Sustainability and Obligations: Everything You Need to Know!

Commitment to sustainability is no longer just an ethical choice but also a regulatory requirement for companies. Under the provisions of Act C of 2000 (Accounting Act), many businesses are now required to prepare audited sustainability reports as part of their business reports. Central Audit Ltd. is ready to assist our clients with the audit and certification of sustainability reports.

Who Is Subject to the Reporting Obligation?

Starting January 1, 2024, large companies already subject to the NFRD (Non-Financial Reporting Directive) must prepare sustainability reports. These include public-interest entities with more than 500 employees and meeting two of the following criteria for the previous two consecutive financial years:

• Total assets exceed HUF 10,000 million,
• Revenue exceeds HUF 20,000 million,
• Average annual number of employees exceeds 250.

From January 1, 2025, the obligation will extend to all large companies that meet two of the following criteria for the previous two consecutive financial years:

• Total assets of at least HUF 10,000 million,
• Revenue of at least HUF 20,000 million,
• 250 employees.

From January 1, 2026, all publicly listed companies must report, except micro-enterprises meeting the following thresholds:

• Total assets of HUF 150 million,
• Revenue of HUF 300 million,
• 10 employees.

(For newly established companies without a predecessor, expected data for the current year should be considered.)

Subsidiary Exemptions in Sustainability Reporting: When Can They Apply?

Under specific conditions, subsidiaries may be exempt from the obligation to prepare standalone sustainability reports.

The general rule, as per Section 95/E (1)–(11), is that the exemption applies if the EU-based parent company prepares a consolidated sustainability report in accordance with European Sustainability Reporting Standards (ESRS), incorporating the data of its subsidiaries.

The exemption does not apply if the subsidiary qualifies as a large, publicly listed company in the EU.

What Should the Business Report of an Exempted Subsidiary Contain?

1. The name and registered office of the parent company preparing the group-level sustainability report.
2. References (internet links) to the parent company’s consolidated report and related assurance opinion.
3. A clear statement of the exemption, included in a separate section of the business report.

Disclosure and Format

• The parent company’s report must be published in at least one official EU language.
• The business report must be published in XHTML format, according to Article 3 of the ESEF Regulation.
• The report must be deposited and published online along with the annual accounts.
• If the company has no website, the report must be available free of charge upon request, in printed or electronic format.

Special rules apply to subsidiaries belonging to groups with parent companies outside the EU.

Why Choose Central Audit?

The experienced team at Central Audit helps clients navigate ESG regulations and ensures the highest level of credibility for sustainability reports. Whether it’s consulting, reporting, or auditing, Central Audit is your trusted partner in ensuring your company meets legal and market expectations for sustainability.
Choose Central Audit to ensure your company aligns with both regulatory and market demands for sustainability.