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Climate Change, Is Your Business Ready?
By Michael Schweibinz

The average business owner rarely thinks about how his or her operations will be affected by climate change. Typically, it’s not until something truly disruptive occurs that concerns about climate related challenges dominate.

This reality was recently exemplified by the flood in Colorado. As the unprecedented storm ran its course, many business operations came to a standstill for a few days at least, and many businesses were left with both a physical and financial mess. Even after pumping the flood waters out of their homes, warehouses, stores, and offices, they realized lost business opportunities, supply chain interruptions, repairs, rising insurance costs, and a fundamental lack of access to essential resources.

Some have recognized that this experience with the so-called “100-year flood” is quite possibly a vision of the future “weirding” of weather patterns as predicted by climate scientists. And for some, the experience has renewed their motivation for efforts to curtail the negative effects humanity has on the planet.

Far from the floods in Colorado, New York City mayor Michael Bloomberg, billionaire Tom Steyer, and former Treasury Secretary Henry Paulson recently made headlines with their commitment to convince the public, policy makers, and investors that the “costs of curbing carbon emissions now is far less than the long terms costs of doing nothing.”

Bloomberg, Steyer, and Paulson, have joined forces to fund a study to quantify the “economic risk U.S. industries face from climate change.” The objective is to analyze the massive price tag tallied up by increased storms, droughts, floods, and other extreme weather events. By doing so, they hope to persuade other investors and policy makers that the time to act is now, not after the next disaster strikes. They believe that investing now will be far more cost effective than waiting until conditions worsen.

It’s important to understand that, like in Colorado, it’s likely to be small business owners who will feel the negative effects of climate change the most. According to the Environmental Leader, small- to medium-sized businesses (SMEs) feel the impacts of the changing climate far more than large companies. Yet, the majority of SMEs aren’t factoring in these risks in their business forecasting or operations.

Usually, SMEs have a single location and very limited resources, leaving them particularly exposed and vulnerable. Chain stores can rely on assistance from “corporate.” And large companies are more driven to report and respond to climate change to prove to their investors and stakeholders that they are well-positioned to mitigate climate-related business risk. So what’s the take-away for SMEs? Perhaps it’s understanding that the “median cost of downtime for an SME affected by an extreme weather event is $3,000 per day—enough to close a business for good.”

Read more on climate change and how its costs affect business here.

Mention of specific companies or securities should not be considered a recommendation to buy or sell that security. Past performance is no guarantee of future results.

Posted: October 14, 2013