When Green Claims Go Bad: How Regulators Are Tackling Greenwashing in 2025

The Rise of ESG – and the Risks

Over the past decade, Environmental, Social and Governance (ESG) has moved from a niche consideration to a mainstream business imperative. Companies now know that investors, clients, and regulators want more than just financial performance; they expect genuine commitments to sustainability. Yet, with ESG becoming a powerful marketing tool, the temptation to exaggerate or misrepresent environmental and social credentials has grown. This is where “greenwashing” enters the picture—claims that sound good but lack substance.

A New Era of Accountability

In 2025, regulators across the globe have taken stronger action against misleading ESG disclosures. The European Union’s Corporate Sustainability Reporting Directive (CSRD) is shifting ESG from voluntary to mandatory reporting, with audit-level assurance on disclosures. In India, SEBI has gone further by allowing ESG ratings to be withdrawn when companies fail to meet standards. Meanwhile, U.S. states such as Texas are investigating proxy advisory firms for their ESG-related voting recommendations, reflecting a political edge to the debate.

Here in Malta, the Malta Financial Services Authority (MFSA) has also made its position clear. The regulator has repeatedly warned against overstating ESG credentials, emphasising that sustainability-related claims must be fair, clear, and supported by reliable data. Greenwashing, the MFSA noted, not only misleads investors but undermines the credibility of the financial system as a whole.

What This Means for Businesses

Greenwashing is no longer simply a reputational risk—it is a legal and financial one. Enforcement actions can result in fines, market exclusion, and damaged investor trust. Companies that fail to substantiate their sustainability statements risk alienating both regulators and stakeholders. At the same time, genuine businesses face the challenge of navigating a crowded landscape where consumer skepticism is high. Transparency, traceability, and independent verification are fast becoming the cornerstones of credible ESG strategies.

Turning Compliance into Competitive Advantage

While regulatory pressure may feel burdensome, it presents an opportunity for forward-thinking businesses. Those that invest in reliable data systems, robust governance structures, and independent assurance can not only withstand scrutiny but also differentiate themselves in the marketplace. In an era where greenwashing is under the microscope, authenticity and accountability will set leaders apart from laggards.

Get in Touch:

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Matthew Aquilina

maquilina@quazar.mt / +356 2388 4600