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Conflict Minerals Law May Shake Up Jewelry Industry in 2013

The arrival of the New Year will mark an important moment in efforts to increase transparency in the jewelry supply chain. As of January 1, 2013, thousands of companies will be subject to a new U.S. law requiring them to disclose whether the gold in their products may have funded a tragic civil war in the Democratic Republic of Congo.

 

That simple disclosure requirement, we think, could not only help end the war in Congo, but could have snowball effects, helping create a more ethical jewelry industry overall.

 

Although not well-known, the war in Congo is one of the deadliest in history.  Since 1996, it has caused more than 5 million deaths, mostly as a result of disease. Thousands of women have been subject to sexual violence and about two million people have been uprooted from their homes.  The causes of the war are complex, but experts believe that valuable “conflict minerals” – gold as well as tin, tantalum, and tungsten –are helping to fund the violence.

 

Congress, in response, has tried something innovative. The Dodd Frank financial reform bill passed in 2010 requires publicly-traded companies subject to regulation by the Securities and Exchange Commission (SEC) (i.e. companies that are traded on the stock market) to examine their supply chains and file reports indicating whether their products may contain minerals that have helped to fund the war.

 

Under SEC regulations issued in August, the law will take effect in 2013. Companies subject to the regulations will have until May 31, 2014 to file their first reports.

 

We’re supportive of this law first and foremost for its potential to help stop the war in Congo. Although the war is now mostly confined to two provinces in the east, it lately has been getting worse.  It is estimated that in the past year alone, more than 900,000 people have been forced to flee their homes. The rebel group M23 has also been getting bolder. In November, the group briefly seized Goma, a city of one million people. The rebels have withdrawn, but the situation remains tense.

 

The new law can’t directly intervene to stop this violence, but over the medium-term it can gradually help choke off the funding. We believe it is worth seeing whether this law can save lives.

 

But we’re also very interested to see how the law affects the entire jewelry supply. Most jewelry-makers are not like Brilliant Earth – they have little idea about the origins of the precious metals and gems that go into their jewelry. These new regulations could help change that, convincing other jewelers to start paying much more attention to the issue of traceability.

 

The regulations, we should be clear, don’t just apply to jewelers. The new rules apply to any publicly-traded company that manufactures or contracts to manufacture a product that contains gold, tantalum, tin, or tungsten. That’s a group that contains many jewelers but also companies ranging from car-makers to cell-phone companies. About 6,000 companies may be affected.

 

Within the jewelry industry, though, any jeweler that is a publicly-traded company and that designs its own jewelry will be subject to the regulations. These jewelers must first figure out whether the gold in their jewelry comes from Congo or a neighboring country. If jewelers can’t be sure that their gold doesn’t come from that region, they must conduct a deeper inquiry into the source of their gold and report the results of the inquiry to the SEC.  Jewelers that use only recycled gold can skip this inquiry and simply report their use of recycled gold.

 

At Brilliant Earth, we design our own jewelry but are not publicly-traded and therefore are not subject to the new regulation. We also use only recycled gold to reduce the harmful environmental effects of dirty gold mining. If we had been subject to the regulation, it wouldn’t be very burdensome for us, as we’d need only to report our use of recycled gold.

 

However, jewelers subject to the regulation will now need to either use recycled gold or get a fairly sophisticated understanding of their gold sources. Either choice would be positive. If more jewelers use recycled gold, there will be less overall pollution. If jewelers demand more traceability, the entire gold supply chain will be become more transparent – arming consumers and retailers with the knowledge they need to make more ethical choices.

 

In sum, this one provision in the Dodd Frank bill could have a major impact on how the entire jewelry industry sources gold. And the ripple effects might not stop there. The provision could also stimulate greater industry interest in tracing diamonds to their source. (We estimate that less than one percent of diamonds at the retail level are traceable to a country or mine of origin.) Some NGO leaders have even floated the idea of a Dodd Frank bill for diamonds.

 

All of this is to say that in the New Year, we have reason to hope that many jewelers will make a resolution to pay greater attention to the issues we care about – and that more jewelry will be produced in a responsible and loving way.

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