OECD Guidelines: A Replacement of the Kimberley Process? was the original name given by the organizers for Panel II at the Second Zimbabwe Diamond Conference that took place in Harare in early November. Though the original name of the panel discussion was changed, at the request of the Organisation for Economic Cooperation and Development (OECD), it didn’t seem to matter much to the officials from Angola, Namibia, DRC, or Zimbabwe who were in attendance. Over the last few years, these officials have been following with some anxiety the activities of what is known as the Precious Stones Multi-Stakeholder Working Group (PS-MSWG), which endeavors to have the OECD Due Diligence Guidelines for the Sourcing of Conflict Minerals also issue specific rules for the industry’s diamond and precious stone production sectors.

Wanting More
It is believed that such specific OECD Guidelines for precious stones (including diamonds) would add additional human rights elements to the Kimberley Process Certification Scheme (KPCS or KP) beyond its current scope of keeping conflict diamonds out of the industry and, essentially, widen the scope of the KP. The driving forces behind the PS-MSWG – a few major U.S. and British retail jewelers, Jewelers of America, Global Witness, and the U.S. government – are dissatisfied with the limited scope of the KP and want “more”; they seek sourcing comfort beyond the KP. The voluntary OECD Due Diligence Guidelines, if adopted, it is argued, could subsequently be incorporated in EU or other national laws – similar to the Dodd-Frank Act in the United States.

Mission Impossible?
At the OECD, the highest authority and greatest expert on conflict mineral guidelines is Tyler Gillard, legal adviser and project head at this intergovernmental agency where he advises governments, regulators and refineries how to guard mostly against conflict gold. Squeezing in time between crucial meetings in Kinshasa, DRC, and in Lima, Peru, Gillard stopped in Harare to participate in a panel discussion that clearly had definite predispositions on the subject. Gillard was basically put in a “mission impossible” scenario, especially since Zimbabwe Mines Minister Walter Chidhakwa had expressed strong opposition to funding in the diamond sector by overseas organizations “that then believe they have the right to tell us what to do, how to develop, how to manage our African affairs.”

Tyler Gillard was facing an audience of close to 1,000 mostly African stakeholders, suspicious of any norms, guidelines, rules, etc., coming from the Western-developed nation-oriented OECD. Add this to the unfortunate circumstance that time constraints made it hardly possible to succinctly present a complicated subject, Gillard must have felt pressured, especially as he arrived at the conference hall directly from the airport only minutes before the start of the panel. Gillard shared the panel with Levy Rapoo, CEO of the South African Diamonds and Precious Metals Regulator; Kennedy Hamutenya, Diamond Commissioner of the Republic of Namibia; Paul M’Vika, the Angolan Chair of the KP’s Working Group on Artisanal and Alluvial Production (WGAAP); and Peter Meeus, the Chairman of the Dubai Diamond Exchange.

Comparing KPCS to OECD Due Diligence Requirements
Gillard made it clear that the OECD Guidelines don’t say from where one must refrain from sourcing minerals, but rather how to effectively and successfully engage in conflict areas without negatively impacting one’s business reputation.

“Our goal is to actually enable investment and trade of minerals in areas of conflict or high-risk by outlining and helping implement clear and reasonable procedures for private sector engagement, which are developed and owned by OECD and African countries, companies in the entire mineral supply chains and civil society. This will enable the mining and trade of minerals in areas of conflict or high-risk to stimulate growth, increase state revenues, prosperity, healthy and safe jobs and local development,” explained Gillard.

Gillard succeeded in reassuring the audience (or at least in putting the audience more at ease) about two main areas of concern: that nothing will be done by his OECD Investment Division without the full cooperation and involvement of the African diamond producers; and that there are presently no plans at the OECD for a Precious Stones (and Diamonds) Guidelines to begin with. He also gave the OECD perspective on the issues pursued by the PS-MSWG.

No Need for Specific Precious Stones and Diamonds Guidelines
Actually, nobody aired any concern about the OECD Guidelines themselves; their acceptance isn’t an issue. The fear of virtually all conference speakers was that with a relatively flexible interpretation, it is likely that certain countries could try and force their way of thinking onto others and, in effect, create non-tariff trade barriers for parts of the industry. The Kimberley Process represents a dreadful precedent to Zimbabwe: while fully KP-compliant and a member of the KP community, Zimbabwe’s diamonds fetch discounts of some 40-50 percent on the open market, and the industry’s foremost players refrain from engaging with Zimbabwe because of “interpretations” around the KP (and the sanction regimes in some countries). OECD Diamond Guidance could be used to be incorporated into legislation, something which is not intended by the OECD. That fear is further magnified by the ways the sponsors of the PS-MSWG are pushing for a chain of custody and hoping that the OECD Guidelines would help put that process in place.

Tyler Gillard is anything but naïve – he is very much aware of various agendas. Consistent with views expressed by OECD Secretary General Angel Gurria, Gillard specifically acknowledged “the great success of the Kimberley Process in combating the production and trade in conflict diamonds through government certification.”

Gillard said that the KP is a mandatory, legally required, certification mechanism that provides governments and stakeholders with an enormous amount of comfort. It also diminishes the need for other similar initiatives. In contrast, stressed Gillard, the OECD Guidelines are strictly voluntary. They also do not (with two specific exceptions: rebel groups and severe human rights abuses) prevent anyone from dealing with minerals from conflict areas – one just has to do proper due diligence.

Holding up the Guidelines for Conflict Minerals Due Diligence before the audience, Gillard explained that “there are two parts to the Guidelines. One is a general one for any company dealing with minerals; the second one refers to a few specific minerals. What the diamond people should understand is that the first part provides practical direction for companies that can be applied to any mineral supply chain, including diamonds as well as other precious stones, even in the absence of a precious stones-specific supplement to the Due Diligence Guidance.”

Talking about business in general, Gillard, referring to the updated OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights, said the society has “set new expectations for companies to undertake due diligence to prevent or mitigate risks of harm that may be linked to their supply chains. Industry-led due diligence practices can and should complement ־ not undermine ־ government-led efforts to regulate its industry in line with international commitments, like the Kimberley Process Certification Scheme.”

Reaching out to African Stakeholders
Gillard is aware of the “noise” the PS-MSWG is making in the diamond industry, especially because of the high profiles (and strong lobbying) of a few participating retailers, namely De Beers and Rio Tinto. One of the conference’s panel members stressed specifically how unrepresentative the PS-MSWG is. Gillard explained that at any given time there may be some 500 different multi-stakeholder groups around the world looking at some aspects of OECD Guidelines.

“It is our task to assist these groups, to educate them, to help them understand what the guidelines are all about. But that’s all. In some instances, one of these groups may have a government suggesting that we look at guidelines – in which case the suggestion will be brought before a forum to conduct a global stakeholder consultation to assess whether the idea has merits and whether separate guidelines are necessary. Generally, a government will not bring up a proposal without it having confidence that it enjoys broad global support.”

Tyler Gillard knows that early this year the PS-MSWG was about to present him with a report (a study) that it had commissioned. He knows it has been postponed. He hasn’t heard any more about it – and he hasn’t seen the draft. Gillard said that if a government formally delivered such a report, and if there was a decision to consider a guideline (and there are no plans for that), “let me assure you that the OECD would seek to involve all relevant stakeholders, including African countries, in deciding and following up on any next steps.” Gillard’s words had also been the sentiments of OECD Secretary General Angel Gurria in a June 2014 letter to South Africa’s Minister of Mineral Resources.

The PS-MSWG, as such, has absolutely nothing to do with the OECD, and the composition of this group is not an OECD matter. Tyler Gillard doesn’t want anyone to think that he and his organization don’t work closely with African countries. He made a point of his successful experience at the OECD while working with all stakeholders, including African governments, in developing and implementing Guideline Supplements on tin, tantalum and tungsten (3T), and gold, which could be useful in the context of promoting responsible precious stones supply chains. Gillard also mentioned numerous examples to show the depth of this cooperation, citing many numbers and regional initiatives [using acronyms that have since escaped me].

Industry Stakeholder Partnerships
“Multiple industry initiatives have now been developed to put the OECD Due Diligence Guidance into practice, namely programs from the World Gold Council, the London Bullion Market Association, Dubai Multi-Commodities Centre, Conflict-Free Sourcing Initiative and Conflict-Free Smelter Program, ITRI Supply Chain Initiative (iTSCi - for tin, tantalum and tungsten), Responsible Jewellery Council, and many more. Consuming countries like the U.S. and EU have included the Guidance into legal frameworks (in the case of the U.S.) and draft EU regulations on responsible minerals supply chains,” explained Gillard.

There is no need for a specific sector guideline to implement OECD rules. Of course, the Zimbabwe Diamond Conference attendants and the diamond industry were interested in learning – in a most authoritative manner – what the story is behind the PS-MSWG. Though Gillard was clearly more interested in talking about the OECD’s initiative in general, he responded as follows:

“The OECD has no specific work program on precious stones and has not held any focused meetings on the subject. Some confusion was generated when a Precious Stones Multi-Stakeholder Working Group (PS-MSWG) had meetings in our Conference Centre on the sidelines of our 5th (April 2013) and then 7th (May 2014) ICGLR-OECD-UN Forum. The PS-MSWG is not an OECD initiative, although we understand that it is a non-exclusive coalition of companies, associations, NGOs and governments sharing an interest in responsible sourcing and supply chain due diligence for precious stones.

The Role of OECD's Due Diligence Guidance
Continued Gillard: “The OECD acknowledges the great success of the Kimberley Process in combating the production and trade in conflict diamonds through government certification. At the same time, broader instruments such as the updated OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights have set new expectations for companies to undertake ‘due diligence’ to prevent or mitigate risks of harm that may be linked to their supply chains. Industry-led due diligence practices therefore can and should complement – but not undermine – government-led efforts to regulate its industry in line with international commitments, like the Kimberley Process Certification Scheme for diamonds.

“There has been much discussion and confusion about the possible role of the OECD Due Diligence Guidance to promote responsible sourcing of precious stones specifically, including diamonds. The OECD Due Diligence Guidance provides practical direction for companies that can already be applied to any mineral supply chain, including diamonds as well as other precious stones, although there are no specific recommendations on diamonds,” Gillard added.

Precious Stones/Diamonds Not on Current OECD Agenda
To make it unequivocally clear, and to allay fears that suddenly stakeholders may find themselves in a fait accompli, Tyler Gillard stated once more that “we have no plans to move forward with pursuing such a work program on precious stones/diamonds at this time.” Stressing his role to educate and advise, he added that, of course, “we remain available to respond to questions or provide insight for industry or the efforts that would seek to implement the [existing] OECD Guidance in precious stones supply chains. This is because the present OECD Due Diligence Guidance is already generally applicable to any mineral supply chain.”

When Gillard started out with his comments, the ministers and other dignitaries in the audience – including members of the discussion panel – clearly expected the panel to become “confrontational.” It wasn’t. Tyler Gillard conquered hearts and minds because he is a professional and he knew that explaining the purpose of the OECD Guidelines would only win him friends. He comes from the “Investment Division,” the pro-business arm of the OECD to increase African access to the markets.

Acutely aware of the limited representation of the PS-MSWG, Gillard concluded that “the OECD would seek to involve all relevant stakeholders, including African countries, in deciding and following up on any possible next steps on precious stones specifically, just like we did successfully with other minerals.”

However, presently, this isn’t anything that is on the OECD’s current or future agenda.

Tyler Gillard's Main Points Regarding OECD Guidance:
OECD Guidance consists of two parts: one is generic with the other being specific to industries (T3 & G).

There is no specific guidance on precious stones, nor is there any current plan to work on the same.

If there is any decision to work on a specific guideline for precious stones, it would be through a consultative process involving all stakeholders, before any specific guidelines can be put in place.

Guidelines also help producing governments put into place more transparent processes and improve revenue collection, etc.

Guidelines do not forbid sourcing from conflict areas, only ensure that the sourcing is from responsible sources; it can also be possible that sources in non-conflict areas are not responsible sources.

On the Due Diligence Process:
The Guidelines require companies to have a “due diligence” process in place.

The “due diligence” can essentially be compared to an enhanced Know Your Client (KYC) process.

Guidelines do not call for a “chain of custody” or source identification.

Companies need to have a process that checks that their suppliers, in turn, have suitable processes to ensure that they, too, source responsibly.

Not all companies need specific audits – audits need to be carried out at specific pinch points (e.g. in gold, refiners need to have audits done).

Companies need to demonstrate that they have a process in place and that it was adequately followed.

The Guidelines understand that failures are likely, and the focus is more on ensuring that the process exists and is followed.

Companies should be able to show that steps were taken to mitigate the issues as per the process when any deficiency was detected.

The Guidelines are for companies and are not a compulsory process to be followed by governments.

No Sanctions, No Embargoes
“We recommend engagement and constructive collaboration among industry players to gradually and positively affect the sourcing decisions and practices of suppliers. Undertaking due diligence on mineral supply chains can enable responsible sourcing from conflict-affected and high-risk areas while cutting off harmful parts of the trade and simultaneously promoting positive developments on the ground. If you read the OECD Due Diligence Guidance you will see that the introduction highlights the need to avoid de facto embargoes that would exclude responsible producers from global supply chains. The OECD Guidance therefore outlines that companies should take a progressive approach and not demand perfection in their engagement with suppliers,” stated Tyler Gillard to the Zimbabwe Diamond Conference delegates.