GUIDELINE

TABLE OF CONTENTS

“The sector is well positioned to be a new economic driver for Malaysia with its two-pronged approach: cultivating entrepreneurship while solving crucial social issues at the same time. It can, and will, redefine the way communities approach the social and economic issues impacting them, helping to create sustainable and equal growth for all.”

Prime Minister of Malaysia, YAB Dato’ Sri Mohd Najib Razak bin Tun Haji Abdul Razak on Impact Driven Enterprise

Why you should be an IDEA?

Types of IDEA

Who is eligible for IDEA?

How do we apply?

2

2

3

4

16

Showcasing your impact

Where can I get more information?

18

19

What’s the IDEA?

What is an Impact Driven Enterprise (IDE)?

In Malaysia, we define IDEs as:

Organisations (either for-profit or non-profit) that proactively create positive social or environmental impact in a way that is financially sustainable.

The Malaysian Global Innovation & Creativity Centre (MaGIC) established the Impact Driven Enterprise Accreditation (IDEA) scheme in July 2017. By becoming an IDEA you would certify your status as an impact driven enterprises, validating your effort to create a positive social change.

Beyond just accreditation, by becoming a certified Impact Driven Enterprises (IDEs) you’ll be listed on MaGIC’s new online directory, allowing you to connect with potential customers and supporters. Helping you scale your impact driven businesses to new heights and granting you the recognition you deserve.

By becoming a certified IDE you will receive the following benefits:

• Get listed on a public directory where potential customers can find impact driven enterprises

• Use the IDE mark on your website and marketing materials to validate your status as an impact driven enterprise.

• Boost your credentials in relevant public procurement competitions – for relevant contracts, your IDE status will earn you extra points for your proposal.

• Get access to other funding and support – over time, MaGIC and other agencies will provide a range of additional support for registered IDEs.

• Join a network of Malaysia’s leading impact driven enterprises – with events, networking and other opportunities to collaborate and learn.

*All these benefits at a certification cost of just RM1000 per annum. The best part is from time to time MaGIC would be providing waiver/discount of the certification fee so keep a the look out for announcements made on IDEA website at www.idea.mymagic.my.

Why you should be an IDEA?

What’s the IDEA?1

2

Types of IDEA3You should apply for impact driven enterprise accreditation if you consider yourself as a: You proactively create positive social or environmental impact and adhere to the guidelines

below. The criteria include:

AND

Social business

You have a social (environmental or cultural) purpose that is core to your business operations;You are focused in conducting commercial activates to sustain your business operations.In contrast to a social enterprise, you contribute back 100% of dividends back to your socialmission.

Social enterprise

Who is eligible for IDEA?4

Criteria 1You have a clearly stated social or environmental goal on your public documents, marketing collaterals and/or your company constitution

Criteria 2

SOCIAL OR ENVIRONMENTAL IMPACT

Criteria 3 Majority of your total annual revenue is earned by business transactions; or for startups, you plan to work towards this revenue model.

FINANCIAL SUSTAINABILITY

Criteria 1: Do you have clearly stated social or environmental goal?

Criteria 1: FAQ Can I become a certified IDE if a social/environmental impact is not my main goal?

As an IDE you need to show that you are committed to a social or environment goal. IDEs with clearly stated goal are said to follow an impact first structure.

What does a good stated goal look like?

1. Best case scenario your goal should specify a positive social or environmental impact.

Example 1: Our target impact is to improve the wellbeing of low income single mothers.

Example 2: Our goal is to reduce the amount of waste that goes to landfill.Or

2. It is also acceptable for the goal simply to say that your organisation/company aims to help a particular disadvantaged group

Example 1: We provide subsidised services for low income households;

Example 2: We provide friendship for elderly people without family support

The goal must be clearly visible in either or the following public documents. Gold standard, it is stated in all. These include:

• Your website; and/or

• Your marketing collaterals; and/or

• Your company’s registration documents (for example Memorandum & Articles of Association/ Partnership Agreement); and/or

• Your company’s policy document or standard operating procedures.

Your IDE accreditation is possible as long as you can show a strong track record of taking busi-ness decisions that prioritise impact over profit.

• Example 1: A catering company that exists to provide meaningful employment and training to people with intellectual disabilities. The Manager can explain that the company hires 10 people with intellectual disabilities who would otherwise struggle to find employment or training.

• Example 2: A fashion retailer that sources for items from local artisans. The mission of providing better livelihood to local artisans is not enshrined in the company constitution, however the social mission is so fundamentally a part of what they do, they are able to give multiple examples of how they spent significant time and resources identifying and working with the artisans.

Please note that if the criteria 1.1 is not met, we may still approve IDEs based on an impact first track record. However upon renewal within a year’s time we strongly recommend that you re-structure your IDE to follow an impact first structure.

Criteria 1: Having a clear stated social and environmental goal

Criteria 2: Allocating significant resources towards solving your social or environmental mission

As an IDE it is imperative that you do not only talk the talk but you walk the walk as well. It is not enough for you to have a social/environmental mission but also you need to contribute significant resources to achieve your mission.

The resources that you contribute towards your mission can be in the form of allocations made from your cost of doing business, staff allocations or end of the year profit distributions. For your ease of understanding, MaGIC has categorised resource allocation into 3 main types. You only need to meet one of the criteria to qualify.

1. Beneficiary favoured profit re-distribution: In this case you have stated policy or can show a track record of allocating at least 51% of annual recorded profit directly towards your social or environmental goal.

Example : A company providing credit to poorer people, but instead of paying out all the profits for shareholders, they reinvest 51% of each year’s profit towards a bail-out fund for families in crisis. E.g. Last year the company recorded a profit of RM100,000. They paid out RM30,000 to shareholders; reinvested RM19,000 in the business itself; and allocated RM51,000 to their social crisis fund.

OR

2. Achievement of your mission is integrated into your daily operations: The purpose of this criterion is to encourage you to integrate your social/environmental mission directly into their operations by contributing atleast 35% of your expenses value in favor of your beneficiary group. Refer to MaGIC’s SE 101 for more details. You will be deemedd to have met this criteria by either one of 3 methods provided :

• Buy and give/cross subsidization model to supply necessity services to the B40: For every single/multiple transaction conducted by your IDE a necessary product is supplied to a B40 beneficiary group, not as a profit re-distribution, but as a part of your business model. Please note that the service or product you are providing must be deemed a necessity service.

Example: Cross subsidisation:

A private healthcare clinic offers standard services to people who are able to pay but also routinely offers subsidised services to people with household income below a certain threshold. Subsidies are covered by the company itself and not cross-subsidised by government or other third party. If the annual value of the subsidies (for each subsidised case, the standard market rate fee minus the actual fee charged) is RM35,000 and the cost of doing business is RM100,000; then C/(COGS+OPEX) = 35,000/(35,000+65,000) = 35,000/100,000 = 35%.

Example: One-for-one:

For example, a restaurant business that serves Thai food at affordable prices gives a free meal to children in need with every meal purchased. The value of such food assistance (determined based on the menu prices) is billed into the restaurant’s cost of operation as it makes this commitment to all its customers and regardless of its profit status. If the total cost of operations in a month is RM40,000 and the total value of meals given out is RM14,000; then C/(COGS+OPEX) = RM14,000/(RM40,000) = 35%

OR

• Inclusive business practices: Providing income above the operating industry standard for a specific marginalised or disenfranchised group in the form of supply or employment contracts. The value of supply or employment contract should be more than 35% in monetary value as compared to the other expenses of the business and should be above current industry standards.

Example: Providing inclusive

For example, an agriculture company that hires struggling single parents as part of the company policy but pays above market rate and provides additional healthcare benefits as well as pensions for workers and their families over the industry standard. If the company records expenses of RM1,000,000 which does not include the cost of labour . The cost of labour for hiring policies that pay above market wage for a marginalised community is RM350,000; then C/(COGS+OPEX) = 350,000/ (1,000,000) = 35%.

OR

• Empowerment of beneficiary via skill building: Cost of production includes the training of marginalised communities that can lead to gainful employment opportunities for the marginalised beneficiary group;

In all cases marginalised beneficiary groups are defined based on the current definitions of B40 utilised by Economic Planning Unit of Malaysia.

OR

• Protecting the environment: Promotion of upcycling/recycling through favouring of procurement of materials that would otherwise end up in the landfill by allocating atleast 35% of your material acquisition budget toward the procurement on upcycled material or investing in the awareness of up-cycling.

Example: Inclusive business that promotes upcycling or recycling

For example, a company selling handbags made from recycled materials with a clear environmental mission to reduce the amount of plastic going to landfill and also to promote recycling and reduce wastefulness. The cost of producing each recycled bag is RM100 more than for standard producers of similar items in Malaysia – this is due to additional costs of sourcing, cleaning and re-processing used plastic bags which are used as raw material. In addition, the company spends RM20,000 per year on events and campaigns to promote recycling. If the total cost of this additional environmental contribution in a year is RM35,000, whilst the registered cost of business is RM100,000 then C/(COGS+OPEX) = 35,000/(35,000+65,000) = 35,000/100,000 = 35%.

OR

3. Preferential hiring policies: Your IDE practices a favouring employment policies that target a disenfranchised group identified by the Economic Planning Unit Malaysia (EPU); in this case, you need to prove that at least 51% of your employees come from this marginalised group and you are paying these individuals a fair wage.

Example: Catering company that favours hiring peoples with hearing impairments

A catering company that exists to provide meaningful employment and training to peo-ple with hearing impairment. The Manager can explain that the company hires 10 people with disabilities who would otherwise struggle to find employment or training. The total workforce in the company is 14 individuals. The differently abled in this case accounts for more than 51% of the total workforce, all the differently abled are paid a rate above the or at par with the minimum wage based on their skills sets.

Criteria 2: Frequently asked questions? Criteria 3: A sustainable IDEIs it possible to contribute significant amount of resources in multiple areas?

Note that your significant resource allocation to your beneficiaries may be met through a combination of different contribution types. You may have multiple impacts and a shortfall in one impact area may be assisted by the other impacts you have attained.

If I provide training to my beneficiaries, how is the value of training determined?

The value of training to beneficiaries is determined based on the average industry price of conducting a similar training or the cost of the training workshop itself, whichever is higher.

Do I need qualify for all the requirements under criteria 2?

No you just need to qualify for one of the 3 requirements under criteria 2.

• This is determined if more than half of your total annual revenue is earned (e.g., by selling goods or services to customers - as opposed to donations or grants); or for start-ups, you have a credible plan to work towards this revenue model.

• Revenue is defined according to the Malaysian Accounting Standards Board Standard 9: “Revenue”. you will be assessed on the total revenue figure reported in your latest financial statements.

How do we apply?5

1. First stage (Creating a basic account):• Create a basic account and fill in the online form

2. Second stage (Apply for certification):• Make a payment of RM1000• Submit requested documentation to evaluate

eligibility to become an IDEA enterprise• We will communicate the results to you

Note that the MaGIC team member may also request to visit your site if necessary (to verify the existence of your operations and the social/environmental programmes you have described in your application).

The diagram below summarises these simple steps:

Stage 1

Create a basicaccount on

IDEA website

Make payment for certification

process

Submit requested documents for audit purposes

Site visits if applicable

Receives rejection letter via e-mail

Receive e-mail confirming IDEA

status

Stage 2

Re-apply

PLUS OR

Start accessing IDEA benefits

. Your profile will be added to the IDEA directory

. Start receiving e-mails about

support for IDEs

. Start using the IDEA mark

. Eligible for procurement

process

Showcasing your impact6

The IDEA online Directory gives IDEs the opportunity to showcase their social or environmental impact results. The IDEA team will develop a set of locally relevant impact indicators over the coming years as we collect more data from the sector. Meanwhile, during the first year of the programme (2017-2018), we will showcase the following impact data on the profile of each IDE listed inside the Directory:

• Number of people from disadvantaged groups who are currently employed by the com-pany (either part-time or full-time). This data will be broken down by different types of disadvantaged groups.

• Percentage of employees from disadvantaged groups who receive more income, training or support as a result of working for the IDE (i.e., more than if they looked for a different job).

• Number of people from disadvantaged groups whom the IDE supported with subsidised goods or services last year (not including employees).

• Any other measurable impact that the IDE would like to share.

Where can I get more information?7

• For further information on the IDEA programme, please visit our website at mymagic.my/idea

www.mymagic.my/idea

enquiries@mymagic.my