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Small Business Planning in a Changing Climate

schneider, nancy, catalysisSevere weather, flooding, drought, and extreme heat or cold have always been potential concerns for any business, but now these conditions and associated risks are just some of the events that must be planned for, due to increased likelihood of changes in our climate. Small- to medium-sized businesses (SMEs) are significantly harmed more often by the impacts of a changing climate than large companies, but most SMEs aren’t considering these risks in their business planning or operations.

It can be said that no single event can be directly attributed to climate change, but weather extremes are expected to happen more often and be more intense due to the changes in our climate.  According to a recent article in USA Today, “extreme weather events are on the rise, with 800-plus extreme events worldwide in 2012 resulting in more than $130 billion in damages, adjusting to a “new normal” of a more adverse and costly climate.”  Even the Federal Government Accountability Office (GAO) added climate change in 2013 to its “High Risk” list, which identifies vulnerabilities of the federal government.

Munich Re, the world’s largest reinsurance company, has compiled the most comprehensive database of natural disasters, which indicates that the number of extreme weather events is rising, stating that the change in the world’s climate system is unmistakable and will result in greater and more frequent precipitation and temperature extremes in the next 20-50 years.

direct and indirect impacts

Impacts on a business can be as far reaching as disrupting your supply chain in a foreign locale, or closer to home when customers can’t get to your business due to flooding, or products spoil from power outages related to a storm.  The American Sustainable Business Council and the Small Business Majority, released a report entitled, “Climate Change Preparedness and the Small Business Sector” in July 2013, which stated, “small businesses with fewer locations and limited resources are particularly vulnerable to devastating extreme weather events.”  The report further clarifies that, “larger businesses are driven to report and respond to climate change to demonstrate to investors and stakeholders that they are well-positioned to mitigate climate-related business risks.  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.”

The majority of SMEs operate out of a single physical location (U.S. Small Business Administration), with up to 90 percent of their business coming from within two miles of their front doors.  Larger companies oftentimes have backup resources at alternate facilities or branch locations.  For the local, small business this means an increase in vulnerability due to direct damage from extreme weather events such as flooding, sea level rise, storm surge and drought, or secondary losses due to technological or telecommunications failures, the absence of employees, power failures, supply chain interruptions, and rising insurance costs.  According to the Institute for Business and Home Safety, an estimated 25 percent of SMEs do not reopen following a major disaster.  The median cost of downtime for a SME affected by an extreme weather event is $3,000 per day — enough to close a business for good.

Coastal community and seasonal businesses are especially vulnerable due to storm surge, hurricanes, increased demand for heat or air conditioning, rising insurance costs, lack of access to natural resources, and loss of work hours during a shorter season.  Tourism related businesses are prone to direct economic losses as a result of interrupted travel plans and cancelled events.

According to a June 2013 poll by Small Business Majority, one-third of small business owners report they have been personally affected by extreme weather.  In the US, small businesses employ 60 million Americans, or roughly half of the private sector and must recognize both their vulnerability to these changing climate conditions and their role as critical participants in local and national climate preparedness.

The Climate Change Preparedness and the Small Business Sector Report recommends the following actions:

  1. Partner with Local Authorities;
  2. Seek Input from the Community;
  3. Identify a Business Continuity Plan;
  4. Education and Outreach.

Collaborating with local, county and state agencies, including departments of environmental protection, public utility commissions, chambers of commerce, and city planning commissions help small businesses prepare for future extreme weather events.  These partnerships facilitate information sharing and inform businesses of any funding available to them for climate-preparedness actions.  One example is for local businesses to partner with the public sector to build resilience in areas of their value chain that they do not control, such as critical transportation networks.

SMEs are closely tied to the communities in which they operate.  Members within a local community, such as academic institutions, non-profits, local agricultural and natural resource organizations, can provide valuable input and technical knowledge for implementing and supporting climate preparedness plans.  Joint planning among various local sectors can result in communities that sustain less economic damage and recover faster from extreme weather events.

Research local events and happenings to learn more and network for resources.  For instance, Florida Atlantic University’s Center for Environmental Studies is hosting its 2nd Annual Sea Level Rise Summit 2013: Resilience in the Face of Change to be held October 16-17, 2013.

Further recommendations include working with your local government for reliable, localized climate projections and related information to help pinpoint and reduce vulnerabilities.  This includes hazard mapping and emergency management information.  Advance cooperation and planning of public-private partnerships can help further protect communities from extreme weather.

Additionally, small businesses can maximize revenue by reorienting their business model or launching new products or services to take advantage of increased consumer demand for alternatives to traditional products as a result of climate change.  While climate change has typically driven business owners to strategize around minimizing loss, some SMEs have been able to maximize revenue by capitalizing on climate-related opportunities.

Developing a business continuity or risk management plan, is essential for a small business to build resilience in the face of future climate-related events.  A continuity plan will help identify the risks of climate change impacts specific to your business.  Any event that could impact business operations should be included, such as supply chain interruption, or loss of or damage to critical infrastructure.  This may lead to developing an energy management plan to determine ways to lower energy and water use and reduce waste, which can simultaneously lower normal operating costs.

Additionally, commercial building owners can take steps to increase their climate change resilience by evaluating crucial systems, storm-resistant structure and landscape design, backup power options, and disaster preparedness protocols.  It may be worth the near-term investment to move expensive equipment up from the basement floor or install a retaining wall to protect that equipment from flooding.

According to the Building Resilience in Boston: “Best Practices” for Climate Change Adaptation and Resilience for Existing Buildings report by the Boston Society of Architects (BSA) and the Boston Green Ribbon Commission (GRC), “each dollar invested in mitigation provides more than $4 of benefits.”  For instance, a strategy to add trees on the property to increase shading also reduces storm water flow, lowers ambient temperatures, lessens wind impacts and improves air quality and quality of life.  This can also help reduce flooding.

Among SMEs, there is a need for education on the potential impacts of extreme weather events, and an opportunity to raise awareness based on the experiences of businesses that have faced extreme weather events. Encouraging small businesses to share their experiences and communicate the results of their implementation efforts is essential to raise awareness of the potential impacts of extreme weather conditions.  Encourage your local Chamber of Commerce to coordinate with local leaders on addressing your community’s impacts, identifying vulnerabilities, and developing local business plans.

For instance, the South Carolina Small Business Chamber of Commerce, is leading an initiative throughout coastal South Carolina to educate the public on the vulnerability of the area’s local economy to sea level rise, which is predicted to rise 6 feet by 2100.  The initiative educates the public by visibly illustrating with signs in local neighborhoods where sea level could reach by 2100.  In Charleston, SC about 90 businesses have put tape, decals, or posters in shop windows.  The campaign is part of a larger effort to draw attention to the risks that climate change poses to small businesses.  Scientists expect sea levels to rise between 8 inches and 6 feet by the end of this century, putting low-lying coastal businesses at risk.

Because small businesses are distinctly critical to the US economy, and at the same time uniquely vulnerable to damage from extreme weather events, collective actions by the small business community could have an enormous impact on insulating the US economy from climate-related risk.

Nancy Schneider is a climate adaptation consultant located in Philadelphia, PA and Delray Beach, FL.  She can be reached best at nschneider2015@yahoo.com

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One thought on “Small Business Planning in a Changing Climate

  1. SME’s need to take it seriously and must plan accordingly in case of any environmental change leading to losses. Small businesses cannot resist to heavy losses that would occur due to climatic problems. So, it’s better that they plan to overcome the environmental challenges by taking a step ahead.

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