Shopping for the Guilt-Free Diamond

In an industry fraught with human-rights abuses, one retailer is targeting socially conscious consumers with its "conflict-free" stones

by Jeffrey Gangemi

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Greg Orpen, a teacher in Boston, prides himself on being aware of the world's social issues. For that reason, when Orpen, 32, was shopping for a custom diamond engagement ring for his girlfriend, he wanted to avoid buying a stone from a country in Africa notorious for violence and human-rights abuses related to diamond mining. Eventually he found the Web site of Brilliant Earth, a retailer based in San Francisco that guaranteed the diamond they would use would be "conflict-free," or mined in a socially and environmentally responsible way.

Beth Gerstein, the co-founder of Brilliant Earth, had experienced the same challenge when her fiancée proposed in 2004. "When we started to research, we became horrified with the practices in the diamond industry. We didn't want to buy a ring with a diamond that was associated with these atrocities," she says, referring to the use of child labor, unfair wages, and civil wars that have been funded with money from diamonds.

Sensing that she wasn't the only one with these concerns, Gerstein, 30, began informally discussing her dilemma with co-workers at Cisco Systems (CSCO) in San Jose, Calif. It turned out that Eric Grossberg, 29, a fellow Stanford Business School alum, had done a feasibility study in school assessing the market potential for conflict-free diamonds. "We were really impressed by consumer interest," says Grossberg, also a former McKinsey consultant and venture capitalist.

COFFEE ACHIEVEMENTS

If coffee can be certified fair trade, then why not diamonds and other precious stones, Gerstein and Grossberg reasoned. They incorporated Brilliant Earth in August, 2005, and its current Web site went live in July, bringing with it increased recognition and a boost in sales, which have doubled since it launched the new site. Along with just a handful of other retailers around the country sourcing only conflict-free diamonds, Brilliant Earth is helping to pioneer a new category in jewelry. They're playing in a big market. The diamond jewelry industry is estimated at about $80 billion worldwide, according to the Diamond Registry, a New York-based diamond wholesaler.

The "conflict-free" label for gemstones hasn't been codified yet but is similar to the widely accepted fair-trade certification for coffee, whereby growers are paid a fair price by the buyers and have access to credit upon request, workers are guaranteed fair wages and safe working conditions, and consumers can expect companies they buy from to operate with transparency, as well as be committed to environmental sustainability.

In the U.S. alone, fair trade coffee sales have grown from $50 million to $500 million between 2000 and 2005. "More and more, U.S. consumers are concerned with origin of their goods—this isn't just good for me, but this is good for others and the environment," says Nicole Chettero, spokeswoman for Transfair USA, the only U.S.-based independent third-party certifying body for fair-trade products.

HELP FROM HOLLYWOOD

But can the principles of fair trade be applied to diamonds, an industry long ruled by a monopoly? The world's largest diamond producer, De Beers, a private company based in Johannesburg, South Africa, controls an estimated 50% to 60% of the market, and had sales of more than $7 billion last year. That company has taken steps to eliminate conflict diamonds from its product line, but Brilliant Earth and others are calling for increased transparency in the industry at large.

Eventually, says Gerstein, conflict-free diamonds will have a certification like fair trade to guarantee the conditions under which they were produced. "Given the explosive growth in [fair trade] consumables, there's no reason to doubt that it will be the same for diamonds," says Chettero.