One of the greatest climate hazards for industry caused by heat and drought is the decreasing availability of water.
While companies focus on cyber risks, geopolitical crises or supply chain disruptions, another challenge is becoming increasingly difficult to ignore: heat and drought. Unlike many business risks that emerge with little warning, developments such as rising temperatures, recurring heat waves and increasing water scarcity can already be seen today. The challenge for companies is therefore to understand the potential consequences, as well as assess at an early stage what impact these developments may have on operations, supply chains and future competitiveness.
Current forecasts surrounding El Niño demonstrate how early warning signals can help organisations prepare for emerging risks. Depending on the region, stronger weather extremes may increase the likelihood of droughts, heat waves, flooding and supply chain disruption. While the precise impacts remain uncertain, such forecasts provide companies with an opportunity to assess vulnerabilities before operational consequences occur.
From Future Risk to Present Challenge
The temperature in Austria has already risen by around 3 °C since 1900, significantly more than the global average. At the same time, the duration and intensity of heat waves are increasing, while longer dry periods and water scarcity are occurring more frequently in many regions of Europe. Companies must increasingly ask themselves what impact these developments will have on their long-term competitiveness and expand their risk management to include climate-related hazards. Climate data, weather observations and risk models now provide significantly better insights into potential future developments than was possible just a few years ago. Companies no longer struggle to obtain the information. The challenge is deriving concrete measures for risk management and business continuity from it.
In the context of climate risk analyses, GrECo is increasingly observing that companies underestimate the impact on cooling water availability, supply chains and human resources.
When Water Becomes a Bottleneck Factor
One of the greatest climate hazards for industry caused by heat and drought is the decreasing availability of water. Numerous production processes are directly or indirectly dependent on sufficient quantities of water. The chemical industry, paper industry, steel production, food industry and energy producers are particularly affected.
Cooling water is a critical factor. In the summer of 2026, several European countries had to reduce electricity production due to low water levels and high water temperatures. To comply with the permissible temperature limits for the return of cooling water to rivers, the output of individual nuclear power plants had to be reduced during the heat waves in France and Hungary. Along the Danube and other European waters, high water temperatures and low water flow led to restrictions on energy and industrial use.
From a risk management perspective, the focus is less on the immediate property damage than on the consequences for operational capability. Even a few days of production downtime can cause significant losses in sales, contractual penalties or the loss of market share.
Heat Stress Puts a Strain on Staff and Productivity
Heat has a direct effect on the performance of employees. Outdoor activities such as construction work, warehouse logistics, loading activities or work on energy and transport infrastructure are particularly affected. Increasing workloads inside buildings particularly affect employees who are exposed to increased physical strain.
Studies show that productivity measurably decreases even with moderate temperature increases. In addition to increased physical strain, poor concentration, error rates and accident risks are increasing. At the same time, the likelihood of heat-related sick leave is increasing. Production areas, warehouses, logistics centers and buildings with inadequate cooling are particularly affected.
In the summer of 2026, European countries tightened their requirements for occupational health and safety at high temperatures. In the future, companies will have to reckon with restrictions on working hours at lunchtime, additional break regulations and stricter health protection requirements. Productivity declines must be expected, especially in the summer months, not only when working outdoors.
Higher personnel costs, lower availability due to sick leave, lower productivity and increasing error rates during heat waves are currently often underestimated cost risks that must be assessed as part of risk management.
Facilities and Infrastructure Under Pressure
Heat and drought can directly affect buildings, technical equipment and infrastructure. Typical consequences include:
- Damage to roads, railway infrastructure, foundations and pipelines as heat and drought cause materials to deform and the ground to move
- Reduced performance and overheating of electrical and cooling systems, production facilities, IT infrastructure and server rooms
- Increased fire risks and failures of temperature-sensitive equipment
- Restrictions on production, cooling, cleaning and fire protection where processes depend on sufficient water supplies
These effects often reinforce one another. High temperatures increase the need for cooling and water, while prolonged dry periods reduce water availability and place additional strain on infrastructure. If several effects occur at the same time, companies have less room to react. These dependencies must therefore be considered in risk management at an early stage.
When Low Water Disrupts the Supply Chain
An often-underestimated risk is the impact on logistics and transport. Low water events on the Rhine, Danube and other European waterways in 2026 have once again shown how sensitive industrial supply chains are to climate change.
Falling water levels on key waterways can restrict transport capacity, increase costs and delay deliveries, creating significant consequences for industrial supply chains.
Companies with just-in-time production can face significant economic consequences after delays of only a few days. Climate risk analysis must therefore extend beyond a company’s own locations and processes to include critical suppliers, transport routes and external infrastructure.
The Economic Consequences are Growing
The economic impact of extreme weather events is increasing noticeably. A study by the University of Mannheim and the European Central Bank estimates the economic damage caused by heat, drought and flooding in Europe at around 43 billion euros for the summer of 2025 alone. By 2029, the resulting losses could add up to around 126 billion euros. Regions and industries with a high dependence on water, transport infrastructure and labour-intensive activities are particularly affectedi.
In addition to direct property damage, these figures also include indirect effects such as productivity losses, business interruptions, supply chain disruptions and declines in sales. For individual industrial companies, the economic consequences can be many times higher than classic property damage.
Future Viability of Business Models Put to the Test
Of particular relevance is the question of whether a business model will remain sustainable in the long term under changed climatic conditions. Companies with high water consumption, energy-intensive production processes or a strong dependence on climate-sensitive supply chains can come under considerable pressure.
The central question is no longer only whether a site can be operated safely in the future, but whether the business model can remain economically successful under changing climatic conditions.
This is where a robust climate risk analysis differs from a classic hazard assessment. In addition to examining buildings, processes, infrastructure, supply chains and employees, the impact a climate risk can have on sales, costs, market position and value creation is assessed.
From Climate Risk Analysis to Strategic Decision
Climate risk management is increasingly evolving from a regulatory requirement into an important component of corporate risk management. Improved data, forecasts and assessment methods allow companies to identify vulnerabilities in locations, infrastructure, supply chains and business processes before disruptions occur.
Companies that systematically analyse these exposures and implement appropriate adaptation measures at an early stage can strengthen their operational resilience, reduce future loss potential and safeguard their competitiveness over the long term.
Business impact-oriented climate risk analyses support decisionmakers by linking climate scenarios with operational and financial impacts, allowing risks to be assessed and prioritised according to their actual significance for the company.
Harald Ketzer
Risk & ESG Consultant
T +43 664 888 44 707
