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On 12 December, the Parliament adopted the ESG Act, a law on the rules of corporate social responsibility (CSR) that takes into account environmental and social aspects to promote sustainable financing and unified corporate responsibility. The ESG Act serves to transpose the EU Corporate Sustainability Directive into Hungarian law by introducing a number of new rules as well as amending existing rules. Some of the new rules came into effect on 1 January 2024.
ESG is a set of criteria for assessing environmental, social and governance impacts in order to plan, measure, report and monitor the sustainable and responsible operation of companies.
The Act aims to ensure that companies’ activities are transparent and accountable not only from a financial but also from a sustainability perspective. To this end, companies will be required to disclose information on the sustainability risks they face, their impact on people and the environment, and the status and direction of their corporate responsibility.
The ESG Act will be mandatory for the following companies established in Hungary:
From 1 January 2024
(The first publication of ESG accounts applying to 2025) Large companies of public interest whose balance sheet total, annual net turnover or number of employees exceeds certain thresholds on ** their balance sheet date of the previous financial year, and for whom at least two of the following are true:
From 1 January 2025
(First publication of ESG accounts: in 2026) Large enterprises whose balance sheet total, annual net turnover or number of employees exceeds certain thresholds**on the balance sheet date of the previous financial year, and for whom at least two of the following are true:
From 1 January 2026
(First publication of ESG accounts: in 2027) Publicly-relevant small and medium-sized enterprises irrespective of balance sheet total, annual net turnover or number of employees
Businesses will be required to carry out sustainability due diligence both on their own activities and on those in their supply chain. This will include the requirement to:
Companies must produce an annual ESG report on the fulfillment of their ESG obligations for the previous financial year, which they must make publicly available on their website, free of charge, within 6 months of the end of the financial year.
The ESG report must include:
Companies should have their ESG reporting audited by a registered ESG certifier. If the ESG certifier finds the ESG report satisfactory, an ESG certificate is issued to the company.
The compliance of companies with their ESG due diligence obligations will be monitored by the Supervisory Authority for Regulated Services, who will keep a register of companies subject to ESG reporting requirements and the ESG reports they prepare.
The Authority will have the right to carry out an official inspection to verify compliance with ESG obligations, which may result in a fine in case of non-compliance, or a certificate of compliance in the event of verification. The details of the sanction regime are currently being worked out.
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