5 MARTINDALE CENTER FOR THE STUDY OF PRIVATE ENTERPRISE Institutional fragmentation and the enforcement gap A central driver of this gap is the fragmentation of environmental governance across multiple institutions. Responsibilities for environmental protection, agricultural management, and resource use are divided across ministries with overlapping mandates, for instance, the Ministry of Agriculture, Forestry and Fisheries and the Ministry of Environmental Protection and Green Transition. This multi-actor structure has expanded participation among stakeholders, but the coordination of many parties has introduced challenges regarding accountability, transparency, and capacity, as it diffuses responsibility for outcomes. These weaknesses are reflected in public perception: In 2023, 96% of Croatians perceived corruption as a major national issue (Eurobarometer, 2023), reinforcing distrust of the institutions responsible for environmental management. In practice, no single institution holds full accountability for implementation of the EU environmental framework, a weakness of forest governance under the EU Timber Regulation. Although Croatia has formally aligned with the EU, assessments reveal deficiencies in transparency, limited compliance checks, and weak sanctioning mechanisms. As of 2021, the country had yet to adopt documentation that effectively enforces the prohibition of illegal logging, with researchers unclear as to whether anyone had ever paid a fine for this misdemeanor. In fact, Hvatske šume, the state-owned enterprise in charge of managing all public forests, has been repeatedly linked to large-scale deforestation and remains dominant in the timber market (Radosavljević et al., 2021). Similarly, Croatia’s implementation of the EU Environmental Impact Assessment Directive suffers from limited public access to information and weak sanctioning and oversight, according to an assessment by the European Network of Environmental Law Organizations (Justice and Environment, 2023). These institutional gaps extend across multiple sectors. Following EU accession, most protected areas became privately owned, granting individual landowners and organizations, rather than government officials, the primary responsibility for managing land and complying with EU environmental standards (Kay, 2014). Croatian farmers already struggled with insufficient infrastructure, lack of funding, and labor shortages. Now, they must not only farm sustainably but also conduct ecological monitoring, manage land to support biodiversity, and submit complex EU environmental reports to qualify for subsidies (Boromisa et al., 2024). For many, notably small-scale producers, these obligations introduce significant administrative and financial burdens, often without sufficient technical support (Pečurlić et al., 2025). Ultimately, environmental compliance becomes procedure-based rather than a tool for improved sustainability. Stakeholders meet requirements to access subsidies and avoid penalties, but lack of coordination and enforcement ultimately stalls progress. Fragmented governance thus leads to uneven policy implementation, inefficient monitoring, and unclear accountability. Innovation and capacity constraints Beyond governance challenges, Croatia’s ability to implement EU frameworks is limited by structural weaknesses in innovation and economic capacity. Croatia’s global rankings have improved recently; at the same time, they reveal fundamental weaknesses: a lack of innovation and low business sophistication. The Global Innovation Index indicates a modest rise from 44th place in 2023 to 40th in 2025, with the country remaining in the lower half of global rankings, scoring lowest in market and business sophistication, highlighting ongoing structural challenges (World Intellectual Property Organization, 2025). The national government had adopted advanced EU frameworks, Natura 2000 and the Tourism Act, but the domestic economy, in particular agriculture and tourism, lacks collaborative networks, knowledge-intensive employment, formal training, research and development, and intellectual property generation (World Intellectual…, 2025). In addition to these innovation gaps, Croatia suffers from significant regional inequalities that continue to widen despite government efforts. Coastal regions experience acute overtourism, with unemployment under 8%; at the same time, inland regions face stagnation and depopulation, with unemployment reaching 15% in 2024 (Croatian Bureau of Statistics, 2026). This divergence leads to an inefficient use of resources, abandonment of rural areas, and a poor quality of life in less developed areas (Denona Bogović & Sverko, 2020). These disparities have direct implications for environmental management. Rural and inland regions, where Croatia’s protected land is concentrated, lack the human capital and governmental capacity for sustainable land management. Coastal regions receive a disproportionate share of resources as they deal with tourism pressures, leaving inland regions under-resourced. Without addressing the regional divide by
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