Sustainability reports
You can read below Sustainability reports published by the Forvis Mazars Office.
ESG and Sustainability Report- compliance with regulations applicable from 2024
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ESG and Sustainability Report
Sustainability has become increasingly important in recent years. Environmentally conscious and sustainable operations and corporate governance, as well as social responsibility, are no longer just an ethical issue but are also relevant to business performance. Forvis Mazars helps companies develop their sustainability strategies, from planning through implementation to reporting.
The ESG Act, which came into force in January 2024, introduces, on the one hand, a duty of sustainability due diligence on the part of companies, the management of environmental and social risks, and the obligation to report regularly (ESG Report); on the other hand, it also amends the Accounting Act by introducing a separate chapter requiring a certain group of companies to prepare audited Sustainability Reports.
Although the two sets of regulations have much in common – both having their origins largely in the sustainability directives of the European Union – the two systems of rules and the reporting requirements they impose differ in a number of ways.
What are the provisions of the ESG Act?
Companies subject to Act CVIII of 2023 (ESG Act) are required to conduct sustainability due diligence and prepare an audited ESG Report.
Sustainability due diligence obligations include the following elements
a, Developing a risk management system,
b, Developing an internal responsibility strategy and system,
c, Conducting regular risk analyses,
d, Taking preventive and corrective action at the company’s own discretion and against its direct suppliers,
e, Compliance with ESG (Environmental, Social, Governance) data reporting obligations,
f, Notifying direct suppliers of any risks that may arise.
It is clear from the above that the ESG Act imposes obligations not only on companies, but also on other entities involved in business relationships, for example, on those who are direct suppliers to a company subject to ESG obligations. These suppliers must declare in a statement that they comply with the human rights and environmental standards expected by the company and that they manage them appropriately along their supply chain. Refusal to cooperate on ESG issues may result in suspension or mandatory termination of the business relationship.
Rules on ESG Reporting
In addition, the companies concerned are required to prepare an ESG Report, audited by an ESG certification body, on the fulfillment of their sustainability due diligence obligations for the previous fiscal year and to make the report freely and publicly available on their website within six months of the end of the fiscal year.
The ESG Report will be audited by accredited ESG certification bodies.
The ESG Report must be prepared in Hungarian in electronic form and certified by the person authorized to represent the company or the parent company, as required by law. The detailed requirements for the content of the ESG Report will be set out in a separate decree by the Supervisory Authority of Regulatory Affairs (SZTFH).
Which companies are affected by the new ESG Act and from when?
ESG Reporting of public-interest large undertakings:
Hungarian large undertakings of public-interest*, to which this applies from the fiscal year 2024, are now required by the Act to disclose appropriate sustainability information. The undertakings concerned are those that met at least two of the following three criteria in the previous fiscal year:
- the balance sheet total exceeded HUF 10,000 million,
- annual net sales revenues exceeded HUF 20,000 million,
- the average number of employees exceeded 500.
ESG Reporting of large undertakings:
For the first time from fiscal year 2025, the Act also applies to large undertakings that met at least two of the following three criteria as of the balance sheet date of the previous fiscal year:
- the balance sheet total exceeded HUF 10,000 million,
- annual net sales revenues exceeded HUF 20,000 million,
- the average number of employees reached or exceeded 250.
ESG Reporting of public-interest SMEs:
The scope of the Act also includes small and medium-sized enterprises of public-interest*, which will be required to comply from the year 2026. These companies must disclose public information on the sustainability risks and opportunities they encounter. These enterprises must demonstrate how sustainability issues affect the performance, position, and development of the business, as well as the impact on people and the environment.
*In this context, undertakings or entities of public-interest typically mean publicly traded companies. (The scope of the ESG Act does not include companies and entities engaged in banking, insurance, or investment services).
Block exemption rules, non-EU groups of companies:
With respect to sustainability due diligence and ESG Reporting, the Act does not provide any exemptions for Hungarian subsidiaries with an EU-based parent company, nor does it contain separate provisions for members of non-EU-based groups.
What are the provisions of the Accounting Act regarding sustainability reporting requirements?
Companies subject to Act C of 2000 (Accounting Act) must prepare an audited Sustainability Report as part of their annual report.
Main rules for Sustainability Reporting
The report must include information on the sustainability-related aspects of the company's business model and strategy and its implementation, including the risks and impacts on stakeholders and the corporate value chain.
The report should be prepared in accordance with the European Sustainability Reporting Standards (ESRS).
The report must be audited by a certified sustainability auditor who is a member of the Hungarian Chamber of Auditors. The audit of the report may be carried out by the auditor appointed to audit the annual report or by another auditor. Where the auditor is the same, the opinion on the Sustainability Report may be included in the independent auditor’s report attached to the annual report.
Which companies are affected by the Sustainability Reporting rules and from when?
Sustainability reporting obligation of large undertakings of public-interest:
Beginning in fiscal year 2024, reporting obligations will apply to those companies that are considered entities of public-interest** and in the individual or consolidated accounts of which
a, in the two consecutive fiscal years preceding the fiscal year, at the balance sheet date, any two of the following three indicators exceeded the following limits:
- the balance sheet total exceeded HUF 10,000 million,
- annual net sales revenues exceeded HUF 20,000 million,
- the average number of employees in the fiscal year exceeded 250, and
b) in the fiscal year concerned, the average number of employees in the fiscal year exceeds 500.
Sustainability reporting obligation of large undertakings:
From the 2025 fiscal year, the Act also applies to large undertakings that met at least two of the following three criteria in the individual or consolidated accounts in the two consecutive fiscal years preceding the fiscal year, as of the balance sheet date:
- the balance sheet total exceeded HUF 10,000 million,
- annual net sales revenues exceeded HUF 20,000 million,
- the average number of employees reached or exceeded 250.
Sustainability reporting obligation of SMEs of public-interest:
The scope of the Act also includes small and medium-sized enterprises of public-interest** (except for micro-enterprises), which will be required to prepare a Sustainability Report from the year 2026.
Reporting obligations of non-EU-based groups of companies:
The Act also contains additional rules on the reporting obligations of ultimate parent entities that are not subject to the laws of an EU Member State and their EU-based subsidiaries.
**Entities of public-interest are typically publicly traded companies, as well as companies and entities engaged in banking, insurance, and investment services.
Group exemption rules, non-EU groups of companies:
An important rule is that subsidiaries whose EU-based parent company includes the subsidiary and its subsidiaries in its consolidated Sustainability Report prepared in accordance with the sustainability reporting standards are exempted from the requirement to prepare a separate Sustainability Report. If the exemption is applied, the consolidated annual report or, where appropriate, the consolidated Sustainability Report of the parent company of the exempted subsidiary must be published in at least one official language of the European Union.
Subsidiaries that are members of a non-EU-based group are subject to separate rules.
How can Forvis Mazars help in compiling the Sustainability Report?
We can assist our clients in learning about and preparing for the new requirements, as well as in preparing or certifying the report. During a personalized consultation, our experts will help you assess what obligations you have and with what time limits, and how you can comply with these obligations.
Preparing and assurance of the report
Companies today are increasingly focusing on non-financial reporting in response to new regulations and growing stakeholder demands. These reports help companies showcase their sustainability achievements and engage stakeholders. To comply with ESG laws, assurance is also gaining more emphasis in order to increase the credibility of the given organization’s reports. In this area, Forvis Mazars offers auditing services, including the assurance of corporate responsibility reports and green and social bonds, as well as the verification of carbon emission reports.
Strategy and due diligence
The Forvis Mazars team provides assistance in developing and integrating sustainability strategies while taking into account the individual needs of each company. The aim of the sustainability strategy is to integrate economic, environmental, and social objectives into the business plan, creating long-term value for the organization, its stakeholders, and society.
Implementation and transformation
Forvis Mazars helps make sustainability a part of your business plans, reducing risk and creating new opportunities for value creation. The company aims to help companies integrate sustainability, including stakeholder engagement and the development of a new corporate culture. The services of our sustainability team include assessing corporate culture, developing a stakeholder engagement strategy, sustainability communications, management effectiveness reviews, and establishing and monitoring anti-corruption schemes.
Sustainable finances
Taking into account the leadership and governance challenges in sustainability and ESG issues, particular attention must be paid to ensuring that business decisions and strategies are aligned with sustainability goals.
Frequently asked questions concerning ESG and Sustainability Reports
What are the two reporting obligations adopted in Hungary and what is their purpose?
Companies subject to the ESG Act are required to conduct sustainability due diligence and to prepare an ESG Report, which is verified during an assurance by an accredited ESG certification body that issues an ESG certificate in case of compliance.
Companies subject to the Accounting Act are required to prepare an audited Sustainability Report as part of their annual report.
Which companies are affected by the ESG Act and when do they have to report?
Both the ESG Act and the Sustainability Report will apply to large undertakings of public-interest from the 2024 fiscal year, while other large undertakings, as well as small and medium-sized enterprises, will have to prepare Sustainability Reports in the following years.
Who does the Sustainability Report apply to, and what indicators should be considered?
In the first stage, the reporting obligation applies to public-interest large undertakings, taking into consideration the balance sheet total, annual net sales revenues, and the average number of employees. After that, however, large undertakings and SMEs of public-interest will also be affected.
What are the Authority’s responsibilities in relation to the ESG Report?
The Authority’s responsibilities include monitoring company obligations, ensuring the transparency of ESG data reporting processes, and accrediting ESG consultants. Most of the Act will enter into force in 2024.
What are the consequences of failing to disclose the ESG or Sustainability Report?
Companies subject to the reporting obligations will face the sanctions set out in the Accounting Act and the ESG Act if they fail to prepare and disclose their reports. In the case of the Sustainability Report, the general rules of the Accounting Act on default shall apply, i.e. the National Tax and Customs Administration (Nemzeti Adó- és Vámhivatal, NAV) controls and imposes sanctions. In the case of the obligations set out in the ESG Act and the ESG Report, the Supervisory Authority of Regulatory Affairs (Szabályozott Tevékenységek Felügyeleti Hatósága, SZTFH) shall have the right to control and impose sanctions.
What should companies include in their ESG and Sustainability Reports?
The companies concerned are required to prepare an ESG Report on the fulfillment of their sustainability due diligence obligations for the previous fiscal year, which shall be made available on their website.
The Sustainability Report must include information on the sustainability-related aspects of the company’s business model and strategy and its implementation, including the risks and impacts on stakeholders and the corporate value chain.
When and why is it important to publish the ESG and Sustainability Reports?
Companies are required to publish their ESG Reports on their websites within six months of the end of the fiscal year, thus increasing their transparency and credibility.
The Sustainability Report must be disclosed as part of the company’s annual report, at the same time and in the same way.
How do the new ESG regulations help companies address ESG and sustainability issues and in preparing Sustainability and ESG Reports?
Both the ESG Act and the Sustainability Report contain rules as to what kind of sustainability due diligence and related measures companies should implement. The detailed rules will be set out in separate legislation.
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Sustainability insights
Please find below our latest sustainability related insights.
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Our sustainability experts around the globe deliver expertise to support businesses on their sustainability journey, whether they are at the beginning or already tackling complex ESG challenges. Visit our blog for insights on how to embed ESG in your business strategy, implement sustainable changes, or navigate sustainability reporting and assurance regulations.
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Bagyura Andras Director, Business Development, Sustainability Budapest
