How climate change
strongly affects small businesses.
The technical note highlights how climate change affects micro, small, and medium-sized enterprises and reinforces the need for mobilization in this sector, given that global losses caused by extreme weather events reach US$160–220 billion per year.
Micro, small and medium-sized enterprises (MSMEs) are among the most vulnerable segments to climate change, yet they are often absent from international climate negotiations, which focus primarily on governments and global targets. With limited resources, fragile supply chains, and low resilience, MSMEs are disproportionately affected by extreme weather events compared to large companies. These vulnerabilities mean that climate change is not a distant political issue for small businesses, but a present and urgent threat to their survival.
Recent events in Latin America and the Caribbean illustrate the magnitude of this challenge. In Puerto Rico, 40% of small businesses did not reopen after Hurricane Maria in 2017, while only 5% of large businesses closed permanently. In the 2022 floods in Petrópolis, Brazil, almost 90% of micro-enterprises reported severe financial losses, most without insurance or emergency reserves. These examples highlight why MSMEs and their representative organizations must take an active role in climate negotiations, ensuring that policies and financing mechanisms meet their realities, while positioning them to seize opportunities for resilience and sustainable growth.
Climate change mitigation offers SMEs important opportunities to increase competitiveness, resilience, and market access, but they face barriers such as high initial costs and the risks of adopting new technologies. To overcome these challenges, policy action and institutional coordination are needed to provide support through grants, research and development partnerships, and training. In Brazil, institutions such as Sebrae, along with Senai and Senar, play a crucial role in offering sustainable management training programs, demonstrating how targeted support can help small businesses adopt climate-friendly practices.
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To seize these opportunities, MSMEs must overcome challenges related to scale, logistics, and compliance with international standards. Strategic actions include investing in training to meet sustainability requirements, obtaining internationally recognized certifications, forming partnerships with larger companies and cooperatives, and participating in global trade platforms. “Access to credit lines and climate finance is also crucial to funding these transitions. By positioning themselves in these emerging markets, MSMEs can not only reduce their vulnerability to climate impacts but also strengthen their competitiveness and contribute to sustainable economic development,” says Luciano Schweizer, author of the study.
Financial incentives
There is a growing need to expand climate finance to developing countries, creating significant opportunities for SMEs. These organizations can organize themselves to access financing through international climate funds such as the Green Climate Fund (GCF), the Global Environment Facility (GEF), and the Adaptation Fund, provided that mechanisms are established with local partners, such as development banks and NGOs, to channel resources effectively. Access to these funds allows SMEs to implement mitigation and adaptation projects in key sectors such as renewable energy, sustainable agriculture, bioeconomy, and water management. In addition to international funds, climate negotiations have encouraged the creation of special credit lines, tax incentives, and subsidies tailored for sustainable investments.
SMEs play a strategic role in building a sustainable and climate-resilient economy, creating opportunities for small businesses to gain prominence and visibility. By demonstrating innovative and sustainable practices, SMEs can achieve international recognition, strengthen their institutional reputation, and expand opportunities for commercial and strategic partnerships. Active participation in international events such as COP, trade fairs, and business forums allows these companies to present solutions, share experiences, and build relationships with governments, investors, and international organizations.
Climate change presents both risks and opportunities for SMEs, shaping the economic and operational contexts in which they will operate in the coming decades. Proactive companies that adopt mitigation and adaptation measures can strengthen resilience, reduce losses, and gain a competitive advantage.
While there is no single approach, attention to these measures provides a critical horizon for the development of knowledge, actions, and policies at the local, national, and international levels. As climate-related events continue to affect the world, learning from past experiences and actively engaging in mitigation and adaptation will determine which MSMEs can survive, thrive, and contribute to sustainable development.
Learn more about the risks and opportunities for MSMEs in the climate context by downloading the full study 'Small Businesses and Climate Negotiations' in Portuguese or English .
Opportunities
For SMEs, mitigating climate change is not just about compliance, but an opportunity to differentiate themselves and gain a competitive advantage. Companies that adopt these measures early can achieve greater profitability through efficiency and innovation, build resilience for long-term sustainability, and increase their visibility in regional and global markets. With the right support, SMEs can go beyond the basics and position themselves as essential contributors to a low-carbon economy.
International climate negotiations, such as those held under the UNFCCC and the Paris Agreement, create significant opportunities for SMEs to integrate into sustainable value chains. These agreements are driving demand for products and services that meet environmental and social standards, enabling SMEs to act as suppliers of sustainable inputs, clean technologies, and specialized services to larger companies working towards climate goals. For Brazilian SMEs, this includes areas such as sustainable agriculture, bioeconomy, renewable energy, circular economy, and sustainable tourism.
