Climate change mitigation: what is the role of small and medium businesses?

• Author: Giudici, Ernestina
• Position: Report

1. INTRODUCTION

   Climate change has been mostly associated with energy consumption. Therefore, a radical change in values and behavior toward lower consumption and waste is needed (Lorenzoni, Nicholson-Cole, Whitmarsh, 2007). The issue of climate change has been taken into serious consideration by the international community. In 1997, 37 industrialized nations worldwide, adhering to the Kyoto Protocol, which was the result of the United Nations Framework Convention on Climate Change (UNFCCC, 1997), agreed to limit their greenhouse gas emissions and to reduce them by an average of 5% of 1990 levels. Although the Kyoto Protocol provides limits and monitors emission targets for the ratifying parties, not every country ratified the agreement. For example, the United States rejected the protocol during the Bush administration (Hunter, Salzman and Zaelke, 2002). Despite the absence of precise regulations, many organizations are committing to voluntary greenhouse gas reductions by setting their own targets and strategic objectives (Hoffman, 2005). People are increasingly concerned about environmental issues and they evaluate behaviors of organizations, often demanding solutions to reduce the environmental impact of businesses (Esty, 2007). Previous research (Garrod, 1997; Gladwin, 1993; Lash and Wellington, 2007; Porter and van der Linde, 1995; Steadman at al., 1995; Wittneben and Kiyan, 2009) has shown that proactive environmental and climate change mitigation behaviors can create a competitive advantage. In fact, the most attentive organizations have understood the benefits they can gain by implementing proactive environmental initiatives. They can enhance their reputation; gain trust from their stakeholders; obtain better economic and financial results; lower costs through the reduction of energy, water, material wastes, transportation needs and disposal; and reduce their carbon footprints (that is the impact of their activities on the climate). Over the last decade, a large number of organizations have adopted environmental policies aimed at reducing their carbon footprints or have presented a "green" image to customers and other stakeholders. Moving beyond whether their initiatives are "authentic" or "green-washing", empirical evidence suggests that many firms, especially large companies and multinationals, tend to be very careful about environmental and climate change issues, and that they are moving toward reducing their impact on the climate. However, large companies are just a small portion of the network of businesses in a country, in which 97% of all firms may consist of small and medium businesses. These organizations, taken together, contribute in "quantity" rather than in "quality" to energy consumption and ultimately to climate change. Despite the significant impact that such a vast number can have on the environment and climate change, previous research (Bianchi e Noci, 1998; Hillary, 2000; Rutherfoord, 2000) has shown that small and medium businesses still have a long way to go to engage in such urgent issues and to begin to reap relevant benefits. On the other hand, more recent studies conducted in the United Kingdom (Revell et al., 2010; Simpson et al., 2004) noticed an improvement in the environmental practices and awareness among small and medium businesses. In light of these conflicting results, and to contribute to the current body of knowledge through new empirical evidence, we aim to extend the issue of climate change to small and medium businesses' environmental practices. The purpose of this study is to examine the relationship between awareness of their own impact on the climate and the adoption of actions aimed to reduce their carbon footprints. Furthermore, we aim to assess whether small and medium businesses are aware of potential benefits they could obtain by taking climate change into account in their activities. We argue that small and medium businesses, because they consider themselves to be too small to substantially affect environmental change, often do nothing to reduce their carbon footprints, thereby aggravating climate change usually without even realizing it. We expect to see that they generally do not have a clear idea of what activities cause climate change and that they are not conscious of their significant influence on it. Lacking the awareness of their impact, they subsequently are incapable of taking actions to reducing their carbon footprints. But, we also expect to find organizations that are aware of potential benefits by taking actions to mitigate climate change. In this paper, we describe the results of a survey conducted among Italian small and medium businesses between March and May 2011. To investigate this issue, we sent a questionnaire to 500 Italian small and medium businesses in the service sector. We aimed to answer the following research questions:

   (1) Are small and medium businesses aware of their influence on climate change? (2) Are small and medium companies taking actions to reduce their impact on the climate? (3) Are small and medium businesses aware of potential benefits of taking action for the climate?

   As was expected, we found a direct correlation between the lack of awareness regarding small and medium businesses' impact on the climate, and actions aimed to reduce their carbon footprints. Our study shows that small and medium businesses are not taking action. These findings are important because small and medium businesses represent 99.9% of all firms in Italy (Eurostat, 2009). At the global level, the data are similar. This vast number is associated with a considerable impact on the environment and a significant contribution in energy consumption and climate change. It is not too late to react, although small and medium businesses will be incapable of reducing their carbon footprints without an understanding of their impact on it. Nevertheless, we also found evidence that the majority of small and medium businesses are aware of the potential benefits of taking climate change into account in their everyday actions, although, at present, they seem to be unable to benefit from such opportunities.

2. LITERATURE REVIEW

   "The scientific evidence is now overwhelming: climate change presents very serious global risks, and it demands an urgent global response" (Stern, 2006, p.1). The report released for the British government by the former World Bank Chief Economist Nicholas Stern discusses the effects of global climate change on the world economy and considers the economic costs of the impact of this phenomenon. According to the scientists who have been warning the international community about the danger and the causes of climate change (Grubb, 2004; Houghton, 1997), the report (Stern, 2006) illustrates how greenhouse gases (GHG) in the atmosphere are increasing because of human industrial activity, and how the GHG concentration has significantly grown since the Industrial Revolution, resulting in an increase in the earth's temperature. The report estimates that the costs of climate change could be anywhere from 5 to 20% of the global GDP. In its latest report, the Intergovernmental Panel on Climate Change (IPCC) reached the same conclusion; there is now unquestionable evidence that climate change is caused by human activities, and immediate action must be taken to avoid a global environmental collapse (IPCC, 2007).

   Italian small and medium businesses, organizations with fewer than 250 employees, account for 99.9% of the nearly four million businesses in the country and employ 81% of the total workforce (Eurostat, 2009). The data at the global level are analogous. For example, in the United States, small and medium businesses represent 97% of all employers (SBA, U.S. Small Businesses Administration, 2009). Although they have significant potential to influence climate change, small and medium...