The controversial topic was among those discussed at the start of the two-day event in Glasgow.
The group, lead by Labour member Allan Grogan, aims to suggest what the party could offer in the event of a Yes vote in the independence referendum next year.
"We're offering an alternative to the SNP," he said.
"Eventually Labour is going to have to acknowledge there are voters in the party who will back independence."
Issues at the conference include the group's position on Nato and policies in education, health and infrastructure.
The event opened with a discussion on the Common Weal, a project led by the Jimmy Reid Foundation which looks at possible changes to economic and social development.
Robin McAlpine, from the foundation, said: "Scotland needs an idea that brings people together. It needs an agenda that includes those living in poverty and those trying to run a decent, local business."
Mr Grogan expects about 100 people to have taken part in the conference when it closes tomorrow.
A Labour spokesman declined to comment.