RCS Primer: HRW Report on Precious Metals

2018-03-02

Earlier this month Human Rights Watch published a major new report on the ethical sourcing risks in jewellery and watch supply chains.

The report focussed on assessments of 13 global jewellery and watch brands with a combined annual revenue of over $30 billion. But while the report only covers 13 brands representing roughly 10% of the industry, it serves as a timely reminder for the entire sector as to the ethical sourcing risks they still face in their supply chains.

The report itself also comes at an interesting time. The Kimberley Process – a landmark agreement for ethical sourcing when launched – is coming under increasing scrutiny as to whether it remains fit for purpose. The HRW report also cites the industry’s over-reliance on the Responsible Jewellery Council as a validating body for responsible sourcing claiming that the RJC has ‘flawed governance, standards, and certification systems.”


1. Key risks highlighted in the report:

1.1. Child labour

The report claims that over a million children work in artisanal or small-scale diamond and gold mining, many of which are working in hazardous environments. The report found cases of such child labour in Ghana, Mali, Nigeria, the Philippines, Tanzania, and Zimbabwe.

1.2. Forced labour and human tracking

The HRW report also cites examples of forced labour in gold mining specifically in Eritrea where state army conscripts were forced to work indefinitely for a global mining company.

1.3. Other issues

The report also highlights the continuing issues of environmental harm, land rights, and exposure to conflict and armed groups. All of these risks still persist in diamond and gold supply chains.


2. Lack of action not prevalence of incidents:

It is worth noting that the report’s primary function is to shed light on the lack of action by the jewellery industry to mitigate against such risks, not to collate and list incidents themselves. Hence, while there is some new primary research, this is not a fully comprehensive profile of the incidents or risks currently present in jewellery supply chains.

However, across all of the issue areas cited, there is a clearly still a huge challenge for the industry to address. For the HRW report, the crucial issue is the level of inaction and the lack of robust industry schemes to sufficiently drive responsible sourcing practice with both the Kimberley Process and the RJC are seen as inadequate.

Yet the report does highlight that the OECD “Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas” offers an established model for the jewellery industry to adopt – the issue now is proactive action. [see more on this below]


3. Consumer awareness:

One issue within the wider base metals industry is to what extent the final end user actually cares about ethical sourcing of material inputs. Opinion polling on the issue is mixed. Yet according to this HRW report, when it comes to jewellery both provenance and ethical production are of great importance to the public, and especially younger adults.

Citing a 2016 report, HRW states that 36% of millennials polled said that the feature of diamond rings they were ‘least likely to compromise on was responsible sourcing. This assertion by HRW seems valid and backed up by media coverage on the issue.


4. How companies have responded according to HRW:

Having outlined the supply chain risks, HRW assessed companies against a set of criteria they believe are critical for a responsible sourcing approach to jewellery supply chains. These criteria were:

  1. Adoption and implementation of a robust supply chain policy
  2. Existence of chain of custody systems
  3. Assessment of all human rights risks throughout the supply chain
  4. Concrete steps to mitigate identified human rights risks,
  5. Third-party audits of the company’s and its suppliers’ human rights due diligence
  6. Annual public reporting
  7. Publication of names of gold and diamond suppliers on an annual basis

Against these criteria companies were marked as either “strong”, “moderare”, “weak” or “very weak” in terms of their action taken.

  • Five of the thirteen companies—Bulgari, Cartier, Pandora, Signet,and Tiffany—were recorded as having a code of conduct for their suppliers that they make public.
  • No company assessed could demonstrate full Chain of Custody across its gold and diamond supply chains. Although HRW did acknowledge that several companies had implemented CoC systems across some of their specific supply chains.
  • The report specifically cites the work of Tiffany in delivering a full Chain of Custody for one its gold supply chains, but the fact this supply chain emanates from a US-based producer (in Utah) its value in terms of ethical sourcing is somewhat diminished.
  • Four companies examined—Bulgari, Pandora, Signet, and Tiffany and Co. —were recorded as saying that they require their suppliers to conduct self-assessments of human rights risks.
  • On the issue of third party auditing the HRW report is particularly critical, arguing that third party audits are rarely undertaken. Instead there is an over-reliance on RJC audits as a basic, box ticking exercise. This quote direct from the report is instructive: “In practice, companies rarely appear to use their own third-party auditors to assess their gold and diamond suppliers and almost none of the companies include visits to mines of origin as part of their third-party audits.”

Nb – this is an initial summary of a much larger set of findings. We would encourage readers to read the full report for more information.


5. What companies now need to do according to HRW:

RCS Global would agree with the criteria outlined by HRW with regards to what represents best practice in responsible sourcing in jewellery supply chains. However, we also recognise that this is not a approach which can simply be switched on overnight.

Companies, many of which have not started an approach to responsible sourcing (as the report clearly reveals), must instead start to take the right steps to align their actions with the expectations of the market and groups such as Human Rights Watch.

We work with several leading jewellery manufacturers and our approach is outlined in our dedicated jewellery sourcing page here.

To be considered a responsible sourcing leader in today’s jewellery industry, your company needs to fully understand the provenance of the precious metals and stones in your supply chain, as well as maintain a best-in-class supply chain due diligence program. Further, your company needs to support practices that benefit economic, social and environmental development for the upstream mining communities from which you source.

The key starting steps for any jewellery company are:

  • Assess responsible sourcing approach and management systems
  • Evaluate due diligence and traceability procedure
  • Develop a plan to improve systems and processes
  • Map your supply chain and engage with suppliers
  • Explore traceability and Chain of Custody Systems

To speak to us about starting or strengthening your jewellery supply chain please contact us at contact@rcsglobal.com

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