Determinants of sustainability performance of manufacturing companies using two-stage data envelopment analysis

The investigation of business performance via the lens of sustainability has become an increasingly attractive topic among scholars. This study contributes to the field by proposing a two-stage methodology. First, to assess companies' efficiency in terms of sustainability, their scores of the environmental, social and governance (ESG) pillars are combined into the single weighted sustainability performance indicator using the 'Benefit of the Doubt' model, which is maximized for each company by comparing it against the best performers in terms of ESG scores based on Data Envelopment Analysis. Then, in the second stage, the significant determinants are identified after efficiency estimates are regressed on company performance indicators using Tobit panel regression. To demonstrate this approach, we selected 559 companies from the manufacturing sector, as this industry continues to face challenges to reduce environmental impact, improve resource efficiency, and promote social responsibility. The main findings include the examination of the best performers and underperforming companies in terms of sustainability, along with key financial indicators identified in the study.