Extreme heat also impacts businesses

The survey cross-references over one hundred thousand data relating to Italian companies divided into five production sectors with high-resolution meteorological surveys recorded from 2009 to 2022. The econometric models highlight how summer days characterized by extreme heat statistically significantly increase the rate of exit of companies from the market.

“Estimates show that every summer day with temperatures between 29 and 32 degrees Celsius is associated with an increase of approximately 0.014 percentage points in the rate of exit of companies from the market compared to a day between 23 and 26 °C. When the temperature reaches or exceeds 32 °C, the increase rises to approximately 0.016% per day“, declares Francesco De Simone. “The concept of exit should not be interpreted as the cessation of production activity, it is not necessarily treated as formal bankruptcy and economic death of the company. For the territory, however, the effect is similar: production capacity, employment, skills, services and economic relationships built over time are lost.”

The economic impact manifests itself through multiple operational factors, such as reduced labor productivity, increased energy costs, employee health issues and decreased customer traffic. “The results clearly show a statistically significant relationship, according to the most rigorous thresholds adopted in this type of study. On a practical level, high temperatures can contribute to a company’s exit from the market through various channels, such as reduced productivity, increased energy and organizational costs, business interruptions, lower customer attendance or employee health,” continues De Simone.

Vulnerability is distributed unevenly: micro-enterprises and individual businesses suffer the greatest consequences due to the limited availability of financial resources dedicated to adaptation. “These realities, a fundamental component of the Italian production system, have fewer financial and organizational resources for adaptation measures and are therefore more exposed to the effects of high temperatures“, adds the Cnr-Itiam researcher. “The effects in terms of exit from the market are concentrated in the hottest areas of the country, a particularly relevant aspect considering that the Mediterranean is one of the main hotspot areas of climate change. The greatest critical issues emerge in manufacturing, trade and services, while the agricultural sector appears more resilient, also thanks to the presence of specific support and adaptation measures“.

Between the first decade of the 2000s and 2022, summer days with temperatures above 29 degrees increased on average from forty-two to sixty. As De Simone concludes: “We are faced with a climatic context that exerts continuous pressure on the production system. And a part of Italian companies still have a limited ability to adapt to new conditions. High temperatures also influence the production system, gradually modifying the economic geography and entrepreneurial dynamics of the country“.