Responsible Sourcing is a vital topic in our trade. Additionally, the ways it interacts with other issues such as money laundering and terrorism make it a “must have” – instituting an AML program and checking it is an important first step to being in compliance with a healthy supply chain, and federal law.
After your AML program is up and running and checked annually, making sure to ask questions of your suppliers and seeking assurances, in writing, is important. Include the concepts in this section into your standard vendor agreement.
After you’ve taken steps to meet your legal requirements, turning to the “last 18 inches” of the trade- read this guide below so you can have an open, healthy conversation with your end customer about how you fit into a responsible supply chain.
Sustainability in the context of the jewelry industry refers to producing jewelry in a way that considers social, environmental, and economic impacts and actively works to ensure that the practices under which materials are sourced limit negative impacts and work to create benefit as much as possible. Finite natural resources are essential to the production of jewelry; initiatives to promote sustainable production are becoming increasingly integral to the industry’s future.
While sustainability addresses the long term viability of the jewelry industry through establishing careful management of the individuals, materials, and environments which the industry relies on, responsible sourcing specifically refers to the process in which jewelry materials are sourced and supply chain due diligence. Responsible sourcing actively works to ensure sourcing does not support harmful activities and invests in benefits for global supply chains by using materials produced under legal and safe conditions, with proper compensation and environmental management, and free of forced and child labor.
The Organization for Economic Co-operation and Economic Development (OECD) has established the leading international standard – OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas – which is the foundation for a number of standards, certifications, and regulations developed in recent years to increase responsibility and transparency in jewelry supply chains. These approaches have led to improved transparency, yet complete guarantees around the responsible sourcing of jewelry materials still do not exist. Criminal activity, forced and child labor, and environmental abuses remain critical to address as the industry continues to deepen its understanding of the issues.
Artisanal and small-scale mining is defined as formal or informal mining operations with predominantly simple forms of exploration, extraction, processing, and transportation. It is highly labor-intensive and typically done by local cooperatives, small communities, and family groups.
The trade of ASM mined natural resources like precious metals, diamonds, and colored gemstones is an important source of economic development for many countries where these products are found. Approximately 30 million people are directly involved in ASM and more than 150 million people are indirectly dependent on the trade. ASM accounts for an estimated 20% of the world’s mined diamonds and gold and almost 90% of colored gemstones.¹ Efforts to strengthen the miners’ knowledge and capacity adds value to the source, increases earning potential, and benefits the industry as a whole.
Despite its ability to be a source of economic empowerment, the trade of natural resources produced through ASM can also fuel conflicts, contribute to human rights abuses, and can be destructive of natural environments. For this reason, it is important to know where your materials are coming from and what your purchase is supporting. Any business using or trading materials that may come from conflict-affected areas or areas where illegal mining is common should carry out supply chain due diligence.
Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development (IGF). (2017).
¹Global Trends in Artisanal and Small-Scale Mining (ASM): A review of key numbers and issues. Winnipeg: IISD.
Industrial and large-scale mining refers to mining operations with high levels of investment, high yields, and low levels of employment. Large-scale mining operations typically have better access to governments, technology, and mining titles than ASM operations and frequently win out over artisanal miners when competing for resources. The dwindling supply of natural materials can also work in favor of large-scale operations that have the equipment and funds to dig deeper in challenging environments. Large-scale operations must be monitored closely for their environmental impacts and potential displacement of ASMs. Adverse environmental effects from large-scale mining include but are not limited to massive deforestation, soil erosion, water contamination, and drastic modifications to biodiversity.
Supply chain due diligence is the process of businesses identifying, evaluating, mitigating, and monitoring risks in their supply chain to ensure their purchases are not contributing to harmful activities. After precious metals, diamonds, and gemstones are mined from dozens of countries across the globe, they are typically exported, traded, and processed in other countries. The materials can travel through several different countries and many different hands before becoming part of a finished piece of jewelry and ultimately reaching the retailer, making it extremely difficult to know the origins of the materials and whether or not they have been tainted by human and environmental abuses.
Although jewelry supply chains are notoriously complex and due diligence can seem like a daunting task, it is a necessary component to ensuring your business is not supporting human and environmental abuses. The jewelry industry continues to develop its capacity to manage supply chains with guidance from multi-stakeholder institutions.
Governments, nongovernmental organizations (NGOs), and businesses across the globe are working to strengthen supply chain transparency. The United Nations Guiding Principles on Business and Human Rights determined that businesses have a responsibility to implement human rights due diligence to account for their impact on human rights through their supply chain. The Organization for Economic Co-operation and Development created its “Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict Affected and High Risk Areas” as the leading standard and guide for minerals sourcing since 2011.
The OECD guidelines are the foundation for most of the existing standards, as well as regulations and legal frameworks in the US, EU, China, and several African countries. The objective of the OECD guidance is to build secure and transparent supply chains, enable due diligence for legitimate artisanal and small-scale mining, and to ensure that legitimate artisanal mining communities can benefit from trade in conflict-affected and high-risk areas to support their development and contribute to improving their countries’ wellbeing. The OECD guidance aims to accomplish this by using a five-step framework to establish strong management systems, identify and assess risk in the supply chain, design and implement strategies to respond to risks, carry out independent third-party audits of supply chain due diligence, and report annually.
The Responsible Jewelry Council is a standard setting organization which has also developed due diligence guidance, a Code of Practices certification, and a Chain of Custody Certification. The OECD recently acknowledged that while there has been substantial progress in raising awareness towards risks in mineral supply chains, voluntary standards and certification schemes tend to be less rigorous than international standards and lack of adequate enforcement. Many of these standards were reassessed and bolstered to better align with the OECD standard. Their improved alignment with the international standard is currently being evaluated.
Some companies choose to publicize their due diligence assessments to communicate to consumers, investors, and the public that they are aware of the potential issues within their supply chain, are committed to sourcing responsibly and sustainably, and that they are taking steps to ensure they do not contribute to harmful activities. Some companies do not publish due diligence assessments because their stakeholders assume they have strong practices in place. You can work towards implementing supply chain due diligence through developing a clear conflict minerals policy, carrying out assessments, actively addressing potential risks, commissioning independent verification and pursuing transparent ways to communicate your findings with the public.
Gold
Gold is highly valuable and rare; its mining and production processes can cause significant environmental and social harm. The rising price of gold has led to rampant artisanal mining of the material – particularly in areas with little regulation and high levels of poverty. ASM gold mines can expose miners to safety risks through poor infrastructure and lack of proper protective gear. There also tends to be less oversight with the use of child laborers and proper handling of toxic chemicals, including mercury, in ASM mines. ¹Industrial gold mines have been observed to have human rights abuses including forced labor, child labor, and sexual assault as recently as 2018.²Alternatives to mercury use in gold mining are becoming more prevalent as they help miners recover high rates of gold, are safer for miners and their families, and benefit the health of their communities and environment.
¹ Human Rights Watch. (2015, June 23). The Dangers of Mercury. Retrieved from https://www.hrw.org/video-photos/interactive/2012/06/15/dangers-mercury
² Kippenberg, J. (2019, February 13). A Brilliant Opportunity for the Gold Sector. Retrieved from https://www.hrw.org/news/2019/02/12/brilliant-opportunity-gold-sector
Silver
Silver is generally a byproduct of other mined materials like gold, copper, and zinc. Although the risks around silver sourcing are less frequently highlighted, they are subject to the same concerns as these other extractive materials. Silver is a highly recyclable material and is increasingly being reused.
Recycled Metals
Using recycled and reclaimed metals helps minimize environmental impact by not further contributing to deforestation and the extraction of materials from the earth. A guiding sustainability principle, “circular economy” can be implemented in jewelry by keeping resources in use for as long as possible and extracting the maximum value from them. This concept should also be applied with diamonds, gemstones, and all finite resources.
Recycling precious metals is especially important when considering the environmental effects. There are now several options for purchasing recycled gold, but buyers should be aware of the nuances. Recycled materials are those which have been purchased or used by consumers (post-consumer), or are a byproduct of manufacturing or finished good that were never in circulation (pre-consumer) that are reused in the manufacturing of products³.
³ The Glossary Project. (2019)
Responsible Mining Initiatives
Responsible mining initiatives to support gold and gemstones as a source of economic and social value in artisanal communities are evolving. Nonprofit organization, Pact, recently developed a standard for mitigating supply chain risk and facilitating formalization of artisanal mining – the CRAFT code. The CRAFT code is a globally-applicable, open source tool to enable due diligence in ASM with the key component of continual improvement. Most artisanal miners are unable to immediately comply with high-level standards due to time, resource, and training restraints. The CRAFT code creates a path towards formalization for these groups.
Fairmined is an example of a responsible supply standard working beyond just due diligence. Fairmined gold originates from small-scale mining groups and is independently certified under the Fairmined Standard, which is comprised of economic, social, legal, and environmental requirements. Critical components of the standard include a premium on the gold price, fair pay and rights for the miners, legal mining operations, gender equality, no child labor, low environmental impact and strong trade relationships. FAIRTRADE gold is another example of responsible supply standards. FAIRGOLD also uses a premium and certifies that sources have met standards on working conditions, child labor, health and safety, and environmental management.
While the illegal gold trade has been immensely problematic in funding conflict in the Democratic Republic of the Congo (DRC), an exciting point of recent progress is the first export of responsible and traceable artisanal gold from the area. Just Gold is a project led by nonprofit organization, IMPACT, which provides capacity building and technical assistance to incentivise artisanal gold miners to trade with legal exporters. Just Gold completed the first export of conflict-free artisanal gold from DRC in 2017 and is continuing implementation of their model.
In the late 1990s, the jewelry industry became broadly aware of conflict diamonds or “blood diamonds” – diamonds which are traded and fund armed groups, child slaves, and other human rights abuses. At that time, the Kimberley Process (KP), an international multi-stakeholder initiative, was developed to increase control of the diamond trade and eliminate diamond-fueled conflict. The KP approached this goal through using a global certification scheme to prevent tainted materials from entering the supply chain. Since then, it has become apparent that this process has limitations and must become more rigorous to truly ensure that the sale of diamonds is not funding harmful activities. Violence, labor issues, and environmental devastation remain serious problems within the diamond trade. Consequently, the United Nations General Assembly has enacted a resolution calling for reforms to increase the efficacy of the KP by expanding its definition of conflict diamonds to include all forms of systemic violence in diamond-mining areas.
Recycled Diamonds
The pernicious issues around diamond sourcing have stirred the industry to seek alternative approaches. As the hardest naturally occurring substance and with an immense supply readily available, diamonds are an ideal material to recycle. While economic principles would traditionally show that increasing the supply of diamonds in the market through recycling could reduce diamond values, responsibly-minded consumers desire to purchase a natural stone without environmental and social concerns may help the entire natural diamond industry retain value against the burgeoning laboratory-grown diamond industry.
Laboratory-Grown Diamonds
Laboratory-grown diamonds have captured the attention of consumers as an alternative to mined stones for their quality, price, and guarantee of not supporting conflict. Human-made diamonds are 100 percent carbon and created with the same chemical properties as natural mined diamonds, resulting in a stone that is difficult to decipher from a natural one without specialized equipment. Laboratory-grown diamonds are becoming a more accessible stone option for consumers as production increases and prices continue to drop. In addition to the cost, laboratory-grown diamonds facilities claim that they are not subject to the same environmental, social, and economic risks as mined diamonds. The environmental claims, especially, have not yet been proven. Environmental researchers note that the industry would benefit from assessing the environmental impact of laboratory grown diamonds versus natural diamonds to identify the best ecological and social metrics of sustainability.
The colored gemstone industry spans the globe and has many dynamics to navigate when it comes to responsible sourcing. While colored gemstone mining can be a source of economic development in countries of origin, it also highly unregulated and rife with social, environmental, and economic risks. Again, forced and child labor, criminal activity, and health and safety concerns are endemic within the trade.
Artisanal and small scale miners are common in the colored gemstone trade and purchasing from the right supplier can have a significant impact. Companies and organizations that strive to make colored gemstone trading a source of economic development have been working to implement frameworks under which the work will require safe conditions, fair pay, environmental management, skill development, and formalization.
Addressing gem-related health issues is another key part of improving the jewelry production practices. Gemstone cutting centers face the growing problem of silicosis, a debilitating and sometimes fatal lung disease caused by the inhalation of silica dust. In 2015, the American Gem Trade Association (AGTA) initiated a six-month long study to evaluate their role in addressing these health concerns. Upon completing the study, the AGTA pursued the funding of abatement equipment in cutting factories and partnered with nongovernmental organizations to develop educational materials that support the use of the equipment.
Responsible sourcing and sustainability is increasingly important to consumers, particularly millennial consumers. A 2017 study found that 88% of millennial consumers are more loyal to a company that supports social or environmental issues, while 76% will refuse to purchase a company’s product or service upon learning it supported an issue contrary to their beliefs.¹ The rise in jewelry businesses claiming ethical products has brought to light an issue that has affected other industries as they shift to more sustainable approaches – greenwashing. Greenwashing happens when businesses falsely convey themselves as responsible or sustainable in order to provide the perception that they have practices in place to ensure products do not create environmental or social harm.
Greenwashing hurts individuals and communities at the source, as well as businesses that are investing time, energy, and funds to improve their supply chains. Ultimately, it prevents the industry as a whole from advancing its sustainability goals. Increasingly savvy consumers, investors, and environmental groups are now questioning the veracity of responsible sourcing and sustainability claims. Similar to marketing synthetic or treated gemstones as natural, the industry will begin to examine these claims more closely as the prevalence of sustainable practices grows and may consider legal guidelines for ethical jewelry marketing. When working to improve your company’s practices, ensure that marketing clearly defines what exactly your ethical practices are and that the claims you make are credible.
¹ Komornicki, S. (2017, May 17). 2017 Cone Communications CSR Study. Retrieved from http://www.conecomm.com/research-blog/2017-csr-study
