The case for linking disaster response to community resilience
When Hurricane Matthew hit the North Carolina coast in late 2016, over 19,000 small businesses were damaged. Many of these businesses were still struggling to recover from the 2007 recession, and in the wake of the storm were at risk of closing altogether. Although relief flooded in through the federal government and other programs, the area’s businesses and broader economy remains in need of additional support.
Unfortunately, the outsize impact of disasters on small businesses is the pattern, not the exception. In the wake of 2017 storms Harvey, Irma and Maria, small and medium enterprises across the affected regions are again facing a long, challenging road to reopening.
However, there is an opportunity for the private sector to lead the way in increasing small-business and community resilience during and after disaster events. With companies from Walmart to DHL stating their commitment to the welfare of the communities they serve, disaster response strategies offer an opportunity for companies to fulfill this commitment.
Given the trends of globalization, no company exists in a vacuum. Distant natural disasters directly can impact supply chains, customers and employees. This makes a compelling case for businesses and corporations to respond to disasters. Even if your company is not directly affected, an empathetic response can make your stakeholders more willing to work with your organization in the good times as well as the bad. In short, large companies have both the resources and the vested interest to prevent situations such as the one now faced by the coastal North Carolina business community. The question is: what should this response look like?
Traditionally, the response of many companies’ corporate social responsibility programs is to donate money in times of disaster: first to large humanitarian agencies that help stabilize the situation by providing emergency aid, then to the reconstruction effort to rebuild infrastructure such as schools and hospitals.
These are viable short- and long-term approaches to disaster relief, enabling other organizations to do what they do best. However, donating money doesn’t necessarily leverage the extensive resources that many corporations already have — through their products, services, human capital, client base, supply chains and footprints. What if, instead of donating to external relief, corporations considered their broader sustainability values and strategically leveraged their resources to support the existing infrastructure and economy in that location?
A small-business lifeline and road to recovery
Small businesses are the backbone of local economies. In the United States alone, companies with fewer than 500 employees make up 99.7 percent of the country’s businesses, and employ 50 percent of the private sector workforce, according to data from the Small Business and Entrepreneurship Council.
In a disaster, these small businesses are often badly damaged, much like the households around them, but the vast majority of aid is directed to individual households. This makes it challenging for business leaders to find the resources necessary to help them recuperate. In the wake of a disaster, owners of local small businesses are often simultaneously supporting relief services in their community and struggling with the personal and professional impacts of the disaster itself.
Damages can affect the business location, an employee's’ ability to get to work and suppliers who provide much needed inputs. Consumer needs change in these disrupted markets, too, especially if humanitarian relief efforts provide free substitutes for the services that businesses provide. And the psychological and physical impacts of a disaster linger in a community, often straining attempts to get back to business as usual.
The result is predictable: almost 40 percent of small enterprises in the U.S. shutter in the wake of "shock events." This creates a negative cycle, as these businesses closing their doors can increase the local reliance on humanitarian or government relief; it causes community job loss and leaves gaps in critical services, hampering long-term redevelopment.
Thus the question: Can corporate leaders and corporate CSR programs help support small businesses and the local infrastructure that they provide? In order to address this challenge, we convened members of the humanitarian and finance communities for a one-day conference at Yale University to discuss the design of disaster financing products. Collectively, we identified creative new opportunities for corporate innovation in this area, such as:
- Before a disaster, explore ways to ensure that you will continue to provide your goods and services to small businesses, in the event of a natural disaster.
- Partner ahead of disasters with organizations that can support small businesses after disasters, providing, for example, mobile internet connectivity until local service has been restored.
- After a disaster, consider offering short-term supplier credit to small businesses in your supply chain to help them survive the period and prevent them from shutting down.
- If you are a financial institution, consider ways that you can support small businesses after crisis through benefits such as delayed loan repayment.
- Survey the products and services that your organization offers, whether a good (clothing) or a financial product (a loan), and look to see whether any of them can be adapted in real-time to the needs of users after a disaster. For most companies, this will require planning out what the product or service might look like before a disaster and then after a shock, customizing it to the needs of affected small businesses after a disaster and running it through an accelerated approval process.
A newly published report out of the Yale Center for Business and the Environment provides more information.
Importantly, these actions are not purely philanthropic; they are also strategic. They are great opportunities to improve relationships with suppliers and customers, gain new customers and ensure that supply chain partners continue to provide your organization with products aftershocks. For example, after Typhoon Haiyan in the Philippines, Procter & Gamble and Coca-Cola provided financing to retailers with cash injections so that the stores would reopen and begin to sell critically needed packaged goods again.
Moreover, companies can use these opportunities to help them meet their broader environmental goals by helping ensure that sustainability is considered in the reconstruction efforts they support. For example, after Hurricane Maria hit Puerto Rico, Tesla helped get power back to the country by sending hundreds of Powerwall battery systems that can be paired with solar panels to store and restore power on the island. Not only does this solution help the country get much-needed electricity during recovery, it also provides a long-term sustainable opportunity as these batteries help increase the usability and flexibility of the existing solar grid.In an ideal world, disasters would not occur, businesses would not be in harm’s way and the effects of climate change would not amplify the severity of weather events. But the reality differs from this ideal and the damages to businesses and economies worldwide only increase each year. Therefore, we need to see each disaster as a call to the corporate sector to strategically support the local businesses and economies upon which their success relies.