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Gem Traders Turn to DNA Tracing, Blockchain to Clean Up Supply Chains

Trade in emeralds, rubies and sapphires have been linked to human rights abuses and funding armed conflict, terrorism and military dictatorships. The industry is struggling to find a solution.
Gem traders at a market in Myanmar in 2015. The world's most prized rubies originate in the country, but the industry's links to the military have made them the subject of sanctions and controversy.
Gem traders at a market in Myanmar in 2015. The world's most prized rubies originate in the country, but the industry's links to the military have made them the subject of sanctions and controversy. (Mongkolchon Akesin, Shutterstock)
By
  • Milena Lazazzera
BoF PROFESSIONAL

KEY INSIGHTS

  • Cleaning up the supply chain for coloured stones is particularly challenging; while a handful of players control most of the world’s diamond output, gems largely come from myriad small artisanal mines.
  • Industry watchdogs say efforts to improve oversight are falling short.
  • High-tech innovations like blockchain have gained buzz, but in practice the options are limited, the technology nascent and implementation needs to start at the mine.

Last month, the world’s finest jewellers sought to dazzle their wealthiest clients with glittering new high jewellery collections, launched alongside this season’s haute couture in Paris.

Brands vied to outdo one another with one-of-a-kind pieces dripping with diamonds, rubies, emeralds and sapphires. Among the most decadent items on display was a 6,225-carat raw emerald, cloistered in a black room in Chopard’s Paris boutique designed to bring out the stones intense green colour.

The so-called Insofu emerald is one of the largest and highest-quality gems of its kind ever discovered, but equally exceptional is the fact that once the stone is cut and polished it will still be possible to trace its history back to the mine in Zambia where the stone was discovered.

It’s the highest-profile example yet of new DNA-tracing technology developed by Swiss jewellery house and gem authenticator Gübelin’s transparency tech subsidiary, established to tackle the fact that lurking behind the gem sector’s glitz is a murky industry facing mounting pressure to clean up its act.

While much attention on jewellery’s negative impact has focused on diamonds and gold, sparkly gems can also hide nasty truths. Sales of stones, including emeralds, jade, sapphires, lapis lazuli and rubies have been linked to funding armed conflict, terrorists and military dictatorships. Mining can be a dirty and dangerous business, and corruption and human rights abuses can extend through the supply chain. Stones typically go through the many hands of miners, sorters, cutters, polishers and merchants across different countries before they are set in jewellery, making it difficult to trace their origin and guarantee an ethical supply chain.

Those challenges risk taking the shine off gems for a growing number of consumers, as environmental and social issues become an increasingly important factor in purchasing decisions; by 2025 as much as 30 percent of all fine jewellery purchases will be influenced by sustainability concerns, according to The State of Fashion: Watches and Jewellery report published by The Business of Fashion and McKinsey & Co last year.

Big jewellers say they carefully manage their sourcing practices and don’t buy stones from high-risk countries, but industry watchdogs say tainted stones still make it onto the mainstream market.

For instance, trade in the world’s most highly prized rubies from Myanmar has been fraught for years because of political conflict that triggered successive embargoes, including fresh sanctions introduced by the European Union, US and UK following last year’s military coup. But that hasn’t stopped rubies from the country finding their way to the jewellers of Place Vendôme, according to a December report by non-governmental organisation Global Witness.

Gems smuggled out of the country are easily absorbed into global supply chains, where they find buyers in international jewellers like Richemont-owned Van Cleef & Arpels, Graff, and LVMH-owned Bulgari, the report alleged. Bulgari and Graff denied that they sourced stones from Myanmar. Van Cleef & Arpels declined to comment, but in its response to Global Witness the company said it was committed to international due diligence and responsible sourcing standards.

“Companies worldwide are hiding behind the complexity of gemstone supply chains,” Global Witness said in a December post around the report’s launch. “These gemstones are sold as symbols of human connection and affection, yet the supply chain is steeped in corruption and horrific human rights abuses.”

Gem-dealers say the report misjudges Myanmar’s importance in the ruby trade, with most stones on the market today from stocks mined years ago and the largest and most sought-after rubies typically bought at antique shops or auctions. But even those in the industry acknowledge the mechanisms currently in place to ensure stones are ethically sourced need improving.

An Imperfect Model

While many consumers are familiar with the conversation around ethical diamonds, the challenge is much greater for coloured stones because of their fragmented distribution; only a handful of players control the vast majority of the world’s diamond output (Alrosa and De Beers mined roughly half of the global total in 2020). By contrast, most coloured gemstones come from myriad small artisanal mines scattered all over the globe.

Efforts to improve oversight have been largely funnelled through the Responsible Jewellery Council (RJC), an industry body that certifies its members are meeting responsible business standards. Standards for coloured gems were added in 2019. But this kind of model of voluntary self-regulation has been criticised for failing to drive real accountability or change.

“There are no strict penalties for companies,” said Clare Hammond, a senior campaigner at Global Witness. “We do not see a mechanism in place that incentivises compliance.” A report published by Human Rights Watch in 2020 called out other weaknesses in the RJC’s standards, including no requirements for full traceability, transparency or robust on-the-ground human rights assessments.

RJC executive director Iris Van der Veken acknowledged that the organisation has not taken public steps to penalise companies for noncompliance, “but I can tell you at this moment there are certain cases we are investigating,” she said. The organisation has defended the robustness of its standards, which it says are based on international frameworks for good business practices and due diligence.

Regulators, on the other hand, are beginning to take a more stringent view, with a growing number of countries looking to toughen up due diligence requirements that could make companies liable for abuses in their supply chains. That leaves the gem sector in need of new solutions.

Technology, Traceability and the Need for a New Approach

High-tech innovations, like blockchain-backed traceability platforms have gained a lot of attention, but in practice the options are limited, the technology nascent and its implementation faces significant hurdles.

Gübelin-owned Provenance Proof, the company responsible for DNA-tagging Chopard’s Insofu emerald, is among the gem sector’s leaders in the space. The CSI-style technique it developed to “inject” emeralds at the mine with tiny, DNA-based nano-particles that can endure through cutting and polishing is now used by gem-mining giant Gemfields for all its premium emerald production, or about 20 percent of its output.

For gems that don’t have natural fissures that enable nano-tagging, Provenance Proof has also developed a blockchain-based platform for the gem sector. Since its launch in 2019, it has processed more than 2 million gems, with miners, cutters and polishers all logging pictures and information to create a tamper-proof record of the stones’ provenance. The end-consumer can access all the information on their smart phone.

But for blockchain-based technologies and other traceability innovations to really move the needle, they need to be adopted much more widely and applied at the point of origin. That means the gem sector needs to get much closer and more familiar with its supply chain, right down to the mine level.

“Jewellers need to take responsibility for their own supply chains and act in ways that they are certain of and comfortable with,” said Susan Wheeler, an American jeweller and founder of the Chicago Responsible Jewellery Conference. “All jewellers need to be aware of what and who is in their supply chains.”

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