The adaptation economy

Welcome to the adaptation economy

The office, the working week, our critical infrastructure, and even our business models are based on environmental assumptions rooted in the last century. How will C-suite leaders adapt firms to this one?
By Peter Stojanovic

The world within which we live and work is warming. That this warming has myriad effects on how we live is well known. But what about how we work? C-suite leaders and their organisations are being forced to redesign themselves around a permanently different operating environment where climate adaptation is a board-level agenda item and a front-line worker's daily reality, in many cases. This creates tension between long term and strategic planning, and a very visible, tangible present. It is forcing experimentation with architecture and working days. It is encouraging leaders to redesign better conditions and more resilient models. It is even forcing a reckoning with management philosophy.

The world within which we work was built for another climate, and leaders are already taking steps to redesign firms, networks, and practices for the one we are inheriting, with markedly mixed results across four domains.

Part 1: The office was built for another climate
Part 2: The working day was built for another climate
Part 3: The infrastructure was built for another climate
Part 4: The business plan was built for another climate

This editorial originally appeared as a four-part series within Editor’s Letter, my weekly HotTopics newsletter.

Part 1: The office was built for another climate

Europe's buildings were built for the previous century’s climate: they were designed to keep warmth in. Thick masonry, generous insulation, and sealed façades reflected the priorities of colder winters, cheaper energy, and an assumption that overheating would remain an occasional inconvenience. Today, those same design decisions are becoming liabilities. For governments and organisations in particular this fact subsidises the urgency with which they are tackling certain key findings.

First, that Europe is warming more than twice the global average, and second that the demand for cooling buildings is increasing rapidly, as shared by the International Energy Agency (IEA) in its 2018 report, The Future of Cooling.

Taking this further the European Environment Agency published Keeping Europe cool: How to avoid overheating from buildings. It highlights passive cooling measures including shading, natural ventilation, reflective materials, and urban greening as priorities alongside energy efficiency—measures increasingly being prioritised alongside traditional insulation because of the World Health Organisation’s assertion that overheating is becoming a health, productivity and equity issue. Heat is now the leading weather-related cause of death across Europe.

Organisations and their C-suite are openly adapting. It may well be an instinctive response to a warming world. It is certainly strategic: commercial buildings are increasingly being managed as long-term climate-resilient assets, with owners investing in retrofit and adaptation to preserve value and functionality in a hotter future. 

Take London's West End as an example. Between them, Grosvenor, The Crown Estate, and Shaftesbury Capital own roughly 15 percent of prime property assets in Great Britain’s capital. Their influence is far greater, although intangible, as they collectively own a particularly important one-seventh, including star postcodes such as Mayfair. What they do is indicative of a wider market pattern, therefore.

The £25M ($33.5M) redevelopment of Mayfair’s Grosvenor Square has wetlands integrated into public realm and soil “redesigned” to absorb approximately 1.4 million litres of stormwater. Heat-tolerant planting is also replacing traditional landscaping elsewhere across the city. The pressure is on planning authorities to permit climate adaptation in conservation areas when one estimate from London City Hall found around one million London homes are estimated to face high overheating risk, plus a further 1,300 schools, 60 hospitals, and hundreds of care homes.

This is broadly aligned to the UK Government’s response: London now has its first heat plan, much like that of Greece’s Athens, or Nigeria’s Lagos, both of which appointed Chief Heat Officers in the last decade. According to City Hall London its heat plan includes “retrofitting buildings, expanding cooling spaces, protecting vulnerable populations, improving infrastructure resilience, and mapping overheating risk”.

Environmental regulation alone is very early 21st Century; we now have environmental redesign.  In fact, Europe is becoming a laboratory for adaptation because it combines several unusual characteristics: the fastest-warming continent is also home to some of the most protected cityscapes in the world, and although dense, walkable urban environments amplify the urban heat island effect they also make district-scale interventions—such as Paris's greening network or London's cool spaces—far more feasible than, say, the US focus on widespread air conditioning.

As cities quickly reconfigure what it feels like to live within them, companies are also rewriting workplace operations for what it feels like to work within them. Schneider Electric, Wates, EDP, and Heineken have all taken steps to support staff during extreme heat. Companies do not need to worry about being “walkable”, but they are beginning to note that warmth no longer makes them as “workable”.

Part 2: The working day was built for another climate

We all have certain assumptions about the working world that have evolved into semi-sacrosanct practices.

The nine-to-five working day regardless of sector, a construction shift continuing through the afternoon, the online shopping delivery schedule, or expectations placed upon warehouses to operate at broadly consistent capacity throughout the seasons: these conventions rarely register as climate-dependent because they have become so culturally and operationally embedded. The frequency of extreme heat, however, is forcing organisations to reconsider when and how people work just as much as how and with what materials their offices are built.

The scale of the problem is considerable. The UN’s International Labour Organisation estimates that 2.4 billion workers are exposed to excessive heat annually, equivalent to around 71 percent of the global workforce. In the UK one estimate put the cost of Britain's June 2026 heatwave at £1.15B ($1.5B) and 24 million working hours.

In response, employers are experimenting with deceptively straightforward strategies. British construction company Wates has introduced earlier starts during extreme heat, as well as additional breaks and training to help staff identify heat-related illness. These interventions might sound more like sensible management than climate adaptation-but that is the point. Consider the case of Transport for London. London bus drivers have staged protests as reports of unacceptable conditions due to recent 40C heatwaves mount; a working day organised around assumptions of relatively temperate British summers becomes less sensible when those assumptions change.

Others are going further. Schneider Electric uses temperature monitoring and wearable technology alongside fans, cooled rest areas, and changes to working practices. What interests me here is less the technology than what is being measured. Businesses routinely monitor financial exposure, cyber threats, absenteeism, and machinery downtime because each can materially affect operations. Now, temperature is beginning to join that dashboard.

This creates a rather different management problem from the one usually associated with climate change. Executives are asked how their organisations might reduce their effect on the climate. Now they must also ask how the climate will affect the organisation: its productivity, working hours, insurance, employee safety, and, ultimately, its ability to operate.

Some of the answers may already exist: Heineken has drawn on experience from its Mexican operations in developing a global heat-action toolkit, reversing the flow of decades of management practices as they migrated from headquarters in northern Europe and North America towards subsidiaries elsewhere. Today, Mexico City knows things Amsterdam increasingly needs to know.

The same principle extends beyond one brewer. Organisations operating across southern Europe, the Middle East, Africa, southern Asia, and Australia have accumulated institutional knowledge about managing people, infrastructure, and operations in temperatures that historically appeared exceptional further north. A multinational considering inventing an entirely new climate-adaptation strategy would be well advised to consider expertise it already possesses and move it around the organisation. There are limits, however, to how much of this can remain a matter of managerial discretion. During periods of extreme heat Greece has required certain outdoor manual and food-delivery work to stop between noon and 5pm local time in affected areas. That turns what Wates approaches as an operational decision into a regulatory one, and introduces a question European governments and employers will increasingly have to answer: who decides when it is too hot to work?

The implications—and questions—extend far.

1. If extreme heat becomes predictable rather than exceptional, should summer working hours change?

2. What responsibilities do employers have towards workers who cannot retreat into an air-conditioned office or work remotely?

3. And when protecting employees reduces output, who ultimately absorbs that cost?

When it comes to climate adaptation, C-suite leaders may find it cheaper, quicker, and smarter to learn from their subsidiary markets than devise entirely new ways of working. In short, a hotter world may require headquarters to become better students of their subsidiaries.

Part 3: The infrastructure was built for another climate

If one were charged with ordering a train to be built in Northern Europe today what maximum operating temperature should be assumed?

France has seen more days of 40C in 2026 than in its previous 105 years. It would be a healthy bet to assume higher given these trains have to still run in 40 years time. Eurostar certainly thinks so: its £1.7B order for 50 new Alstom trains includes the pre-requisite of operating in temperatures of up to 55C. As an acknowledgement that long-lived infrastructure must now be engineered for a very different climate, it is both illustrative and tangible.

Britain’s Network Rail has allocated £2.6B between 2024 and 2029 to “improve resilience to extreme weather”, which include adaptations as simple as painting sections of track white. This reportedly lowers rail temperatures by between 5C and 10C. Sweden is testing the same solution. Elsewhere, the resilience response has been to accept lower performance in order to protect the system itself. During extreme temperatures Slovakia has reduced speeds on sections of railway normally rated for 120-160km/h to around 80km/h where track deformation becomes a risk.

Organisational (and literature) pedants may grumble at the use of the term resilience, therefore.

Across management resilience means maintaining normal service as much as possible whatever happens. But much of Europe’s inherited infrastructure offers a different interpretation: slower trains rather than damaged track; reduced generating capacity rather than system-wide collapse; lighter cargo loads rather than grounding river freight altogether. Whether or not that is how tomorrow’s assets should be designed, European leaders advocate resilience by design when in practice controlled degradation may be what separates disruption from outright failure.

What I’m yet to hear from leaders is how to navigate an undeniable consequence of infrastructure: that it rarely degrades alone. Consider electricity: during a recent Greek heatwave, peak demand rose from roughly 6,000MW to around 9,000MW as cooling requirements surged; rising temperatures then makes some forms of electricity generation harder at the same time. France’s nuclear stations require enormous volumes of water for cooling, while environmental rules constrain how hot discharged water can make rivers. EDF invested around €960M between 2006 and 2021 adapting its nuclear plants to changing climatic conditions and has another programme of roughly €600M running to 2038.

Record low water levels of the Danube this summer reportedly pushed generation at Serbia’s Djerdap I hydropower station to around 20 percent of capacity and Djerdap II to roughly 30 percent. Within the lifecycle of electricity, a river system is simultaneously an energy source, cooling system, freight corridor, and ecological asset. Stress one dependency and several begin weakening as a result.

Businesses leaders, political leaders, and even members of volunteer networks should take note because corporate resilience planning frequently divides into convenient categories: energy risk sits over here; supply chains over there. Technology is assessed separately from transport, and property separately from water.

So, even if a chief executive can approve a building retrofit, as per Part 1 of The adaptation economy, or a COO redesigns working hours, as per Part 2, neither can independently reinforce a national electricity network or deepen the Danube. Spain recently unlocked an additional €17.9B of electricity-grid investment through 2030, potentially taking total network investment above €35B. Adaptation at this scale inevitably requires governments, regulators, utilities, and private businesses to make decisions together about assets with lifespans measured in decades.

It prompts a tough question: how much domestic resilience can companies own?

There is also a danger in allowing this (super El Nino-driven) summer to determine the entire answer. C-suite leaders should resist proximity bias: heat may be Europe’s most visible climate risk this summer but European rail evidence still identifies flooding and heavy precipitation as the more consistently disruptive threats across the continent. Forward-thinking leaders are identifying the climate assumptions buried inside the systems on which the economy depends and understands what happens when several of them are tested at once. The most resilient businesses may not be those whose operations never slow. They may be those that know what can slow, reroute, or degrade without breaking, and where money can be spent on their own version of the 55C Alstom trains. 

Part 4: The business plan was built for another climate

For years, a desalination plant outside Melbourne, Australia, was an easy target for industry critics. Built after the country’s millennium drought (from 2001 to 2009, the longest recorded drought in modern southeastern Australia's history) for A$3.5B, it opened in 2012 only to then spend long periods producing little or no water as normal rainfall returned. Sober critics called it a “white elephant”; the general public were less kind. Today, the picture looks different. With reservoirs under pressure, Victoria has placed the plant’s maximum annual order of 150 gigalitres. The facility has now delivered four times that, and can supply up to one-third of Melbourne’s annual water demand. Critics have since quietened.

For a generation, executives have been trained to remove slack: consolidate suppliers, maximise utilisation, and reduce idle capacity. Yes, the pandemic exposed some of the weaknesses of that orthodoxy, but climate adaptation presents a similar problem with a markedly different flavour: whereas a second cloud provider or alternative AI model may be used routinely, a flood barrier, spare cooling capacity, or drought-resilient water source may spend most of its ‘useful’ life doing almost nothing. Its value lies in its availability. That is an awkward proposition for organisations accustomed to measuring return through utilisation.

Let’s now turn to the city of Setúbal in Portugal. Its board spent €1.28M creating a flood-retention system capable of holding around 240,000 cubic metres of water within a 19-hectare urban park. It was not used as such for the early part of its life; most residents enjoyed it primarily as public space. Then, in February 2026, severe storms delivered intense rainfall. The basins filled to less than half their capacity and helped prevent the type of flooding that devastated Valencia months earlier across the Iberian peninsula.
Setúbal success illustrates a perennial problem for adaptation accounting: the system’s capital expenditure is tangible, but one cannot easily price in a disaster that did not happen.

There are few places immune to that accounting tension. After a 2013 North Sea storm surge flooded the UK’s Port of Immingham and disrupted nationally important supply chains, Associated British Ports and Drax invested in multiple layers of resilience. Just under £5M went into an upgraded outer dock gate, improving tidal flood protection from roughly a one-in-20-year event to one-in-1,000. Another half a million investment protected electrical substations. This created duplicate routes, spare capacity, and strengthened assets, costing money even when unused, but a comparable interruption to Drax’s operations has been estimated at around £1M per day.

These mathematics are less appealing to the CFO than first glance suggests: if adaptation works, they see the cost but not necessarily the loss avoided; if it doesn’t, they experience both the cost as well as the clean-up (and added scrutiny).

One sector which may offer a way forward for executives is insurance. Hong Kong-listed property group Link worked with AXA on a climate-resilience-linked insurance arrangement after modelling severe flood risk across its portfolio. Following additional flood-resilience investment, the group secured an 11.7 per cent reduction in insurance premiums, doubled its water-damage sub-limits, and extended its policy tenure to two years. Despite severe weather during last year, reported claims were 66 per cent lower than in 2023. In other words, corporate accounting and boards need to get better at mapping the value of not being surprised in a way insurers are mastering.

One more thing: boards ought to also audit CEO succession plans inline with climate redundancy.

The average tenure of departing CEOs at leading European listed companies was 7.4 years in 2025. Many of the assets they approve will last far longer. Buildings may operate for several decades; factories and infrastructure longer still. The people being asked to spend on resilience or redundancy will often leave before the investment proves whether they were right. That makes climate adaptation as a business plan a question of stewardship. 

How should leaders justify paying today for capabilities a future management team may need only occasionally, if at all?

The answer cannot simply be redundancy everywhere. (That would substitute one form of bad management for another.) The more useful principle is optionality. A desalination plant that can move from standby to supplying a third of a city’s water is optionality. So is a building capable of tolerating a wider range of temperatures, a supply chain with alternative routes, or an insurance policy that rewards physical resilience.

Across this series I have reviewed how buildings, working practices, and infrastructure have all revealed assumptions inherited from a more stable climate and world. This final assumption is managerial: that capacity unused is capacity wasted. For a generation of executives trained to remove inefficiency, climate adaptation is increasingly demanding a tough lesson: inefficiency may actually provide availability, availability may protect from disaster, and all of this remains invisible from the balance sheet.

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