By  on January 4, 2010

There might be gold in them thar hills, but these days it increasingly matters to consumers how and where it gets extracted.

As shoppers grow more curious and knowledgeable about the products they purchase, companies that sell everything from fashion to food have been forced to focus more on social responsibility in the products they manufacture. And the fine jewelry category is no exception. From top-tier brands such as Tiffany and Cartier to mass merchants like Wal-Mart and Sears, jewelry makers and retailers have begun using only those metals and gemstones that are acquired in ethically responsible ways.

There has been significant media attention to the way jewelry materials are unearthed over the last few years. The pressure on the industry really began to build with the 2006 release of the film “Blood Diamond,” which told a fictional tale centered on conflict diamonds — stones that are mined and traded to finance illegal activities and war in Africa. At the time, industry leaders such as the Diamond Information Center, the marketing arm of De Beers, forcefully informed journalists and the public that the fictional film was set in the mid-Nineties and that since then, the Kimberley Process — an international cooperative monitoring system and certification plan intended to eliminate the flow of conflict diamonds — has been enforced.

Now the gold mining community may be next to attract the media spotlight, beginning with a “60 Minutes” segment that aired in November on the struggle in the Democratic Republic of Congo. The broadcast told viewers that five million people have died in the region as a result of a war fueled primarily by gold mined in the country by warlords and smuggled out to be sold in the open market. The program declared gold mining was “funding the deadliest war since World War II.”

Beyond the political controversies, gold mining faces environmental ones as it is a notoriously messy business with the emission of toxic fumes, mercury and cyanide into the earth and waters surrounding a mine site, affecting not only marine life but also the clean water supply.

Jewelry firms and retailers are equipped for a possible media maelstrom, as they have teamed up with nonprofit organizations to go green and ensure political correctness. Roughly 80 percent of the world’s gold is used in jewelry and the largest gold-consuming countries and regions are China, India, the Middle East and the U.S.

“Producing a single gold wedding band leaves behind 20 tons of waste at a mine site,” said Payal Sampat, director of the No Dirty Gold campaign, which was founded in 2004 by Earthworks, a nongovernmental organization based in Washington. “We’re trying to improve practices at mine sites and change the way mining is done, so it has reduced environmental and human rights impacts. We’re definitely improving [mining, in terms of social responsibility]. We’re not almost there...we’re a long way from there.”

No Dirty Gold has reached out to jewelry brands and retailers across the globe to sign on to its Golden Rules. So far, Tiffany & Co., Cartier, Wal-Mart Stores Inc., J.C. Penney Co. and Sears are among the prominent names that have signed on to the rules, which call on mining companies to meet basic standards in their operations, such as respecting human rights in international conventions and law; obtaining the free, prior and informed consent of affected communities surrounding a mine; ensuring that operations are not located in areas of armed or militarized conflict, and refraining from dumping mine waste into oceans, rivers, lakes or streams.

The pressure for more social responsibility in the industry comes against a background of declining consumer demand, yet skyrocketing prices, for gold, traditionally seen as a safe investment haven in times of stock market turmoil. Over the past decade, gold prices have soared from $288.50 an oz. on Jan. 3, 2000, to $1,097 on Dec. 31.

In November, the World Gold Council, an organization that aims to stimulate and sustain the demand for gold for its shareholders, reported gold demand for the third quarter was $24.7 billion, according to the third quarter of 2009 “Gold Demands Trend Report.” That represented a 34 percent decline compared with the same period in 2008, even though average gold prices for the quarter were 10 percent higher than in the third quarter of 2008, at $960 an oz. Gold jewelry sales were up 17 percent in the third quarter compared with the previous quarter due to seasonal purchasing, but compared with the third quarter of 2008, there was a 30 percent decline.

Gold is mined the world over, including in the western U.S, in Utah and Nevada, as well as Peru, Ghana, South Africa, Indonesia, Australia and Russia. There are requirements for mines in the U.S. to follow fixed environmental rules, but the No Dirty Gold campaign is seeking a third-party certification system akin to what the Kimberley Process has done in diamond mining.

“Sustainability in the gold mining industry means producing gold in a way that balances the economic benefits with social and environmental needs,” said Matthew Graydon, director of corporate communications at the World Gold Council. “We believe the majority of gold mined by gold producers, members of the World Gold Council, is responsibly produced. There are elements of the industry which need to be improved and the WGC and its members are working to address these issues.”

Starting nearly a decade ago, Tiffany has taken a proactive stance on sustainability. The jewelry firm offers its shoppers an illustrated leaflet informing them how the company acquires its gold, silver and gemstones in an ethical manner, and also how it collaborates with Earthworks, Oxfam and No Dirty Gold and supports the Initiative for Responsible Mining Assurance, a group that includes participants from mining, NGOs and the retail communities in an effort to clearly define the best mining practices.

The majority of gold and silver used by Tiffany originates from a single mine in Utah that meets the aforementioned ethical standards.

Michael Kowalski, chairman and chief executive officer of Tiffany, said he has gathered anecdotal information that consumers are becoming more curious as to the provenance of the materials used in the brand’s jewelry.

“We believe that our customers expect us to source precious metals and gemstones crafted into Tiffany jewelry in a responsible way,” he said. “That’s the unspoken Tiffany promise.…[Consumers] have become more interested in everything they consume, whether it’s food or baby toys. The growing awareness of global and environmental issues is a major contributing factor.”

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