In May, Mr. László Balogh (Deputy State Secretary of the Hungarian Ministry of Finance, also the chairman of the Hungarian National Contact Point) held a presentation about the “Responsible Business Conduct from the OECD’s point of view” at the Business Breakfast which was organized by the CSR Hungary. The presentation included many topics, just as the actions of the OECD, the role of the Guidelines for Multinational Enterprises (hereinafter: Guidelines), the OECD Pillar One and Pillar Two, and lastly the targets and the criteria system of the ESG.
Behind the Guidelines there is a strong intention and indirect power of the governments, which made the Guidelines the first multilateral code of conduct of its kind. It supports the multinational enterprises to contribute a sustainable economic, social and environmental development. The eleven chapters of the Guidelines comprise every important field of the business ethics, including some areas which are not applied by other tools. Although the application of Guidelines is voluntary, the setting up of the NCPs is an obligation based on the national commitment ensue from signing the Guidelines. The main function of these NCPs is to promote the effective application of the Guidelines, to popularize them, to answer questions in connection with these topics and also to contribute a solution of the complainant cases regarding the possible infringement of the Guidelines. In Hungary, the Hungarian National Contact Point (hereinafter: NCP) has been operating since 2017 with the prominent experts of the eleven areas. The Secretariat of the NCP works within the framework of the Ministry of Finance and chaired by the president of the NCP’s. The OECD also follows the most recent news in the fields of the classification and investment related to the ESG. Since the OECD is a committed supporter and enthusiastic participant of the fight against the climate change, it advocates every initiation that supports the mission of sustainability. The recommendations of the areas of expertise encourage the participants of the market to form processes which can subserve the recognition and the integration of the ESG into business life, as soon as possible. Moreover, the interest toward the sustainable investments is getting more and more significant, however there are several challenges which are obstructing the effective mobilization of the capital for this purpose.
The acronym ESG is an abbreviation of the English words Environmental, Social and Governance. Within the ESG framework, these are called pillars along he companies are required to make their annual report. The aim of ESG is to objective assess the activities of business organizations from a sustainability point of view. Due to the changing expectations of investors, more and more capital is flowing into companies that perform well based on the ESG aspects and keep the sustainability as a value in their core strategies. . This improvement and change can motivate not only large multinational companies, but also willy-nilly the SMEs that supply them, Any market participant who does not keep up with this trend will sooner or later fall behind and then disappear from the market. At the same time, companies are often faced with the fact that the individual ESG requirements are not harmonized, the significant difference requires a serious ability to adapt, which not all companies are capable of, especially smaller companies. Thus, the OECD strives to use its experience as an international standard-setter to promote the harmonization of the ESG.
The OECD standards also include taxation rules in order to prevent the international tax evasion. In the 2010s the international community recognized the risk factor in the equitable taxation of the digital, multinational companies and corporations, and realized that the only way to handle the situation is a joint action against it.
Regarding to this recognition, OECD suggested an action plan which is made out of two pillars. Firstly, Pillar One which concentrates on the corporations with outstanding profit rate, and the main target is allocation of the tax base based on the place of utilization. Secondly, Pillar Two, also known as “GloBe”, contains the conception of the global minimum tax. The background work was made by 137 countries within the frames of the “Inclusive Framework” and as a result a joint statement was adopted on 8th of October in 2021, which aims to lay the foundations of the new regulation. Mr. László Balogh also said, that the preparation of the integration of the regulations of Pillar Two has already begun but is still under progress in Hungary. The Hungarian tax system is forced to adapt the new rules, and also the form of the tax reliefs need to be reviewed. The new reliefs cannot be dependent on the effective tax rate, the only way to maintain the expected effects is to find other methods, for example considering remarkable changes in other taxes or aids. Hungary is currently working on finding the best solution, which can make the least affect on the competitiveness of the Hungarian taxation system. The first submission is expected during the fall of 2023.