Supply Chain Management & Certifications Flashcards
Identify the goal, governance lead, and driver behind the Kimberley Process
Goal: conflict free
Governance lead: the state & industry-led
Driver: customers
Define “closed pipeline” approach
Closed pipeline: certificate of origin - “official” - licensed buyers & exporters
be clear that the diamonds are conflict free. flow of goods is tightly controlled and monitored at every stage
Describe how the Kimberley Process works, clarifying the 2-part process and what, exactly, is certified
- Certification: conflict free certificate that gets checked and signed off at every point of sale from; packaging, shipping, and selling.
- Sale and Invoice Confirmation: Sellers confirm on invoices that diamonds purchased through authorization and are not linked to conflict. Consumers should actively request certification paperwork when buying diamonds
Identify and describe at least 2 significant weaknesses in the system
- Consumer driven: many diamonds are not part of Kimberley Process- , allowing conflict diamonds to enter the market
- Each state runs its own certification scheme – self regulated- resulting in varying standards and practices. Absence of third-party verification increases risk of corruption by allow diamonds linked to violence go undetected.
- No attention to economic development (living conditions, min. prices)
Explain what the Dodd-Frank Act is
companies have to disclose their use of 3TG (new conflict minerals) minerals, and ensure that these minerals are sourced responsibly by tracking smelters of origin in their supply chain and conducting due diligence
Identify the goal, governance lead, and driver behind the current system to ensure “responsible minerals” in accordance with Dodd-Frank
Goal: conflict free minerals (+e.g. child labor)
Governance led: industry-led( corporate social responsibility) & state (intra-state OECD)
Driver: Importing States-Law
Explain the role that Industry groups like iTSCi play, identifying the services they provide. Clarify why they do not provide “certification”
Offer:
1. Clear-procedures guidelines o comply with OECD criteria for responsible sourcing.
2. An independent auditor verify compliance and ensure proper documentation is maintained.
3. Documentation Templates
Why no certification: assisting companies in establishing responsible practices facilitating access to markets like the US and EU
Describe the iTSCi approach to ensuring responsible minerals, and identify at least two points of susceptibility to corruption/cheating
Approach: They go out into the field and actually look at what is going on. bagging and tagging scheme. bag, tag, and weigh in the mines to ensure the minerals are conflict free
- Government agents can be corrupt: sold tags/bags to unlicensed, conflict, rebels mines
- Refinery/ smelter corrupt: refiner can purchase in conflict ridden mineral and blend them in with the conflict free and then masks them to be sold on the market as conflict free
Describe the impact that iTSCi has had on the industry structure, and characterize how diggers fare in the system
ITSCI exacerbates the oligopsony power structure where downward price pressure from up top comes down and affects the lower tiers, ultimately leaving the digger screwed getting the worst price
with restrictions and fees: shrink number of exporters even more
Describe the institutional structure of Fairtrade for ASMs referring to
1) key rules miners must follow
Miners must form/join co-ops (pay a fee)
Minimize use of mercury/cyanide: Responsible practices (reduce emissions)
Laborers must have
Minimum wages, no illegal/child labor, safety rules
Describe the institutional structure of Fairtrade for ASMs referring to
2) key rules that buyers must follow
Offer long-term (multi-year) contracts with the co-ops
Put contracts in writing
Offer the Fair Trade Prices (min + premium)
Describe the institutional structure of Fairtrade for ASMs referring to
3) the role of the coop (ASMO)
Represents miners in the contract with buyers
Manages the product (middle man): They aggregate gold from miners and sell to buyer
Collects the premium and manages how it is used
Pays the certification fees
Describe the institutional structure of Fairtrade for ASMs referring to
4) the role of the FairTrade Organization.
Goal: economic development
Governance lead: third party certificate
Driver: customer →
buying into the fairtrade products even if more expensive because of the label
Clarify what Fairtrade prices and premiums each mean
*Fairtrade prices: establish a minimum price for products, ensuring that miners receive fair compensation regardless of global market fluctuations.
Minimum price:
Goes to: individual miners and Used for: food, clothes, housing, taking care of family - personal needs
*Fairtrade premiums: extra bit of money compared to global price. Additional funds paid on top of the Fairtrade price, providing extra financial support.
Goes to: co-op and Used for: Community development projects,, infrastructure improvements,
Ientify the economic linkages that the Fairtrade approach attempts to develop
Final demand - trying to put more money in miners pocket to get more linkages from it
Explain why Fairtrade has limited markets, and clarify how that impacts miners
- Not enough buys of fairtrade gold. Limited Consumer Demand because of High prices and the fact that
Not enough consumer know about fair trade - Impacts miners because it isn’t sustainable for their livelihood so they sell outside the fairtrade market
Explain why Fairtrade fails to reach the most needy artisanal miners
- operate in the informal economy, lacking the necessary documentation or licenses, but Fairtrade certification requires documentation
why: high registration fees and corrupt
landowners, chiefs, makes it difficult for Fairtrade to reach the area .
Explain the term label fracturing, providing and example, and why the trend is concerning for ASMs
- Label fracturing: multiple certification schemes and labels that lead to label fatigue – several labels with different criteria and standards.
- Overwhelm consumers trying to choose responsibly sourced products and create confusion on which to choose
Fair Trade, Fairmined, ITSC certification all has different criteria and requirements.
ASMs lack the resources to navigate multiple certification systems, making it challenging for them to meet various standards
