Sustainability Due Diligence: A Critical Pillar in India’s Food M&A

India’s food industry is rapidly evolving, with M&A reshaping the sector amid shifting consumer preferences, technology, and rising ESG expectations. For senior leaders, sustainability due diligence is now crucial in deal evaluation to protect value and manage ESG risks. Leveraging LawCrust’s hybrid consulting expertise across management, finance, legal, and technology, this article offers a concise, strategic guide for navigating Food M&A in India as of mid-2025.

Industry Overview: The Rise of Sustainability Due Diligence in Food M&A

India’s Food M&A market is booming, fueled by urbanisation, a rising middle class, and a $1 trillion consumer base. Companies across packaged foods and QSRs consolidate to boost market share and innovate. While financial and legal checks were once paramount, environmental compliance and sustainability now play a central role. Growing demands from investors, regulators, and consumers for ESG transparency make sustainability due diligence essential for successful deals.

India’s regulatory landscape has strengthened, with FSSAI enforcing sustainability norms on sourcing, packaging, and waste. CPCB sets emission and waste disposal guidelines, while SEBI mandates ESG disclosures through BRSR for listed firms. Sustainability due diligence acts as a strategic tool for acquirers to identify hidden liabilities, evaluate sustainability commitments, and safeguard long-term value by reducing operational and reputational risks.

1. Recent Developments in Food M&A (Mid-2025)

By mid-2025, regulatory focus on environmental compliance in Food M&A has intensified. FSSAI’s 2024 guidelines mandate sustainable packaging and plastic reduction, while CPCB enforces circular economy practices for waste management. Government incentives like tax breaks for renewable energy and sustainable sourcing further embed sustainability due diligence into corporate strategies.

Investor focus on ESG disclosures has surged, with institutional investors and private equity factoring sustainability into deal evaluations as a sign of resilience and value. A notable 2024 Food M&A deal in the dairy sector saw the acquirer lower valuation after discovering wastewater and packaging non-compliance, restructuring the deal with earn-outs linked to environmental fixes saving millions in fines.

2. Key Challenges & Nuances in Sustainability Due Diligence

Conducting sustainability due diligence in Food M&A presents unique challenges, particularly in India’s fragmented food sector:

• Fragmented Supplier Practices: India’s food supply chain often involves small and medium-sized enterprises (SMEs) and informal players with inconsistent adherence to environmental standards, such as pesticide use or labor practices.
• Waste Disposal: Managing food, packaging, and process waste remains complex, with non-compliance risking fines and reputational damage.
• Carbon Footprint Measurement: Accurately quantifying a target’s carbon footprint across operations and supply chains is hindered by non-standardised reporting and limited data.
• Packaging Regulations: Compliance with evolving plastic waste management and Extended Producer Responsibility (EPR) regulations poses financial and reputational risks.

ESG risks in the food sector include high agricultural water use, pesticide residues, and supply chain issues like ethical sourcing and labor practices. Evaluating these risks in informal or SME suppliers is challenging due to limited documentation and awareness. Data accuracy and transparency hurdles during sustainability due diligence require strong methodologies and independent verification.

3. Strategic Implications Using Hybrid Consulting Lens

A hybrid consulting approach, blending management, finance, legal, and technology expertise, is critical for effective sustainability due diligence in Food M&A.

• Deal Evaluation & Risk Mitigation

Integrate environmental compliance checks, ESG risk scoring, and sustainability KPIs into financial and legal due diligence frameworks. Conduct deep dives into environmental permits, compliance records, and potential liabilities, such as future carbon taxes. LawCrust’s hybrid teams temper financial forecasts with environmental remediation costs, ensuring holistic deal evaluation.

• M&A Structuring

Use sustainability-linked earn-outs and warranties to incentivise post-acquisition remediation. For example, structure deals to tie purchase price portions to achieving water usage or waste reduction targets. Post-merger integration plans should prioritise sustainability improvements, aligning acquired entities with higher environmental standards.

• Operational Synergies

Identify opportunities to enhance sustainable sourcing, reduce carbon footprints, and improve waste management post-acquisition. Leverage technology, such as recycling innovations or analytics for water optimisation, to drive efficiencies and reduce ESG risks.

• Regulatory & Legal Strategy

Navigate India’s multi-layered environmental regulations by identifying required approvals and managing past non-compliance liabilities. LawCrust’s legal expertise ensures robust indemnities and representations, minimising post-acquisition challenges.

• Technology Enablement

Deploy data analytics to process environmental data, IoT sensors for real-time monitoring of water quality and emissions, and blockchain for supply chain traceability. These tools strengthen sustainability due diligence, verifying sustainable practices and combating issues like deforestation or unethical labor.

Illustrative Examples

Case Study 1: Organic Food Producer Acquisition
A major Indian food conglomerate’s acquisition of a regional organic producer faced risks when LawCrust’s sustainability due diligence uncovered uncertified farms and poor pesticide and water practices. Using IoT soil testing and blockchain supply chain data, gaps were exposed. The deal was restructured with phased investments and earn-outs tied to sustainability targets. Post-acquisition, water purification and supplier audits transformed the business, boosting value.

Case Study 2: Packaged Food Merger
In a merger of two packaged food firms, sustainability due diligence uncovered non-compliance with EPR packaging rules in the target’s supply chain. LawCrust’s hybrid team renegotiated deal terms with compliance warranties and a post-merger plan for biodegradable packaging. IoT sensors monitored waste streams, lowered ESG risks, and unlocked government incentives, enhancing the merged company’s market position.

Conclusion

Sustainability due diligence is a critical pillar in India’s Food M&A, ensuring environmental compliance, mitigating ESG risks, and maximising deal value. Senior leaders must embed hybrid consulting approaches, combining management, finance, legal, and technology expertise, to navigate regulatory complexities and drive sustainable growth. LawCrust’s integrated solutions empower companies to conduct robust sustainability due diligence, aligning Food M&A with environmental and social goals while securing long-term prosperity.

About LawCrust

LawCrust Global Consulting Ltd. delivers cutting-edge Hybrid Consulting Solutions in Management, Finance, Technology, and Legal Consulting to ambitious businesses worldwide. Recognised for our cross-functional expertise and hybrid consulting approach, we empower startups, SMEs, and enterprises to scale efficiently, innovate boldly, and navigate complexity with confidence. Our services span key areas such as Investment Banking, Fundraising, Mergers & Acquisitions, Private Placement, and Debt Restructuring & Transformation, positioning us as a strategic partner for growth and resilience. With an integrated consulting model, fixed-cost engagements, and a virtual delivery framework, we make business transformation accessible, agile, and impactful.

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