W20625

FAIR TRADE JEWELLERY CO.: ESTABLISHING AN ETHICAL GLOBAL

VALUE CHAIN

Anthony Goerzen and Luke Fiske wrote this case solely to provide material for class discussion. The authors do not intend to illustrate
either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying
information to protect confidentiality.

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Copyright © 2020, Ivey Business School Foundation Version: 2020-08-05

In August 2019, Ryan Taylor and Robin Gambhir, co-founders of Fair Trade Jewellery Co. (FTJCo), were
wondering how to assure their customers that FTJCo jewellery was responsibly sourced. FTJCo was
founded in the trendy Cabbagetown district of Toronto in 2006. At that time, it was impossible to reliably
obtain responsibly sourced gold, despite local and international community mining initiatives. Taylor and
Gambhir were determined to make it possible and invested a great deal of time, energy, and money over
the next 13 years toward their goal. Among their many efforts, Taylor and Gambhir invested hundreds of
thousands of dollars to collaborate with a non-governmental organization (NGO) in developing an ethical
gold supply chain originating in the Democratic Republic of Congo (DRC).

In 2019, FTJCo realized that responsibly sourced gold was potentially being contaminated by other gold in the
refinery that supplied its materials. Therefore, FTJCo was considering developing its own gold-refining
capabilities in Toronto, using well-established micro-production practices. However, the two founders wondered
if they should take such a drastic step in their continuing efforts to provide responsibly sourced gold to their
customers. Would the initiative harm their core business? How much of the risk and financial burden should
they personally endure? “We are already doing more than most in our industry in order to solve these problems,”
Gambhir reflected, “but we don’t want to put the company at risk. It’s not just Ryan and I anymore—we have
employees who make their living and careers at FTJCo. The risk is no longer just ours to bear.”

WHERE DOES GOLD COME FROM?

In 2006, Taylor was asked a seemingly innocuous question by a couple who wanted him to design and
make their engagement rings: “Where does the gold come from?” Taylor, who grew up in a mining family
in Sudbury, Ontario,1 thought he could just pick up the phone to find out, but it was more difficult than he
expected. Most gold for jewellery was sourced from refiners that obtained gold from both large-scale mines
(LSMs) and artisanal small-scale mines (ASMs). Usually, however, the specific origin of the gold was
unknown (see Exhibit 1).2 In some countries, gold was used for money laundering and by non-state armed
gangs exploiting ASM miners, who accounted for approximately 20 per cent of the global gold supply,3
despite only being 5 per cent formalized (or licensed) in many countries.4 In the DRC, for example, a vast
amount of gold mined was smuggled out of the country, much of it funding the ongoing civil war.5

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Gambhir, who had worked as a journalist for many years covering the jewellery industry, explained the
process that gold followed to reach consumers:

All over the world, gold is aggregated from different mines and smelted together. When we started,
there was no gold in the world available to jewellers with lot-level traceability—meaning that a
consumer could know precisely what mine the gold came from. Gold basically loses traceability at
the refiner level, where impurities get removed and gold from different sources gets melted
together.

Taylor was concerned about the state of the gold trade and decided to examine the situation himself. In
2008, he travelled to the Chocó region of Colombia, South America, to visit the Oro Verde mining
community. Taylor documented the miners’ activities and the work of an auditor from Fairtrade Labelling
Organization International e.V. (FLO), the regulatory body that managed standards and the certification of
Fairtrade products. The result was a documentary called The Last Gold Rush.6

The Chocó region was an isolated western part of the country, bordering both the Pacific and Caribbean
seas. Known for tropical jungles, beaches, whales, and wildlife, Chocó was inhabited primarily by Afro-
Cuban Colombians granted land rights by the Colombian authorities in 1993.7 The jeweller Greg Valerio
visited the site and made some observations:

When I visited Oro Verde in 2004, I found myself surrendered . . . by beauty and wonder, toughened
bodies, gentle smiles, playful souls, and a golden product. This community and landscape revealed
to me the true essence; the spirit of what golden jewellery is truly about.8

Taylor discovered that approximately 90 families were primarily mining shallow deposits of gold and
alluvial gold, which was essentially tiny grains of gold mixed in with silt and mud. 9 The miners (both men
and women) removed large rocks and then ran the muddy mixture of soil and rock through an aqueduct and
over a “trap,” which consisted of a pan fitted with an aluminum grill and sack cloth to trap the gold grains.
No chemicals were used in the process. Mined areas were also backfilled with planted trees. Each
community would spend a considerable amount of time on a site. By the time they left, an undergrowth of
brush had formed that limited soil erosion and excessive exposure to the hot sun.

Taylor found the process a sustainable form of mining. It was also entirely collective—any profits made by
the community were distributed equally by the community. This equitable distribution of resources attracted
both him and Gambhir, who felt assured that the profits from selling the gold would go directly to the
miners, rather than to the operations of a major corporate mine. In 2018, a typical large mining company
such as AngloGold Ashanti Limited was earning 4 per cent profit margins on the average annual London
Bullion Market Association (LBMA) price of US$1,268 10 per ounce (28.35 grams).11 However, ASM
miners in many parts of Africa were forced to charge only up to 55 per cent (rather than the full rate) of the
LBMA gold price, partly due to the impurities left in the artisanal ore.

In 2018, in Uganda, an average miner earned $770 per year.12 Gambhir explained the earning process:

Everyone who touches the material along the supply chain takes some value, and the people who
get cheated the most are the people at the beginning of the supply chain—the people who break
their backs to dig this stuff out of the ground. Profits on gold increase dramatically as you move
from mine to retailer. So too does the cost of living, but what we are working toward is a fairer
distribution of value along the supply chain.

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The mining process Taylor saw in Oro Verde was in stark contrast to the process of traditional large mines,
which typically began with up to 10 years of prospecting. Geologists would determine whether a potential
deposit was feasible for gold mining. If scientific modelling showed a promising deposit, construction
would begin on the mine and associated infrastructure. The mine would then be in operation for 10 to 30
years. Globally, gold mines produced approximately 3,400 tonnes per year in total (see Exhibit 2), with the
price per ounce of gold (28.35 grams) at $1,268 in 2018 (see Exhibit 3). In Oro Verde, no chemicals or
heavy machinery, which often led to soil erosion and landscape degradation, were used by the miners. 13
Tayler and Gambhir were able to see that the work at Oro Verde was sustainable and the product was
responsibly sourced, so they immediately began purchasing Oro Verde gold. Couriers were used to ship
gold to Toronto from Colombia. The gold was refined at FTJCo using an inefficient and rudimentary
refining system, but it ensured that the responsibly sourced gold from Oro Verde was single origin and
would not be blended with other gold. Collaborating with Oro Verde was the beginning of a journey that
would grow to include other sources of gold, sapphires, and diamonds, and a sister software company called
Consensas, which provided supply chain tracking and due diligence for commodities.
From its inception, FTJCo distinguished itself from other jewellery companies by helping consumers
understand the narrative of the product—where it came from, and why that mattered. FTJCo’s staff
members included goldsmiths, designers, and salespeople. A total of 10 people worked out of a renovated
Victorian brick building that functioned as the company’s retail store, on Parliament Street in Toronto.
Using three-dimensional (3D) printers to print prototypes of the customer’s design, jewellers at FTJCo
would cast a piece (often a ring) in gold based on the approved prototype. Polishing and setting completed
the process, if a stone was part of the design. In 2019, a fully custom engagement ring without a gem was
priced at approximately CA$2,500.14 The price for plain 18-karat bands started at CA$380. An 18-karat
ring consisted of 75 per cent gold.
FTJCo was an early provider of responsibly sourced gold and direct-to-consumer luxury brands. The results to
date had been impressive. Since its start, FTJCo had been increasing revenue at a rate of 50 per cent per year,
dropping to 20 per cent in 2019. Despite its status as a small regional operation, FTJCo’s profit margins were
considered by its founders to be comparable to those of global luxury retailers such as Tiffany & Co. (see Exhibit
4). However, Tiffany & Co.’s wedding and engagement business results were enhanced by its silver sales and
lower employee costs. In 2019, FTJCo boasted gross margins of approximately 40–45 per cent.

FAIRTRADE GOLD

FLO was founded in 2004 by an “international group of community-based mining organizations,

environmentalists, business representatives, and certification specialists” to become the global organization
that certified products as being fairly purchased.15 In 2008, FLO partnered with the Alliance for Responsible
Mining (ARM) to launch trademarked Fairtrade and Fairmined gold. For the first time, FLO certified and
trademarked a non-agricultural product. A key aspect of the certification was that ASM workers received a
minimum price, as was the case with other Fairtrade trademarked products. The minimum price was usually
95 per cent of the LBMA rate. As well, ASM workers often received a premium of up to 15 per cent in addition
to the minimum, which was intended to help ASM workers improve their social and economic conditions.16
Among the first mines to become Fairtrade certified were the communities at Oro Verde. On February 14,
2011 (Valentine’s Day), the first Fairtrade- and Fairmined-certified gold, originating from South American
mines, was sold by retailers in the United Kingdom and Canada. In Canada, the first retailer to sell Fairtrade
and Fairmined gold was FTJCo. Each jewellery item was fully traceable and came with its own certification.
This initiative was recognized and made public by media outlets, including The Guardian: “Everyone
involved in the new standard hopes that it will be a success with consumers, and put pressure on other
jewellers to reform their own practices and press for greater knowledge of their materials.”17

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Although Oro Verde communities were early participants in the Fairtrade-certified system, they failed to thrive
under it. A premium of $6,000 per kilogram was paid for the gold’s certification as “ecological gold,” but this
was negligible in comparison to the financial benefits of using chemicals such as cyanide to process the ore.
Gambhir felt that this was a key factor in the certification program’s failure. He also noted that the program
was donor funded; ultimately, it was designed to support the community’s other source of revenue—
agriculture. Therefore, there was no incentive to scale up the gold program and increase its efficiency.
When FTJCo first began selling jewellery made from Fairtrade and Fairmined gold, the company assumed
the gold would be as traceable as the Oro Verde gold that the company had previously been purchasing
directly from the community. The supply chain from mine site to refinery to store should have been intact.
However, FTJCo eventually discovered that this was not the case. Like most other gold, Fairtrade and
Fairmined gold lost traceability at the refinery level. There was no chain-of-custody system in place to
protect responsibly sourced gold from contamination from other gold within the “black box” of the refinery.
Taylor and Gambhir were no longer confident that the product in their jewellery was, in fact, responsibly
sourced gold, as they had been with the Oro Verde gold.
Gambhir saw a parallel with Canada’s diamond industry, which was considered among the world’s most
traceable and responsible diamond industries. However, many claims of origin for diamonds were simply based
on written assurances, much like with gold. Suppliers simply signed a document asserting the origin or
provenance of a stone, but Gambhir knew that such documents could be easily manipulated and that audits by
professional bodies charged with oversight into ethical business practice were often imperfect. For example, De
Beers Group sold Ontario-origin diamonds sourced from its Victor mine in Northern Ontario18 but failed to
disclose this fact, according to Gambhir, during provenance claims for the company’s 2015 Responsible
Jewellery Council (RJC) audit. Under the RJC code, any provenance claims a company makes must be declared
and verified as part of the audit process.19 De Beers Group was not sanctioned for the omission. Moreover, when
Gambhir asked to see the RJC audits of the Canadian-owned Dominion Diamond Mine that operated in Canada’s
Northwest Territories and sold Canadamark diamonds, he received no response. Gambhir was concerned that
consumers would eventually become aware of such a lack of transparency in the jewellery industry’s supply
chain and lose faith in the veracity of any claims made by industry members.

TOWARD AN ETHICAL SUPPLY CHAIN

In 2013, the partnership between FLO and the ARM, which had established the Fairtrade and Fairmined
trademarks, was dissolved after the ARM signed a memorandum of understanding with the RJC.20 Some
critics felt that the ARM was aligning its interests with larger mining conglomerates and distancing itself
from FLO.21 However, Gambhir and others felt that FLO was simply reacting to a lack of response by
consumers to the Fairtrade and Fairmined offerings, who found the prices too high. FLO therefore wanted
to reduce the premium paid to miners but keep its own share intact, which neither the ARM nor FTJCo
supported. However, both the Fairtrade and Fairmined trademarks remained active. The Fairtrade trademark
operated in Uganda, Kenya, and Peru22; the Fairmined trademark operated in Mongolia, Colombia, Bolivia,
and Peru.23 FTJCo continued to offer jewellery under both gold trademarks. One of the company’s
fundamental principles was to offer clients vetted choices without moralizing or politicizing them.
The end of Fairtrade and Fairmined gold was certainly not the end of FTJCo’s efforts to find a fully
responsible, entirely verifiable source of ethical gold. Taylor had been a professional colleague of Alan
Martin, the former director of research for Partnership Africa Canada (PAC). PAC was a Canadian NGO
formed in 1986 with a mission to “support grassroots African organizations and address the root causes of
poverty.”24 In 2003, PAC gained recognition and a Nobel Peace Prize nomination for researching conflict
diamonds (also known as “blood diamonds”) in Sierra Leone.25 In 2015, PAC launched the Just Gold project
in the DRC. Funded by Global Affairs Canada and other donors, Just Gold aimed to bring the first “legal,
conflict-free, and traceable gold from artisanal mine sites in the DRC to international markets.”26

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In 2017, PAC was officially rebranded as IMPACT and continued to pursue the Just Gold project’s
objectives:
In the Great Lakes region of Africa, and Democratic Republic of Congo in particular, the artisanal
mining sector remains largely informal and is prone to widespread corruption and violence. While
great strides have been made to trace conflict-prone minerals, there continues to be no tracking or
monitoring of gold flows. This makes artisanal gold an ideal target for financing armed groups,
resulting in the exploitation of mining communities and a loss of revenue for the government when
gold is smuggled out of the country.27
Taylor and Gambhir were interested to learn about Just Gold’s operations, which involved 600 miners at 6
mine sites in the DRC’s northern and eastern Ituri and South Kivu provinces. These areas were designated
as “non-conflict” zones by the DRC government.28 To start, miners joined the Just Gold program and
received photo identification, confirming their participation as a member of the program. Adjacent to each
mine site were satellite trading outposts staffed by licensed traders. Each day, the traders would purchase
rock and alluvial gold ore from mining teams that consisted of 4 to 12 miners. The cost of the gold was an
LBMA-aligned price posted on the trading board. Whenever a licensed trader made a purchase, photo
identification of the mining team leader was recorded, along with the origin of the ore.
After finalizing the sale, the trader and the team leader both signed transaction forms indicating that the ore
had been sold. The type of ore or gold that was bought (i.e., rock or alluvial) was recorded, along with the
weight, the price, information about the mining team or individual, and the pit that had produced the gold.
This form determined the gold’s purity and travelled with the ore from the satellite trading outpost to a
centralized trading outpost, where a project manager verified the paperwork, reweighed the ore, and smelted
the ore into doré bars.29
One specific transaction was detailed by a newspaper reporter at a Mambasa mining site in 2017:
At the mining site near Mambasa, a miner named Andre Santos Atombawa is selling two small
nuggets of gold, weighing 1.52 grams, to a trader in a small wooden hut, who pays him about $40
for it . . . the buyer has a logbook in which he carefully records all of the trading details, from the
names of the miners to the exact source of the gold and the price of the sale. The details from five
mining sites are then entered into a computer, providing the data for the exports.30
Taylor and Gambhir discovered that determining the price paid to miners was a complex issue that depended
on at least four factors. The first factor was the LBMA rate. The second factor was the purity of the gold,
which was often determined through spot checking done in a laboratory to calculate the percentage of all
minerals present in the doré bar, as well as any impurities. The third factor was—at least, in formalized
supply chains—the export taxes charged by the local and national government. The fourth factor, which
Taylor and Gambhir considered most important, was the type of buyer.
Regarding the type of buyer, Taylor and Gambhir again identified four different types. The first type of buyer
was informal traders who sold gold in places such as Dubai and India. These traders typically paid cash for
the gold, which was usually an incentive for ASM miners to offer a price discount. The second type of buyer
was illicit traders, who also used cash and worked directly for criminal organizations, using ASM gold to
launder money. The third type of buyer would barter mercury or other imported supplies for the gold. The
fourth type of buyer was formal firms (e.g., co-operatives or exporters) supported by NGOs and other
organizations that were trying to formalize the ASM supply chain by purchasing through legally recognized
entities. These formalized firms would base the rate they paid on the LBMA daily rate, the gold purity, and
whatever operational expenses had to be recuperated. This price could be up to 30 per cent of the LBMA rate.

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In some contexts, FTJCo found that both informal and illicit traders paid higher prices than normal to drive
out organizations that were attempting to formalize the supply chain. These formalized organizations were
sometimes at a disadvantage due to higher administrative and management costs, as well as potential export
taxes. Taylor found that some ASM miners, who had to choose between selling their gold legally through
a co-operative organization or illegally through an informal or illicit trader, could not appreciate all of the
facets and logistics of getting the gold legally out of the country. Some ASM miners thought Western
traders were simply trying to take advantage of them. However, export costs and administrative expenses
in the country were driving up the cost of gold before Western retailers even became involved.
In late 2016, when Taylor and Gambhir first learned of the Just Gold project, no gold had yet been sold into
the international market. IMPACT, as an NGO, was not in a position to play a key role in the supply chain;
it could only support legitimate supply chain organizations bringing gold to market. This was where FTJCo
could help, being a downstream actor with manufacturing and retail capabilities.
In May 2017, the first export of legal and traceable artisanal gold from the DRC reached Canada. Joanne
Lebert, IMPACT’s executive director, carried 238 grams of gold in official government bags within her
carry-on luggage on a flight from the DRC to Toronto, where she was met by Gambhir. As reported in The
Globe and Mail, “Those 238 grams are believed to be the most rigorously documented export of small-
scale gold in history. A thick dossier of dozens of export permits and tax receipts went with the gold.”31
Along the gold’s journey from the DRC to Toronto, 26 different taxes and fees were paid.32
FTJCo had long since stopped refining gold in-house because the trace mineral content of the DRC gold
required the use of strong acids to refine the gold. However, finding another refinery in Toronto was
difficult. Refineries generally did not trust that gold from the DRC was legitimate, so Gambhir spent several
weeks making calls to try to find anyone who would agree to refine the gold. Gambhir’s quest eventually
led him outside of his industry:
During my calls, I learned there was a subculture of home gold refining practiced by people who
did things such as purchasing old circuit boards or PC [personal computer] cards on eBay and then
sawing off the edge connectors, using acids to refine and extract the gold. I met the guy who refined
the gold at a loading dock in Georgetown [Ontario, Canada]; he was refining gold in a storage
locker. He provided me with a receipt and agreed to take process photos of the gold being refined.
His fee was 10 per cent of the refined gold, much higher than the 2 per cent normally charged. At
the end of the refining, I met him at a gas station to pick the gold up.
Home metal refineries earned money by melting scrap gold, often using nitric and hydrochloric acid to
dissolve its impurities. The gold was then heated and cast into bars, and eventually sold to refineries.33 The
process was dangerous. The acids could burn and emit a potentially fatal red gas while dissolving, under
improper ventilation conditions.34 Taylor thought back to those difficult times:
The fact that a company founded on and preoccupied with responsible sourcing would have to rely
on a DIY [do-it-yourself] process such as this was an example of just how flawed the policies
designed to improve the market for marginalized people are. Those businesses trying to effect
change are procedurally and financially deterred from doing so.
Gambhir would pick up the gold from the home metal refinery (at a gas station) and take it to the FTJCo
store. Kesha Frank, FTJCo’s head goldsmith, would then alloy the gold, assign a serial number and lot
number, and create rings for eventual retail. Four days later, the rings were available for sale to FTJCo
customers. An end-to-end supply chain with a transparent chain of custody had been established.

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JUST GOLD

By 2017, the Just Gold project was in operation. FTJCo once again had access to the same type of traceable
and responsibly sourced gold that it had previously imported from Oro Verde. However, the development
of the Just Gold project was not without challenges. At one point, FTJCo was pre-financing approximately
1,000 miners in the DRC to ensure that the Just Gold project could continue. After the miners exited the pit
with the mined gold, they had to be paid. Therefore, capital was needed before the gold could be exported
and sold. Because funds were short, FTJCo contacted the Canadian government agency Export
Development Canada (EDC) to ask for help with inventory financing. EDC explained that it was certainly
prepared to guarantee a portion of the loan, but FTJCo would have to get a traditional bank to provide the
funds. Therefore, FTJCo contacted its usual provider of banking services, the Royal Bank of Canada.
However, not only did the bank refuse to loan the company any new funds for inventory financing, it went
further to demand that FTJCo repay all previously loaned funding because it viewed FTJCo’s operations in
the DRC as too high a risk. Eventually, FTJCo was able to secure new inventory financing from another
major Canadian bank, the National Bank of Canada.
Press coverage from The Globe and Mail and other reputable media outlets helped legitimize the ongoing
efforts of FTJCo and IMPACT. FTJCo was able to employ a smaller, Toronto-based refinery specifically
for the Just Gold product, with appropriate documentation provided. However, the most challenging
element of the Just Gold project seemed to be scalability. IMPACT staff was unable to sustain the cost of
sending gold from the DRC to Toronto, where Gambhir would manage the refining process. Therefore,
FTJCo and IMPACT began working with Fair Congo Initiatives (Fair Congo), a local exporter that was
licensed to export gold from the DRC.35 After the ASM miners collected the ore and processed it into doré
bars, Just Gold staff would sell the doré bars to Fair Congo, which would then export it to a refinery in the
United States (US) that was known for responsible sourcing.
A new system was developed, whereby FTJCo would purchase the refined DRC gold from the US refinery,
paying up to the equivalent of 122 per cent of the LBMA rate. However, FTJCo was soon disappointed to
learn that the US refinery did not seem to follow a third-party audited internal chain-of-custody system for
its materials. If it did, that information was not accessible or supported by objective evidence. Therefore,
the DRC gold again lost traceability at the refinery level, as it had during the Fairtrade and Fairmined gold
process. FTJCo was still unable to confirm with certainty that the Just Gold gold used in a ring was, in fact,
responsibly sourced from the DRC. In fact, by working with both an exporter and a refinery, FTJCo had
moved two steps away from the DRC gold supply chain that it had helped fund and establish. Taylor and
Gambhir were unsure what they should do next.

MOVING FORWARD

Taylor and Gambir considered two main options for FTJCo’s goal of confirming the purity and authenticity
of their product. The first option was to invest in refinery capabilities in the greater Toronto area. FTJCo
could thus re-establish its earlier projects and develop a small-scale refinery. The company could purchase
the DRC gold directly from Fair Congo and then refine it in Toronto, eliminating the potential for
contamination with other gold. This option seemed feasible, in theory at least. Taylor and Gambhir would
then be assured of the authenticity of the Just Gold gold used in FTJCo jewellery.
Gambhir solicited a quote from an Italian company for shipping refining equipment to Canada, which
included an automatic gold-refining machine, a cooling system, a ventilation system, a waste tank, and a
fee for set up and training (see Exhibit 5). Gambhir also had to locate an industrial rental unit (which was
found in nearby in Markham, Ontario), ensure it was secure, and hire two staff members to run the refinery
operation. The estimated costs were below CA$500,000; however, to ensure that FTJCo would not run out
of cash for the refinery, Gambhir would request CA$1 million in equity or bank-issued debt. Both Taylor

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and Gambhir agreed that the refinery should provide its services to other companies, rather than only to
FTJCo, and should be set up as a standalone business. However, the refinery’s profitability was still too
difficult to estimate. How much of the cost FTJCo currently paid out to the US refinery could be saved by
having its own refinery? How much external business could the refinery generate? How big was the market?
A second option was to resolve FTJCo’s issues by rapidly growing Consensas, the sister company that
Taylor and Gambhir had started before their work with IMPACT and Just Gold. Consensas was co-founded
with David Janes, who had many years of enterprise-development experience and acted as chief technology
officer. The company was a technological and data platform that allowed users to track a commodity
transparently as it passed through the supply chain.36 According to the three co-founders, Consensas was
intended to be particularly inclusive of marginalized actors, such as ASM miners. It also had a vision to
compensate actors for providing their data. With Just Gold in the DRC, the three entrepreneurs had used
Consensas to transition IMPACT from tracking data on a Microsoft Excel Visual Basic prototype to a
technology platform, where each entry was “digitally signed by the authors, in near-real time with multiple
automated and manual methods to verify its accuracy.”37 This success suggested further possibilities. For
example, if the US refinery agreed to use Consensas in its operation, the DRC gold could be tracked end to
end through the refinery, which would solve one of FTJCo’s fundamental problems. “We have no more
visibility into the DRC gold than we did with the Fairtrade or Fairmined gold,” explained Gambhir. “Once
the gold enters our US refiner’s facility, I don’t actually know what happens to it because there is not a
transparent (or at least third-party audited) chain-of-custody process within the facility.”
Gambhir reflected on his current dilemma:
In some way, where we are now with our current supply chain system, is like a “nearer-to-God”
argument. You can get close to God, but you’ll never get all the way there. For us, the system is
imperfect, but it’s the best we’ve got. I’m not sure how much further we can or should go to make
the change we originally envisioned.
Taylor added his own assessment:
I would disagree slightly. It’s likely true that for existing supply models we have exhausted many
of the methods we have to avoid obscuring illegality and human, financial, and environmental
exploitation. That’s why, in my view, Consensas is such an important evolution of FTJCo’s
founding principles. It’s about the emergence of new flourishing supply chains, systems that value
shared information, respect privacy, and compensate actors for providing data. Throughout its
history, FTJCo has been at the vanguard of this radically positive reimaging of inclusive and
objective sourcing with actual evidence, and this goes well beyond just corporate social
responsibility and marketing. I feel optimistic.
The FTJCo founders had to decide the best route for their pursuit of traceable and responsibly sourced
jewellery material. The option to develop refinery facilities was just as fraught with operational challenges
as was a large-scale push to grow the Consensas platform. FTJCo saw itself as an activist company with
the highest ethical standards. Was it necessary to vertically integrate considerably to live up to this mission?
Would the changes affect FTJCo employees, who relied on the business to provide their livelihood? FTJCo
also had to weigh the financial and operational risks of establishing an end-to-end responsible supply chain.
Was such a drastic change feasible and consistent with FTJCo’s mission? Or was it time to stop pursuing
assured purity and authenticity in FTJCo jewellery products?

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 Page 9 9B20M139

EXHIBIT 1: THE GOLD SUPPLY CHAIN

Gold smuggled to International traders

neighbouring
countries

Individuals and working Local exporters Jewellers

groups

Artisanal and small-scale mining Gold refiners Industrial uses

Bullion

Large-scale mining
Smelthouse

Source: Adapted by the authors from Organisation for Economic Co-operation and Development (OECD), OECD Due
Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas, 3rd ed. (Paris,
France: OECD Publishing, 2016), accessed June 22, 2020, www.oecd-ilibrary.org/docserver/9789264252479-
en.pdf?expires=1592920373&id=id&accname= guest&checksum=9D7D04C6E11B8BA6D44D219862090EEF.

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 Page 10 9B20M139

EXHIBIT 2: GLOBAL MINE PRODUCTION (IN TONNES)

2016 2017 2018

North America
United States 229.1 236.5 221.7
Canada 163.1 171.2 189.0
Mexico 127.8 119.4 115.4
Subtotal 520.1 527.2 526.1
Central and South America
Subtotal 564.1 566.0 558.0
Europe
Subtotal 23.6 26.9 27.9
Africa
South Africa 162.6 154.0 129.8
Democratic Republic of Congo 35.7 36.6 44.9
Subtotal 779.9 812.6 821.0
Commonwealth of Independent States
Subtotal 434.1 466.4 498.5
Asia
China 429.4 404.1
Subtotal 675.3 676.1
Oceania
Australia 287.7 292.5 314.9
Subtotal 362.2 367.5 394.8

Global Total 3,397.3 3,441.9 3,502.6

Source: “Gold Mine Production,” World Gold Council, accessed February 27, 2020, www.gold.org/download/file/7593/Gold-
Mining-Production-Volumes-Data.xlsx.

EXHIBIT 3: AVERAGE ANNUAL GOLD PRICES

Currency 2016 2017 2018

US$ per ounce 1,250.80 1,257.20 1,268.50
€ per ounce 1,129.50 1,114.10 1,073.70
£ per ounce 927.30 976.10 949.60
₣ per kilogram 39,575.50 39,771.90 39,882.10
JPY per gram 4,353.50 4,531.70 4,502.20
₹ per 10 grams 27,013.50 26,319.70 27,861.30
RMB per gram 267.00 273.10 269.40
₺ per gram 121.30 147.30 196.20

Note: ounce = 28.35 grams; US$ = United States dollar; € = European euro; £ = British pound sterling; ₣ = franc; JPY =
Japanese yen; RMB = Chinese yuan renminbi; ₺ = Turkish lira.
Source: “Gold Prices,” World Gold Council, accessed February 27, 2020, www.gold.org/download/file/8369/Prices.xlsx.

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 Page 11 9B20M139

EXHIBIT 4: TIFFANY & CO. SELECTED FINANCIALS, 2018

2018
Net sales (in US$ million) $4,442
Net earnings (in US$ million) $586
US sales 40%
Engagement sales 21% of US sales
Number of US stores 93
US$–CA$ exchange rate US$1 = CA$1.32
Note: CA = Canada; US = United States.
Source: Tiffany & Co., 2018 Annual Report, accessed February 27, 2020, https://investor.tiffany.com/static-files/09e06d06-
4bdc-409b-9952-3a233728a1af.

EXHIBIT 5: REFINERY STARTUP COSTS (IN CA$)

Item Cost
Gold-refining machine $78,291
Cooling system $15,762
Ventilation system $21,741
Fixed
Waste tank $3,996
Heavy-duty safe for securing gold $20,000
Set up and training (one-time charge) $6,660
Industrial rent (Markham) per year $70,000
Insurance per year $40,000
Variable
Security system and alarm per year $6,000
Operator (1) and staff administrator (1) per year $130,000
Total $392,450

Source: Created by the case authors using company files.

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 Page 12 9B20M139

ENDNOTES
1
Sarah B. Hood, “Ryan Taylor,” Canadian Jeweller Magazine, May 27, 2014, accessed February 27, 2020,
https://canadianjeweller.com/ryan-taylor.
2
Marco Chown Oved, “Ethical Jewelry Shop Provides Alternative to Conflict Minerals,” The Star, September 29, 2014,
accessed February 27, 2020, www.thestar.com/news/gta/2015/09/28/ethical_jewelry_shop_provides_alternative_to_conflict_minerals.html.
3
International Institute for Environment and Development, Global Trends in Artisanal and Small-Scale Mining (ASM): A Review of Key
Numbers and Issues, accessed June 22, 2020, www.iisd.org/sites/default/files/publications/igf-asm-global-trends.pdf, iv.
4
Alec Crawford, Kristi Disney, and Melissa Harris, Uganda: Assessment of Implementation Readiness, March 2015, accessed June
22, 2020, www.iisd.org/sites/default/files/publications/mpf-uganda-assessment-of-implementation-readiness.pdf, 28.
5
Organisation for Economic Co-operation and Development (OECD), OECD Due Diligence Guidance for Responsible Supply Chains
of Minerals from Conflict-Affected and High-Risk Areas, 3rd ed. (Paris, France: OECD Publishing, 2016), accessed June 22, 2020,
www.oecd-ilibrary.org/docserver/9789264252479-en.pdf?expires=1592920373&id=id&accname=
guest&checksum=9D7D04C6E11B8BA6D44D219862090EEF.
6
“The Last Goldrush-A-Story-of-Fair-Trade-Gold[Documentary]-www.ftjco.com.m4v,” YouTube video, 28:34, posted by “Robin
Gambhir,” December 31, 2011, accessed June 22, 2020, www.youtube.com/watch?v=m25pZLL8CQc.
7
Ibid.
8
Greg Valerio, “Oro Verde—The Most Loved Gold in the World,” April 6, 2010, accessed February 27, 2020,
https://gregvalerio.com/gold/fairtrade-gold/oro-verde-the-most-loved-gold-in-the-world.
9
“Colombia: First Ever Fairtrade and Fairmined Ecological Gold from Condoto, Oro Verde!,” Alliance for Responsible Mining, June
24, 2010, accessed February 27, 2020, www.responsiblemines.org/en/2010/06/colombia-first-ever-fairtraide-and-fairmined-
ecological-gold-from-condoto-oro-verde.
10
All currency amounts are in US$ unless otherwise specified.
11
AngloGold Ashanti, 2018 Annual Financial Statements accessed February 27, 2020, www.aga-reports.com/18/download/AGA-AFS18.pdf.
12
Maria Baretto, Patrick Schein, Jennifer Hinton, and Felix Hruschka, Economic Contributions of Artisanal and Small-Scale Mining in
Uganda: Gold and Clay, East Africa Research Fund, January 2018, accessed June 22, 2020,
https://assets.publishing.service.gov.uk/media/5a392d1540f0b649cceb238b/Uganda_case_study.pdf.
13
“The Last Goldrush-A-Story-of-Fair-Trade-Gold[Documentary]-www.ftjco.com.m4v,” op. cit.
14
CA$ = CAD = Canadian dollars; CA$1 = US$.0.74 on July 20, 2020.
15
“About the Alliance for Responsible Mining,” Alliance for Responsible Mining, accessed February 27, 2020,
www.responsiblemines.org/en/who-we-are/history-2.
16
“Fairtrade Standard Launched for Gold,” Alliance for Responsible Mining, May 8, 2009, accessed February 27, 2020,
www.responsiblemines.org/en/2009/05/fairtrade-standard-launched-for-gold.
17
Kate Carter, “Fairtrade Hallmark Sets the Gold Standard,” The Guardian, February 14, 2011, accessed February 27, 2020,
www.theguardian.com/lifeandstyle/2011/feb/14/fairtrade-gold.
18
“Victor Mine,” De Beers Group, accessed February 27, 2020, http://canada.debeersgroup.com/operations/mining/victor-mine.
19
Responsible Jewellery Council, RJC Code of Practices 2013: Provenance Claims Training Module November 2013, accessed February 27,
2020, www.responsiblejewellery.com/wp-content/uploads/RJC-Provenance-Claims-Training-Module.pdf.
20
“ARM and RJC Announce Their Collaboration,” Alliance for Responsible Mining, June 1, 2013, accessed February 27, 2020,
www.responsiblemines.org/en/2013/06/alliance-for-responsible-mining-arm-and-responsible-jewellery-council-rjc-announce-their-
collaboration-towards-better-social-environmental-labour-and-business-practices-in-artisanal-and-small-sc.
21
Marc Choyt, “Fairtrade/Fairmined Gold in the US/UK,” Reflective Jewelry, September 21, 2018, accessed February 27, 2020,
www.reflectivejewelry.com/news/ethical-jewelry-expose-fairtrade-fairmined-gold-in-us-uk.
22
“Certified Miners,” Fairtrade Labelling Organizations International, accessed February 27, 2020, www.fairgold.org/producers.
23
“Get to Know Fairmined,” Fairmined, accessed February 27, 2020, www.fairmined.org/what-is-fairmined.
24
“30 Years: A History of IMPACT,” IMPACT, accessed February 27, 2020, https://impacttransform.org/en/about-us/30-years-of-impact.
25
Ibid.
26
Ibid.
27
IMPACT, Just Gold: A Conflict-Free Artisanal Gold Pilot Project, April 2016, accessed February 27, 2020,
https://impacttransform.org/wp-content/uploads/2017/10/just-gold-brochure-En-web.pdf.
28
“Jeweller Complex First Export of Responsible & Conflict-Free Artisanal Gold from Easter Congo to Canada,” IMPACT, June 26,
2017, accessed February 27, 2020, https://impacttransform.org/en/jeweller-completes-first-export-of-responsible-conflict-free-
artisanal-gold-from-eastern-congo-to-canada.
29
“Just Gold: How It Works,” IMPACT, April 2016, accessed February 27, 2020, https://impacttransform.org/en/work/project/just-gold.
30
Geoffrey York, “Pioneering Canadian System Ensures Conflict-Free Gold,” The Globe and Mail, June 25, 2017, accessed February
27, 2020, www.theglobeandmail.com/news/world/pioneering-canadian-ethical-trade-system-ensures-proof-of-conflict-
freegold/article35459871.
31
Ibid.
32
Ibid.
33
“How to Make a Profit Refining Precious Metals,” YouTube video, 27:57, posted by “sreetips,” May 28, 2018, accessed June 5,
2020, www.youtube.com/watch?v=NzbUOkut6f0.
34
“How to Use Aqua Regia to Purify Gold,” 911Metallurgist, accessed June 22, 2020, www.911metallurgist.com/blog/how-to-use-
aqua-regia-to-purify-gold#gsc.tab=0.
35
“The Fair Congo Initiatives,” Fair Congo, accessed February 27, 2020, http://faircongo.com.
36
“How It Works,” Consensas, accessed February 27, 2020, www.consensas.com/how-it-works.
37
Ibid.

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