Turning point for croatian companies obliged to disclose non-financial reports: What do we know about reporting and communicating about climate change in Croatia?

Abstract

The business community has recognized climate change as one of the top global risks. However, the quality of managing of the communication and reporting about the issues related to climate change in the companies is insufficient and does not enable the investors and other stakeholders to make informed investment decisions and comprehensively assess the company’s climate impact. Hence, the EU has decided to implement additional legal measures to improve the quality of sustainability reports. The key objective of this paper is to provide information on these new legal requirements relevant to European companies in the preparation of climate-related disclosures, and to examine the current state of reporting on climate in Croatian companies. Previous research conducted in the EU has revealed that non-financial reports of large European companies lag behind in quality and scope when compared to the requirements set by the Non-Financial Reporting Directive. Correspondingly, the authors of this paper hypothesize that non-financial reporting practices in Croatia share the same weaknesses. To test the hypothesis, the authors conducted an anonymous survey, as well as an analytical review of non-financial reports. The overall results show that Croatian companies are not sufficiently familiar with the new legal obligations. Additionally, the key weaknesses of current approach to managing of the communication and reporting about climate have been identified: climate change is not perceived as significant as other business risks; companies are not applying the concept of “double materiality”; they are (still) not combining qualitative and quantitative information.