ESG, Innovation and the Competitive Advantage of Construction Enterprises in China—An Analysis Based on the System Dynamics

The unique characteristics of Environmental, Social, and Governance (ESG) in the construction industry and its impact mechanisms within a complex environment still need to be further explored. This study employs grounded theory and a system dynamics model to construct a system of ESG, innovation, and the competitive advantage in construction enterprises. Through simulation analysis, this study elucidates the dynamic relationships, causal links, and evolutionary patterns among system elements. The results indicate that (1) ESG, innovation, and the competitive advantage exhibit oscillatory convergence patterns, with innovation and competitive advantage exhibiting time-lagged responses; (2) improvements in environmental (E), social (S), and governance (G) awareness generate diminishing marginal effects on corresponding performance metrics, while reductions in S awareness lead to more pronounced performance deterioration; and (3) simultaneous strengthening of E, S, and G awareness substantially elevates peak levels of innovation and competitive advantage while accelerating their attainment. This study systematically analyzes the dynamic and complex mechanisms through which ESG influences construction enterprises’ competitive advantage and provides valuable suggestions for the sustainable development of construction enterprises.