ENVIRONMENTAL ACCOUNTING IN FUNCTION OF SUSTAINABLE
DEVELOPMENT OF HIGHLY TOURISTIC REGION OF ISTRIA
Lorena Mošnja – Škare, Associate Professor of Accounting, «Juraj Dobrila University of
Pula», Department of Economics and Tourism «dr. Mijo Mirković»,
Preradovićeva 1, 52 100 Pula, Croatia, e-mail: lmosnja@efpu.hr, tel. ++385/(0)52 377 042,
fax. ++385/(0)52 216- 416
Jasmina Gržinić, Assistant Professor of Tourism, «Juraj Dobrila University of Pula»,
Department of Economics and Tourism «dr. Mijo Mirković»,
Preradovićeva 1, 52 100 Pula, Croatia, e-mail: jasmina.grzinic@efpu.hr, tel. ++385/(0)52 377
068, fax. ++385/(0)52 216- 416
-
research in progress -
1. Introduction
Environmental accounting has been gradually introducing in Croatian entities along
with the increasing awareness of environmental and social responsibility. In general, this is an
underdeveloped reporting practice in Croatia, although there are some excellent exemptions
that follow GRI (Global Reporting Initiative) Guidelines or prepare environmental/social
reports on their own. Undoubtedly, these non-financial information are of high importance for
all the enterprises and their stakeholders, independently of the type of industry, size or
locality, but in tourism, environmental disclosures are particularly significant, considering the
natural features of this multiplicatively effective industry and its contribution to growth and
development of the Istrian county and the whole national economy. So, there’s an urgent need
to enhance environmental reporting in tourism sector, although according to some research
results that will be presented later, services sector is in average worse environmental reporter
comparing to e.g. petroleum, gas, chemical, pharmaceutical industry, etc.
As the scale of tourism grows, the resource use threatens to become unsustainable.
Withought environmental responsibility and related high-quality accounting information, the
levels of cheaper mass tourism will increase, forcing more “nature-based” tourism to move on
to new destinations. This scenario is opposite to the “Croatian Tourism Development by
2010” strategy.
With a favourable geographic position, almost at the heart of Europe, Istria has always
represented a bridge connecting the Middle European continental area with the
Mediterranean. This area is the most visited Croatian tourist region with 27% of all visitors
and 35% of time spent in all of Croatia. The Croatian National Bank’s preliminary figures for
2007 show that international tourism generated 18.4% of Croatian GDP. For these reasons the
Istrian tourism industry can not ignore environmental issues in its management and requires
the informed participation of all relevant stakeholders (according to the Agenda 21 for
tourism industry).
Properly planned tourism development, combined with environmental protection,
produces the concept of sustainable tourism. Environmentally sustainable form of tourism
represents a step forward from "sea and sun" mass tourism developed at the coastal part of
Istria.
There are a myriad of definitions for Sustainable Tourism, including eco-tourism,
green travel, environmentally and culturally responsible tourism, fair trade and ethical travel.
2
Mentioned selective tourism forms are adopted as the concept of the present and future Istrian
destination development.
The wide range of potential information must be reduced to a set of useable and
meaningful measures important to the decision maker in tourism industry. Actually,
environmental reporting should be considered as an integrative part of all the efforts invested
in sustainable tourism development. That's why we have been exploring the current
developments of environmental accounting in the most propulsive Istrian tourist companies –
the engines of Istrian growth and development, as well as their plans of further action. In this
paper we're going to present the temporarily results of our research in progress started in
summer 2008.
2. “Sustainability Reporting”
Sustainable development that “meets the needs of the present without compromising
the ability of future generations to meet their own needs.”1 is supposed to be the global
mission, necessity and hopefully, reality. Awareness of this problem2 leads to the fact that “all
the world is in the same boat”, that everyone should somehow contribute to the sustainable
development and to communicate about problems, activities and accomplishments in this
threatening area. Here we come to the problem of companies’ sustainability disclosures and
transparent communication with their stakeholders. Actually, we mean the companies’
stakeholders as the term as it is commonly used, as well as if we use the term in the broader
sense - we are all stakeholders together with the future generations dependent on companies’
past, present and future acitivities toward or away of the sustainability.
«As such, financial performance is no longer the exclusive driver for businesses.
Economic, environmental and social factors are now recognized as also playing important
roles. Consequently the competitive international marketplace increasingly rewards those that
go beyond the legal requirements in terms of managing their economic, environmental and
social impacts. This recognition has led to companies being encouraged by internal and
1
World Commission on Environment and Development (1987). Our Common Future. Oxford: Oxford
University Press, p.43.
2
«In a study of 3,000 graduates in the United Kingdom, the United States and China done this year by
PricewaterhouseCoopers, 87 percent of the Chinese respondents said that they would actively seek out
employers whose sense of corporate responsibility reflects their own ethics and values.While in another study
from 2006, TNS, an international market research firm, found that 91 percent of Chinese consumers said that
they would be more likely to refrain from buying a product if a company failed to follow environmental and
ethical standards.» (Gilbert, S. Business Growth Based on Socially Sound Model. China Daily, 24.01/2008.)
3
external stakeholders to demonstrate their performance in these areas, which has resulted in
the emergence of sustainability reporting.»3
Sustainability reporting, non-financial reporting, triple bottom-line reporting,
corporate social responsibility reporting and “many-other-labels” reporting emerged in the
late nineties in USA and Europe, while conventional financial reporting has been developing
over the past century, so there’s no doubt that there are still many challenges on its
developmental path. “The ‘problem’ with sustainability is that it is not intrinsic to a product. It
is not something added or assembled by one supplier as a component or a mark of quality
measured in a finished product. Rather, it is a quality of a product pertaining to the impact its
creation, use and disposal has had on environmental, social and economic systems.”4 Such
impact should be measured, since “what gets measured, gets managed”, so quantitative
information are needed in addition to qualitative ones to enable comparation among the
companies and over the periods. So, besides the sustainability concepts, sustainability metrics
is necessary, as well, and this requires building of substantial capacities.
Despite of many problems non-financial reporting has to face with, there are very
optimistic discussions such as “In a few short years, a new generation of non-financial
reporting will have moved from the extraordinary to the exceptional to the expected, and in
the process will establish a new standard of transparency unimaginable even a decade ago.”;
“Excellence in reporting is an antidote to the loss of confidence in corporations documented
in virtually every opinion poll in the last few years.” 5 It seems that non-financial information
disclosures are expected even to contribute to transparency and excellence in reporting that
would enable a comprehensive view of business in its integrity, helping in such a way to reestablish the confidence in reported information.
«Sustainability reporting is a living process and tool, and does not begin or end with a
printed or online publication. Reporting should fit into a broader process for setting
organizational strategy, implementing action plans, assessing outcomes, and continuously
improving. Whether a key element in risk management, your main vehicle for external
reporting, or a platform for stakeholder dialogue, sustainability reporting is fast becoming an
essential part of management practice for successful organizations of all sizes worldwide.»6
In the table below, there are some reasons for sustainability (not)reporting presented.
3
Miles Hill, K. The Pakistani Perspective on Sustainability Reporting, p.2., www.triplebottomline.com.pk
Wiemer, J., Plugge, L. Transparency in the Supply Chain, Briefing Paper, GRI, 23 July 2007, p.1.
5
White, L.A. New Wine, New Bottles: the Rise of Non-Financial Reporting, A Business Brief by Business for
Social Responsibility, June 20, 2005, p. 1 and 4.
6
The GRI Guidelines – an Executive Summary, GRI.
4
4
Table 1. Companies’ Motivations for Reporting or Non-reporting
Reasons for reporting
enhanced ability to track progress against specific targets
facilitating the implementation of the environmental strategy
greater awareness of broad environmental issues throughout the organisation
ability to clearly convey the corporate message internally and externally
improved all-round credibility from greater transparency
ability to communicate efforts and standards
licence to operate and campaign
reputational benefits, cost savings identification, increased efficiency, enhanced business
development opportunities and enhanced staff morale
Reasons for not reporting
doubts about the advantages it would bring to the organisation
competitors are neither publishing reports
customers (and the general public) are not interested in it, it will not increase sales
the company already has a good reputation for its environmental performance
there are many other ways of communicating about environmental issues
it is too expensive
it is difficult to gather consistent data from all operations and to select correct indicators
it could damage the reputation of the company, have legal implications or wake up
‘sleeping dogs’ (such as environmental organisations)
Source: Kolk, A. (2004). A Decade of Sustainability Reporting: Developments and Significance’, Int. J.
Environment and Sustainable Development, Vol. 3, No. 1, pp.51–64., p. 54.
It seems that the reasons for sustainability reporting have been recognized considering
the growing number of non-financial reporters over the period presented by figure 1.
Figure 1 Sustainability Reporting in 11 Countries in 1993, 1996, 1999, 2002 (in %)
- in years in which a country was not included in the survey, the % is set at 0
Kolk, A. (2004). A Decade of Sustainability Reporting: Developments and Significance, Int. J. Environment and
Sustainable Development, Vol. 3, No. 1, pp.51–64., p. 52.
5
Despite of the continuous increase of the number of reporters, the question is if the
reporting is really accompanied by performance, so Kolk, A. (2004) has introduced the
concept of «implementation likelihood» to assess the real degree of sustainability
performance and reporting. Moreover, in addition to the question: is this, what has been
reported, really performed?, another question arose: is this, what has been reported, really a
sustainability report? «With few, very rare exceptions, the label of "sustainability report" is
attached to a document which contains (a) the sort of partial eco-efficiency, environmental
management environmental report; (b) a brief, bland and partial social report; and (c) some
brief, and substantially un-analytic statement about what sustainability means to the reporting
organisation. Whatever else these reports might be, they are not reports on sustainability!».7
Although some companies prepare non-financial reports, they rarely link them with
the financial disclosures what results in incomplete information. Actually, there’s an evident
need for integration of financial and non-financial information. There’s also a need to
harmonize non-financial disclosures to enable their international comparability, like the
International Accounting Standards – International Financial Reporting Standards were
introduced to harmonize financial reporting worldwide, but with more flexibility. Here we
come to the activities of international organizations and networks, among witch Global
Reporting Initiative has been investing efforts to develop such “sustainability reporting global
standard”.
3. Global Reporting Initiative
Global reporting initiative is the international non-profit organization established to
reach the excellence in the corporate reporting on sustainable development. «GRI is itself
nothing more than a network of interested people worldwide willing to contribute their time
and expertise toward the achievement of a common goal.»8 Launched by Coalition of
Environmentally Aware Economies (CERES) and United Nations Environment Program
(UNEP) in 1997, GRI is committed to guideline the companies how to prepare high quality,
comparable, credible and relevant single and consolidated sustainability reports, feasible to
the particularities of certain industries. It is complementary to UN Global Compact since the
7
Gray, R. Social and Environmental Responsibility, Sustainability and Accountability: Can the corporate sector
deliver?, presentation, Conference in Pretoria, South Africa in September 2000. Subsequent versions published
in The Corporate Citizen 2(3) 2002, pp. 9-16.
8
Richards, T., Dickson, D. Guidelines by Stakeholders, for Stakeholders – Is it Worth the Effort?, GRI, JCC,
Spring 2007, p.21.
6
latter defines values and principles for sustainable development while GRI provides the
reporting framework for communicating organization’s sustainability performance in a given
period; GRI works also in accordance with OECD MNE Guidelines to enable the GRI
Guidelines implementation. So, GRI together with UN and OECD “exemplify international
initiatives that warrant the attention of every firm doing business in global markets.”9
Its efforts are directed to development of the common framework for sustainability
reporting, considered to be the global “golden standard” created through the collaboration of
experts all round the world, from the business community, investors, accountants, labour
unions, international development agencies and leading non-government organization
protecting the environments, human rights and fighting against corruption. This framework
comprises the principles and indicators that enable measurement and reporting economic,
environmental, and social performance of a given organization with a vision that these nonfinancial information become “as routine and comparable as financial reporting.”
More than 1000 organizations in around 60 countries, 94% of the world most
successful companies in 200410 and more than 1500 organizations in 200811. have already
implemented GRI guidelines, but there’s an increasing number of their users also among
smaller companies - not only large multinational ones (GRI provides special guidance for
SMEs), as well as among non-profit organizations and public agencies. This growing trend is
clearly presented by Figure 2.
Figure 2 GRI Reporters in the period 1999-2007
1200
1000
800
600
400
200
0
1999
2000
2001
2002
2003
2004
2005
2006
2007
Source: Zagreb G3 Briefing, March 6th 2007.
9
White, L.A. New Wine, New Bottles: the Rise of Non-Financial Reporting, A Business Brief by Business for
Social Responsibility, June 20, 2005, p. 4.
10
Priopćenje za medije - Predstavljanje G3 smjernica za izvještavanje o održivosti, Globalne inicijative za
izvještavanje, (Press Announcement of GRI's G3 Guidelines on Sustainability reporting), HR BCSD, March 6,
2007.
11
www.globalreporting.org, 18.08.08.
7
The number of GRI reporters is expected to increase since it provides benefits both for
reporters and users, trying to benchmark organizational sustainability performance, its
commitment to sustainable development and enabling comparisons over time and between
organizations assessing their impacts on sustainable development. “An assessment of 300+
GRI reporting companies by the London consultancy Linstock indicates moderately positive
correlation with lower share price volatility, higher operating profits and revenue growth.”12
Obviously, markets consider reporting practices as a proxy for quality of management and
have begun rewarding disclosures beyond conventional financial reporting.13
Of course, GRI Guidelines are also supposed to dynamically develop to higher levels
over time - “Certainly at the time of writing, although the GRI remains the front runner in
terms of wide spread acceptance of reporting guidelines and although they have set reasonable
standards in environmental reporting, they have yet to develop any serious standards in social
reporting and are, therefore, still someway off decent TBL reporting.»14 - we assume they are
a good starting point for non-experienced environmental reporters in Croatia and that's why
we've explored the possibilities of their implementation among Istrian touristic companies.
3.1. GRI Reporting Framework
GRI reporting framework is clearly presented by figure 3, based on improved G3
guidelines that were released in October 2006 replacing G2 guidelines introduced in
Johannesburg 2002, while the first version was issued in 2000.
12
Linstock Consultants and Imagination. Added Values? Meauring the «Value Relevance» of Sustainability
Reporting, London, February 2004, Section 1: Case studies and discussion.
13
White, L.A. New Wine, New Bottles: the Rise of Non-Financial Reporting, A Business Brief by Business for
Social Responsibility, June 20, 2005, p. 3.
14
Gray, R. Environmental Reporting And Accounting, Subsequent version forthcoming as Chapter 7 in The
Institute of Environmental Management and Assessment Handbook, London: Earthscan. www.standrews.ac.uk/~csearweb/researchresources/dps-socenv.html
8
Figure 3
Source: GRI Portal – Reporting Framework, 18.08.08.
The framework consists of:
- Guidelines as the core element for reporting of all organizations of any size, sector, or location.
Part 1 comprises reporting principles and guidance on setting the report boundary to determine
the range of entities supposed to be included in the report. Part 2 includes the three different
types of Standard Disclosures – measures to express strategic approach on how the organization
impacts sustainability and vice versa, management contents on how the organization manages
sustainability to achieve the results, as well as economic, environmental and social performance
results (Profile, Management Approach and Performance Indicators).
- Protocols which comprise key terms in the indicator, compilation methodologies,
indicator’s scope, and other technical references.
- Sector Supplements which complement the use of the Guidelines considering particularities
in sustainability reporting by different sectors. For example, Tour Operators’ Sector
Supplement was developed to be used together with the GRI 2002 Sustainability Reporting
Guidelines (November 2002), applying only to businesses organising holiday packages, as a
part of a tourism industry.
- National Annexes will be designed to meet the particularities in sustainability reporting of a
given country or region addressing the cultural differences, local policies and regulations
differences, etc.
9
In comparison to G2, G3 guidelines are more process oriented, the prinicples are
classified into principles for defining reporting content (materiality, stakeholder inclusiveness,
sustainability context, and completeness) and principles for ensuring reporting quality
(balance, comparability, accuracy, timeliness, reliability, and clarity). Each principle is
associated with short definition, detailed explanation of its importance and the check-list of
questions on the certain principle presence in planning and decision making process. Also,
there are improvements in the part «Standard Disclosures». G2 presented the economic,
environmental and social indicators as a group of questions on policies, procedures and results
for each aspect, while G3 elaborates each aspect through «Management approach» and
«Performance indicators».15
«At the moment, North America, Europe, and Japan appear to have the largest number
of reporters, and there has been only limited reporting from emerging economies.»16
Among the countries accepting G3 guidelines, Croatia is also at the list, although with
only few companies that entirely or partially implement them in their reports.
3.2. G3 Guidelines Implementation in Croatia
Non-financial reporting in Croatia is in its infancy, but there are evident some positive
movements.
Croatia has adopted Management and Audit Scheme - EMAS (EU Regulation
761/2001) referred to ISO 14001, intended to be voluntary implemented in companies willing
to announce their ecological performances, that would be in force once when Croatia enters
the EU. According to World Resource Institute data, there were 8 certified ISO 14000
companies in Croatia in 2000, comparing to 2 companies in 1997.
Croatian Business Council for Sustainable Development (HR BCSD), acting within
the World Business Council for Sustainable Development - WBCSD's Global Network and
founded in 1997 by leading Croatian businesses, has a very important role in sustainable
development in Croatia and related reporting (on their website they clearly state: «Ecoefficiency, social responsibility and stakeholders' dialogue are the main business tools for
sustainable development.»).
Priopćenje za medije - Predstavljanje G3 smjernica za izvještavanje o održivosti, Globalne inicijative za
izvještavanje, (Press Announcement of GRI's G3 Guidelines on Sustainability reporting), HR BCSD, March 6,
2007.
16
Gilbert, S. The Transparency Evolution, Environmental Forum, November/December 2002, pp 19-26., p. 26.
15
10
So far, at their workshops, they tried to improve the management of sludge from the
galvanisation process, the recovery of packaging glass, the implementation of environmental
laws and regulations, the obligatory delivery of environmental data and information from
business,
the
resources
and
energy
management
and
waste
management
in
tourism, they have also led the campaign for change of taxation on municipal waste based on
surface and have organized regional business gatherings among economies in transition.
HR BCSD has been trying to introduce GRI's Sustainability Reporting Guidelines to
Croatian companies and to motivate them to prepare the standardized structure of nonfinancial reports. According to HR BCSD, there are three most important reasons for GRI
guidelines implementtion in Croatia:
1. This is the global standard on sustainability reporting based on 10-year experiences in
more than 1000 organizations of all sizes and types all round the world.
2. GRI framework is harmonized with other reporting standards, particularly with UN
Global Compact. GRI operationalisation is among the goals of ISO 26000 standard
for social responsibility.
3. GRI framework presents the best of efforts in reaching the global consensus of all the
shareholders – business community, civil society and public sector – about
measurement and recording the influences of business and other organizations on
sustainability.
According to HR BCSD «Priopćenje za medije (press announcement) - GR3
Briefing», Zagreb, March 2007, GRI Guidelines in Croatia have been implemented by Pliva,
Podravka, ZABA, INA, Coca Cola Beverages Hrvatska and partially, by Holcim. Podravka
was a single company in the sector of food industry located in the region of South-East,
Middle and East Europe that met GRI criteria and joint to the eminent «club» of ten best
reporters on sustainability for the year 2006. Podravka is a member of WBCSD, World
Business Forum, and one of the establishers of HR BCSD.
HR BCSD invites all the Croatian companies to announce their sustainability reports
on their website (www.hrpsor.hr) and so far (August 2008), the following companies' reports
can be found there: Coca Cola Beverages HR - Sustainability Report, Hartmann Hrvatska Sustainability Report, Hauska & Partner - Corporate Responsibility Report, HEP Environmental Protection Reports, Holcim - Sustainable Development Report, INA - Social
Report, Environment Protection Report, Dukat (Lura) - Annual Report on Environments,
11
Končar - Social Responsibility Report, Pliva - Sustainable Development Report, Podravka Sustainable Development Report, Petrokemija Kutina - Environmental Protection Annual
Report, ZABA - Social Report. It is noticeable the change of report's titles. Also in the world,
environmental reports began to be produced in early 1990s, gradually broadened by social and
financial components to «sustainability reports» a decade (and a half) after, although the label
«sustainability report» is according to Gray, R., misconcepted and mostly used unproperly, as
it was previously explained.
Currently, on the GRI's (web)list of G3 reporters, there is also (although undeclared)
Corporate Social Responsibility Report for 2007, issued by Croatian company Končar
Electrical Industry, Inc.
Evidently, considering the type of industries of Croatian reporters, world's trends are
followed: «Besides financial companies, other sectors which report less than average are trade
and retail, services, and communications and media. Higher than average score chemicals and
pharmaceuticals, computers and electronics, autos, utilities, oil and gas, and food and
beverages.»17 In accordance with these observations, the companies in tourism industry
(belonging to services sector) are not among the previously listed reporters in Croatia.
4. Environmental Accounting Developments
Global warming and ecological accidents are well-known threatens, the manhood has
been facing with every day. Although the manhood had started producing such an situation a
long time ago, … «it is usual to plot modern social accounting from the 1970s. Social
accounting (which, until fairly recently, was generally assumed to embrace environmental
accounting) attracted considerable and widespread attention during the early to mid-1970s.»18,
furthermore, «the roots of corporate sustainability reporting in its current form date to 1989,
when the Coalition for Environmentally Responsible Economics released the Valdez
Principles — a 10-point code of conduct that included a commitment to reporting on
outcomes of implementation. Environmental reporting, the precursor to sustainability
reporting, began in earnest in the early 1990s as part of the search for tools for enhanced
Kolk, A. (2004) ‘A decade of sustainability reporting: developments and significance’, Int. J. Environment
and Sustainable Development, Vol. 3, No. 1, pp.51–64., p. 53.
18
Gray, R. Current Developments and Trends in Social and Environmental Auditing, Reporting & Attestation: a
Personal Perspective, International Journal of Auditing 4(3) November 2000, pp. 247-268.
17
12
accountability.»19 There are interesting overviews of environmental and social accounting
developments in Gray, R.'s valuable contributions and leading thoughts. 20
«Environmental and sustainable development reports not only serve a communicative
role, they are also symbolic and serve as a key device in the marketplace for green images and
environmental legitimacy. …The very act of providing environmental and sustainable
development reports has the potential to change behaviour. The process of reporting and
contributing to a broader discourse should serve to change management strategies and
information systems and in turn lead to changes in management philosophy and practices
(Dierkes & Antal, 1985). Similarly, the act of providing such reports makes them a social
expectation; a social expectation that an expedient might not have engaged in during the early
1990s but must engage in now.»21
Environmentally driven innovation creates shareholder value by lowering costs,
improving the process of service delivery, finding new markets, enhancing the overall
competetiveness, leading to new products meeting customers needs.22 Cost and revenues
related to resources use and waste generation are important data for potential investors, as
well as the assessments of future competitive advantages. «A report by the Rose Foundation
for Communities and the Environment states that inadequate disclosure of environmental
liabilities hampers the ability of investors to assess future earnings growth and shareholder
value (Goodman, Kron, and Little, 2002, p. 14).»23 Graham, A. and Maher, J. has proved how
external environmental liabilities estimates influence a firm’s bond ratings (over and above
the one provided by environmental accruals in financial statements) and bond yields,
following previously discovered relations between external environmental cost estimates and
19
Gilbert, S. The Transparency Evolution, Environmental Forum, November/December 2002, pp 19-26., p. 21.
Gray, R. Social And Environmental Accounting And Reporting: From Ridicule To Revolution? From Hope
To Hubris? – A Personal Review Of The Field - translated by Massimo Contrafatto - Il Social and
Environmental Accounting and Reporting: da speranza a sfida? Un’opinione personale sul tema, in: Rusconi,
G. and Dorigatti, M., (eds). Modelli di Rendicontazione Etico-Sociale e Applicazioni Pratiche, Vol.3, 2005,
pp.113-131.; Gray, R. Taking a Long View on What We Now Know about Social and Environmental
Accountability and Reporting, www.st-andrews.ac.uk/~csearweb/researchresources/dps-socenv.htm. See also:
Owen, D. (2004). Adventures in Social and Environmental Accounting and Auditing Research: a Personal
Reflection, in: Humphrey, C. and Lee, B. (eds.), The Real Life Guide to Accounting Research, London: Elsevier,
pp. 23-36.
21
Buhr, N., Reiter, S. (2006). Ideology, the Environment and One World View: a Discourse Analysis of
Noranda's Environmental and Sustainable Development Reports, in: Freedman, M., Jaggi, B. (eds.),
Environmental Accounting: Commitment or Propaganda, Advances in Environmental Accounting &
Management, Vol. 3, Elsevier Ltd. pp. 1-48, p. 12 and p. 45.
22
Slater, A., Gilbert, S. The Evolution of Business Reporting: Make Room for Sustainability Disclosure,
Environmental Quality Management, Autumn 2004, p. 41.
23
Alciatore, M.L., Dee, C.C. (2006). Environmental Disclosures in the Oil and Gas Industry, in : Freedman, M.,
Jaggi, B. (eds.), Environmental Accounting: Commitment or Propaganda - Advances in Environmental
Accounting & Management, Vol. 3, Elsevier Ltd. pp. 49–75, p. 50.
20
13
equity firm value (Barth and McNichols, 1994; Blacconiere and Northcut, 1997; Campbell et
al., 1998).24
The World Resource Institute's studies applied a methodology of evaluation of how
environmentally related uncertainties could be translated in financial terms. WRI work
showed that individual companies have different risk and exposure levels to environmental
changes and that none of 29 explored companies had included data on environmental issues in
their financial/annual reports, while 6 of them have provided only qualitative information.25
Environmental accounting has found its way to financial reports through
environmental cost accounting techniques development, through the networks (EMANEcological Monitoring and Assessment Network) and accounting bodies that have developed
guidance on environmental accounting.26 But, disclosures under financial reporting haven't
meet the goal to assess the sustainability performance, so some voluntary frameworks for
sustainable disclosure became necessary. Despite of improvements, there would always be
some sustainability data that cannot be transformed into financial outputs. Some companies
prepare separate documents that enable cross-referencing, and some try to prepare a single
annual report including financial and sustainability disclosures. According to GRI survey
(2003) on 112 organizations, 60% of them believed combined reporting (linked and/or crossreferenced) could be performed. «The challenge for market institutions (such as stock
exchanges and standards bodies) is to develop a structure for business reporting that enables
existing financial reporting systems to work in a synergistic manner with other disclosures –
some of which may be in the form of financial figures and others that will not.»27
Undoubtedly, environmental reporting has been gradually spreading to wider extents,
but there is still substantial number of companies that don't recognize benefits as prevailing
over costs of environmental reporting. So, there's a number of studies trying to link some
companies' features with their environmental disclosures as well as with their real
environmental performances to better understand environmental reporting practices. Some of
the studies confirmed relation between environmental performance and disclosures
24
Graham, A., Maher, J.J. (2006). Environmental Liabilities, Bond Ratings and Bond Yields in: Freedman, M.,
Jaggi, B. (eds.), Environmental Accounting: Commitment or Propaganda, Advances in Environmental
Accounting & Management, Vol. 3, Elsevier Ltd. pp. 111-142.
25
Austin, D., Sauer, A. (2002). Changing oil: Emerging Environmental Risks and Shareholder Value in the Oil
and Gas Industry. Washington, DC: World Resource Institute; Repetto, R., Austin, D. (2000). Pure profit:
Financial Implication of Environmental Performance. Washington, DC: World Resource Institute.
26
Slater, A., Gilbert, S. The Evolution of Business Reporting: Make Room for Sustainability Disclosure,
Environmental Quality Management, Autumn 2004, p. 44.
27
Slater, A., Gilbert, S. The Evolution of Business Reporting: Make Room for Sustainability Disclosure,
Environmental Quality Management, Autumn 2004, p. 47.
14
(Freedman, Jaggi and Stagliano, 2004; Patten, 2002; Hughes, Anderson and Golden, 2001;
Bewley and Li, 2000; Al-Tuwaijri et al., 2004; Stanny, 1998; Cormier and Magnan, 1997; Li,
Richardson and Thornton, 1997), while the others found no relation (Walden and Stagliano,
2004; Freedman and Stagliano, 1995; Freedman and Wasley, 1990; Wiseman, 1982; Ingram
and Frazier, 1980). Also, some studies found environmental disclosures positively related to
company's size (Walden and Stagliano, 2004; Warsame, Neu and Simmons, 2002; Alnajjar,
2000; Neu, Warsame and Pe-dwell, 1998), regulatory influence (Barth, McNichols and
Wilson, 1997; Stanny, 1998), and public policy pressure (Patten, 2000; Bewley and Li, 2000;
Walden and Schwartz, 1997).28 Alciatore and Dee's (2006) research performed on the sample
of US oil and gas companies confirmed positive significant relation between environmental
disclosures and size as well as leverage. It has also showed that different firms had different
levels of legitimacy to maintain which was tested during the explored period 1989-1998,
confirming O'Donovan (2002) results. Karim, K.E., Lacina, M.J. and Rutledge, R.W. (2006)
have found negative relation between environmental disclosures in footnotes and foreign
concentration as well as earnings volatility and they have also found the influence of industry
type (less disclosures in electronics versus chemical and petroleum industry), based on
previous researches which explored the relation between environmental disclosures and
amount of ownership by large institutional stockholders (Diamond and Verrecchia, 1991; Kim
and Verrechia, 1994; Choi, 1999; Healy, Hutton and Palepu, 1999; Cormier and Magnan,
2003), foreign concentration (Li et all, 1997), profitability (Lang and Lundholm, 1993;
Bowman and Haire, 1975; Preston, 1978; Neu, Warsame and Pedwell, 1998; Cormier and
Magnan, 1999; Richardson and Welker, 2001; Diamond, 1985; King, Pownall and Waymire,
1990; Cowen, Ferreri and Parker, 1987; Patten, 1991; Cormier and Gordon, 2001), earnings
volatility (Yhim, Karim and Rutledge, 2003), leverage (Buhr and Ray, 1991; Cormier and
Magnan, 1999), future debting (Healy and Palepu, 2001; Reinstein, Ellis and Wierda, 1998),
size (Choi, 1999; Cormier and Magnan, 1999; Alnajjar, 2000; Bewley and Li, 2000; Cormier,
Gordon and Magnan, 2004), and industry type (Li et al., 1997, Bewley and Li, 2000).29
28
Alciatore, M.L., Dee, C.C. (2006). Environmental Disclosures in the Oil and Gas Industry, in: Freedman, M.,
Jaggi, B. (eds.), Environmental Accounting: Commitment or Propaganda - Advances in Environmental
Accounting & Management, Vol. 3, Elsevier Ltd., p. 59.
29
Karim, K.E., Lacina, M.J. and Rutledge, R.W. (2006). The Associationa between Firm Characteristics and the
Level of Environmental Disclosure in Financial Statement Footnotes, in: Freedman, M., Jaggi, B. (eds.),
Environmental Accounting: Commitment or Propaganda - Advances in Environmental Accounting &
Management, Vol. 3, Elsevier Ltd., pp. 77-109.
15
Some authors point out that environmental disclosures in financial reports are still
considered to be mostly voluntary, fragmentary and ad hoc.30 Also, disclosures are more often
presented in the footnotes than in the body of financial reports. So, in order to improve such a
situation, Swanson, G.A. (2006) offers an interesting discussion on possibilities of systems
sciences ideas implementation in the environmental accounting developments. According to
Swanson, those ideas are the evidence that economies emerge in environmental processes and
are «fed» by them, so it is obvious that those processes should be disclosed in public financial
reports.
5. Environmental Accounting – the Agent of Sustainability in Istrian
Tourism
Development
5.1. Sustainable Development of Highly Touristic Region of Istria
Tourism is a consumer of natural environments, historic buildings, urban spaces and
local culture, which are facing the danger of being abandoned if the destinations become
overcrowded and overdeveloped.31
According to the CoastLearn programme (EUCC project),32 sustainable tourism is an
industry that involves social responsibility, a strong commitment to nature and the integration
of local people in any tourist operation or development. In order to achieve continuous and
sustainable development of tourism, three interrelated aspects should be taken into
consideration: economic, social, and environmental (cf. infra figure 4).
WTO researches (2005) prove that a great number of tourism visitors (almost 87% of
German and 65% of UK tourists) are interested in destinations and trips that are involved in
sustainable development concept. Almost 42% of German tourists insisted on eco-friendly
relations in the hotel of staying, and 19% of them preferred chatalogues with eco standards.
Furthermore, it is important to note that since economic valuation of benefit is based on the
30
Swanson, G.A. (2006). A Systems View of the Environment of Environmental Accounting, in: Freedman, M.,
Jaggi, B. (eds.), Environmental Accounting: Commitment or Propaganda, Advances in Environmental
Accounting & Management, Vol. 3, Elsevier Ltd., p. 171.
31
Dumont, E., Ruelle, C. and Teller, J. (2005). Multi-dimensional Matrix Gathering of Impacts, Methods and
Policy Measures; PICTURE (Pro-active management of the Impact of Cultural Tourism upon Urban Resources
and Economies). http://www.culture-routes.lu/picture/IMG/pdf/152_long_en.pdf
32
CoastLearn, a Distance-Training Programme for Accession Countries, the New Independent States (NIS) and
the Mediterranean, funded by the EU. The overall aim of the programme is to promote integrated planning and
management of coastal resources and consequently sustainable development along the coast (Perez, 2006).
16
concept of willingness to pay, the shaded area measures people’s ‘preferences’ for changes in
the state of their environment (Pearce, 1993).33
The Mediterranean is the world’s number one tourist destination.34 Traditionally, in
the market segmentation of the Mediterranean region, leader position belongs to Spain
(40,8%), then Italy, (30%) Greece (11,8%) and Croatia (3,8%). In the last 10 years Croatia
became popular Mediterranean destination, promoting the sustainable development concept.
Croatia has 8.658.876 foreign tourism visits and 47.021.944 tourism nights 35, from above
mentioned, considering emitive markets, German tourists make 18% and Italian 14%.
In the Istrian tourism structure, hotels are the dominant strategy with the largest
number of units. Large hotels in Istria take a part of 11472 rooms desposible on the market,
while 6% (676 rooms) belong to small and family hotels.
Table 2. Structure of Istrian County Tourism Sector
ISTRIAN COUNTY
Subjects
Number of units
Hotels
84
13449
Aparthotels
1
176
Apartments
19
1983
T. Villages
18
7119
Source: Croatian Ministry of Tourism (data -18.08.2008.)
Number of beds
26118
391
5716
14959
According to the Istrian Tourism Association (cf. table 3), the highest percentage of
investments is in the category of large hotel companies and new projects (23,89%, 37,58%).
Table 3. Tourism Investments in Istria
Subject
(private and public sector)
Investments
(in 000 kn)
Share (%)
New projects
1.036.000,0
37,58
Large hotels
658.600,0
23,89
Towns and counties
395.200,0
14,33
MSE
355.200,0
12,88
restaurateurs
200.000,0
7,25
Private apartments
50.000,0
1,81
Tourist Association
37.000,0
1,34
Agrotourism and rural tourism
25.000,0
0,91
33
What this suggests is that when economists attempt to measure the benefits from improved environmental
quality, they are measuring not the value of the environment but the preferences of people for an environmental
good or environmental bad. (Hussen, A., 2004. Principles of Environmental Economics, second edition, London
& N.Y.: Routledge, p. 146.)
34
It is expected that the number of Mediterranean visitors will increase to 655 million by the year 2025.
35
of the total sum of 10,384,921 tourism visits, and about 53,006,946 tourism nights in Croatia, www.hgk.hr –
economic profite: tourism figures for Croatia 2006.
17
Total:
2.757.000,0
100,00
Source: Preparation for Tourist Season in Istria, January-August 2007. Istrian County, Department of Tourism,
Poreč, February 2008.
There’s a question arising: In what ways touristic companies in Istria contribute to the
sustainable development of the local community, considering threats to sustainability in the
long-term?
Because of the dynamics and growth of the sector, tourism gives major contribution to
the Croatian economy and local destinations. Tourism revenues in Croatia cover about 64% of
the balance payment deficit.36 On the other hand, we have to be aware of the fact that, for
example, the estimated carrying capacity is not fixed. That means that Croatian tourism sector
does not determine the maximum number of tourists in the regional destinations (cf. The
Example of Curring Capacity Assessment, in Jurinčič: 2005 – Slovenian case study)37.
Istria is a small Croatian county largely influenced by tourism and there is a risk of
loosing destinations’ values if replaced by the new one in the future. There, pressures are
much greater and impacts are immediately felt.38 In the literature many writers recognise that
an integrated approach to environmentally compatible tourism planning leads to conflict
minimisation (Rose, 1984).39 According to Torkildsen40 the planner's objective (of leisure
planning) is to provide: the right facilities, the best location, the right time and people at
acceptable costs. Istrian tourism region is successfully implementing the Ten Year Plan’s
tourism development bringing the new image and identity in a new and sustainable way. This
document looks at the process of developing a tourism strategy that embraces sustainability
and identifies some of the strategic choices that need to be made.
The main feature of the Croatian/Istrian tourism development is enviromentally
sustainable form in the rural, central part of Istria (cf. Šergo, Z. Bošković, D. i Z. Tomčić
1998;
Ilić, 2002)41. There are a number of articles and studies for rural sustainable
36
Tourism share in the Croatian BDP (period of the last nine months) is 22%.
Jurinčić, I. (2005). Carring Capacity Assessment of Slovene Istria for Tourism, WIT Transactions on Ecologies
and the Environment, Vol. 84. p.724-733.
38
Orbasli, A. (2000). Tourists in Historic Towns- Urban Conservation and Heritage Management: London and
New York: E & FN Spon.
39
Rose E.A. (1984). Philosophy and purpose in planning in Bruton, M.J. (ed.) The spirit and purpose of planning,
London, Hutchinson, p. 31-36. Jurinčić, I. (2005).
40
Torkildsen, G. (1993). Leisure and recreation management, Spon.
41
Šergo, Z. Bošković, D. i Z. Tomčić (1998). Restrukturiranje i prilagodba turističke ponude Istre novim
trendovima u europskom turizmu, Europski sistem ekonomske Unije i prilagodba Republike Hrvatske, Pančić
Kobol, T. (ur.). Opatija: Hotelijerski fakultet Opatija, p. 9-21.
37
18
development of Istria but with no research results concerned of hotel tourism development
(according to the sustainable tourism indicators and tourism trends).
Tourism is an activity which involves a special relationship between consumers
(visitors), the industry, the environment and local communities.42 Figure 4 presents positive
and negative effects in linkages between tourism and sustainable development.
Figure 4. Linkages Between Tourism and Sustainable Development
* + indicates positive influence (i.e. improvement),
- indicates a negative influence (i.e. deterioration, exacerbation).
Source: Markandya, A., Taylor, T. and Pedroso, S. (2005). Tourism and Sustainable Development: Lessons from
recent World Bank Experience, in: Lanza, A., Markandya, A., Pigliaru, F. (eds.), The Economic of Tourism and
Sustainable Development, FEEM Series on Economics and the Environment, Edward Elgar, p. 226.
In Croatian/Istrian case of the environmental sustainabily, it is necessary to develop
the network of cooperation and interdependencies that will include tourism and, probably
most important, universities, institutes and agencies. Substantial efforts are made by institute
and university in Istria as an initial step forward to the hotels in the County.43
42
Making Tourism More Sustainable, A Guide for Policy Makers, UNEP & WTO, 2005, p. 9.
Cf. Krbec, D. et al. (2007 – 2009). Održivi turizam u Hrvatskoj: izrada akcijskog plana održivosti turizma Istre,
Bošković, D. et al, (2007-2010). Valorizacija selektivnih oblika turizma u održivom razvoju ruralnih prostora.
(http://zprojekti.mzos.hr), okusistre.hr
43
19
Responsible tourism is an approach to tourism that delivers benefits to tourists, host
populations and government.44 Obviously, tourism takes other forms of development but still
has a long way to go before it can claim to be sustainable.45
According to Manning E.W.46 building block for sustainable tourism means:
A) Long term sustainability by the tourism sector and the resource base on which it
depends;
B) Modification of the decision processes affecting the development and management of
tourism resources;
C) Practical and strategical solutions;
D) Identification and evaluation of problems;
E) Analysis of key factors;
F) Basic information and data.
But still, there are a number of possible barriers to the sustainable tourism along with
the types of questions one would ask tourism management – which may only benefit form
indicators as part of monitoring programs. Frequently tourism managers and administrators
are overwhelmed with data about tourism operations. For this reason, it may be unable to
discern which trends are relevant to the management of sustainable tourism operations. There
are many instances in which members or sectors are trying to avoid negative effects on the
environment.47 So, the indicators should be based on clear information, practical to obtain,
current, and for sure, understandable for users. Also, good sustainable indicators in tourism
sector must present changes over time and between destinations.
Specific indicators of sustainability prescribed by WTO in the form of specific
measures48 for every destination and stakeholders in Croatian tourism are still not recognized.
Besides introducing those specific indicators, Istrian/Croatian touristic companies should
developed the integral system of environmental accounting based on relevant, feasible,
credible, clear and comparable information to serve in function of sustainable development.
44
Author's conclusion according to Demunter, C. (2008) Are recent evolutions in tourism compatibile with
sustainable development?, Statistics in focus, European Communities, Eurostat, No. 1.
45
Conrady, R. and Buck, M. (2007). Trends and Issues in Global Tourism, Springer: Germany; Douglas, N. et al.
(2001). Special tourism interest, Wiley & Sons, Ltd.
46
http://www.tourisk.org/content/projects/downloads.htm (2004)
47
What Tourism Managers Need to Know, A practical guide to the development and use of Indicators of
Sustainable tourism, WTO, 1996, Madrid, Spain, and Guide for Local Authorities on Developing Sustainable
Tourism, WTO,1998.
48
Site Protection, Stress, Use Intensity, Social Impact, Development Control, Waste Management, Planning
Process, Critical Ecosystems, Consumer Satisfaction, Local Satisfaction. According to Making Tourism More
Sustainable, A Guide for Policy Makers, UNEP (United Nations Environment programme), WTO, 2005.
20
5.2. Environmental Accounting Developments in Istrian Tourism Industry –
the
Implementation of GRI Guidelines
Trying to assess the environmental accounting developments in Istrian tourism
industry, we've started the research in summer 2008, that is still in progress. We've sent the
questionnaires to the most important companies at Istrian touristic market to fill them up
anonimously. The research has included 8 tourist companies in the County that cover
aproximatively 94% of the regional touristic market. As we previously mentioned, others are
in the form of family and small hotels. Four hotel companies have returned the questionnaire,
which achive almost 86% of the total number of employees in all hotel companies in the
County. Total revenues calculate for 1.929.284.511 kn in the total Croatian hotels revenue of
5.112.844.031 (realised in the six Croatian counties)49. According to the above-mentioned, the
sample can be considered as representative.
The questionary was addressed to the accounting departments. It consisted of generaltype questions on company's size, ownership, individual or conoslidated financial reports,
then followed a group of questions about past and current experiences in environmental
reporting of a given company, and, finally there was a group of questions on its development
plans.
Here we present the results relating to three large tourist companies and one middlesized company, according to Croatian Accounting Act criteria. The middle-sized company
was mostly in foreign ownership and prepared only individual financial statements. One large
company with dominantly domestic ownership prepared indivudial financial statements and
two large companies (one with mostly domestic, the other with foreign ownership) prepared
also consolidated financial statements.
None of the examined companies has ever reported in any form the environmentrelated information, except the large one in the foreign ownership which has presented them
at the conference on ecology and tourism in 2007. There's a good news that all of the
examinees will include environmental disclosures in their annual reports for the year 2008
except one large company. This is expected in accordance with the new Accounting Act
which requires such disclosures if they are necessary for assessment of the enterprise's
development, business results and its position.
49
Croatian National Statistical Board & Institute for Tourism - year 2006.
21
We were interested if any of examinees implements GRI Guidelines, at least partially,
since we didn’t find any of touristic companies at the HR BCSD list of GRI reporters. The
answers received were all negative. Still, there are some encouraging developments expected
in the near future since all the examined companies, except one large, plan to adopt the GRI
Guidelines soon. The middle-sized company has stated its intention to introduce the GRI
Guidelines in the period of 2 years covering its environmental, as well as economic and social
performances. Among the environmental performance indicators it plans to introduce the
following ones:
EN 1 Materials used by weight or volume.
EN 3 Direct energy consumption by primary energy source.
EN 8 Total water withdrawal by source.
EN 14 Strategies, current actions, and future plans for managing impacts on biodiversity.
EN 21 Total water discharge by quality and destination.
EN 27 Percentage of products sold and their packaging materials that are reclaimed by
category.
EN 28 Monetary value of significant fines and total number of non-monetary sanctions for
non-compliance with environmental laws and regulations.
EN 29 Significant environmental impacts of transporting products and other goods and
materials used for the organization’s operations, and transporting members of the workforce.
EN 30 Total environmental protection expenditures and investments by type.
One large company with dominantly domestic ownership also plans to introduce the
GRI Guidelines in the next 2 years including its economic and environmental performances,
with following environmental performance indicators for the start:
EN 3 Direct energy consumption by primary energy source.
EN 5 Energy saved due to conservation and efficiency improvements.
EN 16 Total direct and indirect greenhouse gas emissions by weight.
EN 20 NOx, SOx, and other significant air emissions by type and weight.
EN 21 Total water discharge by quality and destination.
EN 22 Total weight of waste by type and disposal method.
Also, another large company with foreign ownership has also been planning to
introduce the following environmental indicators:
EN 3 Direct energy consumption by primary energy source.
EN 5 Energy saved due to conservation and efficiency improvements.
EN 6 Initiatives to provide energy-efficient or renewable energy-based products and services,
and reductions in energy requirements as a result of these initiatives.
EN 10 Percentage and total volume of water recycled and reused.
EN 19 Emissions of ozone-depleting substances by weight.
22
EN 20 NOx, SOx, and other significant air emissions by type and weight.
EN 21 Total water discharge by quality and destination.
EN 22 Total weight of waste by type and disposal method.
EN 24 Weight of transported, imported, exported, or treated waste deemed hazardous under
the terms of the Basel Convention Annex I, II, III, and VIII, and percentage of transported
waste shipped internationally.
EN 30 Total environmental protection expenditures and investments by type.
As it is evident, the research results were not satisfying indicating that the
environmental accounting in Istrian tourism is really in its infancy. We can assume that the
entities trying to report have problems with data availability, complexity of environmental
impacts measurements, related costs, information reliability and confidentiality, as well as
with reluctancy to report because of uncertainties and potential environmental liabilities that
could arise. Tourism, as part of the services sector, as it is previously stated, reports its
environmental performances in average less than other industries like oil, gas, chemical, etc.
On the other hand, based on all previous researches and world’s common ecological threats,
as well as many environmental reporting benefits and feasibilities, environmental disclosures
are enavitable – there could be only differences in velocity of their adopting and development.
That’s why we have found some shy, but positive movements among Istrian touristic
companies considering intentions of GRI adoption in the near future, despite of presently
undeveloped practices in this field. As we can notice, they’ve chosen different environmental
performance indicators to start with, depending on their business peculiarities as well as their
disposable capacities, while EN 3 and EN 21 on direct energy consumption by source, and
water discharge by quality and destination were selected by all future GRI reporters.
Although it is usually expected that large companies would be more interested in
environmental accounting developments due to better capacities and community impacts, the
middle sized company has given us pretty similar answers like the large ones intending to
introduce the environmental disclosures. Two of the future reporters had foreign ownership
and one had domestic ownership. Probably the environmental reporting practice would enter
in Istrian tourism, mostly through the companies with foreign ownership that already had
some experiences trying to be “imported” also in Croatian businesses. That’s also the case at
the European and world’s stage where multinational enterprises spread this practice through
their whole supply chains including also the SMEs.
Considering the results integrally, we have to admit that the level of environmental
reporting in Istrian tourism industry is very low, but the good news is that the leading touristic
companies have intention to introduce environmental disclosures in accordance with GRI
23
Guidelines in the following 2 years. We are looking forward not only to find these leaders
included at some (inter)national environmental reporters list, but we expect them to contribute
to the growing awareness of environmental issues by introducing and broadening “the
culture” of environmental disclosure practices in Istrian tourism industry as one of the tools
towards its sustainable development goals accomplishment.
In addition to environmental reporting in tourism industry at micro-economic level,
similar developments are necessary also at the macro-economic level. In order to catch up the
interrelationships of tourism and natural environment in the process of sustainability strategy
implementation, the satellite account for tourism is necessary. The accounting framework
offered by internationally agreed Tourism Satellite Account – Recommended Methodological
Framework (TSARMF), and Integrated Environmental and Economic Accounts 2003
(SEEA2003), as well as European System of Environmental Pressure Indices (ESEPI) should
be another sets of guidelines to be followed.
50
This should be considered as an indication for
further research in tourism sustainable development tracking at the regional and national
level, since the macro-economic environmental reporting aspects are out of the scope of this
paper, but are also of high importance as a support for the integral sustainability strategies
implementation at micro and macro economic level.
6. Final Thoughts and Perspectives
Previously presented results were derived among the leading touristic companies
in Istria since we perceived they would have more expertise and resources for environmental
reporting in comparison with smaller entities. But, we disagree that the smaller ones should be
exempted. The SMEs present 99% of total business entities in Croatia, and are considered to
be its «growth engine», so they are also expected to contribute to sustainable growth and
development. According to OECD, there are more than 100 millions businesses worldwide
falling in the group of SMEs, approximately employing less than 200 employees. It is also in
the interest of multinational companies to encourage SMEs that function as their suppliers to
adopt environmental/social reporting practices, producing in such a way mutual positive
effects for both sides and their stakeholders. In 2007, GRI received 80 new reports from
SMEs. «Even if just a small percentage of SMEs work to manage their impacts, they can
50
See more in: Costantino, C., Tudini, A. (2005). How to Develop an Accounting Framework for Ecologically
Sustainable Tourism in Lanza, A., Markandya, A., Pigliaru, F. (eds.), The Economic of Tourism and Sustainable
Development, FEEM Series on Economics and the Environment, Edward Elgar, pp. 104-172.
24
make a considerable positive contribution to a more sustainable world.»51 This also definitely
stands for Croatian SMEs, too.
Here we come to a question arising if GRI's Sustainability Reporting Guidelines (or
some other environmental/sustainability guidelines/standards set) will become mandatory for
all the entities, or the group of certain entities, or for noone. Furthermore, compliance with
regulation should also be considered in relation to the level of its enforcement. «Currently
there is not a global consensus on the issues of regulation, not even between the business
community or within civil society». 52 Government regulation of environmental reporting
emerged in late 1990s (e.g. Netherlands in
1997 for listed companies, adopting GRI
framework in 2003, France for 2002 listed companies' reports). In Croatia, there are many
regulations on environment protection and waste management while environmental/social
reporting is voluntary, but the new Accounting Act, introduced in January 2008, requires the
large and medium enterprises to prepare the annual report that should include also the
environmental and social aspects if they are necessary for assessment of the enterprise's
development, business results and its position. Companies that are members of WBCSD, like
Podravka, are obliged to prepare the sustainability reports.
There are some opinions that «Laws can prescribe technological solutions, but do little
to foster fluid systems that learn and adapt to change and maximize efficiencies. By
definition, it is impossible to legislate requirements to go beyond compliance.»53 Croatia is a
country in transition that has inherited the practice of high regulation level in all the fields of
socio-economic life, from the previous system. With so many rules to be followed, there is
very little time and capacities left, as well as there's even a lack of good will to do anything on
the voluntary basis in addition to mandatory requirements, of course with rare exceptions.
Therefore, the two-tyre system that makes differentiation between mandatory and voluntary
environmental/social disclosures, could be one possible solution. The first could be applied to
the largest polluters according to the industry type or to the industries that significantly
contribute to national GDP growth, such as tourism industry, while the latter could be adopted
by the companies that have recognized the benefits of environmental reporting, on their own,
without any enforcement. Although, it was previously stated that «we are all in the same
boat» and accordingly, everyone is expected to provide environmental disclosures, this twotyre system could be the transitional solution for early phasis of environmental accounting
51
Plugge, L., Miles Hill, K. Sustainability Reporting in the Supply Chain. Ethisphere 01/08, 045.
Henderson, J. Perfect Timing - Australia and G3, Reform Issue 87, 2005/06, p. 43.
53
Gilbert, S. The Transparency Evolution, Environmental Forum, November/December 2002, pp 19-26., p. 21.
52
25
development in Croatia. Otherwise, it would hardly increase to broader extents and would
probably be limited only to leading businesses.
All these previously said, stands also for the tourism industry. Istrian county is among
the most developed Croatian's counties and it is expected that awareness of environmental
reporting and other sustainability performance disclosures' benefits would produce new
reporters earlier than in many other Croatian's regions. Although there are still no GRI
reporters found among the examinees, it is encouraging that they plan to adopt GRI
Guidelines in the period in average about 2 years long. That would be even easier once when
tourism sector supplements will be developed by GRI, in additon to those so far developed
only for tour-operators. Such developments are expected particularly because of potential mostly foreign investors that have been widely occupying Croatian tourism and whole
economy in the recent period and that could better assess companies' performance using the
valuable sources of non-financial in additon to pure financial information. In other words,
hopefully, in accordance to sustainability reporting expectations:
“1. investors and analysts will begin to have access to comparable information,
2. companies will begin to better understand their environmental impacts and make
improvements in both performance and reporting,
3. as GRI-based reporting becomes the industry standard, reporting with consistent
metrics will begin to spread through business sectors and supply chains.”54
It is recommended also by GRI to prepare enviromental/social reports annualy or at
least biannually and integration with financial reporting is encouraged to enable better linkage
between financial performance and environmental (also economic and social) performance,
although alone reports as well as combined with financial ones are wellcomed. GRI
guidelines are suitable not only for experienced reporters, but also for the beginners, what
makes them feasible for many Istrian touristic companies as well as other Croatian so far notreporting enterprises. They could be adopted gradually, by focusing at the most important and
feasible topics at the beginnings and then extending the reporting contents over time,
progressing in such a way through three application levels that should always clearly be
declared for a given report. In order to assure the credibility of the environmental/social
report, external verification (by independent competent body or GRI itself) in addtion to
internal control is recommended. AccountAbility's AA1000 Assurance Standard launched in
54
Slater, A., Gilbert, S. The Evolution of Business Reporting: Make Room for Sustainability Disclosure,
Environmental Quality Management, Autumn 2004, p. 48.
26
2003 complements and enhances GRI guidelines and could also be applied to other
standardized or company-specific approaches to disclosure providing a systematic and
consistent framework for non-financial auditing and assurance of performance.55Actually, the
accounting profession has been already developing standards in this area like IFAC's ISAE
(International Standard on Assurance Engagements) 3000, effective after January 1, 2005,
that establishes basic principles and essential procedures for all assurance engagements other
than audits or reviews of historical financial information covered by ISAs and ISREs, for
example, assurance engagements regarding environmental, social and sustainability reports.56
Finally, although the GRI guidelines seems to be another complex project for their
potential implementators in Istrian tourism, they present less problem than building the
environmental – sustainability awareness itself. First, the entities are supposed to be aware of
the problem and then implement the reporting guidelines to support solving the problem.
Transparency and accountability increased by GRI guidelines implementation, may improve
the relations with company stakeholders, facilitate trust between a given company, its
consumers and suppliers, as well as investors, enabling better access to capital sources,
enhace the brand value of the company, its reputation, but also, internally, environmental
reporting is an efficient management tool, particularly for environmental costs management,
cost-saving measures in a short-term, it also builds employees’ morale and taken all together,
it helps to enhance company’s abilities of risk avoidance, contributing to the increase of the
long-term shareholder value. From the other point of view, growing the «culture» of regular,
high-quality environmental reporting could also contribute to strenghtening of the image of
Istria as the touristic destination.
In short: «Non-financial reporting will succeed not because of specific indicators,
measurement techniques, formatting or communication strategies. Instead, it will succeed
because it offers stakeholders what financial reporting alone fails to offer: a window on the
character and competency of the reporting company.»57 Moreover, during all the efforts
invested in environmental and social accounting development, one Gray R.'s thought should
be remembered: «Social and environmental accounting is a profound challenge to current
forms of accounting and finance - it is neither an addendum nor a refinement of GAAP. If it
ever becomes such a redundant appendage to capitalism, we can almost certainly kiss the
55
http://www.accountability21.net/publications.aspx?id=288, 23.08.08.
www.ifac.org/IAASB/ProjectHistory.php?ProjID=0008, 23.08.08.
57
White, L.A. New Wine, New Bottles: the Rise of Non-Financial Reporting, A Business Brief by Business for
Social Responsibility, June 20, 2005, p. 5.
56
27
future of sustainability and, thus, the future of our societies goodbye.»58 Hopefully, the
touristic companies of Istria will recognize both messages.
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