RAPAPORT... 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, these changes may appear to be merely the result of economic evolution, 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.
Control of Resources
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.
Rapaport Minimum Standard
Regarding the issue of human rights and the diamond and jewelry industry: There is great need for a clear and simple minimum standard that everyone can understand and apply. We have therefore established the following minimum human rights standard.
The Rapaport Minimum Standard: “All diamonds that are legal and not involved in human rights violations may be freely, fairly and legally traded.”
Some firms and brands, including Rapaport, may wish to apply ethical standards above and beyond the Rapaport Minimum Standard, and there is nothing wrong with that. 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 allow the purchase of diamonds involved in human rights violations, I strongly and absolutely oppose the trading of such diamonds on the free market. They are a violation of basic human rights even if governments 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 firms do 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.
Zimbabwe and the KP
The Rapaport position is that if Kimberley Process (KP)–certified diamonds from Marange, Zimbabwe, meet the Rapaport Minimum Standard and 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 nor 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 other cutting centers. And finally, we wish to support efforts that increase the quantity of diamonds offered to the diamond trade in order 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:
• Eliminate human rights violations.
• Allow legitimate representatives of the diamond trade and independent nongovernmental organizations (NGOs) free, uncontrolled access to monitor the elimination of such violations.
• Sell the diamonds through entities that are not on U.S. or European Union (E.U.) sanctions lists.
• Assure that the revenues from the diamond sales are distributed legally and in a way that reasonably and fairly benefits the people of Zimbabwe.
Marange Diamonds and RapNet
Regarding the listing of KP-certified Marange diamonds on RapNet: RapNet is a U.S. entity and the companies selling the KP-certified Marange diamonds are subject to U.S. sanctions. RapNet does not support the sale of diamonds from sanctioned entities and has therefore banned the listing of Marange diamonds on our network.
Furthermore, we are deeply concerned about continuing human rights abuses involving Marange diamonds due to the fact that the Zimbabwean military continues to deny access to legitimate, independent human rights inspectors we can trust.
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 yet made the diamonds legal for trade in India, China and most other countries.
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 that the diamonds they sell are not involved in human rights violations as defined in the Rapaport Minimum Standard.
Regarding the possibility of human rights violations associated with KP-certified diamonds: The KP does not certify that diamonds are free of human rights violations. Therefore, KP certification and the KP system of warranties cannot and should not be relied upon to assure the legitimacy of diamonds.
NGOs with whom we have spoken, 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 visit the area due to the arrest and continued persecution of Farai Maguwu, a leading human rights activist. The current status of our information is that we have been unable to confirm or deny whether there are human rights violations associated with the current batch of KP-certified Marange 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 knowingly trading in diamonds involved in human rights violations, that member 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.
Reputational Risk
The fact that Zimbabwean government entities benefiting 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” for them to be ethical. Firms will do good and be good as long as it is good for their business.
We must recognize that the level of ethical behavior and sourcing in our industry is a pragmatic business decision based on cost benefit and driven by consumer demand. It is similar to a manufacturer’s or retailer’s decision to produce or sell Fair, Very Good or Excellent cut diamonds.
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 “more ethical” 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.
India and the Golden Rule
In conclusion, let us consider the Golden Rule. Most interpret the Golden Rule to mean 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 and not be taken advantage of.
There is, however, another interpretation. The Golden Rule also means that he who has the gold, rules. This 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.
We must recognize India’s powerful role as the world’s primary diamond cutting center. Furthermore, India’s rapidly expanding economy is creating unprecedented wealth and opportunity, as well as a booming national jewelry trade. India is no longer the poor country it once was. India now has the gold and with that gold comes responsibility.
India now has the ability to spend hundreds of millions of dollars in Zimbabwe and other countries with problematic human rights issues. Imagine how that money could benefit the poor people of Zimbabwe if it is channeled responsibly. Imagine how it could create good karma for India, Africa and the international diamond trade. But let us also imagine how that money could support oppression, slavery and other human rights abuses if it is spent irresponsibly. How India buys its rough diamonds will have major impact on the reputation of diamonds and the diamond industry.
Let us also recognize that the responsibility is not India’s alone. It belongs to all of us — cutters, wholesalers and retailers the world over. We must set ethical and moral standards for how and from whom we buy diamonds. We must seize the opportunity to create ethical diamonds and jewelry products and markets.
For, in the end, after all the articles are written and read, after all the money is made and spent, in the very end, our diamonds are only as good as we are and we are only as good as the good our diamonds have brought to the world.
For more information on Rapaport and Fair Trade, please visit www.rapaport.com/zimbabwe or email fairtrade@diamonds.net
Article from the Rapaport Magazine - October 2010. To subscribe click here.