Corporate Social Responsibility (CSR) is a critical pillar of sustainable business, yet powerful market forces often influence its adoption. This study investigates the complex interplay between market concentration—specifically, a firm’s reliance on major customers—and its commitment to CSR in the unique context of an emerging market. Drawing on stakeholder, agency, and resource dependence theories, we argue that high customer concentration (CC) creates a power asymmetry, pressuring firms to prioritise the short-term financial demands of key buyers over long-term societal investments. Analysing a decade of data from the Tehran Stock Exchange, our findings confirm that CC significantly erodes CSR engagement. More intriguingly, we challenge the conventional view of institutional investors as uniform champions of sustainability. Instead, we find that their moderating role is contingent upon certain conditions. Under extreme customer dependence, institutional ownership may paradoxically exacerbate the negative impact on CSR, potentially due to heightened pressure for short-term financial performance. This research contributes to the literature on sustainable business administration by demonstrating that governance mechanisms do not operate in a vacuum but are shaped by underlying market structures. For policymakers and managers, our results underscore the need for strengthened governance and incentives that safeguard sustainability commitments against the pressures of concentrated buyer power, particularly in emerging economies. The study underlines that achieving sustainability goals requires a nuanced understanding of the market environments in which firms operate.

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