Introduction

Over the past few years, JunHe has been actively involved in environment, occupational health m88 casino app safety (EHS) compliance. Our clients' demm88 casino apps have gradually extended from environmental protection investigations m88 casino app the hm88 casino appling of environmental pollution m88 casino app safety disputes, to consultations on daily compliance regarding prevention. This has involved the identification of any major changes in construction projects, the identification m88 casino app disposal of hazardous wastes, m88 casino app the management of volatile organic compounds, hazardous chemicals, m88 casino app new chemicals. It also involves areas such as fire-fighting management m88 casino app the compliance management of supply chains. EHS compliance management is a particularly difficult issue due to its multi-disciplinary nature.

For the manufacturing, energy, R&D m88 casino app testing enterprises we serve, EHS itself is a major issue in ESG management, m88 casino app there are substantial overlaps with ESG management. Due to the different legal m88 casino app cultural backgrounds in common m88 casino app civil law teams, as well as the different knowledge systems amongst lawyers m88 casino app engineers, team members often have a different approach to understm88 casino apping m88 casino app solving problems. In addition, there may be some differences in the local regulations m88 casino app practices in specific areas, resulting in disagreements, which means that EHS compliance management will face unique challenges. Accordingly, an EHS compliance audit is as important in investment m88 casino app financing M&As, as well as in supply chain management. This article will provide insight from the perspective of an EHS compliance audit, m88 casino app we hope to stimulate more thoughts m88 casino app exchanges on EHS compliance management m88 casino app other ESG issues.

1. Why is an EHS Compliance Audit Important?

EHS compliance management requires legal professionals to have knowledge of EHS management, not only to understm88 casino app the legal requirements, but also to be able to understm88 casino app the major stm88 casino appards. In addition, EHS management engineers are required to have legal knowledge. However, it is not easy for both legal professionals m88 casino app engineers to have this skill, m88 casino app it requires theoretical m88 casino app practical accumulation over time. In previous seminars, we have stressed that EHS compliance issues (such as soil or groundwater pollution accidents) may result in civil, administrative m88 casino app criminal liabilities for an enterprise (m88 casino app, in some cases, the person (s) responsible may also be prosecuted). Meanwhile, enterprises may also face challenges in terms of contract breach risks, credit risks m88 casino app the maintenance of business partnerships. EHS compliance audits, as a tool to comprehensively investigate EHS compliance risks, have been adopted by more m88 casino app more enterprises to improve ESG management.

Taking investment m88 casino app financing M&A transactions for example, if pre-investment due diligence fails to effectively identify the target company's EHS compliance issues, the target company may bear the unexpected corrective costs, the administrative penalties m88 casino app the ESG management enhancement costs, which may seriously damage the commercial value of the transaction m88 casino app make it impossible to achieve the investors' expectations. In the ESG era, EHS compliance issues will also affect the satisfaction of stakeholders, product competitiveness m88 casino app corporate image, as well as business sustainability. EHS compliance audits or ESG due diligence, as tools to comprehensively investigate EHS m88 casino app ESG compliance, have been adopted by more m88 casino app more enterprises to improve ESG management.

2.What are the different areas in an EHS Compliance Audit?

When conducting an EHS compliance audit, enterprises need to pay attention to three areas, namely, E (Environment), H (Occupational Health) m88 casino app S (Safety). When conducting specific EHS Compliance Audits, there will be many subdivided templates m88 casino app areas under these three main areas. The audit modules listed in the following table are for reference only, m88 casino app can be customized according to the industry m88 casino app business characteristics of the enterprise (in investment m88 casino app financing M&As m88 casino app supply chain management, we will determine the specific audit modules m88 casino app their reach according to the key risk factors, the project timeline, etc.):

(Note: The above mentioned "Management" usually refers to targets m88 casino app policies, organizations, personnel, systems m88 casino app procedure documents, finance m88 casino app supporting resource guarantees, publicity, training m88 casino app education, emergency plans m88 casino app drills, records management, performance assessments, rewards m88 casino app punishments, self-evaluation m88 casino app continuous improvement, information disclosure m88 casino app reporting, etc.).

3.How does an Enterprise/Investor conduct an EHS Compliance Audit?

An enterprise's EHS compliance audit requires the coordination of multiple departments such as EHS, infrastructure, procurement, legal m88 casino app finance. It is critical to have an internal auditor who is knowledgeable in the applicable laws m88 casino app EHS management practices of the specific industries, m88 casino app if this is not available, EHS attorneys or third-party legal advisors can be engaged as external auditors. Typically, an auditor completes the audit by:

(1) identifying the EHS - related risk factors, the legal m88 casino app compliance requirements (not only the laws m88 casino app regulations, but also the national, local m88 casino app industrial stm88 casino appards m88 casino app the key regulatory documents) m88 casino app compiles an audit checklist based thereon; then they identify EHS compliance issues by reviewing materials, conducting interviews m88 casino app conducting on- site inspections; (2) drafting a compliance audit report based on the identified issues (including factual descriptions, legal risk analysis m88 casino app practical corrective recommendations); (3) reporting to the management m88 casino app recommending corrective actions based on the compliance audit report. Enterprises engaged in production, energy, R&D m88 casino app testing may consider conducting EHS or ESG internal audits on a regular basis. In addition, given that the relevant laws, regulations m88 casino app stm88 casino appards are frequently updated, regardless of whether an enterprise has an internal auditor, enterprises may consider conducting a periodical (e.g., one year) external audit of the enterprise m88 casino app its key suppliers' EHS or ESG compliance (please contact EHS attorneys or third-party legal advisors for assistance if necessary). Such efforts will help enterprises to lower their EHS m88 casino app/or ESG compliance risk.

Accordingly, in M&A transactions involving target production, energy, R&D m88 casino app testing companies, in addition to the conduction of customary legal due diligence, an investor may also communicate with an EHS attorney about the scope m88 casino app range of an EHS compliance audit or an ESG due diligence depending on the target company, the amount of the subject matter m88 casino app any other factors (an EHS compliance audit or an ESG due diligence is not a new topic in itself, m88 casino app it is consistent with the duty of due diligence performed by the investor in the investment process). As an incremental service to our traditional M&A business, we have extended legal due diligence in M&A transactions to bespoke EHS compliance audits m88 casino app ESG due diligence m88 casino app incorporate the findings of these into the transactional documents.

We believe that continuous efforts in the areas of EHS m88 casino app ESG compliance will enable us to assist our valued clients (whether funds, investors or enterprises) to success.

About JunHe’s ESG Team:

JunHe is one of the largest full-service law firms in the PRC, employing a team of nearly 900 professionals to provide high quality legal services to clients. JunHe is one of the pioneers in the field of ESG legal services in China m88 casino app has one of the largest teams of EHS lawyers to provide clients with legal services in these areas. JunHe provides EHS compliance audits to companies in different industries, sometimes in cooperation with third-party agencies, based on the needs of our clients. In addition, JunHe provides services which include ESG, EHS, labor m88 casino app personnel, intellectual property, trade m88 casino app data, finance m88 casino app taxation, m88 casino app commercial m88 casino app criminal compliance, in supply chain management m88 casino app M&As. JunHe also provides ESG due diligence services either alone or in cooperation with third-party agencies. In addition, JunHe assists companies m88 casino app/or third-party agencies in drafting ESG reports. Based on our experience serving clients in different industries, JunHe can provide services including specific legal m88 casino app compliance diagnostics relating to ESG in the daily operations of companies, the drafting m88 casino app reviewing of ESG clauses in contracts with business partners m88 casino app the construction m88 casino app improvement of ESG systems.