Balancing growth targets and environmental regulations: An empirical analysis of dual policy impact on corporate environmental responsibility–insights from China

Balancing economic growth with environmental conservation poses a universal challenge for governments worldwide. This study investigates the intricate interplay between governments' economic-environmental trade-offs and their implementation of policies aimed at promoting Corporate Environmental Responsibility (CER). Given the discretion of Chinese local governments in economic and environmental policy, we take China as a case study. To conduct this research, we first merge critical data on China's economic growth targets and environmental regulations with information on listed enterprises. Then, we employ a "U-shaped" relationship model to examine the impact of these trade-offs on CER implementation. The results reveal that: (1)The effective fulfillment of CER by enterprises is primarily driven by stricter environmental regulations. (2) Economic growth targets can, to some extent, diminish the policy effect of environmental regulations on CER fulfillment. (3)The crowding-out effect of economic growth targets is particularly pronounced within specific subsets of enterprises, including state-owned enterprises, heavily polluting firms, and those facing high profit pressure. These findings imply that when local governments implement contradictory policies, they must consider not only enterprises' political connections and economic contributions but also pay close attention to the survival dilemma of enterprises. This balancing act aims to harmonize conflicting policy objectives. This research deepens the understanding of how institutional and policy frameworks impact enterprise engagement in CER, especially within the context of governments' economic-environmental trade-offs. It sheds light on the strategies employed by China and other emerging economies to effectively leverage contradictory policies to foster sustainable green growth.