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World Diamond Magazine Op-ed: Should the Diamond Industry Lead KP Reform or Just Get to the Core Issues?

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World Diamond Magazine Op-ed: Should the Diamond Industry Lead KP Reform or Just Get to the Core Issues?

Posted by Brad Brooks-Rubin on September 22, 2017

Note: This op-ed originally appeared in the September 2017 issue of World Diamond Magazine.

A scan of industry headlines in the print and online media these days leads to the usual suspects: the ever-lasting discussion about synthetic diamonds; the future of retail; the enigma of the millennial market; and the occasional discussion of industry financing, or the lack thereof.

Looking for articles on how the industry is seeking to connect to consumers, you will spend time learning that “Real is Rare,” that the GIA (the Gemological Institute of America) has a new “mine- to-market” app, and a wealth of content about jewellery design.

The only articles of late you will find about the system that the industry continues to claim that it relies on for conflict-free sourcing – the Kimberley Process (KP) – are reports about a mismanaged circus of a KP meeting in Australia. You’ll find few if any articles about the truly urgent issues on that system’s plate.

Why this blatant disconnect?

I would offer that it is because much of the current industry does not understand or particularly care about the system on which they rely. It seems the industry does not understand (or care to acknowledge) that the KP’s main component, the certification scheme, is in danger of becoming fatally flawed, unless true reform is undertaken. Unfortunately, very few of the current players in the KP accept that only the diamond industry itself can truly lead the reform effort.

Where is the urgency?

In March of this year, I argued in a piece in the leading American industry publication JCK that the only true way for the KP to maintain its relevance is to take a dramatic step and eliminate the current ineffective and costly universal certification system and focus instead on (1) a due diligence system for areas with critical concerns and (2) greater development outcomes for producing countries.

That piece brought responses from several KP luminaries, most of whom emphasized that the KP is important and must be maintained and reformed, focusing on such issues as:

  • Meaningful efforts to address data discrepancies and anomalies;
  • A strong administrative function;
  • Poor overall functioning and communication;
  • And a significant overhaul to the approach to rough diamond valuation.

All these are of course worthy issues. But the starting premise for my proposition to end universal KP certification was and remains this: there is no chance, within the current trajectory of the KP, that these will ever be more than debates, and probably half-hearted ones at that, on these or any other reform efforts. This is a KP “review year,” which comes every five years, but there is no committee established to work on review as there has been in the past, and no clear public agenda for reform has been established yet by the Australian Chair, more than halfway through the year it is heading the KP.

Usually, when explaining why the KP cannot reform, we focus on the weak structures and the challenge of reaching consensus in a politicised initiative. But I believe it is more than that: the underlying certification system is no longer an opportunity and incentive for making the KP work; it has become an obstacle.

As conceived, universal certification offered the ultimate incentive and gravest consequence: inclusion in, or exclusion from, the formal diamond supply chain. Of course, no one presumed all smuggling would be eliminated, but the concept of creating a fence (or a “kosher kitchen,” as Martin Rapaport often calls it) for the supply chain was a worthy one, especially when the initiative focused on an agreed-upon issue and approach: preventing rough diamonds from fueling militias seeking to overthrow legitimate governments from entering the supply chain. This remains the only substantive issue that can prevent rough diamonds from being certified within the KP.

Over time, as would be expected, the issues of interest to various KP stakeholders have changed. These range from human rights in diamond producing areas and countries, other forms of conflict, sustainable economic development, to supply chain fairness and consistency. But, as long as there is a certification system underneath which remains premised on a single issue and that can result in exclusion from the formal supply chain, the KP cannot evolve to include these. How can a government or its industry risk exclusion by allowing real discussion of other issues that may be present within such a system?

Yet, when the concept of bringing these issues to other forums is raised, because the KP just focuses on this one issue, the ensuing usual response is that these other issues must be addressed within the KP. Why? Because the KP is a universal system that costs significant human and financial resources to implement, so how can we allow other systems to emerge?

Consequently, I believe there simply is no evidence to support the view that a dramatically overhauled certification system with rigorous data collection, analysis, and enforcement will emerge unless the diamond industry were to decide to fund and support it.

That leaves two options:

  1. Remove certification and attempt a new approach within the current framework of stakeholders that focuses instead on the many critical issues within the diamond supply chain, but without the specific exclusionary legal mechanism of certification. Many supply chain initiatives in other sectors function successfully without this — in fact, they basically all do. So, keep the KP as a body for dialogue and engagement; just get rid of the certificates.
  2. Achieve no real progress on reform, and keep having these same debates year after year within the KP, while spending millions on the existing certification system.

Although governments are the only voting participants in the KP, the choice of what really happens will in practice be made by one of the observer groups the governments rely on for their critical input: the diamond industry.

Yet relatively few within the industry truly understand the KP or could explain more than the most basic elements of how it actually works. Although companies within certain parts of the supply chain do devote resources to compliance, this is often more of a check-box approach than meaningful engagement.

And yet, the diamond industry is the main beneficiary of the system, given the general contention about how the KP supports claims that a diamond is “clean.” Can the industry devote the real resources necessary to ensure that the potential for the KP certification system is realised, so that it is finally robust and meaningful? Or will the industry indicate that certification is no longer the right, cost-effective, or impactful approach, and that, consistent with supply chain due diligence concepts being developed by the industry to implement the UN Guiding Principles, that we can move beyond certification?

Either way, until there is a clear answer from the industry, I see no evidence for the potential of KP reform within the current framework at the level it is needed.

Which brings us back to what is actually on the mind of industry – synthetics, “Real is Rare,” millennials and so forth.

It is time for the industry to re-engage with its stakeholders to understand why “Real” must also be “Responsible,” something that is critical to the next generation of consumers, and push forward with meaningful steps that address broader supply chain concerns. Otherwise, the KP will remain maligned, and industry’s many laudable efforts will miss the mark the KP was ultimately designed to help it hit: a conflict-free and responsible supply chain that future consumers can maintain confidence in and that benefits producing countries in a sustainable way.