Blood Diamonds, Synthetics, and Ethical Supply: the Diamond Industry Fights Its Corner

Diamonds continue to hold their lustre: after a tough year that saw prices and demand fall, the market is showing signs of life in 2016. But the sector, which straddles both mining and high-end retail, is still under pressure, with consumers growing increasingly interested in provenance, while synthetic diamonds are looking to grow their appeal.

The Kimberley Process this week closed its annual plenary session in Dubai, hailing “progress” in the industry to meet the challenges in the supply chain. The KP is the body charged with ensuring that so-called “blood diamonds” from conflict zones do not fall into the hands of consumers. But the process, which includes governments, NGOs and industry, has faced repeated criticism for not going far enough in upholding ethical supply.

Andrey Polyakov, president of the World Diamond Council (WDC) and a vice president of Russian diamond giant Alrosa, spoke after the event to defend the KP and illustrate its progress - including its efforts to bring Central African Republic, a potentially large source of rough diamonds, back into the international fold.

What action should we expect after the plenary meeting this week?

The main goal of the Kimberley Process remains unchanged – to protect the market from conflict diamonds.

One of the main topics for discussion at this plenary was valuation of diamonds. Clear assessment procedures [of valuations] are the basis for our market transparency.

This is especially important for the African countries with small-scale artisanal mining. Lack of market trading experience and qualified specialists does not allow these countries to assess potential revenues from diamond mining. However, this revenue is vital for the countries’ budgets; it allows to continue economic development of the region, to improve the living conditions of the population, to give people jobs and social infrastructure.

What is the diamond industry doing to reassure customers on the provenance of diamonds?

The diamond industry came together more than 16 years ago to form the WDC and help establish the Kimberley Process. Since then the industry’s responsible sourcing activities have nearly eliminated conflict diamonds, with 99.8pc excluded from global trade. Maintaining that standard is vital to the integrity of the supply chain.

The Kimberley Process remains the only international network protecting the market from conflict diamonds

Lots of great work has been accomplished through the Kimberley Process, but we need to do a better job conveying these results – like bringing the Central African Republic back into the Kimberley Process. This year four “compliant zones” have been designated after successful monitoring missions, which were organised and led by KP Participants. In turn, these efforts have allowed for a healthy resumption in the legitimate diamond trade.

This provides a much-needed boost to the one million people that depend on the industry for their livelihood, but most don’t realise the technical and financial assistance that goes into establishing the systems and enforcing the regulations that allow countries to become compliant.

How can certification of diamonds help the industry?

The KP certificate confirms non-conflict origin only for rough diamonds. Understanding the need of building consumers’ confidence, WDC have developed a System of Warranties, which extends the confirmation of non-conflict origin of rough diamonds further down the chain to the final consumer.

Now it is a voluntary system, but we are discussing how to make it more solid and up-to-date. One of the options is to create a cross-functional marker that could be used by all participants of the diamond pipeline and would confirm the non-conflict origin of stones on every stage of creating a diamond piece.

How does the Kimberley Process need to evolve?

The Kimberley Process has been repeatedly criticised throughout its history with some pointing to its structure and others faulting its decision-making process. Despite this fact, the KP remains the only international network protecting the market from conflict diamonds.

Well-timed and concerted industry actions have alerted authorities to counterfeit products, stopped the export of conflict diamonds and encouraged responsible operating practices. The KP is constantly evolving, responding to the new challenges of a changing world, it produces new forms of work, and improves the processes.

What are the biggest challenges to the sector in the next year?

We believe very strongly that education is key to encouraging self-regulation, and one important step in this process is addressing the issue of diamond valuation. Our members have lots of experience they can share in the form of evaluation trainings, and many have already participated in recent valuation workshops and educational seminars with law enforcement.

How big of a threat are synthetic diamonds to the market?

Synthetics have their own niche, although in their marketing campaigns they are trying to compare their product with natural diamonds. The main problem presented comes from the illicit mixing of natural and synthetic diamonds. Our members are providing detection technology and are working to create a separate, transparent supply chain for manufacturers and retailers to use, but these are a completely different product than natural stones.

Synthetics don’t provide the same economic benefits as the natural diamond trade

They aren’t subject to the same standards as the Kimberley Process and they don’t provide the same economic benefits as the natural diamond trade. An estimated 10 million people worldwide are supported by the diamond industry with taxes and revenues going to provide healthcare, educational resources and develop the economies where the industry operates. The synthetic diamond industry doesn’t provide these benefits for producing countries.