If you’re the owner or employee of a small business, you have another reason to worry about climate change. Small businesses are particularly vulnerable to extreme weather, according to research published in July.
“Climate Change Preparedness and the Small Business Sector,” which is based on an opinion survey conducted in June among U.S. small business owners, finds that:
- • More than half (57%) of small businesses believe climate change and extreme weather events such as Hurricane Sandy are an urgent problem that can disrupt the economy and harm small businesses. Four in 10 strongly believe this.
- • One-third (34%) of small business owners personally have seen examples of extreme weather affecting either their business or someone around them.
- • Respondents are somewhat divided on whether the Small Business Administration should track claims related to extreme weather as a way to increase the amount of aid the government provides small businesses affected by such events: 42% say it should; 37% say it should not; and 21% are not sure.
- • Small business owners are a politically diverse lot — 37% of respondents identify themselves as Republicans, 30% say they’re Democrats, and 33% are independents or other.
What the American Sustainable Business Council and Small Business Majority say about the effects
The research was co-sponsored by the American Sustainable Business Council, which represents more than 165,000 businesses nationwide, and the Small Business Majority, an advocacy group that supports the estimated 28 million small businesses in the United States.
It only makes sense that extreme weather would put small businesses especially at risk. As the report points out, most small businesses operate out of one physical location. The SBA estimates that up to 90% 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 other locations.
Direct damage from extreme weather such as flooding, rising sea levels, storms and drought will make a greater impact on small businesses than a larger company. Small businesses also will feel more pain indirectly from technology and telecommunications failures, absent employees, power failures and supply chain interruptions.
Sources cited in the research estimate that 25% to 40% of small to mid-sized businesses never reopen following a disaster. In the case of Hurricane Sandy, 30% of the 60,000 to 100,000 small businesses negatively affected by the storm failed as a direct result.
The majority of small businesses surveyed have not analyzed the potential economic losses from extreme weather events or other climate-related risks, in part due to a lack of resources. More than half (57%) of small businesses have no disaster recovery plan. For those with risk management plans, 90% spend less than one day a month preparing and maintaining them.
The report’s authors recommend that a small business take a number of actions. The first is to create a continuity plan that identifies the risks posed by extreme weather and climate changes on that specific company.
The report estimates the median cost to a small business from downtime caused by extreme weather is $3,000 a day. What many businesses of all sizes are starting to recognize is that waiting to address the repercussions of disasters after they occur is much more expensive than planning in advance.
