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American Sustainable Business Council

Small Businesses Face ‘Major Extreme Weather Challenges’

American Sustainable Business CouncilUS small businesses — which employ 60 million Americans, or about half of the workforce — are particularly at risk from extreme weather and climate change and must take steps to adapt, according to a report from Small Business Majority (SBM) and the American Sustainable Business Council (ASBC).

Climate Change Preparedness and the Small Business Sector says the retail, tourism, landscape architecture, agriculture, roofing, and small-scale manufacturing sectors are more vulnerable to the financial implications of climate change than their larger corporate counterpart.

The report finds:

  • Lacking access to the capital and resources of large corporations, small businesses can suffer lasting economic damage as a result of a single extreme weather event. For example, of the 60,000 to 100,000 small businesses negatively affected by Hurricane Sandy, up to 30 percent are estimated to have failed as a direct result of the storm.
  • An estimated 25 percent of small- to mid-sized businesses do not reopen following a major disaster.
  • The median cost of downtime from a small business affected by an extreme weather event is $3,000 per day. Small businesses’ physical assets tend to be more concentrated: a single building or factory could represent most of the book value of a small business, whereas large businesses benefit from greater geographic diversification.
  • The majority of small businesses have not closely analyzed the potential economic losses from extreme weather events or other climate-related risks, in part due to a lack of resources to do so. In fact, 57 percent of small businesses have no disaster recovery plan, and for those small businesses that do have continuity, or risk management plans, 90 percent spend less than one day a month preparing and maintaining them.

According to the National Oceanic and Atmospheric Administration, 2011 and 2012 were the two most extreme years on record for destructive weather events, which caused a total of more than $170 billion in damages, much of that to businesses.

The majority of small businesses operate out of a single physical location. According to the US Small Business Administration, up to 90 percent of small businesses get the majority of their business from within two miles of their front doors. This makes small businesses more vulnerable to loss compared to larger companies that have backup resources at alternate facilities or branch locations.

As a result, small businesses will be more heavily impacted by technological or telecommunications failures, the absence of employees, power failures, supply chain interruptions, and rising insurance costs. Direct damage from extreme weather events such as flooding, sea level rise, storm surge, and drought will impact small businesses more severely than a larger business with more financial and human capital, the report says.

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