Photo: Bajaj Allianz

Enabling SME Adaptation to Climate Change

By Bella Tonkonogy, Private Sector Advisor, UNDP

Enabling SME Adaptation to Climate Change

Ismail Faisov tends a farm in the mountainous Dashtijum Jamoat region in Tajikistan. Dashtijum Jamoat is rich with indigenous fruits and legumes that have become naturally resilient to drought, cold weather, diseases, and other environmental stresses. For a number of reasons though, Ismail did not cultivate these traditional species, choosing instead to sell imported cultivars that did not fare well in Tajikistan’s changing climate. Consequently, Ismail struggled to support his family.

The majority of people in the developing world live in poor, rural areas and rely on micro and small enterprises (MSEs) for their livelihoods. MSEs account for approximately 60 to 80 percent of the labor force in these countries.

Across the world, these people are struggling to keep up with the challenges of a changing climate. In Cambodia, women farmers in the Siem Reap province face obstacles to accessing affordable water management technologies, such as solar water pumps used for irrigation, that can help them adapt to decreasing rainfall. In the Quatre Soeurs area of Mauritius, small businesses located along the coastline struggle to protect themselves from increasingly frequent flooding.

Yet these crucial stakeholders are often left out when global policymakers discuss ways of engaging the private sector in climate-resilient development. How can we address this gap?

In a forthcoming report co-authored by UNDP and World Resources Institute (WRI), we use the experiences of stakeholders to make recommendations about the best ways to improve the climate resilience of MSEs. The report, “Adapting from the Ground Up” has three main findings:

1) There is an economical case for MSEs to increase their resilience to climate change as well as to create new products and services for enhancing the resilience of their communities. MSEs can reduce the risk of disruption to their business (such as using drought-resistant seeds) and can build new services targeted at their communities (such as a climate information mobile phone service).

2) Owners of businesses face barriers to taking action, including a lack of access to information on risks and cost-effective adaptation measures; a lack of access to finance, technical capacity and know-how; policies that hinder adaptation; and social norms.

3) The public sector, with assistance from development partners, NGOs and others, can help MSEs make smarter investments, ones that not only safeguard and potentially increase profits, but also support the adaptation of the broader society at large. Grant financing available through vertical funds should be made available for such interventions.

Recently, UNDP has put these concepts into practice. For example, grant financing from the Global Environment Facility (GEF) helped Ismail in Tajikistan establish a 1.5 hectare nursery of well-adapted local fruit species. It also helped introduce a certification and labeling program to develop markets. Without this financing, it would not have been possible for Ismail to grow, label and sell his seedlings at local fairs in his district and in neighboring Afghanistan. Ismail has since further protected himself against risks by reinvesting his profits in the construction of a café and shop where he plans to sell products from his garden.

Big notions like transformational change often start with small ideas and small businesses. Governments that engage their MSEs will take a big step forward in creating the conditions for climate adaptation…from the ground up.

Further details of UNDP’s work with small business on resilience can be found in the report.

Editor’s Note:

This blog is part of a special series on Inclusive Business and Climate Change and has been published on Business Fights Poverty with the support of Citi Foundation

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