Do Rising Climate Risks Signal Financial Trouble for Food and Agro Based Firms?

Environmental accounting has become one of the essential practices for encouraging sustainable development and is mainly used in industries vulnerable to environmental changes. The current paper explores the relationship between climate risk factors, firms' financial ratios, and financial stress on the Indian food and agro‐based firms from 2009–2010 to 2022–2023. In the analysis, the authors apply logistic regression to demonstrate that firm‐specific factors considerably affect financial distress. Further, it discovers that as the Climate Physical Risk Index (CPRI) rises, financial stress in firms also increases. The results emphasize the need for firms to integrate climate risk considerations into their strategic decision‐making processes. The study also raises questions about how managers might make things more straightforward and deal with the hazards that climate change can cause that can lead to financial problems. This analysis shows how exposure to climate risk can lead to financial issues and underlines the need for environmental responsibility and managing organizational risks. It also has fascinating legislative and managerial implications. All of these ideas are useful for businesses that want to align their operations with sustainable development goals while dealing with the changing effects of climate change.