The jewellery sector is testament to the fact that “with knowledge, talent, hard work and perseverance, a community of smaller companies can create an industry that generates close to $170 billion per annum, and provides a living and a hope for a better future for its millions of members and stakeholders,” said CIBJO President Gaetano Cavalieri, during the opening session of the World Jewellery Confederation’s congress, which opened in Salvador, Brazil, today. But, he added, smaller and medium sized companies are operating under increasingly difficult conditions.
The full text of his speech follows:
It is now my honour to present the President’s Report. Unsurprisingly, and I say “unsurprisingly” because such has been the case for many years already, it has been an eventful year both for CIBJO and our industry, with numerous challenges and opportunities.
Indeed, there is insufficient time for me to cover all the pertinent topics on our agenda. Consequently, in addition to today’s address, I also have prepared a written report, which you all will receive by email. I encourage you read it.
Today, in my address, I will focus on a number of the subjects and themes contained in the report.
I will begin by paying tribute to representatives of Brazil’s federal government and the State of Bahia, H.E. Senator Eduardo Braga, the Minister of Mines and Energy of the Republic of Brazil, and H.E. Governor Rui Costa, the Chief Executive of the State of Bahia.
It is a privilege to be in your country and your state, and an honour to have you with us today. For many of our members and guests, this visit is an introduction to Brazil and Bahia, and, as one who has already has enjoyed the experience, I can testify that the beauty, hospitality and promise of the country and region can be overwhelming.
Brazil has always featured prominently on our industry’s radar, but mainly as a source of raw materials. This congress will broaden that perspective, showing its skill and ability as a design and production centre, and also a market. It may the first visit for some, but it is unlikely to be their last.
Allow me also to pay tribute to our guests from the United Nations, including H.E. Ambassador Nassir Abdulaziz Al-Nasser, the High Representative of the Alliance of Civilizations. With him is Mr. Alberto Padova, the Officer in Charge of the NGO Branch in Department of Economic and Social Affairs. We also greet an old friend, Dr. Hanifa Mezoui, who was the UN officer who greeted and guided CIBJO into ECOSOC, and who has accompanied us ever since.
Since CIBJO formally became associated with the UN’s Economic and Social Council in 2006, we have expanded our mission, and I believe that of the international jewellery sector in general, to include a commitment to develop sustainable economic, social and environmental opportunities for all of our industry’s stakeholders, and especially those in developing countries, where the added value we can provide is most critically required.
Our guiding light over this period were the Millennium Development Goals, and in particular we focused upon the call by the UN, in its Millennium Declaration, to develop strong partnerships with the private sector and with civil society, in pursuit of development and the eradication of poverty. The jewellery industry, we felt, which is so invested in the developing world, has a special role to play. We may deal in a luxury, non-essential product, but in so many places our industry, and the revenue it generates is absolutely essential.
When the Millennium Development goals were declared at the turn of the century, the United Nations set a deadline of 15 years for them to be realised. 2015 is upon us, and, as our friends from the United Nations can attest, great progress has been made. But the job is far from over.
Each year ECOSOC declares a theme, which sets the tone for the programmes it runs over the course of the year. This year the theme is “managing the transition from the Millennium Development Goals to the sustainable development goals: what it will take?”
I would propose that, among others things, it will take an approach that we have been promoting for the all the years that we have been associated with ECOSOC, and that is, in the developing world, to provide education, skills and grass-roots opportunities. As it said, one can provide a short-term solution to a starving man by giving him a fish to eat, but, if you teach him how to fish, you have provided a long-term solution as well.
De Beers set a sterling example of this approach, when it moved the nerve-centre of its rough diamond sorting and distribution system from London to Gaborone in Botswana. It was not only a matter of creating jobs in an African country, but also transferring knowledge, skills and experience, the effects of which will resonate throughout the country’s economy for many years to come.
That was what a large corporation can do, but I actually believe that, from the development perspective, the jewellery industry can do so much more, because it is at its core a business made up of small and medium-sized enterprises, or SMEs, almost all of which started from the ground up.
We are testament to the fact that with knowledge, talent, hard work and perseverance, a community of smaller companies can create an industry that generates close to $170 billion per annum, and provides a living and a hope for a better future for its millions of members and stakeholders.
From our experience, one of the things that SMEs do best is they generate more SMEs. The sons and daughters in family-owned companies frequently set up their own companies, where they can express themselves and provide independent livings for their individual families. It is inherently sustainable business enterprise.
It is that sort of grass-roots involvement that can turn lofty Millennium Development Goals into long-term sustainable goals.
But we cannot take the existence of our small and medium-sized enterprises for granted. In the developed markets and production centres, they are a sector coming under increasing pressure, where a range of factors that disadvantage them have combined, making it increasingly difficult to stay in business.
For a long while already, producers of raw materials have favoured dealing with larger companies, making the SMEs reliant on the secondary trade, where prices are higher and supply less steady and plentiful.
But the catchphrase of the past year has been bankability, particularly in the diamond sector. The lack of liquidity, particularly in important production and wholesale centres like India, have caused the producers to recalibrate policies about who they sell merchandise to. At the same time, banks have reduced their profile in the industry.
Over the past several weeks, major mining companies have decided to reduce the level at which they cap production, releasing less supply into the chain of distribution. This is despite the fact that, in the consumer markets, demand for our product is growing.
The decision by De Beers to require that its clients maintain a minimum level of personal equity in their business is what most would consider sound business advice. But, once again it limits the manoeuvrability of SMEs in the industry.
The liquidity problem is a direct result of an absurd situation that has developed in our industry over a period of more than 20 years. It is directly related to the fact that the credit burden primarily rests on the mid-section of the jewellery and gemstone pipeline.
Rough producers generally demand to be paid in full upfront or on supply, and retailers have become used to generous terms of credit. It is that mid-section, made up of dealers and manufacturers, where profit margins are lowest, which largely finances our industry. Given recent events, this would seem to be an unsustainable situation.
There urgently needs to be a serious discussion, involving all sectors of the chain of distribution, about the distribution of debt and profit. The health of our industry depends upon it.
CIBJO, where all stages of the chain of distribution are represented, would appear a natural forum for such a discussion.
SMEs are also pressured by the voluntary regulatory procedures, including chain of custody systems, which have raised the bar of entry into the business to levels that some feel they are unable to afford.
In principle we recognise and respect the need for chain of custody protection, and we have worked hard to find solutions that would expand the ability of all ethical participants in the industry to achieve an acceptable degree of compliance.
At the beginning of this year, after years of planning and preparation, we announced that the jewellery industry’s first web-based Corporate Social Responsibility compliance system would soon be launched. It was developed by CIBJO together with Branded Trust Assurance Systems, which also will be responsible for its management.
The agreement with Branded Trust is scheduled to be finalised at the CIBJO Congress in Brazil.
As Don Feaver of Branded Trust will explain in the CSR session this afternoon, the system is geared to providing practical and economic solutions to all companies in the industry seeking to achieve and manage social compliance, develop risk management policies and do social reporting.
Another session that will take place this afternoon will consider the integrity of grading reports.
I believe that we are all aware of disturbing reports about gem labs deliberately over-grading gemstones, allegedly in collusion with customers.
The discussion that resulted was equally disturbing, because it raised the argument that, in the absence of an international accepted and harmonised grading system, no grade can be legally challenged.
It is a situation that challenges our integrity, which in a business such as ours is our most precious asset. We have our work cut for us over the coming three days in Brazil.
May we all have a successful congress.