This study examines how government environmental policies affect company environmental strategy throughout China’s green economy transformation. Environmental rules and subsidies affect enterprises’ sustainability policies, according to panel data from Shanghai and Shenzhen A-share listed corporations from 2010 to 2020. Using a fixed-effects model, environmental penalties and subsidies both increase enterprises’ environmental protection expenditures, with penalties having a greater effect. Environmental restrictions also favorably moderate government actions and company green investments. The study also shows how property rights regulate government action and sustainability efforts. The report suggests optimizing environmental fines and subsidies to fit local conditions, enhancing enforcement effectiveness, and fostering alignment with China’s green transition goals across ownership types based on empirical data. Businesses emphasize green development and proactive compliance with government laws to increase competitiveness. China’s green transition requires governments and corporations to balance economic growth with environmental protection. This research provides critical insights.