Mergers Are Coming: How to Manage ESG through the M&A Process

Authors

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  Laura Gitman

  Chief Impact Officer, BSR

  

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  Laura Gitman

  Chief Impact Officer, BSR

  

  New York

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  Laura is a global expert on corporate sustainability, with two decades of experience in strategy consulting and has advised senior executives at global companies across a range of industry sectors and sustainability issues.

  As Chief Impact Officer (CIO), the first in the organization’s 30-year history, Laura focuses on maximizing the impact of BSR’s work with its network of over 300 members, both through direct engagement on project work and as a mentor for teams throughout the organization. She also oversees BSR’s collaborative initiatives and the Center for Business and Social Justice, and a recognized thought leader and innovator in strategic business.

  She has been an instrumental leader in BSR’s organizational growth and impact. She launched BSR’s financial services practice and New York office, and she served as Chief Operating Officer for five years, leveraging her strengths in strategy, organizational change, and people management. Laura works with leading global companies to develop and enhance their sustainability strategies to maximize value for business and society, and she is sought after to facilitate senior-level strategy workshops and multi-stakeholder collaborations.

  She previously worked for Deloitte Consulting, where she acquired extensive strategy experience advising multinational financial services companies. She also worked on several community and economic development projects in Latin America.

  Laura holds a MBA from Stanford University and a BS in Industrial and Labor Relations from Cornell University. She is an adjunct professor in the Bard MBA in Sustainability program, a Senior Fellow at the Center for the Advancement of Social Entrepreneurship (CASE) at Duke University’s Fuqua School of Business, and a member of the UN Global Compact Expert Network.

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  Recent Insights From Laura Gitman

  • Racing Past the Crossroads: How Sustainability Leaders Can Reassert Ambition / October 31, 2024 / Blog
  • Frankly Speaking #59, Laura Gitman: Which Future for Sustainability Leadership in the Company? / October 30, 2024 / News
  • The CSO at a Crossroads: Three Paths Forward for Sustainability Leaders / October 17, 2024 / Reports
  • ESG Scenarios: Leading Sustainability in a New Context / July 18, 2023 / Blog
  • BSR Appoints Laura Gitman as First Ever Chief Impact Officer, Matthew Welch as New Chief Operating Officer / May 17, 2023 / News

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• Aimee Louise Bataclan

  Former Manager, Communications and Marketing, BSR

We are living through a time of tremendous external disruption, technological innovation, and increased political, social, and climate risk. As a result of this ongoing disruption, we are seeing increased mergers and acquisitions (M&A) activity as companies seek to buy into the latest innovation, to disrupt the competition—or to prevent being disrupted by the competition.

Already this year, we have witnessed high-profile mergers take place in multiple industries, including media (AT&T and Time Warner), pharmaceuticals (AbbVie and Allergan), and mining (Newmont Mining and Goldcorp).

These mergers can have a huge impact on the state of environmental, social, and governance (ESG) affairs for the companies involved. At a time when employees and customers are calling for companies to take stands on social issues and investors, like BlackRock’s Larry Fink, are stressing the value of “purpose,” a company’s ESG performance is more important than ever.  Companies can and should strive to integrate ESG considerations throughout the M&A process from initial due diligence through implementation after the merger.

As business leaders across industries pursue M&A activity, there will be substantial ESG opportunities and risks for the companies involved: opportunities to create more ambitious and resilient sustainability strategies, accompanied by risks that ESG objectives will be sidelined by overwhelming pressures to create short-term value.

BSR has developed a primer, Managing ESG through a Merger, to help Chief Sustainability Officers (CSOs), their teams, and internal allies navigate the M&A process to leverage and enhance ESG-related programs and priorities.

A successful merger requires integration of culture, strategy, and processes—and a company with a resilient sustainability strategy will be better positioned to integrate ESG elements accordingly.

The primer serves as a guide for CSOs and sustainability teams, who may find themselves faced with a range of scenarios:

• Company A bids to acquire Company B, but it is rejected by Company B’s Board due to a lack of commitment to ESG or sustainability. How can Company A avoid this in the future?
• One company has nascent sustainability efforts while the other has a robust sustainability program—how can the merger create an opportunity to elevate the newly formed company up to the higher standards?
• A smaller, sustainability-oriented brand is bought by a larger company—how can the executives ensure that the sustainability commitments, credibility, and progress will continue?
• A larger company intentionally buys a sustainable brand to incubate more sustainable processes or products—how can they replicate those learnings across other parts of the business?
• Two companies with significant investments in ESG merge—how can they combine their efforts, teams, and data in a meaningful way?

A successful merger requires integration of culture, strategy, and processes—and a company with a resilient sustainability strategy will be better positioned to integrate ESG elements accordingly.

It’s important to note that it’s fully expected that the executive management team leading the merger process will prioritize legal and financial issues at play. This still creates an opportunity for CSOs and internal sustainability champions to step in and ensure that ESG considerations are integrated into management’s priorities, particularly during due diligence leading up to the merger. By understanding and acting on the key considerations outlined in our primer, sustainability teams can employ processes that more effectively considers ESG issues, mitigating the reputational and financial risk associated with potential ESG crises and positioning the company to build competitive advantage through better integration of its sustainability strengths.

The new climate for business is one of technological, geopolitical, and climate disruption. It is also one where ESG plays a key role in defining a company’s reputation and culture. As mergers become an increasingly popular business tactic in this climate, business leaders who value sustainability have much to consider. To learn more about how BSR can support your company during the M&A process, please connect with us.