Pandora’s Box of Worms?

Pandora has announced a move from natural to lab-grown diamonds in their jewellery. Possibly the biggest winners will be the shareholders in their US and European lab-grown suppliers. But, even though they happily used to sell natural diamonds, they now insinuate that there is something wrong with them. The biggest losers? Tens of thousands of people in the developed world who rely on the natural diamond industry. Really?! Someone needs to alert the Generation Z consumer!

By Richard Chetwode. 14th May 2021. Private e-mail: richard.chetwode@btinternet.com

Pandora’s announcement that they would be selling lab-grown diamonds in their jewellery in place of natural diamonds, is a huge wake-up call for the natural diamond industry. Okay, let’s be fair and put that in context; Pandora primarily sells lower value fashion trinkets1 and they are very good at it. And since lab-grown diamonds can be very cheaply mass produced they were always likely to find their niche in the low value fashion jewellery market, which is why De Bqeers launched its Lightbox lab-grown collection in the USD800 per carat range. So, it shouldn’t be a surprise that if you want a diamond in your jewellery solely because it ‘sparkles’ and looks ‘pretty’, then lab-grown diamonds and Pandora were made for each other.

Natural diamonds are about beauty, authenticity, and rarity… yes, but they are also just as much about sustainability and social contribution in the developing world. Millions of lives depend on the natural diamond industry. You probably want to ask, “so what is the problem?” After all, Pandora wasn’t that much into diamond jewellery – of the 85 million pieces of jewellery they sold last year, only 50,000 pieces contained diamonds2, and those pieces of jewellery contained natural, not lab-grown diamonds. Look on their website3, and you can still buy natural diamond jewellery; a “Diamond Club Charm” with the following description… “A Pandora Club Charms are only released for one year and are the only charm in our collections that features a genuine diamond. This makes each one a true Pandora collector’s item”. Natural diamonds… makes sense. They have switched to using cheaper lab-grown diamonds; in theory… no problem.

Except in promoting their new line of lab-grown diamonds, their new campaign seems to be based on the insinuation that there is suddenly something wrong with natural diamonds… which they were so recently themselves selling. The London Guardian commented on the story “demand for lab-grown diamonds” was led by “concerns about the environment and working practices in the mining industry4”… REALLY? The “London Metro commented “…Not to mention that diamond mining can cause problems for surrounding communities and wildlife…5”. REALLY? Communities and wildlife are two of the biggest beneficiaries!

This news commentary is about a Company who until recently boasted about their own responsible sourcing of natural diamonds. Maybe they felt uncomfortable talking only about their drive to be carbon neutral (or at least offset any emissions) with lab-grown diamonds when it is common knowledge that not only are De Beers intending for their next diamond mine to be carbon neutral, but the kimberlite ore that all diamond miners excavate, captures huge quantities of carbon emissions.

Whatever their reasons for this kind of promotion, the coverage includes numerous comments about lab-grown diamonds being an “ethical alternative to mined diamonds”. In the background provided to the press release, Pandora points out that “there is very low risk that lab-created diamonds are associated with armed conflict, form part of money-laundering schemes, or other illicit activities6. What is the difference between that kind of comment and a newspaper headline saying “There is no truth in the rumours that so and so beats his wife”. It doesn’t matter if it’s a complete fabrication, because no one remembers the retraction, they just remember the person’s name and the phrase “beats his wife”. It’s that below the belt.

In response a number of important natural diamond trade organisations7 have written an open letter to Pandora demanding that they withdraw the “false and misleading narrative which positions lab-grown as an ethical choice over natural diamonds”. One of the signatures is the highly respected Responsible Jewellery Council (RJC), who Pandora themselves calls as… as one of their “key partners”8! That tells you a story. Wow! So, what’s really happening here? To be objective, the research I carried out was without reference to the companies themselves.

Natural diamonds make a huge financial, environmental, and social contribution to countries that need employment and need the wealth natural diamond mining creates to work for the betterment of all the people of those countries9 most of which are in the developing world. Approximately 1.5 million artisanal miners in West Africa rely on natural diamonds not just for their jobs but for their very lives - once you include their families, they support possibly 10 million people. Hurt the industry and the people you are really hurting are them. Anyway, we know that Pandora sourced its natural diamonds from a company called KGK Group.

I know of, but I don’t personally know KGK, who are involved in natural diamond polishing (and other precious stones) but if Pandora are so worried about ethics, I think we ought to investigate. Except when you do some digging, the first thing you find out about KGK is that KGK are not just about natural diamonds; they seem to be wrapped up in “Social Purpose”! Amongst other things, they built and continue to fund the 250-bed Bhagwan Mahaveer Cancer Hospital and Research Centre in Jaipur, the only cancer specialist hospital in northern India. They are key sponsors of the SS Jain Subodh Shiksha Samiti, a not-for-profit organisation which runs 19 educational institutions which provide education from kindergarten up to MBA/law College for over 33,000 people in Rajasthan. This isn’t beginning to sound like an ethical problem to me; this is great stuff! Oh yes, they also helped rebuild the Jal Mahal (Water Palace) in Jaipur which was a complete wreck.

Okay, so what about the people who sold KGK the natural diamonds which might have been purchased by Pandora? KGK are sight-holders of De Beers… except it’s no good going for De Beers; they are the shining example of a company which makes a lasting social, financial and environmental contribution … so you won’t get very far there. Okay, so KGK are also sight-holders of Alrosa in Russia, the largest producer by volume and second largest by value. Let’s go and dig around them a bit.

Sitting in the middle of Sakha, Yakutia (which we used to call Siberia) is the town of Mirny. When the permafrost melts in the spring the ground becomes a morass, so the entire city is built on stilts, in the winter, the temperature can fall below -50ᵒ C. Mirny is where Alrosa, which employs 30,000 people, is based. What becomes quicky clear is that the local community and the company are completely intertwined – with the local community reliant on their support; incidentally around 40% of the entire Sakha Yakutia region annual budget comes from taxes paid by Alrosa (which accounts for around 90% of Alrosa’s tax payments). But compare them with progressive western companies and you find that… over 30% of their employees are women, 3 of the 15 members of the Supervisory Board are women; salaries at Alrosa are almost 3 time the national average. I didn’t know that!

If you travel only seven miles from Mirny, you may find to your surprise a 32,000-hectare nature reserve – why to your surprise? Because this is about as in the middle of nowhere as it gets! Inside what they call “Living Diamonds of Yakutia” musk sheep, Manchurian wapiti, yaks, axis deer, moose, wood bison, roe deer, bears and peacocks live in a completely protected environment (hunting is banned). Local visitors are encouraged to visit, and children are allowed to help care for the animals…. it is sponsored by… guess who - Alrosa. Really?! Look closer and they seem to be involved in everything from studying and tracking Reindeer to working with the World Wildlife Fund in Russia in financing anti-poaching units. The Company is the mainstay of the region; they invest in education, medical care, children’s recreation… In 2020, they planned to release millions of tiny whitefish, sardine cisco and Peled fish as well as 65.000 tiny sturgeon into the Lena and Vilyuy rivers, to help restock local rivers… (96%) paid for by … Alrosa. Russia may not be everyone’s favourite country for geopolitical reasons but Russia’s biggest diamond company does a great deal to support the communities where they operate.

So, let’s move on and ask what for me is THE question of today. “…we’re in the grip of a pandemic… most companies just looked after their own; what did YOU do when Covid-19 struck?” The answer is an inspiring story of contribution, not just for Alrosa, but the rest of the natural diamond mining industry as well. Alrosa didn’t just take a stand for its own workers and their families and they already provide support to their local hospitals, but even when their own diamond sales were plummeting, they spent USD8 million on the purchase and/or manufacture of additional ventilators, mobile laboratories and reagents for express testing, sanitisers, medication, PPE (including millions of facemasks) to these regional hospitals and thermal cameras to local airports.

…Just as De Beers and their partners donated around USD10 million in medicine, hundreds of thousands of facemasks to local communities but also paid for and donated hugely important PCR testing machines in Botswana and Namibia. In fact, its easier to simply state that during the Pandemic, almost every diamond mining company has stepped up, and more, to help their local communities (and others), whether it be funding support services for domestic violence (which has tragically increased so much) or testing, or medical services, or ensuring clean water supplies, or food parcels. In terrible times… commendable actions!

So, I have stopped looking for the reason behind Pandora’s “newfound” ethical position on diamonds because all I am finding is too many good news stories for natural diamonds. I think it’s just better to accept that there are some who cast dispersions on the natural diamond industry for their own gain, so be it and we move on. But that leaves unanswered another especially important question; if Pandora has switched from natural to lab-grown diamonds, when the physical, optical and chemical properties of both are the same, where, other than a natural diamond’s social purpose, is the difference?

It’s actually relatively simple. If you only want your diamond to “sparkle”, then there is no difference, so buying a lab-grown diamond will be cheaper… but here’s the thing; the one argument I haven’t heard anyone suggest about lab-grown diamonds is that they have an “intrinsic value”. But then maybe “intrinsic value” as a concept doesn’t fit with objects of potentially infinite supply. Therein lies the true difference; it’s the message that you communicate when you wear a natural diamond which you don’t communicate with a lab-grown diamond.

That’s what symbolic products do; they communicate; they talk on behalf of the person who is wearing them; they say something to the people who see them, in the same way that Rolls Royce and Rolex send a financial message about you to everyone else. You don’t just wear Apple iPods because they are good… you wear them because those white iPods tell a story about YOU; when you drive a Mercedes, the Mercedes communicates a story about who YOU are and why YOU matter to the world… a Tiffany’s blue box tells the story of what the purchaser really thinks about YOU; it is their promise for the future – ‘Nike’ is a lifestyle statement that you intend to stay fit for life and so on. We are all telling stories about ourselves all the time. Wearing a natural diamond is YOU telling YOUR story. So if you want something to celebrate the meaningful moments in your life, it surely has to be something that is inherently precious, so it has to be a billion-year-old natural diamond, a natural diamond is a vault that holds your emotional memories and passes them on from one generation to another.

Many luxury goods can say “I am successful”; they can say “I have money”; they can say “that I have taste”, but they don’t say “I am loved, and I am committed” in a way that a natural diamond does. It is a non-financial, non-status, non-fashion symbol of love and commitment… and the need to express that has and will exist everywhere, for all time. That is the unique story told by your natural diamond.

And if you want to buy a natural diamond to celebrate your own success, it tells another story. Because it is expensive, it communicates a message of success to the greater world; The natural diamond’s message is, yes, I am expensive, yes, you have to be successful to own me, yes, the bigger I am the more successful you are, but natural diamonds also do it in a way that is elegant.

I have little doubt that over time, a large proportion of the lower quality low value natural diamonds in fashion jewellery will be replaced by lab-grown because lab-grown diamonds can be produced so cheaply; that is not a debate for me. There are some lab-grown companies who promote their product on its merits alone; no complaints there. What is up for debate is that while some of those involved in the lab-grown industry choose to benefit not by promoting their own product on a stand-alone basis, but by undermining natural diamonds to replace them with lab-grown diamonds; that is wrong, and ultimately it will hurt everyone. It’s worth remembering that lab-grown diamonds have always been much nearer a “Gerald Ratner moment10 than natural diamond ever was.

So if social contribution and sustainability is what you are about, then Pandora and other lab-grown players have the chance to answer the questions which the natural diamond mining industry have been busy answering; “what’s your social purpose, what are you doing to protect endangered wildlife, what have you done to look after local communities who have nowhere else to look for help?” and the really crunch question “What did you do to help other people during Covid?”. I very much look forward to hearing the answers!

In the case of Pandora, a cynic might ask whether their move to lab-grown diamonds had anything to do with securing a new €950 million sustainably linked revolving credit facility from European banks at the end of April? After all, the facility has a pricing mechanism that links borrowing costs to Pandora’s progress on becoming carbon neutral in its own operations and using only recycled gold and silver by 202511. Whatever the reality, Pandora have chosen to sell lab-grown diamonds because they say they will be carbon neutral; that’s their choice. But that doesn’t explain away the insinuations against natural diamonds which they recently happily sold, just not very successfully? CEO Alexander Lacik said about the new campaign, “It’s the right thing to do”. What does seem clear is that those insinuations have undermined the natural diamond business.

You have to ask… why would anyone want to do this? The answer may lie in the three of the key messages repeated in the media coverage: 1. the cost of producing a lab-grow diamond is only a third of that of a natural diamond; 2. their new lab-grown diamond jewellery will start at an entry price of £250, and 3. this will increase the number of people who can afford to buy diamonds, “Diamonds aren’t just forever, they are for everyone” said Pandora’s CEO. The more than reasonable conclusion the most people have drawn is that by using lab-grown diamonds, Pandora is opening their diamond fashion jewellery offering to a customer base who previously couldn’t afford it. But their website seems to tell a different story. In rings they are offering ¼ carat to 1 carat lab-grown solitaire diamonds… a 1 carat G-J colour VS2+ going for £1,260! They have entered an entirely different (and much higher priced) market segment way above most of their normal price points for fashion jewellery, but they haven’t told you that… how long before they start talking about lab-grown diamond engagement rings? Maybe that’s right, with one caveat… there has always been a fine line between very clever marketing and deceit. Promoting sustainability is great, but at the same time undermining natural diamonds was the wrong thing to do.

The diamond mining companies are trying (and more and more succeeding) in doing the right thing, not just for themselves, but the communities in which they live, so are others in the natural diamond industry. People involved in the natural diamond business, so many of whom are in the developed world, aren’t just faceless numbers, they are real people with hopes and dreams and fears just like all of us… and you haven’t just stopped buying their product to have a cheaper version made in Europe and the US; you unfairly risked damaging their future. Maybe a phrase to remember might be that “people who make cheap shiny trinkets shouldn’t throw stones at people in the developing world because they can make more profit”.

1 The average price of Pandora’s product was USD36 per piece last year. They may be the biggest jeweller by volume, but by my estimation their natural diamond jewellery sales were equal to about 0.00021% of global diamond jewellery sales in 2020.
2 “Jeweler Pandora Takes Ethical Stand Against Mined Diamonds” by Christian Wienberg. Bloomberg. 4th May 2021.
3 www.uk.pandora.net/en/discover/pandora-world/materials/stones/diamond.
4 “Pandora jewellery brand says it will stop selling mined diamonds” by Zoe Wood, The Guardian 4th May 2021.
5 “Pandora launches new lab-grown diamonds as a sustainable alternative to mining – starting from £250”, by Lizzie Thomson Metro. 5th May 2021.
6 “Pandora Brilliance – information on sustainability”. www.pandoragroup.com/products/jewellery-materials/pandora-brilliance.
7 Signatories to the letter included the Responsible Jewellery Council (RJC), the World Diamond Council (WDC), CIBJO, the World Jewellery Confederation, the Natural Diamond Council (NDC) and the International Diamond Manufacturers Association (IDMA).
8 “Governance and Key Partners”. 2019 Pandora Sustainability Report. 9 A quote from my last article “De Beers Friend or Foe”. 10 In the 1980’s and early 1990’s, Gerald Ratner turned his small family-owned jewellery chain into a billion dollar business selling low value jewellery. He claimed afterwards it was meant to be a joke but in a speech to the UK Institute of Directors he said that “We also do cut-glass sherry decanters complete with six glasses on a silver-plated tray that your butler can serve you drinks on, all for £4.95. People say, ‘How can you sell this for such a low price?’ I say, because it’s total crap”… He went on to say that some of the earrings sold by the Ratner Group were cheaper than an M&S prawn sandwich but probably wouldn’t last as long”. A year later the company was virtually bankrupt.
11 www.pandoragroup.com/investor/news-and-reports/press-releases/newsdetail?id=24166

Richard Chetwode runs a diamond consultancy business. He is also Chairman of Namibian Diamond Mining Company Trustco Resources, is Chairman of the Advisory Board of Australian technology company Fine Arts Bourse as well as consulting to several diamond (and other) businesses. All the opinions in this article are his own.