How extreme heat and floods are disrupting operations of manufacturing MSMEs

Micro, small and medium enterprises (MSMEs) face a disproportionately higher impact of climate change because of their lower adaptive capacity, with 92% of MSMEs that took part in a survey reporting operational impacts due to heat stress, finds a report.

The report, Resilience of Micro, Small and Medium Enterprises to Climate Risks: A Vulnerability Assessment in the Manufacturing Sectors of Gujarat and Tamil Nadu, by WRI, is based on a survey of 310 manufacturing MSMEs across Surat, Chennai and Coimbatore. It examined how extreme heat and flooding affect productivity, operations, supply chains and business continuity.

MSMEs across these cities increasingly perceive noticeable changes in local climate conditions, particularly rising summer temperatures and changing rainfall patterns (reported by 86% and 76% of MSMEs, respectively).

Rising temperatures emerged as the most widely observed climatic change across cities, while rainfall variability was more strongly perceived in Chennai and Surat. Flood exposure among MSMEs is widespread but spatially uneven, reflecting the influence of local infrastructure quality, drainage systems, and urban planning conditions across industrial clusters.

In Chennai, MSMEs reported flood-related business disruption across all the surveyed industrial areas, and Surat demonstrates moderate but spatially differentiated exposure. Flood impacts cascade through a multi-stage pathway where area-level inundation serves as the primary trigger.

Over 90 percent of affected MSMEs located in inundated areas reported operational disruptions, with nearly three-fourths experiencing business closure during flood events.

Notably, a substantial share of MSMEs without premises-level flooding also reported business disruptions and closures, highlighting the importance of indirect and cascading impacts across interconnected infrastructure, service, and supply-chain systems.

Our findings show that flood impacts on MSMEs extend well beyond direct asset damage, generating widespread disruptions across supply chains, labour availability, and market connectivity.

Heat stress is emerging as a significant workforce and productivity challenge for labour-intensive MSME sectors. Seventy-eight percent of the MSMEs reported reduced worker productivity due to heat stress, with over half of them reporting increased absenteeism linked to high temperatures and workplace heat exposure.

Heat related illnesses and occupational safety risks remain significant among the MSMEs, with 41 percent of enterprises reporting worker illnesses and one-fourth reporting increased accidents and injuries linked to heat stress.