When temperatures in Delhi touched 49°C in summer 2025, the immediate narrative centred on health emergencies and tragic loss of life. What received far less attention were declining factory production across the National Capital Region (NCR), the halt at construction sites and insurance claims filed by warehouse operators whose tin roofs buckled under heat.
But these weren’t isolated incidents during a period of extreme weather. They were early warnings of challenges that a warming world brings to India’s business landscape.
For manufacturing facilities especially, extreme heat poses a double burden. Besides impacting worker productivity, heat degrades physical assets in ways that balance sheets are ill-prepared to absorb.
In a nutshell, extreme heat has moved on from being just a human welfare concern to a material financial risk that demands urgent attention from corporate boardrooms and investors alike.
Declining labour productivity
In business, the most direct impact is on labour productivity. Research from Indian workplace studies shows that when the Wet Bulb Globe Temperature (WBGT) — a measure combining heat, humidity, and solar radiation — crosses 30°C, outdoor worker productivity begins to decline steeply.
The physiological ceiling for industrial labour is lower than many realise. In the humid corridors of Surat, Gujarat, once the heat index crosses the 34°C threshold, heavy manual work becomes physically impossible. For a garment manufacturer employing 2,000 workers, a week-long heatwave can become a systemic failure, translating to a 25–30% collapse in output. Even a 10% dip in productivity translates to 6–7% being shaved off the monthly revenue.
In India, most warehouses have metal roofs. At sustained temperatures above 48°C, these buildings experience structural stress —. roofs expand over successive heat cycles until they buckle.. This can lead to procuring substantial ad-hoc financing for emergency repairs. But the larger cost lies in inventory exposure and disruptions in distribution during repair periods.
The power grid suffers from a similar thermal paradox. Most distribution transformers are built to handle temperatures up to 40°C, but begin shedding their effective capacity as temperatures cross 38°C. Unfortunately, the grid’s ability to deliver power shrinks at the exact moment consumer demand for cooling spikes. For a mid-sized industrial park, this creates a vicious cycle, increasing demand for backup power which balloons operational costs.
The hidden tax
In Rajasthan and Madhya Pradesh, summer ambient temperatures of 48°C frequently push asphalt surface temperatures beyond 65°C. At these levels, the bitumen binder — black, sticky coating on roads — softens into a viscous state, causing the road to lose its structural stiffness. In other words, the road “melts”.
This results in rapid rutting and bleeding under heavy truck axle loads, increasing fuel consumption, tyre wear, and causes delivery delays. For a logistics fleet of 200 trucks, it results in a 12–15% spike in maintenance expenditure.
Each vehicle loses an average of two to three operational days per summer to these unscheduled repairs, a hidden cost of doing business on a melting landscape. Delivery schedules slip, contractual penalties accrue, and just-in-time supply chains discover they have no buffer for heat-induced delays.
Non-linearity
The unpredictability of heat risk makes it difficult to account for in corporate planning. For example, A textile unit in Coimbatore typically maintains peak output up to 28°C, but begins to see measurable productivity declines of 2–4% per degree once ambient temperatures exceed 32°C. At 38°C, critical safety threshold is breached, where work-rest protocols or temporary shutdowns are often undertaken to prevent heat stroke. This threshold behaviour defies the incremental risk management that companies are accustomed to. You cannot hedge against a binary shutdown the way you hedge currency risk.
Fast-Moving Consumer Goods (FMCG) companies like Dabur, Hindustan Unilever and Britannia have admitted that extreme heatwaves and erratic weather have disrupted agricultural supply chains and production cycles, transforming climate risk into financial triggers. This is causing these companies’ stocks to underperform as markets begin to price in the ‘hidden cost’ of extreme weather.
Lenders are increasingly asking questions about heat exposure during project finance appraisals for facilities in hot regions. Most corporate risk registers still categorise heat under ‘general business environment’ rather than as a quantifiable operational risk with specific mitigation strategies.
From crisis management to operational resilience
Companies need to move from reactive crisis management to structured heat risk assessment. This begins with acknowledging that heat impacts are sector and geography specific. For example, a software company in Bengaluru faces negligible heat risk compared to a steel plant in Rourkela, Odisha.
Then, companies need to map their operations against near-term 2030-2040 climate projections that incorporate the lifespan of current infrastructure investments. For heat-exposed sectors, this means integrating climate scenarios into capital allocation decisions. Consider the scenario where a company is deciding on a new warehouse in interior Maharashtra: is the business case still viable if productivity losses and cooling costs are 20% higher than the Pune facility due to more severe heat conditions?
Adaptation investments need reframing as operational resilience requirements. Examples include insulated roofing for industrial facilities, work shift restructuring to avoid peak heat hours and backup power for critical cooling systems.. These are not climate virtue signals but margin protection strategies.
Forward-thinking manufacturers are experimenting with radiant cooling technologies and exploring nighttime operations. They are recognising that the alternative is watching EBITDA take a nose dive during increasingly frequent and intense heat episodes.
Heat risk needs strategic attention
India’s corporate sector has demonstrated remarkable agility in navigating complex regulatory changes, volatile input costs, geopolitical challenges and technological disruptions. Heat risk demands similar strategic attention. Companies which incorporate heat resilience into site selection, infrastructure design and operational protocols will find themselves with a material competitive advantage over those which do not.
Deepak Kumar is a Mumbai-based banking professional specialising in ESG and risk management. Views are personal.
This story was first published on CarbonCopy.
