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What is Environmental Due Diligence?

26 July 2018

What is Environmental Due Diligence (EDD)?

Environmental Due Diligence (EDD) is the assessment and management of environmental liabilities and risks. This can take various forms and be accomplished through several methods, but the objective is always the same: to establish that your organisation is compliant with environmental regulation and safeguarded against environmental accidents such as soil and/or groundwater contamination.

Environmental Due Diligence is both a legal and technical exercise – an action of analysing your organisation’s site or a site your organisation is looking to acquire. It is often demonstrated by a formal assessment of the organisation and land to identify any existing or previous environmental conditions and/or contaminations and quantify financial and legal risks.

Why is it Important?

Environmental Due Diligence is a form of proactive environmental management. As mentioned in our blog from last week, ‘Proactive Environmental Management and Why it Matters’, there are a number of reasons why a proactive approach to environmental management is important. These include (but are not limited to):

  • Avoidance of legal prosecution;
  • Top Management support and involvement in environmental attitude and performance;
  • Positive public relations;
  • Long-term capital gain;
  • Improved environmental performance.

In addition to being proactive, unrecognised environmental liabilities and/or permit requirements can prove costly for organisations. By executing EDD, an organisation will have awareness of historical environmental aspects and permit requirements that might produce large remedial bills in the future. This also allows for the appropriate management measures to be put in place.

Furthermore, Environmental Due Diligence is closely linked to the ‘polluter pays principle’ as set out in the Environmental Damage (Prevention and Remediation) (England) Regulations 2015. The ‘polluter pays principle’ states that any producer of pollution will be responsible to pay for its clean-up and remediation. This links to EDD because if an organisation purchases or inherits land that is already polluted, and the previous occupier cannot be found and/or there is no evidence to support the claim that the pollution was caused by the previous occupier, the burden to clean-up and remediate any negative environmental impacts of the pollution is also inherited. Thus, EDD can aid in an organisation’s understanding of their liability for clean-up operations, provide defence against prosecution and mitigate the amount of any imposed fines.

How does it Apply to Organisations?

In order to combat the negative impacts of failing to consider EDD, an organisation should undertake an EDD audit. Environmental Due Diligence audits are dependent on the size of the organisation, current and historical site activities and the industry sector in which the organisation operates. However, all audits tend to include the following (list is not exhaustive):

  • Legal compliance audit;
  • Physical sampling and laboratory analysis;
  • Phase I & II Environmental Site Assessments;
  • Soil and groundwater investigation.

It is important to remember that not all sites are the same and sometimes more measures are necessary to ensure that all environmental issues are captured.

Is your organisation aware of its Environmental Due Diligence? Have you had an EDD audit carried at your organisation?

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