<p>This study develops and validates the Adaptive ESG Governance Capability Framework (AEGCF) to explain how regulatory pressure, organizational characteristics, and governance capabilities jointly influence environmental disclosure quality and circular economy practices in India's carbon-intensive cement and steel industries. Grounded in Institutional Theory, Stakeholder Theory, Legitimacy Theory, and the Resource-Based View, the framework reconceptualizes environmental disclosure quality as a dynamic governance capability that evolves through regulatory adaptation, organizational learning, and strategic resource deployment rather than as a compliance-oriented reporting activity. A longitudinal panel dataset comprising major Indian cement and steel firms was analyzed using an integrated econometric framework that combines fixed-effects estimation, moderation analysis, dynamic System-Generalized Method of Moments (System-GMM), robustness tests, and sensitivity analyses. The findings reveal that regulatory pressure, firm size, and profitability significantly enhance environmental disclosure quality, whereas financial leverage exerts a negative influence. Industry type significantly moderates the regulatory pressure-disclosure relationship, with cement firms exhibiting stronger responsiveness than steel firms owing to greater environmental exposure and regulatory scrutiny. Dynamic panel estimates further demonstrate that environmental disclosure behaviour is persistent over time, indicating that sustainability reporting gradually becomes institutionalized within corporate governance systems. Furthermore, higher environmental disclosure quality significantly promotes the adoption of circular economy practices, confirming that transparent sustainability reporting contributes to resource efficiency, waste reduction, and environmentally responsible operations beyond regulatory compliance. The consistency of results across alternative model specifications and estimation techniques confirms the robustness of the proposed framework. By integrating static, dynamic, and interaction-based analyses within a unified theoretical model, this study advances ESG governance literature by establishing environmental disclosure quality as a strategic organizational capability that links institutional pressures with sustainable operational outcomes. The proposed AEGCF offers practical guidance for policymakers, regulators, investors, and corporate managers seeking to strengthen Business Responsibility and Sustainability Reporting (BRSR), improve ESG governance, and accelerate circular economy transition in emerging economies. The framework also provides a transferable foundation for future research across industries and institutional settings.</p>