The importance of ESG and sustainability in M&A

In recent years, sustainability has been attracting attention as an important management agenda. Behind this trend is a strong need for companies to address social and environmental challenges for building a sustainable society while also considering the interests of all stakeholders. This is evidenced by the spread of ESG (environmental, social and governance) investment and the SDGs (Sustainable Development Goals).

In response to these changes in the times and in the demands of society, the environmental and social initiatives that companies need to take have evolved. These initiatives are now prerequisites for corporate activities—in other words, they have become the crux of a company’s business strategy. At the same time, companies are needing to return to the essential questions of what their purpose is as a company, what they can do to maintain and improve society and the environment, and what business ventures they should pursue to achieve the corporate and social values for which they aim.

In M&A, as well, companies have traditionally considered acquisitions and divestitures from a closed perspective based only on individual business domains. In the future, it will be necessary for them to examine these deals from a more holistic and comprehensive perspective based on sustainability. Some companies that are highly sensitive to this need have already set their sustainability goals and developed strategies, and have begun implementing M&A as one way to realise them.

This report was jointly prepared by RECOFDATA Corporation and PwC Advisory LLC. It explains the status of M&A in recent years from the perspective of ESG and the SDGs, while also touching on future trends and the impact on corporate value.