2025 marks the first occasion of mandatory ESG disclosure due in Hungary, with an extensive list of obligations for the companies concerned. Although the requirement was only decreed recently, some companies had already noticed the advantages of focusing on these matters and, therefore, the disadvantages of disregarding them; they are further down (or more familiar with) the route all must travel.
“At the time of the first KPMG CEO Outlook survey in 2015, CEOs ranked environmental risk as the least important risk factor. By 2024, almost a quarter (24%) said that if they did not meet ESG requirements, competitors who did could be at an advantage. They ranked this risk ahead of threats to their own tenure (21%) and recruitment challenges (16%),” Julianna Nagy, senior manager of ESG and Sustainability Services at KPMG, tells the Budapest Business Journal.
She adds that “76% of [executives say they] would be willing to divest a profitable part of the business that damages [ESG] reputation, while 68% say they would take a stand on a politically or socially controversial issue even if the board had concerns about it.”
“Until now, voluntary reporting defined the market dynamics,” agrees Ákos Lukács, EY partner of Climate Change and Sustainability Services. “Mostly self-motivated companies progressed in the field of sustainability, allocating resources to projects and actions,” he says. However, with ESG disclosure now mandated, he describes 2025 as the “final phase in big efforts of disclosure [for public interest companies].”
Lukács adds: “This year also brings the second wave of companies into an active preparatory stage for reporting, which results in organizations changing focus and the necessity to determine new resource allocation. ESG has become the norm for bigger companies, [and] their ESG performance will determine their access to financial capital as well as influence public appreciation,” he notes.
Those companies preparing to publish their ESG disclosures are faced with a meticulous, time-consuming project, according to Anita Sávoly-Hatta, partner responsible for ESG reporting at PwC Hungary.
“In the coming weeks, not only consultants but also auditors will have a major task, as these reports will be audited for the first time,” she says.
“Preparing for this has mobilized significant resources in audit firms. Hundreds of hours of classroom and e-learning training, the development of work programs tailored to the audit of non-financial information, the ongoing interpretation of the European Sustainability Reporting Standards (ESRS), the organization of sustainability auditor certification and a large number of professional consultations have been undertaken to prepare for this task,” she explains.
“Compared to last year, there has been a noticeable shift towards more specialized ESG roles within organizations,” says Réka Szücs, the director of sustainability and climate services at Deloitte Hungary, of the pressure of publishing an ESG disclosure.
“The current trends are evolving rapidly, reflecting the growing importance of sustainability and ethical practices in the corporate world. The significant trend remains the increasing emphasis on compliance and reporting,” she says.
“Companies are increasingly dedicating resources to ESG departments or managers who possess subject matter expertise. This change highlights the growing recognition of ESG as a critical component of business strategy and risk management,” Szücs adds.
Sávoly-Hatta reflects on some of the concerns of market players, explaining, “Everyone in the market feels that compliance with EU ESG directives is extremely resource intensive. Perhaps this is why some EU member states are hesitant and delaying the implementation of the CSRD [Corporate Sustainability Reporting Directive] in their member states.”
As a result, “the European Commission announced at the end of 2024 that it intends to reduce the administrative and reporting burden for companies, starting with an ‘Omnibus Package.’ [It] aims to simplify and harmonize the three existing ESG regulations: the CSRD, the Corporate Sustainability Due Diligence Directive (CSDDD) and the EU taxonomy,” she adds.
Regarding global political influences on ESG in Hungary, there is a “general expectation that the second Trump presidency may bring significant shifts in U.S. ESG policies,” according to Szücs. Nagy adds, “Hungarian ESG statement are complementary disclosures focusing on complementary areas.”
Lukács expects that “any matters from the U.S. will be directed to the EU, and through that to Hungary,” without any direct impact. “Luckily, the majority of large corporations already on their sustainability journey will hardly lower their commitments to action,” he predicts.
“ESG has reached a point where it’s a question of compliance, requiring dedicated resources with subject matter expertise,” concludes Szücs.
“Currently, ESG functions aim to ensure compliance with reporting and other disclosure obligations and thematic correspondence with their business partners and investors. As the ESG function is mainly governed by the performance of regulatory obligations, its future is highly connected to the regulatory changes, which we are expecting to occur, and market response to the growing availability of ESG data,” she adds,
It is important to note that the reporting criteria for ESG vary from the broader range of criteria of the earlier introduced Corporate Sustainability Reporting Directive.
“CSRD reporting and the Hungarian ESG statement are complementary disclosures focusing on complementary areas. CSRD reporting primarily highlights the company’s own sustainability performance, while the ESG statement focuses on suppliers and its supply chain. CSRD reporting is defined by the European Union’s Corporate Sustainability Reporting Directive, [while] the ESG statement is defined by the Hungarian ESG Act,” Lukács explains.
According to ACT Legal Hungary, the primary obligations of companies publishing their ESG statements this year are to describe the organization’s sustainability due diligence process, the social and environmental risks they’ve identified and measures the company has taken to offset these issues. The ESG disclosures must be uploaded to predefined data platforms.
This article was first published in the Budapest Business Journal print issue of January 24, 2025.
Producing journalism that is worthy of the name is a costly business. For over 30 years, the publishers, editors and reporters of the Budapest Business Journal have striven to bring you business news that works, information that you can trust, that is factual, accurate and presented without fear or favor.Newspaper organizations across the globe have struggled to find a business model that allows them to continue to excel, without compromising their ability to perform. Most recently, some have experimented with the idea of involving their most important stakeholders, their readers.
We would like to offer that same opportunity to our readers. We would like to invite you to help us deliver the quality business journalism you require. Hit our Support the BBJ button and you can choose the how much and how often you send us your contributions.
