The Carbon Disclosure Project recently released a report stating that 10% of the top 500 companies are responsible for almost three quarters of global greenhouse gas (GHG) emissions.While large corporations are the primary contributors to GHG emissions, they are also more likely to be driven by their stakeholders to be proactive about identifying and mitigating the risks posed by the effects of a changing climate. Small to medium-sized enterprises (SMEs), on the other hand, may have lower emissions, but they are more likely to be directly vulnerable, and they often don’t fully consider and plan for these risks.
For example, a large corporation with a global supply chain is likely to be impacted more often by extreme weather events around the world. But, they also have more resources and pressure to plan, react, and adapt to such disruptions. In contrast, most small businesses operate out of a single location and the majority of their business comes from within a two-mile radius. For such businesses, a single local extreme weather event can have long-lasting detrimental economic consequences. It is less likely that they will have backup business continuity plans in the face of flooding, drought, power failures, etc. The Institute for Business and Home Safety estimates that 25% of SMEs do not reopen following a major disaster. Further, they are less safeguarded against indirect impacts of climate change such as rises in insurance rates and energy costs.
These impacts and pressures on SMEs add up to a big issue for the overall US economy, because SMEs employ approximately 60 million Americans.So, how can SMEs begin to understand and address their vulnerability to climate change? “The Climate Change Preparedness and the Small Business Sector Report” recommends the following actions:
- Partner with local authorities;
- Seek input from the community;
- Create a business continuity plan; and
- Conduct education and outreach.
The financial services sector faces many challenges. Learn how some companies are mitigating sustainability risks – and how you can, too, by downloading Sustrana’s white paper “The Rising Tide of Sustainability: Uncovering the Value for Financial Services Companies.”
For more information on how climate change could impact SMEs and what they can do to prepare, follow this link to Environmental Leader.