Export/Imports Certificates Provide Only "Limited Protection"

De Beers managing director Gary Ralfe introduced this week an all-overriding concept: "Ethical Responsibility." He was even willing to apply the concept to practical situations. If, hypothetically, an African nation that not excels in good governance would nevertheless certify conflict goods, and if these diamonds are subsequently officially imported into a cutting or trading center, the diamond trader buying these goods can still find himself in trouble with the DTC and with the market.

"If you know or suspect the goods to be of doubtful origin, don't touch it," was the loud and clear message of the De Beers chief, "even if the goods are accompanied by certification." The remarks came in the wake of a UN report that (in Appendix I and Appendix II) named a number of diamond trading companies, which the UN recommends to place on a sanctions list within the near future, subject to some further clarifications.

Some organizations hastily condemned the UN report and indicated that, in the past, the UN has also made mistakes in its blaming and shaming reports. It also failed to provide evidence. We recall vividly that the UN has made serious errors in identification in the past, and it may err again.

On the other hand: many dedicated professionals worked on the report and it was based on hundreds of meetings with relevant parties and governments. Instead of a blanket condemnation of the UN report, it would be more prudent to ask ourselves why there are still companies operating within the industry, which are even under a cloud of suspicion.

Let's face it: most players within the diamond industry will have much better information on the participants in the trade than the UN will ever have… Some banks have already taken action on the UN report, not only in their own best interest - but mostly to protect their other clients. 

Banking regulators and examiners are taking a great interest in companies dealing with companies that are seen as "suspect". After September 11 the external environment has changed and the industry must face up to this.

This goes far beyond the more limited issue of conflict diamonds. Gary Ralfe has made it clear that "ethical accountability" is more than just a few points in the Supplier of Choice (SoC) Sightholder criteria. Someone seen as violating the "ethical standards" will lose his Sight or forfeit his chance to get a Sight - even if he is on all other SoC parameters the ideal client.

The diamond bourses and manufacturers organizations have displayed this week great leadership in committing the industry to self-regulation and all-encompassing chains of warranties. (The industry owes a great debt to WFDB president Shmuel Schnitzer and IDMA president Sean Cohen for standing on principles and refusing anything but the most unequivocal and strongest commitment.)

The message of both the industry leadership and De Beers is: Look beyond the certificates - make sure you know your source. Gary Ralfe says that we are witnessing "a strong move towards what I might call ethical accountability among global companies and industries, and those businesses touch the lives of millions. The diamond industry and De Beers need to respond proudly and firmly to the demand from civil society, from the consumer, from NGOs and from governments for ethical accountability. The value of our product lies in its desirability to the consumer and the consumer's desire to own a diamond lies in its value as a symbol - a very beautiful symbol - but a symbol nonetheless of enduring love and purity."

To maintain and nurture that confidence, the industry must accept maximum rather than minimum standards. We are absolutely sure that the industry will live up to that standard. 

Incidentally, ethical accountability also applies to journalists and columnists. Sometimes we assume a cause and effect relationship which appears to exist - even when it doesn't. In last week's Ten Liner we reported on some views heard from within Anglo American on the level of De Beers sales and we also reported that the present and next few Sights would be small. 

De Beers operates as a fully independent company and both legally and practically does not take "instructions" from the 45% shareholder in its parent company. Yes, particularly in strategic matters, its views as a major shareholder will be taken into account, but Anglo American has no input in day-to-day management decisions. It's important to set the record straight.