JCK Looks at Mechanism of Signet’s Responsible Sourcing Protocol for Diamonds

Finance and Trade
07/03/2016 09:20

JCK's Rob Bates takes an in-depth look at Signet’s Responsible Sourcing Protocol for Diamonds that aims to provide information on the origin of stones from the diamond industry's "notoriously convoluted supply chain" where parcels are frequently sold from various sources. "The new program was designed with that in mind and will allow companies to break down the origin of their diamonds into several different categories, says Signet consultant John Hall, the Rio Tinto veteran who helped design the protocol. “We recognized that we needed to have a fairly good amount of flexibility,” he says. “You couldn’t have a one size fits all,” Hall tells Bates.

Signet will want suppliers to account for the origin of as many 0.3 carat and larger stones as possible. Hall believes this isn’t as big a challenge as it may first appear. “When we started doing this work we asked our suppliers: Do you know where the goods derive from?” Hall says. "From a fairly high percentage, they know where the goods are from.” Vendors can cite the name of one of the four major mining companies: De Beers, Alrosa, Rio Tinto, and Dominion, and may also specify artisanal, or informal, sources. For diamonds weighing less than 0.3 carat, Signet will allow further flexibility, allowing for a category known as “mixed sources,” Bates writes.

The overall aim, says, Hall, is to encourage due diligence so that suppliers obtain as much information as possible and are aware of where their diamonds are from. The protocol starts this year, and over the coming months, suppliers will be asked to work toward compliance. At some point, that compliance will be audited. Bates raised two potential concerns in this regard: firstly, the expense that comes with adding new reporting and auditing requirements to the already burdened middle of the pipeline, and secondly, that Signet could cut out certain suppliers that were slow to meet expectations. Hall said there would indeed be costs involved for suppliers, but played it down saying, “There will be costs ... but many of our suppliers say we already have that sort of documentation. They all say we have some form of inventory management. If they didn’t have that they wouldn’t know what their costs are. We envision in many cases existing systems and documentation that are already maintained will be sufficient.” As to the latter concern, he said there are sufficient "firewalls" to keep the information from any audit a private matter between the auditor and supplier. Hall also assured Bates that the auditing process “Is not something that we intend to use in marketing or as a competitive advantage.”