…and the recent G7 “Russian Diamond” sanctions.
“Where does the diamond on my finger come from?” - an end-consumer may ask. What on the outset looks like a harmless question may lead to a complicated and possibly troubling answer:
The diamond industry is one of the most regulated industries in the world. And for a good reason, the industry has been no stranger to legal and ethical issues related to its sourcing of goods:
- Governments have attempted to tackle these issues through global agreements, such as the Kimberley Process (KPCS).
- Later, the WDC implemented the System of Warranties (SoW), conceived as a self-regulatory framework mandating B2B players to include a warranty statement on invoices and memos each time a diamond is exchanged.
- Recent G7 Regulations attempt to put further sanctions on Russia, one of the biggest diamond exporters.
But… can you really know where the polished diamond an end-consumer buys in a store comes from? How interwoven is the diamond industry’s supply chain? Is it possible to stop a country from selling its diamonds internationally?
In this article we’ll uncover the uncomfortable truth about sourcing and traceability, and how it relates to recent events in the diamond industry:
It’s no secret that the diamond industry has a complex and multi-faceted supply chain. The diamond may pass through many different hands, companies, and locations before it finally becomes polished jewelry in a store.
Tracking becomes increasingly difficult as supply chains grow more complex. This difficulty is compounded in the diamond industry, as polished diamonds reveal little about their origins.
Dr. James E. Shigley of the Gemological Institute of America stated:
“It’s much more similar to a chain of custody […] This is what I think is possible today. This is what we do, and I don’t think there’s any way of telling this [just] from studying a polished diamond.”
The Two Hardest Challenges Of Traceability
- How to trace the rough diamonds when the entity changes (sorting, splitting, mixing, etc) and retain that custody for one provider (mine or factory)?
- How can all goods be tracked as they move downstream, passing party to party throughout the pipeline?
While the first challenge is already solved with proprietary technology, such as BidGemmer’s “diamond ERP and stock inventory management” - and some other blockchain solutions…
…the second challenge is still largely unsolved.
What about the Blockchain?
Many people use the term Blockchain in the industry as the “solution” for origin and traceability issues.
The problem? While Blockchain might be a promising technology, it’s unfortunately not a solution in and of itself.
There are three main reasons for this:
- Interchangeability: Even if every transaction is recorded, there’s no way to ensure the stone wasn’t secretly swapped.
- Reporting need: Who checks that the ‘chain’ is complete - or ended abruptly?
- Unified-tracking needs: Even if one party of the supply chain tracks diligently, there’s no guarantee that all the other parties downstream will do the same.
G7 Sanctions: The Recent Catalyst
With the ongoing conflict in East Europe, the G7 countries imposed Russia with further sanctions on its diamond export.
The CNN summed up the situation nicely:
“In other words, even if stones are sent halfway around the world for cutting and polishing, if they originated in Russia they’ll be banned from markets in Europe and the G7. And the industry will need to figure out how to prove it.”
Conclusion: The Truth About Origin And Traceability
The uncomfortable truth about the diamond that the end-consumer buys is that - at the current state - no one really knows for sure where it comes from.
To comply with recent G7 sanctions, the industry will likely need to adopt a unified tracking solution at every touchpoint of the supply chain, from the miner to the jeweler.
Companies in the industry are well-advised to embrace traceability, as it’s certainly here to stay.
About BidGemmer:
BidGemmer is an industry-leading software with a comprehensive ecosystem for the diamond industry. From sales to comprehensive tracking solutions, the software covers it all.
Our technology has been used to sell over $160B+ in auctions and has been in the market for 10+ years. Request a demo.
See it against your own stock.
BidGemmer keeps inventory, clients, finance and every auction or tender on the same stone records. Thirty minutes is enough to tell whether it fits how you trade.
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