The “No Dirty Gold” Campaign: What Economists Can Learn from And
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The Economics of Peace and Security Journal, ISSN 1749-852X J.T. Marlin, The “No Dirty Gold” campaign p. 58 © www.epsjournal.org.uk – Vol. 1, No. 2 (2006) The “No Dirty Gold” campaign: what (parent of Sterling and Kay Jewelers), Helzberg Diamonds, Fortunoff, Cartier, Piaget, and Van Cleef & Arpels. These represented, in February 2006, a market economists can learn from and contribute to share of 14 percent of U.S. jewelry sales, mostly on the luxury end of the retail jewelry marketplace and in middle-market sales in shopping malls. By May 2006, corporate campaigns three more retailers had joined, Turning Point, Fred Meyer Jewelers, and Michaels Jewelers. John Tepper Marlin NDG has succeeded in bringing on board virtually all of the upscale brand names in the jewelry business and, according to the NDG campaign in June 2006, cademic economists have had a great impact on actors in financial several other large retailers are engaged in a promising dialog with NDG: Wal- marketplaces: the Black-Scholes options-pricing model for instance Mart, QVC, and Whitehall. Non-signing jewelry-selling holdouts that are not Aspawned an industry on Wall Street. But economists have had trouble in engaged in such a dialog are: (1) mass-market generic vendors J. C. Penney and recent years affecting issues of war and peace, even though since Adam Smith Sears/KMart, and (2) Rolex and (surprisingly, given the company’s potential many economists have stressed the destructive and wasteful nature of wars. Recent vulnerability to a student campaign during the coming year) Jostens, which United States military decisions appear to have been made either independently of supplies jewelry to school and college students. economic analysis or with such analysis buttressing plans to invade countries with Signatory retailers have made it clear they expect to use their influence with valuable natural resources. mining companies and that (1) they feel morally obliged to respond, (2) as Economists had more input businesses they have a pragmatic need to protect their reputations, and (3) the Economists can increase their policy during the Cold War, when issues extent to which they will be effective depended on NDG keeping up the pressure impact by studying successful NGO relating to missiles and missile from jewelry consumers. Michael J. Kowalski, Tiffany’s Chairman and CEO, said campaigns against corporate actors. defense were openly debated. The he understands that the heavy lifting was still to be done: “What does indeed enemy was clear and the issue constitute a responsible mining operation? Who’s there at the moment, and how do was how best to respond to we get to where we need to be? The critical next step is reaching a substantive threats. But now U.S. military expenditure is growing to wage wars in questionable agreement on those questions.”2 places against amorphous foes. The rationale given for invading Iraq was as a The practical outcome of corporate support for the NDG campaign is the response to the terror attack of 11 September 2001, perpetrators of which were Council for Responsible Jewellery Practices (CRJP),3 which as of April 2006 had largely Saudi nationals – evidence of Iraqi involvement is still hard to find. 43 members including the eight previously cited retailers, seven industry My thesis is that economists can have more impact by studying NGOs associations, six gold/diamond mines, and 22 refining, manufacturing, trading, and successfully working on corporate campaigns for higher environmental or labor wholesaling organizations. The CRJP was created to “promote responsible standards. The “No Dirty Gold” (NDG) campaign may offer a model for practices relating to business ethics, social, human rights and environmental economists. performance throughout the diamond and gold jewellery supply chain from mine to retail.” The “No Dirty Gold” campaign and the jewelry industry response The CRJP has been funded by its members at a level adequate to hire two competent staff members from the NGO community. A Code of Practices has been The “No Dirty Gold” campaign is jointly sponsored by OxfamAmerica and created specifying the expectations for gold mining practices (both environmental 1 Earthworks. The campaign began in 2004 and showed renewed life in the first half and worker-related), and the CRJP is on track to having a significant effect. The of 2006. The NDG campaign targets are clear and visible: corporations with known specific social and environmental standards that CRJP decides that gold producers brand names. The army on the NDG side is made up of jewelry consumers. By should work toward and eventually implement have not yet been developed. The early 2006, NDG had accumulated 50,000 pledges from consumers forswearing quality of these standards will determine whether or not they address the concerns purchase of gold jewelry from any retailers who do not subscribe to the NDG of the NDG campaign. “Golden Rules” relating to the source of their gold. In February 2006, major jewelry retailers companies signed on to the Golden Rules. The first to sign was Tiffany & Co. The others were Zale, the Signet Group The Economics of Peace and Security Journal, ISSN 1749-852X J.T. Marlin, The “No Dirty Gold” campaign p. 59 © www.epsjournal.org.uk – Vol. 1, No. 2 (2006) The heart of the NDG campaign: pulling the supply chain The vulnerability of brands It is too early to break out the champagne and announce that the NDG campaign A consumer brand is more vulnerable to buying power than a generic product. It has achieved its environment and labor goals. It is an open question how carefully costs money to advertise the brand, and this cost must be recouped in the price. For the CRJP Code will be audited and enforced. But the jewelry industry has moved example, in Europe, where the banana industry is protected, brands make a big remarkably quickly to respond to issues that have been raised by NGOs and difference; in the United States the brand of banana matters much less. Europeans explicitly credits the NDG campaign as its motivating driver. will choose one brand of banana over another based on perceived environmental Can economic concepts help explain why the NDG campaign took root so differences, and Chiquita bananas are preferred. Therefore Chiquita is attaching its quickly? Can this analysis in turn provide insights to economists to help them environmentally conscious frog – courtesy of a Rainforest Alliance certification – address broader issues of influencing issues of war and peace? to its labels in Europe, but not in the United States, where bananas are more of a generic commodity.6 One can say that European environmental consciousness is Prior experience in the industry a main driver of Chiquita’s compliance with environmental standards on its farms and on the farms of its suppliers. The jewelry industry is composed of high-cost, Every campaign is path-dependent, following in the footsteps of campaigns that luxury brands that have invested heavily in their reputations. With the price of gold have come before. Jewelry retailers were the targets starting on Valentine’s Day substantially higher in 2006 than 2005, gold jewelry is even more of a luxury. 2001 of a previous campaign sponsored by Physicians for Human Rights,4 Oxfam Jewelry retailers and their suppliers cannot afford to take chances with being tarred America, and 71 other NGOs against “blood” or “conflict” diamonds being used by an activist campaign. to finance civil wars in Sierra Leone and Angola. The clean diamonds campaign led to the Kimberley Process for identifying such diamonds, and this was effective The commitment of “Bitten Brands” in breaking links between the such diamonds and major jewelry retailers.5 Unintended outcomes include an increase in the oligopolistic power of large Once bitten, twice shy. When a brand has been “bitten” by consumer activists, the diamond merchants operating in Africa and a shift of diamond-buying out of brand’s managers often take up the cause with the zeal of a new convert. Gap Inc. Africa to other continents. Retailers’ response to this issue may also have been was “bitten” by anti-sweatshop activists who paraded naked around the company’s relatively easy, since conflict diamonds involve only about 4 percent (according headquarters in San Francisco to show that they would rather wear nothing at all to an industry spokesman) of diamonds coming on the market each year. Having than clothes made in a sweatshop. The distinguished family that started Gap Inc. a prior victory with this constituency provided some momentum for the NDG became anguished and embarked on a uniquely aggressive anti-sweatshop campaign, which raises more widely prevalent issues with the industry. initiative.7 The company was an early leader in seeking compliance with the SA 8000 labor standard and in issuing a detailed report on the progress toward The clout of buying power down the supply chain compliance of its suppliers.8 As of mid-2006, the corporate responsibility function at Gap Inc. was headed by a Senior Vice President with a staff under his direction Wal-Mart has become the world’s biggest company by using its buying power to of more than 90 people. In the jewelry industry, the leading brands were given bring down costs to the consumer. This demonstrates the influence that buyers can enough taste of small bites by the conflict diamonds campaign that they do not bring to bear on the way that goods and services are provided. The fact that wages wish to risk a big bite from the NDG campaign. As a New York City-based jewelry and benefits for most of its own workers has been big part of Wal-Mart’s cost- company spokesman said in the spring of 2006: “We have seen the economic cutting is a reason for a new campaign targeted against it.