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Climate risk and manufacturing resilience: Adapting to and mitigating the impacts of climate change

According to the 2026 Global Risks Report published by the World Economic Forum, extreme weather is the third most significant risk expected to present a material crisis on a global scale this year. For Canadian manufacturers — whose operations depend on stable supply chains, infrastructure, and energy resources — climate risk is no longer a distant concern. It is a present-day operational imperative.

Leading with resilience: The modern manufacturer's imperative

Learn how Canadian manufacturers can manage risk and build long-term stability.

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The difference between climate risk vs. broader sustainability risk

Climate risk specifically pertains to the consequences of adverse weather events, rising sea levels, temperature changes, and the challenges of decarbonization and energy transition.

Broader sustainability risk encompasses a wider array of concerns like environmental issues related to pollution, water scarcity, and biodiversity loss, as well as the social and regulatory implications of environmental challenges.

Both categories are material to manufacturing organizations and require distinct management approaches.

The climate risk landscape for Canadian manufacturers

Depending on the location, risk class, and complexity of operations, manufacturing companies face a host of climate risks that could threaten their operations:

Extreme weather events such as convective storms, hurricanes, wildfires, and rising sea levels can damage plants, warehouses, power lines, access roads, and supply chain hubs. Flooding can interrupt production and require significant investment in flood management controls.

Rising temperatures increase facility cooling requirements, straining transmission and distribution infrastructure. Increased energy demand can disrupt supply to operations and dramatically affect profit margins.

Severe storms and flooding damage roads, railways, bridges, waterways, and ports, impacting the transport of raw materials, components, and finished goods. Sea level rise may further affect port availability and timely transport.

Altered precipitation patterns can reduce water availability for cooling, cleaning, and material processing. Manufacturers may face direct competition with local communities for water resources, creating reputational and regulatory risk.

Governments are implementing stricter emission standards, carbon pricing, and resource management requirements. Companies operating across multiple jurisdictions must navigate both domestic and international climate policy. Investors, insurers, and financial institutions are scrutinizing climate-related risks more closely, making robust climate strategies essential for access to capital and insurance coverage.

Extreme heat can cause heat-related illness, impair decision-making, and increase accident rates. Natural disasters can displace workers, create workforce instability, and contribute to significant mental health strain.

Build resilience. Protect what you've built.

Download Leading with resilience: The modern manufacturer's imperative — Marsh Canada's comprehensive guide to navigating the risk landscape facing Canadian manufacturers. Get ready to act today.

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Five strategies to build long-term climate resilience

  1. Implement a transition-specific risk management approach - A climate transition risk analysis is a systematic assessment that identifies, evaluates, and manages the risks and opportunities associated with the shift to a low-carbon economy. By integrating this analysis into your broader risk management framework, you can anticipate disruptions, comply with evolving regulatory requirements, and capitalize on emerging opportunities in the energy transition — supporting decarbonization and fostering long-term sustainability.
  2. Assess risks with physical climate modelling - Physical climate risk modeling uses downscaled global climate projections and scenario analysis to assess potential impacts across your asset portfolio. This approach enables you to pinpoint your most vulnerable assets and evaluate climate exposure across various perils, scenarios, and timeframes. Adaptation strategies can include:
    • Investing in asset resilience design or retrofitting assets to withstand key climate perils
    • Implementing climate-resilient technologies such as advanced monitoring and early warning systems
    • Engaging in long-term resource planning to ensure supply chain and operational continuity
  3. Identify and address supply chain vulnerabilities - Deeper visibility into your supply chain enabled by advanced platforms that provide real-time alerts and modelling capabilities can be the difference between stalled operations and swift, effective response to a weather-related event. Greater supply chain oversight also allows manufacturing leaders to foster stronger relationships with suppliers and stakeholders by demonstrating a commitment to sustainability and responsible sourcing.
  4. Develop a credible net-zero plan - Manufacturing organizations face growing regulatory and stakeholder pressure to reduce greenhouse gas (GHG) emissions. Begin with comprehensive GHG accounting to understand your emissions baseline, then align reporting with recognized frameworks such as the Science Based Targets initiative (SBTi) or the Global Reporting Initiative (GRI). Carbon offsets can balance unavoidable emissions while transparent, credible reporting builds investor and partner trust.
  5. Emphasize employee training and climate preparedness - As climate change poses intensifying challenges like extreme weather, resource scarcity, or regulatory shifts, manufacturers must prepare the workforce to adapt. This includes equipping workers with skills in new technologies, safety protocols, and sustainable practices. Leaders should also plan for workforce transitions as the industry shifts competencies to align with sustainability goals. Investing in comprehensive training strengthens operational efficiency and fosters a culture of safety and adaptability.