How to Conduct Environmental Due Diligence Remotely
Published: 14 August 2020
The COVID-19 pandemic highlights the need for creative strategies in conducting an off-site compliance review.
Environmental and social due diligence is an important part of any investment or development project. It involves assessing or evaluating project location, design, technology, and other components to understand the potential risks or challenges that are crucial in making informed decisions. This step seeks to minimize and mitigate, if not avoid, adverse project impacts on people and the environment.
Aside from desk reviews, conducting due diligence requires field visits by experts or consultants to make sure that project safeguard standards and guidelines are met. Skipping this step could lead to potential liabilities in the future. This should not be delayed either as this would reduce development impact.
However, the coronavirus disease (COVID-19) and its travel-related implications are roadblocks for due diligence. Travel restrictions and lockdowns might have eased for some cities or countries, but without a vaccine, significant disruptions or limitations to on-site activities will remain.
The pandemic has accelerated the need to conduct due diligence virtually or remotely. This can be done by applying widely available technologies to well-designed audit plans and site visit itineraries.
This explainer is based on the experience of the safeguards team from the Private Sector Operations Department of the Asian Development Bank (ADB). The team conducted a week-long, fully remote environmental due diligence for a potential pharmaceutical warehousing and distribution investment. The staff and consultants were in different cities and countries, and they used geo-tagged photos through Google Maps for environmental assessment, conducted site visits through WeChat videocalls, and conference calls with the clients and external stakeholders through Skype and WeChat.
Step 1: Prepare a detailed audit plan.
Technologies and applications that allow real-time interaction, data, or visuals are helpful in the conduct of due diligence. An on-site facility employee or a local consultant can carry a camera or phone to live stream the inspection while being guided by a remote team of consultants.
Technology alone will not guarantee the efficiency of this activity. A detailed remote site visit plan, itemizing the elements of operating facilities and those under construction that need to be assessed, must be prepared. Reviewing project site coordinates, layouts, plans, and documents from the client will be useful in preparing well-thought-out and structured evaluation questions or discussion points.
Step 2: Choose web conferencing or instant messaging platforms available to all clients and stakeholders.
Remote environmental due diligence, like an on-site due diligence, requires discussions with the clients and external stakeholders, such as representatives from the local environmental protection bureau and the industrial zone management. With the availability of many web conferencing applications, it is easy to say that remote discussions or meetings are the easiest part of this effort. Note however that some of these applications are not available or accessible in some areas or countries.
Once common and convenient applications have been identified, messaging groups can be set and regular calls can be calendared for easy coordination and information exchange.
Step 3: Provide clear instructions to guide the on-site facility host.
The on-site facility employee or the local consultant who holds the livestreaming device will adjust the tour or show the specific areas as a response to the remote team’s questions or requests. Following the audit plan and providing detailed instructions, such as where to start or which particular object or area to focus on for a clearer view, will make the activity more organized and efficient, maximizing the limited time and resources on the site.
Important Factors for Remote Due Diligence
- Client cooperation is critical. Their willingness in showing the project sites or company facilities and in providing clear and straightforward answers can affect the efficiency and success of this process. This highlights the importance of establishing rapport with the client prior to conducting due diligence.
- Having staff or consultants with local expertise is a must. A strong track record and familiarity with the area or country can guarantee that the right questions will be asked and that standards and guidelines specific to the project location are satisfied. The consultant can conduct ground-truthing to confirm information consistency and collect and inspect necessary documents that will be forwarded to experts on remote location.
- Sufficient internet connectivity on the site is required. As livestreaming through video calls will be used, the activity depends on the bandwidth speed of the internet. Connectivity tests can be conducted prior to the actual assessment.
- There is no substitute for proper coordination. All steps and processes, including contingencies, must be clarified to make sure that all are on the same page. For example, if internet connectivity is a challenge at a certain area of the site, it should be clear which photos should be taken to meet the requirements.
Good understanding of project-specific circumstances. A safeguards team must have a good understanding of sector-specific environmental and social risks, project activities and location, how stringent the national requirements are in the particular sector, and the client’s capacity and track record in complying with national regulatory requirements and good international industry practices. These will ensure that the remote due diligence covers all the potential environmental and social risks and impacts and identify appropriate mitigation measures or corrective actions.
The COVID-19 pandemic highlights the need for creative strategies in conducting an off-site compliance review. A similar approach may also be used for instances where a site visit would be dangerous for consultants or staff because of logistical (i.e., extreme weather events) or security reasons (i.e., political unrest). With the potential of remote due diligence, there is a possibility that this process might stay even if COVID-19 travel restrictions are completely lifted. However, a safeguards team should build a strong case that a remote due diligence is the right approach for a project and remain steadfast that safeguards policies and principles are not diminished and that the environment and people are protected from a project’s potential adverse impacts regardless of the approach.
Asian Development Bank (ADB). Safeguards: Overview.
ADB. 2019. Safeguard Policy Statement. Manila.
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The views expressed on this website are those of the authors and do not necessarily reflect the views and policies of the Asian Development Bank (ADB) or its Board of Governors or the governments they represent. ADB does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. By making any designation of or reference to a particular territory or geographic area, or by using the term “country” in this document, ADB does not intend to make any judgments as to the legal or other status of any territory or area.