Industry Has to Raise Bar Ethically

With consumers more skeptical, ethical issues are increasingly front and center in the jewelry industry, panelists agreed at a Jewelers of America Executive Roundtable discussion on business relationships between retailers and suppliers.

Cecilia Gardner, president and CEO of Jewelers Vigilance Committee, stressed the “benefits of legal compliance.” Gardner noted that the jewelry industry is looking at a “more complicated world,” where there is “increased scrutiny of our industry.” She cited increased criminal prosecutions and investigations of the industry, as well as nongovernmental organization campaigns about conflict diamonds and dirty gold.

“Do you know your legal obligations?” she asked. “Can you protect your business from risk and legal liability? What we need to build in this industry is a corporate culture of compliance so compliance becomes part of the everyday running of your store.”

Legal compliance should be “a value that you incorporate into your business model, so that you are aware of the law and implement it,” she said.

“Integrity is good for your business,” she added. “It increases customer trust, and that helps your bottom line. Staying out of jail and court is good for business, too.”

Legal compliance for jewelers today includes following the FTC Guides for the Jewelry Industry, conflict diamond rules, and anti-money-laundering regulations.

Gardner noted that not complying with anti-money-laundering rules can be a criminal offense.  Complying with conflict diamond rules increases consumer confidence, because “consumers want to feel confident that the diamonds they are buying are not hurting people in Africa.”

Another issue is blue topaz, where retailers have to ask their suppliers for warranties about how the stones are irradiated because of new scrutiny from the Nuclear Regulatory Commission. “Believe me, as the head of the Jewelers Vigilance Committee, I never thought I would be sitting in the same room with the Nuclear Regulatory Commission,” she said. She noted that there was fear that the market would collapse. “And for a while that almost happened,” she said. “Retailers pulled their blue topaz from the shelves.”

Michael Rae, CEO of the Council for Responsible Jewellery Practices, agreed that consumers were becoming increasingly skeptical. “We are living in changing times,” he said. “We are seeing in the younger generation a greater interest in social and environmental issues. People want to know: How was this product made? How was the environment impacted? Was anyone hurt by this product? Or, conversely, did anyone benefit?”

He noted that while most jewelers didn’t know much about cyanide and gold mining, if there is a repeat of the 2000 gold spill at the mine in Romania, retailers could start to be asked about it. “At the end of the day, jewelry is emotion,” he said. “It does not house or feed people. As my chairman, Matt Runci, put it, you don’t want emotions associated with collateral damage. We need to be able to clearly signal to our customers that we are doing the right thing.”

His organization is publishing standards for the industry, as well as guidance on how they should be implemented. “Our system is geared around the notion of continuous improvement,” he said. “We want to create a community of confidence.”

As evidence of some of the complicated issues the council is dealing with, he pointed to child labor. “The simple answer is: There is no simple answer,” he said. “It is not a matter of saying we cannot have a child of a certain age working on jewelry. Look at the impact of HIV/AIDS in Africa. You may have a situation where a young boy may well have a job somewhere in this industry and he is the sole breadwinner in this family. If he is out of a job, his younger sister may have to become a prostitute. These are the difficult ethical issues we are wrestling with.”

John Hall, external affairs manager for Rio Tinto, the diamond miner, says his company increasingly has to deal with reputational issues. “As a mining company, our business is based on access to land,” he said. “And people will only open their land to us if our reputation is second to none.”

Things like looking at the environment, community development, and anthropology are now considered core competencies for a mining company, he said. “We do have to be able to demonstrate that our supply chain is beyond reproach. There are risks in our industry, things like terrorism financing and the use of our product by criminal organizations. And so we have a particular responsibility to look after those issues.”

He noted this is not something any one company can do on its own but requires all-encompassing industry organizations like JVC and CRJP. “I would commend to all of you the need for all of us to continue to work together as we work to build the reputation of the industry going forward,” he said.

John Hayes, owner of Goodman’s Jewelers in Madison, Wis., said his customers in a college town are “increasingly well connected to global issues.” Being able to respond to the issues has given his store increased confidence. That includes providing printed handouts about the Kimberley Process and being interviewed by local media after the Blood Diamond movie.  He also has a program where all the proceeds from watch batteries sold on Mondays go to children’s charities.

“I have the integrity of our 75 years in business to protect, which is something I don’t take lightly,” he said. “We have to set ourselves apart and stay constantly on top of the issues. When you do the right things, people will notice, and it will help you build business.”

Kathe Mai, partner in Trios Studio, in Lake Oswego, Ore., said her embrace of fair trade gemstones has won her all sorts of new customers. “This is not all about price,” she said. “It is about our relationship with our suppliers. It is about how we spend our money.”

As Peggy Jo Donahue, director of public affairs for Jewelers of America and the session’s moderator, said, “We are the beginning of this process. Many different models are going to develop.”