What does due diligence mean for investors or business purchasers when applied in an ESG context?
It means mitigating risk by better understanding the target's risk profile and exposure, with an added emphasis on environmental, social, and governance performance. ESG factors can have a real impact in investment and acquisition decisions and play an increasing role in risk assessments.
There are however, obstacles to ESG due diligence, namely the lack of data. For a variety of reasons, ranging from the lack of universally accepted ESG benchmarks to the struggle to collect relevant findings, examining ESG performance during the investment or sale due diligence process can be complex and time consuming.
For small and medium sized companies that are most likely to be targets for investment or acquisition there is typically a lack of mature ESG reporting and available data, meaning an increased risk profile which may ultimately affect the value of the business or the willingness of the acquirer or investor to proceed (especially in a private equity investment scenario).
Our ESG readiness service will proactively help you to identify where your business may be exposed, where is it behind competitors and what the potential regulatory or market shifts are that will impact your business. We will help you future proof your business by advising you on how to mitigate any ESG risks, and ensure that when you are faced with due diligence you already have a clear understanding of your ESG position and can confidently answer any questions.
Government policy, legislation and societal expectations will continue to evolve over time. We can assist you with getting ahead of and preparing for those changes so that you can ensure the long-term sustainability and success of your organisation.
Regulations are coming down the line for small and medium sized businesses, for example the corporate sustainability due diligence directive recently published in the EU. As the UK seeks to become a leading jurisdiction for business in a post-Brexit landscape it is highly likely that UK businesses will be expected to comply with high standards in relation to sustainability, the environment and their impact on communities.
Some examples of our responsible business related support
Understanding the way your business operates, its underlying governance and its impact on the communities in which it operates are fundamental to resilience, future success and brand value. We will undertake specialist focussed ESG due diligence to review any potential ESG exposure and risks across your business, and advise you upon how to mitigate those risks.
Our experts can work with you to establish your ESG policy and implement ESG questions in your due diligence process. For a fixed fee we offer a meeting at one of our offices or online to discuss your goals, practices and drivers around responsible business and our bespoke recommendations to shape your strategy and key metrics.
Alignment of your business with ESG principles and integrating them to your business practices will add real and perceived value to your organisation and make your business more attractive to acquirers and investors.