Protecting Manufacturing: Adapting to Climate Risks

Climate change is increasingly impacting industries worldwide, with manufacturing being particularly vulnerable.

According to a report from the World Economic Forum, climate change could disrupt global manufacturing supply chains, causing a 10% to 20% reduction in output over the next decade if adaptation measures are not taken.

Extreme weather events, such as heatwaves, floods and storms, pose significant risks to manufacturing facilities, potentially damaging infrastructure, disrupting operations and impacting employee safety.

In this context, investing in climate adaptation is crucial for safeguarding your workforce and ensuring long-term business success.

Here’s a look at how climate change affects manufacturing at the factory level, and what investments can protect your employees and enhance resilience.

How could climate change affect manufacturing? 

The intense heat of summer 2023, dubbed the warmest on record globally, highlighted the severe threats climate change poses, including wildfires, floods and storms.

In PwC's 26th Annual Global CEO Survey, more than half of respondents described that their companies will be exposed to some degree of climate risk in the next five years. 

This risk extends to manufacturing facilities, where extreme weather can damage infrastructure, disrupt production and compromise supply chains.

For instance, the widespread use of cloud services, now adopted by nearly 80% of businesses, relies on data centres that are increasingly vulnerable to weather extremes.

Data centres in heat and drought-prone areas, such as California and Texas, face significant risks, highlighting the need for climate-ready infrastructure.

Adaptation involves preparing for these impacts by implementing measures such as early warning systems, cooling centres and investments in resilience.

Despite the clear need, only 17% of Global CEO Survey respondents say "their companies have implemented initiatives to protect their workforce or physical assets from the impacts of climate risk." 

This highlights a significant gap in proactive climate risk management.

Investing in employee safety and resilience

The effects of climate change on manufacturing are not just limited to infrastructure; they also directly impact employees.

As summer arrives, outdoor workers face peak heat levels. Depending on governmental legislation and guidance, workers may face difficult conditions and it remains important for employers to keep their workforce safe- in the UK, for example, they should keep in mind: 

• There is no legal maximum temperature for work. Employers must ensure a safe working environment, including managing heat risks by providing shade, regular breaks and cool drinking water.
• While lighter clothing seems logical, work attire is often regulated for safety. Employers should provide PPE designed for hot conditions to keep workers safe and comfortable.
• Hot beverages do not cool the body and may actually raise body temperature. Opt for cool or room-temperature water.
• Overhydration, or hyponatremia, is a risk. Drink water consistently and consider beverages with electrolytes to replenish lost minerals.
• Tanning indicates UV radiation damage, which can cause sunburn and increase skin cancer risk. Employees should use broad-spectrum sunscreen, wear protective clothing and seek shade.

Implementing these measures is crucial for protecting employees and maintaining productivity during extreme weather conditions.

Strategic investments for long-term success

Investing in climate adaptation not only mitigates risks but also fosters innovation and business growth.

For example, constructing climate-resilient buildings with advanced HVAC systems and energy-efficient technologies can prevent costly retrofitting and offer long-term savings.

The European Environment Agency estimated €145bn (US$158.2bn) in climate-related economic losses in the EU over the past decade, underscoring the financial impact of inadequate adaptation measures.

Andreas Müller, Group CEO of Georg Fischer, noted in an interview with Deloitte Switzerland, “Solutions addressing the sustainability needs of our society become more important and carry more weight in the market.

"Demand for such products is high. Also, these products are often in the early stages of their lifecycle and therefore can deliver higher margins.”

This highlights the market potential for climate-resilient products and services.

Emma Gallagher from Siemens Financial Services UK observes, “Even though the benefits are clear, not enough businesses are seizing the opportunity to invest in sustainability and take control of their energy costs.” 

Integrating adaptation efforts with decarbonisation strategies can yield significant advantages.

Siemens’ CEO Roland Busch states, “We believe in the power of ecosystems to drive digital and sustainability transformation and scale technology.”

By extending existing business continuity programmes to address climate risks and leveraging technologies like AI-powered early warning systems and digital twins, companies can enhance their resilience and navigate climate challenges effectively.

“Integrating your company’s climate adaptation efforts with your net-zero program can yield significant advantages,” according to experts at PwC. 

"Mainstreaming adaptation into business decision-making is key. This practice does involve grappling with complex trade-offs, considering the significant future costs that a company may incur by not factoring climate risk into its current thinking."

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