What is ESG?
The abbreviation “ESG” stands for “Environment, Social, Governance”, which represents the three main areas of sustainability. The ESG framework is designed to monitor sustainability, environmental, social and governance risks beyond financial risks in the operations of large companies.
In Hungary, Act CVIII of 2023 (commonly known as the ESG Act) and Act C of 2000 on Accounting (Accounting Act) contain the obligations that fall under the scope of ESG.
Who does ESG apply to?
The main rule is that ESG applies to large companies with at least two of the following criteria: a balance sheet total of HUF 10 billion, an annual net turnover of HUF 20 billion, and an average number of employees of 250 or more. Different rules apply to companies of public interest. ESG rules may also affect companies that are contractors or suppliers of large companies covered by the ESG, as ESG obliged companies must screen their suppliers against the specified sustainability criteria.
What is complaint handling under the ESG regulation?
As part of ESG compliance, the companies concerned must set up an internal or external complaints handling system through which anyone can report risks and breaches of social governance or environmental obligations.
The internal whistleblowing system under Law XXV of 2023 may also be used as a complaint handling system under the ESG Act.
The complaint handling system can be run by the business itself or by an external, independent service provider. If the undertaking opts for an internal complaints handling system, an employee or internal department must be designated to carry out this task and must not be instructed to do so. The operator of the internal complaint handling system shall handle the matters falling within its remit separately from other departments.
What can be the subject of a notification under the ESG regulation?
Through the complaint handling system of companies subject to ESG regulation, reports can be made regarding social responsibility and environmental risks, as well as violations related to social responsibility or environmental obligations.
Who can report sustainability issues for companies covered by ESG?
For companies that are subject to ESG regulation, anyone can report on social responsibility and environmental risks, as well as violations related to social responsibility or environmental protection obligations.