The Difference Between Preliminary Assessment and Environmental Due Diligence (EDD)

Environmental Due Diligence (EDD) or Environmental Due Diligence Audit is a type of audit aimed at generally identifying the environmental liabilities of a specific area under evaluation (Target).

It differs from the Preliminary Assessment (the initial stage of Contaminated Site Management), conducted on properties with contamination potential, because it provides a broader view of the Target’s conditions.

It is important to mention that Environmental Due Diligence (EDD) demands usually arise during mergers, acquisitions, and investments because the buyer inherits environmental liabilities. Therefore, it is in the buyer’s interest to conduct a comprehensive analysis to assess the risks associated with the Target company.

The selling party is also interested in understanding the risks existing in its operation in order to mitigate them and better position the company during negotiations.

Environmental Due Diligence (EDD) includes a historical review of the occupation and use of the study area, document analysis, verification of activities and handled products, and may also be used to assess costs associated with environmental compliance and remediation, as well as risks and non-conformities related to the company’s activities.

Since EDD is often carried out by consulting firms that also perform Preliminary Assessment studies, the scopes are sometimes confused.

The purpose of the Preliminary Assessment is to identify potential contamination source areas and provide guidance regarding the execution of the subsequent stages of the Contaminated Site Management process, being conducted according to national and regional standards.

It is worth highlighting that a Preliminary Assessment, when conducted in accordance with CETESB Board Decision No. 38 (the environmental agency of the State of São Paulo), will address, in greater detail, investigation strategies based on the site’s Conceptual Model, depending on the level and quality of information accessed during the study.

Therefore, if the purpose of the study is submission to an environmental agency, a Preliminary Assessment study should be contracted in accordance with current national and state regulations.

Environmental Due Diligence, on the other hand, conducted within a broader context to support the seller or buyer of a property, seeks to clarify issues related to the business transaction, such as:

Are there potential risks that may impact the company’s operations after the transaction is completed?

What issues should be addressed before closing the deal?

Is there any potential risk that may affect the business feasibility?

EDD seeks to answer these questions and reduce uncertainties to support decision-making. In these cases, customized and targeted scopes may be developed for the evaluation process, ensuring greater security for the company. For this purpose, it is essential that the consulting firm conducting the assessment has extensive experience in the evaluated company’s industry sector.

RAÍZCON Environmental Consulting is composed of a highly qualified team with consolidated experience across multiple productive sectors and recognized expertise in conducting Environmental Due Diligence and Preliminary Assessment audits.

The work is carried out in accordance with current national and international standards, with broad recognition of the achieved results, always prioritizing compliance with established deadlines, which are fundamental for this type of activity.

If you have any questions about the subject, contact us — we will be pleased to help!