The concept of environmental justice (EJ) – the fair treatment and meaningful involvement of all people with respect to the development, implementation and enforcement of environmental laws, regulations and policies – has been around for decades. However, there’s recently been an increased focus on the topic, stemming from regulatory changes and governmental interest as well as initiatives from the public and special interest groups. In fact, EJ has become a priority in all federal government operations and decision making and several states have issued EJ-specific executive orders.
When deciding if a high-level EJ evaluation is relevant as part of or separate from an expected business transaction – including during new facility siting or when contemplating changes in facility operations – companies should consider the following.
Key Considerations
1. Is the site located in an EJ community?
The first step is to evaluate whether a company maintains operations within or near areas where significant EJ concerns are likely to exist such as underserved neighborhoods. This can be accomplished through publicly available federal and state resources. There are limitations to the available resources (e.g., the USEPA’s EJScreen data is at the Census-tracked level and thus is not facility-specific) and definitions of what qualifies as an “EJ community” may differ.
2. Do company operations potentially contribute to the local EJ burden?
Companies should consider how their operations – particularly those in heavy industrial sectors with significant compliance obligations, visible emissions or operations such as chemical manufacturing, waste management, and energy – could relate to possible local EJ concerns. Could site operations have contributed to the identified concerns? Conversely, has the company taken steps to mitigate local issues?
3. What is the level of activity within the surrounding community with respect to EJ?
Non-governmental organizations (NGOs), including local activist groups, are becoming more vocal in demanding action on EJ. Regardless of whether a company’s actions are actually contributing to EJ concerns, such scrutiny and public attention can affect a company’s reputation and success.
Additionally, a commitment from environmental regulatory agencies to put a more deliberate focus on EJ could also result in increased regulatory scrutiny of site operations and compliance. Companies should also consider if attention on EJ issues will affect an upcoming business transaction involving the facility.
4. What is the potential regulatory impact to the site with respect to EJ?
Are there any EJ-applicable statutory requirements promulgated at the state and local levels? If so, do these requirements impact the company’s operations? Are they likely to increase regulatory scrutiny of the site or result in more stringent compliance obligations? Companies should also consider their capacity to comply with such matters.
5. What is the site’s capacity to manage EJ risks?
With a better understanding of local EJ concerns and interest, and how they overlap with operations and management, companies are better equipped to identify where additional tools or programs are needed to manage related risks, align actions with community needs and goals, and, ideally, take advantage of value creation opportunities. Gaps could require additional assessment (e.g., related to climate risk, stakeholder engagement) or may be able to be filled through internal resources or third-party support.
Ramboll can help
A global leader in EHS and ESG due diligence, Ramboll supports clients in hundreds of M&A transactions each year. We understand the processes, pace and language of transactions, have a reputation for responsiveness and high quality, and are well-known to major law firms and lending institutions.
Our experts support transactions from straightforward acquisitions, divestitures, re-financings and insurance placements to more complex mergers, restructurings, buyouts, public offerings and bankruptcies.