DIAMOND FACTS

Natural diamonds are the Earth’s real treasures, exceptionally rare, and are mined today in a responsible way that supports livelihoods and contributes to conservation efforts around the world.

This new edition of Diamond Facts sets out to address the most common myths about the diamond industry, from those produced synthetically to natural stones unearthed from deep underground.

The first issue of Diamond Facts was well received by journalists, retailers, consumers and business leaders in our industry. As a single point of reference for data, it gave the natural diamond industry an accurate and consistent voice for the first time. This unified voice has had a positive impact on press stories and other influential conversations around the world. Narratives are more factual and balanced than those seen in previous years.

Natural diamonds are part of a dynamic industry, and the market is always subject to change. The information we share must reflect these changes too. This new edition of Diamond Facts, part of our Diamond Reports series, contains updated data on myths included in the first edition and new myths addressed with previously unreported data. We hope that you find this update helpful, and we welcome feedback on other topics and data points that would be of benefit in future versions of Diamond Facts.

We also encourage you to explore our other reports in this series, including Diamonds of Canada.

We will regularly be issuing reports in partnership with leading experts, data organisations and diamond industry representatives*.

DAVID KELLIE – CEO, NATURAL DIAMOND COUNCIL

Understanding grading reports and certifications

Consumers can also be assured about the identity of their diamond by asking for grading reports or certifications²³ (depending on the grading laboratory).

Laboratory-grown diamonds reports must always disclose in a clear way that they are laboratory- grown. For example, the GIA laboratory-grown diamond report²⁴ provides information as to whether a diamond was made via CVD or HPHT.

Figure 1 – Sample of GIA Natural Diamond report²⁵

Figure 2 – Sample of a GIA laboratory-grown diamond report²⁶

Understanding environmental terms

Before diving into the questions about sustainability and environmental impact, take a look at these concepts.

OVERVIEW OF SCOPES AND EMISSIONS ACROSS THE VALUE CHAIN

The emissions accrued can be separated into three overarching types; Scope 1, Scope 2 and Scope 3 emissions^{27 28}.

Figure 3 – Overview of scopes and emissions across the value chain

What about laboratory-grown diamonds’ social sustainability performance?

Any broad claims that laboratory-grown diamonds are always a sustainable option must consider the social implications of the industry across the entire supply chain too.

Whilst this chapter has focused a lot on environmental sustainability, social conditions relating to employment and human rights, as well as the impact and mediation with local communities in laboratory-grown diamond regions, are fundamental to ensuring that when it comes to water usage, laboratory-grown diamonds can justify their ethical sourcing claims.

There is less access to published data and information about the social footprint of laboratory-grown diamond manufacturers and they are not held to account on reporting guidelines.

Additionally, as laboratory-grown diamond production has a business model that relies on technology-based manufacturing, the number of employees it must hire for direct production is significantly smaller than that of the natural diamond industry. There is also much less local procurement and incomparably less infrastructure and social investments made or partnerships developed with local communities.

This means that laboratory-grown diamonds do not have the same socio-economic benefits for communities or a positive social multiplier effect as natural diamonds have. The natural diamond industry operates largely in developing countries, so it contributes to the important economic development of producer countries.

Read more about this later on in our study.

IN FOCUS: MINING REGULATIONS AND GUIDELINES

Whilst not exhaustive, the list below details initiatives, guidelines and frameworks that highlight the level of regulation on the opening and closure of mines:

• Australian Government (2016) Mine Closure – Leading Practice Sustainable Development Program for the Mining Industry: introduction to mine closure and current leading practices from an Australian perspective.
• ANZMEC (2000) Strategic Framework for Mine Closure
• ICMM (2008) Planning for Integrated Mine Closure – A Toolkit: provides a broadly conceived life cycle and risk-based approach to closure planning.
• Mining Association of Canada (2008) Towards Sustainable Mining – Mine Closure Framework: an industry-led initiative to articulate the commitment of member companies to promote responsible mine closure.
• NOAMI (2010) Policy Framework in Canada for mine closure and management of long- term liabilities
• World Bank Multistakeholder Initiative (2010) Towards Sustainable Decommissioning and Closure of Oil Fields and Mines: provides a policy-oriented series of toolkits related to closure for both oil fields and mines.
• Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development (IGF) (2013) The IGF Mining Policy Framework: Mining and Sustainable Development: lays out a framework that provides a comprehensive model for policy that will allow mining to make its maximum contribution to the sustainable development of developing countries.

FACTCHECK:

Natural diamonds are a finite resource. Global natural diamond recovery peaked in 2005, when rough diamond production was around 30% higher than in 2022¹⁰⁵. The annual recovery of 1 carat diamonds is equivalent in volume to filling an exercise ball.

The process of natural diamond formation means that as an object, they are innately rare. Formation takes place across the span of millions, sometimes billions, of years and occurs in limited zones of the Earth’s mantle at extreme temperatures and pressures¹⁰⁶

Natural diamonds are hard to find and have only been found in rock over the last 150 years. The first diamonds were found in caves in India nearly 4000 years ago and for a long time, this was the only known source. Over time, they have become prized for their perfect shape, hardness, rarity, fire resistance and intense light¹⁰⁷.

These conditions contribute to their rarity, with the annual recovery of 5 carat diamonds and above would fit into a basketball¹⁰⁸.

In fact, today there are only 30 significant natural diamond mines in production, with only 7 mines considered to be classified as Tier 1 deposits. Tier 1 deposits are those which have over US$20 billion in reserve¹⁰⁹.

De Beers Group recorded that over the last 140 years, almost 7,000 kimberlite pipes have been sampled by geologists. Yet, approximately only 60 of these were deemed to be sufficiently rich in natural diamonds to be economically viable for large-scale diamond mining companies¹¹⁰.

Graph: Number of diamond deposits sufficiently rich to warrant development

Many industry experts and analysts believe that the annual recovery of natural diamonds peaked in 2005 at 177 million carats¹¹². Though this recovery has fluctuated, leading analyst Paul Zimnisky notes depleting legacy mines and limited new supply sources, further punctuated by the Covid-19 pandemic, resulted in a significant production decline. Through his analysis, it is predicted that production is expected to remain within a range of 115-125 million carats annually, a much lower figure than 150 million carats recorded in 2017¹¹³.

A major contributing factor to this belief is the declining profile of existing mines and the small success rate of exploration. Petra Diamonds states that the success rate in diamond exploration is estimated at less than 1%¹¹⁴.

Data recorded via the Kimberley Process from 2014 – 2021 illustrates the gradual decline of rough diamonds recovered and traded under the Kimberley Process Certification Scheme (KPCS) over recent times.

Deep pockets and large financial investment are needed to explore new diamond mining opportunities.

Determining the economic viability of these projects also extends to different types of mining, including alluvial mining. Alluvial mining is a process where stones are found in riverbeds or shorelines after kimberlites have eroded over time. Approximately 10-15% of the world’s diamonds originate from alluvial mining, however, geologists have commented that often they cannot tell how many stones there are. This is a key piece of information in determining if reserves justify economic investment¹¹⁵.

The closure of mines which have reached the end of their economic lives include Argyle in Australia, owned by Rio Tinto which closed in November 2020, Victor Mine in Canada owned by De Beers Group which closed in 2019, Voorspoed in South Africa, owned by De Beers Group and Snap Lake, owned by De Beers Group in Canada¹¹⁶.

The termination of operations of mines like Argyle, which once produced up to 40 million carats a year is symbolic of the changing landscape of natural diamond mining¹¹⁷.

Further potential near-term closures include Diavik, Ekati, Nyurbinskaya and Almazy-Anabara which are expected to either reach economic depletion or conclude conventional mining by the end of this decade.

In fact, industry analyst Zimnisky notes that these mines currently account for a combined 17-20 million carats of annual production, representing approximately 15% of global supply¹¹⁸. This represents a significant supply change to the natural diamond industry. De Beers Group is also still exploring new opportunities and in 2022 signed Mineral Investment contracts with Angola to return to exploring the country for new sources¹¹⁹.

FACTCHECK:

Inventories of natural diamond producers fluctuate across periods of time, especially when they are broken down by size or quality of stones. This is because, unlike other industries, natural diamond producers cannot operate a just-in-time production model to match supply with demand. Inventories are also impacted by seasonal demand patterns and by external events such as the global coronavirus pandemic.

Comparisons of production and sales data for NDC member companies shows that over a business cycle, there is no evidence of deliberate stockpiling to systematically drive-up prices. This is because total production and total sales are in line with one another. Bain & Company compiled data from company reports and the Kimberley Certification process to estimate that upstream inventories (i.e. those at diamond mine sites and sorting offices) across the world fell by 40% in 2021, leaving them close to minimal ‘technical levels’¹²⁰.

The factors impacting diamond inventories

There are multiple factors that cause diamond inventory levels to fluctuate over time.

Firstly, unlike other industries, there is a large variance in the size, color and quality profile of what diamonds are recovered each month. These characteristics are dependent on natural geological processes, rather than manufacturing decisions. It also takes several weeks and months for recovered diamonds to travel from mine to a point of sale.

This is because they must be sorted, typically into one of 15,000 categories of rough diamonds according to their size, shape and quality, before being sold or auctioned at sales that are typically held once a month¹²¹. Inventories therefore fluctuate particularly by type of stone.

Seasonal fluctuations in demand can also affect monthly diamond inventories. For example, consumer demand for jewelry is usually highest in the fourth quarter of the year, around seasonal holidays, which can impact the inventory upstream.

Additionally, external events like the global coronavirus pandemic in 2020 or the Financial Crisis of 2008 can cause a reduce in demand and therefore, impact inventories following such events when economies start to recover¹²².

Recent trends

So, what has happened to diamond producer inventories in recent times? As explored in the chapter on rarity, natural diamonds are a finite resource and their recovery peaked in 2005 following the closure of legacy mines and finding new deposits¹²³. Production in 2021 was recorded to be 20% below the level of 2017¹²⁴.

Supply depletion, alongside the strong market demand of 2021 as the world emerged from the pandemic has reduced the inventory of mining companies to low levels¹²⁵.

Bain & Company compiled data from company reports and the Kimberley Certification process to estimate that upstream inventories (i.e. those at diamond mine sites and sorting offices) across the world fell by 40% in 2021, leaving them close to minimal ‘technical levels’ .

To review inventory trends, comparisons of published carat production and sales data over a business cycle can be assessed.

Whilst this does not provide a complete picture, when analyzed over a considerable time, it helps to demonstrate that total production and total sales are in line with one another and that therefore, there is no evidence of deliberate stockpiling to systematically drive-up prices.

According to Paul Zimnisky, upstream inventory levels remain at significantly low levels. Production data is available on companies’ websites¹²⁶ and underlines how the industry is pursuing increased transparency when it comes to production and inventory management.

Through the UN and World Trade Organization mandated Kimberley Process Certification Scheme, explored in our chapter on ethical sourcing, international rough diamond trade is regulated and recorded. Data and statistics arising from the Kimberley Process indicate the levels of diamond recovery and paint a clear picture of the market’s production.

FACTCHECK:

Prices for laboratory-grown diamonds have fallen from 2016 to 2023. For example, in some cases the price of a 1.5 carat stone has fallen by over 74%. There is a widening price differential between laboratory-grown diamonds and natural diamonds. Whilst the price of natural diamonds has also fluctuated over the last 35 years, on average they have risen by 3% per annum.

How has the pricing of laboratory-grown diamonds changed over time?

Diamonds were first synthesized in a laboratory in the 1950s and the first synthetic gem-quality stones appeared on the market in the 1970s. In these early years, the stones were mostly small, and yellow or brown in color¹²⁷ and production costs were high¹²⁸.

Since the commercial development of CVD technology in the early 2000s, the production costs of laboratory-grown diamonds have fallen dramatically – in line with technological advances, economies of scale and competitive pressures as new producers have entered the market.

Additionally, machines that were previously used to make industrial diamonds have been repurposed for gems. Bain & Company estimated that in the 10 years from 2008 and 2018, the average production costs of a high-quality laboratory-grown 1 carat stone fell by 90%¹²⁹. Retail prices of laboratory- grown diamonds have also declined, though to a smaller extent. When laboratory-grown diamonds began appearing in commercial quantities in the jewelry market around 8 years ago, prices were typically slightly cheaper than those of
natural diamonds.

However, as the laboratory-grown market has expanded, the relationship has diverged.

However, as the laboratory-grown market has expanded, the relationship has diverged.
For example, analyst Paul Zimnisky has noted that in 2016, a round, almost colorless, high quality, 1 carat synthetic stone cost around 10% less than a natural diamond. However by the close of 2022, the differential was as much as 80%, depending on the manufacturer. Zimnisky’s figures illustrate that a typical, generic, 1 carat laboratory-grown stone of this color and clarity was more than 70% cheaper than a natural diamond at the end of 2022.

Sample prices of man-made relative to natural over 7 years

Source: Paul Zimnisky (2023) State of the diamond market March 2023. Available here

How the prices of natural diamonds and laboratory-grown diamonds have changed from 2016 – 2023

Prices for laboratory-grown diamonds have fallen from 2016 to 2023, in some cases, for example for the price of a 1.5 carat stone, by over 74%. For example, according to Zimnisky’s “State of the diamond market” March 2023 report, in 2016, a 1.5 carat natural diamond would have cost $12,125, while a 1.5 carat synthetic would have cost $10,600 – amounting to a difference
of $1,525. However, early 2023, the retail price of a 1.5 carat natural diamond had increased to $13,625, whilst its laboratory-grown counterpart would have decreased in price to stand at $2,445 – representing a substantially larger difference of $11,180. Research conducted by The Gem Academy illuminates the difference¹³². By analyzing 2021 price data for natural diamonds and laboratory-grown diamonds available from two online retailers, they recorded that the cost of a 1 carat natural diamond was $7,355, whilst a 1 carat laboratory-grown diamond cost $2,110, representing a price difference of -71%. Across diamonds ranging from 0.5-3 carat weight, the research stated there was an average price difference of -66% across all sizes¹³³.

The current pricing of natural diamonds

Natural diamond prices reflect their rarity and limited supply. Bain & Company conducted a historical analysis looking at data between 1970 and 2019, in which they noted that polished prices of natural diamonds had risen over the last 35 years by an average of 3% per annum¹³⁴. Post- pandemic, Bain & Company noted that in 2021, rough natural diamond prices grew by 21% and that prices increased by 9% year on year for polished diamonds. Whilst this is below their historic maximums, it illustrated that both rough and polished prices were returning to pre-pandemic levels¹³⁵. Zimnisky has tracked prices of rough diamonds since 2007. Based on an initial index value set at 100 on 31 December 2007, his rough price index stood at 183.4 at the end of March 2023, implying an average annual growth trend of 4% per annum¹³⁶.

The differences in pricing structures between laboratory-grown diamonds and natural diamonds

In addition to the diverging price trends over time, these is also a difference in the pricing structures of laboratory-grown diamonds and natural diamonds. The supply, size and the available quality mix available of natural diamonds depends completely on geology, and as noted in previous chapters, large stones are very rare. The prices of different types of natural diamonds have therefore always reflected this rarity. For example, this means that a 2 carat stone costs significantly more than double the price of a 1 carat stone. As a laboratory-grown diamond is not dependent on geology, the main constraint is the production capacity of each company. A larger synthetic stone requires more energy and takes longer to produce than a smaller one, but the relationship is broadly linear – the production costs for a 2 carat stone are twice that of a 1 carat stone. Whilst prices of natural and laboratory- grown diamonds have diverged, the differences have not been uniform across all sizes and qualities. They have tended to be highest for larger stones. For example, Zimnisky’s data indicates that between the end of 2020 and the end of 2022, prices of 1 carat synthetic stones fell by 24% while prices of 3 carat stones fell by 45%.

Economic policies and geopolitical factors influence the price differential between natural
and laboratory-grown diamonds. The OECD has recorded that many countries are in a highly competitive race to attract diamond trading, with nations offering tax exemptions or special economic zones for activities like cutting and polishing¹³⁷. To stimulate the production of laboratory-grown diamonds at a significant scale, India has implemented new policies to position itself as a competitive marketplace. For example, there has been a recent push by the Indian government to reduce import duties on diamond seeds, an essential component of lab grown diamonds, originating from China. In the latest 2023 Budget, the Union Finance Minister Nirmala Sitharaman abolished a 5% customs duty on imports of seeds used for the manufacturing of rough laboratory- grown diamonds¹³⁸.

FACTCHECK:

Members of the NDC are dedicated to reinvesting in and creating a positive multiplier effect across the communities they work with, in line with their commitments to the UN Sustainable Development Goals – especially on areas surrounding alleviating poverty, decent work, health and wellbeing, fair wages and reduced inequalities. Up to 80% of rough diamond value can remain within local communities in the form of local purchasing, employment benefits, social programs and investment in infrastructure as well as the taxes, royalties and dividends paid from the industry to respective governments¹³⁹.

Perceptions about economic inequalities across the natural diamond supply chain are outdated and tainted by a history of power imbalances.

Today, this is no longer the case. The natural diamond industry has generated significant economic contributions to many developing nations that are diamond producing countries. This has created a positive multiplier effect for countries like Botswana and Namibia. The flourishing of these economies fights the paradox of the ‘resource curse’.

Enriching the lives of diamond mining communities

The natural diamond industry is often perceived as a mining industry that does not take care of the regions from which it extracts minerals and diamonds, and that operates only for the benefit of organizations in the West. Perceptions of legacy issues such as colonialism and corruption of large-scale diamond miners are often outdated. These companies are heavily regulated and are genuinely invested in the economic and social prosperity of the communities they have worked with for centuries.

The natural diamond industry supports the livelihoods of 10 million people across the world who are involved in the diamond supply chain¹⁴⁰.

It is important to note that many mining companies are partially owned by local governments, which means they receive direct economic benefits and impact the strategic direction of the mining operations. This includes De Beers Group’s operations in Namibia and Botswana.

NDC member companies make a significant socio- economic contribution to the local communities and governments where they operate. This can be in the form of local employment and training, local sourcing of products and services as well as health and education programs and training for local suppliers and businesses, through investment in infrastructure. They aim to ensure that local communities share in the success of the mine whilst it is in operation and also prepare for their future after mine closure.

Table 3 – Summary of socio-economic benefits created by NDC members¹⁴¹

Research conducted by sustainability consultancy ERM determined based on 2019 and 2020 data that countries who host mining operations gain significant opportunities for development and industrialization, especially in regard to the purchasing of goods and services within a given region, which prevents a leak in investment and procurement being transferred elsewhere. It recorded that the total procurement spend by NDC member companies in these countries exceeded spend on wages, taxes, royalties and community investment combined¹⁴².

It was also reported that approximately $3.2 billion was spent with local suppliers, defined as those within the country of operation. This represented over 85% of all procurement spend¹⁴³. These figures indicate how serious the natural diamond industry is about ensuring their operations benefit communities of host mining countries. In 2019, it was also recorded that the natural diamond industry has made a total economic contribution of at least $9.64 billion to local communities¹⁴⁴.

NORTHWEST TERRITORIES

Namibia neighbors Botswana and also demonstrates how positive socio-economic returns can arise from the natural diamond industry. Diamonds generate 20% of Namibia’s foreign export earnings and the country receives 80 cents of every Namibian dollar generated by Debmarine Namibia, its 50:50 joint venture with De Beers Group¹⁵². According to the World Bank, the adoption of new marine mining technologies for diamonds in Namibia in 2004 led to an increase in production and helped the economy achieve historically high growth of 12.3%. As of 2021, diamonds remain Namibia’s most important product in the mining sector, accounting for close to 68% of mineral output and 45% of foreign exchange earnings¹⁵³.

It is not only regions in Africa that stand to benefit from the natural diamond mining industry. It is a foundational industry for the Northwest Territories (NWT) in Canada where it is the largest private sector industry and contributed 24% of total GDP in 2020¹⁵⁴. Data from the 2021 Government of the Northwest Territories Socio-economic Agreement Report for Mines operating in the NWT recounts how the mining industry contributes to construction, transportation, retail and real estate, alongside the direct benefit of wages in 2021. Since 1996, NWT diamond mines have provided 32,137 person years of employment cumulatively and contributed over $24 billion to the economy. Of this, nearly $17 billion went toward NWT businesses and $7.5 billion to Indigenous-owned NWT businesses¹⁵⁵.

FACTCHECK:

The industry is highly regulated. Under the Kimberley Process mandated by the United Nations and the World Trade Organization, all rough diamond trade is strictly regulated to ensure it is conflict-free. Multiple initiatives, processes and policies ensure that the industry moves beyond compliance on social issues across the supply chain. There is a robust set of checks and balances in place, including audits of the largest industry players, to enshrine the importance of ethical sourcing.

Ethical sourcing is essential to the practices of the natural diamond industry. It means that products and services across the supply chain are obtained in an ethical way. This includes upholding labor rights, decent working conditions, no child labor, the existence of health and safety measures and importantly, strong business ethics with respect for local communities¹⁶⁶. In the context of diamond mining, this includes sourcing conflict-free diamonds.

For many years, the natural diamond industry has worked hard to reform and address legacy issues related to mining practices and conflict diamonds. Now, the whole sector is held to extremely high trading standards. This is in part because 85% of the world’s diamonds by volume and 95% by value¹⁶⁷ are extracted and marketed by large mining companies that are public entities which are held to account by shareholders and stakeholders for their social and environmental impact.

Pressure for mine-to-market supply chain transparency and traceability of diamonds has contributed to building the importance of ethical sourcing for the natural diamond community.

Multiple pillars exist to ensure ethical sourcing and compliance across supply chains. The Kimberley Process or Kimberley Process Certification Scheme (KPCS) is a foundational block for the industry in achieving this. As a joint initiative between governments, diamond industry bodies and civil society. It is mandated by the United Nations and the World Trade Organization, to stem the flow of conflict diamonds.

Since it became operational in 2003, it has worked to ensure that only rough diamonds with KP certificates can be legally traded and that only KP compliant countries are able to operate in the international diamond trade. These countries must commit to transparency and exchange of statistical data, export and import controls, and only legally trade with other KP participants. It stipulates that all international shipments of rough diamonds must be accompanied by a certificate that guarantees they are conflict-free.

Now, over 80 countries participate in the process, and it has been recorded that conflict diamonds account for less than 1% of recorded rough diamond trade, a number that once stood at 4-15% in the 1990s.

Whilst the KPCS definition refers to conflict diamonds, the natural diamond industry has built on this to expand ethical sourcing beyond conflict free. To ensure human rights are protected it follows numerous other policies and frameworks.

The industry’s sourcing practices are held to account by legislation such as the Dodd-Frank Act in the United States which implies that any single company assumes its own direct ethical responsibility without transferring this issue to international organizations¹⁷¹. In this report’s Traceability chapter, we touched on the importance of OECD Due Diligence Guidance, UK Modern Slavery Act, California Transparency in Supply Chains Act, the EU Conflict Mineral Regulation and the London Metal Exchange Responsible Sourcing initiative.

Industry standards

The natural diamond industry has committed to measures that encompass social standards and business ethics. This includes codes of conduct, guidelines and third-party oversight measures, alongside in-house due diligence structures. These processes are continuously evolving as industry players proactively address social issues and work to protect human rights through ethical sourcing.

A few examples include:

WORLD DIAMOND COUNCIL SYSTEM OF WARRANTIES

The System of Warranties (SoW) was developed in 2002, to address areas outside the KPCS.

It requires professional buyers and sellers of rough diamonds, polished diamonds and jewelry setters with diamonds to include a warranty statement on invoices and memos each time a diamond changes hand. This is with the objective of assuring the next buyer that it originated from sources in compliance with the KPCS and to confirm its conflict-free origin. The SoW includes responsible business practices related to human and labor rights as well as anti-money laundering and anti-corruption.

Warranty statements are made each time the diamond passes along the supply chain, not
just at export and import stages. It has become challenging to do business without the SoW as
it is demanded by associations, companies and countries like Belgium, where it is integrated into statutory auditing procedures.

Abiding by the SoW is a condition of membership to organizations like World Federation of Diamond Bourses (WDFB) International Diamond Manufacturers Association (IDMA), and the Responsible Jewellery Council (RJC).

The SoW guidelines support universally accepted principles of human and labor rights that prioritize ethical sourcing and references the UN Guiding Principles on Business and Human Rights, the ILO Declaration on Fundamental Principles and Rights at Work, the UN Convention Against Corruption, and national AML guidelines that comply with the FATF’s 40 Recommendations on Money Laundering for Dealers in Precious Metals and Stones¹⁶⁸.

Retailers abide by the SoW and it is cited by multiple jewelers including De Beers, Chow
Tai Fook and Tiffany & Co in their supplier codes of conduct.

RESPONSIBLE JEWELLERY COUNCIL CODE OF PRACTICES

The RJC is a not-for-profit standards authority working to help the jewelry industry create a sustainable supply chain. The Code of Practices defines responsible ethical, human rights, social and environmental practices that certified members must adhere to. Members are upheld against the ISEAL Code of Good Practice for Setting Social and Environmental Standards too.

The Code of Practices has thorough rulings on human rights due diligence, responsible sourcing in high-risk areas, labor rights on contracts, wages, health and safety, grievance procedures, child labor, forced labor, freedom of association and the right to collective bargaining¹⁶⁹.

What to consider when purchasing ethically sourced diamonds

It’s important to ask the right questions and to know what to look for when purchasing a natural diamond to ensure it is ethically sourced.

Here are a few of our tips:

• Ask your jeweler if they have a certification or if they work with suppliers that have 3rd party certifications. This includes the Responsible Jewellery Council who help warrant ethical processes employed.
• Ask that your retailer or jeweler works with diamonds that abide by the Kimberley Process Certification Scheme (KPCS) if trading in rough diamonds.
• Look for certification and brand marks about their sourcing for example the Tiffany & Co provenance guarantee.
• Research whether the jeweler is a member of industry standards and initiatives¹⁷⁴.
• Review the brand’s own policies and see if they go beyond the KPCS.

IMAGE: PETRA DIAMONDS

FACTCHECK:

Members of the NDC ensure that working conditions related to fair pay, health and safety, employee benefits and protection of human rights are followed to the highest global standards within their mining operations. Nearly all (99.7%) employees of NDC members are hired locally and according to data from 2021 were paid on average 64% more than the national average salary¹⁷⁵.

Diamond recovery is mostly carried out by large- scale companies using modern equipment and mining practices. All NDC members have adopted the goal of zero-harm in the workplace. Workplace safety incidents recorded by NDC members are significantly lower than in other industrial and mining sectors.

NDC members seek to build long-term partnerships with the people they employ. They seek to offer safe, high-quality jobs and fair working conditions for all their employees and contractors in terms of wages, working hours, non-discrimination and protection from harassment, as well as the right to collective bargaining and the ability to follow grievance procedures¹⁷⁶. One third, and growing, of the natural diamond mining industry workforce are women, and 30% of board members of NDC members are women.

Employment benefits created by NDC members¹⁸²

As explored in our chapter on ethical sourcing, the industry is highly regulated under trading and legal frameworks by the United Nations and World Trade Organization. Multiple initiatives, processes and policies ensure that the industry moves beyond compliance on social issues across the supply chain. Read more about ethical sourcing in the natural diamond industry here.

The industry also adheres to the Responsible Jewellery Council’s Code of Practices, the De Beers Group Best Practice Principles Assurance Program, the Petra Human Rights Policy and the Rio Tinto Human Rights Policy and Supplier Code of Conduct.

The Responsible Jewellery Council’s Chain-of- Custody Standard requires companies to establish documentary evidence of business transactions along the supply chain and to confirm they are not causing adverse impacts in conflict-affected and high-risk areas. This includes understanding more about the working conditions at each stage of production¹⁷⁸. With a focus on miners in the supply chain, the Resolve and Diamond Development Initiative, Maendelo Diamond Standards and Initiative for Responsible Mining Alliance, amongst many others, are working to enshrine workers’ rights on the ground.

The large-scale mining industry works to do this, not only to meet regulatory requirements but because they are deeply invested in the livelihoods of the millions of workers they employ.

NDC members adhere to the highest labor standards shaped by the:

• UN Guiding Principles on Human Rights
• International Labour Organisation
• GRI Sector Standard for Mining
• OECD Due Diligence Guidance for Responsible Supply Chains of Minerals

Health and safety

All NDC members have adopted the goal of zero- harm in the workplace.

Keeping employees safe is the responsibility of everyone on site. It requires a strong safety culture in which no shortcuts or compromises are acceptable if they could result in an injury. It also requires following strict rules and processes, wearing the appropriate protective equipment, analyzing every task for its safety risk before performing it and continuously training teams to employ safe behaviors.

At workplaces of NDC member companies, work shift starts with a safety review of the last shift and a discussion of risks associated with the next shift. Leaders engage continuously with their teams on the ground to coach, train and correct them. New technologies are continuously introduced, such as vehicle proximity detection equipment or geological movement monitoring devices. The safety performance of every operation is rigorously monitored and is a very important driver of a leader’s performance evaluation. No leader with a poor safety record will be promoted¹⁷⁹.

From De Beer’s Good To Great Program, the Petra Mining Occupational Safety and Health initiative run in cooperation with the South African Chamber of Mines, and the Rio Tinto Critical Risk Management program, NDC members are focused on the health and safety of their workers at all times.

IMAGE: DE BEERS GROUP

Gender diversity in the workplace

NDC members are focused on encouraging gender diversity at an executive level, as well as throughout the entire workforce. One third of the natural diamond industry (for mining) are women which can have a positive impact on their family’s prosperity and inclusivity amongst communities¹⁸⁰. From a corporate governance perspective, 30% of board members of NDC companies are women¹⁸¹.

This surpasses the average for similar sized companies as according to OECD, only around 1 in 20 of the Top 500 multinationals have female representation above 30% at a board level¹⁸². Rio Tinto provides an example as Angela Bigg was the first appointed female President and CEO of the Diavik Diamond Mine¹⁸³ and Kellie Parker is the Chief Executive for Australia¹⁸⁴.

FACTCHECK:

The natural diamond industry is accelerating its traceability initiatives and leveraging technology like blockchain to bring transparency to its supply chains. Historically, tracing raw materials and minerals for diamonds across the globe has been difficult, but now, traceability along the whole mine-to-market diamond supply chain is being realized. Natural diamond retailers are launching their own traceability platforms and collaborating with technology providers to ensure their supply chains meet the demands of global policies on social and environmental regulations as well as heightened sustainability expectations from their customers.

The diamond supply chain consists of mining and trading processes followed by certification, cutting, polishing and manufacturing before a diamond enters the retail landscape and is sold to consumers.

Figure 8 – Diamond supply chain levels.

Supply chain traceability involves tracking the journey of a diamond at each stage of production, from raw material mining through to the moment when it is sold in store. ‘Provenance’ refers more specifically to the details of how a diamond has moved through the supply chain and what exactly happens at each step. Historically, tracing raw materials and minerals for diamonds across the globe has been difficult as there was no centralized digital database for natural diamond certification records.

But now, the mine-to-market diamond supply chain is being realized. The natural diamond industry is focusing on implementing a chain of custody through traceability initiatives that are enabled by technology to ensure diamonds are ethically sourced and real.

Not only can supply chain traceability enhance supply chain efficiencies for the natural diamond industry, but it is also critical to decrease the likelihood of conflict diamonds or synthetic diamonds entering the system. Multiple factors have catalyzed the need for supply chain traceability – such as investor demands for stronger ESG (Environmental, Social, Governance) performance, expectations from customers about social due diligence, as well as heightened regulation across the supply chain. The natural diamond industry is working at pace to achieve full traceability.

From investor demands for stronger ESG (Environmental, Social, Governance) performance, expectations from customers about social due diligence, as well as heightened regulation across the supply chain, the natural diamond industry is working at pace to achieve this.

At a legislative and global guidance level, there are multiple developments that underline the
need for traceability including the Dodd-Frank Act, OECD Due Diligence Guidance, UK Modern Slavery Act and the California Transparency in Supply Chains Act. More recently, the EU Conflict Mineral Regulation and the London Metal Exchange Responsible Sourcing initiative require players to abide by the OECD’s five-step risk-based Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas₁₈₈.

It is no secret that sustainability, transparency and social issues have become a priority for consumers. In its latest Global Diamond Industry report, Bain & Company note that the growing desire for social impact, especially amongst younger consumers, is prompting mining companies to address environmental and social issues, including traceability and transparency¹⁸⁹. Members of the natural diamond industry are working proactively to mitigate these supply chain risks.

The mine-to-market supply chain

Enabled by technology like blockchain, initiatives are being designed by producers, retailers, manufacturers and grading organizations to enhance traceability and share the story of the diamond with customers in order to increase trust.

Blockchain technology creates a peer-to-peer network of trade along value chains to provide a history of transactions for a single product, in this case a natural diamond. It has previously been described as a digital, decentralized, distributed and public ledger of what happens across a supply chain.

For the last few decades, the industry has been reliant on the Kimberley Process Certification scheme to regulate trade in rough diamonds to prevent inflows of conflict diamonds. This paper-based process has since been digitized on blockchain, which has made it more efficient190. The benefits of blockchain technology for the industry are far-reaching. It can ensure that when diamonds are traded on blockchain, each transaction undergoes a clearance process. This helps to ensure that traders comply with regulations related to the Kimberley Process, anti- money laundering and global banking protocols. It also helps to trace a diamond’s lifespan and creates more data for managers in industry¹⁹¹.

Annex I

The process of raw material extraction for laboratory-grown diamonds

Annex II

Overview of Northwest Territories (NWT, Canada) regulatory process, by Ryan Fequet, Executive Director for the Wek’ èezhìi (Mackenzie Valley) Land and Water Board.

In the Northwest Territories (NWT, Canada) the finalization of some Land Claim Agreements (or Modern Treaties) in the early 1990s resulted in a unique, progressive and empowering piece of legislation called the Mackenzie Valley Resource Management Act (MVRMA, enacted in 1998). The MVRMA and associated Land Claims created the regional Land and Water Boards of the Mackenzie Valley (LWBs) the Mackenzie Valley Environmental Impact Review Board (MVEIRB) , the Renewable Resource Boards, as well as Land Use Planning Boards; collectively referred to as the Boards. Together, these entities make up the co-management system that ensures a holistic and integrated approach to renewable and non- renewable resource management.

The LWBs, responsible for issuing authorizations required for projects, have established policies, guidelines and standards to guide applicants and resource developers through the environmental impact assessment (EIA), permitting and licensing processes – and to ensure that all projects are designed for closure from the start. The process begins with the requirement for early engagement with land owners, traditional land users and other potentially affected parties. The level of effort for this required engagement is scaled to the nature of the potential resource development project. Similarly, the information requirements related to proposed activities are also flexible to ensure the level of effort is reasonable for the size, type, and location of the activities.

All applications undergo a public review process that takes place on a real-time online platform where all recommendations and the applicant’s responses are visible to the public (Online Review System). Parties and the Board itself may retain technical and traditional knowledge experts to assist with document review and with ensuring that proposed activities would be carried out in the most appropriate way by helping to assess the potential impacts and mitigations; this step is known as preliminary screening – the first of the three levels of EIA.

There are legislated timelines for the LWBs and MVEIRB to carry out their processes, that range from 52 days to three years depending on the nature of the proposed project (where the longer period would include a full Environmental Assessment prior to regulatory permitting).

Because the Boards are administrative tribunals that must ensure procedural fairness, at the end
of each process the Boards produce a Reasons for Decision that explain how all of the evidence that was provided throughout the process was considered. When a Land Use Permit or a Water License is issued by a Land and Water Board, it contains requirements for: management plans, monitoring programs, reporting and the posting of security – which is the amount it would cost for a third party to come in and reclaim the site to ensure there is financial incentive for the project to reclaim the project site.

A standard requirement is that all management plans must be reviewed each year, and any proposed revisions sought by the Licensee must be provided to the respective Land and Water Board for approval. An Annual Report is also a standard requirement and ongoing environmental monitoring and response plans (when pre-defined triggers are met to avoid reaching an unacceptable level of change in the environment) come in monthly or more frequently as needed.

Regular inspections take place by the federal or territorial government to ensure a project is compliant with the conditions of its permit and/or license. Inspection reports and all submissions and correspondence with the Board are made available on the public registry.

Glossary

ASSURE PROGRAM

The Natural Diamond Council established the ASSURE Program in 2019. It assesses the relative performance of Diamond Verification Instruments available on the market. All results can be found via the ASSURE Directory, in addition to evaluation criteria such as diamond false positive rates, diamond referral rates and diamond accuracy.

BLOCKCHAIN

A digital shared database or ledger, that is distributed amongst nodes of a peer-to-peer network. As a database, it stores information electronically and holds a record of transactions which cannot be edited. This means that the history of transactions are permanently recorded and accessible for anyone across the supply chain network.

CARBON FOOTPRINT

The quantity of greenhouse gas emissions expressed in terms of carbon dioxide equivalent (CO2e), emitted into the atmosphere by an individual, organization, process, product or event from within a specified boundary. The word equivalent is used in the metric as other greenhouse gases besides carbon dioxide, such as methane, are also released into the atmosphere but they are incorporated to create one standard figure for comparison and tracking over time.

CARBON INTENSITY

A measure of the carbon footprint (in terms of carbon dioxide and other greenhouse gases emissions) per unit of activity. For diamonds, carbon intensity is typically calculated by totaling the greenhouse gas emissions over a period from a laboratory or mine and dividing this by a measure of production in that period. This is usually either rough or polished carats.

CARBON OFFSETTING

A process that involves a reduction in, or removal of, carbon dioxide or other greenhouse gas emissions from the atmosphere in order to compensate for emissions made elsewhere.

CARBON SEQUESTRATION

Entails the capturing, removal and storage of carbon dioxide (CO2) from the earth’s atmosphere. It’s recognized as a key method for removing carbon from the earth’s atmosphere.

CHEMICAL VAPOR DEPOSITION (CVD)

A process to make laboratory-grown diamonds. CVD uses a small diamond seed crystal andplaces it into a chamber, which is then filled with gases heated at extreme temperatures of around 900-1200°C. As the chamber reaches the right temperature, layers of carbon begin to form on the seed crystal, which then grows into a diamond crystal. CVD involves breaking down the molecules of a carbon-rich gas, such as methane, into carbon and hydrogen atoms, which then are deposited on diamond seeds to produce a square-shaped, tabular diamond crystal.

DIAMOND DEVELOPMENT INITIATIVE (DDI)

A non-profit organisation that works with an ecosystem of businesses, government and social services to encourage development and growth in businesses involved in diamond mining and promote sustainable and social impact. In 2020, it joined forces with RESOLVE in a program merger to strengthen the capacity of the responsible sourcing of diamonds and minerals for communities, companies and consumers. RESOLVE works across various sectors to design sustainable solutions to critical social, health, and environmental challenges by creating innovative partnerships where they are least likely and most needed.

ENERGY EFFICIENCY

Refers to the use of less energy to perform the same task or produce the same result.

ESG (ENVIRONMENTAL, SOCIAL, GOVERNANCE)

ESG is a framework that helps stakeholders understand how an organization is managing risks and opportunities related to environmental, social, and governance criteria.

FEDERAL TRADE COMMISSION (FTC)

An independent agency of the United States government whose principal mission is the enforcement of civil anti-trust law and the promotion of consumer protection.

GEMOLOGICAL INSTITUTE OF AMERICA (GIA)

GIA is an authority on diamonds, colored stones, and pearls. A public benefit, non-profit institute, GIA is the leading source of knowledge, standards, and education in gems and jewelry.

GREENHOUSE GAS EMISSIONS (GHG)

Greenhouse gases are gases in the earth’s atmosphere that trap heat causing the greenhouse effect. They include carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and sulphur hexafluoride (SF6). These emissions are converted into CO2e using global warming potentials (GWPs) provided in assessments of the Intergovernmental Panel on Climate Change.

HIGH PRESSURE, HIGH TEMPERATURE (HPHT)

A process to create laboratory-grown diamonds. HPHT involves placing a diamond seed into a press inside a chamber which is heated to temperatures of 1300-1600 °C with pressures above 870,000 pounds per square inch. The hot metal plates dissolve the high-purity carbon source and as a result, carbon atoms form on the seed crystal, before the diamond continues to grow.

ISO14001

Sets out the criteria for an environmental management system. It maps out a framework that a company or organization can follow to set up an effective environmental management system.

INTERNATIONAL LABOR ORGANIZATION

A United Nations agency whose mandate is to advance social and economic justice by setting international labor standards.

KIMBERLEY PROCESS CERTIFICATION SCHEME (KPCS)

The Kimberley Process Certification Scheme is the process established in 2003 to prevent “conflict diamonds” from entering the mainstream rough diamond market by United Nations General Assembly Resolution 55/56 following recommendations in the Fowler Report.

LABORATORY-GROWN DIAMOND

A synthetic, man-made diamond created in a laboratory through Carbon Vapor Deposition (CVD) or High Pressure High Temperature (HPHT) processes.

It is an artificial product which has essentially the same chemical composition, physical properties and structure as that of a diamond. The terms “synthetic”, “laboratory-created” and “laboratory- grown” are synonymous with one another. In USA, the Federal Trade Commission also accepts “[manufacturer’s name] created diamond”. Where there is no acceptable local direct translation of the English terms laboratory grown diamond or laboratory created diamond then only the translation of the term synthetic diamond should be used.

DIAMOND MINING

Alluvial mining – An above-ground form of mining that concentrates on gathering diamonds on the surface from deposits of sand, gravel and clay. Beach mining – Involves combing beaches and excavating deposits using machines to move the sand.

Marine mining – A method used for drawing diamonds from the sea with the help of mining vessels.Pipe mining – There are two types of pipe mining. Open-pit mining involves removing the layers of sand and rock found just above the kimberlite. In underground mining, miners tunnel through Earth’s crust to the kimberlite pipe. Tunnels are constructed on two levels, one above the other with funnels built to connect the two.

MAENDELEO DIAMOND STANDARDS

The Maendeleo Diamond Standards (MDS) establish requirements adapted to the specific conditions of artisanal and small-scale diamond mining communities. Maendeleo is a Swahili word meaning development and progress. The standards apply to diamonds mined in conflict- free zones and produced safely with consenting and engaged communities. MDS operations are violence-free, respect human and worker rights, and follow practices that promote environmental responsibility.

NATURAL DIAMOND

A diamond is a mineral created by nature; a “diamond” used on its own always means a natural diamond.

OECD DUE DILIGENCE GUIDANCE FOR RESPONSIBLE SUPPLY CHAINS OF MINERALS

Provides detailed recommendations to help companies respect human rights and avoid contributing to conflict through their mineral purchasing decisions and practices.

RESPONSIBLE JEWELLERY COUNCIL (RJC) CODE OF PRACTICES (COP)

Defines the requirements for establishing responsible business practices throughout the jewelry supply chain, from mine to retail. The COP provides a common standard for ethical, social, human rights and environmental practices, and certification against it is mandatory for all RJC commercial members.

SCOPE 1 EMISSIONS

Covers emissions from sources that an organization owns or controls directly. For the diamond industry, this could include emissions from hydrocarbons, diesel, marine gas, oil or petrol used to power machinery used to mine for diamonds or transport like trucks and ships.

SCOPE 2 EMISSIONS

Scope 2 encompasses emissions that are caused indirectly when energy is purchased and used in production. This could include emissions from electricity generation through to power generators used for buildings and the infrastructure surrounding a given mine.

SCOPE 3 EMISSIONS

Includes emissions that are not produced by the company itself but are a result of indirect activities owned by different stakeholders in the supply chain, like suppliers and transport facilitators.

SOCIO-ECONOMIC AGREEMENTS (SEAS)

A socio-economic agreement is usually agreed between a private organization and a public body. It outlines the commitments and predictions made by a company during its environmental and social environmental assessment including:

•  Employment and business opportunities
•  Cultural well-being and traditional economy
•  Community, family, and individual well-being
•  Net effects on government
•  Sustainable development

UNITED NATIONS GUIDING PRINCIPLES ON HUMAN RIGHTS

The UN Guiding Principles on Business and Human Rights is a set of guidelines for States and companies to prevent, address and remedy human rights abuses committed in business operations.

WORLD DIAMOND COUNCIL SYSTEM OF WARRANTIES (SOW)

The System of Warranties (SoW) was developed in 2002, by the World Diamond Council. It requires professional buyers and sellers of rough diamonds, polished diamonds and jewelry setters with diamonds to include a warranty statement on invoices and memos each time a diamond changes hand.

Natural Diamond Council Members
Sustainability Reports

Read more about the environmental and social performance of our members here:

DE BEERS GROUP

• Building Forever: Our 2021 Sustainability Report

• Building Forever: 2030 Goals – Progress Update 2021

PETRA DIAMONDS

• Sustainability Report 2022

LUCARA DIAMOND

• Sustainability Report 2021

RIO TINTO

• Socio-Economic Monitoring Report 2021

MUROWA DIAMONDS

• Sustainability Report 2020

ARCTIC CANADIAN DIAMOND COMPANY

• Ekati Socio-Economic Monitoring Report 2021