Executive Summary (The 30-Second Brief)
- The Threat: 2024 set a record with $320 billion in climate losses (56% uninsured). ESRS E1 now requires buyers to disclose the monetary amount of assets at material physical risk -- disaggregated by acute vs. chronic -- including supply chain facilities. Insurance is retreating from high-risk regions.
- The Friction: Carbon calculators report how much CO2 a facility produces, not whether it sits in a typhoon corridor or flood zone. Buyers need facility-level location, exposure, and adaptation data that no emission tool captures.
- The Marupass Solution: Marupass uses AI to extract data from raw PDFs and locks it on a Blockchain Audit Trail, instantly generating ESRS E1 physical climate risk reports without manual entry.
The Map Your Buyer Is Building
Your buyer's risk team is building a map. Not an emissions map — they have that. A different map.
This map plots every supplier facility in their supply chain against physical climate risk data: flood zones, typhoon corridors, water-stressed regions, wildfire exposure, coastal erosion paths, extreme heat projections.
They are building this map because ESRS E1 now requires them to disclose the monetary amount and proportion of assets at material physical risk — disaggregated by acute and chronic risk — before considering adaptation actions. IFRS S2 (adopted by Japan via SSBJ) requires scenario analysis covering physical risks.
Your factory is a pin on that map. And the data label next to that pin determines whether your buyer classifies you as a resilient supplier or a risk concentration.
$320 Billion and Accelerating
Physical climate losses are no longer occasional disasters. They are an annual certainty.
Munich Re's 2024 natural disaster assessment:
| Metric | 2024 | Trend |
|---|---|---|
| Total economic losses | $320 billion | Record year |
| Insured losses | $140 billion | 6th consecutive year >$100B |
| Uninsured losses (protection gap) | $180 billion (56%) | Over half uninsured |
| Weather-related share of total losses | 93% | Climate-dominant |
2025 continued the trajectory: $224 billion total, $108 billion insured. The Los Angeles wildfires alone caused $53 billion in total losses — the most expensive wildfire disaster in recorded history.
Swiss Re projects trend losses approaching $145 billion annually in insured losses. Not exceptional years. The new baseline.
Insurance Is Retreating
The protection gap is widening because insurers are withdrawing from high-risk regions:
California:
- 1 in 5 homes in extreme fire risk areas lost coverage since 2019
- California FAIR Plan (insurer of last resort) exposure: $650 billion — up 289% since 2021
Florida:
- Multiple private insurers pulled coverage between 2019-2024
- Remaining insurers raised premiums by over 42%
Japan:
- Four major non-life insurance companies raised fire insurance premiums by ~10% nationwide in October 2024 — the fourth increase since 2019
When insurance retreats, uninsured exposure concentrates in supply chains. A supplier facility in a flood zone that can no longer obtain adequate insurance coverage becomes a risk concentration for every buyer depending on that facility.
Your Buyer's ESRS E1 Obligation
ESRS E1 (Climate Change) requires companies to disclose physical climate risk with precision that goes far beyond general risk statements:
| ESRS E1 Requirement | What Your Buyer Must Report |
|---|---|
| Assets at material physical risk | Monetary amount AND proportion (%) |
| Risk disaggregation | Acute risks (floods, storms, fires) vs. chronic risks (sea level, temperature, water stress) |
| Pre-adaptation exposure | Before considering any mitigation measures |
| Adaptation coverage | Proportion addressed by climate adaptation actions |
| Revenue at risk | Monetary amount and proportion from at-risk business activities |
| Time horizons | Short-term, medium-term, AND long-term |
To complete this disclosure, your buyer needs facility-level physical risk data from their supply chain. They cannot assess "proportion of assets at material physical risk" without knowing which supplier facilities are exposed to which physical risks.
The data they need from you:
- Facility location (precise enough for risk mapping)
- Flood exposure status (is the facility in a mapped flood zone?)
- Climate hazard profile (which acute and chronic risks apply?)
- Existing adaptation measures (flood barriers, backup power, alternative water sources?)
- Business continuity capability (can production continue during disruption?)
A carbon calculator reports how much CO2 your facility produces. It does not report whether your facility sits in a typhoon corridor.
Supply Chain Disruption: The Trillion-Dollar Risk
Physical climate risk in supply chains is not just about individual facility damage. It is about cascading disruption.
A 2024 study published in Nature projected that climate-driven supply chain disruption could cause net economic losses of $3.75 trillion to $24.7 trillion by mid-century — depending on emissions pathway. Manufacturing-heavy countries face disproportionate amplified losses through supply chain cascades.
Real-world examples from 2024:
- Hurricane Helene disrupted over 50 manufacturers in electronics, automotive, and aerospace in North Carolina
- Panama Canal recorded lowest water levels since records began, threatening global shipping schedules
- Environmental risks in supply chains projected to cost $120 billion by 2026
The cascading nature of these disruptions means that your buyer's risk is not limited to their direct exposure. If your facility is disrupted, their production line stops too. That is why their risk team is mapping every supplier facility against physical hazard data.
The Manufacturing Facility Exposure Problem
Physical climate risk hits manufacturing harder than services or finance — because manufacturing facilities are fixed, capital-intensive, and location-dependent.
| Risk Type | Manufacturing Impact | Example |
|---|---|---|
| Flooding | Production halt, equipment damage, inventory loss | Hurricane Helene: 50+ manufacturers disrupted in North Carolina |
| Water stress | Cooling system failure, process water shortage | Semiconductor fabs require ultra-pure water; drought = shutdown |
| Extreme heat | Worker productivity decline, equipment overheating | Manufacturing-heavy countries face 1.8-2.7% GDP losses from heat |
| Typhoon | Structural damage, logistics disruption, supply chain cascade | Japan's four major insurers raised premiums four times since 2019 |
| Coastal erosion | Long-term facility viability, asset stranding | Sea level rise threatens port-adjacent manufacturing |
The key insight: physical climate risk assessment requires facility-specific data, not national averages. A factory in Osaka's flood plain has a different risk profile than a factory on elevated ground in Nagano — even though both are "in Japan." Your buyer's risk team needs your facility's specific exposure, not Japan's average.
The Scenario Analysis Cascade
67% of companies now conduct climate scenario analysis (EY 2025 Global Climate Action Barometer, up from 58%). But only 36% translate findings to financial reports. And only 2-3% of companies report in line with all 11 TCFD recommended disclosures (now absorbed into IFRS S2).
When your buyer's scenario analysis identifies supply chain physical risk, the assessment cascades:
- Buyer identifies material physical risks (floods, heat stress, water scarcity)
- Buyer maps risk to supply chain — which suppliers are exposed?
- Buyer requests facility-level data — location, exposure, adaptation measures
- Buyer incorporates supply chain exposure into ESRS E1 disclosure
- Buyer adjusts procurement — diversifying away from high-risk concentrations
If you cannot provide facility-level physical risk data, your buyer's risk team will estimate it. And estimated data — based on country-level averages rather than facility-specific reality — will likely overstate your risk exposure. The supplier who provides verified, facility-specific data controls their own risk narrative. The supplier who provides nothing lets the buyer's risk model define them.
Active Defense Shield: Your buyer's scenario analysis maps supply chain physical risk. You can provide your own facility-level data — location, exposure, adaptation measures — and control your risk narrative. Or you can let their risk model estimate your exposure. Estimated risk is always assumed to be higher than documented risk.
The Adaptation Gap
Physical climate risk has two dimensions: exposure (what risks your facility faces) and adaptation (what you have done about it). ESRS E1 requires both.
The adaptation dimension is where most suppliers fail to provide data. Many facilities in high-risk zones have taken real adaptation measures — backup generators, flood barriers, elevated equipment, alternative water supplies, diversified logistics routes. But these measures are rarely documented in a structured, exportable format.
| Adaptation Measure | What Your Buyer Needs to Know | What You Typically Report |
|---|---|---|
| Flood barriers | Height, coverage, last tested | Nothing |
| Backup power | Capacity (kW), fuel autonomy (hours) | Nothing |
| Water storage | Volume (m³), days of supply | Nothing |
| Business continuity plan | Recovery time objective, last tested | "We have a BCP" |
| Insurance coverage | Coverage amount, exclusions | Nothing |
The gap between what your buyer needs and what you provide is not a data collection problem — it is a data structure problem. You likely have this information. It exists in facility management reports, insurance policies, safety audits, and maintenance records. But it is not structured for export to your buyer's ESRS E1 disclosure.
Japan's Physical Risk Profile
Japan faces a unique combination of physical climate risks that makes facility-level data especially important:
- Typhoons: Increasing intensity; scenario analysis shows insurance claims rise as central pressure drops
- Flooding: Concentrated in river basins; compound events (rain + typhoon) intensifying
- Earthquake-climate compound risk: Earthquake damage + climate event in sequence creates cascading failures
- Water stress: Regional variation; semiconductor fabrication and cooling-dependent manufacturing vulnerable
- Heat stress: Worker productivity impact; SSBJ standards §14-15 require disclosure of climate-related risks and opportunities
Japan's TCFD consortium has over 1,000 supporters — the largest in the world. Japanese companies are among the most active in climate risk disclosure. When Japanese buyers conduct SSBJ-aligned climate risk assessments, they will request the same facility-level data from their supply chain.
How Marupass Provides Physical Risk Context
Marupass's data architecture captures facility-level environmental data with geographic context — not just aggregate emission numbers.
Facility-Level Data in the Universal ESG Ledger
Every resource flow in the Universal ESG Ledger is linked to a facility. The ledger records not just what resources are consumed but where — providing the geographic anchor that physical risk assessment requires.
SLL Physical Risk Geospatial Integration
The SLL Evaluation Engine already integrates physical risk assessment with geospatial mapping (Leaflet) for bank lending decisions. The same infrastructure maps supplier facility locations against flood zones, water stress indices, and climate hazard data.
ESRS E1 + SSBJ Climate Risk Adapters
The compliance framework adapters export physical risk data in the format each framework requires. ESRS E1 requires disaggregation by acute vs. chronic risk with monetary values. SSBJ §14-15 requires climate risk and opportunity disclosure. Both draw from the same facility-level data.
Adversarial Verification of Adaptation Claims
The Adversarial AI Auditor verifies adaptation claims — ensuring that documented measures (flood barriers, backup power, alternative water sources) are supported by evidence rather than aspirational statements.
Your Factory Is on Their Map
$320 billion in losses. Insurance retreating. Six consecutive years above $100 billion insured. ESRS E1 requiring monetary physical risk disclosure. SSBJ requiring climate risk assessment. Supply chain disruption projected at $3.75 trillion to $24.7 trillion by mid-century.
Your buyer's risk team is mapping their supply chain. Your factory is a pin on that map. The data next to that pin — your location, your exposure, your adaptation measures, your business continuity capability — determines whether you are classified as resilient or risky.
$320 billion. 56% uninsured. Insurance retreating. Your buyer's ESRS E1 report requires monetary disclosure of supply chain physical risk. The supplier who provides facility-level climate risk data — location, exposure, adaptation measures — controls their own risk narrative. The supplier who provides nothing lets the buyer's risk model estimate their exposure. That is not compliance. That is an active defense shield against supply chain physical risk mapping.
- Watch the Magic Trick. You don't need another sales call. Watch our 3-minute interactive demo to see exactly how our AI turns a raw PDF into a verified physical climate risk report instantly.
Your enterprise buyers need verified data. You need to protect your operational time. The gap between their question and your answer is just one email forward.