It is a sandbox, I agree with you on that, but there's a marked difference between:
A) A sandbox
B) A sandbox with tools to play with the sand
Now, I'm a beach-goer myself and anyone who knows me knows I don't need tools to have fun. Big guy upstairs gave me fingers and toes, y'know? Gaming isn't so...expansive, but that's ok. Thing is, a sandbox 'game' has to have some tools. Haven't seen any massive communities build up recently around coding your own game.
I mean, anybody can code. Really. Just like anybody can build a sand fort.
Just might not look like it. The thought counts.
Comparing Elite to EVE is really unfair (to both titles, ironically, given recent history in both)...but EVE has the 'sandbox' thing down in spades, balance issues and all. The tools for making your own story and adventure - a hallmark of sandboxes - is almost unparraled in New Eden (EVE's world). Elite, on the other hand, is a glorified single-player ship simulator that happens to have (rarely stable) multiplayer capabilities.
I know that's a gross oversimplification, just hang in there.
I think players do make content for Elite (obviously) but the tools to do so are sorely minimal. And that's with massive 3rd party support to boot. OP is right that FDev could do more to foster player retention and - to your point - do so by encouraging more player made content. The trouble with emergent gameplay is:
1) You need players. A lot of them.
2) You need 'content makers' - who are a wholly unique, and very rare breed of player. It's estimated in EVE that you have one content maker for about every 5,000 players. A content maker isn't a ganker, nor is it a corporation leader, or even a warmonger. A content maker designs large-scale, long-lasting, impactful content through the gathering of and interaction with many players. DW expeditions are an excellent example of this.
3) Those content-makers need tools by which to architect their content.
#3 is the big hiccup. Elite has plenty of players (for now) and it did have content makers as evidenced by DW2. The PvP community has a few on the small-side, but PvP is sort-of its own beast in non-PvP-centric titles like Elite.
Why aren't there content-makers for PP? (Queue everyone saying, "We're here! You just ignore us!"
Why aren't there content-makers for Thargoids? (Queue AXI and anybody else...)
Why aren't there content-makers for S&R? (Fuel Rats, Hull Seals...)
None of these are BIG content-makers. I don't say that to be offensive. These are all really cool player groups. I say it to point out OP's not wrong: retention in Elite shouldn't be suffering with such great groups out there...except the tools to highlight them, support them, and most importantly - GROW them - don't exist. Squadrons as a feature is a huge miss, messy and unintuitive and not remotely useful to actually organizing large scale content. FCs were designed with some emergent play in mind, then completely ignored that Elite doesn't have a player-made economy.
The point?
I'd argue Elite barely qualifies as a sandbox. It's definitely a box - a big one, too - but I'm not sure there's much sand in it, let alone tools to shape that sand.
There is literally no difference between a player in Colonia and a player in the bubble, except one traveled a very long time to be surrounded by the exact same gameplay. It's no small wonder Elite's only newsworthy content has been the expeditions...because the only content of depth the game has is traveling absurdly long distances and preparing for that journey.