Climate Change Preparedness and the Small Business Sector
Small businesses are particularly at risk from climate change and the extreme weather events it causes and must take steps to adapt, according to a new report Small Business Majority released on July 25, 2013.
The report found that because small businesses are distinctly critical to the U.S. 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 U.S. economy from climate risk. Featuring case studies from the roofing, retail, tourism, landscape architecture, agriculture, and small-scale manufacturing sectors, and policy recommendations on how to help small businesses better prepare for extreme weather events, the report found:
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, according to the U.S. Chamber Foundations Business Civic Leadership Center, of the 60,000 to 100,000 small businesses negatively affected by Hurricane Sandy, up to 30% are estimated to have failed as a direct result of the storm.
According to the Institute for Business and Home Safety, an estimated 25% 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% of small businesses have no disaster recovery plan, and for those small businesses that do have continuity, or risk management plans, 90% spend less than one day a month preparing and maintaining them.