Meet the Change Makers: Tiffany's Diamonds and Gold Get Greenish Sparkle With Stance Against Pebble Mine
Q&A with the jewelry seller's CEO, Michael J. Kowalski
OnEarth | Adam Aston
December 1, 2011
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Most businesses hungrily pursue new sources of vital raw materials. Tiffany & Co., by contrast, has begun to forge a different path. In the last several years, the company has taken an increasingly public and vocal stand against an enormous gold mine that has been proposed at the headwaters of Bristol Bay, Alaska. Pebble Mine, as the project is known, is estimated to hold more than $300 billion worth of gold ore and other precious metals.
Publicly listed Tiffany & Co. traces its roots back to 1837, when Charles Lewis Tiffany and John Young set up a "stationery and fancy goods emporium" in New York City. Today, with $3.1 billion in sales last year, the storied jeweler has a very big appetite for gold, diamonds, and similar earth-borne treasures. Yet Tiffany CEO and chairman Michael J. Kowalski sees the near-term costs of squelching a new gold supply as far outweighed by Pebble Mine's potential risk to the environmental, and in turn, to Tiffany's brand.
The proposed mine lies within a 40,000-square-mile watershed, filigreed by dozens of pristine rivers and tributaries, that is home to beavers, moose, and caribou, which feed off summertime plant growth. A huge population of bears, as well as the native Yupik people, relies on the annual return of spawning sockeye salmon, a flood of wild fish that ranks among of the world's largest such runs. Opponents argue the fishery -- worth hundreds of millions of dollars a year -- and the broader ecosystem could be imperiled by mine construction and runoff of acids and dissolved metals. "I can't think of a mine that threatens more ecological value in North America than Pebble," Kowalski said.
Tiffany's take on mining issues has evolved over a two-decade span that roughly coincides with Kowalski's tenure, during which time the company has faced the overlapping crises of blood diamonds and conflict gold. Mining practices in strife- and famine-torn regions have led to grievous human rights abuses, as warring factions fight for access to mineral wealth, as well as environmental damage, such as mercury pollution from small-scale gold-mining operations. Today, the company states flatly that, with respect to mining: "We recognize that some public lands are simply not suitable for mining, and that their value for recreation and conservation is far greater than their value as a source of minerals."
Tiffany's increasingly visible commitment to sustainability is documented in its first corporate sustainability report, released last month. In addition to advocating for responsible mining, the company has also focused on its retail operations -- manufacturing its iconic blue boxes and bags, for instance, exclusively from materials certified by the Forest Stewardship Council. Efficiency upgrades and solar panels in its stores have lowered greenhouse gas emissions by more than nine percent per square foot since 2006.
OnEarth contributor Adam Aston recently discussed Tiffany's evolving approach to sustainability with Kowalski at his office -- decorated with photographs of family travels to national parks in the United States and overseas -- at the company's Fifth Avenue headquarters in midtown Manhattan.
Tiffany & Co. depends on mining, yet mining is destructive by nature. How do you decide one proposed project is promising, but another, like Pebble, is not?
It's difficult for us to make definitive statements about what constitutes responsible mining today. But in a simplistic sense, we're clear that it's better to extract minerals from a legacy mine than to threaten a pristine ecosystem. That led us to Rio Tinto's Bingham Canyon Mine outside of Salt Lake City. The precious metals used in our U.S. manufacturing come from there as well as from recycled sources.
The mine has been there for 100 years. There are legacy issues, certainly, but today the mine is being managed responsibly. I know Mr. Redford would disagree [Ed. note: Writing for OnEarth's Community Blog, NRDC Trustee Robert Redford has compared the threat of the proposed Pebble Mine to the environmental damage done by Bingham Canyon Mine]. But it is a worthwhile debate.
Look, we all may not be pleased with the standard of U.S. environmental regulations for mining, but they are pretty good in a global context. The greater concern is mines in less-regulated areas. Isn't the more positive thing to source from a nearby mine that is monitored than from one that is far away, where we have no influence, and regulations are practically nonexistent, such as in, say, Papua New Guinea?
Checking industry claims with NRDC's sustainability experts
The prestige of Tiffany's brand means there is real force behind the company's efforts to reshape the way jewelry retailers and the broader mining industry are approaching sustainability, says Joel Reynolds of the Natural Resources Defense Council, who directs its urban west program and the marine mammal protection and Southern California ecosystem projects. He also leads the Save Bristol Bay campaign, bringing together a broad coalition of interests opposing the proposed Pebble Mine in Bristol Bay, Alaska. In particular, he says, "Tiffany has a unique ability to draw attention to [Pebble Mine]."
As Tiffany turned up the volume on the issue, other major retailers such as Walmart and Target -- which sell high volumes of lower-cost gems, gold and other jewelry -- have taken notice, says Reynolds. This is leading to a process that he believes will improve industry practices and lead other major jewelry retailers to sign on to the The Bristol Bay Protection pledge, as Tiffany has done. At the core of the issue, Reynolds said, is the question of whether the mine can be built and operated without significant risk. "Under comparable hydrological circumstances, 93 percent of similar mines in the U.S. have failed to meet the standards they commit to in their original environmental impact assessments," he notes, pointing to a 2006 study of water-quality problems at hard-rock mines.
Key state and federal deadlines for Pebble's developers to submit permit applications for the mine were originally set for this year, but have been pushed back to 2012 and 2013. This suggests opposition to the project is getting traction, Reynolds says. Outside Alaska, the mining reform organization EarthWorks has successfully lobbied more than 60 jewelers to take the "No Dirty Gold" pledge, which would apply to the Pebble Mine. Tiffany & Co. is a long-time signatory. Target is the most recent retailer to sign on, in March of this year.
By taking this voluntary pledge, jewelers agree to abide by The Golden Rules of responsible mining: to ensure that toxins, such as sulfuric acid, don't contaminate the land, water, and air, and that workers rights and labor standards are respected. Still, critics charge that until a third-party certification system for gold mining exists, efforts to clean up the industry will remain piecemeal and difficult to verify. -- Adam Aston
For those reasons, some have suggested that Pebble Mine would operate using the world's best practices, including regulation and monitoring.
The argument has been made: "Well, if you really care about responsible mining, you should be a supporter of Pebble because it will be the most responsibly built and managed mine in the history of mining, and it is unfair to tar Pebble with the abuses of past mining practices." In fairness to the Pebble Partnership (a joint venture between a subsidiary of Anglo American and Northern Dynasty Minerals), I want to make this clear: We have no doubt that they would do everything possible to develop that mine as responsibly as they possibly can. And I'm going to presume that the state of Alaska will do everything possible to make certain that happens if the mine goes forward.
That said, we have reached the conclusion -- as have many non-governmental organizations (NGOs) and local Alaska residents -- that the risk is simply too great. Despite the best of intentions, the location of this mine is so inherently problematic that it is simply not worth the risk of a catastrophic event. Other jewelers have come to the same conclusion and, like us, signed The Bristol Bay Protection pledge.
Is this is first such position you've taken on gold mining?
No. Starting back around 1994, we began receiving a fair amount of unsolicited mail asking us to oppose the New World gold mine that was planned right outside of Yellowstone National Park. At that point, we didn't have the ability to see into our gold or silver supply chain, nor had our company policy on these issues been developed.
We began making inquiries, and as we learned more we thought, "If the New World mine is built, and there's a catastrophic failure of the tailings dam, the flood would destroy a good part of Yellowstone National Park. That's not a good thing for the jewelry industry." It was that simple. We drew the conclusion that, as leaders of the jewelry industry -- not necessarily by size but certainly by reputation -- it was appropriate for us to speak out in opposition.
When did you begin to formalize your mining policies?
About 10 years ago, we began to see concerns about gold mining enter the mainstream media. So around 2001, we started making inquiries to the NGO community, saying, "We're very interested in responsibly mined metals, but what should we do?" The response shocked us because, back then, a lot of NGOs said, "There are no standards of responsible mining yet. We really can't tell you where to go."
In 2002, we began working with NGOs like Earthworks to move forward on this issue. Today we abide by a set of core principles around responsible development and operation of large-scale mines.
Tiffany is synonymous with diamonds. How did the crisis of blood diamonds influence your position on mining?
Our experience with blood diamonds certainly raised our awareness about the environmental and human rights risks connected to metal mining. They weren't remotely on our radar screen when the stories first surfaced. That's because, back in in the early '80s, we did not manufacture the majority of our jewelry. We bought it from manufacturers around the world, primarily from Europe, and some from the U.S. We would also buy polished diamonds -- not rough unfinished diamonds -- from diamantaires* in historic diamond centers such as New York, Tel Aviv, or Antwerp. Because of this arrangement, we had little insight into the supply chain beyond those levels, and quite frankly, little incentive to make needed improvements to our supply practices. [*Ed. note: Diamantaire is an industry term, describing buyers, traders, and artisans who work in the middle layer of the supply chain. Diamantaires buy, cut and polish raw diamonds before they're set into jewelry to sell to larger wholesalers or retail jewelers.]
So dependency on diamantaires left you with little control over the origin of the gems?
Yes. Then, in essence, we became our own diamantaires. We had also undertaken a separate effort to vertically integrate our supply chain, beginning some years before the blood diamond problem first surfaced. The company was growing rapidly, and we needed to assure the flow of supply of manufactured goods, and later raw materials. We committed to cutting and polishing our own diamonds so that we could buy rough diamonds at the mine head. That gave us better knowledge of where a particular diamond came from.
The horrors of Sierra Leone crystallized this part of the strategy. We knew we absolutely had to be able to identify the country of origin and, ultimately, the mine of origin of as much of our raw materials as we could.
It's an ongoing process. We're not all the way there, even today. But we're confident that over time, for diamonds, we can identify the mine of origin, and attest to the social and environmental conditions at those mine sites.
Many industries have abandoned such vertical integration, arguing that high-volume specialists can be more efficient. How has taking control over your manufacturing process affected your bottom line?
By streamlining the supply chain, we have been able to capture a greater share of the profits typically taken at each step, from mine to trader, from trader to polisher, and so on. The vertical integration has been a strong profit-driver, and it's also allowed us to try to exercise some leadership on corporate social responsibility issues around the supply chain. For example, we have invested heavily in places like Botswana and Namibia to train diamond setters and polishers. By investing in those communities, we've helped create industries that deliver more income than the simple extraction of gems could alone.
We're probably rather unique, I think, for a retailer. We are without a doubt the most vertically integrated retail jeweler in the world. We make about 65 percent of all our jewelry at facilities here in the U.S., at a site in Westchester County, New York, and another in Providence, Rhode Island. This includes the jewelry we sell around the world -- in fact, we're a net exporter, even to China.
Other industries have established standards -- I'm thinking of industry-created definitions of "organic" in the food business. Tiffany has been outspoken about the need for third-party standards for responsible mining. What progress are you making?
We very much believe that if there are to be standards for human rights and environmental practices in the jewelry industry, there must be genuine third-party certification, where NGOs and other stakeholders participate in the establishment of those standards. You saw this with blood diamonds. I think the industry rallied dramatically to correct the problem by creating the Kimberley Process [to certify rough diamonds as conflict-free], which I think has largely been a success.
We have every control in place to be certain that diamonds from Tiffany only have Kimberley certificates. Can I make a 100 percent affirmative claim that nothing here has every come through? No one can. And that is, I think, where some of the biggest challenges are, in trying to assure supply chain integrity.
Does this position create tension with the mining industry?
We take great umbrage at criticisms we've faced. Some of the pro-mining folks have said of our efforts, "This is all about public relations." In response, I say, "Hold on. We've been concerned about this for almost 20 years. This is not about greenwashing. This is something we've been committed to. It's what our customers want. It's about the business imperative."
In fact, we're pro-responsible mining because we think that's what is essential for the growth and long-term economic health of the jewelry industry.