The Diamond Industry’s Sad Lack of Leadership: An Update

My recent post on The Diamond Industry’s Sad Lack of Leadership garnered more reaction than anything I have written in a while—and I was surprised to see, given that it was a pretty negative piece, the reaction was almost uniformly supportive and in agreement. (You can read responses to it from the DMIA and World Diamond Council president Eli Izhakoff.)

I should clarify that my target in that blog was not any particular group or person, more an all-too-pervasive system of thought, that I’ve heard expressed many times, which feels the industry has “done enough” with the Kimberley Process and doesn’t need to evolve further. The background to it was a mini-furor—and if you didn’t hear about it, consider yourself lucky—over the “multi-stakeholder meeting” held in conjunction with the recent OECD meeting in Paris. The meeting was arranged mostly by groups in the United States (Jewelers of America and Signet in particular), and apparently some people were invited, and some people weren’t, and then some people were invited but didn’t know they were. (One WDC official told me the email invite got caught in his spam filter.) In any case, the specter of some groups taking it upon themselves to wade into these problems led one commentator to declare they were “hijacking the industry’s conflict diamond leadership.”  You may remember that there were similar complaints when a similar coalition unveiled the Diamond Source Warranty Protocol; certain associations were furious they weren’t consulted. 

One can argue forever who should have been invited or talked to, but some of these complaints seem to just be masks for something bigger: Namely, certain sectors of the industry don’t want anything that builds on the Kimberley Process. This may be because they see a potential chain of custody as too costly, or they worry (with cause) that these systems will decrease the value of Marange goods, and they may have certain connections to Zimbabwe. (Just as Marange split the Kimberley Process, so it has divided the diamond industry.) 

My view is that we are really in a new world. Politics has stuck its nose inside our tent, and it is never going to leave. We can’t wish it away, anymore than we can wish the Internet or email away. And it’s not just our industry: Recently, some leading fashion brands were raked over the coals because their clothes were being produced in the factory that collapsed in Bangladesh, killing 600 people. Can you imagine someone in one of those brands’ boardrooms, standing up and saying we are not going to do anything about this, because the majority of our consumers don’t care? Even if the latter comment were 100 percent true, that person would be crucified for making such an insane statement. And yet we hear talk like that all the time in the diamond industry. 

Moreover, these pressures aren’t just coming from the public, but from governments as well. Members of the American jewelry industry now have to contend with laws regarding how they buy gold and rubies. You can argue these laws, particularly Dodd-Frank, actually hurt the people they were intended to help, and certainly, evidence backs that up. But that is all the more reason the industry needs to take action before laws are imposed on us. 

Anyway, I think most of my readers already understand this, so let’s get back to what’s new: The meeting held in conjunction with the OECD in Paris (see the agenda here). Most of the participants I spoke to, particularly the NGOs, were quite pleased with the dialogue. I talked with two of the organizers yesterday—JA’s James Evans-Lombe and Signet’s David Bouffard—and they repeatedly stressed to me that they view this process as an open one and (quite sensibly) want to include as many people as possible.    

What makes the OECD meeting a little unique is it wasn’t just about diamonds, it also covered colored stones, and included a representative from the International Colored Gemstone Association (ICA), which is currently working on its own chain of custody with the United Nations. The idea was to see if the current OECD due diligence for gold can also apply to precious stones.

This will certainly impose greater responsibilities—and possibly costs—on gemstone traders, and a real and legitimate question exists about who will bear them. But that’s all the more reason for people in all sectors of the industry to engage with these efforts instead of continually trying to torpedo them. Because, in many ways, the train has already left the station. And even if this effort goes nowhere, there will be more coming. So people can keep complaining about these efforts, or try and make them work for all parties. 

Speaking of leadership, the other big news from last week was the World Diamond Council meeting in Tel Aviv, which regrettably I didn’t attend. With Eli Izhakoff stepping down, the group clearly finds itself at a crossroads. One possible model is the World Gold Council, which, thanks to contributions from big miners, has a real budget with paid staff (some of whom come from the diamond industry), including employees solely dedicated to compliance and regulatory issues. And you can see the difference. When the gold price plummeted, a spokesman from the World Gold Council was there to spin the press on why it will head back up. (And it did.) When articles appear criticizing the diamond business—and they tend to appear every few months or so—diamond people just shrug their shoulders and hope no one reads them.

Of course, the big difference is that the World Diamond Council has very little budget and is currently run by dedicated volunteers, some of whom have other full-time jobs. (The president through the end of the year, Avi Paz, is also a full-time diamond trader.) In Tel Aviv, the group agreed to hire, for the first time, professional staff, which will clearly be needed to run the upcoming KP Secretariat. But that will take money, and the group is now exploring different ways to raise it, including membership dues.

Will that be enough? It’s not clear. The other leaders of the industry—namely, the mining companies and big retailers and wholesalers—need to come together and seriously consider what kind of a group the World Diamond Council should be.

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JCK News Director

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