Regulatory pressure, ESG disclosure quality, and circular economy transition: evidence from India’s carbon-intensive industries

Abstract The increasing emphasis on sustainability and regulatory accountability has intensified the demand for transparent environmental disclosure, particularly in carbon-intensive industries. This study investigates the impact of regulatory pressure on environmental disclosure quality in India’s cement and steel sectors over the period 2015–2024. Drawing upon institutional, legitimacy, and stakeholder theories, the study develops an integrated framework linking regulatory intervention, firm-level characteristics, environmental disclosure, and circular economy practices. The analysis is based on balanced panel dataset of listed cement and steel firms and employs fixed-effects estimation, moderation analysis, system generalized method of moments (GMM), and structural equation modeling (SEM), to ensure robustness and address endogeneity concerns. The findings revealed that regulatory pressure significantly enhances environmental disclosure quality, while firm size and profitability positively influence disclosure practices. In contrast, leverage demonstrates a negative association with environmental reporting. The moderation results indicated that the impact of regulatory pressure is stronger on the cement industry than on the steel industry, reflecting sector-specific environmental sensitivity. The dynamic estimation further confirmed persistence in disclosure behavior over time. In addition, environmental disclosure is found to significantly promote circular economy practices related to resource efficiency and sustainable production. The study contributes to the emerging literature on ESG disclosure in developing economies by providing sector-specific evidence from India’s carbon-intensive industries. It further extends sustainability research by connecting regulatory governance with circular economy transition through a dynamic analytical framework. The findings offer important implications for policymakers, regulators, and industrial stakeholders seeking to strengthen sustainability reporting and promote environmentally responsible industrial transformation.