## 2 Literature Review  
This study examines environmental risk and business failure. This relationship is receiving increased attention in academic research. Research on business failure has focused recently on the development of predictive models that incorporate methodological advances and artificial intelligence techniques [9; 10; 11]. These models have evolved to integrate new variables and approaches that reflect contemporary business realities and improve predictive capabilities. While traditional studies have often focused on financial ratios and operational metrics, the significance of including environmental considerations in these models is becoming more widely acknowledged [12; 13]. Firstly, this section will review the literature on the relationship between environmental risk and business performance, then it will cover studies on the methodological tools used in this study. Environmental risk, also known as environmental financial exposure, is defined as the potential percentage of a company's revenue that is at risk due to the environmental damage it causes. This idea covers a wider spectrum of risks, which goes beyond conventional cost measurements, including remediation expenses, regulatory fines, and reputational damage [4; 5]. Therefore, environmental risk has become a critical factor in assessing corporate risk and financial stability, influencing both operational performance and long-term viability. The literature review on the environment and economic activity reveals that many studies have explored the relationship between environmental factors and economic growth, particularly observing the impact of economic growth on carbon intensity. For example, studies have generally concluded that both economic growth and carbon intensity tend to increase in parallel [14; 15; 16; 17]. Although these findings provide important context, they primarily address macroeconomic scenarios rather than the direct financial implications for individual companies. Further research has emphasized the influence of industrialization on environmental outcomes, underlining the significant impact of industrialization on carbon emission intensity [18; 19; 20]. Although these studies contribute valuable insights into the environmental consequences of economic development, they are more focused on aggregate emissions than on the financial risks faced by firms. Numerous studies have advocated for strategies aimed at mitigating these effects, as they recognize the environmental impact of economic development. Researchers have suggested measures such as reducing global energy consumption, investing in renewable energy, and promoting technological advancements [21; 22; 23]. In addition, some have highlighted the vital role of governments in creating regulations and institutional frameworks that nurture a clean economy [24; 25; 26]. These initiatives are essential for reducing environmental risk and ensuring that companies remain financially resilient in the face of environmental challenges. Recent research has concentrated on the direct relationship between environmental risk and business performance, particularly financial sustainability, which is in line with our study's goal of identifying the configurations and factors that contribute to business failure, particularly the role of environmental risk. It has been shown that firms experiencing raised levels of environmental risk tend to see noteworthy declines in profitability, which implies that high environmental financial exposure may serve as a precursor to operational inefficiencies and liquidity constraints [12]. This study supports the idea that financial instability can worsen if environmental risk is not given enough consideration. Similarly, the integration of sustainable practices has been shown to mitigate adverse financial impacts; for instance, a study on the green value chain revealed its effectiveness in reducing the costs associated with environmental failures, thereby improving operational efficiency and long-term viability [27].