Report on the Impact of Climate-Driven Disasters on Small Business Viability and Sustainable Development

Introduction: Economic and Community Vulnerability

Small businesses, which constitute the economic foundation of numerous communities across the United States, are facing existential threats from the increasing frequency and intensity of climate-driven disasters. These events disproportionately impact small enterprises compared to larger corporations, creating prolonged economic devastation that undermines progress toward several Sustainable Development Goals (SDGs). The challenges range from inadequate disaster preparedness resources to insufficient post-disaster financial support, threatening local economies and community stability.

Threats to Decent Work and Economic Growth (SDG 8)

The economic fallout from climate disasters directly obstructs the achievement of SDG 8, which promotes sustained, inclusive, and sustainable economic growth, full and productive employment, and decent work for all. The case of Asheville, North Carolina, following Hurricane Helene, illustrates this threat. The city’s small business-centric economy, known for its artists and boutiques, experienced a severe downturn.

• Revenue Collapse: The hurricane’s timing before the peak tourist season resulted in an estimated 20% to 40% drop in annual business revenue.
• Business Failures: A significant number of businesses, such as New Origin Brewery, were unable to reopen, leading to job losses and economic contraction. National data indicates this is a widespread problem, with 40% of small businesses failing to reopen after a disaster.
• Erosion of Economic Base: The destruction of small businesses weakens the local economic fabric, reversing gains in local employment and economic diversification.

Undermining Sustainable Cities and Communities (SDG 11)

The resilience of small businesses is intrinsically linked to SDG 11, which aims to make cities and human settlements inclusive, safe, resilient, and sustainable. When local enterprises fail, the entire community’s resilience is compromised.

• Community Disruption: The closure of local establishments leaves physical and economic voids in the community, disrupting daily life and diminishing the area’s unique character.
• Infrastructure Failure: The incident in Asheville, where railroad cars were dislodged by floodwaters and destroyed a brewery, highlights a critical failure in building and maintaining resilient infrastructure (a key target of SDG 11).
• Slow Recovery: The prolonged process for recovery and rebuilding, exemplified by the nearly year-long wait for a FEMA-funded buyout program, hampers a community’s ability to return to normalcy and plan for a sustainable future.

The Imperative for Climate Action and Adaptation (SDG 13)

The challenges faced by small businesses underscore the urgent need for robust climate action, as outlined in SDG 13. This includes strengthening resilience and adaptive capacity to climate-related hazards and natural disasters.

1. Pre-Disaster Planning: Experts emphasize that pre-disaster contingency planning is one of the most effective, yet underutilized, adaptation strategies for businesses. This includes understanding insurance coverage and securing inventory.
2. Investing in Resilience: There is a critical lack of financial incentives for small businesses to invest in making their properties more resilient to climate impacts like fires or floods, in contrast to programs available for homeowners.
3. Shifting Financial Focus: A systemic shift is required from post-disaster reactionary funding to pre-disaster financing for preparedness, which would better align with the adaptation goals of SDG 13.

Systemic Failures and the Need for Stronger Institutions (SDG 9 & SDG 17)

Current support systems are inadequate for fostering the resilient infrastructure and inclusive industrialization promoted by SDG 9. Furthermore, the lack of coordinated effort violates the principles of partnership outlined in SDG 17. The recovery process is fraught with systemic challenges.

• Inadequate Financial Support: Businesses find that insurance payouts are often insufficient to cover damages. Federal support, such as low-interest loans from the Small Business Administration (SBA), can increase debt burdens, while grants are difficult to secure. A Federal Reserve analysis found only 14% of businesses received federal government support.
• Bureaucratic Hurdles: The process for obtaining aid is often characterized by burdensome paperwork and significant delays, exacerbating the immediate liquidity crisis that cripples many businesses post-disaster.
• Lack of Coordinated Policy: A report from the Milken Institute highlights a “very reactionary” system and calls for a more integrated approach. Recommendations include:
  1. Appointing a cross-agency “small business resilience czar” to coordinate efforts.
  2. Standardizing disaster assistance forms to streamline the application process.
  3. Ensuring quicker grant dispersal to address immediate cash flow needs.
  4. Actively including local small businesses in official, paid recovery and rebuilding contracts.

Fortifying small businesses against climate shocks is not merely about protecting physical structures; it is a fundamental requirement for achieving sustainable economic growth, building resilient communities, and taking meaningful climate action.

SDGs Addressed in the Article

1. SDG 8: Decent Work and Economic Growth

   • The article focuses on the economic devastation faced by small businesses, which are described as the “backbone of countless communities” and crucial to the “U.S. economy.” The disruption caused by climate disasters leads to significant revenue loss, business closures, and a regional economy going into a “tailspin,” directly impacting economic growth and employment.

2. SDG 11: Sustainable Cities and Communities

   • The article highlights the vulnerability of communities like Asheville to climate-driven disasters. It discusses the need to make urban areas more resilient by addressing the economic fallout on small businesses, improving recovery plans, and mitigating damage from future storms through programs like property buyouts.

3. SDG 13: Climate Action

   • The core issue discussed is the impact of “climate-driven disasters” such as hurricanes, wildfires, and floods. The article explicitly calls for strengthening resilience and adaptive capacity for small businesses to cope with these “climate shocks” through better planning, insurance, and financial support systems.

4. SDG 1: No Poverty

   • The article connects the failure of small businesses post-disaster to increased vulnerability for individuals. By describing a business owner who “ended up facing eviction” after helping with cleanup efforts, it illustrates how economic shocks from climate events can push people towards poverty by destroying their livelihoods.

Specific SDG Targets Identified

1. SDG 8: Decent Work and Economic Growth

   • Target 8.3: Promote development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity and innovation, and encourage the formalization and growth of micro-, small- and medium-sized enterprises, including through access to financial services.
     • This target is central to the article, which details the hurdles small businesses face, including a “lack of post-disaster financing.” It calls for improved access to financial services through quicker grants, better loan programs, and new insurance models to support their survival and growth.

2. SDG 11: Sustainable Cities and Communities

   • Target 11.5: By 2030, significantly reduce the number of deaths and the number of people affected and substantially decrease the direct economic losses relative to global gross domestic product caused by disasters… with a focus on protecting the poor and people in vulnerable situations.
     • The article directly addresses this target by quantifying the “direct economic losses” for small businesses, such as a “20 percent to 40 percent drop in annual business revenue.” It identifies small businesses as a “vulnerable” group disproportionately affected by these disasters.
   • Target 11.b: By 2020, substantially increase the number of cities and human settlements adopting and implementing integrated policies and plans towards inclusion, resource efficiency, mitigation and adaptation to climate change, disaster risk reduction…
     • This target is reflected in the call for structural changes and better policies. The article advocates for governments to “include small businesses in their recovery plans,” shift funding to “pre-disaster preparation,” and create a “small business resilience czar” to implement integrated disaster risk reduction plans.

3. SDG 13: Climate Action

   • Target 13.1: Strengthen resilience and adaptive capacity to climate-related hazards and natural disasters in all countries.
     • The entire article is a discussion of this target. It examines the low resilience of small businesses to “climate shocks” and proposes solutions to strengthen it, such as “contingency planning,” having “more buffers,” using “parametric insurance,” and making buildings “more fire-resilient.”

4. SDG 1: No Poverty

   • Target 1.5: By 2030, build the resilience of the poor and those in vulnerable situations and reduce their exposure and vulnerability to climate-related extreme events and other economic, social and environmental shocks and disasters.
     • The article identifies small business owners as being in a “vulnerable situation” due to their limited resources. The discussion around their inability to recover from “climate-related extreme events” and the subsequent economic shocks directly relates to the need to build their resilience to prevent them from falling into poverty.

Indicators for Measuring Progress

1. SDG 8: Decent Work and Economic Growth

   • Percentage of small businesses that reopen/survive after a disaster: The article provides specific data points that can serve as indicators, stating that in Asheville, “around 85 percent of businesses have reopened,” while national data shows “40 percent of small businesses do not reopen after a natural disaster.”
   • Change in annual business revenue post-disaster: The article mentions that Hurricane Helene led to a “20 percent to 40 percent drop in annual business revenue” for businesses in Asheville, serving as a direct economic indicator.

2. SDG 11: Sustainable Cities and Communities

   • Direct economic loss from disasters: The article provides figures like the “$2.9 billion” spent by visitors in the previous year, implying a significant loss after the hurricane disrupted the tourist season. The revenue drop of 20-40% is also a direct measure of economic loss.
   • Proportion of businesses receiving government disaster assistance: An indicator of support system effectiveness is implied by the statistic that “Only 14 percent of businesses were able to rely on support from the federal government.”
   • Adoption of local disaster risk reduction strategies that include businesses: The article implies a lack of this by noting that governments “often don’t do enough to include small businesses in their recovery plans.” Progress could be measured by the implementation of such inclusive plans.

3. SDG 13: Climate Action

   • Number of businesses with disaster contingency plans: The article implies this is low, as experts note that “Often businesses see contingency planning as a distraction.” An increase in businesses with such plans would indicate improved adaptive capacity.
   • Availability of financial incentives for resilience measures: The article points to a lack of progress by stating, “there is no incentive that exists for this work” for small businesses to make their buildings more resilient, unlike for homeowners. The creation of such incentives would be a measurable indicator.

Summary of Findings

Source: grist.org