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Business Strategy and the Environment Bus. Strat. Env.

15, 334–346 (2006) Published online in Wiley InterScience (www.interscience.wiley.com) DOI: 10.1002/bse.540

Accounting for the Social Dimension of Sustainability: Experiences from the Biotechnology Industry
Justus von Geibler,1* Christa Liedtke,1 Holger Wallbaum2 and Stephan Schaller2 1 Wuppertal Institute for Climate, Environment and Energy, Research Group Sustainable Production and Consumption, Germany, in support with Bastian Buck, University of Maastricht and Frederik Lippert, University of Bonn 2 triple innova GmbH, Germany
ABSTRACT Accounting for the social dimension of sustainability proves to be a challenge for corporate practitioners, due to its intangible, qualitative nature and lack of consensus on relevant criteria. We suggest a semi-quantitative approach based on stakeholder involvement to identify relevant aspects for a sector specific assessment of the social dimension. Our case study on biotechnology illustrates that the dialogue with internal and external stakeholders enabled the creation of a key performance indicator (KPI) set to account for social sustainability in the early design stages of biotechnological processes and product development. Indicators for eight aspects are identified for the social assessment: health and safety, quality of working conditions, impact on employment, education and training, knowledge management, innovation potential, customer acceptance and societal product benefit, and social dialogue. We describe the integration of the KPI set in a software application, tailor made for practitioners of the sector, and highlight first user experiences. Copyright © 2006 John Wiley & Sons, Ltd and ERP Environment.
Received 7 October 2005; revised 21 January 2006; accepted 6 February 2006 Keywords: sustainability accounting; social dimension; KPI; indicator set; stakeholder approach; stakeholder participation; emerging technologies; biotechnology

Introduction

A

T BOTH COMPANY AND PRODUCT LEVEL, THERE IS AN INCREASING DEMAND FOR TRANSPARENCY

and accountability for sustainable industrial development from internal and external stakeholders. Recently, it has become more significant to consumers, shareholders and political actors how different products are being produced. Stakeholders of companies, including NGOs, media,

* Correspondence to: Justus von Geibler, Wuppertal Institute for Climate, Environment and Energy, Doeppersberg 19, 42103 Wuppertal, Germany. E-mail: justus.geibler@wupperinst.org
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public and financial institutions, play an increasing role in awareness raising on sustainability issues and influence the economic success of particular companies or specific products. The reputation of companies, especially of larger ones, has become a key managerial concern. As a strategic and proactive measure, companies in many sectors have begun to account for their performance – with respect to the economic, environmental and social dimensions of sustainability. The goal is to identify and implement improvement opportunities, and to report on sustainability performance objectives and improvements as highlighted in recent literature on environmental management accounting (see, e.g., Bennett and James, 1999; Burritt et al., 2002; Bennett et al., 2003; Rikhardsson et al., 2005). Emerging technologies such as biotechnology face particularly high accountability and reporting demands. This can be attributed to the high societal exposure of these emerging sectors, which have not gained broad public acceptance yet (see Schaltegger and Dyllick, 2002, p. 58). Biotechnology is since its emergence a subject of major public debate. While promising innovations in the area of medical science or the ‘greening’ of industrial processes are widely accepted (see, e.g., Task Force on Science, Technology and Innovation, 2005; OECD, 1998; Hoppenheidt et al., 2004), public concerns concentrate to a great extent on genetically modified organisms related to food and agriculture (European Commission, 2003). As a result, biotechnology has not yet reached the significance scientists and analysts had predicted years ago. Reasons for this can be seen in the multiple social, environmental and economical effects of biotechnological applications that are difficult to anticipate at the basic research level. Adequate tools are needed that assist in assessing the (hidden) sustainability implications already in the development phase of evolving technologies, e.g. to early identify the level of public acceptance and draw conclusions for future market prospects. In order to implement the sustainability idea in physical and financial activities companies have to create metrics to assess corporate sustainability (see, e.g., Bennett and James, 1999; Orbach and Liedkte, 2002; Schaltegger and Dyllick, 2002). Despite progress in the field of sustainability accounting and reporting (see, e.g., Kuhndt et al., 2004a; Rikhardsson et al., 2005; Global Reporting Initiative, 2006), widely accepted accounting standards or metrics to account for the environmental or social performance are missing, at both corporate and product levels. In contrast to environmental management accounting, current research in management accounting for social issues is relatively limited (see Bennett and James, 1999, p. 45; Ranganathan, 1999, p. 481; Adams et al., 2004, p. 22). Practioneers engaging in social accounting have to break new grounds to make the softer and intangible qualitative side of sustainability measurable (Elkington and van Dijk, 1999, p. 496; Schaltegger and Dyllick, 2002, p. 367). This task is further complicated by the differences between industries, which urge the actors to develop sector specific criteria (see, e.g., Bass, 2001; WBCSD, 2002; Kuhndt et al., 2002; Spalding-Fecher, 2003; Global Reporting Initiative, 2005). The case study presents the development process of a key performance indicator (KPI) set for the assessment of the social dimension of sustainability in the biotechnology industry following a participatory stakeholder approach. This task has been addressed within the project ‘BioBeN: assessing social sustainability of biotech products’, which is part of the ‘Sustainable bioproduction’ programme of the German Federal Ministry for Development and Research (see von Geibler et al., 2005). Furthermore the integration of the indicator set in a practical software tool for use in the early design phase is described. In the final software, ‘sabento’, the assessment of social aspects is complemented by an economic and environmental assessment (see ifu Hamburg, 2005). Finally, conclusions regarding the appropriateness of stakeholder involvement, the applicability of the software tool and its results are drawn.

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Theoretical Concept Content of the concept Dimensions Categories Aspects Indicators

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Sustainable Development

Figure 1. Concept specification for sustainable development. (Source: adapted from Köhler, 1987, p. 85.)

Accounting for the Social Dimension of Sustainability
The interest in social performance evaluation has a longstanding history (see, e.g., Zadek et al., 1997). It started in the 1940s with the term ‘social audit’ and experienced an upsurge of interest in the 1970s, followed by a decline from the business agendas (Bennett and James, 1999, p. 45). In the early 1990s companies interpreted the rising sustainable development agenda mainly as a challenge of environmental performance and reporting (see, e.g., Elkington and van Dijk, 1999, p. 496). After some high profile corporate crises (Shell and human rights in Nigeria; Nike and ‘sweatshops’ in Asia), the interest in corporate social accountability increased again (see, e.g., Ranganathan, 1999, p. 481; SustainAbility and UNEP, 1999). In general, there has been less debate on the social than on the environmental management accounting (Bennett and James, 1999, p. 45). Nevertheless there is a need for a consensus that defines what should be measured and how (Ranganathan, 1999, p. 482). As a result, the work on indicators for social sustainability is still ongoing (see, e.g., UNCSD, 2001; Kuhndt et al., 2002; von Geibler et al., 2005; Weidema, 2005; Global Reporting Initiative, 2006). The abstract format of attempts to specify the social dimension of sustainability (see, e.g., Enquête Commission of the German parliament, 1994; DIW et al., 2000) presents a major obstacle to practitioners facing the challenge of implementing the social aspect of sustainability in their daily work. Since the concept of sustainability is too abstract and formulated openly it is not possible to determine indicators for its assessment directly. We apply the model of concept specification developed in social sciences by Zetterberg (1967). The approach for concept specification (see Figure 1) suggests as a first step the splitting of the theoretical construct into descriptive dimensions, which are further specified into more detailed categories and aspects. This splitting facilitates the second step, the selection of indicators, aiming to enable the
Copyright © 2006 John Wiley & Sons, Ltd and ERP Environment

Bus. Strat. Env. 15, 334–346 (2006) DOI: 10.1002/bse

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‘condensed representation of something more complex’ (Persson, 2001, p. 628). In traditional accounting indicator-based measurement procedures are strictly regulated by external legislation and standards (Cerin, 2002). In environmental and social accounting indicators are often chosen internally, which leads to bad information quality and causes arbitrary reporting (Schaltegger, 1997). While sustainability reporting as a vehicle for change as well as a mechanism for incorporating externalities through corporate accounting is seen as of critical importance (Maunders and Burritt, 1991; Puxty, 1991) the involvement of stakeholders can be helpful to reduce indicator-related shortcomings and enhance the internal managerial value of sustainability reporting.

Stakeholder Involvement for the Social KPI Development
Key performance indicators (KPIs) make the qualitative performance of companies observable for internal as well as external stakeholders (De Colle and Gonella, 2002). The translation of the abstract sustainability construct into tangible, relevant and context specific KPI can be supported by a participatory process (Feindt, 2002). Stakeholder consultation for the identification of appropriate sustainability indicators assists in broadening the company’s perspective towards critical current as well as future blind spots (see, e.g., Wilson, 1999, p. 515; Sillanpää, 1999, p. 544; Kuhndt et al., 2004b; Schaltegger and Burritt, 2005, p. 194; Global Reporting Initiative, 2006). Beside accompanying regulatory and fiscal measures to be taken by governments to enforce sustainability aspects that are not negotiable (e.g. the limits of environmental capital), stakeholder engagement assists in drawing attention to current and future (social) sustainability risks and benefits on the company level. Emerging technology project failures have proven that regulatory compliance is only a first step towards public acceptance. As technical developments, their implications for social and environmental aspects and hence public debate is constantly evolving, product development also needs to anticipate future concerns that potentially form obstacles to market success and cause additional regulation. Stakeholder involvement contributes to the preventive assessment of (hidden) sustainability implications of new and emerging technologies already during the development phase. Descriptive, instrumental and normative approaches to stakeholder theory have – despite the different underlying rationales – the common assumption that corporations can profit from a mutual relationship with stakeholders (see von Geibler et al., 2004; Schaltegger and Burritt, 2005). Depending on different scholars, rewards may be of instrumental or of moral value (Jones and Wicks, 1999). De Colle and Gonella (2002) identify several benefits of a relationship with external stakeholders, which among others include an understanding of needs and expectations; improvement of corporate reputation and trust building through accountability; better, well founded decision-making; and findings about organizational impact and development of KPIs. Stakeholder involvement can significantly contribute to identify increasing public concerns and promote the corporate image as accountable and a good public citizen (see, e.g., Biekart and Ree, 1999, p. 356; Gminder et al., 2002, p. 131; Wolters and Danse, 2002, p. 232). According to Burritt et al. (2002), information about stakeholder claims can be especially important for the corporate marketing and public relations department. In the case of emerging technologies and related uncertainty about public acceptance and regulation, stakeholder involvement is an important preventive approach to project future consumption and regulation decisions. Consequently, for the comprehensive identification of relevant social KPI in the biotech industry and the development of a constituent indicator set stakeholder involvement was chosen as the central means. According to stakeholder theory societal actors have different forms of relationships with many constituent groups (‘stakeholders’) that affect and are affected by its decisions (Freeman, 1984). The interests of the (legitimate) stakeholders have intrinsic value (Clarkson, 1995; Donaldson and Preston, 1995).
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The process of developing social KPIs should draw on the involvement of relevant societal stakeholders, i.e. those groups who have an immediate interest in approaching and debating questions of social sustainability. Consideration of stakeholders in far-reaching decisions promotes the legitimacy of the results. Businesses are no longer solely responsible for the maximization of the shareholder’s return on investment; they are – as well as other organizations – perceived as part of an environment and increasingly held accountable for the impacts of their actions. Stakeholder involvement starts with an analysis of the organizational environment. Following a general accepted format, stakeholder groups are identified in a first step, followed by a determination of their interests. Finally, their type and level of power is assessed. Distinctions are drawn between internal and external stakeholders, the two being separated by the boundaries of the firm (see, e.g., Wilson, 1999, p. 511; Schaltegger and Burritt, 2000). Attention has to be paid to the influence that is exercised by different stakeholders and has to be seen in relation to the actual importance of the specific stakeholder for the issue at hand (Gibson, 2000). This warrants a balanced and representative involvement of affected groups.

Considering Stakeholder Demands in the Biotech Sector
Biotechnology was recognized by the international community to be of exceptional importance for the sustainable and environmental friendly development in the Agenda 21 agreement. The potential to contribute to the prevention, detection and removal of damage caused to the environment has been acknowledged in a number of publications (see, e.g., Heiden et al., 2001; Hoppenheidt et al., 2004). Nevertheless, biotechnology is – especially in Europe – the reason for ongoing controversial discussions, which involve numerous societal stakeholders (OECD, 1998; EGE, 2000; COMETH, 2001; European Commission, 2001, 2002, 2003; Task Force on Science, Technology and Innovation, 2005). Two surveys covering internal and external stakeholder demands have been conducted to identify significant social aspects of biotechnological production processes. The identified key social aspects and related indicators should enable the evaluation already in the research and development phase. An assessment in such early stages is of major importance as the majority of far-reaching decisions affecting the product’s costs and application throughout the lifespan will be made in this phase (Eversheim and Bortler, 1995; Tischner and Charter, 2001). The interviews with internal stakeholders were conducted with six project partner representatives from the biotechnology sector. The interview design aimed at the identification of internal, meaning sector and organization specific, views of the social dimension of sustainability. The interview addressed the existing knowledge and practical work on social issues, the degree of involvement in social activities as well as interrelations between organizational characteristics and social policies. The external stakeholder survey was designed on the basis of an extensive literature research, which incorporated numerous sustainability agendas (for details see von Geibler et al., 2005). It covered the contribution of biotechnology to satisfy human needs as well as the relevance of social aspects in different life-cycle phases as the central challenges and options for improvements in the social area. Participants for the survey where selected based on the stakeholder analysis and following the principle of completeness. The following groups were addressed: suppliers, customers, companies, unions, industry associations, NGOs, financial institutions, academia and research, regulatory and legislative bodies, and intergovernmental bodies. A stakeholder survey under involvement of larger samples of citizens did not seem reasonable as public opinion is still evolving. The survey was mailed to 149 recipients, all members of the identified interest groups, with a reasonable response rate of 22 per cent. Nearly all respondents indicated interest in the results and a future dialogue.
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Bus. Strat. Env. 15, 334–346 (2006) DOI: 10.1002/bse

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Developing a Sectoral Set of Social Indicators
An in-depth analysis of the obtained results from both surveys has been conducted to identify the relevant issues for the concept specification. The identified social issues have been grouped into eight aspects considering the indicated significance to the internal and external stakeholders. The classification of aspects has been led by the criteria of coverage of significant issues as well as non-overlapping of aspects. Furthermore, the classification considered existing classifications in the area of corporate sustainability accounting and reporting such as the standard for social accountability SA 8000 or the GRI Reporting Guidelines (Global Reporting Initiative, 2002). The following eight aspects with significant relevance to the social impact of biotechnology have been identified (see Table 2 below for a characterization of these aspects by means of indicators): (1) (2) (3) (4) (5) (6) (7) (8) health and safety quality of working conditions employment education and training knowledge management innovation potential product acceptance and societal benefit societal dialogue.

Furthermore, the analysis highlighted that the social effects of biotechnological production can occur at different levels. Table 1 specifies these levels and provides examples for these possible effects by biotechnological processes identified in the surveys. With respect to the data availability for measuring these effects and the biotech companies’ ability to influence such effects, the surveys highlighted differences for the three levels. For first order effects (from technology development) the data availability within the biotech companies is relatively high, as well as the ability to influence these effects. For the second order effects (technology application) the data availability regarding social impacts of the process development phase is often still sufficient, but becomes more limited and blurry due to the fact that the applications of the developed processes become apparent in the future. Regarding systemic effects, hardly any data is available. The corporate actors have very limited ability to change these effects, which can be considered to be beyond the scope of the biotech companies (but within the responsibility of state regulation). These effects have been excluded from the indicator set in line with this argument. Consequently, the indicator set differentiates between effects at technology development and technology application. For each of the eight aspects and for both layers of evaluation, technology development and technology application, indicators have been identified (see Table 2). For each aspect and layer of evaluation there are four indicators, whereas indicators for the technology application, which is less certain due to its occurrence in the future, require lower levels of knowledge compared with the technology development phase.

Integration in a Tailor-Made Software Tool
Within the project, the sectoral set of social KPIs has been integrated in a tailor-made software tool that supports the modelling of biotechnological production processes in early stages of process development and enables the subsequent evaluation of environmental, economic and social aspects of sustainability.
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Technology development effects (direct effects) Application effects (indirect effects)

Effects caused by the development of biotechnological processes (upstreaming, product creation, downstreaming) Application of biotechnological processes (raw material extraction, production, transport, use and end of life)

• Risk of hazardous substance release • Contribution to education and training • Change in working conditions (reduced health and safety protection measures for removing of rost) • Health improvements through biotechnologically produced Hepatitis B serum • Contribution to food security • Cheaper and more accessible drugs • Promotion of sexual equality

Systemic effects

Change of individual and collective lifestyles induced by biotechnological innovations, adoptions of work and consumption pattern

Table 1. Potential social effects of biotechnological processes and products. (Source: von Geibler et al., 2005, p. 22.)

It is prepared for the assessment of production involved with micro-organisms, cell cultures and enzymes. The development of the software, which is now marketed under the name ‘sabento’, considered the specific demands from the enterprise of the biotech sector. The interviews with corporate practitioners of the biotech sector revealed the general need and potential demand for a KPI application within biotechnological research and development. Furthermore, it turned out that most of the interviewed practitioners could be described as novices in the field of the social sustainability. This can be explained by the lack of resources to employ a specialist and the relative novelty of social accountability as well as the absence of accepted standards in this area. It became also apparent that most of the organizations in the biotech sector are small and medium-sized enterprises with a strong research emphasis. The direct implications of these observations are that a practical tool addressing the social dimension of sustainability in this sector has to provide explanatory content and fulfil an educational purpose (see von Geibler et al., 2005). Furthermore, the tool should enable a cost and time effective assessment method and be easy to handle and understand with a high level of transparency regarding the assessment process and the results. The recognized widespread profound IT skills among practitioners in the biotech sector advocate the development of a software tool that incorporates the above-mentioned requirements. The assessment software developed during the project guides the user through a step-by-step assessment procedure using a manual. Explanations are given for all areas as well as for the underlying assessment method to avoid misunderstandings and misleading interpretations of results.

The Software-Based Assessment Process
During the evaluation, the software provides one question for each KPI, which is answered by choosing from a given range of choices. Thus, the responses allow the generation of metrics for each indicator within a reasonable timeframe. A numerical value (0–3) is assigned to each indicator depending on the selected answer. As a result, each indicator can enter with the maximum value of three points into an aggregation, which ensures that each aspect is covered and weighted equally. Eventually, the software generates a sum based on the given answers and calculates the resulting score for each aspect. The
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Bus. Strat. Env. 15, 334–346 (2006) DOI: 10.1002/bse

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Aspect Technology development Health and safety – Risk group for biological substances – Risk factors for health and safety – Voluntary health measures taken – Quality of health & safety management

Indicators Technology application – Expected share of risk workplaces – Expected amounts of hazardous substances – Planned voluntary health measures – Voluntary health measures during usage – Planned working time arrangements – Expected degree of psychological demands – Expected share of women in leading positions – Planned measures to improve working conditions – Expected safeguarding of jobs – Expected job creation effects – Possible regions of job creation – Expected effects on related labour markets – Planned apprenticeships – Planned training activities – Identification of training needs – Consideration of employee expectations – Planned personal knowledge exchange – Review of personal knowledge exchange – Planned information systems – Expected employee involvement – Anticipated degree of innovation – Product readiness and marketability – Estimated market penetration – Expected number and types of patents – Anticipated product acceptance – Planned use of genetic engineering methods – Social standards in supply chain – Contribution to societal benefits – Reporting channels planned – Planned communication with local community – Targeted dialogue partners – Measures planned to promote societal dialogue

Quality of working conditions

– Working time arrangements – Degree of psychological demands – Share of women in leading positions – Measures taken to improve working conditions – Safeguarding of jobs – Job creation effects – Regions of job creation – Continuity of job creation – Offered areas of employee training – Quality of human resource management – Identification of training needs – Consideration of employee expectations – Quality of personal knowledge exchange – Review of personal knowledge exchange – Information systems in use – Employee involvement in decision making – Existing commercial exploitation potential – Contribution to scientific debate – Management of patents & licences – Number and types of patents – Client and stakeholder involvement – Use of genetic engineering methods – Social standards in supply chain – Contribution to societal benefits – Voluntary reporting activities – Communication with local community – Stakeholder involvement in decision making – Engagement in political dialogue

Employment

Education and training

Knowledge management

Innovation potential

Product cceptance and societal benefit Societal dialogue

Table 2. Typical indicators used to describe and assess the different criterion dimensions of social sustainability. (Source: von Geibler et al., 2005, p. 54.)

maximum score for each application phase is 96 points (resulting from eight aspects, four indictors per aspect and a maximum of three points per indicator; see Figure 2). Linear aggregation of the indicator values has been chosen as the aggregation method with respect to the target group. For corporate practitioners transparency and simplicity of the aggregation method is crucial for the practical use of the software and its results. Due to their complexity, alternative aggregation methods, such as fuzzy modelling, would not be suitable for the target group. To limit the risk of biased aggregation the indicator set has been constructed aiming at non-overlapping of social aspects. Furthermore, the results are presented in a disaggregated manner. The results of the evaluation are presented in a condensed graphical form using traffic light coloured symbols and a spiderweb diagram (see Figure 3). A detailed text report is given presenting the single
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Content of Dimension
Aspects
1)

J. von Geibler et al.
Indicators for Assessment
Indicators
Technology Development Technology Application

Dimension of Sustainabilty

Health and Safety
2)

Quality of Working Conditions
3)

Employment
4)

Education and Training Social Dimension
5)

Knowledge Management
6)

Existing Commercial Exploitation Potential 3 Contribution to Scientific Debate Management of Patents & Licences Number and Type of Patents

Anticipated Degree of Innovation 3 Product Readiness and Marketability Estimated Market Penetration

3

3

Innovation Potential
7) 3 3

Product Acceptance and Societal Benefit
8)

3 …

Expected Number and Type of Patents 3
… max. number of points: 96

Societal Dialogue

max. number of points:

96

Figure 2. Indicator set for the evaluation of social sustainability of biotechnological processes. (Source: adapted from von Geibler et al., 2005. p. 11.)

choices in the assessment process and the evaluation method as well as the results for each indicator, aspect and phase (process development and process application). Thereby, the results are presented in a transparent way and can be used for external and internal stakeholder communication, especially as they can be integrated in existing assessment models. By addressing the comprehensive selection of social aspects defined as critical by various relevant stakeholder groups, the results point at those aspects of social sustainability that require more attention as they may include current or future risks or neglected opportunities for innovation. Used as an inherent part of the R&D process, the software application can raise awareness among researchers and managers for important perspectives beyond their usual working focus. Thus, the software can assist the development of marketable biotechnological applications and support informed management decisions. This is of major importance as it significantly contributes to reducing the risk of long-term investment decisions. The prototype of the software has been tested in actual biotechnological research and development environments by two pilot partners of the project. Interviews have been conducted to assess the practicability, relevance and benefits of the software. The interviews highlighted the high practicability of the
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Bus. Strat. Env. 15, 334–346 (2006) DOI: 10.1002/bse

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Process Development Process Application

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Health and Safety 12 10 Societal Dialogue 8 6 4 2 Product Acceptance and Societal Benefit 0 Employment Quality of Working Conditions

Innovation Potential

Education and Training

Knowledge Management

Figure 3. Graphical illustration of the evaluation results in a spiderweb diagram (Source: adapted from von Geibler et al., 2005. p. 66.)

software tool as well the completeness of the aspects covered. The interviews confirmed an increased awareness towards aspects that were previously not regarded as being part of the company’s influence and responsibility. An analysis of the neglected aspects showed that they would have had a great potential of being negatively perceived by stakeholder groups, with potentially harmful consequences for the company. The results were considered to be beneficial for internal and external communication, specifically in the area of financing and marketing.

Conclusion
The described project concerned the development of a sector specific KPI set for the biotech sector to address the often-neglected social aspects of sustainability. The KPI set has been integrated in a practical software assessment application. It turns out that stakeholder involvement can help to identify relevant fields of assessment and therefore facilitates the social accounting for sustainability in new and emerging industries. Considering stakeholders’ perceptions towards the criteria of social performance allows the assessment of qualitative aspects in a specific context, while at the same time it reduces the risk of overlooking or neglecting critical aspects of current or future relevance. The software application can be considered as a first step towards a more comprehensive, quantitative incorporation of the social sustainability dimension into the daily business practice of the biotechnology sector – also as it is flexible enough to be integrated into different accounting systems. The presented approach can be seen as stimulus to further research activities in this field and as starting point for organizational learning processes in companies. With the development of a software application the project intends to promote a continuous evaluation of social sustainable performance in combination with ongoing stakeholder dialogue rather than be a one-point-in-time event.
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