Smart sustainability: Environmental accounting strategy for modern corporations using machine learning

Abstract

With increasing climate change urgency and regulatory pressures, corporations are expected to adopt transparent and efficient environmental accounting practices. In China, where industrialization often outpaces sustainability, there is a need for intelligent tools to align business performance with environmental responsibility. Despite the existence of environmental key performance indicators (KPIs), many organizations struggle with adopting suitable environmental accounting strategies due to a lack of data-driven frameworks. Traditional approaches often overlook the complexity and industry-specific nature of sustainability data, leading to poor decision-making. This research proposes EcoStratClass, a machine learning-based framework for classifying Chinese corporations into appropriate Environmental Accounting Strategy types based on sustainability performance. Using the Smart Sustainability & Environmental Accounting in Chinese Corporations (SSEC-ChiCorp) dataset, the methodology involves advanced data preprocessing, including attribute removal, target mean encoding, PCA for categorical reduction, ordinal mapping for audit frequency, and hybrid normalization techniques (Z-score, Min-Max, and Box-Cox). The Environmental Signature Score (ESS) quantifies overall sustainability impact, considering CO₂ emissions, energy usage, recycling, and renewable resource consumption. Feature selection employs the Environmental Signature Learning (ESL) method, combining Mutual Information, Chi-Square, ANOVA F-test, Recursive Feature Elimination (RFE), and models like LightGBM, Random Forest, and SVM. The classification model uses a stacked ensemble of LightGBM, Random Forest, and SVM, with Logistic Regression as the meta-learner. SHAP values improve model explainability by highlighting influential attributes. With an accuracy of 92.87%, the model achieves strong performance in various metrics (macro precision, recall, F1 score). EcoStratClass offers a reliable, interpretable decision-support system to guide corporations in selecting effective environmental accounting strategies, promoting ESG-aligned sustainable development.