BMO Climate Institute Survey Shows Costs and Competing Priorities Slowing Climate Action for Small and Mid-Sized Businesses

• Survey shows small and medium-sized enterprises (SMEs) are concerned about the impacts of climate change, but few have action plans
• Businesses expect physical impacts of climate change to disrupt operations over the next five years with severe and unpredictable weather patterns topping the list
• SMEs say they could use help to understand the impact of climate change on their businesses

CHICAGO, Dec. 7, 2022 /PRNewswire/ - A BMO Climate Institute survey of small and medium-sized businesses (SMEs) in North America showed respondents are very or somewhat concerned about the impacts of climate change, but other priorities and the high costs of climate mitigation mean few have plans in place to fight it.

The inaugural BMO Climate Institute survey of SME's views on climate change found that 69 per cent of respondents expect the physical impacts of climate will disrupt operations over the next five years, and almost a third say severe weather patterns are already creating challenges. Despite this, only 28 per cent of businesses have a plan in place to address it. Many SMEs say they are either unsure where to begin or are focused on more immediate challenges to justify the cost of mitigating climate change.

SMEs account for more than 99 per cent of businesses in the United States. They employ approximately 70 per cent of the total workforce and have been responsible for creating more than half of the net new private sector jobs over the past few decades, and yet, they feel they receive very little support from the government and external partners to help them with climate change.

"The BMO Climate Institute commissioned this survey to seek a deeper understanding of how small and medium-sized businesses – fundamental participants in a successful energy transition – view climate change and the associated challenges as well as opportunities," said Susan McGeachie, Head, BMO Climate Institute. "While we weren't surprised that most SMEs don't yet have a climate change plan in place, for myriad reasons, we were surprised to learn that so many of them are already feeling its impact. There are right-sized strategies for SMEs that they can undertake now to protect their businesses from climate change-related risks due to factors like changing weather, and measures to accelerate a low carbon transition."

"The results of the survey reveal that 35 percent of those businesses with a plan are doing it to meet customer expectations, while those without a plan are looking for advice and support in mitigating the impacts of climate change on their businesses," said Niamh Kristufek, Head, U.S. Business Banking, BMO. "BMO's climate ambition is to be our clients' lead partner in the transition to a net-zero world. In response, we are focused on developing tools and solutions specifically for SMEs to drive understanding of climate risks in their space, development of actionable climate plans and financial resources to support this critical work."

The survey was conducted at a time when many large organizations are taking action to manage the greenhouse gas emissions throughout their entire supply chain. Either through collaborative disclosure initiatives or on their own, large companies are increasingly asking their suppliers to report their GHG emissions which enables them to calculate, monitor, disclose and, ultimately, reduce the carbon intensity of their products. 19 per cent of SMEs, however, view greenhouse gas reductions and other transition risks as the top climate-related impact on their business. Rather, 44 per cent of respondents perceive climate change through the lens of severe and unpredictable weather patterns – potentially missing climate related opportunities tied to the transition to a lower carbon economy.

"Interestingly while most SMEs are not yet prioritizing GHG emissions when they consider climate change, many of these companies are part of the supply chains of much larger organizations that are," said Ms McGeachie. "This is a gap that will need to close as large companies seek to understand and remedy emissions along their value chain. It takes time to put the systems in place to measure and track GHG output, so this is something that SMEs need to start thinking about now."

• 19 per cent of the respondents said GHG costs are already having an impact on their economic performance.
  
  
• Another 27 per cent expect carbon pricing to be a challenge within the next three years.
  
  
• Almost a third of the businesses with climate plans have them because they expect it will improve their profitability and/or share value.
  
  
• Across North America, 21 per cent of respondents said investor expectations influenced their decision to adopt a climate change policy.
  
  
• Many executives surveyed said they are too preoccupied with inflation, supply chain, and labor issues to implement climate strategies.
  
  
• More than 90 per cent of business leaders said they are concerned about inflation and rising interest rates.
  
  
• 80 per cent of SMEs ranked supply chain bottlenecks as the biggest concern after inflation and rising rates, while climate change ranked on par with labor shortages amongst roughly 70 per cent.

Small and mid-sized businesses think their banks can help them plan

Forty percent of SMEs are in the process of developing a climate plan but only 19 per cent said they feel supported by the government. The survey found that many leaders see opportunities to partner with their financial institutions; seven in 10 said financial institutions could help them better align their business with climate change objectives. Out of these, 27 per cent said that their financial institutions are already playing this role. Almost half of the business leaders feel financial institutions could do more to help them with climate plans.

The survey also highlights that more than 80 per cent of small and medium-sized businesses say they are either very or somewhat interested in any insights they could get from their banks on how to address climate change, including discounted loan programs to help cover associated costs.

"A key challenge in achieving national climate change goals is that we're still lacking the right economic incentives to both decarbonize and invest in more resilient operations, particularly when the costs associated with addressing climate change are highly uncertain," said Ms. McGeachie. "These challenges create a divergence between corporate strategy and policy goals for decarbonization, especially for SMEs." 

The BMO Climate Institute
Established in 2021, the BMO Climate Institute is a center of expertise bridging policy, science, and finance to help shape the market for climate solutions. The Institute strives to advance climate action with a focus on decarbonization, resilience, and climate justice. The BMO Climate Institute survey was conducted by Pollara with more than 600 business leaders in the US and Canada between October 18 and October 21, 2022.

About BMO Financial Group
Serving customers for 200 years and counting, BMO is a highly diversified financial services provider - the 8th largest bank, by assets, in North America. With total assets of $1.14 trillion as of October 31, 2022, and a team of diverse and highly engaged employees, BMO provides a broad range of personal and commercial banking, wealth management and investment banking products and services to 12 million customers and conducts business through three operating groups: Personal and Commercial Banking, BMO Wealth Management and BMO Capital Markets.

SOURCE BMO Financial Group