Small and Medium Businesses Need Climate Adaptation Plans

Small businesses help knit together the fabric of a community, providing essential services and employment for many. However, they face increasing threats from extreme weather events driven by climate change, including heatwaves, floods, and storms. These disruptions are already considerably impacting their operations and the livelihoods they support.

Severe storms and heavy rainfall can damage properties and infrastructure significantly, leading to power outages that may halt business operations. Additionally, extreme heat poses serious risks to employees’ health, reduces productivity, and compromises the quality of products. This can result in infrastructure issues that disrupt the transport and delivery of goods and services.

These impacts on micro, small, and medium-sized enterprises can also extend to other associated sectors like jobs in construction, professional services, accommodation, and food services, as well as the broader economy and society.

A McKinsey article shows the impacts of Hurricanes Helen and Milton on the United State’s micro, small, and medium-sized enterprises (MSMEs) in two storm-afflicted US states – Florida and North Carolina. The US defines MSMEs as enterprises with fewer than 500 employees. Although termed as micro or small, these businesses are essential in powering the US economy and creating millions of jobs. Some large and publicly traded companies worth billions today started as MSMEs.

Hurricanes impacts on MSMEs in Florida and South Carolina.

Florida

When Hurricane Milton landed in Florida on 9 October 2024, it affected 34 counties that host 60% of the state’s MSMEs or a total of 1.9 million enterprises that generate more than half a trillion dollars in revenue and employ 4 million people. These MSMEs represent various sectors, including healthcare, construction, professional, administration and personal services, retail, real estate, manufacturing, finance and insurance, and wholesale trade.

The article provides infographics that show the sectors impacted and the sizes of these enterprises in terms of the number of employees and revenue in Florida.

North Carolina

The 30 counties hit by Hurricane Helene in North Carolina are home to 45% of its small businesses. The hurricane’s impact on sectors is evenly distributed, affecting up to 50% of the state’s MSMEs with a collective revenue of $34 billion. MSMEs in healthcare are the most impacted, followed by construction, accommodation, and food services.

The article notes that providing relief to MSMEs affected by natural disasters could help restore jobs, heal communities, and mitigate ripple effects on the broader economy. Government-level aid can bolster recovery efforts, as can time and money donated by generous individuals. However, larger companies that have not been impacted can help MSMEs regain their footing. Their support in financing, expertise, facilities, and resources can help them recover and become profitable again.

Preparing for climate change

Global Center on Adaptation presents five ways small businesses can prepare for climate change.

The first step is to assess the risks climate change presents to businesses. The rapid progress in artificial intelligence offers a cost-effective means to model climate-related risks specific to their area, sector, and organisation.

Second, understanding climate risk can inform decision-making, such as how to make buildings resilient or adapt them to climate-related hazards such as wildfires, hurricanes, rising sea levels, or extreme rainfall. Actions can include floodproofing, raising the elevation of buildings, or sometimes relocating the business to less vulnerable or hazard-prone areas.

Third, protecting against infrastructure disruption. Creating a backup or alternative supply chains and energy sources can protect against possible disruptions.  

Fourth, provide safe and productive working conditions for your staff or employees, avoiding extreme heat through green or cool roofs or efficient air conditioning.

Fifth, putting in place disaster recovery plans. This includes having an on-site emergency shelter for workers and supporting public policies that mitigate risks.

SME’s Climate Adaptation Platform

In New Zealand, Climate Connect Aotearoa, in partnership with various private and government agencies, announced the adaptation platform for small and medium-sized enterprises (SMEs) that will be launched in 2025. The platform will provide various tools and resources to help SMEs make their businesses more resilient to climate change risks.

The SME adaptation platform is a response to the need for practical, accessible and free information and resources to help SMEs identify and manage the increasing impact of climate change on their businesses. 

SMEs are the backbone of the New Zealand economy, with 98.7% of all businesses in the Auckland region employing fewer than 50 people. These businesses are increasingly vulnerable to the impacts of climate change.  

The twin climate disasters of the Auckland Anniversary Weekend floods and Cyclone Gabrielle in 2023 have resulted in insurers paying businesses $2.053 billion across 112,812 claims of insurance claim to date, underscoring the importance of prioritising climate change risk management for many business owners. 

It’s not just the immediate physical impacts that drive the need for action.

According to Charlotte Kootstra, Sustainability Manager for Climate and Environment at Sustainable Business Council, supply chain resilience is becoming a priority. “In the wake of the growing disruptions caused by intensified climate events, businesses must ensure their supply chains are prepared. Suppliers with a climate adaptation plan signal to their customers that there is a lower risk of disruption to the flow of products or services, particularly during adverse weather events.”