Major challenges climate change for SMEs

Climate change will cause more extreme weather in the coming future. Think about floodings, extreme heat, wind or rainfall. The economic challenges for small and medium sized enterprises will become bigger because of that. Higher operating costs and a stagnant or declining market are concrete examples.

Rising costs

In addition to rising commodity prices, the cost of insurance premiums will go up. More damage from extreme weather to property, fleet, livestock or farmland automatically leads to higher raw material prices and insurance premiums. The largest reinsurer in the world (Munich Re) indicates that in the next few years, more precipitation and temperature extremes will occur. This may lead to the loss of electricity power, the (temporary ) suspension of production or not getting required commodities or resources in time. Besides from the damage to the property and production process of the entrepreneur, increased climate risks cause higher insurance costs.

Shrinking revenues

According to research, the total cost due to climate change and air pollution by using fossil fuels is now about $1,200 billion a year. That is 1.6 percent of annual global GDP. Predicted is that this trend will continue further to a 3.2 percent of GDP in 2030. These costs will have to be supported, also by SMEs. In addition, climate scientists state that when the earth will warm up an additional 3 degrees, we can expect a global economic decrease between 0.2% and 2%. This because water and food security is at stake which therefore also has implications for public health. With the current and projected greenhouse gas emissions, we can easily expect those 3 degrees extra temperature rise.

Market uncertainty

How pleasant it is to do business with entrepreneurs in countries where the risks due to climate change are big? Suppose you have suppliers or customers in areas that are sensitive for rising sea levels, hurricanes and extreme droughts. How sure are you of the solvency of your business relationships and thus of the continuity of your own business? In addition, climate change causes social unrest. Several million climate refugees are adrift these days in search of fertile and safe territory. This causes unrest and conflict in some parts of the world . And it’s just always better doing business in an area where some degree of well-being and order prevails.

Quick action needed

In order to offer next generation of entrepreneurs a sustainable future, it is fundamental that we start drastically with reducing emissions of greenhouse gases now. Companies have no time to lose when it comes to preventing further unprofitable economic effects of climate change. And the good thing is that you, as an entrepreneur, can earn good money with it. The savings on the consumption of fossil fuels directly deliver higher profit. Consider for example to shut shop- or showroomdoors in winter, put computers on the power save mode and keep the right tension on the tires of your vehicle fleet. At this website we inform and inspire you about energy savings. This makes being a climate -conscious entrepreneur fun and profitable to do. And if you don’t do it for your own profits, then do so for maintaining a livable world.


DARA Group: Climate Vulnerability Monitor: A Guide to the Cold Calculus of A Hot Planet
IPCC: Climate Change 2014: Impacts, Adaptation and Vulnerability
Environmental Leader: Small business planning in a changing climate
Huffington Post: Climate Change Report Predicts Warming Will Only Make Human Ills Worse
IFAD: Tackling the root causes of high food prices and hunger

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