How Does Substantive Environmental Compliance of Polluting Firms Form?—A Case Study on Private Enterprise Environmental Governance in China

Existing studies often reduce private firms’ environmental behaviors to mere greenwashing, rarely unpacking the underlying mechanisms that drive polluting enterprises to develop and sustain substantive compliance. This paper constructs a “Relational Self-Governing” analytical framework grounded in Self-Governance Theory’s core premise of stakeholder interdependence, identifying local social relationality as a critical mechanism that addresses the theory’s inherent limitations of narrow actor scope and interest-bound action logic. This mechanism drives polluting firms to maintain stable, substantive environmental compliance that exceeds minimum legal requirements. This finding expands Self-Governance Theory’s interest-centered practical strategy spectrum and enriches the analytical connotation of corporate agency embedded in localized environmental governance practices. Hierarchical environmental supervision pressures push firms to align operational targets with governmental environmental objectives, while embedded local social relations reinforce compliance incentives to sustain long-term substantive environmental practices. Three core relational paths underpin this process: goal alignment with local governments, peer recognition among firm owners, and shared environmental responsibility with local residents. Leveraging these paths, firms build stable interactive systems spanning government information sharing, inter-firm mutual supervision, and resident collaborative action, collectively constructing organizational legitimacy. This process gradually institutionalizes substantive environmental compliance and fosters public interest-aligned compliance behaviors. This study counters the one-sided greenwashing narrative in prior literature, extending Self-Governance Theory’s application by unpacking the unique operational logic of corporate substantive compliance in environmental governance.