Another worry on climate change
Extreme weather is more likely to hurt small businesses.
If you’re the owner of a small business — or small businesses make up a big part of your customer base — here’s another reason to worry about climate change. Small businesses are particularly vulnerable to extreme weather and climate change, according to research published in late July.
“Climate Change Preparedness and the Small Business Sector” is based on an opinion survey conducted in June among U.S. small-business owners. The report 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. An almost equal number (38%) do not agree that extreme weather and climate change are a problem for small businesses and the economy.
- One-third (34%) of small-business owners personally have seen examples of extreme weather affecting either their business or someone around them. While that’s a substantial percentage, 61% have not been personally affected.
- 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.
- Probably just a coincidence, but 37% of respondents also identify themselves as Republicans while 30% say they’re Democrats, and 33% are independents or other. So, the small-business owners in the survey are a politically diverse lot.
That could be an important point in that the research was co-sponsored by the American Sustainable Business Council, which claims to represent 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. The two groups say that concern over climate change among small-business owners crosses political lines.
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, supply chain interruptions and higher insurance costs.
Different 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.
Looking at small businesses in the big picture of the U.S. economy, these companies employ 60 million people, which is about half the private sector workforce. So, what hurts small businesses can harm the overall strength of the U.S. economy.
If you haven’t yet prepared your company for a weather-related disaster, at least you’re not alone. 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 being a continuity plan that identifies the risks posed by extreme weather and climate changes on that specific company. This step would seem to be particularly essential for a plumbing and heating contractor for you frequently are among the first calls people make when a storm cuts off their heating, power or water supply. That certainly was the case with Hurricane Sandy.
Other recommendations include partnering with local authorities and colleges that can educate a company about what steps it can take to prepare for disasters. A more long-term recommendation is to work with legislators on laws that address the causes of climate change.
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.