The Effects of Climate Change on Small and Medium Enterprises (SMEs)

 

Climate change is defined as the long term shifts in weather patterns. For instance, along the equatorial region in Africa, there are two distinct rain seasons per year; however, climate change can cause a change from two to only one rainy season. There are different causes of climate change, broadly categorized into two; anthropogenic causes and natural causes. Between the two categories, the most common causes of climate change in the current epoch are anthropogenic causes, which are simply referred to as man-made causes.   In cognizance of the commonality of man-made causes of climate change, small and medium enterprises should consider environmentally sustainable business practices because they bear the brunt of its negative effects.  Notably, climate change affects all spheres of human life including political, spiritual and economic spheres.   The focus of this article is how climate change affects SMEs.

 Loss of property

                Small and medium level businesses lack the financial ability to withstand the shock that arise from extremities in weather. Cases of floods and wild fires destroying property are common.   Business assets are destroyed, which eventually negatively affects the balance sheet of the businesses.  Importantly,   most such businesses lack insurance cover that can indemnify them in case of losses arising from vagaries of nature.  Regardless of the business sector, SMEs are affected. Reports of livestock swept by floods, farmlands destroyed by wildfires, vehicles carried by surface run-offs, products destroyed by water, submersion of property due to landslides are common.

Disruption of Supply Chain 

            The destruction caused by floods, mudslides, landslides affect transport infrastructure on land and in the sea ports. Road networks become impassible, or are totally cut off causing delays in product deliveries. Perishable products go bad leading to financial losses. Importantly, the downstream supply chain players particularly consumers cannot dare cyclones or flooding waters to go shopping.  It means that during such times, small and medium businesses make limited sales due to supply chain disruptions.

        Based on the effects of climate change on small and medium enterprises, business planning should include environmental effects and  ways of mitigating them.The triple bottom line, which is profit, people and planet, is necessary for business sustainability. For small and medium enterprises, a mechanism of focusing more on planet, which in this case is the environment, should be considered because the effects of climate change are expected to continue to the foreseeable future