By Segawa Natsuko, Nikkei senior staff writer
Companies are increasingly required to manage the risks associated with the companies they acquire through global mergers and acquisitions (M&As) from the perspective of environmental, social, and governance (ESG) commitments, including human rights. These factors are having a growing influence on corporate value driven by the rising awareness of the public and investors and tighter regulations against the backdrop of the U.S.-China conflict.
Asahi Group Holdings acquired Allpress Espresso, a New Zealand coffee bean distributor, through its Australian arm Asahi Beverages in May. An Asahi Beverages official who oversees business development says, “We agonized over how much details we should look into the bean producers.” He added, “We paid careful attention to the assessment of these producers’ assets” because coffee, cacao, and tea are the three products that carry the biggest risk of child labor.
Allpress Espresso procures coffee beans from Latin America, primarily Brazil, Colombia, and Guatemala. Many farms in these countries are plantations from the colonial period and are said to be at high risk for corruption and child labor. Asahi Beverages signed a M&A contract [with Allpress Espresso] by using fair trade certificates issued for the bean producers by international organizations as the basis for compliance check.
But another Asahi Beverages official says, “It’s physically impossible to check in advance all suppliers, including the fertilizers and machines the farms buy.” Asahi Beverages eventually decided to regularly check whether the fair trade certificates are valid after acquiring Allpress Expresso.
Lawyer Nakajima Kazuho, who is familiar with M&A practices, points out: “It’s difficult in cross-border M&As to check the entire supply chain from a target company down to its overseas subsidiaries at the time of acquisition. Companies have no choice but to check the compliance system of the groups affiliated with target companies, understand the level of risk through investigations conducted by research companies, and require suppliers to guarantee that no laws are being violated.” (Abridged)