The Impact of the “Zero-Waste City” Pilot Policy on Corporate Sustainable Development: Evidence from China

Against the ongoing pursuit of ecological civilization and the Beautiful China agenda, understanding how environmental policies influence corporate sustainable development has become increasingly important. This study aims to examine whether and how the “Zero-Waste City” pilot policy affects corporate ESG performance and to identify the underlying mechanisms through which the policy influences firms’ sustainability outcomes. Based on a panel dataset of Chinese A-share listed firms from 2014 to 2024, this study exploits the phased implementation of the “Zero-Waste City” pilot program as a quasi-natural experiment and employs a multi-period difference-in-differences (DID) model to estimate its causal effects. The results show that the “Zero-Waste City” pilot policy significantly improves corporate ESG performance. Mechanism analyses reveal that the policy promotes ESG performance through three channels: alleviating financing constraints, stimulating green technological innovation, and enhancing corporate environmental attention. Further heterogeneity analyses indicate that the policy effects are more pronounced among firms located in central China, traditional industries, heavy-polluting industries, and large enterprises. Additional analysis shows that the policy mainly improves firms’ environmental (E) and governance (G) performance. This study contributes to the literature by providing micro-level evidence on how environmental governance policies shape corporate sustainability outcomes. The findings offer important implications for improving policy design and facilitating firms’ green transformation. Future research could further explore the long-term dynamic effects, spatial spillover mechanisms, and alternative approaches to measuring corporate sustainability performance.