The World Jewellery Confederation (CIBJO) represents the entire jewelry industry embracing a whole variety of companies, from those mining precious metals and gems to those, which are manufacturing and selling final products.
The confederation members are national jewelry associations from more than 40 countries, including Russia. In 2006, the CIBJO was the only organization granted the official status of a consultant to the UN Economic and Social Council on the development of the global jewelry industry.
Gaetano Cavalieri, President of CIBJO, has kindly agreed to give this interview to Rough&Polished and to talk about his vision of the situation in the diamond industry.
What are the main topics to be discussed at the CIBJO Congress in Yerevan?
I think it is first important to understand the structure of a CIBJO Congress. Like our organization, which mirrors the composition of the gemstone and jewellery industry, the congress is divided into a series of sessions, some of which relate to programmes involving all parts of the industry, and others which relate to specific sectors. Consequently, while there are more general sessions that deal with such issues as Corporate Social Responsibility, sustainability, ethics, education and marketing, there are others run by our commissions, concentrating specifically on product types, such as diamonds, coloured gemstones, pearls, coral, gem labs and precious metals. This means that a wide series of important topics will be discussed, each one of which has significance for our industry.
Consequently while in general session we will discuss subjects like the Kimberley Process, carbon neutrality, defending the chains of custody and means of creating sustainable economic opportunities in the developing countries in which we are active, in the sectorial sessions we cover such subjects as synthetic diamonds, the ethics involved in new rough diamond scanning technologies, inconsistencies in coloured gemstone grading reports, harmonisation of specific colour standards, a universal pearl grading system, new standards for the coral sector and more.
What are the CIBJO’s plans for the nearest future?
A CIBJO Congress, which serves not only as a meeting place for our various sectorial commissions, is also as the place where all our office holders and General Assembly gathers. This provides the opportunity not only to address the pertinent challenges facing the gemstone and jewellery industries, but also to make certain that CIBJO is equipped to deal with those challenges. We will be doing that during the CIBJO Congress in Armenia in October.
We are a dynamic organisation, which has grown and evolved along with the industry we serve. The range of issues that we address has grown considerably over the years. Thus, whereas once we primarily addressed issued like the harmonisation of gemmological standards and nomenclature, today we also deal with CSR, sustainability and the industry’s greater responsibility to its consumers, stakeholders and the societies in which they live. As you may know, since 2006 we have been the only body in the jewellery industry that has formal advisory status in the United Nations Economic and Social Council (ECOSOC).
As I mentioned earlier, there are plans related directly to our general mission on behalf of the industry sectors, and this includes introducing new sets of standards for coral, for example, and new standards for other gems are also being considered. So is a guide for classifying natural and cultured pearls. This is only a sample of much broader programme being carried forward by our commissions.
Then there are the programmes that we are introducing for the industry on a whole. They already include a series of guides, which are downloadable from our website, free of charge for members of member organisations, and at a nominal fee for all others. Earlier this year we launched a six-part online course in CSR, at the end of which students will receive a Certificate of Accreditation (Level 1), issued by WJCEF, our educational foundation. We are about to launch an online system that will enable to all players to begin implementing chain of custody system, and we are broadening our carbon foot-printing and offsetting programme that was first introduced in 2013.
What concerns you and what pleases you?
That is a very broad question, so I think will provide a single answer for each category.
I am concerned about the position of smaller and medium-sized players in our industry. Over the long term jewellery sales are forecast to grow quite considerably, so I am not really worried about the overall health of our business. But there is definitely a consolidation taking place, with a larger companies taking a greater share of the pie, and smaller players get pushed to the side-lines. There are variety of factors responsible for this, and not all are inevitable or irreversible.
Consolidation is not a healthy development, for it robs the industry of vitality, flexibility and ability to innovate, and it also is a disincentive for young people to invest their future in our business. We need to find ways to reverse the trend.
But I am pleased by the growing awareness in our industry for the social and environmental issues that CIBJO has been promoting for 10 years. Our business community has proven its commitment to create and support defensive systems, like the Kimberley Process Certification Scheme, which are designed to ensure the integrity of our products moving through the pipeline. But we are now also seeing growth in proactive social and environmental activities, benefitting the wellbeing of the countries and communities in which we are active. This underscores our belief that while we handle non-essential luxury products, as an economic entity we are essential.
How do you explain the overall decline in consumer demand for diamond jewellery?
There is no denying that the past year was disappointing, with De Beers recently reporting that after five years of uninterrupted growth in the value of diamond jewellery sales, demand fell by 2 percent from $81 billion in 2014 to $79 billion in 2015.
There were a number of reasons, including the slowdown in growth in the China and other emerging markets, the decline in sales in India, and particularly the strength of the U.S. dollar against other currencies. In fact, according to De Beers, at constant exchange rates, global demand for diamond jewellery grew by 2 percent in 2015.
How to ensure profitability in business?
Quite simply to be prudent in terms of supply and do what we can to promote demand. It sounds simple and straight-forward, of course, but is clearly is not.
But in the diamond business that means not buying rough at any price that it is offered, and over the past two years there definitely seems to have been some progress made in that respect. Rough prices did come down, at a rate greater than that of polished, but now that they have begun to climb once again it is important not to return to the situation that existed before.
In terms of demand, the programme of the Diamond Producers Association to reintroduce generic marketing hopefully will spur demand, especially among Millennial consumers, who we are told spent more than $25 billion on diamond jewellery in 2015 in the four largest consumer markets, buying more than any other generation. That is not surprising if you consider that they make up the overwhelming majority of people buying bridal jewellery.
Don’t you think that synthetic diamonds are getting their part of the diamond market?
I tend to agree with the recent study by Morgan Stanley, which suggests that synthetics will have a moderate effect on prices in the melee sizes, but no real impact in larger goods. I also agree that even the effect in the melee sizes will be mitigated by the fact that synthetics will lead to an overall growth in the size of the market, as a result of the introduction of the new product category.
All this, however, is contingent on there being a clear distinction between natural and synthetic diamonds, and an absolute crackdown on the mixing of parcels of rough and polished diamonds. In terms of industry standard CIBJO has played its part, and has been supported by the new ISO standard, which is based on the CIBJO definition, which provides clear guidelines how synthetic goods need to be qualified.
The development of inexpensive and easy-to-use detection technologies is also important.
What would be your current appeal to the world diamond community?
The diamond industry is currently faced by a series of challenges, including low price margins, a shortage of bank financing, and ongoing attacks on its integrity. In terms of the first two, the industry must proceed with care and search for innovative solution, which means thinking outside of the box.
In terms of the latter challenge, which is to say integrity, it needs to be meticulous in the way in which it operates. CIBJO will do all that it can to support the diamond sector in this respect, seeking to define standards and terminologies that serve both its interests and the interests of its customers.
Alex Shishlo, Editor of the Rough&Polished European Bureau in Brussels
