“In framing the terms of reference for this important diamond industry gathering, the conference organizers at HRD have taken careful note of the principle that the integrity, values and commercial worth of diamonds are all dependent upon the trust of consumers. Moreover they have very wisely pointed out this trust can only be achieved if consumers have confidence in the professional ethical standards and reputation of the diamond industry.

 

In the next few minutes I would like to share some thoughts from the perspective of retail jewelers in the United States on this vital trust and integrity proposition and also describe for you specific initiatives undertaken by Jewelers of America, the national non-profit trade association of retail jewelers in the US, for the purpose of protecting the reputation of our products and our businesses through the management of social, ethical and environmental risk.

 

Background

 

The experience of the entire diamond industry in recent years has brought diamond jewelry retailers and suppliers at every level of the value chain much closer together in terms of shared perspectives, awareness of interdependence, and purposeful collaboration directed toward reducing the vulnerability of the legitimate trade to possible abuse. During this process we have come to re-discover in a new and sometimes unflattering light the importance of a fundamental principle that we in the trade have always known – that consumers ultimately hold the retailer fully accountable for managing the risk associated with diamond and diamond jewelry purchases. The consumer places his/her trust squarely on the shoulders of the retailer.

 

As jewelers our image is derived directly from the image of the products we sell. And product image is tied directly to the practices of all those in the supply chain for these products. Hence our reputation as an industry – and our individual reputations within our market spheres – is tied to the practices of everyone that has touched the products we sell. Responsibility for maintaining consumers’ trust is shared among us.

 

As for diamonds we know that they are symbols of love fulfilling a human emotional need for adornment and self-expression. We know too that they are discretionary purchases, by comparison with consumer goods in other sectors, and are typically categorized as luxury goods. Unfortunately, too, from the perspective of some in society, we know that they can be positioned as symbols of wealth and class with distinctly negative connotations. The risk associated with a negative public image of our products is amplified by the very distinguishing characteristics of our business.

 

As a consequence of our experience in recent years, the board of directors of Jewelers of America decided a little more than three years ago to begin a thoughtful and deliberate exploration of issues surrounding the diamond and jewelry industries that could potentially have a negative impact on the existing foundation of trust between consumers and jewelers. For this purpose JA retained the services of the specialist sustainability team of PricewaterhouseCoopers to help identify and evaluate risks associated with issues beyond conflict diamonds that could potentially confront the jewelry industry and might have a negative impact on sales.

 

PWC completed their initial assessment in the summer of 2002. Their analysis drew heavily from the experience of other industries in markets around the world, including footwear, apparel, food products, cocoa, tea, fur, oil, gas, and wood products, to name but a few. In every instance consumer and investor attitudes were impacted negatively to varying degrees through a combination of activist initiatives and media coverage. The risk assessment analysis conducted by PWC also took into account the unique nature of diamonds and jewelry as discretionary purchases.

 

The Analysis

 

PWC’s analysis confirmed what some of the leading retail brands already knew: the existence of risk in the realm of social, ethical and environmental practices that span the entire diamond and jewelry industries value chain -- from mining, through trading, cutting and polishing, and manufacturing, and on through to the retail jeweler. Of particular note were risks associated with various practices surrounding diamonds and gold, which not by coincidence constitute the largest share of the retail jewelry business and where the likelihood of activism was also judged to be highest.

 

In the ensuing months Jewelers of America’s working committees began to explore alternative approaches to the situation brought into focus by this analysis.  As they did so they came to terms with the reality that the social, ethical and environmental issues on which they were focused surrounding diamonds and gold were not static. Rather they continued to evolve even after first emerging.

 

In this analysis doing nothing seemed to pose certain risks:

·                    Damage to product image and brand equity as a result of attacks by NGO or other organizations;

·                    Always operating from the stance of damage control, responding to agendas framed by others, and after the fact at a time when rumor mills might diminish the value of any response by individual companies or by the industry;

·                    Creating a negative perception of the industry that may raise questions for shareholders;

·                    Creating the potential for a crisis of consumer confidence translating into a risk for sales.

 

At the same time doing something seemed to pose its own set of risks:

• Attracting attention to what may at the time be seen as a “non-problem” from a consumer awareness standpoint; if consumers are not now aware how do we know they care?
• Fostering even more scrutiny of the industry to determine just how committed it is to a corporate responsibility agenda;
• Antagonizing customers who do not want their “special moment of emotional fulfillment” ruined;
• Raising questions for shareholders;
• Raising the prices of products;
• Creating concern over industry’s role with NGOs, their goals and agendas.

 

The Choice For JA

 

In the final analysis Jewelers of America’s committees and board of directors decided to seize this as an opportunity to sustain consumer confidence by embracing corporate responsibility as a core value of the association and develop ethical principles and practices that would guide member jewelers in the conduct of their businesses. JA has continued to work with PWC and has been engaged for the last two years in developing and implementing a pro-active strategy that defines a commitment to corporate responsibility that is both realistic and aspirational. The underlying rationale is quite simple: if NGOs should decide to go to war over issues of mining reform in connection with gold mining’s impact on the environment, for example, while the public communication campaign would be waged in the media and on the world wide web, the battles will be fought on the frontlines -- on the sidewalks in front of our stores. That is a level of risk we feel we cannot accept. Why? The highly emotional component of what we do absolutely requires that we must be responsible in the conduct of our businesses. That is precisely what our customers have every right to expect of us as an industry. Even though they may not yet be aware, we must not assume that they would not care.

 

Consequently JA modified its mission statement and produced a new statement of social, ethical and environmental principles that we merged with our traditional code of business ethics. This framework serves to confirm JA’s expectations of its members in regards to corporate responsibility, while at the same time defining the public commitment that retail jewelers are asked to make when joining the Jewelers of America.

 

Following on that step JA has also developed a supplier code of conduct to help retail jewelers uphold and maintain the statement of principles. The goal is for JA members to encourage their suppliers to adopt the ethical business practices described in the code of conduct in order to convey their willingness to strive together with their trade customers to bring about positive change throughout the jewelry supply chain. Together, the statement of principles and the code of conduct endeavor to make sure that both retailers and their suppliers work together in a mutually supportive manner toward a shared goal of corporate responsibility.

 

At present JA is focusing on assisting its members with the implementation of the statement of principles and code of conduct by developing self-assessment, training and awareness tools, communications strategies, and policy and procedure reviews. The initiative is currently in the early stages of development. Details will be worked out in the months ahead.

 

International Outreach

 

At the same time as JA continues working with its own membership on these issues we are also collaborating with leading international corporate and institutional bodies in the pursuit of shared goals. We recognize based upon our careful study of the experience of other industries mentioned earlier in these remarks that among the criteria for demonstrated failure in the realm of corporate responsibility is the potential for multiple and competing initiatives, often driven entirely by individual corporate agendas, without overall industry leadership, that inadvertently overburden the industry supply chain with divergent sets of requirements and compromise the likelihood of any one initiative achieving its intended results.

 

If, for example, key diamond producers and key retail brands were each to develop and institute their own versions of corporate responsibility principles with appropriate verification measures to establish credibility necessary to protect each brand’s equity, the result for the industry would be would not be positive. In addition to the challenge posed to manufacturers and traders of having to comply with multiple and likely divergent individual requirements, the claim of corporate responsibility leadership would reside only in the hands of the larger entities with sufficient resources to build their own programs. This would leave the rest of the marketplace without credible commitment to corporate responsibility of its own. Further, given the very nature of the risks posed to our industry in this area, ultimately no one company, no matter how large, could mount an initiative that would raise the bar for the entire industry. Or, put differently, no matter what any one company might do to protect itself from challenge, an element of risk would remain as long as the balance of the industry remained vulnerable to attack. Negative product image would rub off on everyone. Thus, achieving critical mass is an essential criterion of success.

 

Having assessed the industry landscape we quickly came to realize earlier this year that this scenario, far from being purely hypothetical, was precisely the situation unfolding before our very eyes: among diamond producers, DTC, Rio Tinto and BHP all had declared individual corporate commitments in this realm; among leading international retail jewelers, Tiffany & Co., Cartier, Signet, and the Zale Corporation all similarly embarked on individual corporate initiatives. What we saw developing was a classic study of best intentions about to go awry: industry leaders taking leadership but individually and without the communication and coordination that comes from actually working together.

 

When, about a month ago, we proposed to these companies that we meet to explore these issues, to their credit all responded affirmatively. Today, just a few weeks later, it is with great pleasure that I am able to announce the launch of the Early Adopters Initiative.

 

This Early Adopters Initiative constitutes an understanding between BHP, DTC, and Rio Tinto Diamonds, on the producers side; ABN AMRO Bank; Cartier, Tiffany & Co., Signet, Zale Corporation, The National Association of Goldsmiths, and Jewelers of America, on the retail jewelers side -- corporations and retail trade associations already committed individually to corporate responsibility within their respective individual spheres of influence -- of their intent to explore together the feasibility of promoting responsible business practices within all areas of the industry. This initiative is understood by the parties named to be the starting point for what must be an inclusive process to explore corporate responsibility for the industry. Further these companies understand that if this initiative is to be beneficial to industry at all levels it must take into account a wide range of interests.

 

 

Highlights of this agreement include:

 

• The overriding objective is to retain consumer confidence in our products and the trust of all stakeholders in our industry.
• The primary focus will be on issues related to diamonds and gold jewelry.
• The belief is that the parties can achieve much more by working together than working as individual companies or organizations.
• The further belief is that a coordinated approach will provide increased clarity to all our business partners about what standards are expected within the diamond and gold jewelry sectors, will lessen the burden of evidencing compliance on all those involved in the diamond and gold jewelry supply chains and will reduce the duplication of efforts that would otherwise be created.
• The rationale is that if this initiative is to be successful we will need commitment and involvement from as many business entities and organizations as possible that have a participatory interest in our industry and its continuing success.

 

Ladies and gentlemen, to return to our opening theme, the trust of consumers that our products and our industry enjoy today is built on professional ethical standards and the reputations our businesses have earned in the past. Maintaining consumer confidence in the future will depend on what we as an industry do tomorrow. Corporate responsibility is a critical new factor in the consumer confidence equation.

 

The choice is clear. The path is now before us.

 

Thank you very much."