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Rapaport Group Sets Human Rights Standard

Aug 30, 2010 9:52 AM   By Martin Rapaport
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Human Rights and the Diamond Industry

A Presentation by Martin Rapaport,
Chairman of the Rapaport Group

Wednesday, August 25, 2010
The Taj Mahal Palace, Mumbai, India

Mr. Vasant Mehta, Chairman of India’s Gem and Jewelry Export Promotion Council (GJEPC); Mr. Mehul Choksi, Chairman of the Federation of Indian Chambers of Commerce and Industry; Mr. Ashok Minawala, Immediate Past Chairman of the Gem and Jewelry Federation; honored guests and clients; ladies and gentlemen: Good evening.

The diamond and jewelry industry is undergoing a period of great change. We are in the midst of a global financial crisis that is realigning social, economic and political power. A new world order is emerging as unprecedented demand, driven by extreme growth in developing economies, reallocates power from West to East and North to South. Over the next decade, India and China will be the new America and Africa will be the new India.

For some, the changes may appear merely economic, as yesterday’s suppliers become tomorrow’s customers and factory nations become consumer nations. But there is more to our story than business: The real issue is power.

As the global economy expands beyond our wildest dreams, hundreds of millions of new consumers will demand more products. Control over scarce raw materials will become a national priority for emerging nations. Access to resources will have political and military ramifications. In some instances, resource warfare may develop as countries fight over scarce minerals. Consider just one example of many: Coltan is an irreplaceable component in all electronic devices from iphones to pacemakers. Eighty percent of the world’s supply of Coltan is estimated to come from the Congo, a country at war with itself.

The issue of how to allocate scarce resources in a peaceful and fair manner isn’t just about diamonds. In fact, diamonds are a decidedly minor issue when one considers the strategic importance of oil, uranium, copper, zinc and many other commodities. The diamond industry must recognize that the external forces that impact our supply and demand scenarios are not limited to economic crisis. They include political and social forces involved in the allocation of scarce minerals.

This now brings us to a discussion of human rights and the diamond and jewelry industry. There is a great need for clarity on this issue and so this evening, I present the Rapaport Minimum Standard:

All diamonds that are legal and not directly involved in severe human rights violations should be freely, fairly and legally traded; and

The phrase “directly involved in severe human rights violations” is defined as describing diamonds whose physical production involved murder, rape, physical violence or forced servitude.

Some firms and brands, including Rapaport, may wish to apply ethical standards above and beyond this Rapaport Minimum Standard and there is nothing wrong with this. Everyone is entitled to maintain and brand their own ethical standard as long as they meet an acceptable minimum standard.

It should be clear that if, when and where laws somehow allow the purchase of diamonds directly involved in severe human rights, I strongly and absolutely oppose the trading of such diamonds in the free market. They are a violation of basic human rights, even if governments somehow try to legitimize them.

It should also be clear that it is unfair to restrict or blame firms that follow the Rapaport Minimum Standard. We must accept the fact that the diamond industry is governed by competitive market forces. If a firm does not buy legal diamonds, their competitors will and they will be forced out of business. Diamond firms have a right to make a living and they should not be prevented from buying diamonds that meet a minimum standard.

Let us now discuss the situation regarding Kimberley Process- (KP) certified diamonds from Marange, Zimbabwe.

The Rapaport position is that if these diamonds meet the Rapaport Minimum Standard, ensuring they are free of human rights violations, they can be purchased, cut and traded in all jurisdictions where they are legal.

The Rapaport Group and RapNet, the Rapaport diamond trading network, do not seek to restrict the legal trade in Marange diamonds or honest efforts to legitimize the Marange mining sector through the introduction of responsible firms that implement proper human rights standards. Furthermore, we recognize the positive opportunity that Marange diamonds bring for increased employment in India.

And finally, we wish to support efforts that increase the quantity of diamonds offered to the diamond trade so as to encourage increased competition and reduce the negative effect of stockpiling or restricted production by mining companies. The diamond industry needs more rough and Marange goods should be legitimized and made available.

Our standards for legitimizing Marange rough are straightforward:

1. Eliminate human rights violations;

2. Allow independent nongovernmental organizations (NGOs) and representatives of the diamond trade free, uncontrolled access to monitor the elimination of such violations;

3. Sell the diamonds through entities that are not on U.S. or European Union (E.U.) sanctions lists; and

4. Assure that the revenues from the diamond sales are distributed legally and in a way that reasonably and fairly benefits the people of Zimbabwe.

Regarding the listing of KP-certified Marange diamonds on RapNet: As RapNet is a U.S. entity and the companies selling the Marange diamonds are owned by entities on the U.S. sanctions list, we are unable to list these diamonds for sale on RapNet. It is a strange situation because the KP has certified diamonds that are illegal for a U.S. or E.U. entity to purchase and made the diamonds legal for trade in India, China and most other countries.

Accordingly, RapNet will not suspend members that legally trade KP-certified Marange diamonds as long as they do not list them on RapNet or sell them to U.S. or other entities that are not allowed to buy them. Of course, RapNet members must also ensure the diamonds they sell are not involved in severe human rights violations, as defined in our minimum standard.

Regarding the possibility of severe human rights violations associated with KP certified diamonds: Unfortunately, the KP does not certify that diamonds are free of human rights violations and therefore, diamonds that have been certified by the KP cannot be assumed to be free of human rights violations.

NGOs that we have spoken to, and our own information sources, have been denied access to the Marange area by Zimbabwe military or police forces. Many NGOs have been afraid to even try and visit the area due to the arrest and continued persecution of Farai Maguwu, a leading human rights activist and legitimate independent source of information.

The current status of our information is that we have been unable to confirm or deny if there are human rights violations associated with the current batch of KP-certified diamonds. We reject reports provided by interested parties who have been given controlled-access, guided tours of the Marange area by the Zimbabwean government, following military cleansing operations.

Our position is that it is the responsibility of sellers, not RapNet, to confirm the absence of human rights violations in the diamonds they trade. Should a RapNet member be found to be trading in diamonds involved in severe human rights violations, they will be expelled from RapNet and named. We strongly urge RapNet members to exercise extreme caution regarding all Marange and other diamonds from questionable areas, even if the diamonds have KP certificates.

And now on to the issue of Reputational Risk.

The fact that Zimbabwean government entities benefitting from the sale of Marange diamonds are on the U.S. and E.U. government sanctions list is a clear indication that firms seeking to maintain a reasonable ethical standard are well advised to avoid these diamonds. While it would be unfair for Rapaport to penalize firms that comply with the Rapaport Minimum Standard, it is reasonable for Rapaport Group companies and others to consider refusing to trade in such diamonds.

Consider the following example. If Rapaport or others wish to restrict our diet to vegetarian food, we have a right to do so. Furthermore, if firms wish to open a vegetarian restaurant that restricts certain foods, they have the right to do this, as well. Finally, firms have a right to advertise the fact that vegetarian food is better than nonvegetarian food so as to attract customers to their restaurant.

The issue here is that just because certain diamonds are legal does not mean that they are ethical. Ethical firms may wish to apply standards above the law. They might consider who benefits from the sale of the diamonds. Some firms may not want to buy diamonds that fund activities they consider bad or support suppliers who fail to direct money to legitimate stakeholders. Essentially, diamond buyers, like restaurant diners, have the right to choose where and how they spend their money.

While I understand and accept the concerns of diamond cutters in Surat, I also understand and accept the concerns of diamond retailers facing socially conscious consumers across the jewelry counter. Cutters may not have an incentive to do anything “above the law” out of fear that if they don’t buy Marange goods they may lose business. On the other hand, the position of some jewelers may be the exact opposite. They may fear losing customers if they do not offer socially responsible ethical jewelry.

The bottom line when it comes to applying ethical standards that are “above the law” is the bottom line: the financial bottom line. In other words, in order for firms to apply ethical standards that are “above the law,” they must have an economic incentive to do so. In order for rational business firms to be ethical, it must “pay” to be ethical.

We must understand that ethics in the diamond and jewelry industry is a business matter. Firms will do what is good for their business — no more and no less.

The way forward is for socially responsible firms to create and encourage demand for ethical jewelry products. We must create a situation where ethical suppliers make more profit than unethical suppliers and firms compete to sell “better” products. The level of ethical behavior in our industry depends on our ability to create sustainable ethical demand and the willingness of consumers to pay higher prices for ethical jewelry.

Firms must recognize that the level of their ethical behavior is a business decision, sort of like deciding if you are going to produce an Excellent or Very Good cut for a diamond.

In conclusion, let us consider the Golden Rule. Most interpretations explain that the golden rule means that you should treat others as you yourself would wish to be treated. So, Indian cutters in Surat would want poor diggers in Marange to be treated as they would like to be treated — not taken advantage of.

There is, however, another interpretation. The golden rule means that he who has the gold rules. This also implies that he who has the gold has a responsibility to spend the gold wisely and responsibly.

The point here is that consumers and companies must take full responsibility for how they spend their money. All of us are responsible for the unintended consequences of our purchasing decisions.

The bottom line of our story is that India is on the way up. It is doing well and will do even better. India is no longer the poor country it once was. India now has the gold.

India now has the ability to spend many tens of millions of dollars in Zimbabwe. Imagine how that money could benefit the people of Zimbabwe if it is channeled responsibly. What a great opportunity India has to create good karma, to help Zimbabwe, to create ethical products and fair trade jewelry.

I believe in India and I believe in the goodness of its diamond people. And I believe that when all is said and done, India’s diamond community will use their purchasing power to greatly benefit the people of Zimbabwe. With India’s help and responsible actions, I pray that Marange diamonds can and will be a blessing for the people of Zimbabwe and the people of India.

Thank you. 

View the related Rapaport Press Release from August 30, 2010.


For additional information about the Rapaport Group and our position on human rights and the diamond and jewelry industry, please email fairtrade@diamonds.net or visit www.diamonds.net.

About the Rapaport Group: The Rapaport Group is an international network of companies providing added-value services that support the development of free, fair, competitive and transparent global diamond markets. Established in 1978, the Rapaport Diamond Report is the primary source of diamond prices and market information. Group activities include publishing, research and marketing services, Internet information and diamond-trading networks, global rough and polished diamond tenders, diamond certification, quality control, compliance, shipping and financial services. Additional activities of the group include the development of markets for ethical and fair trade diamonds and jewelry. Additional information is available at www.Rapaport.com or by sending email to info@rapaport.com.
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