Social Due Diligence
With increased emphasis on ethical and social responsibility, businesses are under immense pressure to operate in a socially accountable way. These are times of augmented scrutiny of corporate practices. Thus, Social Due Diligence is emerging as a flourishing domain, and businesses are finding it hard to navigate this multifaceted landscape. At Enterclimate, we offer comprehensive Social Due Diligence Services that allow businesses to assess and understand their social impact while mitigating the social risks and liabilities associated with their undertakings and various projects.
But first, let us briefly discuss what is Social Due Diligence. Social Due Diligence is a process of analysing and evaluating an organisation's social and ethical practices and their impact. It essentially involves assessing how the activities of an organisation impact its employees, clients/customers, assessing labour practices, human rights and the overall impact on community relations. It helps an organisation to cover the potential risks associated with employee rights, labour practices, human rights, etc.
In light of increased transparency and accountability, businesses and organisations are thus expected to conduct social due diligence in addition to already familiar financial, legal, and environmental due diligence.
Why is Social Due Diligence essential?
Companies are often concerned about legal and financial compliances and tend to forget their social responsibilities. But with time, our society is becoming ever-so conscious about the overall social impacts of the decisions being taken at such a large scale; thus, companies can no longer ignore or take this particular domain of due diligence lightly. Furthermore, apart from the regulatory requirements, many customers, shareholders, employees, investors, etc., expect these businesses to comply and prioritise social due diligence as part of their operations.
Let us have a look at the following reasons that make social due diligence an essential avenue for businesses to invest in:
Performing social due diligence helps an organisation or business identify the hidden or potential risks that may arise from their undertakings or projects, such as risks related to labour practices, human rights violations, environmental impact, issues pertaining to employer-employee relations, etc. By identifying these risks well in advance, organisations can take proactive measures to mitigate them in time and save the huge costs that may arise because of these in the future.
Not all publicity is good publicity. Violation of human rights, unfair practices, unethical business conduct, etc., can have an adverse effect on individuals and communities. Furthermore, any kind of negative social controversy or misfortune at your organisation can severely damage your reputation and brand value in the market. Social due diligence helps organisations reduce risks at the workplace and thereby safeguard their reputation by addressing issues proactively well in advance by having an effective mechanism in place.
Compliance and Legal Obligations
The government has enacted many laws and regulations to ensure that the social risks involved with undertaking projects, such as investments, mergers and acquisitions, don't get ignored. Thus, these requirements have been mandated for the companies and organisations to reduce the adverse impacts of such activities. Ignoring or failing to comply with these obligations can result in legal consequences.
Companies that prioritise and pay attention to social responsibility have often experienced an added advantage in the market, allowing them to leverage big investors and attract customer support and loyalty. People uphold social virtues and like to associate with businesses that uphold similar values.
Enhanced Investor Confidence
Investors and stakeholders increasingly demand transparency and accountability in decision-making and social matters. Therefore, companies are expected to be credible about their actions, and this increased demand for transparency, especially in light of the easy accessibility of data, is usually highly prioritised by potential investors. Thus, demonstrating a commitment to social due diligence can attract socially responsible investors and further aid in gaining stakeholder trust.
What does the data say?
Apart from these reasons, let us look at what the statistics have to say about the importance of conducting social due diligence. According to a survey conducted regarding this, there has been a jump in the overall percentage of businesses in India that are conducting social due diligence from 63% in 2020 to 87% in 2022. Furthermore, according to the latest report published by IFC in 2022, the market for social and environmental due diligence services in India itself is expected to reach $400 million by 2025.
This suggests there is good reason for heightened attention towards Social Due Diligence as it will not only take care of your legal and social concerns but also your financial apprehensions, as the data clearly supports that the market for Social Due Diligence Services is going to only get bigger with time.
However, Social Due Diligence is a complicated and multifaceted task that requires a great deal of expertise as it involves several steps and procedures like identifying the risks, collection of data, development of strategies, etc.
Merely fulfilling all your legal obligations will not suffice anymore. Organisations need to hire Social Due Diligence Consultant Services to ensure compliance with their legal and social obligations, as failure to do so may have direct financial, operational, and other adverse impacts on your organisation.
How can businesses prepare for the future of Social Due Diligence?
Now that we have established that social due diligence is an essential component of every undertaking and its significance is only going to grow with time, it is only rational that businesses learn to navigate through this requirement and prepare for the future well in advance to gain that extra mile advantage in the corporate race before it is too late. Businesses can prepare for the future of Social Due Diligence by:
- Integrating SDD into their business strategy and operations by learning the key challenges and benefits, as this will eventually help them improve their compliance and achieve their commercial goals, all at the same time.
- Developing systems for handling social and environmental risks and translating the concerned policies into practice by allocating human and financial resources for its effective implementation.
- Engaging with the concerned stakeholders to comprehend their apprehensions and expectations and incorporating them into your SDD Plans so that they feel associated with the business and can resonate with the social practices of the undertaking.
- Last but not least, disclosing concerned information on their social and environmental performance to stakeholders to assure them of the social and ethical practices that your organisation is prioritising as this helps in improving the performance of the organisation and garnering more support and trust from the stakeholders.
Challenges while complying with Social Due Diligence Requirements
Though the need to conduct social due diligence has been stressed time and again, and there is much noise around the corporate social responsibilities that need to be discharged as well, however, all this is easier said than done. There is a gap in policies and their implementation due to various hindrances that tend to arise when businesses try to ensure the compliance of the same. Some of these challenges faced by businesses while treading on the path of social due diligence are as follows:
Lack of knowledge and expertise
The fear of unknown, hidden, or potential risks associated with your operations, particularly with any new partnership, merger, or investment, can prove to be extremely critical. Furthermore, there are so many laws, rules, and regulations to comply with, and with relentless amendments and changes, businesses often find themselves grappling with these, and thus they struggle to keep up.
Conducting comprehensive social due diligence requires human resources, specialised tools, and technologies and demands significant time at your hands that may not be at every organisation's disposal. If you fall short anywhere, it may lead to phoney or ineffective assessments.
Data Collection and Analysis
The availability of data helps you to make reasoned decisions and take concrete measures to improve your operations and, eventually, the outcomes. However, the collection of relevant data and analysis requires expertise and access to appropriate tools that every organisation may not have access to. With the help of professionals, you can access relevant data and studies at any time and take corrective measures well in advance.
Complexity of Laws and Regulations
Social regulations tend to vary widely by region and sector. Complying with these regulations and ensuring adherence to the prescribed ethical and sustainable practices can be cumbersome, especially when dealing with global supply chains. As discussed earlier, these regulations and compliances often get updated and amended with time, and staying ahead of everything becomes even more challenging.
Difficulty in Identifying Risks
Identifying potential social risks and impacts of the operations, supply chain, or projects of an organisation can be challenging, especially without an objective and impartial perspective. Failing to identify these risks can result in unforeseen liabilities and hamper your hard-earned reputation in the market.
In light of these challenges and many more, various organisations and enterprises choose to outsource Social Due Diligence to experts with the relevant expertise and resources to conduct thorough assessments and help them maintain sustainability and growth. This allows the businesses to do what they do best, i.e., focus on their core operations and make a profit while ensuring compliance with their social responsibilities and legal obligations.
Hiring our consultants with relevant experience and knowledge in this field can help you navigate this complex domain, ensuring timely compliance. We provide customised solutions to your individual problems so that you don't have to worry about them.
Benefits of Outsourcing Social Due Diligence
With changing times, there have been changes in the way business is being done now. As an emerging organisation or even a well-established business, you already have a lot on your plate and a lot of responsibilities to shoulder, and therefore, to make things more seamless and easier, the concept of outsourcing has evolved over a period of time. Thus, outsourcing your social due diligence requirements allows the organisations to reap the following benefits:
Save Time & Money
Outsourcing social diligence services will help your organisation save time, money, and internal resources. With Enterclimate, you will have the added advantage of getting a third-eye view of the organisation and its operations and the chance to get the expert's ideas and solutions, which help you save money.
With the time saved, another benefit is allowing your internal team to focus on other significant and core business operations. With focused attention and resources, you can increase the efficiency of your other operations.
Overall Cost Reduction
In such a competitive landscape, every advantage counts, particularly cost reduction, which allows you to increase your profitability, the ultimate quest of an entrepreneur. Thus, another benefit of outsourcing these services is that organisations can reduce their overall costs by hiring expert services for particular undertakings rather than engaging in full-time expensive services. On top of that, complying with social due diligence norms will further save you from any prospective fines or pecuniary penalties in the future.
Excellence Driven Growth
With the division of labour and resources saved, your organisation can successfully endeavour to tread on the quest for excellence in your core operations and do what you do best while ensuring that your social obligations and compliances are being complied with as well under the aegis of field experts and professions.
Enhanced Decision Making
Outsourcing Social Due Diligence offers insightful information, methodologies, and solutions to help an organisation make better and more reasoned decisions. It further enhances the decision-making process by employing specialised tools and analytical reasoning to extract pertinent information, which further helps identify new problem areas and, therefore, aids in formulating effective strategies.
Therefore, outsourcing social due diligence compliance can help your organisation streamline the process, reduce risks, and ensure that you meet your social responsibility and ethical standards. However, choosing the right outsourcing partner that fits all your requirements becomes imperative, as it is equally important to maintain a collaborative and transparent relationship throughout the engagement.
Enterclimate has a proven track record of successfully assisting its esteemed clients in formalising and achieving their social due diligence or other mandatory targets. Allow us to help you have a Social Due Diligence Management System in place for all times.
We at Enterclimate provide Social Due Diligence Services pertaining to various operations undertaken by organisations, such as mergers and acquisitions, investments, forming partnerships, venturing into new projects, etc. We have a profound engagement in social and environmental services and have a well-established presence globally.
We help businesses and commercial entities kick-start their business and design growth strategies while ensuring their social and environmental compliances are met, which they often overlook in their struggles to stay afloat in the market.
At Enterclimate, we offer a wide assortment of services to help you fulfil your unique Social Due Diligence requirements, such as:
Social Impact Assessment
Every activity or operation undertaken at any scale will likely have various social and environmental impacts. Legally and socially, your organisation is responsible for these outcomes. We can help you conduct a comprehensive and thorough assessment of the social impacts of the activities undertaken by your company or organisation well in advance so that you can accordingly make well-informed decisions.
Identifying and analysing the risks associated with your prospective projects can be daunting. In our services package, you can choose to hire our experts to help you identify the social and ethical risks associated with your operations with an impartial perspective, to help you understand the potential liabilities that may arise in the future, and thus always stay one step ahead of such problems.
Development and Implementation of Code of Conduct
Developing a code of conduct and implementing it properly requires time and effort as it varies according to the structure of your organisation and even varies across sectors and industries. However, having an appropriate code of conduct will help your organisation from a legal point of view and provide an effective link between the organisation, its policies, and values. Our service package may give you access to field experts who can help you create, revise, and implement these codes that reflect your organisation's commitment to social responsibility.
Vetting Existing Social Due Diligence Plans & Gap Analysis
If you already have Social Due Diligence Plans in place, we can assist you in analysing and vetting those plans. We further help you delve into the heart of your requirements by identifying the gaps in your existing Plans that demand urgent and immediate attention, which helps us fathom your current state and the efficacy of your existing strategies and further help you build a more resilient social framework.
Compliance and Legal Audit
We don't provide one-size-fits-all solutions to everyone. We review your organisation's structure and requirements, and depending on your respective industry and operations, we help you with local, national, or even international compliance pertaining to social issues such as human rights, labour rights, environmental impacts, etc. We understand that staying abreast of these ever-changing and multiple regulations can be daunting. That's where we step in.
Customised Strategy Development
As discussed, Social Due Diligence requirements differ as per your organisation type, structure, size, and industry, and we understand that very well, as our Social Due Diligence Action Plans are designed exclusively for you so that they will perfectly align with your business, considering your specific needs and goals. This helps provide a clear picture of the expected code of conduct guidelines and the organisation's values, principles, and vision.
Other Key Services:
We at Enterclimate can further assist you in Social Due Diligence by offering the following services and benefits as well:
Our professional services may be hired to help you steer through the arduous and complex procedures and also help you understand the intricate requirements and eligibilities for any Social Due Diligence Compliances as per your requirements and goals.
To discharge social due diligence obligations, the organisation is required to navigate through extreme red-tapism and undergo a lot of paperwork including, but not limited to, the SIA Report, HR Policy and Management Plan, Insurance Policies, Health and Safety Plan, Security Requirement Plan, etc. which can all seem overwhelming, so allow our professionals to guide you through all this.
Let us become your One-stop Solution Platform to accomplish all your social due diligence needs; from decoding the eligibilities to documentation and filing timely reports and plans, we can take care of everything for you.
Our team will keep you updated throughout the process. You can also easily keep track of everything through our platform and interface and stay abreast of everything.
In addition to the real-time updates, we provide follow-up services as well, which are often ignored, and the expectation is usually placed on the client to stay informed. However, we believe follow-ups by the service providers are crucial to ensure the proper implementation of the solutions and the strategies provided.
If you would like to discuss more about Social Due Diligence Services, please get in touch.
Start your Social Due Diligence journey with us with a single stride by reaching us at 7838390340, and we will assign a dedicated manager to understand and discuss your needs.
We are eager to help you tread on this exciting path that will help you flourish in your industry. Join us today, and let's build a profitable and socially responsible future together.
Frequently Asked Questions
Due diligence essentially refers to the exercise of due and reasonable care and carefully investigating the legal, fiscal, economic, social, etc., risks involved in undertaking any business activity. This enables businesses and organisations to perform risk and compliance checks and, therefore, protect themselves in the long run against the identified liabilities and risks, which may create huge problems for them in the future.
Some of the most common examples of due diligence in a company are investigating and analysing the environmental and social risks involved before a company makes an investment or ventures on a new project.
There are various types of Due Diligence that may be required to be conducted before undertaking an operation, some of which are:
- Legal Due Diligence
- Financial Due Diligence
- Environmental Due Diligence
- Social Due Diligence
- Tax Due Diligence
- Operational Due Diligence
- Regulatory Due Diligence
- HR Due Diligence
Social Due Diligence is a process of analysing and evaluating an organisation's social and ethical practices and their impact. It essentially involves assessing how the activities of an organisation impact its employees, clients/customers, and the overall community. It helps an organisation cover the potential risks associated with employee rights, labour practices, human rights, etc.
ESG due diligence is helpful for businesses as it helps them identify the potential risks associated with their projects or undertakings. By completing their ESG Due diligence obligations, businesses can augment their brand value and reputation and, at the same time, ensure their compliance with relevant laws and regulations.
After a period of intense deliberations, on 1 June 2023, the European Union Parliament adopted and accepted the proposed amendments in the Corporate Sustainability Due Diligence Directive, which aims to ensure that the in-scope companies conduct due diligence and hold responsibility for environmental harm and practices abusing human rights.