Environmental and social audits are flexible tools for gathering information to support decision-making. Since the early 1990s, many international financial institutions have incorporated audit procedures to help mitigate credit risks associated with borrowers’ environmental and social impacts. The primary objective of any audit is to provide an independent assessment of a company’s compliance with applicable legal requirements and international standards.

Historically, environmental audits have encompassed not only environmental protection issues but also assessments of occupational health and safety, as well as industrial and fire safety practices. In recent decades, audit frameworks have increasingly included social performance aspects—such as labour relations, working conditions, land use issues, community health and safety, and engagement with local stakeholders.

Typical circumstances where an environmental, health and safety, and social audit is required:

• Securing and justifying investment;
• Ensuring compliance with national legislation, corporate requirements, and/or international standards;
• Obtaining a substantiated valuation of the enterprise in the context of a transaction;
• Preparing for entry into public capital markets (IPO);
• Reducing operational costs through safer and more efficient practices;
• Minimizing fines and reducing other financial risks.

A standard audit procedure involves site visits by auditors, document reviews, staff interviews, and photographic documentation of facilities. Auditors assess risks arising from both past and current activities in the fields of environment, occupational health and safety, industrial and fire safety, as well as social issues. They evaluate compliance with national and international ESG requirements and assess financial risks associated with the audited assets. Based on the findings, the auditors develop a corrective action plan to bring operations into alignment with applicable regulatory and international standards.