The Mediating Role of Community Development in CSR Economic Return -Sustainability Nexus: Evidence from a PLS-SEM Approach

Despite increasing attention to Corporate Social Responsibility (CSR), empirical studies have rarely examined how the economic dimension of CSR (CSREC) contributes to business sustainability (BS) through community development (CD), particularly in the context of industrial parks in emerging economies. This study addresses this gap by investigating the mediating role of community development in the relationship between economic CSR and sustainability outcomes. Stratified random and purposive sampling were used to select a sample of 351 employees and surrounding community members respectively, across four industrial parks found in Ethiopia's Amhara Regional State. The study employed a quantitative survey design and analyzed data using Partial Least Squares Structural Equation Modeling (PLS-SEM). Validated multi-item Likert scales were measured the key constructs Economic CSR, Community Development, and Business Sustainability. The findings revealed that while Economic CSR activities do not directly influence business sustainability (β = 0.031, p = 0.248), they exert a strong indirect effect through community development (indirect β = 0.373, p < 0.001). Community development showed a significant direct effect on business sustainability (β = 0.714, p < 0.001), thus confirming a full mediation effect. These results underline the crucial role of social engagement in translating CSR into sustainable business outcomes. In conclusion, economic-driven CSR alone is insufficient for sustainability unless strategically aligned with community development. The study recommends that firms operating in industrial zones embed their CSR initiatives within broader local development strategies, emphasizing health, education, infrastructure, and cultural programs to enhance social capital and business resilience.