# How do I do a basic climate risk assessment for a small factory?

Canonical: https://senseible.earth/answers/climate-risk-assessment-for-small-business

List what your factory depends on, then check two kinds of risk: physical risks such as flood, heat, cyclone and water shortage at your site, and transition risks such as carbon prices, CBAM, energy costs and buyer demands. Score each by likelihood and cost, act on the top three, and repeat yearly.

## Step 1: list what the business depends on

- Sites, buildings and key machines, with their location.
- Energy: grid power, diesel, coal, gas, and how much of each you use a year.
- Water source and volume.
- Main buyers and export markets, and main raw material suppliers.

## Step 2: physical risks

Check public hazard maps and your own history for flooding, waterlogging, extreme heat, cyclones and water shortage at each site. Ask what a bad event would cost: days of lost production, damaged stock, higher cooling cost, or a worker safety problem in heat. Consider both sudden events and slow change such as rising summer temperatures.

## Step 3: transition risks

Your fuel and electricity use gives the tonnes that any carbon price would apply to, so this part can be quantified from your bills.

- Carbon pricing: EU CBAM on exports of steel, aluminium, cement, fertilisers and hydrogen, and India's Carbon Credit Trading Scheme for obligated sectors.
- Energy prices and fuel switching costs.
- Buyers asking for emissions data or targets, and the risk of losing orders without them.
- Lenders pricing climate risk into loans.

## Step 4: score, act and record

1. Score each risk 1 to 5 for likelihood and 1 to 5 for financial impact, and multiply.
2. Pick the top three and write one action each, with an owner and a date.
3. Use the IFRS S2 headings (governance, strategy, risk management, metrics and targets) if a lender or buyer wants a structured answer.
4. Review once a year or after a major event.

## Worked example: transition exposure from a carbon price

- Diesel: 40,000 L x 2.68 kg CO2/L = 107,200 kg, 107.2 t CO2
- Grid electricity: 300,000 kWh x 0.710 kg CO2/kWh = 213,000 kg, 213 t CO2
- Total: 107.2 + 213 = 320.2 t CO2
- At an illustrative carbon price of Rs 2,000 per tonne: 320.2 x 2,000 = Rs 6,40,400, about Rs 6.4 lakh a year

The carbon price is a hypothetical stress test, not a current Indian price. Try two or three prices to see the range.

## What Senseible does here

Senseible turns fuel and electricity invoices into Scope 1 and 2 tonnes, which quantify transition risk such as a carbon price or CBAM cost. It does not provide physical risk data such as flood or heat maps.

- [Climate risk](https://senseible.earth/climate-risk)
- [Physical vs transition climate risk](https://senseible.earth/climate-intelligence/physical-vs-transition-climate-risk-financial-institutions)
- [Carbon pricing impact calculator](https://senseible.earth/calculators/carbon-pricing-impact)
- [Which NGFS scenario to use](https://senseible.earth/answers/which-ngfs-scenario-should-i-use)

Sources: [IFRS S2 Climate-related Disclosures (2023)](https://www.ifrs.org), [TCFD Recommendations (2017)](https://www.fsb-tcfd.org)

Last reviewed 2026-10-15.