The Sheep Sustainability Framework is in its consultation period before it is released to the public by the end of the year.
The SSF is led by Sheep Producers Australia and WoolProducers Australia, with Meat & Livestock Australia and Australian Wool Innovation both providing funding, and its aim is to demonstrate the industry's sustainable practices, identify areas of improvement, and better communicate these to consumers.
Charles Sturt University Professor of Livestock Systems Bruce Allworth is the chair of the SSF steering group, which comprises nine people from across the Australian sheep industry supply chain.
Professor Allworth said it was crucial that the sheep industry was transparent when it came to its sustainability.
"Sustainability is really important to the industry," he said.
"We're in high end markets and there's high consumer expectations, so we need to keep improving and demonstrating our progress.
"The aim of the SSF is to develop transparency and trust with stakeholders."
He said the SSF would report on the performance of the sheep industry - both meat and wool - in terms of its sustainability against key priorities and indicators.
There are four themes being covered in the SSF which mirror those in the dairy and beef industries' own sustainability frameworks - animals, environment, people and business.
"It's all about what's happening on individual farms but it's not about individual farm reporting," he said.
"It's about giving a picture of what's happening across the industry for both our internal and external stakeholders."
He said the objective of the SSF wasn't to move the industry in a particular direction, but it could be used to guide future research and development in issues related to sustainability.
"Once we get the results, it may well move things in a particular direction, but that's not the objective of the framework; the objective of the framework is to present the information so that people can judge how the industry is performing," he said.
"The framework will potentially identify things that need improving in the industry, but equally it will also identify areas we're doing very well in."
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He said when it came to reporting on the industry's performance, they would "walk before we can run".
"Initially the focus of the SSF will be mostly on farm and where the animals live," he said.
"We won't be going further down the value chain like the Beef Sustainability Framework (which has been up and running for three years) does as this stage but our commitment is over the next one to three years we will go all the way down the chain.
"The reason we're not going down the chain is we think it's important to get very accurate and highly credible information and we think we can do that within Australia and from our farm sector.
"But we're not convinced we're able to do that with overseas processing and with wool in particular, a lot of that occurs overseas."
By the end of this month or at the beginning of next month, the SSF will enter its third and final stage of consultation, which Professor Allworth said involved public feedback.
"Anyone who has an interest in what's going on, I would encourage you to keep an eye out for the online public consultation," he said.
"You should definitely get involved and have your say."
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