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Now’s the time for watch industry due diligence
Economy

Now’s the time for watch industry due diligence

Monday, 16 November 2020
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Christophe Roulet
Editor-in-chief, HH Journal

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5 min read

Precious metal and precious stone supply chain due diligence is becoming a matter of urgency for watch brands, whose reputations could be put on the line by mining in high-risk areas. The Fondation de la Haute Horlogerie is there to assist them in this crucial social and environmental transition.

The answer is in the question: can watchmakers and jewellers turn a blind eye to the origin of the precious metals and stones they use? In other words, can they ignore the need for due diligence which, to quote the Responsible Jewellery Council, “provides companies with the information they need to identify risks in order to prevent or mitigate adverse impacts associated with their sourcing practices.”? It’s common knowledge that resources mined in high-risk areas continue to finance local armed conflict as well as terrorism, and that small-scale mining is far from innocent of the worst forms of abuse including prostitution, child labour and forced labour, not to mention environmental degradation through deforestation and mercury pollution.

© Eric Sauvage – Piaget
© Eric Sauvage – Piaget

Movies such as Blood Diamond and Dirty Gold War, alongside in-the-field investigations by nongovernmental organisations, have alerted the international community to a situation that lingers in the mind of every luxury consumer. For an industry selling desirability and romance, even the slightest suspicion can do untold reputational damage, leaving businesses with little choice: either commit to sustainable, socially responsible practices or risk a potentially devastating backlash. This means implementing due diligence to control the origin and traceability of raw materials.

Due diligence in the watch industry

The Fondation de la Haute Horlogerie (FHH) – which works to promote excellence and sustainability in watchmaking – addressed the subject at an online seminar, The Watch Industry and Due Diligence in 2021, held early November in collaboration with the Responsible Jewellery Council (RJC) and the Organisation for Economic Co-operation and Development (OECD). In her introductory address, Isabelle Hildebrand, sustainability manager at the FHH, explained how since 2018 the foundation has proposed its services to “inform, train and accompany the watch and jewellery industry in its social and environmental transition.” This is no small task, as confirmed by the Deloitte Swiss Watch Industry Study 2020. Almost 90% of the executives taking part in the study said they believed sustainability to be an important issue for the Swiss watch industry, yet “only half actively communicate their initiatives and less than one-third publish a sustainability report.” Meanwhile, 50% of consumers surveyed by Deloitte said sustainability was one of the factors they took into consideration when buying a watch.

A supply chain due diligence strategy must be independently audited.

Louis Maréchal, policy advisor on extractives at the OECD, spoke of the support given by international organisations, in particular a tougher legislative and regulatory framework. He cited the example of the Conflict Minerals Regulation that will come into force across the European Union on January 1, 2021, and which is based on OECD Due Diligence Guidance for Responsible Supply Chains of Minerals, which he presented to the audience. It objectives are to show how companies can identify and better manage risks throughout the entire mineral supply chain and to promote responsible investment as a means of fostering sustainable development in producer countries. Put simply, the purpose of what is a complex and evolutive system is for industry to design and implement a strategy first to identify and assess then respond to risk in the supply chain. A company must carry out an independent audit of its supply chain due diligence and report annually on it.

The work of the FHH

The RJC, whose 1,300 members include 152 in Switzerland, focuses on self-regulation as opposed to a binding legal framework (such as the one targeting multinationals that the Swiss will vote on in a referendum on November 29). Nawal Aït-Hocine is a strategic advisor at the RJC. She explained how the organisation strives to become the reference in recognised standards and certification from mine to retail for the watch and jewellery industry. As part of this, the RJC has developed two standards: the RJC Code of Practices (CoP) which promotes transparency and ethical business practices, and the RJC Chain of Custody (CoC) which certifies the traceability of precious metal and precious stone supplies. Transparency across the supply chain is at the core of due diligence and the process which the RJC has put in place for stakeholders follows a similar step-by-step model as OECD guidance.

The FHH is introducing three new training programmes to accompany businesses on the path to sustainable watchmaking.

To help its members on their due diligence journey, the RJC recently rolled out a “toolbox” specifically for the diamond and coloured gemstones supply chain. In a similar vein, the FHH has put together three new training programmes to accompany businesses along the path to sustainable watchmaking. Alongside its Gold Essentials course, the foundation is proposing a series of online seminars to make participants self-sufficient in achieving RJC Chain of Custody certification. Then, from January next year, CSR Essentials will focus on corporate social responsibility. The last word goes to Deloitte: “Driving the focus for greater transparency are changing consumer demands, a desire by the company itself to be more sustainable and the media.” None of which can happen without due diligence.

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