The Impacts and Governance Strategies of Environmental Policy on Provincial ESG Performance in China
Abstract
The rapid diffusion of Environmental, Social and Governance (ESG) frameworks has reshaped the objectives of corporate sustainability, placing environmental policy at the core of responsible business transformation. Yet, the pathways through which environmental regulations influence ESG performance remain insufficiently understood, and governance strategies to optimize regulatory outcomes are still evolving. This study investigates the multidimensional impacts of environmental policy on provincial ESG performance, focusing on regulatory intensity, policy instruments, and institutional environments. Drawing on a mixed‐quantitative analytical approach, the research reveals that during the period from 2007 to 2023, ESG levels exhibited a continuous upward trend. There are substantial differences in ESG level across regions in China. The implementation of environmental policy can effectively improve the level of ESG. The greater the level of economic development (lnx1), population density (lnx2), fiscal revenue level (lnx3), and advanced industrial structure (lnx4), the higher the regional ESG level. Moreover, it differs considering region, population size, and economic development. Moreover, policy effectiveness is amplified when supplemented by transparent information systems and stakeholder participation. This paper provides practical guidance for policymakers, regulators, and enterprises in designing integrated development strategies that leverage environmental policy as a catalyst for sustainable ESG development.