Recently I took a day trip to Gaylord, Michigan, a cute small town that looks like an alpine ski village. Unfortunately Gaylord was affected by a tornado a few months ago, which caused a lot of property damage to local businesses. When I visited, many businesses hadn’t finished all of their repairs. A sandwich shop I ate lunch at couldn’t open their dining room due to damage and was only offering takeout. I also noticed that some businesses had never reopened at all and were still closed for renovations.
With climate change on the rise, the frequency of these disastrous weather events is only going to increase, which could hurt your company’s bottom line. Here are some of the ways climate change could affect businesses and strategies to help mitigate the impact on your company.
How Climate Change Could Affect Your Business
More than 80% of executives are concerned about climate change, and for good reason. Climate change will increase the frequency and intensity of adverse weather events like wildfires, droughts, and hurricanes. For example, roughly 700 million people are at risk of being displaced by drought as early as 2030, which shows that climate change is happening at a pretty alarming rate.
These increasingly severe weather patterns could cause the cost of business insurance to rise and create operational challenges for your company, such as supply chain issues and resource scarcity. For instance, as water becomes a more precious commodity, its cost will increase and the regulations surrounding it may tighten up. Analysts at Barclays say that fines for water pollution are becoming more common. Plus, some western states like California and Nevada have had to implement water cutbacks.
Severe weather can also cause business disruptions. If a hurricane or tornado hits your area, you’ll be forced to shut your doors until the threat of the storm passes. Your storefront could also be damaged, which takes time to repair and results in lost revenue. And sadly, 40% of businesses don’t reopen following a disaster.
Additionally, consumer behavior can be affected by climate change. For example, warmer winters may reduce the need for heavy winter jackets, ski equipment, and snowmobiles. Tourism in ski towns suffers as well when there isn’t as much snowfall. It’s also important to note that consumers in areas affected by severe storms may reduce their spending as they try to recover from their own financial losses. This can make it harder for local businesses to bounce back.
The Ability to Pivot Is Crucial
During any challenging time, the ability to adapt is crucial. At the height of the pandemic, many businesses had to pivot and change their business models because in-person sales were no longer possible. Many restaurants offered socially distanced curbside pickup and started selling toilet paper and other grocery essentials to try to increase revenue.
If a severe weather event damages your storefront and forces you to shut your doors for awhile, it’s important to find other ways to collect revenue to ensure business continuity. Although disaster loans, your emergency fund, and business interruption insurance can help keep your company afloat while you make repairs, it may be better if you have another income stream that’s still coming in.
After all, it took up to three months for some businesses to reopen after hurricane Harvey. It would be much easier to get through an extended closure if you were still generating some profit. Starting an online store or a consulting practice could diversify your business and reduce the risk that a disaster will decimate your revenue.
Turn Challenges Into Opportunities
Another key way to mitigate the impact of climate change on your business is to turn challenges into opportunities. Many ski resorts that have been affected by milder winters are expanding their summer operations by turning their slopes into mountain biking tracks. A ski resort in a town about two hours away from me even built an all-season pedestrian bridge with scenic views to draw in tourists year-round.
Viewing climate change as an opportunity rather than an obstacle can open up new revenue streams for your business. Finding ways to make your products and services more sustainable and climate-resilient is a great way to appeal to consumers while managing business risks. Sixty-six percent of consumers and 75% of millennials say they consider sustainability when making a purchase. Many consumers are even willing to pay more for green products, which can help offset the costs associated with switching to more eco-friendly materials and production methods.
Are you concerned about climate change and the impact it could have on your business? What things are you doing to make your business more climate-resilient? Share your thoughts in the comments section below!
Vicky Monroe is a freelance personal finance and lifestyle writer. When she’s not busy writing about her favorite money saving hacks or tinkering with her budget spreadsheets, she likes to travel, garden, and cook healthy vegetarian meals.