Adapting to climate change: An economic imperative for SMEs
Insurance Bureau of Canada data indicate that meteorological events in 2023 were very costly for insurers. As of September, $600 million had been paid out to disaster victims in Quebec. That is six times higher than the annual average over the last ten years. These figures exclude the damage caused by floodwaters in Baie-Saint-Paul and forest fires, events that also led to major evacuations and disruptions.
We must become more resilient against climate change to limit the costs associated with these events. SMEs are particularly concerned.
What is climate change adaptation?
Climate change adaptation involves reducing the vulnerability of humans and nature to the effects of climate change. It is a series of initiatives and measures aimed at mitigating the impacts of change and strengthening our resilience against them.Under-estimated risks
Until recently, most businesses did not seem concerned about climate‑related risks. In 2023, the Business Transition Barometer revealed that 65% of businesses perceived few or no risks related to climate change. Some manufacturing businesses expressed worries regarding supply chains. However, risks to assets and facilities remained largely under-estimated.
Yet, climate events are having increasing impacts on Canadian businesses. Among these effects are increased insurance costs, the creation of new requirements, supply and distribution disruptions, and facility damage.
According to the Canadian Climate Institute, every dollar invested in adaptation can avoid up to $6 in direct expenses to restore or replace damaged assets, and up to $15 in indirect expenses caused by supply chain disruptions.
Adaptation tools for Quebec’s SMEs
The forest fire crisis in the summer of 2023 is a reminder that climate change adaptation is essential. Businesses must adopt measures to assess risks and plan their actions to transition to a green economy.To do this, SMEs must anticipate the possible impacts of disrupting events. They must also seize opportunities arising out of climate change.
A proactive adaptation strategy could include:
- an evaluation of climate risks;
- planning for resilience against disasters;
- planning to transition to a low-carbon economy;
- an analysis of the costs and benefits of adaptation measures;
- a sustainable development plan;
- preparing for regulatory changes;
- innovation and R&D;
- an ongoing monitoring and evaluation approach.