Extreme Heat, Floods, and Supply Chain Shocks: How to Future-Proof Your Manufacturing Operations

A growing number of billion-dollar disasters are forcing manufacturers to rethink risk. Here’s how to get ahead before the next crisis hits. 

Climate-related extreme weather events are becoming more frequent across the U.S., causing record-breaking damages and posing significant risks to the manufacturing industry: 

2024 was the hottest year on record.  At first glance, this headline can feel abstract—but the implications for manufacturing are real and immediate. Extreme heat poses serious risks: it increases the chance of heat-related illnesses for workers in outdoor or poorly ventilated environments, reduces labor productivity, raises energy costs for cooling facilities, creates fuel price volatility, and can even impact the performance and longevity of equipment and tooling. 

In 2024, there were 27 billion-dollar weather disasters in the U.S. alone—totaling US$182 billion. Again, this may seem theoretical until you look at how it affects operations on the ground. For manufacturers, extreme weather events can cause direct damage to facilities, drive up maintenance and repair costs, disrupt power supply through grid instability or brownouts, delay transportation of critical materials forcing higher investments in on-site inventory. Insurance premiums may also rise—or coverage may be lost altogether.

The increasing frequency of climate-related events forces manufacturing companies and facility leads into a constant state of crisis management—disrupting operations, reducing efficiency, and putting pressure on the bottom line. 

How can you get out of this crisis cycle? Identify your key climate risks and develop a proactive strategy to mitigate risks and increase resilience—this can be achieved through a comprehensive climate risk assessment using climate scenarios.  

A Climate Risk Assessment: 5 Key Steps 

1. Define Climate Scenarios

Develop two to three tailored science-aligned climate scenarios to explore potential climate-related risks and opportunities. Best practice includes considering both physical risks (e.g. water scarcity risk, wildfire risk) and transition risks and opportunities (e.g. changing fuel prices, investment in renewable energy), and scenarios are a powerful tool for identifying both. 

2. Identify Risks and Opportunities

Collaborate with teams across the business to assess how each scenario could impact your company and facilities. The best results come from working not only with facility managers and operation teams, but also with product development teams, sales teams, risk and strategy teams, and finance teams. Ask questions like: If this scenario were reality today, what risks would we face? What opportunities could we leverage?

3. Map Climate Impacts

Use geospatial mapping and climate data to assess how specific physical climate impacts—like heat, flooding, drought, or storms—could affect individual assets or facilities. This will help facility leads assess which physical climate impacts are most likely to impact the facility, and thus, what challenges the facility should prepare for and mitigate against.

4. Analyze Impact and Severity

Evaluate the risks and opportunities you've identified to determine which are most significant to your business. This helps prioritize focus areas for action and even incorporate them into existing Enterprise Risk Management processes. 

5. Develop Strategy and Actions

For each high-priority climate-related risk and opportunity, define concrete actions to mitigate the risks and capture benefits. This may mean identifying ways to improve proactive facility maintenance to prepare for extreme weather, raise inventory and stock off the ground to reduce flood risk, or replacing heating, ventilation, and air conditioning (HVAC) systems with more efficient models to reduce energy costs. Integrate these into a broader business resilience strategy and begin implementation.

Conducting a climate risk assessment is a proactive way to budget for and manage climate impacts—helping your company become more agile, improve operational efficiency, reduce costs, and safeguard both assets and people. 

Where to begin? 

Start by identifying an internal champion to lead the effort at the corporate level—this could be someone from the sustainability team or corporate risk function. 

Then, engage a qualified partner, such as BSR, to conduct the assessment. A strong provider will not only help identify climate risks and build a resilience strategy, but also ensure key stakeholders are involved throughout the process—paving the way for successful implementation and long-term impact. 

This article was originally published at the BSR website "Sustainability Insights" and is written by Nina Hatch, Associate Director, Energy, Extractives. Transport, and Industrials at BSR.