RJC Punts on Chain of Custody

This morning, the Responsible Jewellery Council announced it was delaying implementation of its “chain of custody” initiative for diamonds, in response to trade objections. The RJC leaders I spoke to seem a bit taken aback by some of the criticism their proposed system has drawn, most of which began brewing after last week’s meeting with diamond industry leaders at the State Dept.

Now, on the surface, one could argue, there is no reason for anyone to object to this system, as no one is forcing anyone to be a part of it. Only one miner (BHP) makes it compulsory to join RJC, and that miner is likely exiting the business. What’s more, the chain of custody certification offered by the RJC is purely voluntary, and not necessary for RJC membership, or to become an RJC-certified company. When I talked to RJC CEO Michael Rae yesterday, he said the group will never make chain of custody mandatory, as that would “run into serious anti-trust issues.” 

But after talking with several diamond industry leaders critical of the RJC’s chain of custody—and strikingly, none of them would go on record—the main objections to the system include (but are not limited to) the following:

First, most didn’t buy the idea this system will stay “voluntary.” Even though having a certified chain of custody is not required for RJC membership, the RJC is backed by some of the world’s biggest retailers, including Tiffany & Co. and Sterling. If any of them decide they want a certified chain of custody, that would likely make it mandatory for their vendors, and, quite possibly, companies that those vendors source from. There are also fears that the State Dept. could mandate a chain of custody, although this seems a red herring: While the U.S. is quite interested in—and may say nice things about—the RJC’s ideas, it’s unlikely to require that companies join it.

The second point is that many diamantaires feel the current diamond chain of custody proposed by the RJC would be unworkable, particularly for small goods, and maybe even for smaller dealers who don’t source directly from mines. The RJC now feels those criticisms have validity, which is one reason that the system has been delayed. “Melee is a real problem, because it’s traded in parcels,” says Rae, who hints the small stone question may be gotten around with a size limit. Now, some could argue that a cut-off is somewhat hypocritical, as it does not offer a totally clean supply chain. To which RJC boosters counter, you have to start somewhere.

Rae adds that contrary to some trade fears, a chain of custody wouldn’t force industry middlemen to disclose their sourcing to their customers. “The [system’s] auditors would know that,” he says, “but that’s it.”

The final objection is that a chain of custody will lead to “different categories” of diamonds, with chain of custody stones valued more. There is no way to square the circle here; this is, as they say, a feature, not a bug. Still, to believe non-CoC diamonds will be significantly devalued, you are presupposing widespread adoption of the RJC standard. And we aren’t even close to there yet.

Furthermore, the industry has already agreed that diamond sourcing matters; that is the very logic of the Kimberley Process. The problem is, the KP is dedicated to an issue that no longer exists. And the issues that do exist, it is unwilling to handle. As I’ve said before, U.S companies operate in an environment where Marange diamonds are subject to sanctions, Burma rubies are banned, and a law was just passed to dissuade companies from buying “conflict gold.” So it’s not unreasonable for companies to want a better handle on where their materials come from. That is the thinking behind other chain of custody initiatives, including Walmart’s “Love Earth” line, the Forevermark, Rapaport’s “ethical cert” idea, and Tiffany’s sustainability program. (In fact, Tiffany’s website now boasts that  “over 80% of serialized diamonds in [its] inventory were purchased directly either from a mine or a supplier that only sources from known mines.”) 

Whether the RJC can develop a more all-encompassing system that the industry will embrace remains to be seen. Perhaps the RJC’s launch of its gold and platinum chains of custody can serve as a test run, letting the industry judge if this kind of system will prove as calamitous as some fear.

The other day I wrote that wanting a traceable chain of custody makes “good business sense.” I may be wrong in that, but that’s the barometer by which these initiatives will rise or fall. If the system is unworkable, or onerous, or too costly, or consumers don’t care, it won’t be adopted. It is in the interest of everyone, including the RJC, to have a system that works for all segments of the chain. Is that possible? Well, we’ll see. But no matter what happens with the RJC, I firmly believe the desire for these kind of supply chain assurances isn’t going away.

For more information on the RJC’s program, see its website. And, for the opposing view, you can read two articles by Chaim Even-Zohar objecting to the proposed system here and here.   

JCK News Director