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Pleading Signet’s CSR Case

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May 11, 2017 8:00 AM   By Avi Krawitz
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RAPAPORT... “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you would do things differently.” — Warren Buffett.

Signet Jewelers has had a frustrating time of late. In the past year, it has battled allegations of diamond-swapping, sexual harassment and gender discrimination that have put its brand on the back foot and depleted its share price by more than 40% since last May.

But the company’s valuation is not the only casualty here. Signet, the largest jewelry retailer in the US, has made great strides in advancing responsible sourcing for the jewelry supply chain — strides that the recent negative publicity has overshadowed. And while this consequence is unfortunate, it serves as a reminder to the diamond and jewelry industry that a company’s reputation makes all the difference in a socially conscious consumer environment.

As Signet has carefully responded to each of the claims against it, it has highlighted its corporate social responsibility (CSR) program. Last month, the company published a CSR report for the first time — a “celebration” of its past activity in this area “going back decades,” David Bouffard (pictured), vice president of Signet corporate affairs, told Rapaport News at the time.

Responsible sourcing is one of four pillars that governs Signet’s CSR policy, as outlined in the report — the others being its people, environmental stewardship, and charitable giving. It’s also the policy that will likely have the biggest impact on the greater diamond and jewelry market.

Considering that Signet sources goods from approximately 700 suppliers across the globe, its responsible-sourcing protocols have a far-reaching effect. In addition, the company requires its suppliers to implement those protocols with their subcontractors, extending the impact even further into the trade.

“The raw materials that go into our jewelry — including gold, diamonds and other precious metals and stones — come from a multitude of locations around the world,” the company wrote in the report. “We understand that because this is such a complicated supply chain, maximizing transparency is essential.”

After successfully implementing protocols for gold and the 3Ts — tungsten, tantalum and tin — Signet has claimed a conflict-free gold supply chain for three consecutive years. It’s currently developing a protocol for silver and platinum-group metals, which is scheduled to launch this year, and one for colored gemstones, slated for 2020.

The protocol for diamonds — be it rough, polished or mounted in jewelry — was rolled out last year, and implementation is under way.

All of Signet’s sourcing and compliance practices take a two-pronged approach, one focusing on suppliers and the other on the raw materials themselves.

On the supplier side, Signet requires all companies that it works with to join the Responsible Jewelry Council (RJC), a body that sets responsible business practices for diamonds, gold and platinum-group metals. The protocols also encourage suppliers to purchase their goods from other RJC members. Last year, 199 of Signet’s suppliers were part of the council — up from 50 in 2014 — accounting for approximately 99% of the company’s purchased inventory, Bouffard noted.

Verifying the actual raw materials is more complicated, especially for diamonds.

To better clarify the origin of diamond production, the Signet Responsible Sourcing Protocol for Diamonds (D-SRSP) breaks down supply into four categories:

1. Single-stone tracking — Individual diamonds that have been tracked to the four major producers: De Beers, Alrosa, Rio Tinto and Dominion Diamond Corporation.

2. Parcel tracking — Parcels of diamonds verified to have been supplied by those major producers, even if the individual stones have not been tracked.

3. Mixed sources — A mixture of diamonds derived from various sources, with a percentage of goods coming from identified ones.

4. Other identified sources — Diamonds from a producer country or mine that is not affiliated with the top four companies.

Bouffard said the program would help Signet figure out what percentage of diamonds were bought from the four largest mining companies, which in turn would indicate how much of the supply was coming from the artisanal sector. That knowledge would enable Signet to work more with artisanal miners through organizations such as the Diamond Development Initiative (DDI), he explained.

“It’s not about tracking diamonds as much as it is understanding the source of supply,” he said. “We want to work with all sectors of the supply chain.”

Signet expects to have better information about the source of its diamonds a year from now — in time for its next CSR report. And since the company is one of the largest buyers of diamonds in the market, its findings would present a picture of the industry’s wider supply chain.

In today’s retail environment, such efforts are essential, Bouffard stressed.

“Consumers, especially millennials, before walking into a store, make the assumption that the goods are sourced responsibly,” he said. “We’re giving them the assurance that we meet their expectations. We have to meet their expectations.”

It’s a narrative the company has repeated within the industry over the past few years as it has led the charge to develop a practical system that provides those guarantees.

It’s therefore somewhat ironic that the other areas of Signet’s CSR program have been called into question.

The contrast between the company’s responsible-sourcing work and the sexual harassment allegations it is fighting — the most serious of which date back to the late 1990s and 2000s, according to a Washington Post report — suggest that Signet is a vastly different company today than it was a decade or two ago. Yet a company is always responsible for its actions — past, present and future. That goes as much for Signet’s stature in the public eye as for the legal consequences it is expected to endure.

The awareness that the industry is vulnerable to such reputational risks should force everyone in the supply chain to take Warren Buffett’s advice and “do things differently.”
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Tags: Avi Krawitz, CSR, diamonds, gemstones, gold, Jared, Jewelry, Kay Jewelers, Responsible Jewellery Council, responsible sourcing, RJC, Signet Jewelers, silver, warren buffett
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