Climate change poses a significant global challenge, impacting ecosystems and human health. Despite international commitments, environmental policies often lag, and resource depletion and carbon emissions have surged post-pandemic. Sustainable development offers a solution, focusing on responsible resource use and preserving the environment. Green finance, characterized by transparency and stability, encourages private investment in green projects, providing access to capital for sustainable initiatives. A crucial aspect is corporate carbon accounting, enhancing transparency for investors and informing government policies. This study examines the influence of green finance and carbon accounting on the sustainable development of manufacturing companies listed on the Shanghai Stock Exchange in China, a major global carbon dioxide emitter that has committed to carbon neutrality by 2060. The study aims to contribute valuable insights into the nexus between environmental responsibility, financial strategies, and long-term economic prosperity in China.

Prior research highlights the challenges and prerequisites for achieving sustainability, emphasizing the need for regulations, roadmaps, and institutional commitments. Studies also point to the importance of cost reduction through digitalization and the obstacles posed by fossil fuel dependence, insufficient sustainability literacy, and inadequate green project funding. Green finance's instrumental role in promoting sustainable development objectives has been extensively studied, focusing on the positive impacts of green financial instruments in enhancing sustainable projects, technological advancements, and renewable energy expansion. The crucial role of carbon accounting in promoting corporate sustainability through emission quantification and environmental impact assessment has also been emphasized. This research aims to address a literature gap by investigating these aspects specifically in the context of China.

This study analyzes 500 manufacturing companies listed on the Shanghai Stock Exchange from 2010 to 2020. A sustainable development index (SDI) is calculated using six indicators (innovation-driven, structure upgrading, resource-intensive, environmental coordination, benefit optimization, and liberalization) based on Zhang et al. (2021). The study uses a panel data model with two key explanatory variables: received green financing (RGF) and carbon accounting (CACCO – a binary variable). Control variables include ESG investing, number of employees, stock price, and resource consumption (water and electricity). The Augmented Dickey-Fuller (ADF) and Kwiatkowski-Phillips-Schmidt-Shin (KPSS) tests assess variable stationarity. The Autoregressive Distributed Lag (ARDL) bounds test determines co-integration. The fully modified ordinary least squares (FMOLS) technique quantifies the effects of independent variables. Diagnostic tests and a robustness test (altering the dependent variable to R&D expenditure) ensure reliability and consistency of results.

The ADF and KPSS tests showed that the variables were non-stationary at their initial level but stationary in their first differences. The ARDL bounds test confirmed co-integration among the variables. FMOLS estimation revealed that carbon accounting positively impacts the SDI. Receiving green facilities also significantly improves the SDI (a 1% increase in RGF is associated with a 0.41% improvement in SDI). ESG investing also positively influences SDI. Conversely, the number of employees and resource consumption (water and electricity) negatively affect SDI (a 1% increase in employees is linked to a 0.35% reduction in SDI). An increase in the stock price positively impacts the SDI. The Wald test confirmed the appropriateness of the empirical model. A robustness test using R&D expenditure as the dependent variable yielded consistent results.

The findings support the hypothesis that carbon accounting and green finance positively contribute to sustainable development in Chinese companies. The positive impact of carbon accounting highlights the importance of transparency and informed decision-making. The positive relationship between green finance and SDI underscores the role of access to capital in facilitating green initiatives. The negative impact of employee numbers suggests potential inefficiencies or a lack of green skills within the workforce. The negative relationship between resource consumption and SDI emphasizes the need for efficient resource management. These findings align with previous research showing the positive effects of carbon accounting and green finance on sustainability.

This study demonstrates the significant positive impacts of carbon accounting and green finance on the sustainable development of Chinese-listed companies. Policy recommendations include government incentives for carbon accounting adoption, the expansion of green finance markets using digital technologies, promotion of sustainable corporate management practices, investment in green energy projects, and standardization of financial reporting. Future research could expand to other economic sectors, investigate the impact of the COVID-19 pandemic, and employ multi-criteria decision analysis.

The study focuses solely on manufacturing companies listed on the Shanghai Stock Exchange, limiting the generalizability of the findings to other sectors or regions. Data availability also constrained the sample size and the potential inclusion of additional variables. The study relies on self-reported data for some variables, which might introduce biases. Future research should address these limitations by broadening the scope of the study and using more comprehensive datasets.