BG041 - Corporate Social Responsibility in Diamond Supply Chains

This report provides an in-depth analysis of corporate social responsibility (CSR) within the diamond supply chain, drawing reference from the 'Blood Diamond' documentary. It highlights the significant social, environmental, economic, and political impacts of the diamond industry on the international market. The report identifies drawbacks of irresponsible supply chains, including human rights violations like forced labor and sexual abuse, non-compliance with labor laws, decreased revenue, and diminished brand value. It suggests actions companies can take to prevent these issues, such as implementing blockchain technology and supply chain cleaning. Recommended practices for environmental responsibility include tracking technologies, eliminating unauthorized subcontractors, and adopting clean manufacturing processes. The paper emphasizes the importance of responsible investment in corporate social governance, alternative energy, and environmental initiatives, and proposes a CSR audit framework. The conclusion underscores the necessity of a responsible supply chain through the effective application of corporate social responsibility across the entire diamond value chain.

Running head: MANAGEMENT 1
Management
Student Name
Institution
Author’s Note

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Executive summary
The report analyses the corporate social responsibility of the diamond supply chain with
reference to the documentary Blood Diamond. Diamond is an important commodity in the
international market and the diamond industry has a social, environmental, economic and
political impact on the development of the international market. The drawbacks of an
irresponsible supply chain are evidence through lack of compliance to labor laws, human right
violations, decrease revenue and decrease the brand value. Moreover, some of the human right
violations by the diamond industry in Africa include taking away if life, sexual abuse, forced
labor and slavery. This has resulted in some actions that companies need to take to prevent
human right issues and these include using technologies such as blockchain and supply chain
cleaning. There are some recommended practices that can ensure good environmental
practices by diamond industry and these include the use of current tracking technologies,
elimination of unauthorized subcontractors and clean manufacturing. Companies within the
diamond industries need to invest in corporate social governance investments, alternative
energy provision, and environmental investments. In addition, there are some areas that form
the basis of CSR Audit and can be applied to the CSR Ombudsman. This paper concludes by
identifying the importance of a responsible supply chain and this is through proper application
of corporate social responsibility all diamond value chain.
Table of Contents

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Introduction.................................................................................................................................................3
a) Impact of the diamond industry......................................................................................................3
b) Drawbacks of irresponsible supply chain.........................................................................................5
i. The irresponsible supply chain has social issues..........................................................................5
ii. Do not comply with labor laws such as forced labor...................................................................5
iii. Decreased revenue......................................................................................................................5
iv. Decrease brand value..................................................................................................................5
c) Human rights and company actions................................................................................................6
d) Recommendations...........................................................................................................................7
i. Companies should employ new technologies that can track materials.......................................7
ii. Eliminating incentives for unauthorized subcontracting.............................................................7
iii. Clean manufacturing....................................................................................................................8
e) Responsible investment...................................................................................................................8
f) CSR Audit for the investments.........................................................................................................9

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Introduction
a) Impact of the diamond industry
Diamond has a social, environmental, economic and political impact on the
development of the international market. Firstly, the diamond industry has a high impact on
the social and cultural development of the international market at every stage of the diamond
value chain. Many companies within the diamond value chain value diamond as a source of
wealth and its extraction in countries especially within Africa is attributed to control of power
(Srivastava, 2010). In addition, the diamond industry has been known to contribute largely to
power and control within the international market. For instance, major companies trading on
the diamond are known to be wealthy hence decision makers in the international market.
Diamond industries have been known to support human right violating militant groups in Africa
and this has resulted in pressure within the international market for these companies to clean
their value chain. One example of companies under pressure is Sodiam which is a leading buyer
of conflict diamond mined in Africa (Adhikari, 2016).
Secondly, the extraction of diamond has resulted in environmental issues within the
international market leading to conflict. Many environmental groups such as UNEP have come
out to pressurize companies within the diamond industry to remain sustainable throughout
their value chain. Many companies such as De Beers is currently trying to remain
environmentally sustainable in order to remain in the international market. This is following
much concern that the company has been dealing in diamond mined from Africa under unsafe
environment. Many international market players are concerned with environmental activities of
diamond industry companies and this has resulted in sanction for companies participating in
environmental unsafe practices (Maditati, Munim, Schramm & Kummer, 2018).
Thirdly, diamond has an economic impact on the development of international market
since there are many different products that are valuable along the diamond value chain.
Diamond trade in the international market has contributed to the development of the
machinery market especially those machines that are directly or indirectly involved in diamond

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mining or processing. The wealth that is attributed to diamond has an economic impact on both
community mining diamond and the companies trading on the diamond. In addition, there are
many companies that have accumulated huge wealth from diamond trade (Robert, 2012).
Lastly, the diamond industry has political development of the international market since
many political players are linked to the diamond industry. Diamond being one of the major
commodities in the market today plays an important role in shaping both geopolitics and
international market (Wieland & Handfield, 2013). When the issue of conflict or blood diamond
came about many political players both at the mining country and the international political
players such as United Nations had to look for a solution for the issue. The overall implications
were sanctions for various companies and country involved in blood diamond at the
international market level. Many African countries such as Angola, Sierra Leone and Democratic
Republic of Congo where at one-time sanctioned from the international market due to blood
diamond (Farai, Wonacott & Childress, 2010).
b) Drawbacks of irresponsible supply chain
i. The irresponsible supply chain has social issues
Irresponsible supply chain does not respect human right and labor laws and this is
detrimental for an organization. One of the reasons why many companies within the diamond
industry have been forced to ensure a clean supply chain is the social concerns. Various
companies within the diamond supply chain are linked to military organizations that kill rape
and enslave Africans (Blanchard, 2017).
ii. Do not comply with labor laws such as forced labor
Irresponsible supply chain does not comply with labor laws and this as a drawback
makes it difficult for many companies currently working on CSR to accept products from such
companies. Companies have been under intense pressure to clean supply chain from
irresponsible behaviors or practices that are similar to conflict diamond in Africa (Bhattacharya,
Sen & Korschun, 2011).

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iii. Decreased revenue
Decrease revenue is another drawback of irresponsible supply chain and this is
evidenced by companies that have been part irresponsible supply chain. According to the Blood
Diamond documentary many companies within the diamond industries involved in this conflict
diamond are selling diamond at a low cost. The illegality within the supply chain often results in
a low cost of product involved and this was also evidenced through smuggling of diamond into
neighboring countries through low cost (Sheehy, 2015).
iv. Decrease brand value
Irresponsible supply chain decreases the brand value and this has been evidenced by
various companies within the diamond industry. For instance, the De Beers Company with
diamond mining has been forced to clean its supply after found sourcing blood diamond in
Africa. Some other companies such as Apple, Volkswagen, and Samsung have also been
attached to cobalt that is mined by Congolese forced labors. This affected the brand until these
companies started cleaning the supply chain from irresponsible practices (Jared, 2011).
c) Human rights and company actions
There are many human right violations that have been reported in the diamond industry
in Africa. Firstly, there is death that results from the violence that characterized diamond
mining in Africa in 1990s. this is against the right to life and liberty as enshrined in the human
right and freedom. Secondly, forced labor is another human right violation that also affected
many Africans mining diamond (Statistics Brain, 2016). The forced labor bridges the right work
without discrimination or forced work. Thirdly, sexual assaults or harassment is another human
right violation that is characterized by sexual abuse, rape, and sexual slavery. Lastly, slavery of
citizens as they are used by militia groups to mine diamond for sales to fund military activities.
The human right principle based on the freedom of movement which is also part of the New
Zealand bill of right (Farai, Wonacott & Childress, 2010).
There are also some actions that have been taken by diamond companies to avoid
human right violations. Some companies such as Everledger has adopted a blockchain tracking

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system that ensures that the diamond is tracked from places of origin to eliminate sources that
violate human rights. Secondly, De Beers is another diamond mining company in Africa that due
to pressure from the international community has tried to clean its diamond supply chain to
ensure rid of human right violating companies (Armstrong, 2012).
d) Recommendations
i. Companies should employ new technologies that can track materials
Companies need to apply new and modern technologies that can track the origin of the
material to ensure that these materials were sourced from a clean environment and from a
specific company that is environmentally responsible. There are many companies that have
come up with technologies that track or trace the origin of the raw materials and this is to
ensure that the raw materials are only sourced from responsible companies (Stehr & Jakob,
2014). Some of the companies that currently have these technologies include Associated Press
in Thailand used satellite global positioning technologies to track boat in a bid to fight slavery in
the Thai fish industry. Similarly, Applied DNA Science in New York is also using molecular ink to
track products. IBM also developed a blockchain tracking system that helps in tracking of
movement of valuable products. One customer of IBM blockchain system is Everledger that is
using the system to track the movement of diamond (Nash, 2016).
ii. Eliminating incentives for unauthorized subcontracting
In order to remain a sustainable company, diamond companies need to enact policies
that eliminate subcontractors that are unauthorized to ensure that only those companies
certified as sustainable are involved in supply. Elimination of subcontractors that in the supply
chain is another way to solve the problem of authorized raw materials is another way that
companies need to adopt. In order to eliminate incentives companies, need to have harder
policing by buyers with higher penalties around the negative behaviors. One example of a
company that has adopted this is Apple that own smelters hence put huge penalties on
subcontractor's enterprises (Kumar, Teichman & Timpernagel, 2012).

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iii. Clean manufacturing
Application of sustainable manufacturing is another area that companies need to apply
to ensure corporate social responsibility. Companies within the diamond industries need to
work out a clean manufacturing system that is coupled with clean material that is
environmentally friendly. This involves the application of clean manufacturing policies within
the supply chain as was applied by Nike Inc. In addition, companies eliminate irresponsible
behaviors through the development of clean supply chain policies. This will also require key
suppliers and value chain players to be certified sustainable companies before accepting their
products (Sheehy, 2012).
e) Responsible investment
Diamond industry can responsibly invest in various community investments leading to
corporate social responsibility. Firstly, investment in environmental social governance (ESG) is
one way to invest in the community of people living within the diamond mining areas of Africa.
This will involve working and funding various environmental groups to ensure that
environmental products are well funded. This is an important practice that will ensure that
there are sustainable practices in areas where diamond mining has caused environmental
degradation or destruction. For responsible investment, diamond companies such as Boodle
need to team up with groups such as UNEP for effective ESG investment in Africa (Smillie,
2013).
Secondly, sustainable energy production is another area of investment that has been
indicated as socially responsible. Diamond industry can invest in the development of an
alternative clean source of energy such as nuclear energy that will ensure there is limited
environmental pollution and degradation. In addition, solar energy investment is another is that
result in the production of clean and sustainable energy. Therefore, companies within the
diamond industry can invest in companies that produce a sustainable source of energy to
diamond mining communities. There are many companies that offer alternative energy solution
and allow investment to ensure that the community has clean energy or water (Giesler &
Veresiu, 2014).

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Thirdly, investment in social initiative groups such as human right advocacies, consumer
protection, and human resource management. Companies within the diamond industry need to
invest or fund some of the human right groups to ensure socially responsible business practice
along with its supply chain. Consumer protection is another area of social concern that
companies need to consider investing in so as to maintain CSR in the market. The inclusion of all
communities is an important human resource strategy where companies such as Sodiam can
recruit employees from all diamond manning area (Lee & Kotler, 2013).
f) CSR Audit for the investments
The corporate social responsibility audit for the investment will mainly consist of a
sustainable performance, environmental impact, social responsibility, goals attainment and
impact on stakeholders. Firstly, the sustainable performance of the community investment
based on the company's reputation in terms of sustainability, health, and safety, environmental
impacts of the diamond companies need to be assessed (Shamir, 2011). The audit will ensure
that investment such as human right activities should be sustainable for societal development.
Secondly, environmental impact and safety of diamond companies is another area that needs
consideration. This includes compliance with environmental protection requirements, safety
measures and the overall environmental performance of companies within the diamond
industry. Thirdly, the social responsibility of diamond companies is part of the audit since there
is a need to investigate the diversity of these companies in terms of human resource, human
right protection, and common good objectives. Lastly, the impact of the activities of the
company on stakeholders is another area that needs assessment to ensure the company
remains responsible (Farrington, Curran, Gori, O'Gorman & Queenan, 2017).
Application of CSR OMBUDSMAN
The CSR ombudsman is based on two main areas and these are performance and
operational. There are also three principles that guide CSR ombudsman when applied to the
diamond industry and these include virtue ethics, social contracts, and legitimacy. Firstly, the
operation of firms within the diamond industry needs to perform in ethics and sustainable
practices (Tammy, 2012). This is important for ensuring that solar energy investment, for

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example, provides services in compliance with human rights, labor laws and standards of
practices. Secondly, firms need to ensure social contracts that uphold equity, health and safety
and diversity of humanity. Thirdly, the legitimacy principle of the operation ensures that firms
perform in legitimate practices and behaviors especially in compliance with environmental
principles and social standards (Demuijnck & Fasterling, 2016).
Conclusion
In conclusion, the Blood Diamond shows the darker side of the irresponsible supply
chain that has hit the diamond industry. The documentary shows the role played by corporate
social responsibility within the supply chain of valuable product at the international market
level. The report also analyses the implications of the irresponsible practices within the supply
chain and possible solutions to ensure companies within the value chain of diamond remain
responsible. In addition, there are some community investment options that companies within
the diamond industry can adopt for good corporate social responsibility.
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