Questions about greenhouse gas emissions, the existence of external certifications, or even workplace turnover have been received in large numbers by Hungarian, typically supplier SMEs from their multinational customers. This was particularly the case in the automotive industry and other industries with complex supply chains. And the wide and often changing range of questions and data required is a major challenge for these businesses.
In rapid response to this problem and the expected direction of EU legislation, the so-called ESG law has been in force since this year. As part of this, the largest companies in Hungary will be required to produce a detailed report on their sustainability efforts, while their entire supply chain, potentially thousands of domestic SMEs, will be screened. This screening, however, is no longer done arbitrarily, but according to pre-defined questions.
Customers therefore expect and now require ESG reporting from their suppliers based on a common set of questions.
From next year, financing banks will also expect this, based on the recommendation on corporate lending issued by Magyar Nemzeti Bank at the end of September. Under the Recommendation, from 1 July 2025, financial institutions will be required to include ESG considerations and questionnaire-based information in their risk assessment when lending to corporates, based on a minimum set of questions. Initially for new corporate lending above HUF 500 million, gradually decreasing to HUF 100 million by 2028. In other words, ESG reporting obligations will affect more and more businesses, including a significant number of SMEs, when applying for loans. Several state-subsidised schemes, such as the Széchenyi Investment Loan MAX+, now offer smaller businesses the opportunity to borrow more than HUF 100 million.
A significant motivating factor is that the buyer and the financier expect sustainability transformation, not to mention the regulator. And rightly so, as the shift to a more sustainable business model has tangible benefits, including more energy efficient operations, higher employee satisfaction and a better business reputation. When it comes to customer expectations,
nearly 80% of respondents to a recent Századvég survey of the general public said that companies bear the greatest responsibility for taking action for our future.
Despite the clear public expectation, the increasing customer and financing demands for sustainability and the comprehensive national legislation,
less than half (46.8%) of the companies surveyed were aware of the ESG reporting obligation, and this proportion is only 70% for large companies.
In other words, there seems to be a significant need for corporate knowledge development, whether it is a clarification of general basic concepts or specific training focused on specific sub-topics.
Corporate knowledge building is therefore essential for the successful implementation of ESG legislation and recommendations.
Almost 94% of businesses surveyed said it was essential to have sufficient time and support to adapt to the new rules. The survey also shows that while financial support is the most important help for micro and small enterprises, technical support and specific training are the most important for medium and large enterprises.
