As the Chinese Sustainability Disclosure Standards (CSDS) enter the mandatory implementation stage, ESG development in China is transitioning from voluntary corporate practices to a new stage of institutionalized governance. While existing studies have extensively examined Environmental, Social, and Governance (ESG) performance and its economic consequences in mature markets, theoretical analyses addressing the unique institutional logics of emerging economies remain limited. This paper reviews the evolution of ESG in China and analyzes its development through the combined perspectives of institutional isomorphism and stakeholder theory. It further constructs an analytical framework for China’s ESG ecosystem by conceptualizing ESG disclosure, ESG rating systems, and ESG investment as three interconnected and mutually reinforcing pillars, and elucidates the ecosystem’s operational dynamics driven by the interplay between the state institutional arrangements and market mechanisms. The study also discusses three major challenges facing China’s ESG ecosystem, including data fragmentation, rating divergence, and friction between domestic institutional logics and international standards. Finally, a future research agenda is proposed based on the Theory-Context-Characteristics-Method (TCCM) framework, providing directions for future studies on ESG governance, sustainable finance, and institutional development in state-led economies.
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