Diamond industry:Ethical supply chain deconstruction

Michael Eich Business & Society - executive MBA - HEC Lausanne 2009-2010

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Diamond industry : under scrutiny

NGO media campaigns raises public awarenessUN sanctions related to conflicts diamond 1

Reputation & consumer confidence at risk Various certifications, ethic codes

FABR

ICIO

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Slave & child labor

“Blood diamond”

Pollution

Aboriginal land violated

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Diamond supply chain and associated challenges

Exploration

Mine

Sorting, distribution & trade

Cut & polish

Manufacture

Retail

Issues: environmental, sociopolitical, human rights, labor

Environment, human rights, legal dispute

Environment, forced labor, child labor, wages, health & safety, force relocation, price control, corruption

Smuggling (war & terrorism financing), stone mixing, price control, counterfeit

Working conditions, child labor, wages

Money laundering, training salespeople, policies on conflict diamonds and the self-regulation, several “ethical” certification

Heath & safety, child labor, wages

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Exploration

Environment: dewatering, pollution, deforestation

Human rights: Indigenous rights, distort and disrupt the cultural and social lives (Canada 4), forced relocation (Botswana 3)

Legal: legal title and rights dispute (« cancel » by the state once diamond discovered 5)

Exploration mainly done by drillingIn 2004, 500 projects worldwide (investment USD 250mio in 2003) 2

Diamond found in 35 countries ; 65% are found in Africa 2

Placer Dome. Western Australia Country

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MiningNo One Nels. Argyle Diamond Mine, Western Australia

Esthr. De Beers diamond mine in Jwaneng, Botswana 

Deepchi. Srilanka

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Mining

Environment: pollution of soil, water and the all ecosystem (by the removal of the top soil), deforestation

Forced labor & child labor: 171 million children (2006) 6

Wages: poverty, more than 1 million workers in the alluvial diamond extraction earn only a dollar a day 14

Heath & safety: respiratory problems (dust), lack of safety protection

Forced relocation: bushmen in Botswana 4

Price control: 50% of production controlled by De Beers 8

Corruption

250 tons of ore must be mined and processed to produce a single, one-carat diamond 7

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Sorting, distribution & trade

Smuggling: war & terrorism financing

• “Bloody diamond” (from war zone): 10-15% of total supply in in 1990s 15 today less than 1% 2 (thanks to Kimberly certification)

• al Qaeda in trading network 2003 10

Stone mixing : mix illicit diamonds with legal stone

Price control: dominant position by De Beers (63% of rough diamond market)8

Counterfeit

Rough diamonds market valued at $8.1 billion in 2002 8

Photos8.com

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Cut, polish & manufacture

For India

Heath & safety: diamond-cutting in the top 10 “hazardous industries”16, silicosis (diamond dust)

Child labor: still exists but declining rapidly 13

Wages: cheap labor

Israel, Belgium, USA, Thailand (for color gem), India (for small pieces, highly manual process)

Surat (India) cut & polish 92% of the world's diamond 13

Mr Huevo , Thailand

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Retail

Money laundering: respect of the law (e.g. US Patriot Act)

Training of salespeople: awareness about issues across the supply chain

Policies on conflict diamonds and the self-regulation : existence / enforcement

Several “ethical” certifications: different scope not always fully independent, confusing for the final consumer

From the extraction to the retailer the price has been multiplied by 3 from its extraction 17

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The Responsible Jewellery Council, The Diamond Development Initiative, Rapaport Fair Trade, Kimberly agreement, …

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SourceQuoted1. Resolution on "conflict diamonds" by United Nations http://www.un.org/peace/africa/Diamond.html2. Diamond Facts by the World Diamond Council http://www.diamondfacts.org/3. Botswana Bushman land carved up for diamond exploration http://www.survivalinternational.org/news/374. Editorial: Canada's Blood Diamonds http://www.diamonds.net/news/newsitem.aspx?articleid=162355. Diamonds in the Rough: Human Rights Abuses in the Marange Diamond Fields of Zimbabwe by Human Right Watch http://www.hrw.org/sites/default/files/reports/zimbabwe0609web.pdf 6. Diamonds Are Forever, But Not The Lives Of Child Workers by Travis Molina http://ihscslnews.org/view_article.php?id=1627 How a new generation of lab-grown diamonds is shaking up the jewelry world by By Vanessa O'Connell , the Wall Street Journal http://www.post-gazette.com/pg/07016/754167-28.stm9 Weak Controls and “Poverty Diamonds” by Global Witness http://www.globalwitness.org/media_library_detail.php/350/en/weak_controls_and_poverty_diamonds10 Making it Work, Why the Kimberley Process Must Do More to Stop Conflict Diamonds by Global Witness http://www.globalwitness.org/media_library_get.php/260/1274133589/GW_Making_it_work.pdf8, 11 De Beers SA A Diamond is Forever By Scott Reilly & Professor Russell Winer NYU Stern pages.stern.nyu.edu/~rwiner/De%20Beers%20case.doc13. Uncommon Brilliance By Aravind Adiga, Time.com http://www.time.com/time/magazine/article/0,9171,610100,00.html14. A different kind of diamond mining By Ian Smillie, Partnership Africa Canada http://www.madisondialogue.org/SmilieDDI_DifferentKindofDiamondMining.pdf15. From mine to mall or mayhem. Thoughts on the Diamond supply chain…, By robjbell http://transformationallogistics.wordpress.com/2009/04/11/just-diamonds/16. Grime behind the glitter? By Sakina Sadat Hussain, MSNBC.com http://www.msnbc.msn.com/id/15842528/17. Diamond Global Value Chain By Sean Bani, Stefanie Bohrt, Carson Denny, Courtney Landy, Duke University http://www.duke.edu/web/soc142/team7/Diamond Global Value Chain.htm

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SourceAdditional

Clear Conscience Jewelry By Jennifer Malkin & Wiam Hasanain, Berkly University of California www.madisondialogue.org/Clear_Conscience_Jewelry.pd

London Diamond Bourse http://www.londonmondialbourse.com/HIV & AIDS in Botswana, By AVERT is an international AIDS charity http://www.avert.org/aids-botswana.htmDiamond Development Initiative http://www.ddiglobal.org/pages/issues.phpDiamonds and Human Security annul review 2009 By Partnership Africa Canada

http://www.pacweb.org/Documents/annual-reviews-diamonds/AR_diamonds_2009_eng.pdfArtisanal Diamond Cooperatives in Sierra Leone: Success or Failure? By The Diamond Development Initiative and Partnership

Africa Canada http://www.ddiglobal.org/contentDocuments/Policy Brief June 2008 (English Version).pdfDiamonds in the Rough By Human Right Watch http://www.hrw.org/en/node/83957/section/12A pratical approach of fair trade and ethical mining certification By Jean_Claude_Michelou

http://www.gemstone.org/congress/panyu2009/speakers-presentations/Jean_Claude_Michelou/JC_presentation-ICA_Panyu_revised.ppt

https://open-site.org/Business/Retail_Trade/Loose_Diamonds/Diamond_Mining Broken Vows: Diamond Jewellery Retailers Fall Short on Conflict Diamond Pledge By Global Witness

http://www.globalwitness.org/media_library_detail.php/330/en/broken_vows_diamond_jewellery_retailers_fall_short

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Under Common Creatives licence. Author : http://www.gentleface.com/

PicturesUnder Common Creatives licence

deepchi1 http://www.flickr.com/photos/deepchi/Swamibu http://www.flickr.com/photos/swamibu/FABRICIO_DG http://www.flickr.com/photos/_fabriciodg/kaysha http://www.flickr.com/photos/kaysha/Placer Dome http://www.mining.ubc.ca/cimarchive/index.php?image=10000381No One Nels http://www.flickr.com/photos/dan_and_claire_nelson/Photos8.com http://www.flickr.com/photos/publicdomainphotos/Mr Huevo http://www.flickr.com/photos/mrhuevo/Wumpiewoo http://www.flickr.com/photos/wumpiewoo/

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