How can I create multi level hierarchy in SQL Server

If you already have the FolderName column, some simple replacement and conversions turns it into a hierarchyid which already understands how to sort hierarchically:

declare @t table (ID int,DeptID int, ParentID int, FolderName varchar(900))
insert into @t(ID, DeptID, ParentID, FolderName) values
(1 ,1,0,'2'),
(2 ,1,1,'2.1'),
(3 ,1,1,'2.2'),
(4 ,1,1,'2.3'),
(5 ,1,2,'2.1.1'),
(6 ,1,2,'2.1.2'),
(7 ,1,2,'2.1.3'),
(8 ,1,2,'2.1.4'),
(9 ,1,5,'2.1.1.1'),
(10,1,5,'2.1.1.2'),
(11,1,5,'2.1.1.3'),
(12,2,0,'1'),
(13,3,0,'3')

;With Abc as (
    select
        *,
        CAST('/' + REPLACE(FolderName,'.','/') + '/' as hierarchyid) as FolderNameRightType
    from
        @t
)
select
    *
from
    Abc
order by FolderNameRightType

Result:

ID          DeptID      ParentID    FolderName           FolderNameRightType
----------- ----------- ----------- -------------------- -----------------------
12          2           0           1                    0x58
1           1           0           2                    0x68
2           1           1           2.1                  0x6AC0
5           1           2           2.1.1                0x6AD6
9           1           5           2.1.1.1              0x6AD6B0
10          1           5           2.1.1.2              0x6AD6D0
11          1           5           2.1.1.3              0x6AD6F0
6           1           2           2.1.2                0x6ADA
7           1           2           2.1.3                0x6ADE
8           1           2           2.1.4                0x6AE1
3           1           1           2.2                  0x6B40
4           1           1           2.3                  0x6BC0
13          3           0           3                    0x78