Under pressure to distance themselves from gold originating from Russia, jewellers are making advances in traceability and transparency. We unpack how.

Gold mining has come under increased scrutiny for its links to mercury pollution and human rights abuses, prompting a move towards sourcing more traceable, fair-mined gold. A warning in March from the Global Gold Transparency Initiative that brands must ensure they have a full and accurate view of their gold supply chains – or risk unwittingly funding Russia’s war on Ukraine – sped that up further.

Several jewellery houses, from independent designers such as the UK’s Stephen Webster and Brazilian-born Fernando Jorge, to big international names such as Messika and Bulgari, are transitioning to 100 per cent traceable gold. A new industry standard called Single Mine Origin (SMO), which first launched in 2018, is gaining traction, and responsibly sourced recycled gold is another potential solution. But there are still challenges to overcome in the rush for transparency, including cost and distribution.

Gold is notoriously difficult to trace. According to the World Gold Council, an average of 2,500-3,000 tonnes of gold are produced annually and shipped to refineries, where they are transformed into gold bars. However, since gold is indestructible and infinitely recyclable, refineries usually mix freshly mined gold with some of the metal that has been mined since the beginning of time. With around 200,000 tonnes of it in circulation, it is near-impossible to determine its origins. Russia is the second-largest producer of gold globally, after China.

The Alliance for Responsible Mining and Fairtrade International both run schemes to help brands source gold that can be traced from mine to finished jewellery, and guarantee that the gold has been produced in a way that protects the people who mined it. Through these, brands can individually establish close links to small-scale and artisanal mines. For example, in 2013, Chopard began sourcing directly from artisanal and small-scale miners in Peru, Bolivia and Colombia, under the Alliance for Responsible Mining’s scheme.

However fair-mined and fairtrade gold comes with a premium price tag — about $4 more per gram than standard gold, according to Fairmined, an initiative that connects certified responsible mines with gold buyers. “We’ve taken a cut on our margins to be able to ensure that all of our production is fair-mined and it’s been challenging, but it is possible,” says Nigora Tokhtabayeva, founder of US-based fine jewellery brand Tabayer, which launched in 2019. Lower margins have “huge implications” in a business in which raw materials are expensive and the gold price fluctuates as it means the brand has less leverage to hedge for changes in the price of gold. However, she is committed to fair-mined gold, noting that customers and retailers increasingly ask about sourcing policies.

Brothers Charlie and Dan Betts — whose family has been in the gold refining business since the 1700s — believe that real change will only happen by connecting the jewellery industry with medium and large-scale gold mines. In 2018, they created the SMO kitemark, which is applied to gold that has been produced by a legitimate mining operation that holds no ties to conflict, and where miners are being paid a just wage.

SMO operates chain-of-custody protocols on two large-scale mines in Mali and Ivory Coast. A third mine in Guinea is under construction and is expected to start producing SMO gold by mid-2023. Upon arriving at a partner refinery in Switzerland in segregated batches accompanied by documents, SMO gold is refined separately from other gold bars. Independent auditors have been appointed to monitor the process. Jewellery made with SMO is traceable using a QR code. Boodles was one of the first to switch to SMO gold in 2018, and other jewellers such as Garrard, Emefa Cole and Shaun Leane have followed suit.

The brothers claim SMO offers traceability without the premium prices of fair-mined and fairtrade schemes. “The two African mines produce more than 300,000 ounces of gold per year between them, and thanks to the volume and economy of scale there is no need to charge a premium,” says Charlie Betts, “plus, the programme is scalable and can be applied to other mines.”

Jewellery brands are also exploring the opportunities in recycled gold, which can be a responsible choice when the source is known. Recycled gold has been boosted by recent government scrutiny of electronic waste: a UN report published in 2020 valued the recyclable metals such as gold and copper trapped in electronic waste at $57 billion. Earlier this year, the British Royal Mint, a purveyor of coins, medals and gold for investment since the ninth century, launched a jewellery brand called 886 (the year the British Royal Mint was established) made out of reclaimed metals and gold mined in electronics. Chopard recycles gold at its own foundry, while online retailer Finematter offers clients vouchers in exchange for recycling unwanted gold jewellery. Alexander Thiel, a partner at management consultancy McKinsey & Co in Zurich, says that while knowing the origins of materials is important, “consumers, at the moment, are placing more value in recycled materials and circular models.”

Another solution to the transparency challenge in gold sourcing is blockchain technology. Industry body the Responsible Jewellery Council trains jewellers in implementing a chain of custody. Every sourced material needs to be segregated and accompanied by documentation as it moves across the supply chain, and a third party must supervise every stage. The council says blockchain technology can be used to support the process.

In March, the London Bullion Market Association and the World Gold Council announced that they would be working together on a blockchain-backed digital system to track gold across the supply chain from the mine until it is set in jewellery. Similar technology was successfully implemented by De Beers in 2018 with Tracr, a proprietary tool that uses blockchain and artificial intelligence to follow diamonds higher than one carat in the rough from the mine until it reaches the client.

World Gold Council CEO David Tait said its blockchain project was the “first step towards a more aligned gold industry, where we work together to ensure a more accessible and transparent market”.

Source: Vogue Business