U.S. retailers get poor grade from NGOs

New York—A new survey from non-governmental organizations Global Witness and Amnesty International USA indicates that the American retail-jewelry industry is failing to take adequate measures to assist consumers in avoiding conflict-diamond purchases.

In the survey, conducted between December 2006 and February 2007, the groups said they polled 37 retailers listed in National Jeweler's "$100 Million Supersellers" report, which identifies, surveys and ranks the nation's largest fine-jewelry retailers by sales volume. Several of the survey's main findings include:

* 50 percent of the retailers failed to respond to requests to provide information on their conflict-diamond policies (among those who didn't respond were Costco, Sears Roebuck and Co., Shop NBC, Target and the Home Shopping Network).
* 56 percent of those who responded reported having no auditing procedures in place to combat conflict stones, despite recommendations from Jewelers of America (JA) to do so.
* 57 percent of top jewelers don't include public information on their Web sites regarding their conflict-diamond policies.

The survey did note that Helzberg Diamonds, Sterling Jewelers and Tiffany and Co. have taken stronger measures to combat conflict diamonds, including third-party auditing.

This latest report—an update of a survey conducted in 2004—comes on the heels of recent reports of diamond smuggling, including an incident on Feb. 4 involving two men in Tucson, Ariz., who were arrested and charged with smuggling 11,000 carats of diamonds from Africa in violation of the Clean Diamond Trade Act.

Global Witness and Amnesty International charge that the incident in Arizona, along with reports of illegal diamond trafficking from Zimbabwe, Venezuela and the Ivory Coast, highlight loopholes in the Kimberley Process (KP).

"Americans buy half the diamond jewelry sold worldwide—$33 billion a year in U.S. sales," Amnesty International USA Executive Director Larry Cox said in a statement. "We feel that this industry has an obligation—and consumers should demand—that the diamonds that are bought and sold are conflict-free."

Global Witness Founding Director Charmian Gooch said it's reasonable to demand that the industry give consumers adequate assurances that the diamonds they buy are conflict-free, given the human toll of blood diamonds.

"With such huge profits, retailers should be willing to do more to solve this problem," she said.

The two NGOs have called on the industry to take the following actions:

* All sectors of the diamond industry, including retailers, should implement third-party audit measures and responsible sourcing policies.
* The United States and other governments should carry out stricter oversight of the diamond industry and strengthen and improve enforcement of the KP and the Clean Diamond Trade Act.
* Jewelry retailers should make their policies on conflict diamonds prominently accessible on their Web sites.

Jewelers of America President and Chief Executive Officer Matthew A. Runci responded to the NGO's statement, noting that the World Diamond Council's (WDC) System of Warranties (SoW), agreed to by KP participants from government, industry and civil society, gives retailers the responsibility of writing to their diamond suppliers to require warranties and keeping these for five years.

"JA strongly encourages retailers to comply with its SoW responsibilities and has repeatedly provided them with the tools to do so. JA also recommends that retailers consider internally auditing their invoices to ensure the warranty statements are there," Runci said in a statement. "But failure to do so is not a violation of the SoW and should not be misconstrued as such."

Runci said a larger question remains, however: How is more auditing by retailers contributing to the key issue the KP identified at its plenary in November 2006, which is closing loopholes in the rough-diamond trading system?

The WDC also responded to the media release from the NGOs:

"The World Diamond Council agrees with the need for retailers to be able to provide assurances to consumers that their diamonds are conflict-free, and we have been working closely with retailers to ensure that they understand and fulfill their responsibilities under the Kimberley Process and System of Warranties," WDC Chairman Eli Izhakoff said. "While we believe that progress is being made toward eradicating the trade in conflict diamonds—as of today 99.8 percent of diamonds are certified conflict-free—we will not rest until they are completely eradicated."

He added that it's the combined effort of governments, NGOs and the diamond industry that will make conflict diamonds a thing of the past.

"We would encourage consumers to be fully informed about the issue, to purchase from a reputable jeweler, and when buying a diamond, seek assurances from the retailer that the diamond is from a conflict-free source," Izhakoff said. "If a retailer cannot provide reassurance that their diamonds are conflict-free, we would advise the consumer to seek an alternative retailer who can."

Earlier this month, the WDC released results from a post-holiday survey conducted by GfK that indicated that 88 percent of the jewelers polled had either asked for or received guarantees from their suppliers that all the diamonds they purchased from those companies were conflict-free.

The study involved 318 jewelers in the United States, ranging from small independent stores to national chains, department stores and Internet outlets.