Hungary is preparing for a significant shift in corporate transparency with the introduction of its first mandatory ESG reports in 2025. Under the ESG Act, phased in from the start of 2024, large publicly listed enterprises must disclose their environmental, social, and governance (ESG) performance. This initiative aligns with Hungary’s broader carbon neutral strategy, reinforcing the country’s commitment to sustainable business practices and regulatory compliance. 

Corporate leaders increasingly recognize ESG compliance as a critical factor in maintaining a competitive edge. According to a KPMG survey, 24% of CEOs now see ESG as a key business risk, ranking it above concerns related to executive tenure or recruitment challenges. Additionally, 76% of executives are willing to divest profitable business segments if they negatively impact ESG performance, highlighting the growing importance of sustainability in corporate decision-making. 

Experts from EY and PwC emphasize that ESG reporting requires significant resource allocation, with companies restructuring their operations to meet compliance standards. As businesses adapt, audit firms are also mobilizing extensive resources to ensure accurate ESG assessments. Hundreds of hours of training, development of non-financial reporting work programs, and the interpretation of European Sustainability Reporting Standards (ESRS) are part of the rigorous preparation process. 

The transition to mandatory ESG reporting is not without challenges. Compliance with EU ESG directives has proven resource-intensive, prompting some EU member states to delay implementation. In response, the European Commission announced an “Omnibus Package” to streamline existing ESG regulations, including the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). These efforts aim to simplify compliance while maintaining the EU’s sustainability objectives. 

Despite potential political shifts, particularly in the U.S., Hungarian businesses are expected to stay committed to ESG goals. Experts predict that large corporations already on their sustainability journey will maintain their commitments, ensuring continued progress toward long-term environmental and social responsibility. 

Hungary’s ESG reporting framework operates alongside EU regulations but with a distinct focus. The CSRD emphasizes a company’s internal sustainability performance, whereas Hungary’s ESG statement places additional emphasis on supply chain due diligence and sustainability risk management. This dual approach ensures that businesses not only assess their own ESG impact but also account for the broader effects within their supply chains. 

Sources: 

https://bbj.hu/economy/statistics/analysis/hungarys-1st-mandatory-esg-reports-due-for-publication-in-2025/ 

https://www.wolftheiss.com/insights/esg-obligations-in-hungary-adapting-to-broadening-regulatory-demands/ 

https://insightplus.bakermckenzie.com/bm/environment-climate-change_1/hungary-long-term-competitiveness-with-sustainability