Sustainability reporting versus ESG reporting
In Hungary, sustainability compliance is currently twofold - on the one hand, Act C of 2000 on Accounting regulates sustainability reporting, and Act CVIII of 2023 regulates ESG reporting. This means that companies have to comply with two different laws.
The relevant part here is the Accounting Act:
A company that, on the balance sheet date of any two - consecutive - financial years preceding the financial year, has any two of the following three indicators exceeding the following thresholds in the two - consecutive - financial years preceding the financial year:
(a) the balance sheet total is HUF 10 000 million,
(b) the annual net turnover is HUF 20 000 million,
(c) the average number of employees in the financial year is 250, the provisions of this Act relating to sustainability reporting laid down in Act No 2 of the Method 2 shall apply for the first time to the financial year starting in 2025.
Therefore, on the basis of the above, those who meet the two conditions for the years 2024 and 2023 are required to prepare a sustainability report.
The Accounting Act provides an additional exemption for those whose parent company in an EU Member State prepares a consolidated report and discloses it accordingly.
ESG Act:
23 Transitional Provisions Section 54 (1) The provisions on due diligence for sustainability purposes shall apply for the first time to (a) an enterprise within the meaning of Section 1(1)(a) for its activities in the financial year 2024 and its first ESG report in the year 2025; (b) an enterprise within the meaning of Section 1(1)(c) for its activities in the financial year 2025. § (1)(1)(b) shall apply it in respect of its activities in the financial year 2025 and shall prepare and publish itsfirst ESG report in the year 2026; (c) an undertaking within the meaning of Article 1(1)(c) shall apply it in respect of its activities in the financial year 2026 and shall prepare and publish its first ESG report in the year 2027.
Here point (b):
(b) a large enterprise for which any two of the following three indicators exceeded the following thresholds on the balance sheet date in the financial year preceding the financial year: ba) the balance sheet total exceeds HUF 10 000 million, bb) the annual net turnover exceeds HUF 20 000 million, bc) the average number of employees exceeds 250;
Based on the above, therefore, those who meet the two criteria in 2024 are required to prepare a sustainability report.
No consolidation exemption is available for ESG reporting, so compliance with this legislation may be different from compliance with sustainability reporting.