Business Strategy as a Moderator of the <scp>ESG</scp> ‐Efficiency Relationship in Global Energy Companies

ABSTRACT The global transition toward sustainability has increased pressure on energy firms to balance environmental responsibility with financial performance. Although environmental, social, and governance (ESG) practices are widely examined, their impact on firm efficiency remains unclear, with mixed findings across contexts. One possible explanation is the limited attention given to the role of corporate strategy. This study examines the relationship between ESG performance and firm efficiency in the global energy sector over the period 2017 to 2021, with particular attention to the moderating role of business strategy. It first estimates sustainability and profitability efficiency scores using a chance‐constrained two‐stage network data envelopment analysis model. It then uses these efficiency scores in hierarchical regression to examine the relationship between ESG performance and firm efficiency, as well as the moderating role of business strategy. The results show that sustainability efficiency is generally higher than profitability efficiency, reflecting the sector's increasing focus on environmental performance. More importantly, the effect of ESG on efficiency varies across strategic orientations. Environmental performance contributes more positively to efficiency in firms adopting defender strategies, while its effect is weaker in prospector‐oriented firms. In contrast, social performance shows stronger positive effects under prospector strategies. Governance performance does not exhibit a significant moderating pattern. These findings indicate that ESG initiatives do not produce uniform efficiency outcomes, but instead depend on how they align with corporate strategy. The results help explain inconsistencies in prior research and provide practical insights for aligning ESG practices with strategic priorities.