A Wider View of EHS Due Diligence for Mergers & Acquisitions

I have been working on Environmental Health & Safety Due Diligence for US, European and Japanese clients. The recent happenings indicate the need to have a wider view while carrying Due Diligence for Mergers & Acquisitions. While a large number of US companies only restrict the exercise to Environmental Due Diligence as per ASTM 1527-2013, some other carry out full EHS Compliance Assessments. However, in all the cases some of the happenings around the country indicate need to focus on at least two new areas:

1. Human Capital – Safety does not get the due share while carrying out the Due Diligence and some of the companies had trouble for almost two years after the Merger to start the plant as the management tried to enforce the Safety management systems that were resisted by the local workforce.

2. Social and Demographic Profile – There have been cases where there were fatalities of Human Resource personnel due to the friction between the management and employees including contract workforce. The degree of risk needs to take into account behavioral pattern in the regions where plants are being proposed. Similarly, some of the companies had to defer their operations for years due to social resistance from the community

3. Future Perspective- There is a need for better respect for Laws of the Land and also a focus on changing scenario in enforcement. Many times, the overseas counterparts are informed that we can manage the compliance as we have been doing for years. However, as evident from recent cases where NGT has intervened including fine on World Culture Festival, the scenarios are changing fast in the developing countries and historical data like fines in the past should not be taken as a measure of risk for future.

4. Transfer of Information – While there is immense money and effort spent in carrying out EHS due diligence, this data even after successful mergers or acquisitions of new companies or sites is not shared. There have been cases where this information could have avoiding of costs of investigation once this new site or company faces an environmental litigation or audit

We hope the above would be taken to account to improve the return on investment made on EHS and Social Due Diligence.

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