NO MERCY! ESG FINES MAY EXCEED EUR 125 000

NO MERCY! ESG FINES MAY EXCEED EUR 125 000

At the end of August, several laws and amendments related to Hungarian ESG regulations were published in the Hungarian Gazette. Some of the new legislation implements the June amendments to the ESG Act in lower-level implementing regulations, but the new legislation also includes the so-called ESG fine regulation, which authorizes the Supervisory Authority for Regulatory Affairs (SZTFH) to impose fines in the event of a violation of the ESG Act and related legislation.

Let's see what fines the SZTFH can impose under the ESG fine regulation!
According to the decree, fines can range from HUF 200,000 (approx. EUR 500) to 1% of the company's net sales revenue, but no more than HUF 50 million (approx. EUR 125 000), depending on the type of violation. In the event of multiple violations, the maximum fine that can be imposed is the sum of the maximum fines that can be imposed for each individual violation, meaning that the fines imposed by SZTFH may even exceed HUF 50 million. Under the ESG fine regulation, some fines may be imposed after September 6, 2025, while others will only become applicable after January 1, 2026.
Fines that may be imposed on companies subject to ESG compliance after September 6, 2025 are the following:

• The highest fine (1% of net sales revenue, but HUF 50 million at maximum) is related to the supplier due diligence process: a company must expect such a fine if it obtains information from a source not permitted by the ESG Act (e.g. from micro and small enterprises until July 2027) or in a form and content not permitted in order to fulfill its ESG data reporting obligations. Large companies can therefore expect fines ranging from HUF 1 million (approx. EUR 2500) to HUF 50 million if the questions they ask during the due diligence process differ from the questionnaire approved by the SZTFH, or if they wish to request ESG data reporting from micro or small enterprises under the ESG Act (or if they require their suppliers to do so in a contract or in writing).

• In the event of a breach of the quarterly data reporting obligation to SZTFH, which means data to be requested from suppliers and sent to SZTFH on a quarterly basis, the fine may range from HUF 200,000 to HUF 2 million (approx. EUR 5000).

• Companies subject to ESG requirements that use ESG contributors may also face fines ranging from HUF 200,000 to HUF 2 million if they fail to report the use of ESG contributors to the SZTFH or any changes in the contributor’s data.

From January 1, 2026, the SZTFH may also sanction further violations and impose fines between HUF 200,000 and HUF 3 million (approx. EUR 7500) on companies if they fail to consult with the medium-sized company prior to the ESG data request to determine whether it has a state ESG rating, or if the company fails to comply with the requirements relating to the preparatory program provided to suppliers to assist them in completing the questionnaires.
Within the ranges specified by law, the actual amount of the fine may be determined by the SZTFH at its discretion, taking into account the following factors in addition to those specified in the Act on Sanctions for Administrative Offenses:

• harmful impact of the infringement on the promotion of sustainable development and the strengthening of environmental and social responsibility, and

• activities undertaken prior to the SZTFH’s proceedings or decision-making, independently of those proceedings or decision-making, with a view to remedying the infringement.

The company must pay the fine imposed within 8 days.
The ESG fine regulation does not comprehensively define the scope of violations subject to penalties, as the ESG Act itself stipulates that after January 1, 2026, the SZTFH may impose administrative fines if a company fails to comply with its ESG data disclosure obligations for sustainability purposes , or if the ESG report does not comply with the requirements of the ESG Act or the legislation issued for the execution of the ESG Act. Thus, the amount of fines that may be imposed for the failure to prepare, certify, or publish an ESG report has not yet been specified, so further legislation is expected regarding these fines.
The message is clear: compliance with the ESG Act requires increased attention and awareness from businesses. Those who do not follow the legal requirements and do not ensure compliance expose themselves to serious financial and operational risks.