6 Ways to Make Small Businesses More Resilient to Climate Change
The consequences of a warming planet are already being felt by communities around the world, especially poor and vulnerable populations living in developing countries. Mobilizing financial support to boost adaptation among those already, and soon to be, suffering from climate change is a major goal for the countries negotiating a binding international agreement at the COP21 climate summit. UNEP estimates the gap between available resources and those needed to be $115 billion. Public funding will likely address a large part of this need, but ultimately, filling this gap will require involvement of businesses.
Harnessing the private sector’s role in developing countries can help communities become resilient to climate change. In most countries, the private sector generates more than 60 percent of gross domestic product, and micro and small enterprises (MSEs) in developing countries provide around 60 percent of all jobs. Many of these jobs are in the agriculture sector, which is especially vulnerable to extreme weather changes. Moreover, since billions of people rely on MSEs for their livelihoods, supporting this economic segment is crucial to help communities adapt to climate change.
A new report from WRI and UNDP, Adapting from the Ground Up, highlights creative, low-cost and sustainable actions national governments, donors and others can take to engage MSEs in poor, rural areas and increase investment in adaptation.
Taking six steps can help boost the resiliency of MSEs:
1. Business-relevant climate information and risk analysis
MSEs typically lack adequate resources to access information needed to guide their decision-making under new climate conditions, but targeted weather and climate information can help them understand particular business risks and opportunities. For example, businesses in rural communities can benefit greatly from early warning systems. In Cambodia, 52 villages including 11,073 households started receiving timely weather forecasts to help them cope with extreme events, enabling them to better plan for extreme weather and to change farming practices to increase and protect their yields.
2. Technical assistance and training
The public sector can help MSEs through sharing information, conducting research and development, and building skills to understand adaptation options that help their businesses become more resilient. In Tanzania, BBC Media Action partnered with local radio stations to broadcast talks on program management and climate-smart agricultural planning. BBC’s research shows that many people have taken action as a result of listening to the broadcasts, improving their livelihoods as a result.
3. Government policies enabling adaptation investments
Governments can integrate adaptation into their development planning across agencies to conserve resources, improve productivity, and strengthen community resilience, with far-ranging impacts for MSEs across countries. To ensure climate change is tackled across multiple sectors, the Government of Rwanda designed a National Strategy for Climate Change and Low Carbon Development incorporating the country’s climate change development projects and policies into one document to guide resilience-building. This integrated approach can benefit MSEs through infrastructure, government programs, and other national or regional adaptation projects supporting the private sector.
4. Market and business development
MSEs have the opportunity to provide products and services to meet consumer demand in a changing climate. Finding and producing products and services that help consumers build resilience, plus finding ways to better access new markets in general, can greatly help MSEs become more resilient and prosperous. In Tajikistan, local farmers received support from the United Nations to plant climate-resilient Tajik fruit species in a nursery. They then sold seedlings of these species at local markets and fairs. The farmers became very successful and built a great reputation for selling sustainable and well-adapted fruit species in the region.
5. Partnerships and cooperatives
Partnering with other businesses or public entities is a cost-effective way for MSEs to overcome having limited resources to invest in adaptation. This can enable them to pool resources and funding and to self-insure against weather-related shocks. In Nepal, members of the Garima Farmers’ Cooperative expanded their variety of crops that grow well in shortened seasons. They then developed a saving mechanism to invest in other products to further diversify their incomes.
6. Financial instruments
A lack of available financing options is the biggest barrier facing MSEs trying to invest in adaptation. However, more and more options are becoming available to provide low-risk financial instruments and support MSE adaptation investment, including insurance, loans and seed capital. The African Risk Capacity, for example, is an agency within the African Union using weather data to estimate how many people will be affected by a poor harvest due to weather. These people receive a payout to help them bounce back.
MSEs must adapt to climate change for developing countries to become more resilient, but part of this change needs to come from public support. The success of COP21 depends not only on the high-level agreement among negotiating parties, but also on the implementation of this agreement on the ground, and how well it serves and engages MSEs. By learning from the successes highlighted in Adapting from the Ground Up, all sides of the equation can efficiently adapt to a changing climate.