Diamond Disclosures

Avi Krawitz

If it looks like a diamond and shines like a diamond, it must be a diamond. That is, at ‎least, from a consumer point of view. The respective discussions this past week ‎regarding undisclosed synthetic stones filtering the market and attempts at the World ‎Diamond Council (WDC) meeting to widen the definition of conflict diamonds have ‎correctly argued otherwise. 
Whether the industry likes it or not, today’s diamond consumer has many questions to ‎consider when making a diamond purchase — in addition to the four C’s. Is the diamond ‎natural or man-made? Is it ethically sourced? Does it have Kimberley Process (KP) ‎certification?  And is that enough to ensure it is conflict free?‎

Both issues illustrate the importance of providing full disclosure regarding where the ‎diamond is sourced and tracking its development throughout the supply chain. Ultimately, ‎both issues will impact consumer confidence if not responded to appropriately. ‎

The International Gemological Institute (IGI) issued a trade alert this week that hundreds ‎of undisclosed CVD synthetic diamonds were found at its Antwerp laboratory. IGI’s co-‎chief executive officer Roland Lorié stressed to Rapaport News that the company ‎recognized the potential impact that the news might have on consumer confidence, ‎which motivated its decision to go public about the matter. Encouragingly, the trade was ‎quick to state its position.‎

‎“Our structure is such that we cannot tolerate any misuse of the reputation of our ‎business,” said Avi Paz, president of the World Federation of Diamond Bourses (WFDB). ‎‎“These recent events emphasize the importance of buying from sources that can be ‎trusted. It is in the interest of our global business that it remains transparent so that ‎consumers can receive full disclosure about the diamonds they purchase.”‎

It is important to recognize that synthetic diamonds are legitimate products when ‎disclosed properly. In the same way that natural diamonds are sent to laboratories for ‎grading and certification, companies producing synthetics work with various laboratories, ‎IGI included, to determine the quality of their stones. ‎

Therefore, they represent a real competitive product to natural diamonds. With the ‎technological advances that make it increasingly difficult to differentiate between the two, ‎competition from synthetics may shift jewelry demand away from natural diamonds and ‎restrain natural prices. ‎

The IGI case is indicative of this development. Lorié noted that the polished dealer who ‎submitted the goods to IGI’s Antwerp lab was unaware that his goods were synthetic and ‎that he bought them at natural diamond prices. Lorié explained that the goods came ‎complete with inclusions and that only the sophisticated equipment at the laboratories ‎could detect that they were CVD synthetics. ‎

Where does this leave the consumer-diamond trade relationship? Not only is it incumbent ‎upon the trade to insist on the required disclosures, but it is also necessary that it educate ‎consumers why they should insist on full disclosure about their purchases. Of primary ‎concern to the entire jewelry industry are the three D’s – detection, disclosure and ‎documentation. Failure to ensure either should be regarded a fraud and unethical. ‎

Members of the diamond industry need to recognize that being a responsible corporate ‎citizen — by insisting on full disclosure and transparency — enhances their product. ‎

The same applies to ensuring that the diamond is conflict free. But while the trade may ‎be effectively responsive regarding the synthetics issue, one cannot help but feel it is ‎missing the point on the conflict diamond front.  ‎

In a statement from its annual meeting in Vicenza, Italy, the WDC affirmed a proposal ‎that conflict diamonds should cover “diamond-related violence in rough diamond ‎producing and trading areas.” The change represents expanding its current definition that ‎limits conflict diamonds to those funding rebel movements opposed to legitimate ‎governments.‎

Whether the WDC’s resolution is as significant as it was hailed, remains to be seen. For ‎now it’s a mere suggestion. In reality, the chance that the resolution — which will be ‎proposed by Gillian Milovanovic, the U.S. KP chair — will pass at the KP, is minimal. The ‎consensus system at the KP is difficult to navigate, and, without a vote, the WDC’s role ‎will be to lobby those government’s that rely on the trade to come on board. Already, ‎reports have surfaced that certain countries would oppose it. The harsh reality is that it is ‎not in the interest of a number of governments in the KP to change the conflict diamond ‎definition.

Notably, the wording — which is loosely based on Milovanovic’s proposal — did not ‎include any human rights language. Rather, as the KP chair suggested to Rapaport ‎News, it is implied, with the hope that a softer tone will enable the discussion to progress.‎

The industry should not have that luxury of compromise. The fact that the WDC does not ‎vote at the KP should enable it to take a stronger stance. The organization should ‎therefore not be taking its cues from the KP or presenting the KP as the solution to ‎diamond-related human rights issues. ‎

In 2010, Rapaport Group recognized this and defined a conflict diamond as, “A diamond ‎which comes from a mine located in or providing profits to any of the following: civil ‎conflict; an illegitimate rebel movement; an oppressive regime; or a violation of the ‎Rapaport Minimum Human Rights Standard. A conflict diamond is also a diamond which ‎is mined, cut or polished under harmful or unjust labor conditions.”‎

Indeed, the lack of strong human rights language and the WDC’s inability to influence the ‎debate illustrates that it cannot ensure responsible corporate practice throughout the ‎diamond pipeline. ‎

A robust ethical verification is certainly required for diamonds, which neither the WDC ‎nor the KP can guarantee. In the same way that consumers are being accustomed to ‎question whether their diamonds are natural or synthetic, they will increasingly insist on ‎the ethical DNA of their purchase. ‎

Here too, the industry will be called on to insist on full transparency based on the three ‎D’s. Can we ensure that there is sufficient detection, disclosure and documentation ‎applied to all ethical issues regarding the diamond purchase? ‎

The industry needs to recognize that non-disclosure of both synthetic and unethically ‎sourced diamonds is tantamount to fraud in the same way. The less that the trade does to ‎protect consumers from such purchases, the less inclined consumers will be to buy the ‎product. By guaranteeing complete disclosure and transparency, the industry can ‎safeguard the value of its natural product, and ensure the true authenticity of the ‎diamond.‎

Source Rapaport