Sustainability

 

CIBJO Congress

 

12 March 2007

Cape Town

 

Speech by Davy Lapa

 

Thank you for inviting me to speak today. I hope that the content of what I’m about to say will make up for the mistakes I make, as English is not my Mother tongue.

 

Sustainability, indeed a very appropriate subject, one for which too many in our industry pay only lip service to.

 

One for which too many stakeholders address only one facet: its “social accountability”.

 

But the social accountability aspect is nothing more than progress.

 

We all understand technological progress, but we fail to understand that along with it comes social progress.  What was socially acceptable 2 generations ago is not anymore and is this very city in which we all are; Cape Town, with its democratic elected parliament not a testimony to this!

 

Sustainability in business means much more and in particular for our business.

 

With your permission I would like to tackle two pillars of sustainability: rough supply and polished sales.

 

In his book “The Crisis of Global Capitalism”, George Soros, the financier who thrives on speculation admits that too much speculation can destroy the very base on which our economies are founded.

 

Oscar Wilde said “I can resist anything but temptation” and I believe this should be a perpetual reminder to the producers, countries and companies alike.

 

Diamonds are extracted from the ground in a very scientific and technological manner.  From that point they become very much a craft.  At all stages of the production chain, diamonds remain a craft; so much so that we don’t even know how to spell “diamantaire”.  Some people spell it with an “a” and “t”, others with an “o” and “d”.

 

Of course this state of affairs brings some difficulties in understanding what this industry is all about.

 

The General Manager of one of the world’s leading mining houses told me: “it took me 2 days to move from zinc to lead, two months from lead to steel, two years from steel to diamonds and I still don’t understand it.

 

The last couple of months we have heard from many different quarters troubling noises regarding the status of rough diamonds: are they a commodity or not? The industry can’t seem to decide; reviving 30 years old dreams of creating a futures market.  We are told it’s all about price transparency.  Whether futures or any derivatives it’s all meant to hedge risks because it became an industry with no rewards.  I don’t know whether those financial tools will come to be in our industry but surely, should they come they can’t be perceived as good news by the producing countries and companies.

Moreover allow me to state very clearly that in business “reward” is a pillar of sustainability.

 

Onto the “polished sales” side of the equation, I would like to emphasize that diamonds are not an essential economic commodity / product. Diamonds rely on two axioms: “vanity and greed”.  As long as humans are humans those two axioms will remain forever and maybe because of this, the slogan “A diamond is forever” has been so successful.  One has to recognise though that those two, rather nasty, characteristics of vanity and greed only come together because diamonds are as beautiful as they are.

 

The magic of diamonds packs a powerful enough punch to inspire the writing of books, the shooting of films, the singing of countless songs, not to mention annual sales of around 68 billion US$ worth of diamond jewellery to retail consumers around the world.

 

Diamonds are in many ways synonymous with illusion and confidence.

Shockwaves across parts of the diamond industry can therefore rapidly impact the broader diamond market.

 

Even more dramatically and of greater concern is the possible impact of negative news within the diamond industry on the consumer market.  Today news cannot be restricted to “insiders” or just to the direct stakeholders of the diamond pipeline.  News today becomes rapidly available to everyone from the minister of mines in a diamond producing country to a potential diamond jewellery buyer.

 

When major flames arise in one of the confidence providing organisations of our industry it is the diamond community’s responsibility to rise to the challenge, to recognise the problems, offer compensation and in doing so ensure the public’s confidence.

This requirement for frankness and honest representation is another pillar of sustainability.

 

I would like to read to you “verbatim” a concern expressed in a very recent piece of market research commissioned by isee2 and a major rough producer: “one of the consumer’s biggest concerns for buying diamond jewellery was whether they can properly evaluate the ratio quality/price of diamonds or not.”

 

How many sales does our industry lose because the consumer feels vulnerable when entering a jewellery store? But we can do something about it by creating a different buying experience, one that helps consumers understand what contributes to the beauty, quality and prices of diamonds.

 

I sincerely believe that the quality of the product, not merely defined by the 4 C’s, but rather its beauty and brilliance, as well as the authentic trail of origin, with transparent depiction of the product from mine to finger, are key elements that provide the consumer with the necessary confidence, in regarding what has been, until now, a blind purchase.

 

The premise on which diamonds have been sold for the last 65 years, has been truly based on the raw material used, the 4 C’s.

The 4 C parameters value the product in the same way as any other commodity, based on its relative rarity.

-) a bigger diamond is rarer than smaller – more expensive

-) a good colour rarer than a low colour – more expensive

-) a clean stone rarer than an imperfect stone – more expensive

 

But the polished diamond we sell is not raw material.  It is a carefully handcrafted product and its beauty and performance must be emphasized, as they are a direct result of the craftsmanship of the polisher.

The latter is another pillar of sustainability.

 

When one buys a Hermes tie, no picture or description of the worm which provided the silk in Thailand is presented, nor is the weight in silk. As a consumer we pay the price for a designer tie because of the quality of the handcraft, creativity and exclusivity it provides.

 

Likewise when one buys a car, no one receives the technical details of the steel out of which the car has been manufactured.  One buys a car for its looks and performance. Moreover two cars of similar size and same basic functionality, a Volkswagen Beetle and a Porsche yield a significantly different price.  The Porsche selling for at least 5x the price of the Beetle, because of its performance, design and the butterflies in the stomach it creates.

 

Once a diamond is set in a piece of jewellery neither consumers nor professionals can recognise a colour D from an H; nor clarity IF from VS2.  Yet, the value of the latter is about a third of the former. 

But we can recognise the sparkle and light reflection of a diamond. Breaking the vicious circle created by a price list based on blind and raw material parameters and moving our industry towards a performance based product is another important pillar to ensure sustainability.

 

Allow me herewith to draw the analogy with another industry: “Pictures”.

Kodak, since 1888 leader in the “world of pictures” failed to understand the trend towards digital pictures and along under which format people will keep them and look at them.  Kodak today is struggling. 

Pictures didn’t disappear from our world: the way we, as a consumer, look at them, keep them, cherish them, changed.

Diamonds will not disappear from our world, the way we appreciate and value them, will undoubtedly change.

 

Thank you.