Environmental compliance audits are detailed audits of an operation or manufacturer to determine if the operator is in compliance with local, state, and federal regulations. Compliance audits differ from Phase I and II environmental site assessments (ESAs) in a fundamental way: Phase I and II ESAs focus on releases of hazardous substances to real estate, whereas compliance audits focus on whether or not operations comply with environmental laws with the objective of reducing regulatory risk, avoiding violations, enforcement, and fines. Environmental Site Assessments are a standard component of the transactional due diligence process, but conducting a compliance audit during due diligence is the exception, not the rule.
This is because non-compliance may not obviously de-value an asset, and the cost therefore may not seem justified. This is unfortunate because environmental compliance audits offer much more than simply an opportunity to avoid fines and violations. Compliance audits directly benefit each party involved in a large or small real estate or corporate transaction, whether it's the buyer, seller, operator, lender, or investor.
Operators
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