Corporate social responsibility, profitability and marketability in business performance evaluation: a directional network slacks-based measure approach

In order to realize corporate sustainability, it is crucial for firms to embed environmental, social and governance (ESG) concerns into their business practices when embracing corporate social responsibility (CSR). The evaluation of business performance thus far provides limited support for the promotion of corporate sustainability since it rarely takes the nonfinancial information of ESG into account. Although much research has been carried out on the association between CSR and business performance, little attention has been given to incorporating CSR within the production system from an efficiency perspective. Using the well-known two-stage (profitability–marketability) data envelopment analysis (DEA) as a backdrop, this paper presents an extended framework that incorporates CSR, profitability and marketability into a parallel-series (mixed) structure of network DEA. A directional network slacks-based measure model, which allows the presence of shared resources and nonpositive data, is formulated to better evaluate firms’ business performance. The proposed model is illustrated with an empirical application to overall and three divisional efficiencies of 71 firms that were awarded Top 100 Excellence in CSR in Taiwan. The empirical results indicate that most sampled firms do not achieve full efficiency, highlighting considerable room for improvement. Among the dimensions of profitability, CSR, and marketability, CSR efficiency is relatively the lowest, yet it shows a strong positive association with overall efficiency, underscoring its crucial role in promoting sustainable business operations. In contrast, a negative relationship between profitability and CSR efficiencies suggests potential trade-offs between financial performance and social responsibility. The proposed network DEA framework enables firms to assess their competitiveness across these dimensions and set appropriate improvement targets, thereby supporting more sustainable business practices. These findings also provide valuable insights for investors seeking to make informed, ESG-oriented investment decisions.