Australia’s manufacturing sector is under growing pressure to transition to a low-emissions future. The introduction of the Australian Sustainability Reporting Standards (ASRS) is accelerating this shift, placing mandatory climate-related disclosures front and centre for manufacturers across the country. For CFOs, Heads of Sustainability, Risk and Compliance, the challenge is now twofold: manage increasing carbon risk and unlock value in the supply chain while navigating complex data and regulatory requirements.
But this isn’t just a compliance issue. For forward-looking manufacturers, the ASRS marks a turning point. It’s an opportunity to future-proof operations, drive efficiencies, and build resilience in a rapidly decarbonising economy.
Mandatory climate reporting is here for manufacturers
The ASRS, developed by the Australian Accounting Standards Board (AASB), draws directly from the International Sustainability Standards Board (ISSB)’s global climate reporting framework. Once legislated, these standards will make climate-related disclosures mandatory for large Australian entities, including many manufacturers.
Manufacturers are expected to disclose Scope 1, 2 and, critically, Scope 3 emissions, alongside detailed transition planning, climate governance, and scenario analysis. For a sector with sprawling, emissions-intensive supply chains, this raises the stakes significantly. Scope 3 emissions, which typically account for the majority of a manufacturer’s footprint, require detailed data from suppliers, many of whom may not yet be collecting or reporting this information.
This is no longer a voluntary reporting exercise or a checkbox for ESG ratings. The ASRS brings with it legal, financial, and reputational consequences. Climate-related disclosures will sit alongside financial statements and will be subject to the same scrutiny from boards, auditors and investors.
Decarbonisation pressure is intensifying
Manufacturers are already facing pressure on multiple fronts. Global value chains are shifting. Key trading partners, like the EU, are implementing carbon border adjustment mechanisms (CBAMs), penalising imports from emissions-intensive supply chains. Customers, investors and regulators are demanding greater transparency and action.
In this context, climate-related financial disclosures under ASRS act as a forcing function. They compel manufacturers to understand, quantify, and reduce their emissions, not just within their own operations but across their value chains. This includes everything from upstream suppliers of raw materials to downstream transport, packaging, and product use.
This pressure isn’t just regulatory. Manufacturers that can’t demonstrate credible emissions reductions risk losing major customers and access to global markets. On the flip side, those who move early are more likely to secure investment, win business, and retain top talent.
Data is the key challenge, and the key opportunity
Despite increasing awareness, data remains a critical barrier. Most manufacturers aren’t set up to measure emissions across complex, tiered supply chains. Internal systems may not capture the right information. Suppliers may be small, offshore, or lack the capability to report at all.
This is where platforms like Avarni can make a real difference. Avarni helps manufacturers rapidly assess their emissions exposure, including indirect (Scope 3) emissions, by ingesting procurement data and automatically mapping it against emissions factors. Instead of relying on industry averages, Avarni enables companies to invite suppliers to submit actual emissions data, building a more accurate and actionable footprint over time.
With automated analytics, manufacturers can identify emissions hotspots, prioritise reduction opportunities, and model different transition scenarios. This allows teams to move beyond reporting towards strategic emissions reduction planning aligned with ASRS expectations.
Importantly, Avarni’s AI-powered platform helps manufacturers accelerate supplier engagement, streamline data collection, and report with confidence. For companies facing increasing audit and assurance requirements, this level of rigour and transparency will be essential.
Supply chain action will drive real impact
For most manufacturers, tackling value chain emissions is where the biggest opportunity lies. Scope 3 categories like purchased goods and services, upstream transport, and capital goods typically dwarf operational emissions. This means decarbonisation efforts must extend well beyond the factory gate.
This will require a shift in procurement strategy. Manufacturers will need to work closely with suppliers, especially high-emitting or strategic ones, to set expectations, gather data, and co-develop low-carbon alternatives. In many cases, they may need to reconfigure their sourcing models, support supplier up-skilling, or work with industry groups to drive standardisation.
Platforms like Avarni enable manufacturers to track supplier emissions over time, benchmark performance, and demonstrate progress to regulators, investors, and customers. By embedding emissions insights into procurement and product development decisions, companies can align commercial goals with climate targets, turning sustainability into a driver of long-term competitiveness.
Transition planning must be more than box-ticking
The ASRS requires companies to publish detailed transition plans, outlining how they will reduce emissions over time and manage climate risks. This includes target-setting, capital allocation, and board-level oversight.
Manufacturers cannot afford to approach transition planning as a static or siloed process. Plans must be grounded in robust data, backed by credible emissions pathways, and integrated into broader business strategy. For energy-intensive operations, this may involve investing in process electrification, renewable energy, or low-carbon materials. For others, it could mean redesigning products, optimising logistics, or shifting to circular models.
Avarni’s scenario planning tools help manufacturing leaders stress-test assumptions, compare decarbonisation pathways, and understand the financial implications of different strategies. This level of foresight is key to building resilient transition plans that meet ASRS requirements and support long-term value creation.
A turning point for manufacturing sustainability
The ASRS is a wake-up call for Australian manufacturers to take control of their climate risks and reposition themselves for success in a low-carbon future.
Yes, the challenges are real. Data gaps, supply chain complexity, and uncertainty about future regulations make this a difficult shift. But the cost of inaction is rising, and the opportunity cost of delay is even higher.
Manufacturers that act now will differentiate themselves in the market, attract investment, and build more resilient, future-ready businesses.
With the right tools and a clear plan for engaging the supply chain, Australian manufacturers can meet the demands of mandatory sustainability reporting while driving real-world emissions reductions and unlocking competitive advantage.
Summary
- ASRS introduces mandatory climate disclosures: Australian manufacturers must now report scope 1, 2, and 3 emissions and develop transition plans in line with ASRS requirements.
- Carbon risk is increasing: Global decarbonisation pressures, trade regulations, and investor expectations are accelerating the need for action in the manufacturing sector.
- Data is a major barrier, and an opportunity: Manufacturers need tools like Avarni to gather and analyse emissions data, especially from suppliers, to meet ASRS standards.
- Scope 3 action is critical: Decarbonising the supply chain will deliver the greatest emissions reductions and must become a priority for procurement and sustainability teams.
- Transition plans must be strategic and credible: ASRS demands more than ambition, plans must be based on accurate data and integrated into business planning.
- Early movers will gain a competitive edge: Manufacturers who invest now in sustainability will be better positioned for future regulation, customer demands, and market shifts.
