["Business Strategy and the Environment, EarlyView. ", "\nABSTRACT\nThis study examines how China's Pilot Free Trade Zones (FTZs) influence corporate ESG performance. Using a staggered difference‐in‐differences model on Chinese listed firms from 2009 to 2024, we combine coarsened exact matching (CEM) and geography‐based instrumental variables to ensure robust identification. We document three main findings. First, FTZ designation significantly enhances firms' composite ESG scores, with effects that intensify over time. Second, mechanism analysis clarifies that the ESG improvement is driven by institutional openness and market incentives, rather than a mechanical injection of foreign capital. Specifically, we find that the effect is contingent on firm‐level heterogeneity: ESG gains are most pronounced among firms with high global connectivity or high financing constraints. Third, addressing concerns regarding ESG authenticity, we distinguish substantive innovation from symbolic disclosure. We find that FTZs significantly increase green patent grants without raising greenwashing scores, indicating genuine sustainability upgrading. The findings highlight that institutional liberalization reshapes nonfinancial corporate behavior by transmitting global norms and alleviating resource bottlenecks. Crucially, these results offer actionable insights for policymakers designing future mandatory ESG disclosure frameworks, demonstrating that institutional empowerment fosters authentic green governance in emerging markets.\n"]