Last year, the World Wildlife Fund conducted a research project which produced results making possible to declare Tiffany the only top retailer sticking to such principles in jewelry ethics that surpassed the industry standards by their rigidity. In general terms, the research findings were criticized by experts and the industry mass media. However, there was no one to contest the superiority of the American company in this field.
This year, Tiffany backed up the anti-Burmese initiatives of George Bush’s administration, while in August it was in the focus of a heated public debate around the construction of a gold mine in Alaska and its own partisanship to the No Dirty Gold campaign.
According to Fortune, Tiffany & Co. joined its efforts with Wal-Mart and the Richline Group, the world’s largest producer of gold jewelry and a unit of Warren Buffet’s Berkshire Hathaway.
The companies call upon miners to adopt strict environmental and social standards, verified by independent third parties. They also collaborate with environmental groups based in Washington - Conservation International and Earthworks, a watchdog group, which is behind an Internet campaign called “No Dirty Gold.”
That kind of activities pursued by environmentalists unnerves jewelers and upsets the mining industry. But facts are facts. Mining enough gold to make a typical 18-carat wedding ring leaves behind 20 tons of waste. In the U.S., metal mining creates nearly 30% of all the toxic releases measured annually by the Environmental Protection Agency, more than any other single industry. And in poor countries, where regulation is lax, the picture gets really ugly. Waste products have poisoned rivers in Guyana, destroyed rain-forest land in Papua New Guinea, and forced the evacuation of villages in the Philippines. In West Africa, thousands of children dig for gold. According to the UN, a fifth of the world’s gold supply is scratched out of the ground by desperately poor miners.
By contrast, Bingham Canyon (the U.S.), the world’s largest quarry mining gold, silver and copper boasts a social and ecological record which gives ground to call it “the gold standard” for the mining industry.
No wonder this is where gold and silver are bought for a new, eco-friendly line of jewelry dubbed “Love, Earth,” which went on sale at Wal-Mart and Sam’s Club in July. The launch marks the first time a mass-market jeweler has been able to track its precious metals through the supply chain.
Though Wal-Mart is the No. 1 retailer of jewelry in the U.S., it’s still a relatively small player in the world’s $80 billion global market for gold. And the world’s mining giants aren’t in the habit of having their behavior dictated to them by a retail chain, even a big one. Wal-Mart and Tiffany may have figured out how to begin shielding themselves and their customers from the tarnish of dirty gold, but the struggle to clean up the business is just beginning.
Perhaps no one has done more to alert the jewelry industry to these problems than Michael J. Kowalski, the 56-year-old chief executive of Tiffany & Co. An impeccably tailored man with degrees from Wharton and Harvard Business School, Kowalski is seen by some as a tree-hugging radical. “Almost everyone in the mining industry considered our degree of engagement suspect, stupid, or insane,” he says.
As it happens, Kowalski loves the outdoors – he’s a scuba diver and a hiker - but he has become an environmental activist for pragmatic reasons. “If the mining companies and the NGOs go to war, the battles are going to be fought on the sidewalks in front of Tiffany,” Kowalski says. That’s a nightmare scenario for the 151-year-old purveyor of luxury goods, because the appeal of gold jewelry, like that of a fur coat, depends upon its cachet.
Kowalski has been digging into Tiffany’s supply chain since the late 1990s, after human rights groups accused the jewelry industry of trafficking in so-called conflict diamonds. “Shame on us and the entire jewelry industry,” Kowalski says. “It was a wake-up call.” Jewelers worked with the NGOs and governments to develop a scheme called the Kimberly Process that enables retailers to assure customers that their diamonds are “conflict-free.”
But when Tiffany began asking questions about the origins of its gold and silver, the company hit a wall. Gold is mined in more than 60 countries, and the industry that supplies the metal to retailers is highly fragmented, with dozens of refineries buying gold from mines across the globe and often melting it together. Those who sold Tiffany its precious metal could not tell the company which mine, or even which country, produced its gold.
That’s why traceability is vital. Without it, retailers and their customers can’t use their buying power to reward mining companies that act responsibly and avoid those that don’t. This approach is by no means unique to mining. On the contrary, it has been developed and refined over time in such industries as fishing, forestry, and agriculture, where activist groups have pressured brand-name retailers to set standards that protect natural resources.
Tiffany solved its traceability problem by opting to buy its gold exclusively from Bingham Canyon. But Kowalski wasn’t finished. Since then Kowalski has convened meetings of jewelers and NGOs, financed studies of mining practices, and publicly opposed new mines in environmentally sensitive areas.
We may see an interesting intra-industry controversy brewing over the proposed “Pebble” gold and copper mine in Bristol Bay, Alaska, Rob Bates writes in his JCK blog.
In August, Tiffany hosted a screening of “Red Gold,” a compelling documentary about the issue, which was certainly enough to give pause about the whole project. The mine’s opponents argue that its construction poses environmental risks and will destroy one of the world’s greatest salmon fisheries, and with it, the Bristol Bay fishing culture that has existed for generations. The New York Times said the debate boils down to “fish or gold.”
The crusade to stop the mine has run into roadblocks. “The Alaska Clean Water Initiative,” which would have put significant barriers to the mine, was voted down. For many Alaskans, the proposed economic benefits of the mine outweigh possible downsides. Still the fight over this mine is likely to be long and ugly.
Tiffany has spoken out against the mine and vowed not to source gold from it. Taking a stand like this has undeniable benefits. If the mine does go forward, we will probably see a lot damaging publicity about “where your gold comes from” a la the No Dirty Gold campaign. Tiffany is wise to get ahead of this issue.
And yet there is no doubting the sincerity of company’s principals. It is one thing to declare you won’t buy gold from Pebble (as other retailers, like Fortunoff and Helzberg’s, have done.) It’s another to host a screening of an anti-mine documentary. It is still another to actually visit Bristol Bay in Alaska to scout things out, as CEO Michael Kowalski did recently. Kowalski has even taken to asking for Alaskan salmon when he goes out to restaurants.
It’s also worth nothing that Tiffany’s stand is in direct opposition to that of Anglo-American, the mine’s developer. Anglo is, of course, the parent company of De Beers, the company that Tiffany buys quite a bit of diamonds from.
On past social issues, like “conflict diamonds,” the industry acted more or less with one voice. But we could be seeing a real split here, Bates says. And by the way, if McCain chooses Alaska governor Sarah Palin as his running mate, this issue could get a boost in profile.
