From <scp>ESG</scp> to Efficiency: How Business Strategy Shapes Sustainability and Market Outcomes in the Food Industry

ABSTRACT This study investigates how business strategy moderates the relationship between environmental, social, and governance (ESG) practices and firm efficiency in the multinational food industry, specifically focusing on sustainability and market outcomes. Using a sample of 44 multinational food firms from 2017 to 2021, the study applies a network data envelopment analysis to measure sustainability and market efficiency. Subsequently, a truncated regression analysis examines the effects of ESG three pillars and business strategy. The results show that the governance pillar consistently enhances sustainability efficiency and exhibits a generally positive, though less stable, relationship with market efficiency, highlighting the role of strong corporate governance structures. In contrast, the environmental and social pillars display heterogeneous effects. Environmental practices are associated with lower sustainability efficiency, but this negative effect is mitigated under a more proactive business strategy. Similarly, social practices tend to reduce market efficiency at lower levels of business strategy, but the relationship becomes positive when aligned with a proactive strategic orientation. These findings extend the ESG–efficiency literature by identifying business strategy as a key contingency factor that shapes how ESG initiatives are translated into efficiency outcomes. The study also provides practical implications for regulators, investors, and managers to promote more effective ESG integration and sustainable competitive advantage.