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.

What is its purpose?

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.

Which companies are affected?

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:

1. the balance sheet total exceeded HUF 10 billion
2. the annual net turnover exceeded HUF 20 billion
3. the average number of employees in the financial year exceeded 500

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:

1. the balance sheet total exceeded HUF 10 billion
2. the annual net turnover exceeded HUF 20 billion
3. the average number of employees in the financial year exceeded 250

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

What obligations will businesses have?

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:

• develop an ESG strategy,
• establish an ESG risk management system,
• conduct a regular ESG risk analysis,
• establish preventive and corrective ESG measures within the business,
• the actors in their supply chain,
• establish preventive and corrective ESG measures for direct suppliers in their supply chain,
• have their indirect suppliers declared in relation to the ESG risks they face,
• prepare, validate and publish ESG reports.

What is ESG reporting?

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:

• a description of the due diligence process for sustainability purposes,
• whether the company has identified any ESG risks or breaches of ESG obligations,
• the measures taken by the company to prevent, mitigate or remediate adverse sustainability impacts and the results of those measures,
• its conclusions for future actions.

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.

Who will verify compliance with ESG law?

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.