Climate change is a major concern for small and medium-sized enterprises (SMEs), according to Zurich Insurance Group’s fourth annual global SME survey. Almost four-fifths (78 percent) of SMEs surveyed expected risks associated with climate change to have a significant effect on their business.
The survey, which polled 2,600 C-suite executives and managers at SMEs in 13 countries in Europe, the Americas and Asia Pacific, revealed that downpours and heavy rain (22 percent) and droughts and severe heat (20 percent) were the natural events believed to have the most potential to hurt business.
More than one-third (36 percent) of SMEs considered material damage as likely to be the most critical risk to business due to climate change. The next-greatest risk related to climate change was listed as the threat of business interruptions (26 percent), said the survey titled “Potential effect on business of small and medium enterprises (SMEs) due to climate change in 2016 – Global survey report.”
Additional risks that could arise due to climate change included supply chain interruptions, potentially higher costs for energy and water, and the impact of climate extremes on employees’ health, according to 14 percent of survey respondents.
While a few multinationals are believed to be looking into potential business opportunities related to mitigating climate change, virtually none of the SMEs surveyed saw climate change offering business opportunities – they did not see avenues to profit from climate change, said Zurich in a statement accompanying the survey results.
The global survey revealed significant regional differences in terms of how climate change risk was perceived, and the potential impact it might have. These regional differences are details as follows:
U.S. SMEs. SMEs’ managers in the U.S. “were most keenly aware of the potential impact climate change could have on the businesses they run,” said Zurich in its survey commentary. Only 6 percent expected no impact. Over three-quarters of respondents were concerned about the impacts of extremes in precipitation, including the effects of heavy rain and floods, as well as droughts. Further, just 13 percent believed that hurricanes and tornadoes posed a high risk.
The survey also found that material damage from climate change was ranked as the top risk by 47 percent of U.S. SMEs, while 26 percent of those surveyed named the health status of their workforce as their second-biggest concern.
European SMEs. SMEs in Europe were the least likely to view climate change as posing a risk to their business. A quarter of SMEs in Europe, the highest percentage among regions surveyed, anticipated no negative impact on their business due to climate change. Among the 75 percent of European SMEs that did see climate change as posing a risk, most believed the biggest impact on their business was likely to be caused by flooding (22 percent). Where floods were concerned, material damage was considered to be the greatest risk (35 percent).
Latin American SMEs. Latin American SMEs, like their U.S. counterparts, were most concerned about extreme weather, the survey found. Downpours and heavy rain were the leading cause of worry for 36 percent of SMEs in Latin America and 43 percent expected material damage would be the most significant result of such risks. Responses from SMEs surveyed in Latin America found that more than one out of five SMEs in that region believed natural catastrophes had the potential to affect their business operations, affecting supply and distribution chains, and causing business interruptions.
Asia Pacific SMEs. Unlike SMEs in other regions, those in Asia Pacific were most worried about the impact climate change could have on business continuity; the fear of business interruptions, rather than material damage, was their greatest worry, the Zurich survey found.
Over a third (34 percent) of SMEs in Asia Pacific also reported droughts and heat as likely to have the biggest potential impact on their businesses. That was in contrast to the concerns among SMEs in other regions, where respondents were more worried about events related to increased precipitation.
“The results of this year’s SME survey demonstrate that an overwhelming number of businesses are concerned about the threats and potential impacts that climate change presents, such as business interruption and material damage, and the increased threat of floods, drought and other extreme weather,” said Cecilia Reyes, group chief risk officer at Zurich. “Businesses should take action now to limit these risks, but also identify the opportunities climate change could bring.”
Reyes said the Zurich survey once again revealed significant regional differences, which highlights the need to global solutions providers to understand the needs of their customers in local markets.
Zurich’s fourth annual SME survey was carried out by research company GfK. The leaders of 2,600 small and medium sized enterprises (up to 250 full-time employees) around the world were asked questions on climate change related risks facing their businesses. A representative sample of 200 CEO/owners, general managers, CFO/treasurers and COO/head of operations from each of the following 13 countries were included: Australia, Austria, Brazil, Germany, Hong Kong, Ireland, Italy, Mexico, Portugal, Spain, Switzerland, Turkey and the U.S.