Manufacturing Impact Report: All Industries Edition, Q1 2025

Climate Impacts and Trade Barriers Transform Manufacturing Resilience Strategies

This cross-sectoral analysis reveals how manufacturing companies face increasingly significant risks from extreme heat events, which are the most lethal of all weather-related disasters, posing substantial threats to operations, assets, and workforce health. The research examines how these physical climate risks manifest as both operational challenges and strategic considerations, requiring robust materiality assessment processes that address both financial materiality, through business continuity, and impact materiality, through worker welfare, across diverse manufacturing contexts.

The report additionally highlights how recent tariff volatility has complicated climate resilience initiatives for 62% of manufacturers creating economic uncertainties that delay adaptation investments.

Call to Action: Manufacturing companies should develop regionalised production networks and implement flexible resilience strategies that address both climate risks and trade policy fluctuations ensuring worker protection and environmental commitments remain prioritised despite economic pressures.

The report highlights that temperatures above 24-26°C are linked to decreased labour productivity, while exposure to air temperatures above 37°C can cause hyperthermia; manufacturing workers in non-air-conditioned environments are particularly vulnerable to these conditions. Without climate intervention, the average U.S. worker could lose 0.4 hours of productivity annually between 2040 and 2059 - a significant impact when multiplied across millions of workers, which directly affects operational efficiency and financial performance throughout manufacturing sectors.

This analysis examines the challenges faced by semiconductor manufacturing in the context of climate extremes, with Taiwan's drought posing a significant threat to 90% of the global supply and underscoring the sector's reliance on water. These vulnerabilities highlight the interconnected nature of climate risks, where regional climate conditions can lead to global supply chain disruptions with significant implications for industries reliant on semiconductor components, including automotive, consumer electronics, and industrial equipment manufacturing.

The report examines how companies are implementing integrated risk management strategies and design-based responses to address extreme heat challenges. These approaches combine infrastructure modifications, worker protection protocols, and operational adjustments to enhance resilience against increasingly frequent and severe heat events, demonstrating growing industry recognition of the dual materiality considerations in climate adaptation planning throughout manufacturing operations.

Looking to the future of manufacturing landscapes, the report identifies how energy-efficient machinery, AI integration, and waste reduction strategies are transforming industry approaches to sustainability and climate resilience. Companies implementing comprehensive approaches, including high-efficiency motors, intelligent control systems, and automated power management, are demonstrating enhanced preparedness for both physical climate risks and transition challenges associated with the UK's net-zero objectives. This creates both environmental benefits and competitive advantages across increasingly climate-conscious manufacturing sectors.