1. Introduction
Carbon emission has affected the environment, ecology, economics, society, and human health. After becoming aware of the severity of this problem, governments worldwide have begun collaborating and developing relevant control regulations to prevent societal, environmental, and economic damage caused by climate change. In 1992, the United States convened an Earth Summit in Brazil which passed the United Nations Framework Convention on Climate Change for controlling the amount of artificially produced carbon emission. In 1997, the United Nations developed the Kyoto Protocol to serve as a basis for carbon emission management and reduction. Additionally, in 2016, the Paris Agreement replaced the Kyoto Protocol and required participating entities to review their carbon emission goals every five years.
Enterprises need to follow the global climate change convention, use low-pollution equipment, and improve R&D technology to lower the operational risks faced by carbon reduction [
1]. How to use industrial development policies to reduce greenhouse gas emissions, create green business opportunities and competitiveness was pointed out, and this has become the industry’s highest priority for sustainable management [
2]. Expansion in the scale of an enterprise’s production and increased labor force are the key factors for the increase of greenhouse gas emissions [
3]. Low-carbon industrial policy can contribute to both environmental and social sustainability [
4].
The greenhouse gas emissions generated by continuous economic growth have caused stress to the environment, and it was necessary to formulate an efficient energy portfolio policy [
5]. The correlation between environmental and financial performance was studied and analyzed in Japan from 2004 to 2008 [
6]. The data of CO
2 emissions and business performance of 89 international companies from 2006 to 2009 were analyzed [
7]. Time series model was used to predict greenhouse gas emissions from fossil energy consumption, and China’s GDP growth rate and the rate of change in carbon emissions from fossil energy was researched [
8]. The increase in regulations for carbon and waste management are forcing firms to consider their supply chains from ecological and social objectives [
9].
The climate is a determinant of most economic activities worldwide [
10,
11]. The weather can decide economic prosperity or depression. Regardless of whether observations are being made from a global perspective or from the perspective of individual countries, the climate exerts a strong influence on businesses, stock markets, and economic development. However, scientists have become concerned that industrial and economic developments may have affected the climate; therefore, effective control measures must be adopted in a timely manner [
12]. Developing long-term goals and strategies for carbon emission reduction can enhance the competitiveness of businesses and reduce their expenditure on measures for protecting the environment [
13]. Businesses should include the environmental costs incurred by business operation and policies of sustainable management in their financial statements to reflect actual profits [
14].
Environmental issues will be inseparable from corporate financial accounting in the future [
15]. Therefore, companies need to generate business operations in their financial statements. The environmental costs, sustainable business policies and other information should be disclosed, so that the financial situation is in line with the current state of the economy. The current accounting system has no complete norms, so environmental accounting (green accounting) was jointly proposed by the industry, government, and academia to understand companies’ internal and external environmental costs. Through procedures such as identification, measurement and analysis, the consumption and benefits of the company’s environmental capital can be reflected [
16].
William Nordhaus, winner of the 2018 Nobel Prize in Economics, pioneered the research field of climate economics. Climate change, energy conservation, and the reduction of carbon emission have received worldwide attention. Nordhaus indicated in his research that climate change limits economic development. During the process of economic development, damage inflicted on the natural environment is a “negative externality.” [
17]. Nordhaus considered that the costs derived from negative externalities should be deducted from profits to obtain reasonable and realistic profits; in other words, negative externalities must be internalized. Therefore, Nordhaus proposed measures such as carbon emission rights trading or carbon tax to allow CO
2 generators to take on the responsibility for carbon emission, prompting governments and businesses to internalize external environmental costs [
18].
At present, in order to solve the problem of externalities derived from corporate greenhouse gas emission, governments have applied “carbon pricing” to the international carbon emission trading market mechanism and also formulate carbon tax regulations to reduce greenhouse gas emission and achieve optimal pollution levels. Governments planning to move towards “carbon emission trading” or a “carbon tax” model in the future may change the business model if the regulations are implemented [
19,
20]. Therefore, it will be a challenge for enterprises to continue to operate and profit. The use of carbon pricing can be used as the basis for apportioning carbon costs per unit of product, which will have an impact on the cost accounting system for product cost attribution. Enterprises should set long-term reduction targets and follow the regulations to disclose carbon emission information in their financial statements.
With the rise of environmental awareness and the government’s industrial development policy, enterprises have to cooperate with the laws and regulations in accordance with regulatory policy adjustments and corporate social responsibility requirements. Therefore, enterprises should build a low-energy and low-pollution operating system to enhance operational management efficiency and eliminate waste of resources, reduce energy consumption, upgrade technical equipment, develop renewable energy applications, and achieve long-term objectives. As a consequence, corporate carbon emission reduction has become an inevitable trend.
Sustainable development of the global economy is closely associated with environmental resources. Under regulations for energy conservation and carbon emission reduction, businesses should establish effective mechanisms for carbon emission management. The Carbon Disclosure 2017 Project Report indicated that approximately 1400 companies have adopted or will adopt internal carbon pricing. As the mechanisms for carbon emission reduction have become increasingly comprehensive, businesses should increase their capacity for carbon emission prediction and management. However, similar to how the organizational structure, management strategies, and performance of businesses change over time in accordance with their stage of growth, carbon emissions also vary. Therefore, this study adopted the carbon emission data disclosed by financial statements to construct a time series model to investigate the dynamic relationship between business growth and future carbon emission. The results are expected to supplement research on carbon emission reduction and management mechanisms as well as serve as a reference for businesses in developing effective carbon emission reduction strategies.
5. Conclusions
Under the Paris Agreement, consensus has been reached worldwide regarding the need for developing carbon emission reduction strategies and the potential benefits of carbon neutrality. Enterprises can save their emission allowances by implementing emission reduction measures and selling their remaining allowances on the carbon trading market to obtain additional income. If an enterprise’s carbon emission reduction measures fail, then it must purchase carbon credits to compensate for its excess emission, resulting in increased operating costs and risks. Therefore, enterprises should establish an effective forecasting model to obtain an estimate of their carbon emission. The purpose of this research is to explore the dynamic correlation between an enterprise’s business growth and carbon emission performance, and to construct a time series model to predict the growth of an enterprise’s carbon emission. This research will help enterprises to strengthen their own carbon emission forecasting and management capabilities to achieve the goal of carbon neutrality through the carbon exchange.
The results from this study indicated stable cointegration between an enterprise’s business growth and carbon emission performance. An enterprise’s business growth can serve as a reference variable for predicting carbon emission performance. In terms of VEC analysis, when the annual rate of increase in carbon emission reduces excessively compared with the long-term trend, substantial adjustments may be made in the short term, leading to fluctuations and instability. VAR analysis reveals that the total amount of carbon emission is affected by the total amount of carbon emission in the previous period, the stability of growth, and years of establishment in the short term, and that the annual rate of increase in carbon emission is affected by the years of establishment in the previous period.
According to the research results, there are two benefits to reducing carbon emissions by enterprises. First, since the risk of climate change has a considerable influence on business operations, enterprises need to check and identify the carbon emissions produced by different internal production activities, and consider environmental costs among the items included in the operating costs. Then, when the price of the carbon rights trading market fluctuates, enterprises can achieve the goal of reducing emissions through the management of carbon emission, and minimize the impact of environmental costs on corporate profits and shareholders’ equity. Second, in accordance with the amendments to the provisions of the company law, enterprises should disclose their greenhouse gas emissions in their financial reports, so that stakeholders can better understand the enterprise’s investment in energy saving and carbon reduction activities. This will help to enhance the company’s image and sustainable development, fulfill its social responsibility and obligation, promote the positive transformation of enterprises and stimulate the development of green industries.
This study investigated the relationship between an enterprise’s business growth and its carbon emission performance, thereby supplementing the deficiency in existing literature on enterprises’ carbon emission. This study also constructed a forecast model using the time series method to help enterprises manage their carbon emission and achieve carbon neutrality.
This paper still has some limitations. First, this study identifies an enterprise’s operating dynamics from variables such as business growth rate; however, other items on financial statements may also have comparable value for predicting carbon emission performance. Future researchers are advised to conduct analysis using different variables for the enhancement of prediction accuracy. Second, the present research spans six years, from 2012 to 2017. The results can be interpreted as being attributable to other short-term factors; future researchers can extend the research period in order to evaluate this possibility. The disclosure of carbon emission data is currently voluntary, and numerous enterprises have not revealed their carbon emission data. Therefore, sample size is one of the limitations of this study. Legal regulations should be imposed to render the disclosure of carbon emission data compulsory, thus allowing future researchers to conduct in-depth investigations with larger sample sizes.