Nowadays, we see that the responsible supplies and tracing the provenance of rough diamonds are thriving and widely discussed in the industry. Only recently, Human Rights Watch once again criticized jewellery retailers pointing out that not all of them can provide information about the provenance of goods they sell. At the same time, various companies try to establish their own tracing systems. Recently, IBM announced the creation of their TrustChain for the jewellery industry. Even earlier, De Beers started the development of a blockchain platform for similar purposes.
Today, Russia keeps up with the trend and maybe even moving ahead of it in some aspects. On the sidelines of the annual meeting held by Responsible Jewellery Council (RJC) in Moscow last week, the representatives of the Russian Federation Ministry of Finance, regulating this market in Russia, and the world’s largest diamond miner, ALROSA, told the audience that they had been engaged in large-scale activities in this field for a long time.
Regulator protects the market
Alexey Moiseev, Deputy Minister of Finance of the Russian Federation, said that in accordance with the resolution of the authorities, a large-scale pilot project would start in this country on June 1, 2018 for marking jewellery. “At the first stage, government authorities, jewellery manufacturers, mining and processing companies will establish exchange of information between them. this relates both to the goods made in Russia and imported goods. The information about them will be exchanged between the system participants – the Customs Service, Assay Chamber, Ministry of Finance and the market stakeholders,” Alexey Moiseev said.
The pilot system is underpinned by the solutions devised in Russia and it is already being tested. During the next stage starting in 2019, each jewellery piece in a store will bear a special QR-code. “Any buyer of a jewellery piece will be able to scan its code with his or her smartphone and get the information where the gold in it was mined and affined, where the stone was extracted and cut, where the jewellery piece was made, and so on,” the deputy minister said.
He explained that the main purpose of this work is to protect consumers from low-quality and counterfeit products, the share of which in the market being a concern to the regulator. “Unfortunately, there are substandard goods in the market now – for example, a hallmark on a jewellery piece may not correspond to the real one. This explains the complaints we receive from time to time that the ‘diamond in the ring got scratched, the metal has changed its color, turned black or green.’ To prevent this, we are developing a system that will enable us to fully control the market and allow the customer to be completely protected and have confidence in what he or she buys. The customer will be able to see all the information in this system, and if any part of the information does not correspond to what the seller is telling, it will mean the item is fake. Similarly, the customer can be sure that the stone he or she buys is really natural, not lab-grown,” Alexey Moiseev said.
According to him, the Ministry of Finance simultaneously examines the technologies, mainly developed in Russia, that will allow manufacturers to put this information not on the label but on the jewellery piece itself – both on the metal and on the stone. The regulator will switch over to marking jewellery goods later on and step-by-step, as soon as the appropriate services and manufacturers will be ready to do this.
“Our ultimate goal is to have a computer-readable marking not only on jewellery pieces but also on their components, that is on their settings and inserts. Currently, we are looking into marking technologies, first of all into those developed in Russia, also paying attention to marking techniques applied to diamonds. That said, the system should function so that these data could be saved and transferred through all the stages even during the processing operations, for example, on a rough diamond or gold bullion. It is a rather complex integrated system, much more sophisticated than everything ever created. Each jewellery item will have an immutable digital ‘trace’ at each stage. Practically it is a ‘Big Brother’,” he said.
ALROSA responds to the consumers’ needs
ALROSA is also working on the development of a tracing system. “We are in no way stimulated in this respect by the government, although our efforts to solve the same task coincided,” Sergey Ivanov, CEO of ALROSA said. “ALROSA has long been working on its own tracing system, as we see the change in the needs of both consumers and retailers. There is a strong demand from jewellery houses – not only in the United States, but also in China, India and the Middle East. Today’s consumers are now interested not only in prices and quality of jewellery, but also in its ethical component, the stone’s story.”
According to Sergey Ivanov, ALROSA is now developing a prototype of its own system to trace the stone’s provenance and route, including the development of a digital platform where a consumer will have access to all this information. It is expected that it will contain all the data – from the date and place of a stone’s extraction to the date and place of its cutting and polishing, “technologically this can be traced even to the name of the cutter if this information is of interest to the consumer.”
“Taking into account the reputation, the brand of Russian rough diamonds, the compliance with the ethical standards, environmental standards, quality of our cutting and polishing, Russian jewellery traditions, it is very important that the customers should have an opportunity to get an online access to this data base, so that he or she would understand that exactly this jewellery item consists of the rough diamonds mined in such-and-such countries, including Russia, and cut at such-and-such factories, and that there are no toxic elements in the value chain that could influence the customer perception,” Sergey Ivanov said.
It is expected that ALROSA will start the development of this system intended for large-size rough diamonds. “Technologically, it is not possible to translate this system to the entire range of rough diamonds,” he explained. “We shall continue to study this issue, and it is possible that it is not necessary at all in the small-size segment. In the large-size segment – on the contrary. Firstly, these are higher–end stones with a high added value. Secondly, the clients, who purchase these stones, show greater demand for this information.”
At the first stage, ALROSA will include diamonds cut and polished at its own subsidiary, BRILLIANTY ALROSA, into this system. If Smolensk-based diamond manufacturer Kristall will be integrated into ALROSA, this system may also be tested there. Then, ALROSA will study how to involve other market stakeholders into the system.
“Our solution is not an attempt to protect ourselves from other systems that are under development by other players in other countries. We communicate with our colleagues and look at other technologies, too. We do not see any problems here because eventually we are solving our common task – strengthening the consumer confidence in our industry. I think that various systems in the market will be mutually supportive, and the customers will choose which platform they would like to use,” Sergey Ivanov said.
While studying the issue, we could not find any examples of similar systems in the industry used in other countries yet, especially those regulated at the governmental level (although, Rough&Polished will look into this issue more thoroughly). At the same time, there are many similar systems in other fields. The currently popular ‘Responsible Consumption’ has been long urging manufacturers to provide full online information, starting from the place of raw material production. There are such examples in the apparel and food markets.
The jewellery industry has always been one of the most difficult to regulate. In their journey to the store, both gold and polished diamonds go through many stages and many intermediary hands. This complicates the tracing of goods and also gives an opportunity for fraud. All of us know that there are cases of selling synthetic diamonds passed off as natural diamonds, and also cases when a fairly average-quality polished diamond is passed off as an ideal and high-end gemstone.
If the above-mentioned plans will be implemented, this will protect consumers to a great extent – at least, customers in Russia and ALROSA’s clients. However, as Alexey Moiseev noted that “the world market is now turned global and that is why if tracing is well streamlined in some country, this does not solve the whole problem. That is why this industry requires, first of all, joint efforts and co-operation.”