Institutional Embeddedness and Collaborative ESG Governance: Configurational Mechanisms of Green Transformation Among Heavily Polluting Firms in China

ABSTRACT Improving ESG governance in heavily polluting firms has become a critical yet insufficiently understood issue. Existing studies predominantly examine the net effects of individual factors, but pay limited attention to the configurational logic through which internal structures and external contexts jointly shape ESG outcomes. Drawing on the structure–context framework, this study integrates NCA and fsQCA to examine the driving mechanisms of ESG governance among 148 A‐share listed heavily polluting firms in China over 2021–2024. The NCA results reveal that shareholder network centrality (DC) and investor sentiment (SS) function as bottleneck‐like lower‐bound conditions for achieving a targeted level of ESG governance. Building on this boundary‐setting insight, the fsQCA results identify three equifinal pathways to high ESG governance: Agile Response–Policy‐Market Resonance, Resource‐Driven–Institutional Embeddedness, and Network Synergy–Low‐Carbon Leadership. In contrast, the configurational pathways leading to non‐high ESG governance are markedly different, confirming causal asymmetry. This study enriches configurational ESG research and provides differentiated strategic implications for the green transformation of heavily polluting firms under the Dual Carbon goals.