How is climate change going to affect how you run your small business?

Running a business can be tough. Even just maintaining ‘business as usual’ can be a struggle when the prices of everything are going up, and customer spending power is decreasing. But how does climate change play a role in all this?

Climate change is becoming a huge factor in the way businesses operate now and in the future. 

For UK SMEs, this means dealing with more frequent extreme weather, changing regulations, shifting customer expectations and the indirect effects of climate policies on costs and supply chains.

 Let's take a closer look at how climate change can affect your small business and how to tackle it head-on.

Five-point summary

• Climate change, largely driven by human activity, is causing harmful shifts in weather and temperature, leading to urgent risks such as more frequent extreme weather events, increased physical and transitional risks, and a rise in climate-related regulation and litigation.
• Businesses face significant physical, liability, and transitional risks due to climate change, including direct damage from events like floods, supply chain disruptions, tougher working conditions, and rising insurance and operational costs.
• Consumer preferences are shifting: awareness of sustainability is rising, especially among younger generations, with greater demand for eco-friendly products and transparency, but affordability remains a key barrier for many.
• The UK has a historical responsibility for global emissions and strong legal commitments to lower greenhouse gases, with national legislation aiming for net zero by 2050 and oversight from the Climate Change Committee.
• Businesses can help tackle climate change by reducing energy use, choosing sustainable suppliers, and minimising travel, all of which can reduce operating costs, improve reputation, and prepare companies for future regulatory challenges.

What is climate change?

Often referred to as global warming, climate change refers to the long-term shifts that we’re currently experiencing in the Earth's temperatures and weather patterns. 

Although some argue that these shifts are natural, human activity has been one of the primary drivers of climate change. Activities such as burning fossil fuels (oil, coal and gas), mismanagement of waste and the unsustainable harvesting of natural resources have caused a climate crisis through the effect of greenhouse gases. 

Ongoing analysis from leading NASA scientists states that the Earth's average global temperature has increased by at least 1.1°C since 1880. 

Why is climate action so urgent?

In just the past few decades, the planet has seen:

• Rising temperatures due to adverse and worsened weather events
• Wildfire seasons are lasting months longer than usual
• Coral reefs have been bleached of their bright colours
• Chunks of ice in the Antarctic have broken apart

When the world warms up, even by just 0.5°C, evaporation increases, which leads to more water in the atmosphere. When conditions change to the extent that humans, animals and the planet aren’t accustomed to them, this puts our health, water supply and agriculture at risk.

What are the risks of climate change?

Three main risks of climate change will affect everyone, not just businesses. 

1. Physical risks

The physical risks of climate change are any immediate threats that come from the physical environment. Events such as wildfires, flooding, hurricanes and droughts are all symptoms of climate change that can and will cause an impact on a global level. 

The skiing industry, for example, is already seeing an immediate threat from climate change as rising temperatures reduce snowfall, meaning resorts have shorter seasons.

2. Liability risks

Climate litigation is increasing worldwide, and liability risks arise when companies fail to adapt to, mitigate, disclose or comply with the ever-changing legal and regulatory requirements. There’s also an even greater focus being placed on this from regulators and investors who want to ensure that the businesses that they’re supporting are complying with this landscape. 

3. Transitional risks

Transitional risks are any potential costs to businesses that could come from the introduction of laws, policies and other regulations that address climate change.

The energy and mining sectors are the biggest industries that are most likely to be impacted by transitional risks. With the global push for greener energy sources, governments are facing increasing pressure to shift toward a reliance on renewable energy, meaning the energy sector has to find a solution and implement it. 

Precious metals could be at financial risk from policies that introduce carbon prices. The negative effects of mining on the environment and the climate are increasingly becoming a reputational issue for mining companies and investors.

Why is it important for my business to care about the risks of climate change? 

As climate change transforms the way consumers, employees and shareholders interact with businesses, it’s important to factor climate change into any strategic plans. A warming planet creates a wide range of risks for businesses, from labour challenges to rising costs of supply chains and added disruption. Extreme weather conditions, such as floods and fires, have a direct impact on 70% of all economic sectors worldwide. 

In the UK, more frequent heavy rainfall, heatwaves, storms, and floods are already affecting sectors from retail and hospitality to agriculture, logistics and construction. At the same time, public and private sector buyers are increasingly building climate criteria into tenders, for example, asking for carbon reduction plans on larger contracts, which can affect whether SMEs win or lose work.

By taking action now, businesses can lower the risks that come from climate change and even take advantage of opportunities that a green future offers. Failure to do so will undermine the sustainability of the business.

How can climate change affect your business?

Climate change isn’t just an environmental problem — it’s inextricably linked to nearly everything that we do as a society, and we’re already seeing these consequential shifts within businesses. Some of the most prominent ways that climate change will affect businesses include:

Increased risk due to extreme weather conditions

The risk of extreme weather events like storms, floods, heatwaves and droughts has caused major disruption to business operations, and it’s only going to get worse as temperatures increase. 

From this disruption comes extreme financial and physical damage, meaning businesses are having to fork out of their own pockets to replace goods and fix issues. 

Severe weather is a primary reason that climate change increases risks for businesses as well, and because of this risk, insurance prices are on the rise, meaning businesses will have to pay more. 

In coastal and flood‑prone parts of the UK, some small businesses already struggle with higher insurance premiums, excesses or exclusions for flood damage, which can threaten long‑term viability

Staff wellbeing and productivity

As weather patterns change and we see temperatures rise, certain sectors may see harsher working conditions. Jobs that require physical labour, particularly outdoors, such as airport ramp agents or outdoor activity instructors, will become more challenging.

Heatwaves can make workplaces uncomfortable or unsafe, reduce productivity and increase health risks, particularly for outdoor work or buildings without adequate cooling.

With these challenges also comes a rise in health and safety risks. Learn more about protecting yourself and your employees in the workplace with our health and safety guide.

Change in cost and resource availability

Extreme weather events have the potential to disrupt supply chains, meaning getting the stock of materials or resources to businesses has become even more of a challenge. For eateries or businesses that sell food and drink, severe droughts and weather pattern changes have caused shortages in crops, meaning food scarcity has increased. 

Rising transportation and electricity costs may also increase the cost of moving goods, charging this back to businesses and causing price increases for the customer.

Changing customer expectations

As the public grows more conscious and accepting of the facts of climate change, it becomes less acceptable for businesses that fail to reduce their impact on the environment. 

More customers, especially younger generations, expect businesses to reduce emissions, avoid greenwashing and provide transparent information about their environmental impact.

Consumers are actively searching for businesses that produce sustainable products or have a smaller environmental impact compared to other companies or products at the same level. 

There’s also increased public pressure on companies to take steps to become more socially responsible in their operations, be more environmentally friendly and donate to positive environmental charities. Major brands like IKEA, Apple, LEGO and Starbucks have all committed to producing 100% renewable energy. 

But as public pressure increases, some businesses hop on the bandwagon and make claims about their green future, without ever committing to it.  

Regulation and reporting

While many climate‑reporting rules currently focus on larger companies, SMEs are increasingly affected through supply‑chain requirements, government procurement rules and evolving UK climate regulations.

How can extreme weather events affect your business operations?

Extreme weather events can have a significant impact on UK business operations, particularly for small and premises-based businesses. Here's how:

1. Physical damage to property

Flooding, high winds, or storms can damage business premises, equipment, stock, or signage, leading to costly repairs and downtime. Check out this Bionic guide for more information on how to protect your business from storms and bad weather.

2. Disrupted supply chains

Extreme weather can delay or stop deliveries, especially if transport networks are affected by snow, flooding, or fallen trees. If you have international suppliers, adverse weather across the globe can affect your business in the UK. 

Global climate impacts can disrupt key materials, crops and components, leading to shortages and price spikes that filter down to even the smallest UK businesses. Noticed how the price of olive oil has shot up recently? This is largely due to climate change impacting production. 

3. Power outages

Storms or heatwaves can lead to power cuts, disrupting everything from lighting and heating to payment systems and machinery. As more businesses electrify heating, cooling and transport to cut emissions, resilience to power cuts and grid constraints will become an even more important part of climate planning.

4. Staff shortages

Adverse weather can make commuting unsafe or impossible, leading to reduced staffing or even temporary closures.

5. Customer access issues

Severe weather can keep customers away, particularly if your business relies on footfall or in-person appointments.

6. Increased energy use and costs

When the weather's bad, we tend to use more energy for lighting and heating. And when we use more energy, this instantly increases the cost of our energy bills. But increased demand during cold snaps and heatwaves can push up heating or cooling costs, especially if you're on an out-of-contract or variable energy tariff. That's why it makes sense to switch to a fixed-rate business energy contract and protect against price volatility.

7. Insurance and recovery delays

High volumes of weather-related claims can slow down the insurance process, delaying your recovery or payout after an incident.

How is climate change influencing consumer preferences?

There's evidence to suggest that climate change is having a significant influence on consumer preferences in the UK. As you might expect, much of it comes down to the affordability of goods and services, but some is also generational. 

Here are some of the key trends in consumer preferences that may, in part at least, be influenced by climate change:

• Rising awareness of sustainability - UK consumers are increasingly aware of sustainability and environmental issues when making purchasing decisions. Around two-thirds (66%) now rate environmental impact as important when buying products, and 57% say that living sustainably has become more important to them over the past year.
• Price sensitivity is key - Although climate concerns are growing, price remains the most important factor for most UK consumers. 93% rate price as “very/somewhat important” compared to 66% for environmental impact. Cost-of-living pressures mean that half of Britons would like to do more for the environment but feel they can't afford to, and 64% of consumers only opt for a more sustainable product if it costs the same as the conventional option.
• Appeal to younger generations - Concerns about climate change are especially prominent among younger consumers, as 56% of those aged 16 to 34 say environmental impact has become a bigger factor in their purchasing over the past year (up 13% from 2024)https://www.ipsos.com/en-uk/price-trumps-planet-britons-want-sustainable-products-budget. Nearly 60% of 18 to 29-year-olds choose different brands for sustainability reasons, especially regarding packaging.
• Certain products are affected more than others - Sustainability considerations are strongest in categories like groceries, household, and beauty products. Packaging is a primary concern - 65% say ease of recyclability is decisive, and 89% would choose fibre or cardboard over plastic if given the option. More than a third (37%) have reduced their consumption of plastic-packaged goods.
• Second-hand is growing - Consumers are increasingly shopping for second-hand items and repairing rather than replacing. They're also seeking products that can be reused, recycled, or are designed for longevity. Cutting food waste, buying locally, and limiting single-use plastics have become common sustainable behaviours.

How much is the UK responsible for climate change?

It’s tempting to think that a country the size of the UK can't possibly play as big a role in climate change as countries the size of America or China. But that isn’t always the case.

The UK is actually one of the biggest contributors to global warming over time. This is due to our long history of generating greenhouse gases, which dates back to the beginning of the Industrial Revolution, creating emissions in both the US and the UK in the eighteenth and nineteenth centuries.  

A study conducted by Oxfam found that European and North American countries currently consume more and have higher emissions per person, on average, compared to people in China or India, which have larger populations. 

What are the UK government's climate change commitments?

Politicians in the UK have known about climate change and its consequences for years, but some are still refusing to acknowledge this. However, the UK government has put certain measures in place to tackle climate change.

The Climate Change Act 2008

The UK was the first country in the world to create a legally binding commitment to cut greenhouse gas emissions. Known as ‘The Climate Change Act 2008’, the government committed, by law, to reduce greenhouse gas emissions by at least 80% of 1990 levels by 2050. In 2019, this target was amended to achieve net zero emissions (100%) by the same time frame. 

The Committee on Climate Change

The CCC — The Committee on Climate Change — advises the government on emissions targets and reports to Parliament on the progress that has been made in reducing greenhouse gas emissions. 

The Climate Change Committee has an important role in monitoring the actions taken by the government and undertakes an annual assessment of whether the UK is on course to meet its carbon budgets. 

Emissions rose 4% in 2021 compared with those in 2020. 

How can your small business prepare for climate risks?

Although you may not think there's much you can do - climate change is a global risk that's bigger than any one business - it helps to be proactive. Consider the below to help protect your business:

• Carry out a basic climate risk assessment - Identify which climate‑related events (such as floods, storms, heatwaves or droughts) could affect your premises, people and supply chain, and how serious the consequences might be.
• Strengthen physical resilience - Consider measures like flood defences, improved drainage, shading and ventilation, backup power arrangements and reviewing where you store critical stock or equipment.
• Review insurance and continuity plans - Check your business insurance covers relevant climate risks and make or update a business continuity plan that spells out what you will do if operations are disrupted.

What can businesses do to help with climate change?

There are simple ways that businesses can help in the fight against climate change — even small differences can make a big impact!

1. Reduce energy consumption

Focusing on energy reduction can result in big wins for businesses, both in terms of cost savings and sustainability.

If you’re looking into how to make your business energy efficient, most companies look toward simple solutions like updating to LED lights and properly optimising heating and cooling systems, as well as installing energy-efficient products.

If you're unsure how much energy your business should be using, our guide to average business energy usage should have the answers.

If you work in or manage an office and want to find out how to make it more energy-efficient, check out our handy guide. 

Reducing your energy use, switching to low‑carbon heating and power, and cutting unnecessary travel will lower both your carbon footprint and your exposure to volatile energy prices.

2. Choose sustainable suppliers

As companies work to make their business greener, they must look toward their supplier line to see the action that they’re taking. You can’t claim to be working toward a sustainable future but still get supplies that are made or become unsustainable somewhere along the line. 

Ensuring that any suppliers you work with are sustainable means that sustainability remains a priority throughout the entire supply chain. 

3. Minimise business travel

Business travel is one of the biggest contributors to a business's high rate of emissions. 

Normalised by the Covid-19 pandemic, shared online drives and online video calls have played a huge part in helping to reduce business travel, making it easier for businesses to reach staff, customers and suppliers alike.

If travel is required and the destination is close, public transport like buses, trains and trams can help in reducing carbon emissions.

4. Engage staff, customers and suppliers

Involving employees in climate initiatives and working with greener suppliers can improve reputation and help you meet growing expectations from larger customers and the public sector.

5. Use SME‑friendly support

Free resources like the UK Business Climate Hub and SME Climate Commitment can guide you through measuring emissions, setting targets and taking practical steps.

Get your business set with Bionic

At the end of the day, we all want to see our businesses flourish the right way whilst protecting the Earth as best as we can. From understanding climate change to the simple steps businesses can take, our guide can help.

Get in touch today with the Bionic team to discuss your needs or get more information on business finance. 

FAQs on climate change and your small business

Here’s an at-a-glance guide to some of the most frequently asked questions about climate change and UK small businesses:

How is climate change already affecting small businesses in the UK?

Climate change is already affecting UK SMEs through more frequent floods, storms and heatwaves, higher insurance and energy costs, and disruptions to supply chains and staff.

Which UK small businesses are most at risk from climate change?

Businesses in flood‑prone or coastal areas, weather‑dependent sectors like agriculture, tourism and construction, and energy‑intensive industries are among the most exposed.

How does climate change affect business energy costs in the UK?

Climate change‑related policy, global fuel markets and changing weather patterns contribute to volatile energy prices, which many UK businesses say are forcing them to raise their own prices.

What climate‑related regulations should UK SMEs be aware of?

SMEs should keep an eye on rules linked to the Climate Change Act, carbon pricing, energy efficiency schemes and tender requirements for carbon reduction plans, especially when working with the public sector.

How can a small business in the UK reduce its climate impact?

Simple steps include improving energy efficiency, switching to greener tariffs, reducing waste and travel, and working with more sustainable suppliers.

Do UK small businesses need a climate or carbon reduction plan?

While not all SMEs are legally required to publish plans, many larger customers and public‑sector buyers now expect suppliers to show how they are cutting emissions.

Where can UK small businesses get help with climate action?

The UK Business Climate Hub, government guidance and sector‑specific support – plus advisors like Bionic for energy – can help SMEs plan and implement climate actions.

How can Bionic help my UK small business respond to climate change?

Bionic helps UK SMEs cut energy costs and emissions by comparing business energy tariffs and providing guidance on greener, more efficient ways to power their operations.