ABSTRACT The global clothing industry is one of the largest contributors to environmental and social challenges; however, firms face increasing demands to integrate environmental, social, and governance (ESG) practices into their core strategies. Prior studies have linked ESG to efficiency and competitiveness, but their findings remain inconsistent, partly because they overlook the role of competitive intensity (CI). This study examines how ESG influences eco‐efficiency and market efficiency under varying market conditions using a two‐stage network data envelopment analysis (DEA) and hierarchical regression on 56 publicly listed clothing firms from 2019 to 2023. We complemented the regression results with a strategic mapping framework that classifies firms by eco‐ and market efficiency and prescribes ESG strategies tailored to their competitive contexts. The DEA results show that firms perform better in terms of eco‐efficiency than market efficiency, with significant variations across regions and firm sizes. The regression results show that the impact of ESG is conditional: In highly competitive markets, environmental ESG improves market efficiency, whereas in concentrated markets, governance ESG enhances eco‐efficiency. Regional analysis confirms these dynamics: European firms in concentrated markets prioritize governance for legitimacy, whereas American and Asian/African firms in fragmented markets leverage environmental initiatives for differentiation. By positioning CI as a boundary condition, this study clarifies the conflicting evidence in the ESG‐performance literature and offers practical guidance for tailoring sustainability strategies to the market structure.
Lu et al. (Sun,) studied this question.