As the business world shifts towards a more environmentally and socially conscious approach, the significance of sustainability in M&A has become increasingly prominent. In light of this, companies are now considering the environmental, social, and governance (ESG) initiatives of their target companies before making any acquisitions. In this article, we explore the importance of sustainability in M&A and how to perform sustainability diligence, with insights from Sarah Thuo, Chief Operating Officer at IBM.
“Change is inevitable, and a business that doesn’t change is usually a business that’s dying away. Embracing change and understanding how to thrive in that change is the way to go with sustainability.” - Sarah Thuo
The push for sustainability in the business world is driven by several key factors, including:
The benefits of incorporating sustainability into business operations are clear. Companies that embrace sustainability enjoy:
If seeking to assess a company's compliance with ESG key performance indicators (KPIs), start with performing sustainability diligence. The relevant KPIs will vary depending on the industry, geographic scope, and the company's own commitments. The following steps will guide you through the process:
Step one: Understand the ESG KPIs of the target company.
Step two: Assess how they are performing compared to the expected standards set by regulations, customers, or peers.
Step three: Evaluate their future performance based on their operations, growth goals, and supply chain changes.
Some of the do's include:
Some of the don'ts include: