U.S. Small Business “Uniquely Vulnerable” to Climate Change, Extreme Weather

U.S. small businesses are particularly at risk from extreme weather and climate change and must take steps to adapt, according to a new report from the Small Business Majority (SBM) and the American Sustainable Business Council (ASBC).

Titled “Climate Change Preparedness and the Small Business Sector,” the report concludes: “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.”

According to the the National Oceanic and Atmospheric Administration (NOAA), 2011 and 2012 were the two most extreme years on record for destructive weather events, which caused a total of more than $170 billion in damages, much of that to businesses.

Key findings in the report include the following:

• Small businesses must recognize both their vulnerability to these changing climate conditions and their role as critical participants in national climate preparedness. According to a June 2013 poll by Small Business Majority, one-third of small business owners report they have been personally affected by extreme weather, and 57 percent believe extreme weather events are an urgent problem.
• The majority of small businesses operate out of a single physical location. According to the U.S. Small Business Administration, up to 90 percent 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 alternate facilities or branch locations. As a result, small businesses will be more heavily impacted by technological or telecommunications failures, the absence of employees, power failures, supply chain interruptions, and rising insurance costs. Direct damage from extreme weather events such as flooding, sea level rise, storm surge, and drought will impact small businesses more severely than a larger business with more financial and human capital.

• An estimated 25 percent 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.

Lea Reynolds, senior policy analyst and report author, M.J. Bradley and Associates, said:  “The U.S. business community is increasingly analyzing the risks, opportunities, and financial implications of climate change and integrating them into long term business plans. In recent years, the financial repercussions of weather variability and extremes have significantly impacted the U.S. economy by affecting both supply and demand for the products and services of almost every industry. For small businesses, the imperative for action is particularly acute.”