Some of the biggest concerns facing the jewelry industry include the need to properly disclose the material characteristics of the jewelry we sell along with increased consumer expectations when it comes to where and how products are sourced. The latest Jewelers of America Industry Risk Report for JA Members looks at areas of heightened risk around these concerns – like undisclosed lab-grown diamond melee and responsible sourcing -- and how the industry is working to address them.  

To prepare and protect your business what follows is a summary of the latest reputational risk analysis prepared by for Jewelers of America's Ethical Initiatives Committee by Sustainable & Responsible Solutions (SRS), a UK-based consultancy that specializes in risk assessment and strategy. 

Areas analyzed in most the recent report

For further information, JA Members have access to a full range of Member Guidance on some of the issues below and can browse past Risk Reports. 


Laboratory-Grown Melee Diamonds

The Risk Report focused on undisclosed laboratory-grown diamond melee and the reports that these stones have entered the natural diamond supply. The Report stated that it is inevitable that some jewelers in the U.S. will unknowingly sell lab-grown melee as natural at some point (if they haven’t already). Several factors show that this is a trend that will increase, not decrease, if the industry doesn’t work to ensure proper disclosure of lab-grown throughout the supply chain. 

Reasons for More Lab-Grown Melee

  • As more lab-grown diamonds are produced -- with new facilities coming online in the last year – the price of lab-grown diamond melee has dropped significantly, down to as low as $5 (and occasionally lower) per carat (for 150/200 stones) at the time of publishing.
  • At the same time, the major producer of natural small stones that are destined for melee, Rio Tinto’s Argyle mine in Australia, is set to close sometime in 2020. As the supply of natural melee decreases, diamond manufactures – especially in markets like India and China – are expected to turn to lab-grown melee to meet their demand for goods.


Detection Options

The industry is working to keep undisclosed lab-grown goods out of the natural supply with new testing services and devices introduced each year by De Beers, GIA, HRD Antwerp and others. While better detection technology is a good thing, it isn’t a cure-all, and the Risk Report cited several concerns related to detection including the high cost of most devices on the market, a lack of industry-wide standards for detection devices, and the fact that current devices cannot check melee in bulk that has been set into jewelry. To address some of these issues, the Diamond Producers Association (supported by Alrosa, De Beers and Signet) has commissioned Underwriters Laboratories to develop a standard – under the name “Project Assure” – to provide independent assessment of the performance of diamond detection devices. That standard is expected to be available later this year and will be a welcome and much-needed addition to the industry’s tool chest.

Jewelers of America continues to work closely with other industry associations, through the United States Jewelry Council, to stay up to date on the issue and provide tools that can help the industry – and JA Members – protect consumer confidence. We will update members as needed.


How to Avoid the Risk

Outside of testing every stone, there is currently no foolproof way to have 100% assurance that undisclosed lab-grown diamonds aren’t entering the natural diamond supply chain.

 

Reducing Risk With Responsible Sourcing Initiatives

World Diamond Council System of Warranties

While the Kimberley Process remains an important tool in addressing the issue of conflict diamonds, our Risk Reports have continuously reported that the industry and consumers are demanding assurances beyond its narrow definition of conflict diamonds. With this in mind, the Fall Risk Report gave an update on the World Diamond Council's strengthening of its System of Warranties to address human rights violations and other ethical sourcing issues more directly, covering gaps that have not been fully addressed by either the Kimberley Process or the System of Warranties to this point.

While the Kimberley Process only deals with rough diamonds, the WDC System of Warranties deals with all diamonds, rough and polished, from mine to retail. Among the key changes proposed are new guidelines that seek to improve the current System of Warranties by making compliance with the Kimberley Certification Scheme obligatory, versus voluntary, and the addition of a self-assessment process and increased levels of verification. Additionally, the new guidelines ask users of System of Warranties Statements to voluntarily support universally accepted principles on human and labor rights, anti-corruption and anti-money laundering, none of which are part of the current System of Warranties.

With tremendous pressure on the jewelry industry to address concerns around the effectiveness of the Kimberley Process, Jewelers of America believes it is critical to strengthen the WDC System of Warranties. The hope is that WDC can have a new system in place for the Kimberley Process Plenary in November. Stay tuned, Jewelers of America will keep members updated on the WDC's progress.


Blockchain

The Risk Report also provided an update on how the jewelry industry is utilizing the technology of blockchain as part of the solution to increase the traceability of product from the mine to the consumer. Blockchain is a digital, decentralized ledger of transactions, which grows as completed “blocks” are recorded. The technology is secured using cryptography, so it cannot be tampered with once the data has been recorded. For the jewelry industry, blockchain can trace goods by registering each interaction (such as when a diamond is cut and polished) through the supply chain from mine to retail.

In recent months, there have been several major announcements about the progress of developing blockchain programs within the industry:
  • First, De Beers has successfully completed a pilot on its program, Tracr, which tracked 100 large diamonds (more than 2 carats) from mine to retail, with the involvement of five De Beers Sightholders. Signet Jewelers is the first retailer to publicly announce their involvement, though other retailers will also participate.
  • De Beers also announced it is preparing a pilot program called “GemFair” on behalf of the Diamond Development Initiative. That program would create a secure and transparent route to market for ethically-sourced artisanal and small-scale mined (ASM) diamonds. GemFair will use dedicated technology to record ASM production at mine sites that meet demonstrable “ethical” standards, with the aim of purchasing rough diamonds from approved locations, while helping to improve working conditions and livelihoods for those in the sector.
  • Richline announced that it has successfully completed a pilot of its blockchain: TrustChain Jewelry. Their efforts involved companies within the Berkshire-Hathaway group, together with Rio Tinto, Asahi Refining and UL Responsible Sourcing. It covers both diamond and gold, from mine to retail.

While these blockchain programs show technology can work in the jewelry industry to aid in tracking the supply chain and sourcing of goods, our Risk Report authors at Sustainable & Responsible Solutions advise that blockchain should be viewed as another tool and not a panacea. How useful it proves to be depends entirely on the accuracy of the information fed to the technology. Additionally, the current pilots announced have focused on relatively large stones and it remains to be seen whether or not blockchain can work with melee. Jewelers of America will continue to monitor these efforts and share updates with members.

About JA’s Industry Risk Reports
Jewelers of America Members have access to SRS risk assessment and management servicesThis email address is being protected from spambots. You need JavaScript enabled to view it., JA Director of Membership & Sales, to learn more.

Staying well ahead of the curve on issues that can damage consumer confidence or restrict your business operations is a critical component of the work Jewelers of America is doing on behalf of our members. In fact, part of our Board governance includes a committee dedicated to ethical initiatives within the industry. Each quarter, the committee reviews a professionally prepared “risk report” to identify key risks -- and opportunities -- facing the jewelry sector. While we don’t have a crystal ball forecast of the future, the risk assessment reports help Jewelers of America develop member guidance on issues so your business remains risk-free and your reputation secure.
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