Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024

I want to focus my comments tonight on the scope 3 emissions section of the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 because the effects of the indirect emissions in scope 3 won’t begin and end with large business. This is an entirely new and major impost on business and industry, but it will particularly impact on small and family businesses. It will actually impact on those who haven’t yet realised what’s ahead for them, as we’ve heard tonight, starting in 2027-28 but by 2030 being mandatory.

ASIC itself has said the compliance will be passed on to small business. It’s not just large business; the compliance cost and work will be passed on to small business. ASIC itself has said so. I know the Small Business and Family Enterprise Ombudsman, acknowledged by ASIC, is very concerned about the impacts of the scope 3 emissions because many of the entities that small businesses bank with, the businesses that small business supply or buy from, will have to provide the scope 3 sustainability report each financial year. But that regime forces all companies with turnover of over $50 million—it’s not profit; it’s turnover of over $50 million—or assets over $25 million to disclose and report annually audited and verified scope 1, 2 and 3 emissions disclosures to ASIC.

Scope 3 emissions are those that happen when a business sells its products, when it buys the inputs it needs to run the business, as well as reporting to financial institutions—when the banks get involved with this, which they are and will be with this legislation—that the business, the small and family business, borrows from, perhaps invests in or has lending from in different ways. This will be a mandatory reporting process for businesses with, as I said, over $50 million turnover or a $25 million asset level, which the Treasury itself has said will cost $1.3 million per business per year to comply with. That’s $2.3 billion a year every year in compliance costs being passed on to small business, to both their customers and suppliers—and I think, given what we’re seeing here in this place, the $2.3 billion will prove to be a conservative estimate, given the Labor government legislation we are dealing with today and what’s encompassed in it. If those small businesses cannot pass on their costs of all that work—the auditing, the collecting of data—to their buyers, they will have to close; they’ll have no choice. Good luck trying to get increased prices from major supermarkets or big businesses, given their market power, when you’re a small business!

Independent research has put the cost to the economy of red tape at over $176 billion a year. The Labor government is going to add another $2.3 billion to that for business. Imagine what the reduction in the cost of living and the cost of running small and family businesses would be if that $176 billion was reduced or gone. By default, this bill simply adds another $2.3 billion at least to the $176 billion—just more complex, confusing and costly red and green tape, probably designed to keep busy the 36,000 additional public servants Labor has employed.

I had a discussion with a family dairy and dairy manufacturing business regarding the scope 3 emissions in this bill. It will be forced to report based on that $25 million asset threshold. The first response I got was, ‘Does the Labor government want to send all businesses broke?’ It’s a fair call. The owner said, ‘This is just the next layer of green and red tape we have to deal with, and it’s costing us a fortune.’ This is coming at the same time so many businesses in the south-west in manufacturing, hospitality, freight, construction and agriculture have been and are under enormous personal and financial pressure. They’re struggling for workers, there’s no accommodation available for workers if they can get them and the owners themselves are simply exhausted. These are the people who work in and on their business every day. We know 16,000 businesses have become insolvent in the last two years. Here are the same small businesses that are going to have to pay through the nose to provide professionally assessed, assured and audited reports on their scope 3 emissions every year to give to those bigger businesses that the previous member spoke about.

This additional cost is coming at a time when, according to COSBOA’s Luke Achterstraat, there are a million small businesses who are not able to pay themselves properly or break even. There are 2.5 million small businesses in Australia employing almost half the private sector workforce that will be impacted. There’s no doubt that these same small businesses will be in the firing line from the Environmental Defenders Office and other activists, given the Labor government’s continued funding of the EDO in relation to this reporting process. Those same small businesses will have a foot on their throat and will be worried constantly and under pressure because of the threat and risk of regulatory action from ASIC, the ACCC, their banks, the businesses they’re dealing with or activists.

How much information will actually enough for these major corporates? Will they demand what will effectively be anticompetitive information that gives them even more market power and control, by exposing the finances and cost inputs of the small businesses that supply them or buy from them? How will big corporates weaponise that information? And how many small family businesses will be at risk of being ‘debanked’ if they can’t or don’t comply? That’s what we’re facing here from the finance sector.

As we know, the major banks in Australia have an enormous amount of power already. I got an email this week from another bank that’s shutting down a whole tranche of branches, some in my electorate. These banks are even going as far as charging customers to access their own money held in debit card accounts—that’s your money, sitting in a debit card account, and yet you’re charged to access your money that’s sitting there.

Small and family businesses are under enormous financial and bureaucratic pressure. Already we see the same information being asked for in different ways from various agencies, over and over—local, state, federal. It is a massive, endless reporting process, each time slightly different to meet the specific demands, adding layer upon layer of cost, pressure and work for small family businesses. There are multiple and ever-increasing requests— time, money and grief for small-business owners, the ones who are working their hearts out. They’re often the people who give people their first job or their last job in life. These people are time poor and are simply seeking the simple and basic right to supply to the buyer or corporation.

Australia’s productivity has fallen, and, in global economic competitiveness rankings, Australia declined from fourth to 19th in 2023. That’s actually the harm that red tape is imposing in this country. It is helping to make us less productive and far less competitive. Independent research shows that, since 2005, federal red tape has increased by 88 per cent, two-thirds greater than the national economic growth. And yet here Labor is imposing another massive increase in red and green tape.

I just want to look at the practical example of the layers of regulation and compliance needed in a small business. I will talk about a dairy farm, for instance. Buying, selling and finance will all have to be accounted for under scope 3, demanded by the bigger businesses. So the farmer will have to pay to have their whole business assessed and apportion their scope 3 emissions across all of their inputs, like bought-in feed, electricity, irrigation, fuel, cartage, contractors’ services, repairs and maintenance, hardware, new infrastructure, fertiliser, telecommunications— you name it. They then will have to do the same to assess, apportion, audit and report their scope 3 emissions for every business they sell to. That could be the milk processor, the abattoir they sell cattle to, the supermarket or buyer of their cattle at a saleyard, the buyers of calves. They will all feed into this interconnected, elastic stream of scope 3 emissions reporting. The banks they borrow from or have investments with will demand this information from farmers and small businesses. I am really concerned about the debanking of customers that we’re seeing.

But, of course, on a farm the circumstances change as often as the weather. I just remind people watching: no farmers, no food. The cost and compliance will be variable, onerous and obscene, in my opinion. Then I look at the small businesses that supply the dairy industry, which will have the same reporting obligations and pressures. The milk processor will have to assess, apportion, audit and report their scope 3 emissions up and down their supply, value and finance chain. The local machinery dealer will have to do the same, whether they are selling John Deere, Massey Ferguson or any other brand. These companies may well have assets over $25 million. They may have to report their scope 3 emissions up and down their individual supply and value chain. So, when you look at this, this is just extraordinary layer upon layer of regulation, red tape and endless paperwork.

The abattoir will have to do the same. The abattoir will have to account for all of the scope 3 emissions of every farmer supplying them with cattle and the livestock transporters who deliver the cattle to their yards. We’ve seen the effect that our major supermarkets have had on cattle markets and prices.

What about the constant seasonal changes experienced by farmers? Be it a dry season, be it times when you need to apply more fertiliser, be it the seasonal aspects of when you’re seeding, doing hay or harvesting, all of these will change the reporting requirements constantly. So here we are, punishing even more small businesses—our farmers, especially the farmers who are working their land, working on greater productivity all of the time.

Of course, as I said, they could be supplying a range of different entities, and this goes across all different businesses. When you look across this—whether, for instance, you’re selling grapes to a winery or it’s the fruit and vegetables that go to a supermarket—scope 3 has to be reported. That all comes back to the supplier of those products—the individual grain growers, perhaps—with land and farming assets over the $25 million.

I don’t know what impact this is actually going to have on local government. Will the bankers need to report their emissions to meet their obligations as well? I don’t know whether the businesses that supply the projects and programs that local government tender out will have to report their scope 3 emissions and provide those sustainability reports.

It goes on and on. There are irrigation cooperatives and their members and customers up and down. There are businesses like Albemarle, Simcoa, Alcoa, Perkins in my patch, Doral, Fulton Hogan, Qube, Dale Alcock. All of their supply and value chains will have to be accounted for with scope 3.

I find that this is just an extraordinary mesh of additional requirement. It actually reminds me of a terrible elastic condition. This will filter down to all levels. It’s a massive impost on small and family business, and even on the bigger businesses and the major businesses that are getting on with their business. They’ve got people that can do this sort of work for them. Those in small and family businesses work in their business all day, and sometimes half the night, and this type of reporting comes over and above that, plus they will have to pay. From what I can see there will be a new industry built around this, and a new bureaucracy in Canberra that will have to deal with this as well.

When you put it all together, I think the inclusion of scope 3 emissions and how this will filter right down from the top to the smallest business and right across the board is going to add so much cost and so many more layers of useless regulation in many terms for those small businesses that are forced to comply with it.