There is little to no way for consumers to know about the number of hands that such a diamond has passed through, the lives it may have affected...
In an industry such as the diamond trade, where a single stone can go from mine, to aggregation, to market, to lapidary, to market again, to manufacturing, to wholesale, to retail and finally to the customer, full transparency is difficult to achieve.
This multifaceted process has long endured and, like other historical luxury trades, existed as a juxtaposition of trust, tradition and legacy against a backdrop of trafficked goods, questionable ethics and backroom deals. Today, daring and sometimes unscrupulous sellers empowered by digital platforms such as WhatsApp and Facebook are trading diamonds, often using forged papers, from countries such as Cameroon and the Central African Republic.
There is little to no way for consumers to know about the number of hands that such a diamond has passed through, the lives it may have affected or whether it has links to armed groups or human right abuses. The reality of companies trafficking in conflict diamonds is tarnishing the polished image of brands in the industry, perhaps more than they would like to admit.
Certification schemes such as the Kimberley Process have made significant progress in counteracting the sale of conflict diamonds, yet its objectives and documentation processes, which often comprise filing paper certificates in cabinets, are outdated. With the rapid rise of technology, the luxury goods industry’s provenance and sourcing practices are being brought into question, and as identified in The Future Laboratory’s Whole-system Thinking macrotrend, consumers are increasingly aware of the environmental and humanitarian issues associated with certain products and materials, and expect greater clarity and ethical assurances from the brands they favour.
So how will blockchain technology help brands to meet consumers’ expectations? By providing a clear, secure chain of custody and detailed supply chain information. With diamonds, it will disrupt traditional trading models, complementing traditional handshake deals with technology-enhanced traceability. London-based company Everledger is already putting this into practice, using IBM blockchain technology to track a diamond at each stage of the supply chain.
Beyond diamonds, blockchain technology has the potential to transform traceability in the wider luxury industry.
Logging a diamond’s details at source, Everledger creates a secure public and private digital record of its history and ownership as it changes hands. This enables stakeholders to trace a diamond’s provenance and verify its authenticity.
Using blockchain technology throughout the supply chain would not only offer consumers and stakeholders more transparency, but encourage mine operators, traders and brands to ensure their business practices are ethical and environmentally friendly. According to Kimberley Process’s 2016 Mid-term Report, the certification body is exploring the possibility of using blockchain technology to eradicate false certificates and reduce the impact of human error when uploading data.
Beyond diamonds, blockchain technology has the potential to transform traceability in the wider luxury industry. Consider the positive consumer sentiment that luxury brands could build by providing a clear chain of custody for animal hides, exotic skins, artworks, wine, watches, rare raw materials or specialist ingredients.
Yes, the integration of blockchain technology will challenge and in some cases expose established practices in the luxury industry, but in doing so it will drive the industry towards a future in which attributes such as traceability and truth are proudly promoted and valued.
For more on how technologies like blockchain are transforming the luxury market, read our 2017 Luxury Futures report.