Wal-Mart Creates a New Model for Jewelry
World's largest retailer looks to establish sustainability standards
Supply Chain Innovation
MORE INFORMATION
2009 INNOVATIONS REVIEW
Companies find that environmental sustainability helps reduce costs and gain advantages.
It is tough to talk about sustainability where jewelry is concerned. Neither the mining nor jewelry industries have accepted sustainability standards. And gold mining, for instance, is one of the world's dirtiest industries.
Yet Wal-Mart, the world’s biggest retailer, is making a first attempt. Its allies include the Richline Group, the world's biggest manufacturer of gold jewelry and a unit of Warren Buffett's Berkshire Hathaway.
The retail giant is also working with a "good-cop, bad-cop" duo of environmental groups based in Washington, D.C.: Business-friendly Conservation International and Earthworks, a watchdog group, that launched a hard-hitting campaign called "No Dirty Gold."
The impact of mining
Mining enough gold to make a typical 18-carat wedding ring leaves behind 20 tons of waste, according to Earthworks. In the U.S., metal mining creates nearly 30% of all the toxic releases measured annually by the EPA, more than any other single industry.
In poor countries, where regulation is lax, the picture gets really ugly. Gold mines and their waste have poisoned rivers in Guyana, destroyed rainforest in Papua New Guinea and forced the evacuation of villages in the Philippines. In West Africa, thousands of children dig for gold under harsh conditions.
According to the UN, a fifth of the world's supply is scratched out of the ground by desperately poor miners working for subsistence-level wages.
How "Love, Earth" works
Wal-Mart wants to avoid the taint of such practices. To do so, it has to know where its gold originated. This is no easy feat because gold is mined in more than 60 countries, and the industry that supplies the metal to retailers is highly fragmented, with dozens of refineries buying gold from mines across the globe and often melting it all together before shipping it off to banks or manufacturers. Refiners and banks that sell precious metals often don’t know which mine, or even which country, produced their gold.
"There are many impermeable membranes in the supply chain for gold jewelry," explains Assheton Carter, an expert who advised Wal-Mart while working for Conservation International. "You don't know if your gold comes from a responsible company like Rio Tinto or Newmont, or from a child laborer in Sierra Leone."
Wal-Mart decided to work closely with two companies: Kennecott, a unit of Rio Tinto, which operates a mine in Bingham Canyon, Utah, and Newmont Mining, which operates mines in Nevada. (Environmental activists in Nevada quarrel with the choice of Newmont because its mines, like all gold mines, generate air and water pollution.)
Because Wal-Mart does not make its own jewelry, the company needed a way to track the gold from Kennecott and Newmont through its supply chain. It turned for help to the Richline Group, which manufactures gold jewelry for Wal-Mart and other retailers, and to a startup company called Historic Futures in Gloucestershire, England, that specializes in supply-chain traceability. Historic Futures built a web-based system to track serial numbers etched on bullion from the mine to the refinery to the manufacturer to Wal-Mart.
In 2008, Wal-Mart launched the new line of jewelry dubbed "Love, Earth," which went on sale at Wal-Mart and Sam's Club. The launch marks the first time a mass-market jeweler has opened up its supply chain. Consumers can now go to a website to trace their gold bracelet or necklace to its origins.
While Wal-Mart says it eventually wants all of its gold, silver and diamonds to be sourced from mines that meet its standards, it has set a modest target of buying just 10% from these sources by 2010. As more companies embrace traceability, consumers will be able to use their buying power to reward those that act responsibly and avoid those that don't.
A first step
"Love, Earth" is still controversial. According to a statement by Earthworks (which helped develop the "Love, Earth" standards), "We do not yet see any sources of gold from large-scale operations that are independently labeled by a third-party as fully 'responsible.'" But Earthworks also noted, "This is an important step in the process of making jewelry supply chains more socially and environmentally responsible."
Posted: 20-Apr-2009; Updated: 06-Apr-2009
