ESG Governance, Green Industrial Transformation, and Competitive Advantage: A Comparative Analysis of the Electric Vehicle Industries in Germany and China

Abstract

The global transition toward low-carbon industrial systems has accelerated the strategic importance of environmental, social, and governance (ESG) governance within contemporary manufacturing industries. This article examines how ESG governance influences industrial competitiveness, innovation capability, and organizational transformation through a comparative analysis of the electric vehicle (EV) industries in Germany and China. The study argues that green industrial competitiveness depends not only on technological innovation or market scale but on the interaction between institutional governance systems, industrial policy coordination, corporate strategy, and supply chain transformation. Germany and China were selected because both represent globally influential EV ecosystems operating under distinct institutional and governance models: Germany through coordinated market capitalism and advanced manufacturing specialization, and China through state-led industrial transformation and platform-integrated industrial policy. Drawing on OECD industrial indicators, International Energy Agency reports, corporate disclosures, trade statistics, sustainability reports, and peer-reviewed business scholarship, the findings indicate that China’s vertically integrated and policy-driven EV ecosystem has generated rapid scalability and cost competitiveness, while Germany’s governance-intensive model has emphasized engineering quality, ESG compliance, and long-term industrial upgrading. However, both systems face structural challenges related to supply chain dependence, regulatory uncertainty, labor transition, and geopolitical fragmentation. This article contributes to business and economics scholarship by developing a governance-centered framework linking ESG institutionalization, industrial transformation, innovation ecosystems, and long-term competitive resilience in green manufacturing sectors.