The elephant is an element included to one level of the Desert Island called Lights, Camel, Action. The elephant is used for Croc to ride on in order to reach certain platforms in the level. It makes a loud trumpeting sound and seem to be frightened of Croc when he jumps on its back. It runs around in a mud pit that would hurt Croc if he touched it, but, like the hippos in Croc 2, it doesn't seem to harm them.
It is possible that the game designers originally planned to use a camel at first, seeing that the creature was in the level's title.