Parliamentary Committees

Natural Resources Committee: Inquiry into Environmental, Social and Governance (ESG) in Primary Production

Ms WORTLEY (Torrens) (11:02): I move:

That the sixth report of the committee for the Fifty-Fifth Parliament, entitled Inquiry into Environmental, Social and Governance (ESG) in Primary Production, be noted.

There is an increasing expectation at the global, interstate and state levels for primary producers to exhibit accountability for their actions and sustainability in their practices. South Australian primary producers are aware of this and are committed to sustainable land management practices as signified by commodity-specific sustainability frameworks and initiatives. However, global sustainability initiatives, such as environmental, social and governance (ESG) frameworks, vary and have not adequately considered Australia's unique production context.

On 16 November 2023, the Natural Resources Committee resolved to inquire into ESG in primary production to examine how South Australian primary producers navigate domestic and international ESG landscapes, especially in communicating their initiatives and achievements in this arena and the pathways to ESG leadership. In particular, the Natural Resources Committee investigated:

1. what ESG is in the primary production context;

2. the process or processes employed or undergone by entities to craft ESG frameworks;

3. the current status of ESG initiatives in South Australia, interstate and internationally relative to:

(a) entities using the framework;

(b) reporting standards; and

(c) measuring impacts;

4. the pressures and opportunities for primary producers in South Australia regarding ESG;

5. what an ESG leader in primary production in South Australia looks like and the pathways to get there; and

6. any other relevant matter.

The committee received six submissions and conducted 10 public hearings from February to June 2024. The committee received evidence from representatives of South Australia's peak industry bodies, a state government department, experts from academia, and research and policy institutions.

Written submissions and oral evidence received by the committee described ESG as a holistic approach to sustainability that takes into account primary producers' performance as stewards of nature (E); relations with employees, customers, communities, and other actors in the supply chain (S); and the practices and processes in their leadership structure (G).

The committee heard evidence that the process of transitioning and complying with ESG principles necessitates (a) primary producers and relevant stakeholders working together; (b) having a standardised set of measures; (c) improving primary producers' ability to fulfil ESG requirements; and (d) balancing environmental stewardship with profit maximisation.

The evidence provided to the community, and as mentioned earlier, indicated that the current demand for ESG compliance among primary producers at the international, interstate and state levels is gaining momentum. This is indicated by the plethora of metrics and reporting systems that have surfaced, the implementation of ESG-related legislation, and the development of ESG-related products in the financial sector.

The committee heard evidence that primary producers are familiar with and committed to sustainability practices as indicated in each industry's specific frameworks and blueprints. This is an essential condition relative to ESG transition and compliance. However, the evidence received by the committee indicated that the uptake of ESG amongst primary producers in South Australia differs, and there are dissimilarities in primary producers' capacity and maturity towards ESG compliance.

The committee also heard evidence that South Australian primary producers are confronted with the pressure to present their ESG credentials despite no standardised ESG metrics and reporting schemes at the global, interstate and state levels that South Australian primary producers can use. As a result, farmers find themselves overloaded and uncertain about the requirements, and they delay or resist their transition to ESG.

Additionally, the evidence presented to the committee indicated that the lack of standardised measures and reporting requirements opens ESG measures and reporting to manipulation by entities themselves and performance auditors. Amidst this pressure, the committee heard evidence of an asset and opportunity that South Australian primary producers could use or maximise to facilitate ESG transition and compliance. The evidence provided to the committee noted that South Australian farmers' extensive and longstanding stewardship of the environment makes them well equipped already to demonstrate sustainability practices, placing farmers in an advantageous position relating to ESG compliance and reporting.

The committee also heard evidence of current ESG-related initiatives at the federal and state levels. One of these is the Australian Agricultural Sustainability Framework (AASF), an outcome rather than a practice-based approach to ESG-aligned sustainability reporting. The AASF is a shared-values approach towards sustainability that, although not an ESG reporting system, uses an ESG lens that primary producers can use as a guiding tool to convey their ESG stories.

Another opportunity for primary producers in South Australia is the Australian Sustainable Finance Taxonomy currently being developed. The agricultural sector is one of the priority areas of this taxonomy, and it is hoped to guide primary producers' reporting on sustainability, including ESG, to financial institutions. Furthermore, the evidence provided to the committee noted that given Australian, including South Australian, farmers' management of natural resources, tools to account for or assess natural capital and product traceability innovations are opportunities for South Australian primary producers towards ESG compliance.

In regard to ESG leaders and pathways to leadership, the committee heard evidence that South Australia's dairy, grain and wine industries are advancing towards ESG compliance as exemplified in these industries' state action plans and initiatives.

The evidence received by the committee indicated that the enabling factors towards South Australian primary producers' trajectory towards ESG are (a) standardised ESG metrics, (b) data digitisation, (c) information and experience-sharing platforms, (d) federal and state level policies that promote and support the primary production sector's sustainability credentials and performance, and (e) the communication of primary producers' sustainability narratives to the international, interstate and state markets. As such, the committee makes significant recommendations in relation to ESG and primary production in four areas: (a) ESG metrics and reporting schemes, (b) education and capacity building, (c) innovation and research, and (d) legislation.

I hope that members here will consider viewing this report. I would like to sincerely thank all witnesses who gave their time to assist the committee with this inquiry. I commend the committee members for their contributions throughout the inquiry: Sarah Andrews MP, Mr David Basham MP, the Hon. Tammy Franks MLC, the Hon. Ben Hood MLC, Ms Catherine Hutchesson MP, the Hon. Russell Wortley MLC and also, of course, the previous Presiding Member of the committee, you, Mr Speaker, the Hon. Leon Bignell MP. Finally, I acknowledge and thank committee staff for their assistance, in particular Mr Shane Hilton and Ms Jennefer Bagaporo.

Mr BASHAM (Finniss) (11:11): It is a privilege to rise to speak to this report, and certainly likewise I would like to thank very much Shane and Jennefer for their work that they did preparing the report on behalf of the committee. All our committee work, no matter which committee it is, very much relies on the staff of the parliament. They do a fantastic job of helping us through this process.

I just want to make a few comments in relation to the report, in particular being a former dairy farmer and very much involved in the sustainability framework that was established in the dairy industry back in 2012. At that time, the dairy industry was very much a leader in this space and trying to deliver what the market wanted in getting the message out there to actually report on what farmers and the industry as a whole does in relation to environmental, social and governance and, in particular, the sustainability of those industries.

The challenge, particularly on farms, is that farmers have been doing things in a very sustainable way for a very long time. They just have not been able to document and report, because there has not been a clear framework for them to actually do that and an understanding of how they can. There was not a lot of need for change of practice on farms as we headed down this path; it was actually more about making sure we were able to record what good work farmers were doing.

Farmers are great custodians of the land. Most of South Australia is under the care of farmers, pastoralists, people caring for the land. They are the ones who actually look after the land to make sure things are operating well. There are challenges, of course, and our seasonal conditions can be our biggest challenge at times. We feel very much for our farmers, certainly in the productive agricultural areas of South Australia at the moment, as over the past 12 months there have been large proportions that have been the driest on record, so it has been really challenging for those farmers operating in that environment.

There is a huge opportunity for us to actually help our farmers—not get in their way, but actually help them—to make sure that there is some commonality about reporting. One of the challenges, particularly from industry to industry, certainly that I found as a dairy farmer when I was trying to report, is actually understanding what happened on farmers' properties that I bought grain and hay from, understanding what the inputs were coming from there. It is very hard for farmers to actually have that understanding about how to report those transitions of responsibilities from one farmer to the other. So there are certainly many challenges there that we need to work through.

I think it is great to see this. I was looking this morning and discovered a select committee report from back in 2013 done here and chaired back then by the Deputy Speaker, the member for Light, looking at sustainable farming practices. That was in the very early days of moving down this path. Interestingly, I gave evidence at that inquiry. I had actually forgotten I ever did so. But certainly, it is interesting how much the industries have moved in that time, how much government—and all facets of government, whether it be state, federal or even local government—has been able to sit there and help farmers move through this path.

Industry is doing a fantastic job in this space. We need to be making sure we are there to assist industry. This is something that is very important to industry, so I very much commend the work that has been done here and thank my fellow members of the committee and past members of the committee for their work in this space. Again, I would like to thank Shane and Jennefer for the wonderful report they prepared.

The SPEAKER (11:15): I would also like just to quickly add my thanks to everyone involved in this report and in particular the member for Gibson, whose idea it was that we actually do the investigation. I want to thank all the current members of the committee for continuing that work and coming up with an excellent report, and I would like to thank Shane and Jennefer and Alison before Shane, for all the work they did as well and continue to do on the committee.

Ms WORTLEY (Torrens) (11:16): I would like to thank those who have made a contribution and thanks again to the committee and of course to you, Mr Speaker, for the work that you put in as Chair previously.

Motion carried.