DeBeers Corporate Social Responsibility - Research Paper Example

DeBeers’ Corporate Social Responsibility How DeBeers has responded to the importance of social responsibility by developing and implementing socially responsible, sustainable, strategies and practices Introduction The De Beers Group of Companies is the worldwide leader in diamonds. It has been the leader for over 100 years. Its present CEO, Nick Oppenheimer, has redirected his company to work for sustainability, social responsibility, and full legal compliance worldwide. Its new rallying call is: “The De Beers Family of Companies operates toward the goal of sustainable development.” (http://www.debeersgroup.com/Sustainability/) Through these new efforts, it is the aim of this paper to show that De Beers Group of Companies is a model in corporate social responsibility. Definition of Corporate Social Responsibility What is Corporate Social Responsibility? Three words stand out in this phrase: corporate, social, and responsibility. Simply states, it is the responsibility of business corporations (who work mainly for profit) to contribute to the welfare of the society in which it exists. Society is represented by the different persons the corporation comes in contact with. These include its customers, its employees, its shareholders, its community, and its country. Other definitions of CSR include: “The notion of companies looking beyond profits to their role in society is generally termed corporate social responsibility (CSR)….It refers to a company linking itself with ethical values, transparency, employee relations, compliance with legal requirements and overall respect for the communities in which they operate. It goes beyond the occasional community service action, however, as CSR is a corporate philosophy that drives strategic decision-making, partner selection, hiring practices and, ultimately, brand development.” - South China Morning Post, 2002 “The social responsibility of business encompasses the economic, legal, ethical, and discretionary expectations that society has of organizations at a given point in time.” - Archie B. Carroll, 1979 “CSR is about businesses and other organizations going beyond the legal obligations to manage the impact they have on the environment and society. In particular, this could include how organizations interact with their employees, suppliers, customers and the communities in which they operate, as well as the extent they attempt to protect the environment.” - The Institute of Directors, UK, 2002 Mission and CSR Group Principles De Beers has decided to make a shift away from monopoly into competitive yet socially responsible strategic management. The mission of DeBeers is shared throughout its global enterprise. Its mission statement is, “We are driven to turn ‘diamond dreams’ into lasting realities.” The De Beers policies and principles embody the standards of the ISO 14001, OHSAS 18001, and the Best Practice Principles. More than just a promotional ploy, the Principles by which De Beers Group of Companies abides embodies De Beers commitment to abide by its corporate responsibility to all its stakeholders – its customers, employees, shareholders, the community, and the environment. These are shown in the following diagram: Source: http://www.debeersgroup.com/ImageVault/Images/id_1609/ImageVaultHandler.aspx How DeBeers applies its CSR principles in its economic activity De Beers has redirected its operations to apply the principles in the diagram above, to better respond to the demands for corporate social responsibility. These thrusts involve: 1. The Supplier of Choice Completely opposite from its previous policy of purchasing diamonds from its competitors and controlling the supply to maintain the price, DeBeers has established its “Supplier of Choice” strategy, which is their response to the calling for greater accountability. Through this, customers could differentiate DeBeers diamonds from its competitors by the creation of value in the product. The new plan is a change in focus from controlling supply to responding to customers. Through "Supplier of Choice", De Beers aims to provide its customers with a choice alternative based on quality, as against what used to be monopolized trading. 2. Differentiation through branding. Similar to the “Intel Inside” symbol, De Beers has developed the Forevermark as its hallmark, as a way of guaranteeing the DeBeer diamond’s product integrity. But more than just a symbol, the company wants to create a brand following on the DeBeers name in itself, particularly in the retail market. While some business experts observe that its strong entry into retail means that DeBeers will be competing against its own customers, yet the company hopes that they would create sufficient value added to make a difference. While Forevermark caters to jewelry-grade cut and polished diamonds for retail marketing, the DeBeers Industrial Diamonds group has adopted the new brand Element Six. The new brand name comes from the fact that the diamond is a form of carbon, the sixth element in the periodic table. Another push by DeBeers is the use of ethical branding. The company explores all avenues by which its name may be associated to environmental and social advocacies. Through these means, the company hopes to create a lasting impression of adherence to quality, in that way maintaining differentiation, keeping profit margins up, and avoiding what they perceived as “the commoditization of diamonds” (Stein, 2001). The above strategies are to create in the mind of the customer the DeBeers dedication to quality and service, hallmark of its corporate responsibility. By emphasizing on its commitment to meet consumer needs, not just close a sale, DeBeers addresses the highest social purpose of a business, which is to create value for society. 3. Partnership-building and collaboration Another avenue being explored by DeBeers is creating partnerships and strengthening collaborations with other business entities. Formerly protectionist, DeBeers is now exploring synergies and ways of enhancing its value chain. Besides, local collaborations enhance DeBeers’ assimilation and acceptability into the local communities. By closer collaboration with the community in which it operates, DeBeers brings progress to these communities and at the same time becomes partners with them in the development of their natural resources and human resources potentials. Corporate governance, sustainability, and community building: Hallmarks of CSR DeBeers’ shift towards being perceived as and actually practicing greater ethical business has further undertaken the following high-profile measures (http://www.debeers.com/page/socialresp) 1. The Diamond Best Practices Principles. These are a set of principles that comprise DeBeers new ethical code of conduct. This code is expected to be observed by the DeBeers Family of Companies, its clients, and certain third parties who forward the interests of DeBeers. The Best Practices Principles articulate several required standards of conduct concerning: 1.1 Business Responsibilities 1.2 Social Responsibilities 1.3 Environmental Responsibilities By attending to business responsibilities, the company hopes to ensure that all employees and officers act responsibly, ethically and legally in the conduct of their normal and daily course of business. Social responsibilities are meant to make certain that business is conducted in a way that looks beyond economic gain, and works so that the communities benefit from “real social value” as a result of the company’s operations. Finally, the environmental responsibilities are intended to ensure that the company’s operations maintain only the highest standards required by law and convention concerning their impact on the environment. In order to ensure compliance by all parties, the Best Practice Principles are supported by an “Assurance Programme”; compliance thereto is audited by a third party, the Société Générale de Surveillance or SGS. The SGS audit is in turn verified by a fourth party, the United Registrar of Systems Ltd or URS. 2. The Kimberley Process Conflict diamonds, as earlier stated, are rough diamonds traded by rebel movements in order to fund their armed insurrections against legitimate governments. In the interest of preventing the proliferation of conflict diamonds in the industry, DeBeers, in conjunction with the United Nations and other international organizations, was instrumental in creating the World Diamond Council, the representative of the international diamond and jewelry industry, which will function in the Kimberley Process. The Kimberley Process Certification Scheme (KPCS) is a system for certifying that the source of uncut diamonds do not fall under those from which the conflict diamonds are known to emanate. The process was adopted in November 2002 and began implementation in January of the following year. As a result of this process, 99,8% of the worldwide supply of diamonds are conflict-free. The provisions of the Kimberly process are explicit. As of the end of 2008, 75 nations which were substantial participation in the trade of diamonds have committed to the process. Their governments must guarantee that each shipment of rough and uncut diamonds must be in a “secure container” which is accompanied by a Kimberly Process certificate – a government-validated, uniquely numbered document manifesting that the diamonds are conflict-free. 3. The DeBeers Diamond Policy De Beers further undertakes to guarantee that not only are their diamonds conflict-free but also child labour free. Thus it undertakes to observe not only the Kimberley Process Certification Scheme, but also the System of Warranties. This latter system was established by the World Diamond Council (WDC). It requires all elements in the supply chain, from mining houses all the way to retail jewellers, to declare on the invoice of transaction of diamonds – whether rough or polished diamonds, or diamond jewelry – that the diamonds are “not involved in funding conflict and are in compliance with United Nations resolutions.” Third party audits and oversight by the country’s government authorities are part of the system. Likewise, DeBeers requires its suppliers to warrant that their diamonds are manufactured under conditions compliant with the UN’s Universal Declaration of Human Rights and conventions of the International Labour Organization, especially those that are protective of the rights of the child. (debeers.com) 4. The policy of total legal compliance worldwide As part of its effort to clear the DeBeers name, which as already mentioned had a long and arduous history of transgressing the law with seeming impunity, there is now a new direction at DeBeers of total and complete adherence to legal standards in every nation wherein it does business. Through its policy of total legal compliance worldwide, DeBeers wishes to signify that it is willing to abandon legal shortcuts and to shoulder the additional cost of compliance in the name of good international citizenry. 5. Good corporate citizenry Last but not the least, DeBeers has embarked on development programs meant to demonstrate its concern not only for its business environment but also for the social and ecological milieu in which it operates. For instance: 5.1 The company has set aside 185,000 hectares of its owned and managed property as a nature reserve wherein research is conducted on biodiversity. 5.2 It has secured ISO 140001 certifications and addresses environmental problems concerning water and waste management, energy consumption and efficiency, carbon dioxide and sulphur dioxide emissions, and hazardous materials handling and disposal, in its mining operations (debeers.com/environment). 5.3 It has also been awarded by the Global Business Coalition on HIV/AIDS (GBC) in recognition for its efforts in “fighting the spread of the HIV/AIDS epidemic in sub-Saharan Africa,” where DeBeers has several of its mines (Media release, 2005). 5.4 Furthermore, DeBeers was also cited by Botswana’s Minister of Minerals, Energy and Water Resources, Ponatshego Kedikilwe, for its initiative in Botswana in instituting the Peo Venture Fund and the Diamond Trust. 5.4.1 The Peo Venture Fund amounts to $40 million to date, that was donated out of the profits of DeBeers’ Botswana and Debswana operations, in order to promote the development of commercially viable small and medium scale businesses. 5.4.2 The Diamond Trust Fund, on the other hand, is a non-profit entity that supports community projects, particularly in areas where the company operates. 5.4.3 Further significant contribution in amounts approximating P100 million per annum on projects such as mine hospitals, roads and infrastructure for the mines primarily but made available to the communities, and schools and educational support from primary to tertiary education. (Botswana Press Agency, 2009) Status of ongoing social programs De Beers launched their newly developed Social Impact Assessment Guidelines, which build on work carried out by the International Council on Mining and Metals and the principles endorsed by the International Association for Impact Assessment Social and Labour Plans (SLPs) were approved for almost all of their mines in South Africa. A total of US$43.8 million has been allocated to SLPs for the coming year. The company has also established a Corporate Social Investment Working Group, as well as a Social Investment Policy based on international best practice, in order to improve coordination and establish a unified social investment strategy across the Family of Companies The Family of Companies disbursed a total of US$10.1 million in social investment projects in Africa (2007: US$15.1 million) New Projects onstream in 2008 Soul City: Soul City continued to conduct training sessions throughout the year. This included peer educator training of inmates at Baviaanspoort prison near the Cullinan mine. The programme has reduced high-risk sexual activity within the prison and also prompted inmates to disclose their status, seek treatment, and take up voluntary counselling and testing. Grassroots Soccer: The programme uses Soul City resources to provide age-appropriate information on HIV and Aids to its participants. The programme has recently been extended to all six DBCM operations in South Africa and is empowering local teachers and community members to coordinate training activities to ensure long-term sustainability of the initiative. Catholic Medical Mission Board: Support is extended for the improvement of HIV and Aids education to orphans and vulnerable children in Taung. SA Red Cross Air Mercy Services (AMS): Funding was provided for the purchase of two vehicles, the construction of offices and installation of motorised hangar doors for its Kimberley base. The building of the offices remains outstanding due to higher construction costs and a funding shortfall. AMS is seeking additional funds from company donors. UNICEF: Support for a project to increase child access to an HIV care and treatment programme in the Northern Cape Province. A formal agreement for the support of key interventions was signed with the Department of Health in September 2008, with final programme activities yet to be finalised. The proposal will be implemented in 2009. EngenderHealth: Support for EngenderHealth’s Community Action for Gender Equality pilot programme in Musina. This includes the elimination of gender stereotypes amongst school children through facilitated group discussions. EngenderHealth has trained a total of 20 stakeholders in gender issues. Key projects and activities in 2008 Conclusion De Beers is a 124-year-old company that has renewed the way it does business. It has adopted a strong mission and vision, established a strict code of principles, and created many programs that shows its commitment to its social responsibility. DeBeers has answered the call to do business according to the principles of good corporate governance and citizenship. Because of the steps it has taken to make itself a highly effective and reliable instrument for social change, it is truly a diamond that will continue to provide value to society. REFERENCES Canada NewsWire, “UK: De Beers Changes Its Name to Element Six”, Sept. 30, 2002 “DeBeers promotes SMMEs”, Botswana News Agency (BOPA) April 9, 2009. Available from: [April 18, 2009] “De Beers wins international HIV/AIDS award”, Media release Sept. 28, 2005. Available from: [April 18, 2009] De Beers Social Reponsibility n.d. Available from: [April 18, 2009 from] Department of Justice (DOJ) 1994, General Electric and DeBeers Charged with Fixing Industrial Diamond Prices, official news release. Fowler, JA 2008, Case History for De Beers Canada, Inc. – Experiences with Diamond Exploration and the Victor Project, Ontario. Kretschmer, T 1998, De Beers and Beyond: The History of the International Diamond Cartel, London Business School Labaton, S 2004, “DeBeers Agrees to Guilty Plea to Re-enter the U.S. Market”, New York Times, July 10, 2004. Available from: [April 19, 2009] Lujala, P, Gleditsch, NP, & Gilmore, E 2005, “A Diamond Curse? Civil War and a Lootable Resource”. The Journal of Conflict Resolution, Vol. 49, No. 4, Paradigm in Distress? Primary Commodities and Civil War (Aug., 2005), pp. 538-562. Sage. Available from: [April 19, 2009] Marciano, S, Porter, ME & Warhurst, A 2007, De Beers: Addressing the New Competitiveness Challenges, Harvard School Publishing O’Connell, P 2009, “The Issue: DeBeers’ Multifaceted Strategy Shift, Jan. 6, 2009, available from [April 18, 2009] Pressler, MW 2004, “DeBeers Pleads to Price-Fixing: Firm Pays $10 Million, Can Fully Reenter U.S.”, Washington Post, July 14, 2004, page E01 St. Antoninus Institute n.d., “South Africas DeBeers: The Most Unethical Corporation in the World”, EWTN. Available from: [April 19, 2009] Settlement update (Class action suits), Sept. 15, 2008. Available from: https://diamondsclassaction.com/> [April 20, 2009] Stein, N 2001 “The De Beers Story: A New Cut On An Old Monopoly”, Fortune Magazine, Feb 19, 2001. Available from: [April 20, 2009] “The Analysis: De Beers: From Supply to Demand”, Businessweek Interactive Case Study, January 6, 2009. Available from: [April 19, 2009] Internet websites, accessed on April 18, 2009: http://www.britannica.com/EBchecked/topic/153349/De-Beers-SA http://www.costellos.com.au/diamonds/history.html http:/www.debeersgroup.com http://www.diamonds-are-forever.org.uk/history-of-diamonds.htm http://www.washingtonpost.com/wp-dyn/articles/A48041-2004Jul13.html Canada NewsWire September 30th, 2002 http://www.debeersgroup.com/en/Sustainability/Approach/ Economics Payments to partners, joint ventures and suppliers amounted to US $ 4.8 billion (2007: US $4.9 billion).   About US$3.2 billion of this was paid for diamonds and services in Africa (2007: US$3.6 billion). See our approach to economics > Ethics All diamonds sold by De Beers are 100% conflict free. Compliance with the Kimberley Process and system of warranties for 2008 was verified by the Government Diamond Office of the United Kingdom and Societe Generale de Surveillance.  In May 2008, the Federal District Court in New Jersey issued its written opinion approving the settlement of class actions in the United States involving De Beers. See our approach to ethics > Employees Lost Time Injury Frequency Rate (LTIFR) increased to 0.19 (2007: 0.18). Women constitute about 21.8% of our permanent workforce and 20.2% of management roles, and have been fully integrated into technical positions.  Kimberley mine appointed our first female operations manager in DBCM’s 120-year history.  See our approach to employees > Communities We launched our newly developed Social Impact Assessment Guidelines, which build on work carried out by the International Council Mining and Metals and the principles endorsed by the International Association for the Impact Assessment.  The Family of Companies disturbed a total of US $10.1 million in social investment projects in Africa (2007 US $15.1 million) See our approach to communities > Environment In 2008, we used 37.2 million m3 of new (potable and non-portable) water at our mining operations (2007: 41.4 million m³).  Our use of reused-recycled water increased to 28.1 million m³ (2007: 20.9 million m³).      Energy consumption fell slightly to 14.58 million GJ (2007: 14:87 GJ).  This was due to efficiencies (specifically a 4% energy efficiency saving at De Beers Consolidated Mines) as well as energy consumption changes due to the sale, production halting and opening of new mines during the year.  See our approach to environment > Read More