BUILDING CLIMATE

RESILIENCE FROM THE

BOTTOM UPCatalyzing Small Business Engagement in

Climate Change Adaptation

LISA DOUGHERTY-CHOUX L.DOUGHERTY-CHOUX@WRI.ORG

PIETER TERPSTRA PTERPSTRA@WRI.ORG

Photo Credit: Flickr/Oxfam International

• Marginalized communities in low-income countries will experience the effects of climate change the harshest

• Policymakers need to find ways to protect livelihoods of the most vulnerable

• International organizations, donors, non-governmental organizations (NGOs), and multinational corporations (MNCs) can help

PROTECTING THE VULNERABLE

bit.ly/Z081IF

70%

VULNERABLE PEOPLE RELY ON MICRO AND SMALL

ENTERPRISES (MSES) FOR THEIR LIVELIHOODS

THE IMPORTANCE OF AGRICULTURE IN THE RURAL

ECONOMY

• Agriculture is one of the most vulnerable and economically-important sectors in low-income countries

• At least 80 percent of the rural poor derive their primary income from formal or informal employment in agriculture

• Agriculture has one of the highest concentration of small businesses in developing countries

Photo credit: International Maize and Wheat Improvement Center

RURAL POPULATIONS MAKE UP A LARGE SEGMENT

OF TOTAL

0

10

20

30

40

50

60

70

80

Sub-SaharanAfrica

East Asia &Pacific

Middle East &North Africa

Europe &Central Asia

Latin America& Caribbean

Rural population (% of total population)

2000

2012

Source: World Bank, World Development Indicators.

WHY FOCUS ON MICRO AND SMALL BUSINESSES

(MSES) IN ADAPTATION

Photo Credit: CGIAR Climate via Compfight (cc)

1. MSEs are best suited to reach vulnerable

communities in low-income countries– The majority of vulnerable populations rely on MSEs

for their livelihoods

2. If MSEs are resilient, so are communities– MSEs are the most direct contributors to economic

stability

3. Vulnerable populations have the fewest resources to adapt to climate change– Climate impacts could have long-term effect on

development

MSES INVEST IN ADAPTATION TO:

Reducing climate risk

Gaining financial or strategic benefit

Responding to government regulations

1

2

3

BARRIERS FACING MSES TO INVEST IN ADAPTATIONBarrier Description

Availability and knowledge

of cost-effective adaptation

options

Even when small businesses are aware of climate risks, they will

not take action if they are not aware of, or do not have access to,

viable adaptation options.

Institutional factors

(regulations and policies

affecting investment in

climate adaptation)

In many cases, existing policies can frustrate adaptation efforts by

the private sector, such as energy subsidies, water subsidies, or

land use laws. In order to make long-term investments in

adaptation, businesses need a clear national adaptation policy that

describes the government’s intentions and activities for the long-

term.

Awareness and knowledge

of climate risk

Oftentimes businesses make decisions based off of gut feelings,

leading to poor investments, because they were not aware of what

investments could really benefit their business.

Technical capacity to

implement

New technologies often require technical skills that small

businesses do not have; limited technical understanding in turn

leads to lower adoption rates.

Financial capacity to

implement

Roughly 200 to 245 million formal and informal businesses need

loans, insurance, and credit, but are unable access these financial

instruments. In most cases, adaptation requires a new investment

or investment in new technology or services.

Social attitudes Often, cultural and behavioral factors have an important effect on

businesses’ decision-making.

INTERVENTION OPTIONS TO CATALYZE INVESTMENT

Photo Credit: Evgeni Zotov via Compfight (cc)

Climate

Knowledge

Technical assistance and

training

Government policies• Laws and policies

• Public utility pricing

• Subsidies, tax reliefs, and

carbon credits

Access to markets• Public spending on

infrastructure

Partnerships• Business partnerships and cooperatives

• Public private partnerships

Financial Instruments• Grants and seed capital

• Investment

• De-risking and financial

instruments

• Loans and microfinance

ZIMBABWE: CONNECTING SMALL BUSINESSES

TO LARGE COMPANIES

Photo Credit: 10b travelling via

It can be valuable for larger companies to build resilient value

chains, so that along the production process, all players,

including small producers, have the least disruptions in the

face of climate change.

In Zimbabwe, for example, a beer brewing company played

this role with respect to red sorghum farming in the Chiredzi

district. The UNDP partnered with the brewery to ensure that

there would be a ready market for small grains such as red

sorghum, which are more climate resilient than the crops

typically grown in the region. As a result of this partnership,

red sorghum production has grown considerably.

INTEGRATING PRIVATE SECTOR IN ADAPTATION

POLICIES AND STRATEGIES

1. Prioritize sectors

2. Identify drivers

3. Identify barriers

4. Design interventions

5. Scaling-up

CONTACT FOR MORE INFORMATION:

l.dougherty-choux@wri.org

pterpstra@wri.org

THANK YOU

For more on this topic, check out these blogs at wri.org/blogs:

• 3 Reasons Small Businesses Must Play a Large Role in Climate Change

Resilience

• Micro, Small, and Medium Enterprises: Key Players in Climate Adaptation

• 3 Ways Governments Can Involve the Private Sector in Climate Change

Adaptation