Environmental Due Diligence Services in India: An Overview

The environmental due diligence (EDD) services in India ensure maintaining business compliance related to environmental regulations and sustainable practices. The environmental due diligence services include business evaluation across various metrics, ensuring determining its impact on the environment, potential risks and liabilities.

The environmental due diligence services which comprise of site assessments, environmental due diligence audits, and compliance review is simply a method which offers comprehensive guidance on regulatory requirements and implementation of strong environmental management systems. EDD services in turn reduces the risk of legal risks and violations. The process further boosts a company’s reputation by ensuring all compliances are duly followed.

Need expert guidance for Environmental Due Diligence in India? Connect with our environmental due diligence consultants to ensure compliance and safeguard your operations.

What is Environmental Due Diligence?

Environmental Due Diligence (EDD), also termed as corporate sustainability due diligence, is a comprehensive process that encompasses the assessment of a business to evaluate the risks and liabilities it poses to the environment. The environmental protection agencies (EPAs) which sets standards for corporate sustainability due diligence to ensure businesses comply with environmental laws and regulations.

The environmental due diligence is one of the most important compliances which assists the businesses in making informed decisions, managing risks, and avoiding legal & financial penalties for violating environmental regulations. It further assists in identifying the contaminated sites and hazards, and calculates the potential impact of these risks on human health and the environment.

Benefits of Environmental Due Diligence Services

The organizations need to ensure compliance with Environmental Due Diligence services for the following reasons, as described below:

1. Ensures Regulatory Compliance: The environmental due diligence services assist businesses to comply with all the mandatory environmental regulations and avoid further legal actions.
2. Risk Management—The environmental due diligence services assist businesses in identifying and addressing potential environmental risks or liabilities.
3. Legal Protection: The environmental due diligence services safeguard businesses against liabilities, penalties, and legal actions resulting from non-compliance with environmental regulations.
4. Boosts Goodwill: The environmental due diligence services boost business goodwill towards establishing its commitment to fulfilling environmental responsibilities.
5. Operational Efficiency: The environmental due diligence service secures business commitment towards sustainable goals through efficient management and optimal use of its resources.
6. Investment Attraction: The environmental due diligence offer business with an opportunity to explore and invest in new markets and uncharted territories across the globe.
7. Stakeholder Trust: The environmental due diligence services foster trust among its customers and all stakeholders, building its market reputation.
8. Promotes Sustainability: The environmental due diligence which is a legal compliance promotes & develops sustainable practices as a responsible corporate behaviour.
9. Promotes Health & Safety: The environmental due diligence services promote the health and safety of their employees, community and environment.
10. Informed Decision Making: Environmental due diligence promotes businesses to make informed and thoughtful decisions that prevent further liabilities.
    
    

    Key Components of Environmental Due Diligence in India

    The key components required for conducting environmental due diligence in India are as discussed below:

    • Environmental Site Assessment: Environmental Site Assessment (ESA) is a type of due diligence which ensures addressing and improving the underlying environmental issues in the real estate assets such as contamination, hazardous waste, and improper waste management practices.
    • Environmental Impact Assessment: The Environmental Impact Assessment (EIA)is a practice of evaluating the environmental impact of ongoing and future operations, including effects on air, water, and soil quality.
    • Liability Assessment: Liability Assessment is the process of identifying potential liabilities arising from the contamination or non-compliance with regulatory norms.
    • Regulatory Compliance Review: Regulatory Compliance Review ensures conducting the examination of permits, licenses, and approvals granted in compliance with regulatory norms such as the Water Act, Air Act, and Environmental Protection Act.

    Sectors that Require Corporate Sustainability Due Diligence

    Outlined below are some of the prominent sectors that require corporate sustainability due diligence-

    • Manufacturing Industries comprising chemical, pharmaceutical, textile, and automative that handle toxic materials.
    • Real Estate & Construction Industries comprising of projects involving land development, infrastructure, and building construction.
    • Mining & Extractive Industries comprising of businesses involved in mining, quarrying, and extraction of minerals or natural resources.
    • Energy & Power Generation Industries comprising of businesses involved in thermal power plants, renewable energy projects, oil & gas exploration.
    • Waste Management & Recycling Industries comprises businesses involved in waste treatment, recycling facilities, and disposal sites.
    • Transport & Logistics Industries comprises businesses that manage fleets or facilities with potential environmental impacts.
    • Hospitality & Tourism Industries comprises businesses located in environmentally sensitive areas or engaged in eco-tourism.

Procedure for Environmental Due Diligence in India

The phase 1 of environmental due diligence in India involves an initial evaluation of the environmental risks at the site or project. Have a look over the key activities performed during the phase 1 of the corporate sustainability due diligence in India.

Phase I

• Data Inspection

The first step provides for the analysis and inspection of environmental issues in the existing data. It necessarily validates regulatory compliance and offers better understanding of the facility’s environmental status.

• Surveys & Interviews

This step ensures conducting stakeholder’s survey and interviews for collecting evidence about past and current environmental state, operational systems, and possible risks.

• Site Assessment

This step involves conducting physical inspections of the facility with an aim to identify contaminations, environmental hazards, and compliance issues regarding that of soil and water.

• Report Filing with Findings and Recommendations

The next step ensures outlining the details of the findings of the EDD process in a comprehensive report. The report further finds and specifies all the risks identified, compliance status, and effective recommendations to mitigate the risks or redress the problems.

Phase II

Phase 2 of environmental due diligence involves investigating and quantifying the substantial risks and issues highlighted in Phase 1.

• Examine Issues Highlighted in Phase 1

The first step of Phase II ensures analysing and examining all the environmental issues highlighted during Phase I assessment. The highted issues of Phase 1 enables understanding the scope of the identified issues, their seriousness, and the potential impact of these risks on the facility and business.

• Prepare a Detailed Budget Report

This step necessarily develops an all-inclusive, effective, and efficient financial solution by preparing a detailed budget report for addressing and resolving the identified environmental issues.

Phase III

The Phase 3 of the environmental due diligence, the strategies are created to address & mitigate the identified risks and other environmental liabilities.

• Addressing Identified Risks, Contamination, Water Management & Air Pollution

This step addresses environmental risks, rectifies soil contamination, and manages water resources to prevent water and pollution through cleaning harmful materials, installing water treatment systems, and adopting technologies. The objective of this phase is to safeguard environmental compliance, protect public health, and encourage sustainable practices.

Examples of Recognized Environmental Conditions

Examples of recognized environmental conditions/risks include:

• Historical gas stations and car repair centres with underground storage tanks/ other surface features
• Car repair shops make use of and stock dangerous substances, including solvents, energy products, plastics, polychlorinated biphenyls (PCBs), and per-and polyfluoroalkyls (PFAs)
• Present and historical dry-cleaning firms where tetrachloroethylene (PCE) solvent
• Foundries processing plants or other massive industrial facilities
• Earlier release on or next to relevant land.

Laws Governing Environmental Due Diligence Audit Procedure

The procedure for environmental due diligence in India is governed by a set of different laws, guidelines and regulations that form the comprehensive legal framework. Let us look at some of the key legislations for environmental due diligence audit procedure:

1. The Environment (Protection) Act, 1986

The Environmental (Protection) Act, 1986 which is an umbrella legislation authorizes the government of India to take action to protect and improve environmental quality and pollution control.

2. The Air (Prevention and Control of Pollution) Act, 1981

The Air (Prevention and Control of Pollution) Act, 1981 intends to prevent, control, and reduce air pollution through Central and State Pollution Control Boards.

3. The Water (Prevention and Control of Pollution) Act, 1974

The Water (Preservation and Control of Pollution) Act, 1974 endeavours to prevent and control water pollution through Pollution Control Boards.

4. The Water (Prevention and Control of Pollution) Cess Act, 1977

The Water (Prevention and Control of Pollution) Cess Act, 1977 provides for the levy and collection of Cess on water consumed by persons carrying on certain industries and by local authorities.

5. The Wildlife (Protection) Act, 1972

The Wildlife (Protection) Act, 1972 helps safeguard wildlife and their habitats through national parks, wildlife sanctuaries, and other protected areas to prevent poaching and hunting.

6. The Forest (Conservation) Act, 1980

The Forest (Conservation) Act, 1980 aims at conserving forests by regulating the diversion of forest land for non-forest activities.

7. The Biological Diversity Act, 2002

The Biological Diversity Act, 2002 ensures conserving the biological diversity which promotes fair use of biological resources.

8. The Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016

The Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016 ensures regulating the waste management via the optimal handling and disposal of toxic and non-toxic waste.

9. The Public Liability Insurance Act, 1991

The Public Liability Insurance Act, 1991 makes public liability insurance compulsory for industries dealing with harmful substances so that they are able to offer instant relief to victims impacted by accidents occurring while handling toxic materials.

10. The National Green Tribunal Act, 2010

The National Green Tribunal Act, 2010 ensures handling cases related to environmental protection as well as conservation of forests along with other natural resources.

11. The Coastal Regulation Zone (CRZ) Notification, 2011

The Costal Regulation Zone (CRZ) Notification, 2011 aims to protect and conserve the coastal environment by regulating the activities in the coastal areas by segregating coastal areas into different zones and specifying permissible activities in each zone.

Timeline to Conduct Environmental Due Diligence in India

The timeline to conduct the end-to-end environmental due diligence services depends on various factors like environmental risks, project investment, regulatory compliance, etc.

The process for environmental due diligence which is completed over a series of three phases including data collection, site visits, stakeholder interviews, among others takes around 30 days to 6 months. However, depending on the complexity of the project, it may take longer than the usual time frame.