Balancing Efficiency and Culture: How Individualism Shapes the Environmental, Social, and Governance–Performance Nexus in Industrial Manufacturing Multinational Enterprises

ABSTRACT This study examines the influence of environmental, social, and governance (ESG) pillars on sustainable efficiency and profitability efficiency in multinational enterprises within the industrial manufacturing sector, while incorporating the moderating role of individualism. Our hierarchical regression findings from 46 MNEs as samples from 2017 to 2023 reveal that the environmental pillar negatively impacts sustainable efficiency and profitability efficiency, suggesting that environmental initiatives reduce operational and financial efficiency, especially when not well integrated with core business strategies. In contrast, the social and governance pillars (GPs) demonstrate positive effects, highlighting the role of socially responsible practices and sound governance in enhancing stakeholder trust, employee productivity, and managerial effectiveness. Further analysis reveals that individualism significantly moderates the relationship between ESG pillars and efficiency outcomes. Specifically, higher levels of individualism intensify the negative effects of environmental and social initiatives on profitability, indicating that cultural context can hinder the translation of ESG investments into profitable efficiency. These findings offer important implications for policymakers, managers, and investors by emphasizing the need to align ESG strategies with local cultural norms. This study contributes to the literature by offering a complex, context‐aware understanding of ESG and efficiency linkages and by integrating cultural dimensions into ESG‐performance models, an area previously underexplored in cross‐border efficiency studies.