IB accreditation was introduced since 2016 various Asian economies (Cambodia, China, Malaysia, Myanmar, Philippines, Viet Nam) to create a more transparent system for qualifying companies as IB. Cambodia also decided to introduce IB accreditation from 2021 onwards. IT tested the system under the IB landscape study. Interviewed companies also had the opportunity for self-rating (based on summary criteria) and in most cases the results tally with the assessment done by independent experts.
Incentives require pre-accreditation of IB business lines: Self-claiming social impact is not a good practice and would result in market distortion. While NGO driven labelling (like fair trade or environmental seals) may be independent and helps companies with their branding, it often lacks acceptance of the government. For any support to private companies, the public hand (government) needs good reasons and transparent criteria for doing so. Typically, support to private sector companies is rationalized by companies working in priority sectors, earning foreign exchange through export, or being located in priority areas. Inclusive Business add a forth reason namely their strong impact on improving the income or living situation of the poor and low-income people. As Inclusive Business investments can be found in all sectors, all geographical areas, and are not necessarily export oriented (although some are), they form a separate category for investment support. However, the social result orientation of IB (i.e. providing scaled up systemic and innovative solutions to the relevant problems of the people at the base of the income pyramid (BoP, the bottom 40%) needs to be proven in the business model. Of the many companies existing in the Cambodia economy, only few can be identified as following Inclusive Business models, initiatives or activities.
Principles of certification and accreditation: The key principles of such accreditation system are:
- -Voluntary participation initiated by the companies that wish so.
- -For new business lines not for the company and not in retro-prospect.
- -Small and larger companies need to fulfil the same criteria (including their relative importance or weight), but different targets are being used for the actual rating to reflect different company sizes. The company size will be determined by revenue criteria only, with small companies and for-profit social enterprises being defined as having annual revenues of $0.2-$0.5 million, medium sized companies from $0.5-2 million, and larger companies above $2 million.
- -The prospects of a company (its growth in commercial and social results) are being considered as outlined in the business plan. IB accreditation is not a financial due diligence. The IB rating will result in endorsing potential a real IB companies.
- -IB accreditation will be done in 2 stages: First, an independent consultant team will do the preliminary assessment (including company interview) and initial rating. The rating and company case will then be discussed and finalized by the formal IB accreditation team, composed jointly by representatives form 5 government agencies (MISTI, MAFF, MoT, CDC-BOI, MEF) and 4 business associations (YEAC, CCC, FASMEC, CWEA).
- -The IB accreditation for the IB business line (only) will be done based on transparent criteria and targets assessing three key business dimensions:
- -The commercial viability (in terms of revenue, growth, profitability, bankability, and ES standards)
- -The commercial viability (in terms of revenue, growth, profitability, bankability and ESG standards)
- -The social impact interns of reach and targeting (including women empowerment), social depth, and its systemic change contribution for the poverty situation and gender equality in Cambodia; and
- -The innovation character (in terms of business, technology, social and environmental factors)
- -A composite rating tool will be used to do the final decision on what qualifies as IB and what not. This assures to understand the company in its totality, the relative importance of commercial and social impact, as well as being able to compare between sectors, company sizes and IB types. The composite rating tool is summarized below:
- -Companies that wish to be accredited as an IB need to fill up a summary IB questionnaire. The questionnaire will then be verified through a company interview.
- -IB accredited companies will have access to certain incentives from the government, and will be publically awarded, thereby strengthening the branding of the company.
More information on the IB accreditation is in the attached accreditation concept note (LINK to attached paper).
The proposed detailed rating criteria for the initial assessment