1 Literature Review

In the 21st century, the global economy and society are facing unprecedented challenges and opportunities. With the increasing prominence of environmental issues such as climate change, environmental degradation, and resource depletion, these problems pose significant threats to the sustainable development of global society. Digital transformation emphasizes the integration of digital technologies into corporate decision-making and operations to promote sustainable economic development. Its core features include: Integration of digital technology: Embedding digital tools into corporate operations; Green innovation: Encouraging investment in environmentally friendly and renewable energy projects; Socially responsible investment: Focusing on the social impacts of corporate activities. Against the backdrop of the digital age, the transformation of corporate Environmental, Social, and Governance (ESG) practices has attracted extensive attention from academia and industry. Digital transformation involves not only technological innovation but also profound changes in corporate ESG performance. Recent studies have focused on how digital transformation empowers companies to enhance their ESG performance and helps them adapt to changing market and regulatory environments.

Wang Yang and Guo Junhua investigated the impact of innovation agglomeration on industrial green transformation, finding that innovation agglomeration facilitates the exchange of knowledge and technology, thereby promoting green transformation in the industrial sector [1]. Du Shuang and Cao Xiaoxi, using data from Chinese listed companies, explored the relationship between corporate digital transformation and green innovation, concluding that digital transformation significantly enhances corporate green innovation [2]. Xie Nan, Duan Zicong, and Wang Wenyu analyzed financial decisions regarding corporate green technological innovation from the perspective of local government regulation, highlighting that local government regulatory policies significantly influence corporate green technology innovation [3]. Li Wanhong and Li Na further examined the relationships between green innovation, digital transformation, and the carbon reduction performance of high-energy-consuming enterprises, discovering that digital transformation significantly improves carbon reduction performance by fostering green innovation [4]. Yang Jiajia and Zhang Changbing studied the relationship between digital transformation, ESG performance, and green innovation in high-tech enterprises, finding a positive correlation between digital transformation and ESG performance, with this relationship being particularly pronounced in high-tech firms [5]. These studies provide new perspectives for understanding the role of digital transformation in promoting corporate environmental and social responsibilities.

In conclusion, digital transformation offers enterprises opportunities to achieve greening and enhance ESG practices. By leveraging advanced digital technologies, companies can manage environmental and social risks more effectively, improve governance, and drive sustainable development. However, this transformation requires enterprises to consider and invest in strategic planning, technological innovation, and talent development comprehensively. Future research could explore differences in ESG practices across industries and regions during digital transformation and investigate ways to overcome the challenges associated with this process.

1.1 Overview of Digitalization, Greening, and ESG

In the 21st century, digitalization and greening have emerged as two core drivers of sustainable development in the business world. Digitalization is not merely a technological revolution; it encompasses cutting-edge technologies such as big data, artificial intelligence, and the Internet of Things, which are reshaping corporate operational models. By enhancing productivity, optimizing management processes, and improving marketing precision, digitalization has become a critical factor for enterprises to boost competitiveness. It enables companies to: Improve production efficiency through intelligent automation; Optimize decision-making with data analytics; Enhance customer experience through precision marketing.

Greening serves as the foundation of corporate sustainable development. It requires enterprises to achieve energy conservation and emission reduction, practice resource recycling, and provide eco-friendly products and services. Greening not only responds to the global call for environmental protection but also strengthens brand reputation and opens new market opportunities. It encourages businesses to: Reduce dependence on natural resources; Minimize environmental impact during production processes; Develop market-driven green products, achieving a win-win for the economy and the environment.

ESG represents a new dimension for assessing the comprehensive value of enterprises. Environmental focuses on the company’s impact on the natural environment; Social evaluates the company’s responsibilities toward employees, consumers, and communities; Governance examines the company’s management structure and transparency. The ESG framework guides companies to shift from pursuing short-term profits to long-term sustainable development. It requires businesses to balance economic benefits with social and environmental outcomes, thus aligning with the broader goals of sustainability.

There is a significant synergy between digitalization and greening. Digital technologies enable precise monitoring and management of corporate energy consumption and emission levels, effectively supporting energy conservation and emission reduction. Simultaneously, the demand for greening drives digital technologies toward more environmentally friendly and sustainable innovations. ESG (Environmental, Social, and Governance) integrates the principles and practices of digitalization and greening, serving as the core framework for corporate transformation. Through ESG practices, enterprises can enhance their environmental and social performance while ensuring the effectiveness and sustainability of these practices. This allows businesses to achieve commercial success while contributing to the sustainable development of society and the environment. In this transformation process, companies must leverage the synergy between digitalization and greening and integrate ESG principles into their strategies. This involves: Optimizing production processes to improve efficiency and reduce environmental impact; Green supply chain management to ensure sustainability across operations; Green innovation in products to meet market demand for eco-friendly offerings; Upgrading digital infrastructure to support sustainability initiatives; Improving governance structures for greater transparency and accountability. Through these specific practices, businesses can achieve green transformation in the wave of digitalization, contributing actively to a sustainable future. As technology continues to advance and global emphasis on sustainable development goals increases, digitalization and greening will become essential pathways for companies to achieve ESG objectives.

1.2 The Impact of Digital Transformation on ESG Practices

In the context of globalization, digital transformation has a multifaceted impact on corporate ESG (Environmental, Social, and Governance) practices. It not only alters the internal operational logic of enterprises but also reshapes their interaction with the external environment. This transformation produces significant effects across the three ESG dimensions.

Digital transformation, by introducing advanced information processing and analysis tools, greatly enhances a company’s ability to monitor and manage its environmental impact. For example: IoT Devices: By deploying Internet of Things (IoT) technology, companies can collect real-time data on energy consumption and waste generation. These data enable the optimization of production processes, reducing resource wastage. Big Data Analytics: Data-driven insights help enterprises identify opportunities for energy conservation and emission reduction. Artificial Intelligence (AI): Predictive algorithms allow companies to forecast and adjust their environmental footprints proactively. Cloud Computing Platforms: By reducing the need for extensive physical infrastructure, cloud computing helps lower corporate carbon emissions. The application of these technologies not only minimizes the negative environmental impact of business operations but also leads to cost savings and efficiency improvements for enterprises.

In the social dimension, digital transformation enhances corporate social responsibility by improving transparency and facilitating communication. Engaging Stakeholders: Social media and online platforms enable companies to interact directly with consumers, suppliers, and community members, allowing them to better understand and respond to their needs and expectations. Promoting Awareness: Digital tools help companies widely share their corporate social responsibility (CSR) initiatives, increasing public awareness of their social responsibility efforts. Building Capacity: Digital transformation offers opportunities for companies to invest in the capacity building of employees and community members through online training and educational programs, fostering social inclusion and economic development. Enhancing Accessibility: Companies can leverage digital services such as e-commerce and telemedicine to provide greater convenience to a broader audience, thereby improving social welfare.

In governance, digital transformation optimizes internal governance structures by improving decision-making quality and strengthening internal controls. Real-Time Insights: Digital tools such as Enterprise Resource Planning (ERP) and Customer Relationship Management (CRM) systems provide management with real-time business insights, enabling more informed decisions. Risk Management: Digital auditing and compliance tools help companies monitor and manage risks more effectively, ensuring adherence to legal regulations and ethical standards. Transparency and Accountability: Digital transformation enhances transparency and accountability in governance. Online dashboards and reporting tools grant stakeholders access to key business and ESG metrics, improving overall governance quality.

Overall, digital transformation enables companies to better manage their environmental and social impacts while optimizing their governance structures. As technology continues to advance, companies must explore and leverage digital tools to enhance their ESG performance and gain a competitive edge in an increasingly dynamic market.

2 Adaptive Development and Challenges in the Transformation of Chinese Enterprises

2.1 Adaptive Development of Digital Transformation in Chinese Enterprises

In China, digital transformation has become a vital strategy for enterprises to enhance market adaptability and address changes in regulatory environments. With rapid technological advancements and evolving market demands, enterprises face unprecedented challenges and opportunities. Digital transformation not only helps companies increase their sensitivity to market changes but also strengthens their ability to meet regulatory requirements.

Digital transformation significantly enhances enterprises’ ability to adapt to market changes by improving their data analysis capabilities and market insights. With big data analytics tools, companies can monitor market trends, consumer preferences, and competitor activities in real-time, enabling them to adjust product and service strategies swiftly. For instance, by analyzing consumers' online behaviors and feedback, businesses can quickly identify shifts in market demand, respond promptly, and optimize product designs and marketing strategies. This flexibility allows enterprises to maintain a competitive edge in highly dynamic markets. Additionally, digital technologies facilitate supply chain optimization, enabling companies to manage inventory and logistics more efficiently, reduce operational costs, and improve responsiveness to market demands.

In the face of increasingly stringent regulatory requirements, digital transformation equips enterprises with advanced compliance management tools and processes. Digital tools, such as compliance management software and data analytics platforms, allow companies to monitor compliance risks in real-time, automatically generate compliance reports, and minimize human errors and compliance costs. Through digital means, businesses can collect and analyze compliance-related data more effectively, identifying potential issues and taking corrective measures promptly. Furthermore, digital transformation fosters better communication and collaboration between enterprises and regulatory bodies. Online platforms and data-sharing mechanisms enable companies to respond more quickly to regulatory requirements, enhancing transparency and building trust with regulatory authorities.

2.2 Challenges in the Transition from Digitalization to Greening for Chinese Enterprises

Chinese enterprises face multiple challenges in their transition from digitalization to greening. The integration of digitalization and greening lacks a unified standard and framework, resulting in uncertainties for businesses implementing ESG practices. There are significant differences in how enterprises understand and apply digital tools and green standards. This inconsistency complicates the formulation and execution of ESG strategies, increasing management and operational complexity. Furthermore, many enterprises lack transparency in environmental information disclosure, making it difficult to accurately assess their ESG performance. This information asymmetry hinders investors’ ability to evaluate corporate sustainability and social responsibility, thereby reducing competitiveness in the green finance market. The lack of transparency raises doubts among investors regarding companies' environmental and social impacts, influencing investment decisions negatively.

Some enterprises experience dual pressures of technology and funding during the digital transformation process. While digital technologies can enhance operational efficiency, the high costs of technological investment and maintenance are prohibitive for many companies. Additionally, a lack of market demand and incentives for green projects limits their ability to attract financing, restricting investment in greening efforts. Although the government has introduced a series of policies to promote digitalization and greening, businesses still lack clear legal and policy support in practice. An incomplete regulatory system may expose enterprises to legal risks when implementing ESG practices, further affecting their motivation and effectiveness in pursuing transformation.

The public and stakeholders’ understanding and support for corporate ESG practices directly influence the effectiveness of enterprises' transformation. A lack of widespread awareness of the concepts and implications of digitalization and greening may result in insufficient societal support for corporate sustainability efforts, limiting their promotion and application in the market.

To address these challenges, enterprises must collaborate with governments, financial institutions, and various societal actors. Establishing a unified standard system, enhancing information disclosure and transparency, improving enterprises' technological capabilities and financial support, refining the legal and regulatory framework, and raising public awareness of the integration of digitalization and greening are all critical steps to advancing the transformation of ESG practices. Through these efforts, enterprises can more effectively achieve the transition from digitalization to greening, contributing to the realization of sustainable development goals.