The Hungarian Ministry of National Economy published a bill to amend the ESG Act on 21 March 2025, simultaneously launching a public debate on the proposal. According to the official justification, the amendment aims to optimise the ESG reporting framework for sustainability aspects of Hungarian enterprises, to further strengthen the competitiveness of enterprises and to reduce the reporting and administrative burden on enterprises.
The simplification package of the European Union can be seen as a precursor to the proposed amendment to the Hungarian ESG Act. According to the EU Competitiveness Compass published on 29 January 2025, the Commission will deliver an unprecedented simplification effort. To ensure sustained and measurable efforts over the years ahead, the Commission has set ambitious quantified targets for reducing reporting burden: at least 25% for all companies and at least 35% for SMEs. Further to this, the EU Competitiveness Compass states that the 25% and 35% burden reduction targets should, in the future, refer to the costs of all administrative burdens, and not only reporting requirements.
Although the Hungarian ESG Act is not directly derived from EU legislation, in line with the Commission’s objective, the Hungarian ESG Act also needed to be amended to ensure the competitiveness of enterprises in Hungary. Based on the proposal, large companies covered by the ESG Act will be given an additional period of two years to prepare their first audited ESG report, while Hungarian micro, small and medium-sized enterprises will be fully exempted from all ESG data provision under the ESG Act until mid-2027 and will only be required to complete a significantly shortened questionnaire thereafter. Based on the given additional two-year preparation period, large companies covered by the ESG Act would have to publish their first ESG report in 2028. Another significant change is that the corrective measures that enterprises have to take in certain cases would be mitigated.
Most of the amendments would enter into force on the third day after publication of the final act. However, the content of the proposal may change as a result of the opinions received during the public debate, which lasted until 29 March 2025, so it is worth monitoring the progress.
By Tamas Zsiros, Associate, KCG Partners Law Firm
