Fear and Loathing on the Road to Ethics

The Responsible Jewellery Council (RJC) is developing a new certification standard for Chain of Custody (CoC). The intentions are good, but seem to irk the diamond industry, which is why I want to bring the issue to the table.

"Irk" is really a too tame a term. Some central figures in the industry are very unhappy about this, and oddly, even those involved in drafting it and outwardly supportive of it, say in private that CoC is not needed. 

The basic premise of CoC is segregation of diamonds, gold and platinum metals from mine-to-retail, assuring that the highest standards are maintained – from a legal and a human rights’ standpoint. 

At its heart, the tracking system is voluntary and seeks to augment the Kimberley Process (KP), and System of Warranties – the proposed polished diamond assurance system. The initiative was prompted by "conflict in gold and diamond supply chains," namely in eastern DRC and Zimbabwe, where "human rights abuses, lack of rule of law, involvement of armed groups, illegal artisanal mining, smuggling and money laundering" issues are involved says RJC.

"Once you protect the rough [with KP], there is no need to protect polished," argues Shmuel Schnitzer, past president of the Israel Diamond Exchange and the World Federation of Diamond Bourses. "This is the most transparent industry around," he adds.

While CoC calls for the documentation of goods as they change hands, this raises a host of issues - and goes beyond the fact that no one wants added costs and related administrative work. The issue seems political. 

For example, a desire for a wider interpretation of the term "Conflict." According to Dr. Fiona Solomon, RJC's Director of Standards Development and one of the people leading the project, the suggestion is to follow OECD due diligence guidance, which frames conflict in terms of armed aggression and serious human rights abuses, irrespective of the parties involved. This is a far wider definition than KP's rebel forces vs. legitimate governments. As Dr. Solomon puts it, “It's a different context."

Considering the recent mess with KP and its inability to resolve issues with Zimbabwe, the industry really doesn't want to hear about widening the definition of “conflict.” The Russians, Chinese and Israelis are particularly sensitive to this proposed change in definition.

James Suzman, De Beers' Director of Public Affairs and an RJC board member, told us that consumers are increasingly interested in the provenance of what they buy. "Industry will follow consumer demand," he said. Michael Rae, CEO of RJC says that retailers are demanding this.

It seems that consumers, RJC and the diamond industry are at odds. The criticism is that this is a complicated and expensive system and "not necessarily the right way to go," as one put it. "The unintentional consequences need to be considered," another cautioned. 

Anonymous Criticism
One of the surprising revelations is that practically none of the critics willingly spoke out in public. The reason, it seems, is concern that if you don't support the cause, you are not pro-ethical governance - it's not PC. 

One topical question is what will happen if KP breaks down? According to Suzman, "Some countries may consider a legislative process that will fill the gap, using Chain of Custody." 

CoC is maybe required in the U.S. for gold because of the Dodd-Frank Act, and intended as a pre-emptive measure to prevent expanding the Act to diamonds. 

People closely familiar with the U.S. State Department's intentions reject this concern, saying it is unlikely that the Act will be extended to diamonds, calling the State Department’s occasional talk on the issue "a paper tiger." This certainly deflates a main reason for CoC.

For the first time RJC, until now considered one of the good folks, is facing harsh criticism.

The diamond industry can't continue to act under the fear of 'what some may say about us,' even if it’s the NGOs. With an honest discussion, maybe the retailers in the group could warn the diamantaires of a coming tidal wave they are not aware of.

However, if so many in the diamond industry think CoC is expensive, complicated, requires extra administration, is politically charged, redundant and unnecessarily expands the definition of "Conflict," they should say so publicly. Only if it's on the table, CoC will be revised or shelved.

Have a peaceful weekend.