In business activities and transactions the focus is often on tangible figures, although “soft” factors are often equally or more important. Environmental and social management schemes identify related intangibles in business operations, making them subject to fact‐based decision making. The applicability of these schemes is reduced when confronted with new situations such as mergers, acquisitions, and other asset transactions. Here due diligence (DD) procedures review factors deemed material to such a transaction including, since recently, also environmental and social ones. The purpose of the paper is to describe and conceptualize a DD procedure addressing social and environmental factors.
The paper describes an indicator‐based algorithm for the systematic identification of social and environmental risk factors in asset transactions. The application of the method is demonstrated and tested by example of case studies.
The paper presents and discusses an environmental and social DD procedure. The performance of the procedure is discussed on the basis of concrete case studies.
The DD‐method is applicable in a wide range of firms operating in cost‐driven markets for identifying social and environmental risk, putting a price tag on it, and thereby enables the firm to manage it.
Starting from fieldwork by one of the authors the paper introduces formally a social and environmental due diligence procedure.
