*2.1. Impact of Environmental Regulations (ERs) on Sustainable Growth (SG)*

Environmental regulations (*ERs*) are a collection of features for government environmental policies aiming at reducing businesses' influence on the natural environment and providing an atmosphere conducive to environmental innovation [25]. According to López-Gamero et al. (2010), *ERs* are a collection of environmental behaviors that are either mandatory or discretionary and are disseminated directly or indirectly by economic organizations or governments [26]. Pargal and Wheeler (1996) established the notion of informal *ERs*, arguing that in poor nations where institutional regulation is weak or non-existent, many communities have struck emission reduction agreements with local firms [27]. Informal regulation is the term for this occurrence. For command and control and market-based rules, Li and Ramanathan (2018) find a positive non-linear relationship between Environmental regulations (*ERs*) and Sustainable growth (*SG*). [28]. The informal *ERs* represented by environmentally related technology and education levels, according to Wang and Shao (2019), have a favorable and substantial influence on *SG* [29]. *ERs* have a statistically significant and positive connection with *SG*, according to Javeed et al. (2020a) [14]. Higher *ERs* intensity might drive manufacturing, resulting in a more concentrated economy with lower CO2 emissions, hence promoting *SG* [30]. Firms can increase staff quality at or beyond the *ER* threshold level, according to Song et al. (2018), for additional gains in *SG* [31]. Labor cost and *ERs*, according to Zheng et al. (2019), have a synergistic influence on company growth and structural adjustment [32]. Zhao et al. (2018) suggested that if appropriate *ERs* are used, then in a short period of time, *ERs* and financial returns can produce a win–win situation [33]. The effect of *ERs* on the link between technical innovation and *SG* is theoretically good, but not substantial, showing that there is still an "implementation gap" [34].

According to Ramanathan et al. (2017), depending on their resources and expertise, firms that adopt a more dynamic approach to reacting to *ERs* innovatively and taking a proactive approach to managing their environmental performance are generally better able to reap the *SG* [35]. Regulatory and supervisory actions based on actual market conditions, according to Xie et al. (2017), have a non-linear connection and can be favorably associated with "green" production [6]. Dasgupta et al. (2001) discovered a substantial positive correlation between the frequency of *ER* agency inspections and the *SG* [36]. According to

Liu et al. (2018), *ERs* have a net negative effect on energy usage, which is advantageous for reducing energy pressures [4]. In China, the energy-saving impact of *ERs* is dynamic, with complicated outcomes arising from the "Green Paradox" and "compliance cost." It has also been found that *ERs* help stimulate technological progress in manufacturing, which indirectly saves energy [37].

Based on Liu et al. (2018), this paper breaks down environmental regulations into three aspects: economic, legal, and supervision [4], and makes the following hypotheses about their relationship with sustainable growth (*SG*), respectively.

**Hypothesis 1a (H1a).** *Economic environmental regulation is conducive to sustainable growth.*

**Hypothesis 1b (H1b).** *Legal environmental regulation is conducive to sustainable growth.*

**Hypothesis 1c (H1c).** *Supervised environmental regulation is conducive to sustainable growth.*
