How does ESG affect government procurement in countries where ESG systems are established from the top down?

Implementing Environmental, Social, and Governance (ESG) strategies enhances enterprises' competitive advantage, especially in emerging economies with top-down ESG frameworks. While extensive research exists on ESG, its impact on securing government procurement contracts in these economies remains insufficiently explored. Using data from A-share listed firms in China, an emerging economy, from 2010 to 2022, along with text analysis to obtain government procurement contract data, we examine how enterprise ESG influences the acquisition of government procurement contracts. We demonstrate that enterprises with better ESG can receive more government procurement contracts. High product quality and adherence to institutional legitimacy are key mechanisms driving these outcomes. The effect is particularly stronger among firms in regions with lower marketization levels, firms not benefiting from industrial policy support, and non-state-owned enterprises. Our research highlights the critical importance of ESG strategies in strengthening firms’ competitive positions within the government procurement market.