Fix the leak.

It looks like the drywall has water damage---the bubbled area above the quarter round molding. To completely eliminate mold, that drywall needs to be replaced. To do that, remove the quarter round and cut out a section of the drywall about 4" high and from the first stud on one side with undamaged drywall to a stud on the other side with undamaged drywall. Make a patch, install, mud and sand, prime and paint. Then replace the section of quarter round.

Is that drywall? It looks like a baseboard to me. I'd hit it with a good strong bleach solution, rinse, and dry thoroughly (use a fan) before going to replacement.

I agree that the quarter round molding has to go.

That is baseboard and I'm pretty sure it's mdf (particleboard).

Fix the leak. Let things dry out.

If you want it to be perfect you will replace the baseboard and the quarter round.

If you are okay with "pretty good" then let it dry, then clean it with bleach, sand the baseboard and prime and paint.

Unless you are really good, you may end up with a better looking end product by NOT removing the base and quarter round. Removing it gets into painting the wall and the trim, often a little mudwork and getting joints to match, etc.

Limit scope.

Please shut the water off to that toilet until you get it repaired, or you may end up with a rotted floor too. Water causes a lot of damage.