Signet Responsible Sourcing Protocol For Diamonds Ensuring The Integrity Of The Natural Diamond Supply Chain April 18, 2017
Agenda Introduction: Signet Responsible Sourcing Signet Responsible Sourcing Protocol for Diamonds (D-SRSP) Key Points Compliance with the D-SRSP Lab-Grown Diamond Risk Mitigation Requirements Signet Quality Assurance / Assay Protocols Signet Supplier Testing Best Available Technology Signet Supplier Requirements Warranty Statement Next Steps 2
Introduction: Signet Responsible Sourcing Signet believes that a responsible, conflict-free supply chain is fundamental to the reputation of the jewelry industry and its future. Signet worked closely with a range of jewelry industry organizations to ensure that Signet s Responsible Sourcing Protocol for Diamonds (D-SRSP) requirements align with related industry standards and guidelines. Consultation included the Organisation for Economic Co-operation and Development (OECD), Responsible Jewellery Council (RJC), World Federation of Diamond Bourses (WFDB), the United States Jewelry Council (USJC) and the Jewelers Vigilance Committee (JVC). Conflict-free sourcing has been a part of a broader initiative around responsible sourcing. 3
Signet Responsible Sourcing Protocol for Diamonds (D-SRSP) 1. Overview Key Points 2. Compliance Requirements 3. Signet Diamond Categories 4. Lab-Grown Diamonds 4
Signet Responsible Sourcing Protocol for Diamonds (D-SRSP) Key Points Developed in a process of collaborative research with 40 diamond suppliers, as well as industry associations, NGOs and governments. To provide transparency and to assure all Signet diamonds are sourced through identified and verified sources, over time. Signet acknowledges the adoption of standards and certification is a long-term process for the jewelry industry and encourages a continuous improvement approach. Supplier compliance required in 2017 and applies to all diamonds supplied to Signet including loose, rough and polished diamonds, and diamonds set into finished jewelry. 5
Compliance with Signet s Responsible Sourcing Protocol for Diamonds (D-SRSP) SRSP compliance criteria and requirements include but are not limited to: Conduct Due Diligence Company Policies & Procedures Documents and Evidence Map your supply chain. For diamonds, list your suppliers and categorize the sources of your suppliers. Include all entities in the chain from rough to finished jewelry. See D-SRSP Appendix B for an example supply chain map. Create appropriate company policies (i.e., compliance with the KP, Conflict Minerals policy). Establish and implement a Know Your Counterparty ( KYC ) policy and Terms of Business with your suppliers. Maintain information and documentation of your due diligence, invoices, delivery notes, and certifications, which will be required should you be asked to undergo an independent third party audit. Once the requirements for compliance to the SRSP are achieved, the Signet warranty statements should be included on all invoices and delivery notes. 6
Compliance with Signet s Responsible Sourcing Protocol for Diamonds (D-SRSP) Suppliers Category 1 Single Stone Tracking must identify all diamonds supplied to Signet within each or any of these 4 categories: Category 1 Single Stone Tracking Category 2 Parcel Tracking Category 3 Mixed Sources Category 4 Other Identified & Verified Sources Confidential & Proprietary Information of Signet Jewelers Individual diamonds supplied by or sourced from identified and verified diamond producers such as DeBeers, ALROSA, Rio Tinto or Dominion. Parcels of diamonds supplied by or sourced from identified and verified diamond producers such as DeBeers, ALROSA, Rio Tinto or Dominion, not individually tracked but verified to have derived from all or any of these producers. This category allows for the mixing of diamonds deriving from a number of different sources, with some percentage of the diamonds deriving from identified and verified sources. This category applies to diamonds which derive from a producer country or particular mine, originally sourced from other than DeBeers, ALROSA, Rio Tinto or Dominion. Documentation of your due diligence: invoices, delivery notes, and certifications, will be required should you be asked to undergo an independent third party audit. 7
Laboratory-Grown Diamonds (LGDs) Laboratory-Grown Diamonds (LGDs) are increasingly available in the jewelry market. While most LGDs are appropriately disclosed, there is a risk that undisclosed LGDs could enter the natural diamond supply chain. This potential constitutes a serious threat to the reputation of the jewelry industry. Signet believes all possible measures must be taken to mitigate this risk. 8
Lab-Grown Diamond Risk Mitigation Requirements 1. Signet Quality Assurance / Assay Protocols 2. Testing and Best Available Technologies 3. Diamond SRSP ULGD Requirements 4. Signet Supplier Requirements 5. Diamond Warranty Statements 6. Summary of Activities and Events 9
Signet Lab-Grown Diamond Risk Mitigation Requirements Signet Quality Assurance / Assay Protocols Signet Assay protocols include testing of all diamond SKUs to verify the diamonds are natural. Testing capability has been enhanced to ensure all Signet diamonds of 0.18 carats or larger are individually tested using the IIDGR Diamond Sure. Frequency of assay for diamonds smaller than 0.18 carats is also being increased. 10
Signet Lab-Grown Diamond Risk Mitigation Requirements Testing - Best Available Detection Technology Preferences Signet is conducting on-going research into the available diamond detection technology and supports the development of an independent standard against which technologies can be assessed.* We have determined the current detection technology leaders are technologies or services supplied by De Beers (IIDGR), the GIA and HRD (Antwerp). Until an independent third party validation of other technologies is available, we strongly prefer suppliers use these technologies and services. * Signet is working with the Diamond Producers Association (DPA) on a research project to develop independent standards for diamond detection technology. 11
Signet Lab-Grown Diamond Risk Mitigation Requirements Diamond SRSP (D-SRSP) ULGD Requirements All Signet suppliers who supply diamonds (rough, polished, or set in jewelry) are already required to supply Signet only with natural diamonds. It is Signet policy to sell only natural diamonds and not to deal in or sell lab-grown diamonds. With this in mind, Signet has added requirements relating to ULGDs to the D-SRSP. 12
Signet Lab-Grown Diamond Risk Mitigation Requirements Risk Mitigation Requirements The new requirements are designed to mitigate the risk of undisclosed lab-grown diamonds, treated diamonds, or diamond stimulants entering the supplier s natural diamond supply chain. The key elements that constitute diamond pipeline risk assessment include: Identifying Potential Risk Points Policies, Procedures and Training Testing of Diamond Parcels According to Risk Level 13
Diamond SRSP New Risk Mitigation Requirements Supplier Requirements From your suppliers: Obtain a written warranty that no ULGDs are included in parcels supplied to them Follow the recommended warranty statements in the WFDB Charter on Disclosure of Synthetic, Treated Natural and Natural Diamonds Document your suppliers due diligence processes to ensure compliance with this requirement Comply with De Beers Best Practice Principles Standard Guidance Undisclosed Synthetic Diamonds and the related Disclosure Practice Note. Conduct an internal pipeline risk assessment covering all movement of product, identifying all possible points ULGDs could enter natural diamond supply chain. Policies, procedures and training must pay special attention to these risk points. Reference: D-SRSP (dated February 2017), Requirements section, beginning on page 3 of the D-SRSP 14
Diamond SRSP New Risk Mitigation Requirements Suppliers Who Deal in Lab-Grown Diamonds: Suppliers must have clear policies and procedures and take all precautions to ensure LGDs are segregated from natural diamond production at all times Policies, procedures and training must make specific provision for this risk where appropriate Implement adequate procedures and maintain clear records with respect to product handling, storage and transportation, which will assist in identifying any irregularities Implement appropriate training for staff involved in handling, movement or security of product These requirements should also be implemented in accordance with the Clause 3.5.8 - Disclosure Reference: D-SRSP (dated February 2017), Requirements section, beginning on page 3 of the D-SRSP 15
Diamond SRSP New Risk Mitigation Requirements Supplier Diamond Testing Signet strongly prefers suppliers use technologies supplied by De Beers (IIDGR), the GIA and HRD (Antwerp). Diamond testing (single stone or batch) should be conducted, depending on the attributed risk. Testing may be conducted by the supplier using relevant detection technology, or may be outsourced to a qualified gemological laboratory. Detailed policies, procedures, security, monitoring and training to avoid the possibility of ULGDs to be switched for natural diamonds during the production process. Reference: D-SRSP (dated February 2017), Requirements section, beginning on page 3 of the D-SRSP 16
Diamond SRSP New Risk Mitigation Requirements Supplier Requirements Inventory Management Employ a inventory management system which documents your chain of diamond ownership and can be verified by audit, for all rough and all polished goods 30 points or larger. As required in Signet s Supplier Code of Conduct, suppliers will need to pass on the requirements of the D-SRSP to all subcontractors. Reference: D-SRSP (dated February 2017), Requirements section, beginning on page 3 of the D-SRSP 17
Diamond SRSP New Risk Mitigation Requirements Diamond Suppliers Warranty Statement Diamond suppliers will be required to add the WDC and updated Signet warranty statements to all invoices and delivery notes: Signet Warranty Statement (from September 2017): The seller warrants that any products containing gold, tin, tungsten, tantalum or diamonds have been supplied in compliance with the Signet Responsible Sourcing Protocol ( SRSP ). The seller hereby guarantees that the diamonds herein invoiced are exclusively of natural origin, formed and grown under natural and geological processes, based on personal knowledge and/or written guarantees provided by the supplier of these diamonds. WDC SOW: The diamonds herein invoiced have been purchased from legitimate sources not involved in funding conflict and in compliance with United Nations Resolutions. The seller hereby guarantees that these diamonds are conflict-free, based on personal knowledge and/or written guarantees provided by the supplier of these diamonds. Reference: D-SRSP (dated February 2017), Requirements section, beginning on page 3 of the D-SRSP 18
Summary of Activities and Industry Events Date/Time Activity / Event Details Sunday, June 4 th* Tuesday, June 6 th* April September September U.S. Jewelry Council Responsible Sourcing Event Signet Supplier Workshop Conduct Due Diligence on Entire Supply Chain Including Pipeline Risk Assessment; Policies & Procedures, etc. Annual Signet SRSP Compliance Reporting JCK Las Vegas, Banyan Room JCK Las Vegas, Palm C, (Focus will be all SRSP Requirements) Requirement for all Signet Suppliers Reference LGD Requirements in D-SRSP (Pages 3 4) Requirement for all Signet Suppliers Formal invitations and details coming soon. 19
Next Steps Communicate D-SRSP to your suppliers and contractors. Develop a continuous improvement policy seek original source information from your diamond suppliers wherever available. Map your diamond pipeline* (using your supply chain map as the basis) including all suppliers/contractors and identify any risks, especially for potential entry of ULGDs. Review your diamond testing protocols apply the De Beers Melee Guidance and test accordingly. (See D-SRSP Appendix D) Review your diamond testing technology and/or use external lab (IIDGR, HRD, GIA). Review your factory policies and the policies of your suppliers ensure policies, procedures, training are relevant to the risks. Maintain copies of all records including supply chain map, risk analysis, invoices, delivery notes, KP Certificates, terms of business with suppliers, diamond test results. Prepare for SRSP annual reporting in September. * See D-SRSP Appendix B for example supply chain map. 20
Summary and Q&A 21
Thank You! For additional questions or information, please contact: info@signetsrsp.com Website: www.signetresponsiblesourcing.com 22