The Practical Dilemma and Relief of ESG Compliance in the Construction Industry Under the “Dual Carbon” Strategy in China

Abstract

Against the backdrop of the deepening “dual carbon” strategy and the globalization of ESG investment, China’s construction industry, an important key carbon-emitting sector, faces a “triple institutional dilemma”. It includes high carbon lock-in, human capital alienation, and an ambiguous governance structure. Current research on the practical paths of ESG compliance and its localized adaptation in this industry remains limited. Drawing on the green transformation theory, this study systematically explores the theoretical logic, realistic picture, and breakthrough path of ESG compliance in the industry. Firstly, it clarifies the connotation of ESG compliance and maps out the industry’s policy framework and practical patterns. Secondly, it analyzes core dilemmas from three dimensions: environmental constraints related to technical pathways, social conflicts between labor and community arising from institutional imbalances, and governance inefficiencies caused by irregular information disclosure and imperfect structure. Finally, it proposes a “three-dimensional collaborative” mitigation mechanism. This study provides localized, practical pathways for ESG compliance in the construction industry and offers a theoretical reference for the sector’s green transformation, thereby contributing to advancing Chinese-style modernization and ecological civilization construction.

1. Introduction

ESG compliance has evolved from a voluntary sustainable development initiative for enterprises to mandatory requirements bound by legal, financial, and reputational constraints. Major global regulatory bodies have established clear frameworks: the EU’s “Corporate Sustainability Reporting Directive” (CSRD) mandates enterprises to disclose detailed information regarding environmental impacts, social practices, and governance structures, while integrating sustainability data with financial reports; the US SEC’s climate disclosure rules impose climate-related information disclosure requirements on US enterprises; and the Global Reporting Initiative (GRI) framework offers supplementary ESG reporting standards for multinational enterprises.

The core of ESG compliance encompasses three key areas: environmental reporting (including carbon emissions, resource consumption, etc.), social responsibility (including labor practices, diversity indicators, etc.), and governance transparency (including board composition, executive compensation, etc.). Its regulatory scope extends far beyond mere data collection and submission, with specific requirements varying based on the applicable jurisdiction’s specific legislation and existing regulations [1].

Against the backdrop of China’s push for green development, the Third Plenary Session of the 20th Central Committee of the Communist Party of China (CPC) put forward the propositions of “improving the green and low-carbon development mechanism” and “promoting the development of an economic system characterized by green, low-carbon, and circular development” [2]. On 11 August 2024, the CPC Central Committee and the State Council issued the Opinions on Accelerating the Comprehensive Green Transformation of Economic and Social Development, which made systematic arrangements for advancing the comprehensive green transformation of economic and social development [3]. As a vital pillar of the national economy, the transformation of China’s construction industry directly impacts the progress of the country’s “dual carbon” goals (carbon peaking and carbon neutrality). The 2024 China Urban and Rural Construction Sector Carbon Emission Research Report shows that in 2022, the construction industry (including construction activities and building operations) accounted for 44.8% of the national total energy consumptio and 48.3% of the nation’s energy-related carbon emissions with 2.82 billion tons of carbon emissions from the construction phase and 2.31 billion tons from the operation phase [4]. Meanwhile, as a labor-intensive sector, the construction industry provides employment for nearly 50 million workers. Its industrial chain covers dozens of professional fields, including building material production, engineering construction, and operation and maintenance, and involves multiple stakeholders with diverse interest demands [5]. Against this backdrop, China’s construction industry, as a crucial pillar of the national economy, faces enormous pressure for transformation and heavy social responsibility burdens [6]. How to build an ESG ecosystem that aligns with international ESG (Environmental, Social, Governance) standards while preserving Chinese characteristics has become a major challenge in China’s modernization process. The global spread of ESG concepts at an accelerated pace indicates that green transformation has emerged as one of the core strategies for sustainable development in the new era.

The ESG concept shares a natural and inherent compatibility with the “dual carbon” goal (carbon peaking and carbon neutrality). The former assesses an enterprise’s sustainable development capacity through a three-dimensional evaluation system encompassing environmental, social, and governance dimensions, while the latter guides the green transformation of industries with the goals of carbon peaking and carbon neutrality. Together, they form the core support for advancing high-quality development.

Taking the “dual carbon” strategy as the research perspective essentially addresses the urgent demand for industrial transformation: On the one hand, the construction industry is the “largest carbon emitter”, and its target of reaching carbon peaking by 2030 has been incorporated into the 14th Five-Year Plan for Carbon Peaking Action [7]. ESG compliance serves as the key vehicle for translating abstract carbon targets into concrete management practices. Requirements in the environmental dimension—such as carbon footprint accounting and energy efficiency enhancement—directly align with carbon emission reduction efforts.

On the other hand, amid the global restructuring of green governance rules, policies like the EU’s Carbon Border Adjustment Mechanism (CBAM) have incorporated construction-related high-carbon products into their regulatory scope. Only through ESG compliance can low-carbon transformation be realized, facilitating the breaking of green trade barriers and safeguarding the industry’s international competitiveness.

China’s implementation of low-carbon city pilot policies has significantly strengthened enterprises’ ESG practices [8].

As Nobel laureate Joseph Stiglitz noted in his book Globalization and Its Discontents: “Sustainable development is not merely a choice but an unavoidable economic imperative” [9]. In the construction sector, ESG compliance is not only a response to societal sustainability demands but also a necessary measure to realize a win-win balance between economic benefits and environmental responsibilities. The industry’s long construction cycles, complex industrial chains involving multiple stakeholders, and substantial environmental impacts render ESG compliance management highly demanding and challenging to implement. Additionally, the labor-intensive nature of construction, coupled with its high resource consumption and emission attributes, has positioned the sector as a key focus of government and social oversight [10]. The “Emission Gap Report (2024)” by the United Nations Environment Programme (UNEP) emphasizes the urgent need to accelerate action in the construction industry to meet global climate goals [11]. Therefore, strengthening ESG compliance can not only improve the transparency of construction enterprises but also effectively enhance the communication between enterprises and stakeholders, thereby injecting new impetus into the sustainable and healthy development of enterprises.

Although the widespread dissemination of ESG concepts has facilitated enterprises in achieving certain progress in sustainable development, current ESG research within the construction industry predominantly centers on theoretical dimensions, with insufficient exploration of practical implementation paths and operational methods. Notably, a distinct gap remains in tackling how to achieve ESG compliance adapted to China’s national conditions.

Therefore, the construction industry is required to explore localized ESG management and implementation solutions. Such solutions should not only align with the continuously escalating environmental and social responsibility requirements both domestically and internationally, but also balance economic benefits with social outcomes [12]. To provide effective ESG compliance frameworks and strategic support for the construction industry, this study examines the challenges and opportunities of ESG compliance in environmental protection, social responsibility, and corporate governance within China’s construction sector. By analyzing advanced practical experiences and real-world policy contexts, we propose comprehensive ESG compliance strategies to offer scientific foundations and theoretical support for sustainable development in the construction industry. This contributes to achieving high-quality growth through green transformation, thereby advancing Chinese modernization and ecological civilization construction [13].

2. Methodology and Academic Comparison

This study is grounded in the green transition theory as its core theoretical underpinning, while incorporating multiple theoretical lenses—including sustainable development theory and stakeholder theory—and employs a mixed-methods research approach to systematically investigate the practical landscape and breakthrough pathways for ESG compliance in the construction industry. This study adopts an integrated research framework combining the empirical approach, literature research method, and comparative method to systematically explore the construction path of the ESG compliance system for China’s construction industry, ensuring that the research conclusions are both theoretically grounded and practically feasible.

2.1. Research Methods

The empirical approach serves as the core method of this study, focusing on the interaction between norms and facts to verify the practical status and regulatory needs of ESG compliance in the construction industry. In terms of data sourcing, the study draws on core statistical data from China’s National Bureau of Statistics (NBS) regarding carbon emissions, energy consumption, and workforce size in the construction industry from 2018 to 2023, supplemented by detailed data from the 2024 China Urban and Rural Construction Sector Carbon Emission Research Report. These data are used to clarify the evolutionary characteristics of environmental pressures in the sector and the current state of social dimensions, providing solid empirical support for addressing compliance challenges such as “high carbon lock-in” and “labor rights protection”. For case analysis, leading enterprises in China’s construction sector—covering general construction, railway construction, power construction, Shanghai Construction Group, and transportation construction—are selected as research samples. The study systematically examines their ESG reports, social responsibility reports, and specialized practice documents released from 2020 to 2024, analyzing the specific measures adopted by these enterprises in environmental emission reduction technologies, social responsibility implementation mechanisms, and governance structure optimization. It objectively evaluates the effectiveness of these practices and identifies existing deficiencies, thereby extracting replicable experiences for the broader industry.

The literature research method forms the foundational basis of this study, laying a robust theoretical and normative groundwork for exploring ESG compliance in the construction industry. The study systematically collates and analyzes domestic and foreign research outcomes, normative texts, and industry reports: on the theoretical side, it reviews core literature on green transformation theory, stakeholder theory, and ESG compliance, clarifying the theoretical logic of ESG compliance in the construction industry; on the normative side, it integrates China’s policies and regulations related to the “dual carbon” strategy and construction industry ESG compliance (e.g., the Action Plan for Carbon Peak Before 2030, Opinions on Accelerating the Comprehensive Green Transformation of Economic and Social Development), as well as industry guidelines such as the Guidelines for CSR Reports of Chinese Enterprises—Construction Industry (CASS-ESG 5.0); on the industry data side, it combs through authoritative reports including the 2024 China Urban and Rural Construction Sector Carbon Emission Research Report and the Global Status Report for buildings and construction 2024/2025, ensuring the research is aligned with the latest industry development trends and normative requirements.

The comparative method is applied to provide an international reference and practical insight for constructing a localized ESG compliance system for China’s construction industry. The study conducts comparative analysis in two key dimensions: first, a cross-border comparison between international green governance rules and China’s localized ESG framework, focusing on the core differences between the EU’s CBAM, CSRD and China’s construction industry ESG compliance system (e.g., environmental indicator design, social responsibility boundaries, and governance norms), to identify the connection points and differentiated characteristics between China’s framework and international rules; second, a comparative analysis of ESG practice models among leading domestic construction enterprises, exploring the differences in environmental emission reduction technologies, social responsibility implementation mechanisms, and governance structure optimization approaches adopted by enterprises such as Shanghai Construction Group and China Power Construction, to summarize diversified and adaptable ESG compliance paths for the industry.

In summary, the three research methods complement one another: the empirical approach anchors the realistic dilemmas and enterprise practice samples of ESG compliance in the construction industry, the literature research method consolidates the theoretical and normative foundation, and the comparative method broadens the international perspective and practical reference of institutional design. Together, they serve the core research objective of “exploring the realistic dilemmas and mitigation mechanisms of ESG compliance in China’s construction industry under the ‘dual carbon’ strategy” and provide localized and practical paths for the green transformation of the construction industry.

Building on the aforementioned methods, the core research framework of this study is outlined below. Section 1 clarifies the connotation and characteristics of ESG compliance in the construction industry and the actual needs. The second section introduces the research methods and academic comparisons covered in the article, highlighting the innovative aspects of this study. The third part systematically reviews the relevant policies and typical practices of ESG compliance in the Chinese construction industry, clearly defining the institutional guarantees and practical foundations. The fourth section analyzes the practical dilemmas encountered in ESG compliance, uncovering the current challenges from the inherent requirements of environmental, social, and governance dimensions. The fifth section proposes a “three-dimensional synergy” mitigation mechanism covering environmental, social, and governance perspectives. The final section summarizes the core conclusions of this study and points out the shortcomings of the research.

2.2. Discussion of Academic Comparisons

International academic research on environmental sustainability and ESG compliance in high-carbon industries has formed diverse analytical frameworks and empirical paradigms, while this study’s core academic contributions—in theoretical deconstruction, mechanism innovation, and practical paradigms—complement and expand the global research landscape by addressing the contextual characteristics of China’s construction industry and the institutional logic of transitional economies.

From a theoretical perspective, mainstream international studies have explored the linear and non-linear relationships between ESG dimensions and corporate outcomes across sectors, confirming that ESG disclosure can drive corporate green development and that ESG performance (especially environmental and social dimensions) is positively correlated with firm valuation in emerging markets, though governance metrics show inconsistent results due to regulatory and measurement heterogeneity [14]. These studies provide empirical evidence for the role of ESG in corporate development but focus on direct causal relationships between ESG indicators and single outcomes (e.g., green innovation, valuation), lacking in-depth analysis of institutional dilemmas in ESG compliance for specific high-carbon industries such as construction. In contrast, this study adopts an institutional economics framework to systematically analyze the interlocking vicious cycle of three core institutional dilemmas in China’s construction industry: high-carbon lock-in, inadequate labor rights protection driven by cost pressures, and inefficient governance due to structural ambiguity. Different from studies focusing on corporate governance attributes as antecedents of ESG outcomes [15], this study further identifies how institutional imbalances (rather than individual governance factors) exacerbate ESG compliance challenges, providing direct theoretical references for identifying institutional obstacles and exploring breakthrough pathways in similar high-carbon industries across transitional economies.

In terms of governance mechanism construction, international research on ESG governance has increasingly focused on the interaction between technological innovation, regulatory frameworks, and supply chain dynamics, verifying that ESG compliance moderates the relationship between technological advancement, green practices, and green supply chain performance, and that standardized ESG metrics and data-driven technologies are critical to mitigating supply chain ESG risks [16]. It has also been demonstrated that blockchain technology can address deceptive ESG disclosure in supply chains, though adoption costs may lead to non-monotonic effects on supply chain participants [17]. However, most of these frameworks focus on either technological tools or regulatory compliance [18] and fail to consider the project-driven nature and multi-stakeholder collaboration characteristics of the construction industry. This study innovatively proposes a three-dimensional interactive mitigation mechanism integrating institutional design, technological empowerment, and practical operation, breaking through the limitations of traditional manufacturing-centric ESG governance frameworks. By targeting the full lifecycle of construction projects—establishing a full-life cycle carbon footprint traceability system at the environmental level responding to the focus on environmental performance outcomes of ESG disclosure [18], protecting labor rights through digital supervision at the social level, and improving information disclosure at the governance level addressing the call for more research on governance metrics beyond compliance indicators [15]—this mechanism complements international research relying on single-dimensional solutions (e.g., technological innovation or fiscal incentives). Its construction logic and design philosophy serve as methodological references for ESG governance systems in other high-carbon or project-oriented sectors globally.

At the empirical application level, international empirical research on ESG compliance in developing countries’ high-carbon industries has increasingly adopted advanced analytical techniques to capture complex relationships, finding that government collaboration reduces carbon penalties and improves environmental scores for large enterprises, and that machine learning outperforms conventional regression in predicting firm valuation from ESG data [19]. However, such research mainly relies on macro panel data or cross-sector samples and lacks context-adapted micro-level case verification and operational paradigms for the construction industry. In contrast, this study constructs a context-specific empirical analysis paradigm tailored to China’s “dual carbon” strategy and construction industry characteristics, verifying its feasibility through case studies of leading Chinese construction enterprises. This paradigm not only links ESG compliance to practical green transition outcomes in response to research on green innovation in Chinese construction firms [14] but also systematically presents China’s practical experience in balancing economic development and social responsibility in the construction industry.

In summary, this study’s contributions align with the UN 2030 Agenda for Sustainable Development’s emphasis on inclusive and context-specific sustainable development pathways. By deconstructing institutional dilemmas, innovating governance mechanisms, and building practical paradigms, it not only advances the theoretical understanding of ESG compliance in China’s construction industry but also provides multifaceted value references for global research and practice in high-carbon industry sustainability, reflecting the unique role of transitional economies in the global ESG governance system. ESG transformation in the construction industry is a long-term endeavor requiring collaboration among governments, enterprises, and society; through technological innovation and management upgrading, this collaboration can drive the industry toward low-carbon and sustainable development, supporting the advancement of Chinese-style modernization and ecological civilization construction while resonating with the international community’s focus on multi-stakeholder collaboration and systematic governance for sustainable outcomes.

3. Theoretical Logic and Practical Needs of ESG Compliance in Construction Industry

In advancing ESG compliance, the construction industry must develop a thorough understanding of the foundational theories underlying ESG to achieve dual support for corporate benefits and sustainable development. ESG compliance is defined as the process by which enterprises enhance their sustainability and social responsibility fulfillment through adherence to relevant standards and regulations across three dimensions: environmental protection, social accountability, and corporate governance [20]. As a resource-intensive and high-carbon-emission sector, the construction industry has an urgent need for ESG compliance. In practice, construction enterprises must carefully balance compliance with operational efficiency, thereby avoiding counterproductive outcomes resulting from blind implementation. As a resource-intensive, high-carbon-emitting industry with extensive industrial chain coverage, ESG compliance in the construction sector is not merely a policy response but an inevitable choice grounded in multiple theoretical logics. Its implementation must avoid the pitfalls of cost escalation and efficiency erosion caused by blind enforcement.

3.1. The Theoretical Basis of ESG Compliance in the Construction Industry

The ESG compliance framework in the construction industry is not a single dimension, but a composite framework rooted in sustainable development theory, stakeholder theory, triple bottom line theory, and industry-specific theory, which complement each other to form a closed loop of practical logic.

The first is Sustainable Development Theory. This theory emphasizes the synergistic balance among economic growth, environmental protection, and social well-being, with its core lying in avoiding the erosion of long-term development capacity by short-term interests [21]. The full-life-cycle characteristics of the construction industry (from design and construction to operation and maintenance) result in its long-term impacts on resource environments and social systems. According to the Global Construction Industry Status Report 2024–2025 by the United Nations Environment Programme, carbon emissions from the construction industry account for more than 30% of the global total, and its green transformation is directly linked to the achievement of the “dual carbon” goals (carbon peaking and carbon neutrality). Sustainable Development Theory provides a value orientation for ESG compliance in the construction industry, requiring enterprises to integrate environmental goals such as carbon emission reduction and resource recycling into the entire project process.

The second is Stakeholder Theory. Proposed by R. Edward Freeman, Stakeholder Theory expands the scope of corporate responsibility to include “individuals and groups that can influence or be influenced by corporate goals,” breaking through the limitations of the traditional “shareholder primacy” concept [22]. Stakeholders in the construction industry are extremely broad, encompassing not only investors, employees, and suppliers but also property owners, community residents, and even the ecological environment. For example, the protection of homebuyers’ rights under the “housing delivery guarantee” policy and the control of impacts on surrounding communities during construction are both concrete practices of this theory in the industry. The legislation on Benefit Corporations in the United States and the social enterprise standards of the European Union both confirm that balancing the demands of diverse stakeholders is a core guarantee for the long-term stable operation of enterprises.

The third is the Triple Bottom Line Theory. The “economic-environmental-social” Triple Bottom Line Theory, proposed by John Elkington, provides an operable evaluation framework for ESG compliance [23]. For the construction industry, the economic bottom line requires compliance practices to balance cost control and efficiency improvement; for instance, prefabricated construction technology not only reduces environmental impacts but also enhances construction efficiency. The environmental bottom line focuses on core indicators such as carbon emissions and waste disposal—Vanke’s 2023 achievement of 100% green building standards for all new projects is a typical practice in this regard.

The last is the green transition theory. Guided by the thought of socialism with Chinese characteristics, this theory fully implements Xi Jinping’s economic thought and ecological civilization thought, takes the resolution of resource, environmental, and ecological issues as its foundation, and aims to achieve high-quality development and modernization of harmonious coexistence between humans and nature. Through comprehensive, multi-sectoral, and systematic reforms, it promotes the transformation of the economy and society toward a green and low-carbon direction. It emphasizes the green transition of industrial structures and requires traditional industries (such as steel, non-ferrous metals, petrochemicals, chemicals, and building materials) to undergo green and low-carbon transformation [3].

From the above, the theoretical foundation for ESG compliance in the construction industry is a composite framework composed of five complementary core theories: Sustainable Development Theory provides a value orientation; Stakeholder Theory defines the boundary of responsibilities; Triple Bottom Line Theory clarifies the assessment criteria; The construction industry’s “Trinity” model is adapted to the industry characteristics, and together they provide comprehensive theoretical support for ESG compliance practices.

3.2. The Characteristics of ESG Compliance in the Construction Industry

The construction industry comprises a broad array of elements and complex processes, ranging from initial design to final maintenance. This sector extends beyond the development of residential and commercial real estate to encompass infrastructure projects, including roads, bridges, tunnels, and public transportation systems. As a crucial economic pillar, construction not only provides essential living and working spaces but also serves as a significant source of employment. Amid evolving technologies and changing times, the industry is experiencing continuous transformation.

Environmental protection and energy efficiency have grown increasingly critical in green and sustainable construction practices, fostering greater emphasis on ecological conservation and energy efficiency during planning and construction. Meanwhile, the sector confronts challenges such as labor shortages, cost management, and project coordination. Future development will increasingly depend on technological innovations such as Building Information Modeling (BIM), modular construction, and automated construction technologies. These advancements are anticipated to enhance project efficiency, reduce costs, and improve building quality. Against the backdrop of a growing global focus on sustainability, the construction industry must endeavor to protect our shared ecological environment while addressing housing demands.

ESG refers to an investment philosophy and corporate evaluation framework that prioritizes environmental, social, and governance performance over traditional financial metrics. It embodies the tangible embodiment of sustainable development principles in both investment markets and enterprises [24]. Enterprises should not solely prioritize economic benefits but must holistically consider their impact on all stakeholders—including employees, customers, communities, suppliers, and the natural environment—while fulfilling social responsibilities to achieve sustainable development.

ESG is not a novel concept but rather an evolved form of corporate social responsibility in capital markets, constituting an integral part of social accountability. The current ESG system consists of three key components: ESG disclosure, ESG evaluation, and ESG investment. Enterprises disclose relevant information as required by regulations, rating agencies assess disclosed ESG data, and investors conduct risk evaluations and investment decisions based on these assessments, creating an integrated ESG operational mechanism [25].

Based on the above, the connotation of ESG compliance in the construction industry is constantly deepening, driven by the dual forces of policy evolution and technological innovation, and specifically presents three core characteristics: full-life-cycle coverage, multi-stakeholder collaboration, and strengthened quantitative orientation. From the perspective of coverage scope, this compliance connotation has exceeded the traditional single environmental protection requirements in the construction phase, and further extended to the full-life-cycle chain of “design-construction-operation and maintenance-demolition,” enabling systematic management and control of environmental and social impacts at all project stages. From the perspective of implementation entities, a collaborative pattern led by enterprises, supervised by the government, and participated in by third parties has gradually taken shape in the industry; each entity performs its respective duties while cooperating with one another, jointly promoting the implementation and improvement of ESG compliance standards. From the perspective of practice orientation, quantitative disclosure and performance linkage have become the core trends in the industry’s compliance development. However, the industry still faces issues such as excessive qualitative descriptions and insufficient quantitative data, and the average score of ESG information disclosure for major projects also needs to be further improved—this is also a key area for optimization in subsequent compliance efforts.

3.3. The Practical Need for ESG Compliance in the Construction Industry

In 2022, the “14th Five-Year Plan for Construction Industry Development” highlights that the construction sector confronts a series of challenges, including extensive development models, low labor productivity, high energy consumption and emissions, irregular market order, overall subpar building quality, and relatively high rates of engineering quality and safety incidents. During the 14th Five-Year Plan period, the Plan emphasizes accelerating industry transformation with key tasks encompassing the promotion of green construction methods, the improvement of market operation mechanisms, the cultivation of a skilled construction workforce, and the refinement of project organization models. It also sets specific requirements for environmental, social, and governance dimensions. Against the backdrop of an era replete with challenges and opportunities, construction enterprises face dual pressures: urgent need for transformation and growing regulatory scrutiny [26]. Under such circumstances, short-sighted profit-driven approaches have become unsustainable, while pursuing sustainable development has emerged as the essential path for enterprises to maintain competitiveness and achieve long-term growth. Therefore, construction companies must incorporate ESG principles into their future strategy formulation—a practice that will yield substantial advantages across multiple dimensions.

3.3.1. Risk Avoidance and Compliance Improvement: Strengthen Corporate Governance and Build Risk Barriers

The hallmark of ESG metrics resides in their focus on non-financial performance areas, yet the risks within these domains can significantly impact corporate financial stability [27]. For construction enterprises, compliance risks are frequently closely linked to environmental protection, labor rights, and supply chain management. Through the implementation of ESG standards, enterprises can proactively identify potential risks and adopt preventive measures, thereby reducing post-event remediation costs.

For instance, real-time updates from third-party ESG assessments enable construction companies to identify operational pressures arising from raw material shortages, rising labor costs, or policy changes. More importantly, the implementation of ESG standards facilitates the establishment of systematic compliance frameworks that integrate environmental, social, and governance requirements into daily operations and decision-making processes. This governance system transcends traditional financial dimensions. It not only meets current regulatory demands but also equips enterprises to navigate uncertainties with greater resilience. By preventing reputational crises and legal disputes stemming from regulatory non-compliance or failures in social responsibility fulfillment, it ultimately serves as a robust safeguard for the sustainable growth of construction enterprises.

3.3.2. Enhance Market Competitiveness and Internationalization Ability: Seize the Commanding Heights of Green Economy

As infrastructure development decelerates and industry competition intensifies, traditional competition centered on price and quality-based rivalry is giving way to more sophisticated multi-dimensional rivalry. Green construction and sustainable development have emerged as new focal points in the construction industry, with the quality of ESG practices acting as a key differentiator for enterprises in fierce market competition. On one hand, exceptional ESG performance enhances enterprises’ attractiveness in domestic markets; on the other hand, amid globalization, ESG has become a core factor determining eligibility for multinational project approvals. In international bidding processes, host governments prioritize comprehensive evaluations of environmental protection, human rights compliance, and social responsibility—all of which are central to ESG assessments.

Enterprises that meet global ESG standards not only overcome policy barriers but also secure recognition from international partners and capital markets [28]. As global ESG criteria become increasingly standardized, leading ESG practices will empower enterprises to seize opportunities in international markets, functioning as a core driving force for business expansion and market share growth.

3.3.3. Promoting Sustainable Development and Talent Attraction: Building Long-Term Competitive Advantage of Enterprises

Against the current backdrop of prioritizing green transformation and social responsibility, ESG has evolved from a moral obligation to a practical strategic tool for the sustainable development of enterprises [29]. Firstly, construction enterprises that implement ESG principles can optimize capital structures and lower financing costs through financing channels such as green bonds and social responsibility funds. Meanwhile, by rationally allocating resources and innovating management models, these enterprises can actively contribute to sustainability efforts while enhancing brand reputation and market recognition. Secondly, deepening ESG practices also equips construction enterprises with a competitive advantage in talent acquisition. A growing number of young job seekers regard corporate social responsibility, environmental awareness, and employee welfare as key factors in their choice of employers. Enterprises that demonstrate excellence in green construction, employee protection, and social responsibility significantly attract high-end talent. Furthermore, a sound ESG framework can stimulate employee enthusiasm and innovation by improving work environments and optimizing benefit policies, thereby creating a virtuous cycle.

4. Policy Guidance and Practice of ESG Compliance in Construction Industry

Against the backdrop of global economic transformation and the pursuit of sustainable development goals, the construction industry—a key sector for resource consumption and carbon emissions—confronts heightened compliance requirements and societal expectations [30]. ESG not only sets new benchmarks for corporate governance but also poses greater challenges in navigating policy shifts, market competition, and social accountability. From policy formulation to implementation, the integration of ESG in construction demonstrates a dual synergy between “top-down” regulatory frameworks and “bottom-up” corporate innovation: while policies set clear development objectives and behavioral standards covering building energy efficiency, green construction, eco-friendly materials, carbon emission trading, ESG information disclosure, smart construction, and workplace safety, enterprises’ practical innovations focus on environmental (green technology application, emission reduction), social (employee rights, public welfare), and governance (structure optimization, risk control) dimensions, further diversify ESG implementation pathways. China is accelerating the establishment of a domestic ESG evaluation system from both the policy orientation and industry practice perspectives [31].

4.1. Policy Guidance on ESG Compliance in the Construction Industry

China has implemented a series of ESG-related policies and regulations for the construction industry, forming a multi-dimensional policy system that evolves from framework construction to refined implementation and standardized disclosure. These policies provide crucial institutional safeguards and policy support for the sector’s sustainable development, and their specific content and evolutionary logic are as follows.

4.1.1. Specific Content of Core Policies

Issued in 2020, the Green Building Action Programme focuses on promoting green building development and improving building energy efficiency, guiding enterprises to integrate environmental concepts into real estate development by emphasizing the integration of engineering practice with academic research and the promotion of green technology real estate strategies based on green, health, and wisdom. In 2021, the Green Building Labeling Management Measures standardized the evaluation system for green buildings, clarifying technical requirements for energy conservation and environmental protection, and advocating the architectural concept of “green, ecological, and intelligent” to guide enterprises in adopting active and passive energy-saving technologies and comprehensive water-saving technologies. In 2022, the 14th Five-Year Plan for Building Energy Efficiency put forward the mandatory goal of popularizing green buildings in all new urban buildings by 2025, focusing on clean energy layout, talent training through university-enterprise cooperation, and the establishment of special responsibility organizations to advance industry energy efficiency. In 2023, the Implementation Plan for Green Building Materials: Boost high-quality industry growth emphasized the high-quality development of green building materials, encouraging enterprises to adopt green construction, reduce emissions, increase environmental investment, and simultaneously strengthen employee rights protection, public welfare participation, and governance structure optimization. The 2024 Guidelines for Sustainable Development Reports (Trial): Regulate ESG disclosure established standardized requirements for ESG information disclosure, urging enterprises to develop green building technologies, promote energy conservation, focus on employee growth, fulfill public welfare responsibilities, and improve internal control systems to enhance information transparency. In 2025, the Guidance on Corporate Environmental, Social, Governance (ESG) Information Disclosure further refined ESG disclosure indicators, integrating digital transformation and safety management into compliance requirements while guiding enterprises to improve green management, solve ecological problems, and guarantee employee rights to strengthen practice operability.

4.1.2. Evaluation of Policy Evolution

The ESG policy system for the construction industry presents a clear “from single to comprehensive, from framework to refinement” evolutionary path: the period 2020–2021 served as the foundation-laying stage, focusing on establishing green building standards and labeling management systems to build the basic regulatory framework for industry ESG development. From 2022 to 2023, it entered the deepening stage, integrating national strategic goals such as full green building popularization and high-quality development of green building materials, and expanding policy coverage to energy layout, talent training, and industrial chain governance. The years 2024–2025 have become the standardized disclosure stage, shifting the policy focus from behavioral regulation of enterprises to information transparency and digital governance, thus forming a systematized policy of “practice guidance & disclosure supervision”.

From a positive perspective, these policies exhibit strong targetedness, with each measure directly addressing key pain points in the industry’s ESG development, and good synergy with enterprise practice, as evidenced by the close alignment between the implementation measures of representative enterprises and policy requirements. Additionally, the policies cover the entire industrial chain from building design, material selection, to operation management, forming a systematic regulatory network that ensures the comprehensiveness of ESG governance. However, there are still areas for improvement: due to differences in regional economic development levels, the implementation effect of policies varies across regions, leading to uneven compliance levels among enterprises; supporting incentive policies such as financial subsidies for green technology research and development (R&D) and tax preferences for green building materials are not yet sufficient to fully mobilize enterprise enthusiasm; the quantitative assessment indicators for enterprise ESG performance in the policies need to be further refined to enhance the operability of supervision and evaluation. The following Table 1 synthesizes core policies, representative enterprises, and their key implementation measures:

Table 1. Main ESG compliance policies and practices in the construction industry.

Time	Policy	Enterprises	Core Practice
Green Building Action Programme	2020	China Metallurgical Real Estate Group Co., Ltd., Beijing, China	Integrate industry-academia-research, promote green technology real estate with green/health/wisdom
Green Building Labeling Management Measures	2021	Fuzhou New District Group Co., Ltd., Fuzhou, China	Adopt active/passive energy-saving and water-saving technologies for low-carbon construction
14th Five-Year Plan for Building Energy Efficiency	2022	China Power Construction Group Co., Ltd., Beijing, China	Layout clean energy; cooperate with universities for talent training; issue green asset-backed plans
Implementation Plan for Green Building Materials: Boost high-quality industry growth	2023	Shanghai Construction/China Railway Construction/China Metallurgical Group Co., Ltd., Shanghai, China	Promote green construction; protect employee rights; strengthen compliance and risk control
Guidelines for Sustainable Development Reports (Trial): Regulate ESG disclosure	2024	Chinese Architecture Group Co., Ltd., Beijing, China	Develop green building technologies; optimize internal control and ESG disclosure
Guidance on corporate environmental, social, and governance (ESG) information disclosure	2025	Hubei Transportation Investment Group Co., Ltd., Wuhan, China	Improve green management; advance digital transformation; fulfill social responsibilities

4.2. Practice Exploration of ESG Compliance in the Construction Industry

Although China’s construction industry’s ESG development is still in the exploratory stage, leading enterprises have achieved remarkable results by aligning practices with national policies and market realities, as shown in Table 1. Their experiences, which integrate strategic guidance, technological innovation, and management optimization, set benchmarks for the industry. Based on the practice of representative enterprises in the table above, the overall characteristics of ESG compliance practices in the construction industry are summarized as follows.

4.2.1. Policy-Driven and Enterprise-Independent Innovation Synergistic

All leading enterprises take national ESG policies as the core guide for practice: Chinese Architecture responds to the “double carbon” strategy by formulating energy conservation and emission reduction targets; China Power Construction implements the 14th Five-Year Plan for Building Energy Efficiency by deploying clean energy; Hubei Transportation Investment Group complies with ESG information disclosure requirements by improving digital management. At the same time, enterprises actively carry out independent innovation: Fuzhou New District Group takes the lead in low-carbon construction in Fujian Province through technological integration; China Communications Construction invests in offshore wind power projects to expand green industry boundaries, forming a “policy guidance & market innovation” dual-driven pattern.

4.2.2. Three-Dimensional Coordinated Advancement of Environment, Society, and Governance

In environmental protection, enterprises focus on the core demands of the construction industry: promoting green building technologies (Chinese Architecture), strengthening resource recycling (Shanghai Construction), and participating in ecological restoration (China Metallurgical), forming a full-cycle environmental management system. In social responsibility, the “people-oriented” concept is fully reflected: protecting employee rights and interests (China Railway Construction), strengthening supply chain environmental governance (Shanghai Construction), and participating in public welfare undertakings (China Metallurgical), realizing the coordinated development of enterprise and society. In corporate governance, enterprises improve the institutional system: establish special responsibility organizations (China Power Construction), optimize internal control mechanisms (Chinese Architecture), and standardize information disclosure (China Communications Construction), laying a solid foundation for ESG implementation.

4.2.3. Technology Empowerment and Industrial Chain Synergy as Key Supports

Technological innovation is an important driving force for ESG practice: digital transformation (Hubei Transportation Investment Group) improves safety management efficiency; green building material research and development (China Metallurgical) reduces environmental impact; clean energy technology application (China Power Construction) promotes emission reduction. Meanwhile, enterprises gradually realize industrial chain synergy: Shanghai Construction guides partners to adopt environmental policies; China Power Construction cooperates with universities to build talent training bases; China Railway Construction participates in formulating national ESG evaluation standards, driving the overall improvement of the industry’s ESG level.

4.2.4. From Fragmented Practice to Systematic Operation

In the initial stage, enterprises focused on single-dimensional practice such as green construction; now they have formed systematic operation covering strategy, management, and business: Chinese Architecture takes ESG as a strategic tool and formulates special management manuals; China Metallurgical integrates ESG into production and operation through environmental management system optimization; almost all leading enterprises have released ESG reports or social responsibility reports, realizing the systematization and normalization of ESG practice.

In 2024, among the top 500 enterprises in China, 17 enterprises in the engineering and construction sector released ESG reports, accounting for as high as 77.3%, approaching the advanced international level. In terms of report types, “ESG reports” were the most numerous, accounting for 47.37%; “social responsibility reports” accounted for 31.58%, indicating that enterprises’ disclosure preferences are shifting from traditional social responsibility to a more systematic ESG framework [32]. Overall, the ESG practices in the construction industry are advancing in a more systematic and in-depth direction, contributing to the high-quality development of the industry.

5. The Real Dilemma of ESG Compliance in the Construction Industry

The ESG compliance predicament in the construction industry is not a discrete practical problem, but rather a systemic impediment manifested across the three dimensions of environment, society, and governance. Its essence lies in the divergence from the core tenets of theories, including sustainable development theory, stakeholder theory, triple bottom line theory, and green transformation theory. From the coupling logic of theory-practice interaction, the environmental dimension predicament stems from insufficient impetus for green transformation and misalignment with sustainable development goals; the social dimension predicament is rooted in the insufficient coordination of stakeholders’ rights and interests; and the governance dimension predicament points to the dual failure of collaborative mechanisms and internal control systems. These three aspects interact and reinforce each other’s effects, collectively impeding the advancement of ESG compliance in the construction industry. Below, a detailed analysis of the predicaments in each dimension is conducted by integrating multiple theoretical perspectives.

5.1. Environmental Pressure: Excessive Carbon Emissions and Waste Disposal

5.1.1. The Current Situation of Excessive Carbon Emissions and Institutional Causes

Against the backdrop of a profound shift in the global division of labor, the transformation of social development marked by green, low-carbon, and intelligent attributes has emerged as a key domain where countries pursue new sources of economic growth [33]. Green transition theory posits that the low-carbon transformation of the construction industry should take technological innovation as its core and be underpinned by institutional guarantees. The sustainable development theory further underscores the need to control carbon emissions within the environmental carrying capacity, so as to prevent the depletion of future generations’ living space. However, the current carbon emission profile of the construction industry deviates significantly from the tenets of these theories.

The construction industry is a major contributor to global carbon dioxide emissions and ranks among the primary sources of greenhouse gas emissions worldwide. Per the 2022 Global Construction and Building Industry Status Report, the construction sector accounted for approximately 37% of global CO₂ emissions in 2021 [34]. Data from the Global Building Climate Tracking (GBCT) reveals that the construction industry is substantially off track in meeting the 2030 and 2050 decarbonization targets. Between 2015 and 2023, CO₂ emissions from building operations increased by 5.4%—contrary to the required 28.1% reduction. Energy intensity decreased by only 9.5%, falling short of the 18.2% target, and the share of renewable energy in final energy demand rose by merely 4.5 percentage points—well below the 17.8-percentage-point target [35]. The construction industry’s significant carbon footprint exerts a profound impact on the global climate system: The high level of carbon emissions not only results in elevated concentrations of atmospheric greenhouse gases, intensifying the global warming trend and triggering the frequent occurrence of extreme weather events, but also extends across the entire life cycle of buildings—ranging from high carbon emissions generated during the production of building materials (e.g., steel and concrete) to excessive energy consumption incurred during the construction, operation, and demolition phases. This thus exhibits the systematic and full-chain nature of carbon emissions in the sector.

Against the backdrop of the continuous advancement of global urbanization, the steady growth of new construction projects, the frequency of construction activities, and the significant surge in related demands have exerted a direct driver on the rise in regional carbon emissions. In urbanizing countries such as China and India, rapid increases in construction industry-related carbon emissions to meet infrastructure development needs have greatly elevated the urgency of addressing climate change. Data indicate that the growth rate of carbon emissions in these regions far exceeds the global average, thereby further threatening ecosystem balance [36] and posing a prominent challenge to the global decarbonization of the construction industry.

While there is a global consensus on decarbonizing the construction industry and the urgency of emission reduction has become increasingly evident, the actual transformation process still faces dual obstacles in technology and institutions. This directly contradicts the core tenets of green transition theory and sustainable development theory.

From the technical perspective, the core tenet of “technology-driven transformation” under green transition theory has not been effectively implemented. The R&D costs of green building materials are significantly higher than those of traditional building materials, and market acceptance of such materials has yet to achieve large-scale penetration. Driven by cost control considerations, most enterprises tend to persist with traditional high-carbon production models, leading to a severe lack of internal impetus for green technological innovation. This “prioritizing short-term costs over long-term transformation” choice leaves the construction industry’s low-carbon transformation without core technological support—a direct conflict with the core requirement of green transition theory that technological innovation serves as the cornerstone. This further widens the gap between current practices and sustainable development goals.

From the institutional perspective, the “institutional guarantees” emphasized by green transition theory exhibit structural deficiencies, which have become a key constraint on the transformation process. Firstly, the locking effect of path dependence has continued to intensify. From the lens of path dependence theory in institutional economics, the construction industry has long relied on a production model centered on high-carbon building materials (e.g., steel and concrete), resulting in a systemic locking effect that encompasses the “technological R&D—production equipment—supply chain system” nexus. However, the necessary guarantees for investment in technological innovation and a reasonable cost-sharing mechanism for green building material substitution have not yet been established. This perpetuates the path dependence of traditional high-carbon models, severely impeding the low-carbon transformation process. Secondly, policy incentive mechanisms have notable shortcomings. Past environmental governance policies have primarily adopted a “command-and-control” model, focusing on imposing mandatory emission-reduction requirements. At the same time, market-based incentives for R&D, the application of green building materials, and enterprises’ carbon-reduction initiatives remain insufficient. On one hand, the application of green building materials is not integrated into enterprises’ bidding credit evaluation systems, leaving enterprises without market competition-driven motivation to adopt such materials. On the other hand, the coverage and support of special subsidies for green technology R&D are limited and inadequate, failing to effectively offset enterprises’ transformation costs or stimulate their internal motivation for proactive transformation. Thirdly, an incomplete standard system exacerbates the systemic challenges of emission reduction. Currently, carbon footprint accounting standards for green building materials fail to cover the full life cycle, as carbon emissions from the entire process—including raw material extraction, production and processing, transportation, use, and waste disposal—are not incorporated into accounting frameworks. Meanwhile, carbon reduction standards for building projects across different regions and types lack uniformity and alignment, resulting in fragmented carbon reduction mandates. This prevents the formation of systematic carbon reduction synergy across regions and industries, ultimately limiting the large-scale promotion of green building material substitution.

5.1.2. Resource Waste Caused by Building Materials and Waste Disposal

The effective advancement of environmental governance hinges on a tripartite collaborative framework encompassing government regulation, enterprise implementation, and social supervision. The absence of any party in this framework will lead to governance failure, which aligns closely with the triple bottom line’s inherent tenets—centered on the coordinated development of economic, environmental, and social dimensions. The current chaotic state of construction waste management in the construction industry is a direct consequence of the breakdown of this collaborative mechanism. It not only causes severe resource waste and ecological damage but also deviates significantly from the core tenets of green transformation theory and sustainable development theory. The construction industry is a major consumer of natural resources and ranks among the primary sources of solid waste. China serves as a case in point: construction waste has consistently accounted for more than 40% of the total urban waste, with its annual output exceeding 3 billion tons in 2023 and projections indicating it will reach 4 billion tons by 2025 [37]. Behind this scenario lies a full-chain waste of resources: during the construction phase, substantial quantities of natural resources—including steel, concrete, and wood—are consumed; during the demolition, renovation, and transformation phases of buildings, waste of these materials becomes even more severe, with many materials of usable value being discarded directly. More critically, some construction waste contains hazardous substances such as paints, asbestos, and heavy metals. If not managed appropriately, these substances will cause persistent pollution to the surrounding soil and water bodies, resulting in long-term ecological harm. Meanwhile, large-scale landfill disposal of construction waste occupies substantial precious land resources, while incineration releases harmful gases that exacerbate air pollution. As urban waste disposal capacity approaches saturation, local governments are forced to tighten disposal policies, further increasing the operating costs of the construction industry and forming a vicious cycle of “high consumption, high emissions, and low recycling.” This model not only reflects inefficiencies in industrial resource management but also triggers a series of ecological and social issues, imposing additional pressure on urban waste management systems and public health.

The prominent problems in resource utilization and construction waste management within the construction industry stem from a set of deep-seated institutional deficiencies and the breakdown of coordination mechanisms, which directly contravene the core requirement of the triple bottom line theory: “multi-party collaboration to ensure environmental compliance and sustainable development”.

Firstly, inadequacies in the resource recycling mechanism represent the core bottleneck. Currently, the classified collection of construction waste and the certification and promotion system for recycled building materials remain underdeveloped: classified collection has become a mere formality due to insufficient supporting facilities and ambiguous operational standards, making it difficult to achieve source reduction and targeted recycling; the certification system for recycled building materials lacks uniformity and authority, with the market generally questioning the quality of recycled products—this leads to low market acceptance and restricts the circulation and application of recycled building materials. Consequently, enterprises struggle to secure stable economic benefits from resource recycling, further dampening their enthusiasm for participating in the process and creating a closed-loop predicament of “difficult recycling, limited utilization, and low benefits”.

Secondly, ambiguity in the full-chain division of responsibilities for construction waste has undermined governance effectiveness. The generation, transportation, and disposal of construction waste involve multiple entities, including construction companies, transportation firms, and disposal institutions. However, the current institutional framework fails to clearly define the rights and obligations of each party, and the principle of “who generates waste shall be responsible for it” has not been effectively institutionalized. Construction companies often shirk responsibilities for waste classification and standardized disposal; transportation firms may engage in random dumping to cut costs; and disposal institutions lack a clear accountability mechanism for meeting environmental standards. This ambiguity in responsibility boundaries leads to mutual buck-passing when problems arise and makes it difficult to trace accountability, seriously weakening the implementation of waste management policies.

Finally, inadequate supervision and law enforcement have further exacerbated management chaos. The current regulatory system lacks a regular, comprehensive mechanism for full-process supervision: on-site inspections are mostly sporadic and reactive, failing to cover the entire chain of construction waste generation, transportation, and disposal. Meanwhile, penalties for illegal waste disposal are relatively lenient, with fines far lower than the costs enterprises would incur for standardized disposal—this creates a distorted scenario where “the cost of non-compliance is lower than that of compliance.” As a result, some enterprises take chances and disregard waste management regulations. This not only renders policy standards ineffective but also undermines market fairness: law-abiding enterprises face a competitive disadvantage due to higher operating costs, further weakening their willingness to comply with environmental regulations.

In summary, the lack of tripartite synergy—characterized by insufficient government supervision, inadequate enterprise implementation, and ineffective social supervision—has ultimately led to a vicious cycle. This chaos not only causes severe resource waste and ecological damage but also seriously deviates from the “efficient resource recycling” emphasized by green transformation theory, the “intergenerational equity and ecological balance” pursued by sustainable development theory, and the “multi-party collaborative development” requirement of the triple bottom line theory. It has thus become a prominent environmental predicament in the green transformation of the construction industry.

5.2. Social Responsibility: Challenges of Labor Rights and Community Conflict

The social dimension constitutes the core value driver of ESG compliance in the construction industry. Its predicament is primarily manifested in the inadequacy of labor rights protection and the dysfunction of community relations. The root causes of these two issues stem from the divergence from the core tenets of stakeholder theory and the triple bottom line theory. The stakeholder theory departs from the traditional organizational principle of prioritizing shareholders and the company, breaking free from the singular focus on “shareholders and corporate interests first.” Instead, it advocates that enterprises shall comprehensively balance the interests of key stakeholder groups, including shareholders, employees, and communities. Organizational goals should be extended beyond mere financial indicators to encompass social value considerations; the theory further requires ESG compliance to transcend profit-driven imperatives and integrate social impacts deeply into the core of enterprise decision-making [38].

5.2.1. Lack of Labor Rights and High Incidence of Work-Related Injuries

The effective advancement of environmental governance hinges on a collaborative framework encompassing government supervision, enterprise implementation, and social supervision. The absence of any party in this framework will lead to governance failure—a logic that aligns with the core tenet of the triple bottom line theory, which centers on the collaborative development of economic, environmental, and social dimensions. The current chaotic state of construction waste management in the construction industry is a direct consequence of the breakdown of this collaborative mechanism. This situation not only causes severe resource waste and ecological damage but also runs counter to the core requirements of green transformation theory and sustainable development theory.

The construction industry is not only a prominent consumer of natural resources but also one of the primary sources of solid waste, with its inefficiencies in resource utilization and irregularities in waste disposal being particularly pronounced. Taking China as an illustrative case, the proportion of construction waste in total municipal solid waste (MSW) has consistently exceeded 40%: its annual output surpassed 3 billion tons in 2023 and is projected to reach 4 billion tons by 2025. Currently, the resource utilization rate of such waste remains at a relatively low level of 50–55% [37]. Behind this scenario lies a full-chain waste of resources: during the construction phase, substantial quantities of natural resources (e.g., steel, concrete, wood) are consumed; during the demolition, renovation, and transformation phases of buildings, waste of these materials becomes even more severe, with many materials still possessing usable value being discarded directly. More alarmingly, some construction waste contains hazardous substances such as paints, asbestos, and heavy metals. If not managed appropriately, these substances will cause persistent pollution to the surrounding soil and water bodies, resulting in long-term ecological harm. Meanwhile, large-scale landfill disposal of construction waste occupies substantial precious land resources, while incineration releases harmful gases that exacerbate air pollution. As the capacity of municipal landfills gradually approaches saturation, local governments have been compelled to tighten disposal policies—further increasing the operational costs of the construction industry and forming a vicious cycle of “excessive resource consumption → environmental damage → cost escalation.” This model of high consumption, high emissions, and low recycling not only reflects inefficiencies in industrial resource management but also triggers a series of ecological and social issues, imposing additional pressure on urban waste governance systems and public health.

The prominent predicament of the construction industry in resource utilization and construction waste management stems from a set of deep-seated institutional deficiencies and the breakdown of collaborative mechanisms—directly contravening the core connotation of the triple bottom line theory: “multi-party collaboration to ensure environmental compliance and sustainable development.”

Firstly, inadequacies in the resource recycling mechanism constitute the core bottleneck hindering problem resolution. Currently, systems for the classified collection of construction waste, as well as the certification and promotion of recycled building materials, remain underdeveloped: classified collection often becomes a mere formality, failing to achieve source reduction and targeted recycling; the certification system for recycled materials lacks unified standards and authority, with the market harboring widespread concerns about the quality of recycled products—this leads to low market acceptance and further restricts the circulation and application of recycled materials. Consequently, enterprises struggle to secure stable economic benefits from resource recycling, which further dampens their enthusiasm for participating in such processes and ultimately perpetuates a vicious cycle of “difficult recycling → limited utilization → low benefits.”

Secondly, ambiguity in the full-chain division of responsibilities for construction waste has undermined the practical effectiveness of governance. The generation, transportation, and disposal of construction waste involve multiple entities, including construction enterprises, transportation firms, and disposal institutions. However, the current institutional framework fails to clearly define the rights and obligations of each party, and the principle of “who generates waste shall be responsible for it” has not been truly institutionalized. Construction enterprises often evade responsibilities for waste classification and standardized disposal; transportation firms may engage in random dumping to cut costs; and disposal institutions lack a clear accountability mechanism for ensuring environmental compliance. This ambiguity in responsibility boundaries leads to mutual buck-passing when problems arise, making it difficult to trace the root causes and seriously undermining the implementation effect of waste management policies.

Furthermore, inadequate supervision and law enforcement have further exacerbated management chaos. The current regulatory system lacks a regular, full-process supervision mechanism: on-site inspections are mostly sporadic and reactive, failing to cover all aspects of construction waste generation, transportation, and disposal. Meanwhile, penalties for illegal waste disposal are relatively lenient, with fines far lower than the costs enterprises incur for standardized disposal—creating an irrational scenario where “the cost of non-compliance is lower than that of compliance.” Some enterprises thus take chances and disregard relevant waste management regulations, which not only render policy standards ineffective but also undermine market fairness. Law-abiding enterprises, burdened with higher operating costs, face a competitive disadvantage, further weakening their willingness to comply with environmental requirements.

In conclusion, insufficient government supervision, inadequate enterprise implementation, and ineffective social supervision have collectively perpetuated a vicious cycle in construction waste management. The lack of unified standards, ineffective law enforcement, low enterprise willingness to cooperate, and ineffectual social supervision intertwine to exacerbate the predicament, making it difficult to eradicate the chaos. This situation not only causes severe resource waste and ecological damage but also seriously deviates from the core tenets of relevant theories: the “efficient resource recycling” emphasized by green transformation theory, the “intergenerational equity and ecological balance” pursued by sustainable development theory, and the “multi-party collaborative development” advocated by the triple bottom line theory. It has thus become a prominent environmental dilemma in the green transformation of the construction industry.

5.2.2. Construction Projects Are Bad for Community Life

The Sustainable Development Theory underscores the coordinated advancement of economic development, ecological protection, and social well-being. Stakeholder theory further elaborates that enterprises shall consider the needs and interests of multiple stakeholders when pursuing development goals. Community residents, as direct stakeholders of construction projects, are entitled to the full protection of their quality of life and legitimate rights and interests. However, construction activities during the implementation phase of projects often exert notable adverse impacts on surrounding communities, resulting in an imbalance between project development and residents’ livelihoods. This phenomenon not only violates the core tenets of these theories but also constitutes a prominent manifestation of the construction industry’s divergence from green transformation and sustainable development goals.

The adverse impacts of construction project implementation on communities are primarily manifested in three dimensions: noise pollution, compromised air quality, and traffic congestion. These issues directly undermine residents’ quality of life and give rise to disputes and social conflicts. Firstly, continuous equipment operation, ground excavation, and high-altitude operations during construction generate high-intensity noise, severely disrupting the daily routines of surrounding residents. Particularly during nighttime or early morning hours, excessive noise not only impairs residents’ sleep quality but also may induce a series of health problems, including hearing damage, elevated stress levels, and emotional disorders. A typical case illustrates that during the construction of a project in 2021, the project site’s proximity to residential buildings led to long-term excessive noise pollution. Consequently, 132 residents jointly initiated legal proceedings, requesting the construction unit to cease the infringement and provide compensation for mental distress; some residents further claimed compensation for direct losses, such as the installation of soundproof glass and reimbursement of medical expenses [39]. This case underscores the severe disruption caused by noise pollution to community life. Secondly, pollutants emitted by construction vehicles and machinery, along with harmful chemical substances contained in construction dust, substantially degrade regional air quality—directly threatening the respiratory health of community residents and increasing the risk of related diseases. Thirdly, the transportation of construction materials and the frequent entry and exit of construction vehicles at the project site are prone to causing traffic congestion in the surrounding areas. For large-scale projects, overloaded transport vehicles further exacerbate this congestion, which not only inconveniences residents’ daily commutes but may also lead to severe traffic paralysis during peak hours, further deteriorating the community living environment.

The adverse impacts of construction projects on community life, as well as the resulting disputes and conflicts, originate from structural deficiencies in institutional design and implementation—failing to effectively balance the relationship between project development and the protection of residents’ rights and interests.

Firstly, the lack of a community participation mechanism has excluded residents from the early planning stage of projects. Most construction projects lack institutionalized channels for soliciting community opinions during planning; key decisions, such as project layout and construction schedule arrangements, are predominantly led by construction units and regulatory authorities, with residents’ right to information and right to participation not effectively safeguarded. This “top-down” decision-making model hinders project planning from fully accommodating the actual needs of the community, laying the groundwork for potential future conflicts.

Secondly, inadequate compensation and communication mechanisms further fuel the escalation of conflicts. Currently, there is a lack of unified and clear standards for compensating for environmental impacts—such as construction noise and dust pollution—in practice. Instances of unfair or inadequate compensation are common, failing to offset the losses incurred by residents. Meanwhile, the lack of a regular communication platform results in poor information transmission: residents’ reasonable demands cannot be promptly communicated to construction units and regulatory authorities, nor can construction units effectively inform residents of adjustment plans, noise reduction measures, and dust control initiatives. This causes initial minor dissatisfaction to gradually escalate into intense disputes or even legal proceedings.

Finally, the ineffective enforcement of regulatory standards undermines the restrictive effect on construction-related environmental impacts [40]. Although environmental protection standards for construction noise and dust control have been established in China, actual regulatory efforts are notably inadequate: Supervision of night-time construction is largely perfunctory, lacking real-time monitoring equipment for noise and dust as well as a rapid response mechanism. Consequently, long-term excessive noise emissions and illegal dust pollution fail to be promptly curbed. This regulatory gap directly enables construction activities to harm residents’ health and livelihood rights, further intensifying tensions between communities and construction parties.

In conclusion, the multiple adverse impacts of construction projects on community life essentially stem from the failure to fully safeguard the legitimate rights and interests of community residents as stakeholders at the institutional level. This violates the core tenets of the sustainable development theory—centered on the “prioritizing social well-being” [41] and the “economic–ecological–social” collaborative development goal—as well as the stakeholder theory, which emphasizes “coordinating diverse interests.” The imbalance between development and livelihoods arising from institutional deficiencies not only gives rise to community conflicts but also undermines social harmony and stability. Moreover, it is fundamentally inconsistent with the “economic-ecological-social” collaborative development goal pursued by the construction industry’s green transformation, emerging as a prominent predicament that urgently requires resolution in the industry’s sustainable development process.

5.3. Governance Dilemma: Lack of Information Disclosure and Structural Imperfection

The governance dimension functions as the institutional guarantee for ESG compliance in the construction industry. Its predicament is primarily manifested in the lack of standardized information disclosure and insufficient governance efficiency. The emergence of these two issues necessitates a comprehensive analysis that integrates tripartite theory, stakeholder theory, and sustainable development theory. Tripartite theory underscores the need for synergy among government oversight, corporate internal control, and social supervision to ensure governance effectiveness. Stakeholder theory further elaborates that information disclosure shall satisfy the right to information of stakeholders. Sustainable Development Theory posits that governance structures shall mitigate the conflict between “managers’ pursuit of short-term profits” and “long-term sustainable development goals.” However, in the current governance practices of the industry, none of these theoretical requirements have been effectively implemented, leading to challenges in governance compliance and fulfilling the compliance needs of the environmental and social dimensions.

5.3.1. Incomplete ESG Information Disclosure Affects the Credibility of Construction Enterprises

The core essence of ESG information disclosure lies in enterprises disclosing detailed data on environmental, social, and governance dimensions in a comprehensive and accurate manner to stakeholders—including investors, regulatory authorities, and the public—thereby providing a reliable foundation for external entities to assess enterprises’ sustainable development performance [42]. Stakeholder theory explicitly requires enterprises to safeguard the right to information and the right to supervision of multiple stakeholders, while tripartite theory further emphasizes that the transparency of information disclosure directly determines the effectiveness of the “social supervision” mechanism. The absence of high-quality disclosure will lead to supervision failure. However, the construction industry exhibits significant deficiencies in ESG information disclosure completeness and notable structural imbalance, which not only violate the core requirements of the aforementioned theories but also severely undermine enterprises’ credibility, emerging as a key manifestation of the industry’s divergence from green transformation and sustainable development goals.

From a global industry perspective, the completeness of ESG information disclosure in the construction industry is notably insufficient. The disclosure imbalance in China’s construction industry is pretty prominent. As indicated in the China Construction Industry Environmental, Social and Governance (ESG) Report (2024), disclosure within each dimension and across governance frameworks presents significant imbalance: in the environmental dimension, disclosure rates for wastewater management and climate change response are relatively high, while those for greenhouse gas emissions and green finance information remain low; in the social dimension, the disclosure rate for issues such as responding to national strategies reaches 100%, whereas the rate for areas like responsible marketing stays at a low level; in the governance dimension, disclosure of content such as governance structure is relatively adequate, but information related to commercial ethics is insufficiently disclosed; at the ESG governance level, disclosure rates for issue management and communication are high, while those for goal setting and strategic planning are less than 20% [43]. This selective disclosure prevents external entities from comprehensively grasping enterprises’ true sustainable development status, seriously compromising the objectivity and fairness of assessments.

Incomplete ESG information disclosure and structural imbalance exert multiple adverse impacts on the survival and development of construction enterprises and on the industry’s sustainable transformation. Firstly, it disrupts investors’ decision-making processes and exacerbates financing constraints. As sustainable investment continues to expand in the global capital market, investors’ attention to enterprises’ ESG performance has increased significantly, with data on carbon emissions and labor rights protection becoming core indicators for risk assessment. Disclosure gaps make it difficult for investors to accurately evaluate enterprises’ sustainable development risks, thereby dampening investment intentions or increasing financing costs [44]. Secondly, it damages enterprises’ public reputation and social recognition. In the information age, public expectations for corporate social responsibility continue to rise, and ESG transparency is directly linked to enterprises’ public image. Insufficient disclosure by construction enterprises in areas such as carbon emission control, efficient resource utilization, and labor conditions easily triggers doubts about their environmental commitments—incomplete carbon emission data may be interpreted as disregard for environmental responsibility, while a lack of transparency in labor rights information may arouse concerns about working conditions, ultimately weakening enterprises’ reputation and social recognition. Thirdly, it increases compliance risks. On a global scale, requirements for the standardization of ESG information disclosure are increasingly stringent: The European Union mandates that enterprises comply with the ESRS standards (which are highly aligned with GRI standards), with enterprises failing to comply subject to heavy penalties; The climate disclosure rules issued by the US Securities and Exchange Commission draw on the SASB framework but do not mandate adherence to SASB standards; The global sustainability standards developed by the International Sustainability Standards Board (ISSB) are being adopted by a growing number of countries, driving the accelerated standardization of global ESG information disclosure. It further exacerbates uncertainty for construction enterprises participating in global competition.

The widespread defects in ESG information disclosure in the construction industry are not accidental but stem from dual deep-seated factors: institutional constraints and enterprise motivations.

From an institutional perspective, first, the absence of unified industry-adapted disclosure standards constitutes the core obstacle. Current mainstream ESG disclosure frameworks have not developed detailed guidelines tailored to the construction industry’s unique characteristics—such as decentralized production processes, lengthy supply chains, and diverse stakeholders. This has resulted in a lack of operational disclosure requirements, with enterprises relying primarily on qualitative descriptions and insufficient quantitative indicators. In the absence of clear guidance on the content and measurement methods of core indicators, enterprises often adopt a “selective disclosure” strategy: prioritizing the presentation of easily quantifiable and positive information while avoiding high-risk and complex issues, directly leading to global disclosure imbalance. Second, the insufficient mandatory nature of disclosure requirements weakens enterprises’ motivation to disclose. ESG disclosure in most jurisdictions remains voluntary, with no rigid penalty mechanism established for non-disclosure or incomplete disclosure. For construction enterprises, ESG information disclosure requires additional human and material costs but yields few immediate economic returns. In the absence of mandatory constraints and incentive mechanisms, enterprises tend to minimize investment in disclosure and even deliberately conceal negative information. Third, the lack of a third-party verification mechanism undermines the credibility of disclosed information. Currently, most construction enterprises’ ESG reports rely on self-declaration, with no independent third-party institutions verifying the accuracy and completeness of data. This not only makes it difficult for stakeholders to distinguish the authenticity of information but also gives rise to “greenwashing” or superficial disclosure, further eroding the core value of ESG disclosure [45].

From the perspective of enterprises’ own motivations, evading compliance costs and mitigating negative public opinion are key drivers. On the one hand, disclosing negative information—such as high carbon emissions and high injury rates—may lead to increased carbon taxes and stricter government regulation, directly raising operational costs. On the other hand, incomplete disclosure can temporarily avoid investor doubts and community dissatisfaction, maintaining enterprises’ superficial image in the short term. This short-term-oriented behavior not only infringes on stakeholders’ right to information but also violates the fundamental principles of the stakeholder theory. Moreover, it renders the “social supervision” mechanism, which the tripartite theory relies on, ineffective due to the lack of authentic data support: the public and third-party institutions cannot assess enterprises’ ESG compliance levels based on incomplete information, making effective supervision difficult to implement. Ultimately, this traps the industry’s ESG compliance in a passive cycle.

In conclusion, the lack of completeness and structural imbalance in the construction industry’s ESG disclosure is essentially a joint consequence of institutional design flaws and insufficient corporate responsibility. Its core harm lies in violating the core requirements of stakeholder theory and tripartite theory, severing the connection between external supervision and enterprises’ sustainable development performance. This situation not only damages construction enterprises’ market credibility and competitiveness but also results in a lack of effective external constraints and social supervision for the industry’s green transformation. It seriously deviates from the “transparency and responsibility” development concept advocated by the sustainable development goals, becoming a major institutional predicament that restricts the industry’s high-quality transformation.

5.3.2. The Imperfect Governance Structure of Construction Enterprises Increases the Compliance Risk

A core tenet of sustainable development theory lies in its “long-term orientation,” which requires corporate governance structures to prioritize “intergenerational equity” and “economic-environment-social coordinated development” as core goals—avoiding the prioritization of short-term profits over long-term sustainable value creation. The tripartite theory further emphasizes that improving governance efficiency necessitates collaborative constraints between “corporate internal control and government supervision,” ensuring that governance practices align with sustainable development requirements through the joint action of these two parties. However, in the current ESG compliance promotion process within construction enterprises, significant shortcomings exist in governance structure development. This not only directly restricts the effectiveness of ESG implementation but also exacerbates compliance risks, resulting in a dual divergence from the requirements of these two theories and emerging as a key institutional obstacle that disconnects the industry from green transformation and sustainable development goals.

Deficiencies in construction enterprises’ governance structures are primarily manifested in three dimensions: ambiguous division of powers and responsibilities, fragmented internal control mechanisms, and inadequate oversight of decision-making and execution stages—collectively exhibiting a characteristic of insufficient systematic governance effectiveness. Firstly, ambiguous boundaries between powers and responsibilities lead to weak ESG decision-making impetus. Many construction enterprises fail to clearly define the core responsibilities of boards of directors and management in ESG governance, with management exerting excessive influence over decision-making processes. Some board members and supervisory committee members directly participate in daily business operations, eroding their independence and objectivity, and making them prone to conflicts of interest during decision-making. Meanwhile, overlapping roles among some directors prevent them from devoting sufficient energy to ESG issues, weakening the board’s leading role in promoting ESG compliance and often rendering ESG decisions formalized or lagging behind regulatory requirements. Secondly, fragmented internal control mechanisms fail to support full-process ESG compliance. ESG compliance requires enterprises to establish robust internal control systems to continuously track and dynamically monitor environmental, social, and governance performance throughout business activities [46]. However, the internal control mechanisms of most construction enterprises are incompatible with ESG governance needs, lacking specific control processes for core issues such as carbon emission control, labor rights protection, and community impact management. This prevents full-cycle tracking of ESG targets, not only hindering the timely identification and correction of potential compliance risks but also potentially leading to issues such as distorted ESG reporting data—ultimately damaging enterprises’ market reputation and industry credibility. Thirdly, oversight of decision-making and execution stages is absent, particularly in emergency response scenarios. Construction projects feature long cycles and complex industrial chains, exposing enterprises to multiple ESG risks (e.g., environmental accidents, labor safety incidents). However, redundant internal management levels and incomplete supervision mechanisms prevent effective early handling of some risk events, which eventually escalate into severe compliance crises—further amplifying the negative impacts of governance structure deficiencies.

Inadequate governance structures in construction enterprises directly exacerbate compliance risks and trigger multiple chain reactions for the industry’s sustainable transformation. On one hand, ESG compliance implementation falls into a “predicament of passive response.” Due to the lack of systematic integration of ESG issues into governance structures, enterprises cannot quickly form coordinated responses when facing external policy changes (e.g., upgraded environmental standards, strengthened labor rights supervision). They often only adopt temporary remedial measures, resulting in significant increases in compliance costs while still failing to avoid compliance risks. On the other hand, the ability to identify and resolve compliance risks is weakened. The absence of effective internal control mechanisms prevents enterprises from conducting full-project-lifecycle prediction and management of ESG risks. For instance, during the construction phase, the lack of internal control processes for environmental risks easily leads to violations such as excessive emissions; in human resource management, the absence of internal control standards for labor rights protection may result in violations of labor laws. Furthermore, ineffective governance can cause emergency escalation—e.g., safety accidents left unaddressed promptly due to insufficient internal supervision. This not only leads to administrative penalties but may also trigger public opinion crises and legal proceedings, posing a fatal threat to enterprises’ sustainable operations.

The predicament of inadequate governance structures in construction enterprises is not accidental. Its root causes lie in structural flaws in governance system design, imbalances in incentive and restraint mechanisms, and insufficient external collaborative oversight—essentially representing a systemic divergence from the core requirements of sustainable development theory and tripartite theory.

Firstly, governance structure design lacks a sustainable orientation, leading to the fragmentation of ESG governance powers and responsibilities. Most construction enterprises have not established dedicated ESG decision-making and supervision institutions; instead, ESG-related responsibilities are scattered across multiple departments (e.g., production, finance, human resources). Due to the absence of a unified coordination mechanism and a core responsible entity, cross-departmental collaboration efficiency is low, and ESG compliance promotion is prone to “responsibility conflicts” or “responsibility vacuums”—making it difficult to form governance synergy. This structural design essentially reflects enterprises’ focus on short-term financial goals in governance, which directly conflicts with the “long-term coordinated development” requirement emphasized by sustainable development theory. When ESG governance lacks dedicated institutions for promotion, long-term investments (e.g., green technology R&D, labor training, community relationship maintenance) are easily dismissed as “unnecessary costs” and compressed by management to safeguard short-term profits.

Secondly, performance assessment and incentive mechanisms are disconnected from ESG performance, weakening internal impetus for governance optimization [47]. Currently, the performance evaluation systems of most construction enterprises still focus on short-term financial indicators (e.g., revenue, profits), with ESG indicators not effectively integrated into the assessment frameworks for senior executives and project managers. Meanwhile, dedicated incentive measures for ESG compliance performance are lacking, and restraint mechanisms for violations are not rigid enough. This “imbalance between incentives and restraints” leaves management without sufficient internal motivation to promote ESG governance optimization, and some even sacrifice long-term compliance benefits for short-term performance. This further consolidates the governance orientation of “prioritizing economy, neglecting the environment, and downplaying social responsibilities”—contradicting the “multidimensional value integration” requirement of sustainable development theory.

Finally, the “corporate internal control-government supervision” collaborative mechanism has failed, resulting in insufficient external supervision constraints. From the perspective of tripartite theory, improving governance efficiency requires the formation of a linkage effect between corporate internal control and government supervision. However, the current collaborative effect between these two parties has not been effectively realized. On the one hand, enterprises lack dedicated governance entities to implement government ESG compliance requirements, making it difficult for regulatory policies to be effectively translated through internal governance systems. On the other hand, government-level ESG compliance incentive mechanisms are unsound, lacking guidance for governance structure optimization and failing to form positive interaction characterized by “internal control ensuring direction and supervision promoting execution.” Meanwhile, external stakeholders (e.g., investors, media, the public) have limited supervision channels—they cannot obtain authentic information on enterprises’ ESG governance due to the absence of standardized information disclosure platforms and supervision mechanisms. This prevents the formation of effective external constraints on governance deficiencies, further entrenching inadequate governance structures.

In conclusion, the core problems of inadequate governance structures in construction enterprises are threefold: the lack of a sustainable orientation in governance design, the disconnection between incentive mechanisms and ESG performance, and the failure of “corporate internal control-government supervision” collaborative constraints. This systemic defect directly violates the “long-term orientation” requirement of sustainable development theory and the “collaborative governance” requirement of tripartite theory. Inadequate governance structures not only lead to the continuous escalation of ESG compliance risks but also deprive enterprises of internal institutional support for green transformation. Ultimately, this creates a sharp contradiction between economic interests and sustainable development goals, becoming a deep-seated governance predicament that hinders the construction industry’s achievement of high-quality green transformation.

6. Promoting ESG Compliance in the Construction Industry

Against the backdrop of increasingly severe global environmental challenges, the construction industry bears both social responsibility and economic incentives to achieve ESG compliance [48]. Effective ESG strategies enable enterprises to reduce resource waste, lower operational risks, enhance brand image, and build greater trust among investors and society. Environmental compliance initiatives not only protect natural resources but also strengthen corporate social responsibility (CSR) credibility. Socially, workers’ rights and community relations directly impact internal stability and external fundraising risks [49]. Governance-wise, sound corporate governance structures and transparent information disclosure systems form the foundation for sustainable development. As previously highlighted, ESG compliance in the construction industry faces three core challenges: high carbon lock-in, human capital alienation, and ambiguous governance structures. Drawing on stakeholder theory, green transformation theory, and other related frameworks, this study develops a mitigation mechanism for ESG compliance in the sector. Through the dynamic interaction of three pillars—system improvement to break path dependence, technological empowerment to reduce compliance costs, and stakeholder coordination to resolve right and responsibility conflicts—it systematically addresses the core issues of ESG compliance in the industry.

Furthermore, the mechanism deeply integrates practical requirements across the environmental, social, and governance (ESG) dimensions, realizing a tight alignment between the theoretical framework, real-world challenges, and mitigation strategies.

6.1. Environmental Perspective: Reducing Carbon Emissions and Construction Waste

6.1.1. Reduce Carbon Emissions and Improve Energy Efficiency

As specified in the Proposal of the Communist Party of China Central Committee on Formulating the 15th Five-Year Plan for National Economic and Social Development (released on 23 October 2025) [50], the construction industry is explicitly incorporated into the modern industrial system, with intelligent and green construction emerging as core directions for the sector’s transformation. This strategic orientation offers clear guidance for the environmental dimension of ESG compliance, requiring systematic solutions to high carbon lock-in and resource waste via institutional innovation, technological breakthroughs, and multi-stakeholder collaboration. The construction industry can substantially reduce high carbon emissions and lessen reliance on traditional fossil fuels by promoting low-carbon building technologies, optimizing energy-efficient designs, and integrating renewable energy. This requires multi-level optimization throughout the entire lifecycle of buildings, spanning from material selection and design to construction and operation.

Institutional Level: Develop Incentive Mechanisms and Policy Implementation

ESG compliance serves as a key indicator in assessing enterprises’ sustainability and operational stability. High-carbon enterprises are notably shaped by policy nodes and market expectations, with their ESG performance exhibiting compliance-driven volatility. This underscores the path dependence and institutional pressure inherent in the transformation process of traditional enterprises [51]. Building on existing policies, such as the Announcement on Improving the VAT Policy for Comprehensive Resource Utilization [52] and the Notice on Further Expanding the Scope of Government Procurement Policies Supporting Green Building Materials and Promoting Construction Quality Improvement [53]. Local governments have begun phased, differentiated implementation of incentive mechanisms. Tax exemptions and financial subsidies should be granted to enterprises that adopt or purchase green building materials complying with national standards. Yichun City, Jiangxi Province, for example, has strictly implemented the Action Plan for the Modernization of the Energy Conservation and Environmental Protection (Circular Economy) Industrial Chain (2023–2026), which prioritizes R&D and production of exterior wall insulation materials, new wall materials, and prefabricated building components. Enterprises in the city that adopt these green building materials have received VAT exemptions of up to 13% and financial subsidies accounting for 5–8% of R&D investment, driving a 37% year-on-year increase in the local adoption rate of prefabricated components in 2024 [54].

In terms of carbon emission trading, the 2024–2025 National Carbon Emission Trading Market Quota Total and Allocation Plan for Steel, Cement, and Aluminum Smelting Industries [55], differentiated quota allocation coefficients should be set for residential buildings, public buildings, and infrastructure projects. Enterprises that exceed emission reduction targets should be allowed to freely trade surplus quotas or carry them over to the next year. A national green construction technology innovation fund should be established, with a focus on supporting cutting-edge technologies such as low-carbon building material substitution and carbon capture applications in construction.

Technical Empowerment: Promote Digital Traceability and Low-Carbon Integration

Per the China Construction Industry Informatization Development Report (2025)-The Application of New-Quality Production Capacity in High-Quality Construction, developing new-quality production capacity constitutes the core pathway for the transformation and upgrading of the construction industry. Its essence resides in driving industrial innovation through digital technology, and improving efficiency and quality across the full life cycle of building design, construction, and operation via new technologies, business models, industries, and driving forces. The digital traceability of full-life-cycle carbon footprints and the integration of low-carbon technologies should be advanced through the establishment of a unified national carbon footprint management platform—providing core support for the industry’s low-carbon transformation. On one hand, the carbon emission factor database for building materials should be expanded to cover full-life-cycle emission data of all material types. The deep integration of BIM models and carbon accounting software should be promoted to realize the real-time calculation and optimization of carbon footprints during the design phase, thereby laying a scientific foundation for low-carbon design decisions. On the other hand, the proportion of low-carbon construction methods in new projects should be gradually increased. Modular construction technology pilots should be launched in key projects (e.g., affordable housing), with construction cycles shortened and carbon emission intensity reduced through technological and process innovation to facilitate the low-carbon transformation of construction processes. Technological innovation and workforce training have served as pivotal drivers of industry transformation [56].

Multi-Stakeholder Collaboration: Clarify Responsibilities and Full-Life-Cycle Management

The division of responsibilities among governments, enterprises, and industry associations should be explicitly defined: governments should set regionally differentiated emission reduction targets and policies, and establish green technology promotion platforms; enterprises, as primary responsible entities, should integrate emission reduction goals into their medium- and long-term development plans; industry associations should take the lead in formulating low-carbon construction technical guidelines to standardize technology implementation. The key to industrial low-carbonization resides in full-life-cycle building carbon management: carbon emission prediction should be conducted during the planning and design phase, low-emission schemes should be selected via carbon assessment tools, and real-time monitoring and adjustment of building energy efficiency management systems should be implemented to achieve high-efficiency operation—fundamentally reducing carbon footprints.

6.1.2. Optimize Resource Utilization and Improve Emission Management

As a resource-intensive industry, the construction sector confronts substantial environmental pressures and social responsibility requirements related to resource consumption and emission management [57]. To optimize resource utilization efficiency and improve emission management systems, it is essential to promote multi-dimensional synergy at the institutional, technical, and practical levels, combining systematic institutional safeguards with technological innovation and enterprise-driven implementation to achieve tangible results.

Institutional Level: Establish Safeguards for Recycled Material Application

The institutional design of recycled building material application is the cornerstone of large-scale and standardized resource recycling. It is necessary to establish a “regional compensation” mechanism for construction waste recycling and reuse, provide logistics subsidies for the cross-regional transportation of recycled building materials, and incorporate the utilization rate of recycled materials as a mandatory indicator in the approval of urban renewal projects. This institutional arrangement breaks down policy barriers to the large-scale application of recycled building materials, provides rigid constraints and incentive guidance for their standardized promotion, and consolidates the institutional foundation for resource recycling from a top-level design perspective.

Technical Level: Advanced Intelligent Recycling and Collaborative Platforms

Technological innovation is the core driving force to improve the efficiency of resource recycling and emission control. On one hand, it is imperative to promote intelligent classification and recycling technologies for construction waste, enforce strict waste control throughout the architectural design, construction, and operation stages, and integrate AI image recognition and material analysis technologies into waste management processes. This can enhance the accuracy and efficiency of waste classification, driving the transformation of classification models toward intelligence and high efficiency. On the other hand, accelerating the development of regional construction waste recycling collaborative platforms is crucial–these platforms integrate regional recycling facilities, building material producers, and construction projects to optimize the cross-project allocation of recycled materials and improve their high-value utilization.

Futai Technology’s practice serves as a typical and persuasive case. In response to the Ministry of Housing and Urban-Rural Development’s relevant opinions on construction waste management, the company leveraged its “Dual-Circulation Data Governance + AI Intelligent Supervision” system to upgrade four key links in construction waste governance: source control (AI-enabled precise classification and dynamic monitoring), transportation supervision (AI-powered three-dimensional inspection and intelligent early warning), terminal disposal (AI-assisted resource utilization and intelligent scheduling), and full-process management (AI-driven data closed-loop and cross-departmental collaboration). By integrating full-chain data and realizing cross-departmental digital collaborative supervision, the company significantly improved the efficiency of construction waste governance, which fully validates the core role of intelligent technologies in optimizing resource utilization and regulating emissions [58].

Practical Level: Enterprise-Driven Waste Management and Green Material Adoption

Construction enterprises, as the main implementers, play a pivotal role in translating institutional and technical goals into practical results. First, enterprises should actively adopt green-certified building materials (e.g., low-carbon cement, recycled raw materials) to reduce reliance on non-renewable natural resources. Second, they need to establish systematic waste classification mechanisms: through refined management, construction, and treatment, waste should be categorized into recyclable and non-recyclable types, resource recycling centers should be set up at each construction site, and reusable waste should be converted into secondary building materials. Third, a comprehensive monitoring system should be built to track the generation and processing of waste in real time, and strict waste indicators and systematic review systems should be implemented to regulate operational behaviors, prevent pollutant emissions, and mitigate potential environmental risks.

6.2. Social Perspective: Safeguarding Rights and Interests and Maintaining the Relationship Between Social Enterprises

6.2.1. Labor Rights Protection

In the social dimension, attention should be focused on issues of human capital alienation and community conflicts. Based on the existing policies, such as wage guarantee funds and training subsidies, an equity protection system compatible with the transformation of intelligent construction should be established.

Protecting workers’ rights is central to achieving ESG compliance in the construction industry. Drawing on the Guidelines for Jointly Safeguarding Workers’ Legal Rights and Interests [59], enterprises must fully pay statutory social insurances (e.g., work-related injury insurance, pension insurance) and establish a wage payment supervision mechanism—directly addressing the core issue of “insufficient labor rights protection” tied to human capital alienation.

Institutional Innovation: Build Incentive-Constraint and Training Systems

Institutional innovation in the construction sector centers on establishing a sound incentive-constraint mechanism and a hierarchical training system, with solid policy support from relevant national departments. To lay the institutional foundation, the General Office of the Ministry of Housing and Urban-Rural Development (MOHURD) issued the Notice on Further Improving Employment Services and Rights Protection for Construction Workers in 2022, which implements the central government’s decisions on stabilizing employment, safeguarding the legitimate rights and interests of construction workers, and coordinating work safety and people’s livelihood security in housing and municipal engineering. Building on this, MOHURD and the Ministry of Human Resources and Social Security jointly developed the Simple Labor Contract for Construction Workers (Model Text) in 2023, in accordance with laws such as the Labor Law and the Construction Law, as well as relevant policies. This model text standardizes employment management in the construction industry by providing a reference for labor contract conclusion, further consolidating the institutional guarantee for labor rights protection.

Guided by these policies, efforts are focused on improving the incentive-constraint labor rights protection system: preferential guarantee deposit policies are offered to compliant enterprises with sufficient skilled personnel reserves, and policy guidance is utilized to encourage enterprises to adhere to labor norms and invest in training. Meanwhile, a hierarchical and classified training subsidy system is being developed, while ensuring support for basic skills training, subsidies for specialized training related to intelligent construction are enhanced. Enterprises are also required to increase investment in intelligent construction training, aligning skills development with the industry’s technological upgrading needs. Together, these institutional innovations integrate policy support, incentive-constraint mechanisms, and targeted training, effectively safeguarding construction workers’ rights and promoting the high-quality development of the construction industry.

Technical Empowerment: Leverage Digital Supervision and Services

To effectively optimize labor rights protection, it is recommended to fully leverage digital tools to strengthen full-process labor rights supervision and services. On the one hand, the digital supervision platform for labor rights can be upgraded to integrate holistic information, thereby achieving full traceability of workers’ career development and rights protection. Meanwhile, by building data models for key risk points, an intelligent early warning module should be added to the platform. On the other hand, it is advisable to develop user-friendly mobile service tools (e.g., mini-programs and APPs) for workers to expand diversified services, which helps improve the efficiency of responding to workers’ demands and resolving issues.

Luohe City, Henan Province, has provided a vivid practice of this concept. Targeting complaints concerning migrant workers’ unpaid wages, the People’s Procuratorate of Luohe City designated the Yancheng District People’s Procuratorate as a pilot. It integrated key datasets such as migrant workers’ wage guarantees, ongoing projects, and enterprises with adverse credit records to establish a unified “data pool.” Through data screening and analysis, the procuratorate accurately identified ongoing projects associated with unpaid wages. By issuing procuratorial recommendations to administrative authorities and co-establishing a “joint working mechanism” with 8 relevant entities, it effectively urged construction enterprises to settle arrears and supplement wage guarantee funds. This practice not only broke down data silos between human resources and social security departments and housing and urban-rural development departments but also transformed the governance model from “post-hoc wage recovery” to “pre-emptive prevention.” As a result, it has formed a replicable “Luohe Experience” for addressing migrant workers’ unpaid wages in the engineering sector, fully demonstrating the practical value of digital technology in optimizing labor rights supervision and services [60].

Practical Promotion: Translate Frameworks into Concrete Actions

Institutional design and technical support should be translated into concrete implementation measures, with a sound wage and welfare structure established to stimulate workers’ enthusiasm, improve their quality of life, and reduce turnover rates. Additionally, workers’ rights protection and capacity building should be strengthened through the regular organization of safety training and vocational skills enhancement programs—these initiatives help workers mitigate work risks, ensure personal safety, and support the smooth progress of construction projects. Over the period 2019–2024, the onboarding training for new employees at major state-owned engineering and construction enterprises centered on three core pillars: “leveraging online modalities, promoting the mentor system, and standardizing curriculum.” China Engineering has utilized the “Jianzheng Growth Cloud” platform, migrating all onboarding training, online assessments, and mentor assignments to the digital platform—covering a total of 200,000 participants. China Railway Construction Corporation No.11 Engineering Bureau Group has implemented the “One Mentor, Double Ten” training model—where one mentor guides ten apprentices and ten core skills are standardized, training approximately 3000 new employees annually. China Construction of No.8 Hydropower Engineering Bureau has consistently delivered training via the “Shangshui Academy” digital platform over 2022–2024, covering a total of 1200 recent graduates, with the curriculum completion rate rising from 89% in 2022 to 96% in 2024 [61]. Furthermore, a worker representative system should be established to safeguard workers’ right to participate in enterprise decision-making. This system not only enhances their sense of belonging and responsibility but also incorporates grassroots perspectives into policy formulation, thereby improving decision-making accuracy and implementation effectiveness to achieve a win-win outcome for employers and employees.

Labor rights protection is not only a core reflection of corporate social responsibility but also a key prerequisite for standardizing industry order and promoting the construction sector’s sustainable development.

6.2.2. Community Relations Maintenance

As a core dimension of ESG management, community relations maintenance directly determines an enterprise’s social recognition and operational stability. According to the methodology for community relations, key issues in the ESG rating released by MSCI, community impact and interference, conflicts and human rights, and benefit distribution are the three core aspects for evaluating community relations management. These three factors jointly determine the quality of the relationship between enterprises and society. The healthier the relationship, the higher the social recognition and operational stability of the enterprise [62]. For the construction industry, where project implementation inherently risks disrupting communities (e.g., noise, dust, or traffic impacts), maintaining harmonious community relations is a critical priority for achieving ESG compliance. To this end, enterprises should not only incorporate local needs and interests into project planning and implementation [63] but also leverage digital tools—such as the digital platform for monitoring community interaction and construction impact—to focus on community communication during the construction phase, provide real-time feedback on construction-related impacts, and proactively resolve potential community conflicts.

Institutional Level: Refine Compensation and Co-Construction Mechanisms

Institutional design is the foundational safeguard for standardized community relations management, directly addressing the ESG core dimensions of “benefit distribution” and “community impact and interference.” Enterprises should optimize the interaction mechanism between construction projects and communities in two key ways: First, transform construction impact compensation from a static to a dynamic accounting model. Introduce third-party professional assessment institutions to scientifically evaluate the comprehensive impacts of construction (e.g., noise pollution, dust emissions, traffic disruption) on communities, and classify compensation levels based on impact severity—ensuring precise alignment between compensation standards and actual community losses. This institutional arrangement eliminates arbitrary compensation practices and ensures fair redress for community impacts. Second, establish a “community-enterprise co-construction fund,” mandating that projects allocate a fixed proportion of total costs to support community public welfare (e.g., renovating public facilities, upgrading green spaces, or subsidizing elderly care services). Full and transparent disclosure of fund usage to residents is required to safeguard their right to information and supervision, turning the fund into a tangible channel for benefit sharing and building institutional trust between enterprises and communities.

Technical Level: Leverage Digital Tools for Interaction and Monitoring

Digital technology empowers efficient, real-time community relations management, effectively mitigating “conflicts and human rights” risks highlighted in MSCI’s ESG evaluation framework. Enterprises should develop a specialized digital platform for community interaction and construction impact monitoring, expanding its multi-dimensional index system to cover residents’ daily living factors (e.g., noise decibels, dust concentration, construction schedule deviations, and complaint hotspots). This enhances the timeliness and accuracy of monitoring data, providing data-driven support for scientific construction impact management. Building on this platform, a regular “community-enterprise dialogue” mechanism should be institutionalized, conducting periodic online/offline dialogues to establish a direct communication bridge between enterprises and residents. Enterprises must categorize, track, and resolve residents’ demands with clear timelines and publish resolution results on the platform to boost demand resolution rates.

Practical Operations: Embed Harmonious Coexistence Throughout the Project Lifecycle

Embedding the principle of community-enterprise harmony into the full project lifecycle translates institutional and technical designs into tangible outcomes, covering all three core ESG dimensions of community relations.

Before construction commences, comprehensive community surveys should be carried out through symposiums, information disclosure platforms, and household visits to accurately identify residents’ core interests (such as housing safety and living convenience) as well as potential construction impact factors; this ensures that project planning and design fully respect and accommodate community needs, proactively reducing the risk of “community impact and interference”. During the construction phase, enterprises should take the initiative to disclose project progress and potential impacts to residents via digital platforms, community bulletin boards, and resident WeChat groups, while establishing accessible feedback channels (including 24/7 hotlines and online complaint portals) to respond to residents’ inquiries promptly, thereby building a communication mechanism based on mutual trust. After the completion of construction, enterprises need to sustain their engagement in community public welfare initiatives, such as sponsoring cultural activities and upgrading post-construction community infrastructure, to fulfill social responsibilities beyond project delivery and consolidate the foundation for long-term harmonious coexistence between enterprises and communities [64].

6.3. Governance Perspective: Improve Information Disclosure and Corporate Governance

6.3.1. Establish a Sound Information Disclosure System

The digital technology in the governance dimension focuses on improving the efficiency of information disclosure and enhancing the precision of risk management. In the ESG framework of Chinese enterprises, the disclosure of enterprise LCPs information is mostly “self-reporting”, lacking the verification and validation by third-party institutions. This results in the disclosed content possibly having “qualitative and fragmented” issues [65]. In the construction industry, establishing a robust ESG compliance system is the core support for achieving sustainable development, and the improvement of the information disclosure system is a crucial part of it.

Institutional Level: Adopt Differentiated Regulation and Incentive Mechanisms

Establishing differentiated regulatory and incentive mechanisms serves as a core institutional guarantee for standardizing ESG information disclosure in the construction industry and elevating its overall quality and credibility. This institutional design focuses on balancing regulatory constraints and positive guidance, ensuring that ESG disclosure requirements are implemented effectively while motivating enterprises to proactively improve their disclosure performance.

To implement this institutional framework, targeted regulatory measures should be prioritized. Given the significant social impact and resource allocation capacity of large-scale construction enterprises, clear mandatory ESG information disclosure requirements should be imposed on them, making full disclosure a non-negotiable obligation to guide the industry’s disclosure practices. In parallel with regulatory constraints, incentive mechanisms should be leveraged to drive quality improvement: enterprises that meet disclosure standards and demonstrate outstanding performance should be rewarded with preferential policies such as tax benefits and priority in government project bidding. These incentives convert compliance pressure into intrinsic motivation, encouraging enterprises to go beyond basic requirements and pursue higher-quality disclosure.

To further enhance the credibility and standardization of disclosure, supporting systems for third-party verification need to be improved. A specialized credit rating system for third-party verification institutions should be established, with comprehensive evaluations conducted based on their compliance with regulations, professional capabilities, and the reliability of verification results. Institutions with high credit ratings should be granted policy support and market recognition, while irregular operations are strictly regulated. Additionally, third-party verification reports should be formally designated as a key basis for enterprises to access green financial support—linking disclosure credibility directly to financial benefits. This not only strengthens the authority of third-party verification but also compels enterprises to attach greater importance to the authenticity and rigor of their disclosed information. Together, these differentiated regulatory measures, targeted incentives, and standardized third-party verification systems form a synergistic institutional ecosystem. They not only ensure the compliance and comprehensiveness of ESG information disclosure in the construction industry but also effectively enhance its credibility and guidance value, laying a solid institutional foundation for the industry’s sustainable development.

Technical Level: Leverage Digital Transformation for Efficient Disclosure

Digital transformation serves as a core technical pillar for enhancing the efficiency and quality of ESG information disclosure, with technology playing an indispensable role in optimizing the entire disclosure lifecycle. Technologically empowered ESG reporting not only enables enterprises to efficiently collect, analyze, and process large volumes of ESG data—streamlining workflows, improving data management, and minimizing errors and inconsistencies through specialized software—but also facilitates real-time access to ESG data and reports for stakeholders, significantly boosting transparency and accountability. Furthermore, technology aids enterprises in proactively identifying and managing ESG risks, providing data-driven support for informed decision-making on sustainability strategies. Ultimately, such technical empowerment enhances the accuracy and reliability of ESG reporting, laying a solid foundation for enterprises’ improved risk management and sustainable financial performance.

To translate this technical potential into practical efficiency tailored to the construction industry, targeted digital transformation measures are recommended. First, establishing a unified digital ESG disclosure platform for the sector is crucial, with built-in automatic data synchronization with existing industry digital tools (e.g., carbon traceability systems and labor rights supervision platforms). This integration ensures seamless data flow, eliminating silos and safeguarding data consistency and accuracy. Second, ESG disclosure templates should be regularly revised to align with industry characteristics: key quantitative indicators—such as intelligent construction progress, embodied carbon emissions, supply chain ESG management, and data traceability requirements—need to be clearly defined. This revision strikes a balance between the comprehensiveness of disclosed information and the timeliness of disclosure, avoiding excessive complexity while ensuring core ESG performance is effectively communicated. Together, these technical strategies—rooted in leveraging digital tools and optimizing platform and template design—fully unleash the value of digital transformation, driving the construction industry toward more efficient, accurate, and transparent ESG information disclosure.

Practical Implementation: Establish Systematic Disclosure and Communication Mechanisms

A stable and systematic ESG information disclosure mechanism is essential, with regular and detailed ESG reports issued periodically [66]. Such reports should focus on the environmental, social, and governance (ESG) dimensions, incorporating specific sets of data (e.g., carbon emissions, water usage) and relevant measures (e.g., labor rights protection, governance structure), thereby ensuring information transparency and accuracy [67]. Enterprises are expected to maintain active communication with investors and other stakeholders through multiple channels, and promptly communicate ESG practice progress and the challenges encountered to enhance market confidence in their long-term sustainable development.

The value of ESG disclosure in mitigating the practical impacts of information asymmetry and moral risks has strengthened the necessity of improving the quality and comparability of such information. It not only concerns the realization of company shareholders but also has significant implications for public policies [68]. Considering the differences in the development stages and disclosure capabilities among Chinese enterprises, and adhering to the strategy of focusing on key areas, conducting pilots first, adopting a strategy of focusing on key areas, piloting first, andand advancing incrementally, the Ministry of Finance and multiple other departments jointly formulated the Enterprise Sustainable Disclosure Standards—Basic Standards (Trial), which was officially released at the national level on 17 December 2024. This standard has established the “basic framework” of the sustainable disclosure standards system, standardizing the core concepts, principles, and general requirements for enterprise sustainable information disclosure, and laying a foundation for subsequent specific standards and application guidelines [69].

6.3.2. Establish a Sound Corporate Governance Structure

A well-established corporate governance structure is the core guarantee for construction enterprises to implement ESG compliance requirements and achieve sustainable development. Its core lies in ensuring that decisions are legal, fair, and transparent, strengthening risk management and internal control, opening up channels for employee participation, and adopting scientific and systematic governance measures to meet the ESG development needs of the industry.

Institutional Level: Establish an Incentive-Constraint Governance Guidance Mechanism

Institutional design serves as the foundational premise for standardizing ESG governance in the construction industry, with “regional adaptation tools” (e.g., “targeted incentives” including green building subsidies, or “governance transparency frameworks” such as unified disclosure standards) playing a pivotal role in guiding enterprises’ ESG governance practices [70].

To further strengthen the binding force of institutional norms, ESG governance levels should be incorporated into the core evaluation indicators for construction enterprises’ top-tier qualifications, and dynamic adjustments to enterprise qualifications should be implemented to incentivize compliance and penalize non-compliance. Meanwhile, the Guidelines for ESG Governance Structures in the Construction Industry should be formulated to clarify the responsibility boundaries, decision-making authority, and operating procedures of ESG special committees within enterprises, avoiding the problem of unclear accountability in ESG governance. Additionally, differentiated ESG personnel allocation standards should be established based on enterprise scale, with explicit requirements for professional backgrounds (e.g., environmental science, social responsibility management, corporate governance) of ESG practitioners, to ensure the professionalization and standardization of ESG governance work.

Technical Level: Enhance ESG Governance Efficiency via Digital-Intelligent Tools

In the era of the digital economy, with the wide application of technologies such as big data and artificial intelligence in all aspects of ESG, a new model of ESG development driven by intelligent technology will be constructed [71]. Digital and intelligent tools act as effective enablers to improve the efficiency and precision of ESG governance, compensating for the limitations of traditional manual governance models in risk identification and response. Specifically, an AI-driven ESG risk early warning model should be constructed, which integrates internal operational data (e.g., production safety records, carbon emission data) with external information (e.g., policy updates, industry ESG risk alerts) to cover core risk dimensions including environmental protection, social responsibility, and corporate governance. This model can significantly improve the accuracy and timeliness of ESG risk identification by leveraging big data analytics and machine learning algorithms. Furthermore, a hierarchical risk classification and handling mechanism needs to be established, in which responsible entities, disposal processes, and assessment criteria are clearly defined for different risk levels (e.g., general, major, critical risks). By shortening the time frame for risk disposal and establishing a management system for “risk identification—early warning—disposal—review”, the timeliness and effectiveness of ESG risk control can be substantially enhanced.

Practical Operation Level: Optimize Governance Practices and Stakeholder Participation

Optimizing governance practices and enhancing stakeholder participation at the practical operation level is a critical pathway to translate institutional and technical ESG governance frameworks into tangible outcomes, directly determining the effectiveness of construction enterprises’ ESG compliance and sustainable development strategies.

To begin with, the composition of corporate boards should be optimized by appointing independent directors with diverse professional backgrounds; [72] such a diversified board structure enriches the perspectives of corporate governance decision-making and provides specialized support for addressing industry-specific ESG challenges including carbon emission reduction, circular resource management, and labor rights protection, leveraging the expertise of independent directors in environmental science, social responsibility management, and risk control [73]. This not only improves the scientificity of ESG-related strategic decisions but also reinforces the board’s oversight capacity for the implementation of ESG practices, laying a solid foundation for the professionalization of corporate ESG governance.

Given the construction industry’s inherent features such as high resource consumption, long project cycles, and complex labor relations, standardized ESG risk identification, assessment, and control processes should be formulated to cover the full lifecycle of construction projects, systematically identifying potential financial risks (e.g., cost overruns caused by environmental non-compliance), environmental risks (e.g., excessive embodied carbon emissions, construction waste pollution), and legal risks (e.g., labor contract disputes). Establishing tiered risk assessment criteria and targeted mitigation measures enables proactive prediction and mitigation of ESG risks, reducing the likelihood of operational disruptions caused by non-compliance and enhancing the risk resilience of corporate governance. As core stakeholders in the execution of ESG practices, employees should be granted enhanced rights to participate in corporate governance; enterprises are advised to establish employee representative systems and regular ESG communication forums to popularize ESG compliance knowledge, elevate employees’ awareness of sustainable development and sense of responsibility, and collect feedback on the implementation of ESG strategies. Dynamically optimizing ESG strategies and operational measures based on employee feedback ensures that sustainable development concepts are integrated into all organizational roles and operational links from on-site construction to daily management, realizing the internalization of ESG governance at the grassroots level. To adapt to evolving policy requirements and market dynamics in the construction industry, corporate governance structures need to undergo regular evaluation and dynamic adjustment. By engaging third-party governance evaluators, enterprises can objectively assess the effectiveness and adaptability of their current ESG governance models (e.g., rationality of organizational frameworks, efficiency of process execution, alignment with industry ESG standards), and use evaluation results as a basis for continuous adjustments to the governance structure to maintain its adaptability and effectiveness. For instance, China Construction Group Co., Ltd. has constructed a corporate governance mechanism characterized by “clear division of rights and responsibilities, transparent operation, coordinated collaboration, and effective checks and balances”, and promoted its optimization from three core dimensions (clarifying rights and responsibilities, strengthening cross-departmental collaboration, and ensuring governance effectiveness), which has effectively supported the enterprise’s high-quality development [74]. Against the backdrop of Industry 4.0, as the construction industry advances toward digitalization, intelligence, informatization, and industrialization, effective ESG compliance at the practical operation level not only enables enterprises to meet environmental regulatory requirements and fulfill social responsibilities but also guides the direction of technological innovation—directing R&D resources toward green construction technologies and driving the transformation of business models to green services [16]. This dual role of ESG compliance not only mitigates operational risks but also enhances the long-term core competitiveness of construction enterprises, realizing the organic unification of ESG governance, technological progress, and sustainable development.

In summary, optimizing governance practices and stakeholder participation at the practical operation level is a pragmatic guarantee for the effective implementation of ESG governance in the construction industry; by diversifying board composition, standardizing risk management processes, empowering employee participation, dynamically adjusting governance structures, and aligning with industry digital transformation trends, enterprises can integrate ESG practices into daily operations and industry development trends, further improving the soundness of corporate governance structures and ensuring the effective realization of ESG compliance and sustainable development goals.

7. Conclusions, Research Limitations, and Future Research Directions

The pressing challenges posed by global climate change and resource scarcity have rendered the transformation and upgrading of the construction industry an imperative, as these issues serve as pivotal drivers of sustainable development. As a primary contributor to global carbon emissions and resource consumption, the sector faces substantial environmental pressures: elevated carbon emissions from construction projects and improper construction waste disposal have exacerbated ecological degradation. In the social responsibility domain, issues such as labor rights violations and community conflicts demand urgent resolution. At the governance level, inadequate information disclosure and flawed governance structures have complicated ESG compliance processes in the industry. These problems intertwine to create a systemic vicious cycle, severely hindering the construction industry’s green transformation and sustainable development.

Against this backdrop, this study systematically explores the “triple institutional dilemmas” confronting the construction industry in achieving ESG compliance: high carbon lock-in, human capital alienation, and ambiguous governance structures. It is crucial to acknowledge that the construction industry’s ESG transformation is a long and arduous process. Accordingly, this study constructs a three-dimensional mitigation mechanism and investigates how institutional incentives, technological innovation, and multi-stakeholder collaboration jointly influence the effectiveness of ESG compliance. In conclusion, the tide of ESG compliance brings forth both challenges and opportunities. By constructing low-carbon, eco-friendly green buildings, enhancing employee-community relationships, and optimizing corporate governance systems, the construction industry will gradually realize sustainable transformation. Let us collectively embark on writing a new chapter of sustainable development in the construction industry, contribute to environmental protection, and foster a more harmonious and prosperous future for human society [75].

However, this research has several limitations that warrant attention. First, the analysis of corporate practices primarily draws on ESG reports and public data of leading construction enterprises, which may limit the generalizability of the findings to small and medium-sized enterprises (SMEs) facing distinct resource constraints and stakeholder pressures. Second, the evaluation of the three-dimensional mechanism’s effectiveness is predominantly based on qualitative analysis and case studies, with insufficient quantitative empirical testing of the causal links between mechanism components and compliance performance. Third, the research focuses on China’s construction industry, and the applicability of the proposed framework to other emerging economies or high-carbon sectors remains untested. Finally, the influence of dynamic policy shifts on the three-dimensional mechanism’s operation has not been fully explored.

To address these limitations, future research can proceed in the following directions. First, expand the research sample to include construction SMEs and conduct comparative analyses to clarify the differentiated compliance pathways of enterprises of varying sizes. Second, adopt panel data analysis or quasi-experimental designs to empirically test the causal links between the three-dimensional mechanism and ESG compliance performance, while identifying key moderating and mediating variables. Third, extend the research context to multiple emerging economies to validate the cross-regional applicability of the localized compliance framework and explore how institutional differences affect compliance effectiveness. Fourth, investigate the interaction between technological innovation and ESG compliance to enrich the mechanism’s technical empowerment dimension. Finally, explore the three-dimensional mechanism’s dynamic adaptability amid policy shifts and industry transformation trends, providing more comprehensive theoretical and practical insights for the construction industry’s long-term sustainable development.