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Due diligence

Position paper on mandatory due diligence

The European Federation of Jewellery supports the idea of an EU- wide cross-sectorial legislative framework on due diligence provided that the future requirements are coherent with the ones already in place and that a level playing field is ensured for EU companies at the international level.

On the 29th of April, Didier Reynders, European Commissioner for Justice, announced to the European Parliament Responsible Business Conduct Working Group that the European Commission plans to propose a legislative initiative on mandatory due diligence in 2021. Commissioner Reynders further specified that the legislation will be cross-sectorial and will include enforcement mechanisms to ensure compliance and access to justice for the victims.

The European Federation of Jewellery (EFJ) supports the idea of an EU-wide cross-sectorial legislative framework on due diligence and is ready to take a proactive role in the decision-making process.

In this respect, the EFJ would like to point out that the European jewellery sector is preparing to comply with EU Regulation 2017/821 laying down supply chain due diligence obligations for Union importers of minerals originating from conflict-affected and high-risk areas, that will become applicable from the 1st of January 2021. The EFJ has been cooperating with the EU decision-makers all along the legislative process to make sure that the Regulation took into consideration the specificities of the European jewellery sector, a sector mainly composed of Small and Medium-Sized Enterprises (SMEs), with limited human and financial resources.

The EFJ welcomed the adoption of the Regulation and noted with satisfaction its alignment with the Organisation for Economic Co-operation and Development (OECD) framework as well as the provisions making it possible for industry / private sector schemes to be recognised as compliant with the European rules. The Federation was also an active contributor in the process that led to the creation of a set of tools aimed at supporting SMEs to comply with the regulation. The EFJ indeed thinks that all the actors in the jewellery sector should comply with the EU Regulation 2017/821 as a medium-term objective.

Furthermore, the EFJ would like to recall that the European diamond sector, which is an essential component of the jewellery sector, is committed to improving transparency and accountability in the global diamond value chain through the Kimberley Process (KP), an international certification scheme established in 2003 to prevent conflict diamonds from entering the mainstream rough diamond trade.

In light of the considerations above, the EFJ would like to invite the European Commission to build the new framework on the basis of existing schemes such as the so-called Conflict Minerals Regulation and the Kimberley Process Certification Scheme in order to avoid any duplication of legal requirements which would lead to an increased administrative and financial burden on EU companies or even create incentives to companies to relocate their activities outside of the EU. The EFJ notes that it will be more difficult, or even virtually impossible, for EU companies to comply with the new legislative framework if coherence is not ensured between the new requirements and the ones already in place.

To this aim, the EFJ invites the European Commission to perform a thorough impact assessment as well as an analysis of the existing schemes to clearly identify potential compliance issues.

The EFJ would like to invite the Commission to also take into consideration existing third-party’s schemes such as the Responsible Jewellery Council’s (RJC) Code of Practices (CoP). The RJC is an industry-driven body and its CoP integrates the OECD guidelines into a special framework for jewellery companies to handle and trade gold, silver, platinum-group metals as well as diamonds in a way that is fully traceable and responsibly sourced. The RJC has already applied to have its certification schemes recognised as compliant with EU Regulation 2017/821 and thus represents a valuable example of due diligence for the jewellery sector.

Furthermore, the EFJ urges the Commission to ensure a level playing field for EU companies at international level in order to support European competitiveness. The EU trade policy could play a crucial role in this area and the Commission should promote the future EU legal framework in international fora, through bilateral and multilateral trade agreements and political high-level contacts.

Commissioner Reynders stressed that the new EU rules would be mandatory and that enforcement mechanisms will also be put in place. In this respect, the EFJ would like to underline that the Regulation should also incorporate a supporting mechanism to promote compliance and tools to support EU companies during the implementation phase. A specific and agile framework should be envisaged for SMEs to encourage them to incorporate due diligence into their business model without increasing the administrative and financial burden. The cross-sectorial EU legal framework on mandatory due diligence should include a transition period of at least 3 years before entering into full force to allow national governments and companies to adapt to the new regulation.

The EFJ believes that an EU-wide cross-sectorial legal framework on due diligence has the potential to significantly influence the way EU business will conduct their operations in the future and will define an ambitious threshold for countries and companies globally. However, it is essential that the new rules are pragmatic and implementable, and this can be achieved only by fully involving all stakeholders in the discussion and by taking into consideration the challenges and needs of the different sectors as well as their specificities.

Download: EFJ position paper – Mandatory due diligence – September 2020

Due diligence

Position paper on conflict minerals

The EFJ demands a concerted implementation of the European regulation establishing a due diligence system to fight against conflict minerals. The implementing act should be inspired to existing tools and include simple, understandable and practicable measures. A support system for SMEs is also needed to help them adapt to the new rules.     

Key points:

  • The European Federation of Jewellery welcomes the adoption of the European regulation on due diligence system for a responsible sourcing of minerals as well as the Delegated act setting the methodology and criteria for the assessment and recognition of voluntary due diligence schemes.
  • The alignment of the European legislation to the OECD system is of paramount importance for a simple and workable implementation as of the 1st of January 2021.
  • SMEs, which are the backbone of the jewellery sector, should be proactive and show their willingness to adapt to the new framework. However, an appropriate support scheme needs to be put in place to help them comply with the rules.
  • The Federation is committed to remain fully involved in the ongoing process designed to create the tools to support SMEs in the implementation.
  • Diamonds should remain outside of the scope of the regulation as the diamond trade is highly competitive and internationally regulated via the Kimberley Process.

The European Federation of Jewellery (EFJ) has always worked towards ethical and responsible behaviour in the supply chain of the jewellery sector. The EFJ therefore considers the adoption of the European regulation on due diligence system for a responsible sourcing of minerals as a step forward and advocates a wide implementation by all actors provided that they are duly supported.

The jewellery sector being fragmented with a multitude of players, mainly Small and Medium Sized Enterprises (SMEs), it is important to take inspiration of existing private and public certification schemes and to adopt a streamlined approach for an appropriate enforcement of the regulation on all levels and branches. In this regard, the fact that the European Union (EU) opens up the possibility for private systems to be recognised as compliant to the European regulation is key. Although these systems are voluntary, they represent robust tools to monitor due diligence in the jewellery sector. This is notably the case of the Responsible Jewellery Council’s (RJC) Code of Practices and Chain of Custody Standard, which apply the OECD guidelines into a special framework for companies to handle and trade gold and platinum group metals, in a way that is fully traceable and responsibly sourced. It should be stressed that the RJC has recently reinforced its action by launching its new Code of Practices[2]. The scope of the Code has been extended by including the OECD requirements on due diligence for the diamonds supply chain. Other systems exist such as the London Bullion Market (LBMA) responsible Gold Guidance which implements the OECD gold delivery due diligence guidance to the “Good delivery refiners.”

The existing voluntary due diligence schemes being largely inspired by the OECD framework, the EFJ sees positively the fact that the European regulation and the Delegated Act 2019/429 align to the OECD system. The Federation is notably satisfied with the uniform approach adopted regarding the criteria and methodology to assess voluntary supply chain due diligence schemes which pursue the same objectives as the European regulation. The equivalence criteria put in place by the EU will allow companies which comply with another due diligence model to get a certificate of equivalence. The EFJ also welcomes the future collaboration between the European Commission and the OECD services regarding reports which will seek to assess whether the private scheme fulfils the conditions for public recognition. The alignment between the EU and the OECD system will strengthen the coherence and will ease the steps of the private operators. However, the EFJ will remain vigilant that the implementation of the EU regulation is smooth, understandable, practicable and will not lead to administrative burden for companies.

Moreover, the EFJ hereby reaffirms its commitment to continue to be fully involved in the on-going process regarding the setting up of tools to help SMEs reach the objectives set in the regulation. As the jewellery sector is mainly comprised of SMEs, the current 100kg threshold set by the EU legislation on gold import above which the mineral must be traced means that most companies fall outside of the scope of the current regulation. However, the EFJ thinks that all the actors of the jewellery sector should be proactive and should have as a medium-term objective to comply with the rules. To accompany the sector in this work, it is essential to put in place solid support measures. The EFJ is therefore happy to be a member of the Advisory Board set up by the European Commission to provide inputs to the project aiming at creating an online tool to help SMEs implement the due diligence system. This tool will be launched in November 2019.

The EFJ is also convinced that the EU should rely on the numerous actors of the sector and especially the professional associations in each country. They can play a key role in disseminating the information and answering questions. In turn, it would also allow the European Commission to have an active and productive feedback from the jewellery sector which will eventually lead to adequate and carefully studied measures being taken.

Finally, the EFJ would like to ask to the European Commission to refrain from extending the scope of the European regulation on due diligence systems for minerals supply to diamonds as the international trade in rough diamonds is already certified by the Kimberley Process Certification Scheme (KPCS). Although the EFJ recognises that more can be done to make the Kimberley Process stronger and more efficient, we believe that the system has also many strengths that cannot be underestimated. Moreover, the EFJ would like to underline that the diamond trade is highly competitive and internationally organised. Hence, a unilateral application of such a regulation will put the EU diamond industry in a competitive disadvantage vis-à-vis its competitors, which are all located in third countries outside the EU.

Download: EFJ position paper – Conflict minerals – June 2019