The incorporation of ESG criteria (Environmental, Social and Governance) in the stages ofdue diligence– in-depth investigation and analysis conducted before the completion of mergers, acquisitions, partnerships, or investments – is a relatively recent practice. However, it has been gaining ground gradually in recent years, reflecting the growing concern of the market with non-financial risks that directly impact reputation, sustainability, and the long-term value of companies.
A due diligenceESG emerged as an evolution of the traditionaldue diligencelegal, accounting, labor, tax, and financial. It is based on the pressures exerted by investors, consumers, and regulatory agencies, who consider environmental, social, and governance factors as essential criteria in risk and opportunity assessment. Thus, the adoption of the practice reflects a paradigm shift: ESG performance has come to be understood not only as a competitive advantage but also as a requirement for the sustainability of businesses.
In practice, the process includes assessing whether the company complies with environmental laws and adopts sustainable practices; verifying working conditions, diversity, and human rights in the supply chain; and analyzing governance structures, transparency, ethics, and anti-corruption measures. The goal is to ensure that the business is responsible and resilient, protecting the investor against hidden liabilities.
The first step for achievement ofdue diligenceESG is planning and scope definition. This means identifying the objectives of thedue diligence; define relevant ESG criteria according to the sector, region, and size of the company; and establish who are the team members responsible for carrying out the work. This can be composed of internal collaborators as well as professionals linked to a specialized consulting firm.
Subsequently, a collection of information should be carried out, requesting documents and reports related to environmental policies (licenses, resource use, emissions, waste, environmental risk management, etc.), social policies (labor practices, diversity, health, safety, and community relations), and governance (control structure, ethics,compliance, transparency and anti-corruption). With all of this in hand, it is important to talk to the company's leadership responsible for ESG and risk areas and, if possible, conduct technical visits.in locofor practice and physical structure verification.
After assessing compliance with laws and regulations, alignment with international standards (such as GRI, SASB, TCFD, and OECD), and identifying potential risks (low, medium, high)—as well as opportunities for improvement—the process of preparing a detailed report should begin. Nele, in addition to all the collected information, recommendations should be suggested, such as possible corrective measures; and contractual clauses or guarantees should be indicated (if it is a corporate operation).
To conclude, mechanisms for monitoring and tracking ESG progress within the company can be established, with possible periodic audits or KPIs (key performance indicators).Key Performance IndicatorsorKey Performance Indicators) sustainable. The entire process contributes to making decisions more informed, assertive, and sustainable, with mitigation of legal, financial, and reputational risks.
