Introduction

Sustainable development is the biggest challenge of the society and it depends on establishing the balance between economic growth, the progress in the society and the concern for the environment. The impact that the companies have, as well as on the development of the society as a whole and on the environment, makes them one of the most responsible factors in creating future in the size of man. However, in order to meet all the challenges of the modern age, the responsibility of the socially responsible business management must be identified in all structures of the society.

Primary role of the companies, to create profit and wealth with their activities, is being complemented by the demands to integrate the principles of socially responsible business into their strategies. Integration of those principles is voluntary and it represents the striving of the companies to use their activities in expanding legal frames with regard to economic, social and environmental effect. In that way that companies constantly add more and more value to their products and services, using less resources, producing less waste and less pollution. In order for the companies to be able to achieve goals set, while integrating the principles of socially responsible business, it is vital that their efforts are supported by other institutions, on governmental, regional and global level.

Developed markets need to give out clear signals and recognize the price of the product and services in compliance to social, economic and environmental effect, the same as financial markets need to evaluate the companies not just by the profit they make, but also according to their investment into long-term sustainable development. Other institutions, primarily government institutions, but also NGO's and organizations at regional and global level need to encourage accpetance of the principles of socially sustainable business through cooperation with the business community.

Globally, the emphasis has been far too long given to the analyses of the existing situation and processes definition and it should be shifted to a more transparent measuring of the results individual companies contribute in the battle against violating social terms and against environment protection, which should lead to recognizing those companies that voluntarily invest thier efforts to satisfy the demands of sustainable development.

Taking into account GRI guidelines, Podravka has in the past year reported about its business in 2005. Experts from all segments of Podravka participated in creating this report. Their team work revealed some of the challenges that Podravka needs to face in the upcoming period. Some of those challenges were already replied and hopefully our stakeholders will recognize this in the 2006 Report in front of you, created while following new GRI guidelines.

The year behind us was marked with a restructuring process. WIth the3 purpose of rationalizing business, Podravka's companies in Poland were merged, production in Slovakia and Czech Republic was merged into production in Czech Republic, and sales operative divisions were merged in Croatia. The Management Board made the decision to continue with the outsourcing process of spinning off parts of the company that deal with non-basic activities, so green surface maintenance and office building cleaning services were outsourced. The process of spinnig off Koprivnička tiskarnica d. o. o. -Podravka owned press company - was also completed. The processes were conducted in a dialogue of the employees, unions and Workers's council, and funds for severance payments were insured for all of those wanting to leave for early retirement and for those wanting to leave Podravka. Such managing of the restructuring process proves that Podravka is committed to socially responsible business conduct.

A series of challenges awaits us in the upcoming period which we will try to answer by working in compliance to socially responsible business.

Always with a heart!

Management Board President (till july 2008.)

Darko Marinac