Triple Bottom Line considerations in Venture Capital Decision-Making in Germany

This research investigates the integration of the Triple Bottom Line (TBL) into strategic decision-making within the Venture Capital (VC) industry in Germany, a rapidly changing area for sustainability policy and practice. The study aims to enable German VC firms to better integrate the TBL into their strategic decision-making, particularly in fund set-up, due diligence, and public sustainability commitments, by identifying the underlying structures and mechanisms shaping sustainable practices in the industry. Objective 1 examines influences on VC funds' strategic decisions in fund set-up, focusing on incentives for sustainability-related aspects. Objective 2 evaluates sustainability due diligence methodologies, identifying factors that may influence start-up behaviour. Objective 3 analyses the prominence of TBL elements on VC websites, deducing sustainability commitments of purely financially driven, Environment, Social and Governance (ESG) focused or impact funds. Grounded on a Critical Realist philosophical foundation, this research combines qualitative and quantitative methods. Methodologically, the study innovates by applying Critical Realism to explore observable and unobservable structures affecting the VC industry. Insights were derived from 25 semi-structured interviews with senior VC participants, revealing mechanisms influencing strategic decisions. Additionally, a custom-developed tool analysed VC fund communications, generating extensive data on economic, environmental, and social themes on their websites. The research provides practical insights for VC firms on implementing TBL aspects and promoting sustainable financial practices. For the fund set-up, 15 practical recommendations were identified, falling into the categories of change management in implementing sustainability, focusing on materiality assessments, investors driving change and monitoring regulatory changes. The evaluation of prominent ESG and Impact due diligence frameworks identifies potential gaps in comprehensiveness and offers means to identify mechanisms that may influence the start-up founders in the absence of observable structures. The transparency of website communication priorities allows VC funds to address potential gaps. No research addressing the TBL in the strategic decisions affecting fund set-up, sustainability due diligence and fund communication from a Critical Realist point of view could be identified. This study contributes to academic knowledge by addressing this gap in the literature. In addition, it introduces a valuable investigation tool for scholars to evaluate website communication. This research underscores the potential value of TBL implementation in VC and start-ups, offering a novel perspective on a rarely investigated area and contributing significantly to academic theory and management practice.