European Heavy Industry Faces Climate Change

Global warming in Europe is progressing twice as fast as the global average, transforming theoretical projections into concrete production disruptions. For industrial players, risk management can no longer be limited to emissions reduction; it must integrate the active protection of infrastructure and processes against increasingly frequent extreme weather events.

Sectors such as steel, refining, glass, cement and ammonia are particularly exposed due to their reliance on capital intensive assets, continuous processes, water availability, energy supply and complex logistics networks. Under these conditions, climate hazards can translate directly into production losses, infrastructure degradation and increased costs.

While decarbonization currently captures the majority of industrial investment, climate adaptation remains insufficiently integrated into corporate strategies. 

Leveraging its combined expertise in energy and industry, and strengthened by advanced data analytics capabilities, Sia analyzed 365 sites across 29 European industrial companies to accurately map physical and transition risks with a high degree of granularity, reflecting the operational realities of each sector.

Heatwaves emerge as the most critical hazard identified. By 2030, 292 sites are projected to be exposed, increasing to 347 sites by 2050, representing more than 95% of the assets analyzed. This exposure has direct consequences for workforce health, process performance, and the availability of energy resources. 

Flooding, and especially river flooding, constitutes the second most significant risk. By 2050, more than one-third of the sites assessed are expected to face high flood risk. In contrast to heatwaves, which tend to affect operational performance and working conditions, floods can cause immediate and direct damage to industrial systems.

Around 60% of total physical risk is concentrated around two major industrial stakes: 

• Integrity of extraction sites and upstream supply systems: when raw material production sites are exposed to flooding, water stress or extreme heat, the impact can propagate rapidly across the industrial chain.
• Operational performance of production sites, particularly where continuity depends on reliable access to water and energy. In such environments, climate hazards can affect not only physical infrastructure but also output quality, productivity and cost structure.

The analysis also identifies a structural vulnerability in the steel sector, where upstream exposure is structurally higher due to dependence on four main raw materials: iron ore, coal, scrap and limestone; compared with an average of approximately 2.8 raw materials in other sectors. This complexity increases sensitivity to disruption across the supply chain.

Anticipating climate impact requires a granular analysis of the industrial ecosystem, from raw material extraction to final distribution. To secure long-term operations, we recommend leveraging three strategic pillars:

• Process robustness: Strengthening critical infrastructure by adapting drainage systems for water management and reinforcing electrical substations against extreme events.
• Operational flexibility: Implementing systemic actions such as the modularity of production processes and the use of hybrid technologies to reduce dependency on volatile supply chains.
• Resource circularity: Developing local loops and industrial ecology, such as recovering waste heat, to enhance both environmental and economic resilience.

For European heavy industry, the climate agenda is entering a new stage. Decarbonization remains essential, but it is no longer sufficient on its own. The growing intensity of physical climate risks means that resilience must now be incorporated into strategic planning, investment decisions and operational management.

Sia’s analysis underscores the scale of this challenge. Heatwaves, flooding, water dependency and upstream fragility are already shaping the risk profile of industrial assets across Europe. In this context, adaptation is not an adjunct to climate strategy; it is one of its necessary pillars.

For heavy industry, the ability to anticipate, absorb and adapt to climate shocks will increasingly define industrial resilience and long-term performance.