Why is Pandora's announcement of the abandonment of natural diamonds controversial?

Source: ladymax

Just as the debate between electric vehicles and internal combustion locomotives is inseparable, in the fashion industry, the game between natural diamonds and laboratory synthetic diamonds is also rendered as an epoch-making battle between old and new.

Pandora, the world's largest jeweler from Denmark, announced on Tuesday that the company would no longer sell naturally mined diamonds and would turn entirely to lab-grown diamonds, commonly known in the market as man-made diamonds. It will launch its first collection using laboratory diamonds in the UK this year before moving to other markets in 2022. Rings, bracelets and earrings in the collection will feature 0.15 to 1 carat diamonds.

Pandora CEO Alexander Lacik explained the reasons for the move in a statement, "Diamonds should be affordable and sustainable. ”

He said the change was part of the company's overall sustainability strategy. Pandora has previously pledged to be carbon neutral by 2025, which will be achieved through a number of energy conservation measures and increased use of renewable energy, and Pandora will announce a detailed emission reduction plan in line with the Paris Agreement by the end of 2021. Starting in 2025, the company will also use only recycled gold and silver.

Some commentators have said that pandora mainly uses recycled metals and artificial gemstones to make jewelry compared to fine jewelry brands such as Cartier and Bulgari, and produces a significantly smaller carbon footprint than the use of artificially mined metals and precious stones.

In the relevant reports of major media such as the BBC, The New York Times, bloomberg and so on, Pandora's abandonment of natural diamonds has also been interpreted as the company's determination to attach importance to sustainable development.

The context of this interpretation is that in recent years, as sustainability has become a major topic in global markets, particularly in Europe and the United States, concerns about the environment and how the mining industry works have led to an increasing demand for laboratory-grown diamonds.

In 2020, global production of laboratory-grown synthetic diamonds has grown to between 6 million and 7 million carats. According to a study released last year by the International Diamond Development Association IGDA, 66 percent of millennials said they consider synthetic diamonds when buying a wedding ring.

A popular view has emerged that laboratory-grown diamonds are more sustainable than natural diamonds because they are more controllable in various technical aspects.

After announcing the decision to abandon natural diamonds, Pandora shares rose 7 percent on May 4 to a four-year high.

At the same time, however, the diamond industry has strongly condemned Pandora's approach. Five major industry groups, including the World Diamond Council (WDC), the Responsible Jewellery Council (RJC), the World Jewelry Federation (CIBJO), the Natural Diamond Commission (NDC), and the International Diamond Producers Association (IDMA), issued a joint letter accusing Pandora of "misleading" remarks.

It is worth noting that Pandora is a member of the Responsible Jewelry Council (RJC), and some commentators have said that they have never seen the RJC publicly accuse any of its members.

They argue that Pandora's misleading remarks imply a low level of ethics in the natural diamond industry, which could have an unexpectedly significant impact on the diamond industry in developing countries, and that Pandora does not use many natural diamonds.

It's clearer from the data. Only 0.04% of the gemstones Pandora used in 2018 were natural diamonds. Of the 85 million pieces of jewelry sold last year, only 55,000 were natural diamond products.

Some commentators argue that Pandora unilaterally stated that she would no longer use natural diamonds, but never mentioned that it used very little of natural diamonds. Pandora's use of the contradiction between natural and laboratory-grown diamonds to cunningly turn it into an opportunity for brand marketing is not only hypocritical, but will also lead to the emergence of more imitators, further intensifying existing contradictions and causing a wider potential impact.

Many in the industry worry that the traditional diamond industry employs tens of millions of people around the world, and their families and communities depend on the income and benefits provided by the natural diamond industry. These communities need industry support more than ever since the pandemic. Contrary to the imagination of the elite who talk about sustainable development, these vulnerable groups do not want the traditional diamond industry to collapse.

Now, natural diamonds and laboratory synthetic diamonds have been placed in the opposite position of the market under the influence of multiple public opinions, and the contradictions have become more and more prominent.

De Beers, the world's largest diamond supplier, has staunchly defended the status of natural diamonds, emphasizing that natural diamonds are the "real" diamonds. The company's top brass had insisted that they would never sell lab-grown diamonds, and even invented an instrument that could identify lab-grown diamonds.

In 2015, De Beers also joined forces with six other world-class diamond companies to form the Diamond Producers Association DPA to launch the Real is Rare (Real is Diamond) promotion project. This slogan officially replaces de Beers' famous advertising slogan that has been used since 1948, "Diamond is forever".

However, despite attempts by diamond giants such as De Beers to reaffirm the value of natural diamonds to the market, the defense of the "authenticity" of natural diamonds has had little effect in the face of public opinion and market pressure. In the end, De Beers reversed course three years ago and officially launched Lightbox, an artificial jewelry brand that uses synthetic diamonds.

At the end of last year, Lightbox began actively expanding its production capacity, and a new manufacturing plant in Gresham, Oregon, USA, has officially started production, costing $94 million to build, and once fully operational, it will produce about 200,000 carats of laboratory-grown synthetic diamonds per year, increasing its production capacity by about 10 times.

De Beers' layout continues to spark a comparison of the two diamonds, yet smart people in academia and industry have realized that hostility is meaningless and that the result will be a lose-lose situation.

Current public opinion has gone against scientific facts. Columnist Lenore Fedow, in a recent article titled "We Need to Change the Way We Talk About Cultivated Diamonds," criticizes the blind comparison of synthetic and natural diamonds in the market. "I don't want to hear anything more about lab-grown and natural diamonds."

Laboratory-grown diamonds, which are touted to be more sustainable, actually require a lot of energy to produce, are manufactured in high-pressure, high-temperature technology environments, and the use of coal power is common. 50% to 60% of the world's synthetic diamonds come from China, and Pandora's latest artificial jewelry collection will also be made in the UK, which means that the market share growth of synthetic diamonds may shift the diamond industry employment from Africa to the northern hemisphere.

A transparency report on the natural diamond industry, written by Trucost ESG Analysis, a global subsidiary of S&P, titled Socio-Economic and Environmental Impact of Large Diamond Mining Enterprises, corrects the misconception that natural diamonds have a high environmental footprint, when in fact synthetic diamonds produce three times more carbon dioxide emissions than natural diamonds.

As of 2016, the world's seven leading diamond miners generated $16 billion in net socio-economic and environmental benefits through their diamond mining operations, spent billions of dollars on community building, and mining companies vigorously hired local residents, especially local indigenous people, and paid $3.9 billion in direct and indirect economic benefits.

The change in the market share of the two diamonds essentially stems from a further segmentation of the market positioning, with sustainability not being a major factor.

Olya Linde, lead author of the Bain report, believes that natural and synthetic diamonds can coexist wonderfully and enable the entire diamond market to grow. There is a clear need for each type of product. Better design and lower prices are the number one reasons why customers choose lab-grown diamonds over natural diamonds. Concerns about the environmental, sustainability and ethical impacts of mining diamonds did not make it into the top five of the shopping factor.

Pandora's abandonment of natural diamonds was already driven by huge commercial interests. In addition to sustainability, CEO Alexander Lacik acknowledges the advantage of synthetic diamonds in that they are cheaper. The price of a product of the same grade can even be as low as one-third of that of a natural diamond. Although diamonds account for only a small share of their sales, the decline in the average price of diamonds will stimulate a surge in sales of its synthetic diamond products.

This cheap synthetic diamond is better suited as everyday jewelry than the natural diamond that is mostly used as a gift, and Pandora's brand positioning is exactly everyday jewelry.

From a purely commercial point of view, Pandora's one-sided use of the sustainability label to win word of mouth is imperative for Pandora from the Nordic region, which is more sustainable and the public expects more; on the other hand, trying to open up the market for synthetic diamonds, killing two birds with one stone, is a successful PR act.

But from the end result, Pandora's misleading remarks have not played a positive role in providing a better understanding of the two diamonds and the healthy development of the industry. Although Alexander Lacik told the BBC that "the total demand for diamonds is likely to increase, it is not a matter of 'we stole someone else's lunch'", the voice was wrapped up in a clear moral banner and was not heard by the market at all.

He also said that for millennials in particular, they are more concerned about sustainability issues, and their awareness of laboratory synthetic diamonds is significantly higher than that of older generations, so it is also an educational issue.

Some argue that Pandora is just doing business by taking advantage of young consumers' concern for sustainability, but others argue that this is understandable. After all, there's no essential difference between bundling synthetic diamonds to sustainability and the original natural diamond producers tying diamonds to emotion as successful century marketing cases.

In any case, marketing cannot be divorced from the truth, and sustainability means more public responsibility. There is currently a huge information gap between academia, business, industry bodies and the media on the issue of natural and synthetic diamonds. The same is true in many industries, people seem to be locked in the laws of understanding by the evolutionary theory of the biological world, and when they see technological development, they habitually call it innovation, thinking that the new must replace the old.

However, the real industry situation is very complex, and it is irresponsible to summarize the huge industry in general. More and more companies are selling both diamonds at the same time, more for the sake of market segmentation.

This is not a dead-and-die stock race, and natural diamonds certainly need to find new ways to maintain their value in the face of low-priced synthetic diamonds, otherwise it will not be able to blame synthetic diamonds for shrinking market share. But synthetic diamonds also don't always stand on the moral high ground, they're just an affordable option.