Without a Climate Plan, Small Businesses Will Not SurviveMaria Mendiluce, CEO, We Mean Business Coalition & Simon Mulcahy, President of Sustainability, TIME; CEO of CO2.com
The impacts of the COVID-19 pandemic were challenging for the hospitality company Legacy Vacation Resorts.
When a hotel goes without guests for a week, times can get tough. Just as Legacy Vacation Resorts were getting back on their feet, wildfires caused closures at their Colorado and Reno resort locations. The inability to go outside and explore, not to mention the health impacts from breathing smoke, also caused cancellations and further loss of business. The recent Hurricane in Florida resulted in further loss of business and guest cancellations due to closures, evacuations and localized damage. The Red Tide in Florida has also resulted in cancellations, lost revenue and turned away repeat guests after they witnessed dead fish on the beach and a foul smell from the water. Now inflation is forcing Florida-based entrepreneur and Legacy Vacation Resorts Chairman Jared Meyers to once again look at how he can adapt the business to tackle the latest in a catalogue of obstacles. He explains how he’s looking for cost effective solutions that will save his business money, whilst also making it resilient to the shocks of a rapidly changing climate.
“The way I see it, cost increases are linked to the global energy crisis and the energy crisis is linked to climate change,” he said. “Our company can’t survive if extreme weather events worsen and become more frequent. The climate crisis significantly affects us all if we don’t act. We are switching to renewables and increasing energy efficiency because these decisions save us money and help future proof our business. By tackling the climate crisis, we’re also cutting costs.” If we don’t collectively take action to reduce emissions, the impacts of climate change will continue hurting the safety and security of our businesses, communities and economies.
While this is just one company, looking at one of America’s 30 million small businesses like Legacy Vacation Resorts can tell us a lot about how our society and our economy is faring in the current times. Small and medium-sized enterprises (SMEs) employ the majority of the population in the U.S., having created 2 out of 3 of the country’s jobs over the past 25 years. of the country’s jobs over the past 25 years.
It’s been an uncertain few years for most small business owners and their employees. The COVID-19 pandemic brought economic recession and the most severe decline in employment since the 2007 financial crash. Amidst increasing economic uncertainty, the impacts of rising global temperatures are compounding risks for America’s businesses of all sizes. Over the last five years, climate-related disasters have cost more than $788 billion and claimed 4,500 lives in the U.S. The recent Hurricane Ian alone is set to be the most costly storm in U.S. history, causing an estimated $67 billion in economic damages, including property and infrastructure destruction along Florida’s coastline and the ruining of orange farms in the largest producing state. And only 30% of this damage is covered by commercial insurance.
Disruption to U.S. supply chains, critical infrastructure, and local communities have a major impact on small businesses in the affected regions—from preventing staff going to work, to power cuts and struggles to source key materials and products. Take, for instance, Clif Family Winery & Farm, a vineyard based in Napa Valley, California, which has experienced disastrous wildfires caused by climate change that have displaced employees and severely damaged land and products. “We’ve seen, first-hand, that we must take action now to protect our community and our people for the future,” says Clif Family Winery & Farm President Linzi Gay.
As a result, the small-production wine and specialty food business owned by Clif Bar & Company co-founders Gary Erickson and Kit Crawford, joined the SME Climate Hub to make strides towards its emission reduction targets. Their climate action strategy has included installing solar panels on their office and tasting room along with new innovations like using sheep in the vineyard for weed control and fertilisation, a practice which is cutting both costs and emissions.
“The sheep have made a huge difference, said Gay, “since much of the company’s emissions come from fuel used for the vineyard’s vehicles and tractors.”
The winery has also enrolled in the not-for-profit electric provider MCE’s 100% Deep Green Power initiative. The program supplies the entirety of the company’s energy from wind and solar power, and the winery also works with their packers to enable them to do the same. The company is also working to reduce the use of foil capsules on their bottles in 2023, and they aim to source all their specialty food packaging from within the U.S. to reduce their supply chain impacts.
Building a climate-action strategy also inspired Clif Family Winery & Farm to develop solar-grown honey products sourced from pollinator-friendly solar farms, which both reduces emissions and fosters important pollinator habitats. The next critical step is reducing the company’s value chain emissions. Gay explains, “Our plans in 2022 include working with our co-packers and supply chain partners to get a baseline of our emissions, and to determine what work we can do with these partners to reduce our emissions.”
Companies don’t have to start out as sustainable brands, and in fact, many are growing to develop climate action plans. VP of Strategy at the retailer Adore Me, Ranjan Roy explains that once the company realized the economy was headed, irreversibly towards net-zero, Adore Me knew they needed to sustainably transform their business. “It became clear that if you don’t build your business sustainably, you will be left behind. If you remember digital transformation was all the rage in the early 2010s, we think sustainability is going to go the same way where it will be ingrained in every single part of your business.”
Adore Me, which was around $100 million in revenue when they started their transformation in 2019, is now over $200 million. “While scaling as a growing brand, our experience is that you really can change the way you operate and that being more sustainable has been really good for business.”
For SMEs, costs are a major factor. Roy says that looking at the whole picture is important when considering where you can reduce costs, not just at an individual product in isolation. “An example is air shipping versus sea shipping,” he says. “Air shipping can have 20 to 50 times the impact as sea shipping on the planet. And sea shipping is 5 to 10 times cheaper. Of course, sea shipping takes longer so you have to adapt by being better at inventory management and building your supply chain in a predictable way.”
Beyond cost savings and innovation, from a regulatory standpoint, there’s never been a better time for SMEs in the U.S. to get involved in climate action. They can tap into the Inflation Reduction Act’s $369 billion in investments and tax credits to make clean energy more accessible and affordable to all, including small businesses.
The SME Climate Hub offers resources and suggestions for companies to prioritize in their climate action plans. This includes eliminating waste to reduce costs and emissions and limiting energy use to ultimately save money and cut emissions. Companies must look for every opportunity to cut material waste and use more recyclable materials. These can be simple actions like shutting down heating and cooling systems when they are not needed and turning off the lights when offices are empty.
SMEs can also play a role in reducing fossil fuel dependence by calling on large corporate customers with science-based emission reduction targets to support them in making the switch to renewables. In Europe, companies like IKEA and Siemens are supporting their SME suppliers to adopt renewable energy solutions. IKEA for example offers its SME suppliers support to convert to clean energy by enabling the purchase of renewable electricity. Even minor interventions, such as plastic-free packaging, cycling to work schemes, or subsidizing public transport can make an impact on demand for fossil fuels. The companies that invest in decarbonization – such as renewable energy and efficiency – are doing what’s good for the bottom line, health and safety of communities, and the economy.
Businesses of all sizes must prioritize emissions reductions in their value chain before looking at offsets to compensate for emissions they can’t yet cut. Many cheap offsetting projects are still of poor quality and transparency, so it’s essential to support credible, high integrity programs beyond their value chain. Initiatives like TIME’s new climate venture CO2.com aim to build robust, diversified high quality climate action portfolios for businesses. It focuses on the highest quality credits that moves the needle on carbon and delivers real impacts for nature and communities.
Small businesses are the cornerstone of the American economy, which makes them central to our collective efforts to stabilize the climate. As more and more of our 30 million community leaders, entrepreneurs, storekeepers, start-ups, hard workers, and big dreamers begin to see it makes sound business sense to embrace climate action, it gives us hope that the turbulence and uncertainty in our economy may soon become a thing of the past and a more secure future might be in sight.