This article first appeared in The Edge Malaysia Weekly on May 19, 2025 - May 25, 2025

Increasing scrutiny on ESG has led to a global rise in litigation against companies that commit greenwashing. At the same time, several countries are coming up with regulations and guidelines to prevent the activity.

Malaysian companies have also been accused of greenwashing, which is the practice of giving misleading information about the environmental impact of a company’s products or services. The country does not, however, have regulations for such activity; neither have companies been sued for greenwashing.

Some individuals ESG spoke to believe Malaysia should consider introducing such regulations to protect consumer rights.

“Enforcement action and the ensuing litigation first started with global regulatory shifts, including increased sustainability reporting requirements by large companies, developments in competition laws and a growing recognition of environmental harms,” says Abhilaash Subramaniam, an ESG and tax lawyer.

He adds that while Malaysia is not at the forefront of this shift, more measures are being taken to combat greenwashing and increase transparency in companies’ sustainability initiatives. This includes the newly announced National Sustainability Reporting Framework, which marks the first time Malaysia is mandating sustainability reporting for large non-listed companies.

“This has ultimately been with a view to aligning Malaysia with global standards, in order to increase global investor confidence and to promote Malaysia and its companies as a viable, safe and prudent investment option,” says Abhilaash.

While Malaysia has legislative frameworks to protect consumers against misleading or inaccurate statements or conduct, there is a lack of clear guidelines on what constitutes greenwashing, he adds.

Abhilaash hopes that any guidelines introduced will apply not only in the context of the Consumer Protection Act 1999 but to all the relevant laws in Malaysia that relate to reporting or disclosure.

“These guidelines should include terminology and labelling of what could constitute an environmental claim, clear definitions of what constitutes greenwashing with case examples, disclosure requirements that would be easily accessible to consumers, requirements for full and frank reporting, metrics and thresholds to be met before an environmental claim may be made, and manner and methods for correcting and disclosing false claims,” he says.

This point is echoed by Mohideen Abdul Kader, president of the Consumers Association Penang.

“Greenwashing misleads consumers into believing a product or company is more environmentally friendly than it actually is. This deception can lead to misplaced trust, where consumers pay a premium for so-called ‘green’ products that do not deliver on their claims,” he explains.

“Stronger regulations can help ensure that businesses provide accurate, verifiable information.”

Mohideen recommends having a requirement for all environmental claims to be accurate, verifiable by an independent third party.

“Terms such as ‘eco-friendly’, ‘sustainable’, or ‘carbon neutral’ without proper scientific backing must be prohibited.”

The current standards in Malaysia that can address greenwashing include the Malaysian Code of Advertising Practices, which has a provision against misleading claims and requires all claims to be substantiated.

“While it is not specific to greenwashing, the rule applies across the board. If complaints are raised, the burden falls on the advertiser to prove, with evidence they must have on hand,” the Advertising Standards Malaysia board tells ESG in an email reply.

“In most instances, when substantiation isn’t provided, it is usually for one of two reasons: either there was nothing to back the claim, or the claims were from internal findings, which even the advertiser felt would raise more eyebrows than trust, if declared. However, if third-party verification is mandated by law, it would definitely be beneficial.”

Fourteen instances of greenwashing by nine companies operating in Malaysia were identified by environmental watchgroup RimbaWatch in January, based on the Zero Greenwashing Alliance’s Green Claims Guide released in November 2024. Of those companies, most are in the automotive or oil and gas industries, and were accused of “falsely” advertising their services or products as sustainable, using offsets to claim a service is carbon neutral, or failing to provide sufficient evidence for their claims.

Grab, for instance, was highlighted for using offsets to promote its services as carbon neutral. The act of using offsets has been banned by the advertising standards of a number of jurisdictions around the world.

In response, the company acknowledged that there is a lack of universally aligned standards for the carbon market, and emphasised the legitimacy of carbon credits as an instrument for climate change mitigation.

“We will continue to hold a high bar on our suppliers to ensure selected projects support their intended outcome, and hope the industry will continue to debate the topic and work constructively together towards a lower-carbon future. At present, we conduct additional due diligence and reference the best available information provided by top carbon rating agencies and state-backed voluntary carbon market exchanges in Southeast Asia,” it said in a response to the Alliance.

Petronas was also highlighted for using offsets to achieve carbon neutrality. In response to the Alliance’s accusations that the company omitted crucial information in its claims, the national oil company stressed its commitment to supporting the transition towards a lower-carbon future.

“Navigating the complexity of the energy transition in a developing country context requires a whole-of-society approach. Towards this objective, Petronas is playing an active role in shaping this transition and in promoting sustainable practices across the wider ecosystem to support Malaysian efforts on climate and energy,” said Petronas.

Another company identified by the Alliance was Malayan Banking Bhd with regard to the promotion of its myimpact Visa Signature Credit Card, which uses forest-based carbon offsets.

In response to ESG, Maybank says the credit card is not in conflict with global advertising standards and that it offers an optional feature that allows users to offset their carbon footprint by financially contributing to regional reforestation initiatives.

“We also seek to clarify that we did not make any arbitrary claims, and relied on credible third party programme implementers, which include the Malaysian government via its agencies, and other recognised validators,” says Maybank.

“We emphasise that proper governance is in place to ensure that projects selected for the carbon offset programmes under the myimpact credit cards meet credible environmental and social criteria. We actively monitor evolving industry standards and assessments to maintain the integrity of our sustainability initiatives.”

Similarly, MINI Cooper was identified by the Alliance for a claim related to the promotion of the MINI Cooper SE on a billboard advertisement in June 2023, claiming that the SE has “zero carbon emissions”.

In response to enquiries from ESG, Sashi Ambihaipahan, director of corporate communications & sustainability at BMW Group Malaysia, clarifies that the advertisement has not been in use since November 2023, and acknowledges that sustainability claims must be communicated with clarity.

“The original intent was to represent the environmental benefits and responsibility of the MINI Electric vehicle introduced. Since then, we have taken on board valuable feedback and conversations about how sustainability claims are framed and shared,” he says.

“While the MINI Cooper SE produces zero tailpipe emissions, we recognise that the broader environmental impact — such as energy sources, manufacturing and even repurposing and recycling — is an important part of the discussion.”

He adds that “until we achieve true zero carbon emissions across the entire value chain, we will ensure that our messaging reflects where we are on this journey and does not overstate our progress. At the same time, we will continuously refine how we communicate these aspects to ensure transparency and accuracy”.

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