India's manufacturing sector — contributing over 16% of GDP — faces growing threats from climate change. From extreme heat disrupting worker productivity to floods damaging infrastructure, the physical and financial risks are accelerating. Companies that assess and manage these risks proactively will be better positioned to survive and grow.

⚠️ A 2023 McKinsey report found that India faces some of the highest climate risk globally, with potential GDP losses of 2.5–4.5% annually by 2050 if adaptation measures are not taken.

Two Types of Climate Risk

🌊 Physical Risks

  • Flooding of factories and warehouses
  • Heatwaves reducing worker productivity
  • Water scarcity disrupting operations
  • Cyclones damaging infrastructure
  • Erratic monsoons affecting raw material supply
  • Rising sea levels threatening coastal plants

📊 Transition Risks

  • Carbon taxes increasing production costs
  • Stricter environmental regulations
  • Loss of export markets (EU CBAM)
  • Stranded assets — coal-dependent equipment
  • Investor divestment from high-emission companies
  • Reputational damage from poor ESG scores

Impact on Key Manufacturing Sub-Sectors

Textiles: Water-intensive production faces serious risk from groundwater depletion and erratic rainfall. Many textile clusters in Gujarat and Rajasthan already face acute water stress.

Steel & Cement: These are among India's largest emitters and face the most significant transition risks, including carbon pricing and demand shifts toward low-carbon alternatives.

Automotive: The shift to electric vehicles is both a transition risk (legacy ICE manufacturing) and opportunity (EV components and batteries).

Pharmaceuticals: Temperature-sensitive supply chains are vulnerable to heat extremes and cold chain disruption.

How to Conduct a Climate Risk Assessment

A comprehensive climate risk assessment involves identifying climate hazards relevant to your geography, assessing their probability and financial impact over short, medium, and long-term horizons, and developing adaptation strategies to build resilience.

BEC's climate risk specialists use global climate datasets and sector-specific models to provide actionable risk assessments aligned with TCFD recommendations.

📞 Contact BEC for a climate risk assessment tailored to your manufacturing operations. Build resilience before risks become losses.