de la pollution atmosphérique (Citepa), the European Commission already plans to expand the scope of CBAM to include an additional 180 products as of 2028. Therefore, CBAM is a commercial reality that manufacturers must take into account to remain competitive in European markets.

How can you reduce your costs and boost your competitiveness through ESG?

Viewing ESG criteria as no more than a set of regulatory requirements is too simplistic. For manufacturers that systematically incorporate them, these criteria can drive operational performance.

When you reduce your energy consumption, optimize your waste management and rethink your logistics, you can generate measurable gains while simultaneously improving your ESG profile. For many manufacturers, these initiatives can lead to lower production costs and higher profit margins.

ESG criteria also force you to break down information silos within your organization. In too many companies, environmental issues fall under operations, human resources departments are tasked with social issues, and governance is led by management or finance teams. This fragmentation limits the ability to anticipate certain risks and make consistent decisions across the organization.

An effective ESG approach involves cross-functional collaboration of all teams to support performance measurement, strengthen decision-making and pinpoint vulnerabilities before they become critical.

Risk profile and financing: preparing for future expectations

Climate risk is playing an increasingly prominent role in the thinking of insurance providers, financial institutions and investors. Companies that fully understand their risks and demonstrate their ability to manage them will be better positioned to meet emerging market expectations. Therefore, a structured ESG approach can help strengthen organizational resilience, support decision-making and prepare the company for future challenges.

If you’re a Québec-based manufacturer, the question is no longer whether ESG criteria will influence your business environment, but how quickly. If you start preparing now, you’ll be better positioned to secure your markets, strengthen your supply chain, manage your risks and support your long-term growth.

Whether you’re leading an SME or a large organization, contact us to schedule a no-obligation exploratory meeting.

Sources

• Portrait manufacturier des régions du Québec, (overview of the manufacturing sector across all Quebec regions), Ministère de l’Économie, Gouvernement du Québec
• Statistics Canada — Table 14-10-0027-01
• Manufacturiers et Exportateurs du Québec (MEQ), Statistics Canada, 2023
• Fédération des chambres de commerce du Québec (FCCQ) — Bilan de la guerre tarifaire : l’incertitude est ce qui fait le plus mal à l’économie québécoise (assessing the price of the tariff war: uncertainty is hurting Québec’s economy the most), August 2025                             
• Gouvernement du Québec— Climate change impacts, Ministère de l’Environnement, de la Lutte contre les changements climatiques, de la Faune et des Parcs (MELCCFP)
• Ministère de la Transition écologique, MACF (Carbon Border Adjustment Mechanism)
• Citepa