Social Responsibility in the Italian gold
industry
Ethics and Sustainability in the Supply Chain
D G PI C
D.G.P.I.C.
Corporate Social Responsibility
Economic
Dimension
Linked to the business
ability to afford its
activity’s costs and to
grow
SUSTAINABLE
VALUE
Social Dimension
linked to the organisation
capacity of engaging its
t k h ld
d off
stakeholders
and
satisfying their
expectations
Environmental
Dimension
linked to the
management of natural
resources and of the
business environmental
impact
Businesses should
manage, improve
i
and
d
communicate not only
financial performances
performances,
but also their social and
environmental impacts,
relating to the reference
stakeholders
2
ETHICS AND BUSINESS: yesterday, today, tomorrow
Today/tomorrow
Today
y
Yesterday/today
Ethics as a
competitiveness
requirement
Ethics as a means of
increasing Cost Efficiency
Ethical Issues
ousted Cost
Efficiency themes
3
The World’s Gold Production
Mining gold production: + 4,9%
p
with 2010 equal
q
to
compared
1343 tons during the first 6
months of 2011
New large-scale projects:
Kazakhstan, Burkina Faso,
Eritrea, Côte d
d'Ivoire
Ivoire
Jewelry demand: + 7,5% first
q
to 1.037
semester 2011 equal
tons
source: Gold Survey
2011,, Thomson Reuters
4
Where is gold mined
5
Where gemstones are mined
source: Global Policy
Forum
6
Focus: Goldmines
Between 10 and 30 millions small-scale
mines in the world (Communities and
Small-Scale Mining - CASM)
100 milions people are directly or indirectly
dependent on small-scale mines
 between 800.000 and 1,5 millions
artisanal
DRC(Democratic
ti
l miners
i
iin DRC(D
ti
Republic of the Congo) between 350.000
and 650.000 in Sierra Leone
source: Longitude, March2012
 between 150.000 and 250.000 in Ghana
7
Focus: diamond trade
10 million people all around the world are
directly or indirectly supported by diamonds
industry
65% of worldwide diamonds comes from
Africa
source: www.diamondfacts.org/
Diamonds mining industry creates more
than 40% of the annual export incomes in
Namibia
In July 2000 the world diamond industry
proclaimed a ″zero tolerance″ policy
against conflict diamonds and still it holds
thi liline
this
8
In Italy…
Italy is the biggest gold
manufacturer
f t
in
i the
th world
ld
The gold processed by the
skillful goldsmith has two
sources:
 Internal
 International: Ghana
Ghana, China
9
The ethical risks connected to the supply
Child Labour
Health and Safety
Environmental Pollution
Artisanal Mines
Corruption
p
and Lack
of Freedom
10
What are the risks in the
gold supply
g
pp y chain?
Lack of precious material
Lavoro minorile
traceability
•Deforestation
•Child Labor exploitation
•Lack of health and safety on the work-place
(
(ground
d collapse)
ll
)
•Slavery and lack of human right protection
Sicurezza e salute
•Lack of working rights
GOLD
Largescale
Mi i
Mining
Refining
Smallscale
Mining
Smelting
g
Step 1
Trade
Product
P
d t
Manufacture
Recycling
Step 2
Lack of
precious
material
traceability
Step 3
Dangerous mixes of traced and
non-traced precious material
•Pollution
P ll ti off water
t b
bearing
i strati
t ti and
d off surrounding
di
areas
•Lack of safety (mercury in the environment and in the
air – mercury vapors)
T d
Trade
Wh l
Wholesale
l
R t il
Retail
•Lack of origin certification
•Poor transparency in the ethical
and social issues disclosed to
customers
Step 4
•Corruption of the inspectors (governments,
institutions)
•Militias funding (conflict zones)
Corruzione e
•Government bribery
libertà
•Irresponsible practicesmancanza
of the international
gold
and diamonds wholesalers
11
What are the risks in the
gold supply
g
pp y chain?
DIAMONDS
Large-scale
Mining
Trade of
raw
material
Small-scale
Mining
•Deforestation
•Child Labor exploitation
•Lack of health and safety on the work-place (ground
collapse)
ll
)
•Slavery and lack of human right protection
Sicurezza e salute
•Lack of working rights
Lack of
precious
material
traceability
Trade of
polished
gemstones
Cut and
Polish
Product
Manufacture
Retail
Trade
Trade
•Lack of origin certification
•Poor transparency in the ethical
and social issues disclosed to
customers
Laboratorygrown
diamonds
Step 1
Wholesale
Step 2
Step 3
Step 4
Corruzione e
mancanza libertà
•Corruption
p
of the inspectors
p
(g
(governments, institutions))
•Militias funding (conflict zones)
•Government bribery
•Irresponsible practices of the international gold and
diamonds wholesalers
12
Workers Health and Safety
Sicurezza e salute
•Lavoro
Child minorile
Labor
• Illegal Labor
• Hazardous Labor
Inquinamento ambientale
(lack of safety)
• Lack of training
• Lack of work tradeunion
rights
Miniere artigianali
• Mortality and high
Illnesses
Corruzione e
mancanza libertà
13
Environment and Territory
Lavoro minorile
Sicurezza e salute
•Deforestation
•Lack
Lack of post-mining
post mining
reuse for agriculture
Inquinamento ambientale
•Landscape Disruption
Miniere artigianali
•Water-bearing stratum
Pollution
• Ground impoverishment
and empoisoning
Corruzione e
• Critical
C iti l IInternal
t mancanza
l
libertà
Migrations
14
Community and Institutions
Lavoro minorile
•Corruption
linked to
exploitation and to raw
materials trade
Sicurezza e salute
Inquinamento ambientale
•Militias Funding (conflict
areas)
Miniere artigianali
•Lack of stewardship from
instit tions and
institutions
governments
Corruzione e
mancanza libertà
15
Map of risk areas
16
Gold or Misery supply chain? The Mali case
•20.000 work in gold artisanal mines, in extremely
poor and hazardous conditions (i.e. mercury
handling)
•The government has not taken any measures to
end mercury handling by children workers
Local authorities often get benefits from gold
mining
•Artisanal mines are not the object of ongoing
working
orking controls
•Little consideration of health risks for the children of small traders buying
precious materials
materials, and reselling them to wholesalers
•Most of such gold is exported in Swiss and in the United Arab Emirates,
particularly in Dubai
17
What does Social Responsibility mean for a
goldsmith business manufacturing
g
g jewelry?
j
y
STEP
RESPONSIBLE PRACTICES
Supply
•Definition of clear objectives for a responsible supply and
indentification of responsible personnel within the business
•Education/training of the suppliers on CSR themes
•Checking
Ch ki th
the working
ki and
d safety
f t conditions
diti
off th
the suppliers
li
•Monitoring and, if necessary, sanctioning the suppliers
•Product traceability
M
Manufacture
f t
• Protection of human and working rights and of the workers’
workers
safety
• Investing on the employees’ ability and skills
• Respect
p
of the environment and minimizing
g environmental
impacts
Sale
• Transparent communication of product quality and of the
production and supply
p
pp y p
procedures
• Projecting ways of communication to get improvement
feedbacks and to build a dialogue on CSR themes
• Devoting a part of the proceeds to support the ethical cause
The issues to be addressed
•Forced labor, constrained labor and child
labor
•Freedom
F d
off association
i ti and
d collective
ll ti
bargaining
y
•Security
•Remuneration
•Bribery and corruption
•Discrimination
•Environment, biodiversity and protection
of local ecosystems
•Indigenous people rights
Traceability
•Traceability
19
Why is it necessary to be responsible?
Globalization
and Market
Changes
Information
spread by
mass media
and press
Gold Supply
Chain
Sustainability
New
consumer
y
sensibility
National and
International
activities for
the Gold
Industry
sustainability
20
New consumers
• Being aware of the product origin and of the
way it was produced is as important for the
consumer as the product itself
•Luxury companies tried to meet the
expectations of increasing sensitive
consumers towards environmental, social and
ethical issues
Source: Responsible luxury – a report on the
new opportunities for business to make a
difference, Jonathan Kendall, CIBKO
21
New consumers
With their proceeds under pressure, luxury brands can survive only
if they are social responsible, this is a matter of fact
Source: Responsible luxury – a report on the
new opportunities for business to make a
difference, Jonathan Kendall, CIBKO
Material Values
- Design
- Raw materials quality
I
Immaterial
t i l Values
V l
- Respect of the
environment
- Respect of human rights
- Governance ethics
22
Globalization and market changings
•Today, the supply chain is
fragmented
•The
Th commercial
i l product
d
iis
made up of different parts and
components from international
t it i
territories,
very far
f from
f
the
th
company
•The
Th companies
i outsource
t
a
labor intensive series of
activities in Developing
countries because of the low
countries,
workforce costs (ethical risks)
23
The factors leading companies to responsibly
manage
g the supply
pp y chain
Production outsourcing in
″low protection″ areas
Awareness raising
campaigns made by
NGOs and lobbies
Increasing relevance of the
responsible consumer figure
Increasing relevance of
Social Responsible
Investing
g
Reputational and image risk
Trade Unions activism
and workers
organizations
i ti
Ethical Management of the
supply chains
Attention to the respect of
human rights by national
Governments and
supranational institutions
Source: Quaderni Osservatorio Operandi
24
Mass media and social media interest
Widening of the sensitizing
information on corporate ethics
themes, on human rights and
workers protection within the
supply chain
Focus on critical aspects of
developing countries as far as
social conditions and
environmental damages are
concerned
25
What are the adverse impacts for businesses?
Ethical/
G
Governance
Social
INTERNAL
RISKS OF
THE SUPPLY
CHAIN
Disrespectt off labor
Di
l b and
d
human rights
NEGATIVE
EFFECTS
•
•
Serious wastes creation
Business carried out in
conflict areas
Use of polluting
chemicals and solvents
dangerous for the
environment and health
Corruption
Adverse impacts on
communities
Strikes and Conflict
Decrease in
productiveness
Tensions with trade
unions and local
comm nities
communities
Economic losses due
to damages payment
and fatalities
High natural resources
and energy
energ consumption
cons mption
Illegal mining practices
Poor health and safety
protection
•
•
Environmental
•
•
•
•
Possibility to incur in
fines and penalties
Negative company
reputation
Increased controls by
the institutions
instit tions
Pressure and
clarification requests
from international
NGOs and press
•
•
•
Increased costs for
lack of energy
resources monitoring
Tensions and
conflicts with local
communities and
institutions
Decreased trust
towards the business
activity
26
What are the adverse impacts for businesses?
MARKET
INTERACTION
RISKS
NEGATIVE
EFFECTS
Asymmetric
Information
•Incorrect evaluation of the
business real value
•Identification of a higher
degree in business risk than
the existing one
•Decrease in probabilities of
investments in the company
•Decrease in the security
value (if the company is
listed)
Negative
B d
Brand
Awareness
Reputational
Risk
•Decrease in proceeds
•Loss of revenue
•Decrease in portfolio
•Boycott
Boycott risk
•Worsening in the relations with commercial
partners
•Worsening in the trust building relation with
customers
•Any exposure linked to the loss of customers
and partners
•Worsening of the reputation
•Loss
L
iin th
the security
it value
l (if th
the company iis
listed)
27
What are the benefits deriving from a responsible
management?
g
• Improvement in the company
g and reputation
p
image
• Strengthened trust building
relation with customers
• New products lines
• Strengthened company brand
• Increased quality in productive process
• Costs saving
• Contributing to save human lives
• Concurring in the suppliers qualification
• Improvement in the relations with the suppliers and the
community
28
What are the international initiatives?
Kimberley Process: monitoring of the company social and environmental risks
•Certification agreement granting that the proceeds of
diamond trade are not employed in civil wars funding
•It has been elaborate by many countries
governments, multinationals diamond producers and
civil societyy
What a State has to do in order to adhere:
•the diamonds produced in that country will not
fi
finance
rebel
b l groups or other
th organizations,
i ti
aiming
i i tto
overthrow the government recognized by the UN
•any exported diamond must show a certificate to
attest the respect of the Kimberley Process scheme
•no diamond will be imported from or exported to a
non member country of the Kimberley Process
Participant Countries in the Kimberley
Process
29
What are the international initiatives?
RJC System: the monitoring of the social and environmental company
risks
•Developed by the Responsible Jewellery Council to
which the Italian Federorafi Association adheres
•RJC’s
RJC’ Mi
Mission
i iis tto advance
d
responsible
ibl ethical,
thi l social
i l
and environmental practices, which respect human rights,
throughout the diamond and gold jewelry supply chain,
f
from
mine
i tto retail
t il
•It attests the adhering organizations, which operate in
gold sector,
sector to manage their activities in a responsible
manner
Since 2005 the RJC Members have increased from 14
to over 250
30
What are the international initiatives?
RJC System – the monitoring of the social and environmental company
risks
Key aspects to be reported by the company
Fight
Corruption
RJC System
y
Sustainability
Report
Product
integrity and
safety
Environmental
Protection
Kimberly
Process
Adherence
Workers and
Human Rights
31
What are the international initiatives?
Chain of Custody – Product traceability
It supports the identification of jewelry materials
produced, processed and traded through the gold and
diamonds supply, which are issued by a responsible
supply.
supply
It mainly focuses on the product traceability theme
Chain of Custody
Certification
The certification is granted to the product, not to the
company
It is complementary to RJC System
32
What are the international initiatives?
Due diligence in the mining and minerals sector – responsible
management of metals purchases in conflict or high risk areas
They provide guidance for a global responsible
mineral supply chain management
They help companies to respect human rights
and not to contribute to conflicts in their
supplying countries, through their decision
making
ki and
d th
their
i mineral
i
l and
d metal
t l purchase
h
practices
They mustt be
Th
b implemented
i l
t d by
b all
ll companies
i
supplying minerals or metals from conflict or
high risk areas
33
What are the international initiatives?
Cyanide Management Code
Voluntary program promoting a responsible
management of the cyanide employed in
goldmines
It is aimed to improve human health
protection and to reduce the potential
environmental impact
34
Some good practices: from mining…
•It is a Columbian Mine
run by Green Gold
Corporation
•It is aimed to improve
and ensure the local
miners communities
wellbeing
•Training is provide on
mining procedures not
employing chemical and
respecting natural
resources
•It’s
It s in place a strict
certification system of
mining procedures
35
…to retail
Ethical certifications for
both gold and diamonds
New product lines:
Etichal Gold and
Stonethic
5% of the ethical diamonds
sale proceeds are dedicated
to Il solitario campaign to
support African children
36
Focus on OECD Guidelines
OECD Guidelines for multinational enterprises (2000)
• It is one of the various documents composing the
″Public statement on international investment
regime”
• These recommendations are made by the
Governments to multinational enterprises and
suggested to the national ones
• Voluntary principles and rules for responsible
business practices are here enounced
enounced, within the
compliance of applicable laws
In 2011 it was published the updated version of the
•In
OECD Guidelines
37
The OECD Guidelines application scope
Publication of information
Occupation and industrial relations
Governance models and company
p y
communication
Human capital improvement policies
Environmental strategies and
policies as business sustainability
premises
Tax system
Authorities
cooperation and
internal control
procedures
Fight corruption
Stakeholder relations
management, within a
perspective of legality and supply
chain value creation
Science and
technology
gy
Innovation sharing, project
partnerships for territory
development and relations
i
improvement
t
Environment
Competition
Consumers interests
Ethics in practices and
market relations
Reputational and image
strengthening, listening and
dialogue
38
OECD Guidelines most significant updates
New chapter (IV) concerning corporate
responsibility and partners responsibility
for human rights protection (referenced in
the Framework of Ruggie and in preeminent
international standards)
g link between human
Stronger
rights and workers’ rights
Implementation responsibility for
a “due
due diligence”
diligence system
capable of analyzing and
preventing risks connected with
the themes highlighted in the
guidelines
Innovations in the complaints
procedures raised to the NCPs
(enhanced collaboration among
NPCs, more transparency and
certainty)
Strenghthening of the fight
against hard labor and child labor
Update of tools and standards
referenced in the guidelines
Focus on the need for a supply
chain assessment, in order to
prevent risks concerned with the
guidelines themes
Company’s need to establish
appropriate relationships with the
stakeholders
39
Th k you ffor th
Thank
the kind
ki d attention
tt ti
Social Responsibility in Gold Industry
Ethics and Sustainability in the Supply Chain
D G PI C
D.G.P.I.C.