Are we expecting too much from the private sector in flood adaptation? Scenario-based field experiments with small- and medium-sized firms in Ho Chi Minh City, Vietnam

Abstract

Adaptive governance approaches emphasize the crucial role of the private sector in enabling climate change adaptation. Yet, the participation of local firms is still lacking, and little is known about the conditions potentially influencing firms’ adaptation decisions and mechanisms that might encourage private sector engagement. We address this gap with an empirical analysis of the willingness of manufacturing small- and medium-sized enterprises (SMEs) to participate financially in collective flood adaptation in Ho Chi Minh City (HCMC), a hotspot of future climate change risk. Using scenario-based field experiments, we shed light on internal and external conditions that influence potential investments in collective initiatives and explain what role SMEs can play in flood adaptation. We find that direct impacts of floods, perceived self-responsibility, and strong local ties motivate firms to participate in collective adaptation, whereas government support, sufficient financial resources, and previously implemented flood protection strategies reduce the necessity to act collectively. Here, opportunity costs and the handling of other business risks play a decisive role in investment decisions. This study shows that although private sector engagement appears to be a promising approach, it is not a panacea. Collective initiatives on flood adaptation need formal guidance and should involve local business networks and partnerships to give voice to the needs and capacities of SMEs, but such initiatives should not overstretch firms’ responsibilities.

Micro business participation in collective flood adaptation. Lessons from scenario-based analysis in Ho Chi Minh City, Vietnam

“…A study by Geaves and Penning-Rowsell (2016) shows that large-scale protection measures fail to attract long-term participation from private actors due to a lack of local bonding. By contrast, a recent study by Leitold et al (2020) reveals that smallscale adaptation measures initiated in a smaller neighborhood, like flood protection awareness programs, can promote the willingness of resident SMEs to adapt. In particular, collaborative approaches, with shared funding by different actors (i.e., the community, firms in the neighborhood, local government gives incentives) could help to overcome biases, and support the implementation of different adaptation options.…”

“…Businesses play important roles in economic and social development worldwide by providing employment, goods, value added, services, and taxes (Halkos et al, 2018;Leitold et al, 2020;Lo et al, 2019). However, the fifth IPCC Assessment Report (2014) revealed a striking gap in existing scientific literature on private sector adaptation to floods (e.g., Berkhout et al, 2006;Linnenluecke et al, 2013;Linnenluecke et al, 2011).…”

“…What Daddi et al (2018) and Linnenluecke et al (2013) already illustrated for SMEs is especially true for micro businesses: Their decision-making for or against adaptation action is still underexplored and remains a black-box (Crick et al, 2018;Pauw and Chan, 2018). Recently, multi-stakeholder initiatives involving small-and medium-sized businesses have been discussed as door-openers for private sector engagement in adaptation efforts (Challies et al, 2016;Chen et al, 2013;Leitold et al, 2020;. But, how successful can these initiatives be without exactly knowing how micro businesses are impacted and reacting to climate change, which adaptive capacities they possess and whether their adaptation behavior would change if for example incentives like financial support is provided?…”

Coping with increasing tides: Evolving agglomeration dynamics and technological change under exacerbating hazards

“…Also, climate shocks could align with hydrological flood maps and hazard patterns corresponding to different impacts under the downscaled IPCC scenarios. Third, governments, households, and firms are known to take climate adaptation action to reduce the adverse impacts of hazards (Leitold et al, 2020;Linnenluecke, 2017;Neise and Revilla Diez, 2019;Noll et al, 2022;Vousdoukas et al, 2020). Hence, private and public climate change adaptation could be jointly considered to analyze both limits and opportunities that regions have for development despite adversities.…”

Anpassung an Überschwemmungen in südostasiatischen Megastädten – Was kann der Privatsektor leisten?

“…Weiterführende Projektstudien zeigen, dass viele befragte KMU in HCMC und Jakarta bereit sind, sich gemeinsam mit den lokalen Behörden und der Bevölkerung an Flutanpassungsmaßnahmen zu beteiligen (vgl. Leitold et al 2020;. Daher sollten die Potenziale von Multistakeholderansätzen auch in den rechtlichen Rahmenbedingungen zur Anpassung an Überschwemmungen -und Klimaauswirkungen generell -stärker berücksichtigt werden.…”